Buying for Keeps

The average net worth of billionaires declined 23 per cent in 12 months due to the current economic crisis, according to Forbes’ latest report on the billionaires of the world.


On March 4, the Government of Singapore Investment Corp’s (GIC) Chairman Lee Kuan Yew told Reuters that the fund’s assets have fallen about 25 percent from their peak.


In Parliament on 10 February, Senior Minister of State of Finance Lim Hwee Hua  revealed that Temasek’s net portfolio value dropped 31 per cent between March 31 and Nov 30 last year, from $185 billion to $127 billion. During the same period, the MSCI Singapore Index lost 44 per cent and the MSCI Asia ex Japan lost 45 per cent both in Singapore dollar terms.

If you have stayed invested in various investment portfolio, expect to see your investment value dwindling.

As at 5 March when the Straits Times Index (STI) was at a low of 1,518 level, my Singapore equity portfolio was down about 35 per cent. But I am not losing sleep over it. I invest for long term and am not about to liquidate and realise the losses. Majority of these companies are blue chips which are component stocks of the revamped STI as reported in The Straits Times today. These companies have managements who are actively involved in re-looking at current corporate operations, trimming costs and re-capitalising their balance sheets.

Instead of focusing on opportunities to sell my shares, I look at opportunities to buy some blue chips at prices that I feel comfortable to hold for long term. It is not always possible to hit the lowest price in this still uncertain climate. It is also highly likely that the share prices you paid for will decline further after you have bought them. As long you feel that the value is acceptable to you at the time of purchase, this is what matters. Disregard the daily share price gyration. In the longer term when the global economies recover, equity values will rise again as history had shown repeatedly.

Look at it in another way. At the peak of share prices, it is expensive to own blue chip companies. We can now own companies at prices that were clearly less than half. For examples, OCBC Bank can be had for $3.95 recently. Its one-year high was $9.09. The low of Keppel Corporation was $3.35 compared to $12.50 at its peak. Singtel’s low was $1.94 against a high of $4.05.

Having said all these, I am not an advocate of using borrowed money for share investments. Call it conservative but this market is not predictable and investment losses can mount if the economy turns worse than expected.

Written on 3/13/2009 3:36 PM


Copyright © 2009, the author known as LKT in Singapore.


The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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