Sunday, March 8, 2009

How Low Could the STI Counters Possibly Get...Let's Calculate

Ah...The million dollar question on when the STI's low will be reached, so let us attempt this with some tangible data based on the last 2 recessions, the Asian Financial Crisis ( 97/98) and Sars ( 02/03). Actually, the idea to blog this was from a post from a website called money-and-girls.blogspot.com ( yeah you perverts...you saw it right...girls...) who took the data from another website which we would have definitely acknowledged if we knew.

Below is the data showing the percentage decline from the peak 93/98 high to 97/98 low during the Asian Financial Crisis and from the peak 99/00 high to 02/03 low during the Sars period for the various STI counters.

High Low of STI counters During Recession

The above is taken from money-and-girls.blogspot.com

Let's use this percentage data to calculate the possible decline for the various STI counters in this financial crisis...shall we? See below document( The document below was done by SGDividends)

Possible Low

(Please note that those highlighted in blue are those stock counters that were listed during the 2 time periods from boom to bust...and we will only focus on these)

So what can the above tell us?

From the second document, it seems that there could possibly be more downside to go for many of the STI counters if one were to base strictly on history alone, ceteris paribus. The first document highlights something interesting. Notice that for nearly all the Straits Times index counters, their 02/03 lows were higher than their 97/98 lows. However, if one were to compare their 97/98 highs to their 02/03 highs, this pattern does not exist.

Therefore, a lesson learnt is that one should never ever invest when its a boom year cos you might just be stuck for ages and one should always invest in a recessionary or depression-like year as its highly probable that you will still make money even if you had not sold out your stock positions by the next downturn.

But then again, pls be mindful that its not always 100% true that the most recent low will be higher than the previous low as seen by the Nikkei index below from 1984 to current where the low just get lower and lower....poor japanese investors!

Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

1 comment:

  1. Isn't this type of comparison fallacious? I mean, no adjustments made for stock splits, dilution, etc. So comparing px to px no longer (even %-wise) becomes misleading? Of course the general trend of 02/03 lows being higher than 97/98 lows still stands I suppose.
    Just wanted to know if you fellas are going to account for or recaculate (coz obviously I'm too lazy to do it myself). Please?

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