Triple Blows

Triple Blows

Its 5 months into 2018, I suffered triple major blows to my returns this year which made it seem like a year of loss or at best breakeven.

First blow, arbitrage venture in Midas Holdings Limited that went horribly wrong; it was an experiment to buy Midas in SGX (bought $0.169 in Jan 18) and sell in HKSE (then trading at around SG$0.60), however the transfer of shares takes 2months and suddenly on 8 Feb 2018 it was suspended and the rest is history. Apparently, PRC companies simply have a trait of forging their accounts, their bank balances and pledging shares for loans without declaring and finally emptied the company’s coffers and bankrupt it.

The result of this experiment was a loss of $9477. This is the biggest loss in several years since my naïve days of holding (also another PRC company) Beauty China of $10K worth to zero after it was delisted.

Second blow, was my recent trade on YZJ Shipbuilding SGD that horribly dropped 3% from $1.08 to $0.98 on Friday, 25 May 2018. I entered based on trading and exited at stop loss $0.99 which resulted in a near $2K loss. It was later realised that HSBC Global Research the previous day on 24 May 2018 downgrading to reduce with a target price of $0.87, in absence of other news, this could potentially be the cause of the fall.

Third blow, was my purchase of Q&M Dental for trading between Friday, 25 May 2018 and Monday, 28 May 2018. It hit my stop loss alert but due to illiquid volume I failed to take action immediately as I was also busy with my work. At the end of Monday, it dropped 6.8% from $0.59 to $0.55, my cost was about $0.585 as I bought since Friday, 25 May 18 for trading. In the end, I sold off at $0.545 during the opening, hopefully to close this painful chapter behind and never have it again.

Because of the 3 major blows, my returns fell to -

Q2	-$9,623.51
Q2%	-6.42%
Q2*	-$146.51	* (exclude Midas write off)
Q2%	-0.10%
Q1	$2,261.76
Q1%	1.51%
Till Date	-$7,361.75
	-4.91%

Next blog I am considering a change in my investment strategy and possibly list the new strategy’s concept framework.

World Cup effect on Stock Markets

As World Cup 2018 at Russia is starting soon on 14 June 2018 with first match between Russia and Saudi Arabia, its timely to share on this World Cup effect on stock markets.

Apparently, with records going back from 1994, World Cup have been consistently correlated to -0.3% to -25.5% to equity market in second quarter of the World Cup year.

Credits to DBS Bank analyst who compiled this table for World Cup's impact on Straits Time Index level.

The effect was attributed to rotation of funds from equity markets to sports markets (more like gambling casino) where people would withdraw funds from stock markets and speculate on World Cup matches. 

There's even professional arbitragers that try to take bets and arbitrage on the different rates offered by various bookies / betting houses, thus locking in to the spread regardless of what the results went. 

Eg. Bookie A takes bet of $1000 from various parties whom bet on Match 1, home team to win, the bet is accepted at a rate of 2.1x payout, ie if home team win bookie A is to pay $2100 to the parties. One way to arbitrage on betting markets, is for bookie A to unload the bet of $1000 to other bookies / gambling house that later increase the rates to say 2.3x as most have fluctuating rates depending on the bets they receive to spread out their risks.

However, for bookie A, once he secured the higher rate of 2.3x, he is effectively risk free and sure win especially if this is repeated often enough with larger / wider bets received. If home team win, he is locked into 2.3x and would earn 0.2x spread of $200 after paying out $2100 back to the parties.

If away team win, then he has no loss to pay since he already offload the risk & monies to other gambling houses. The only risk is counter party risk where say if home team win, the other gambling houses ran away and failed to pay.

That's for today, I may be writing more blogs moving forward as I am pondering a change in my investing strategy and as I reflect on 3 major blows that hit my returns this year. More in my next week's blog, see you!