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Stock | Property Stocks Singapore

 

What is stock?

Stocks are issued by companies to raise capital or financing from a pool of  investors. Any one can become a shareholder of the company by buying stocks of the company. Shareholders are usually entitled to a share of any dividends that are declared and paid. Another term for stocks is shares.

There are broadly two classes of shares – ordinary shares and preference shares. Ordinary shareholders have a right to attend and vote at general meetings on matters such as a major policy or strategic plan or appointment of directors.  Shareholders can make sure of such general meeting as a platform to voice their opinions or exercise their voting rights to the board or top management about certain plans that the company wishes to undertake.

Most of Singapore stocks are traded in lots of 1,000.  To own a lot for a stock unit price of $1, one will need to fork out $1,000 excluding the commission and/or related charges by the security firm.

To holistically blog about Property Investment in Singapore, we will be also covering the property stocks being listed in Singapore Stock Exchange. Other non property related stocks will be excluded. To certain extent, we prefer property stock investment than other types of stock investment in Singapore primarily is because local property developers are usually tightly regulated by the local government and they will need to have solid financial health to undertake land bidding or property development in Singapore.

Why Invest In Property Stocks? 



Singapore investors buy property stocks in the expectation that the property stock price will rise. Whenever Singapore stock market turns bullish, it is not surprisingly to see that the big brothers in property stocks will runproperty stocks like a horse. The question is whether when is a good market entry to ensure that there is a capital gain or is the investment objective just purely to have dividend gains.

Many Singaporean investors are excited about the capital gain of stock investment. Just take one of our all time favorite property stock, i.e. Keppel Land for example. The lowest stock price of Keppel Land in the past 13 years was $0.97. If you had bought Keppel Land stocks at this price and sold off at its highest ever peak at $9.60 after 5 years, we are talking about a whopping 889% returns. From this peak of $9.60, it actually went down to $0.985 per share in just two years due to US sub-prime crisis effect. If one invests at this 2nd lowest price entry on April 2009, it will fetch a handsome reward of 239% too if you sold it off today. While the capital gain can be spectacular, the risk of losing pants is also there if you hit at the wrong time.

keppelland stock

Characteristics of  Property Stocks 

 

Property Stocks
Business Focus Focus on property related and the scope can be covering other unrelated industries
Safe Custody of Properties The company owns the properties

Dividend Policy

Board will usually make such decision and announcement via SGX
Investment and Leverage Guidelines Usually not but it will be leveraged if Contract For Difference (CFD) is used
Tax-Exempt Income (dividend) No
Traded Through Broker Yes
Management Fees No
Clearing Fees Yes
Brokerage Commission Yes
Settlement Today + 3 Business days

What Are The Risks In Investing Property Stocks? 

 

Property stock prices can fluctuate due to market conditions e.g. cooling measures by the government or there is a change in the company’s performance. There will be higher risk on shareholders than bondholders and other creditors if the company fails and is wound up.  Under the worse case scenario, a shareholder may lose up to the entire amount invested in the company.

In the course of property stock trading, the investors may be exposed to other risks when there is a suspension of trading ahead of some corporate announcement to the investors or trading halt by SGX for some internal investigation over unusual trading activities.

While an investor is excited about the perceived “low market entry” property stock price, one can never predict how low is low. The stock investor should not overlook rights issues, company financial health, historical stock chart performance and other corporate future plans.

Like normal stock trading, an investor can possibly lose his/her entire capital by investing property stocks at the wrong time or due to special circumstances. But if the trading is done on margin financing such as Contract for Difference (CFD), it can be a double edge sword which leads to unlimited losses depending on the positions taken. But if it is coming from the investment point of view, value investing approach should be taken after detailed fundamental analysis of the company is performed.

If you are the type of emotional person, stock investment or trading may not be suitable to you. If you are analytic enough, property stock investment can lead you to financial freedom or at least load with you annual dividend gains as a form of passive income.

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