World's Strongest Bank - Singapore's OCBC

Oversea-Chinese Banking Corp (OCBC) has been ranked the strongest bank in the world by Bloomberg, based on figures compiled by the leading financial news and data services provider.









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Also in Mar 2011, Citibank in its latest Asean banks report, titled Top Guns and Dark Horses, which focuses on stocks to watch in Indonesia, Malaysia, Singapore and Thailand.
The top guns represent its mainstream country picks, while the 'dark horses' are projected to deliver superior returns versus their country peers over the next five years, irrespective of present or future market shocks.

Citibank singles out OCBC as Singapore's 'top gun' for the next five years.


Apart from looking back at the last five years to see which Asean banks delivered the best shareholder returns over the period of December 2005 to December 2010, the report also provides a 12-month view of the present.
Over the past five years, Indonesia was the best banks sector in Asean to own, given superior profit economics and strong book-value growth.
In Singapore, OCBC delivered the best five-year total returns, with a five-year compound annual growth rate (CAGR) of 8.1 per cent, a three-year CAGR of 6 per cent, and an 8.6 per cent one-year return.
Its share price rose 48 per cent over the 2005-2010 period, making it the top-performing bank in Singapore.
The report also states that OCBC was the most defensive going into the 2008/2009 crisis and the best performer coming out.
Citibank singles out OCBC as Singapore's 'top gun' for the next five years.
DBS was picked as Citibank's 'dark horse' in Singapore. The Asean 'dark horses' share some characteristics: strong and liquid balance sheets for growth but generally sub-par return on assets (ROA) and return on equities (ROE).
Valuations of the 'dark horses' are also said to have stemmed from the fact that investors have yet to be convinced by management changes or new strategies, perhaps in part due to their less-than-impressive track records in showing improving growth and profitability. The report predicts that some critical execution risks - such as a transformational acquisition - may be key to realising their full potential.
The key themes emerging in Asean banks at present include a growing sense of investment and business lending recovery, and that central bank policy rates will be broadly higher by the end of the year.
However, the report highlighted that Singapore is the key exception, where efforts to combat inflation by strengthening the Singapore dollar (SGD) could keep short-term rates low. Citibank's projections for the next five years see Indonesia and its big-cap banks being once again the top-performing market in Asean.
After Indonesia, however, the report forecasts the possibility of Thailand overtaking Malaysia as the next best performing of the four Asean markets.
This is asssuming sustained domestic capex recovery plus superior net interest margins (NIMs) in Thailand, while Malaysian big caps take a riskier regional route for growth.
The report states that Singapore remains challenged largely due to three reasons: low profit economics, capital ratio constraints enforced by a conservative regulator, and an even greater need to execute on regional growth to deliver superior returns.
However, Citibank notes that Singapore may outperform its peers during periods of inflation and oil shocks, thereby remaining the most defensive market.
The Citibank report also cautioned that the extraordinary returns of 2005-2010 may be hard to repeat in the next five years.
http://www.asiaone.com/Business/News/My+Money/Story/A1Story20110318-268820.html

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Small Cap Investment - Chasing the next emerging blue chip

Why small caps? 

Well, every current blue chip company was once a small cap.
Great acorns too came from small seeds.

Small caps are out of institutional radar, and they are too small.

As such, these is one area where the astute individual investor can have an edge over the Goliaths by being early and nimble.

Investing in small caps can lead to multi-baggers, but of of course not all selections will be successful, and some will become worthless. Therefore, one must adopt a portfolio approach to such investing.
However, to fully realize their value, positions must be held for long periods.
It is like a farmer sowing the seeds, and letting successful acorns mature fully.
This requires a long period. as such, the starting point must be a macro view of a mega-trend, or themes that can last for years.

Such macro themes that are still running includes:
- Emergence of emerging markets, and especially China
- Decline of $USD
- Unsustainable US Debt situation
- Approaching of retirement of baby boomers in the developed economies of US, Europe, Japan

In Ian's books, his formulation for screening potential winners are as follows:
Small Cap Investor Book blog

Step 1:	Growth Trends: Identify growth trends and market sectors positioned for rapid growth in the years to come.
Step 2:	Finding Potential Winners: Screen more than 7,000 publicly traded companies to find those companies that are unknown performers that are positioned to grow.
Step 3:	Fundamentals Matter: Understand the fundamentals of the potential investment, including products, services, and management’s ability to run the business.
Step 4:	Financial Performance: Review and evaluate key metrics in a company’s financial statements to understand historical financial performance.
Step 5:	Earnings Quality: Look for red flags that indicate financial manipulation or fraud to avoid investing in a small-cap lemon.
Step 6:	Growth Outlook: Develop an understanding of expectations for growth to make valid valuation comparisons.
Step 7:	Technical Analysis: Understand the technical indicators of share price movements to help timing of investments, and maximize profits while limiting losses.
Step 8:	Pulling the Trigger: Determine the optimal timing for entering new positions by using effective trading strategies.

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Posted in: Strategy