Chasing Hot Stocks or Hot Funds Lands One in Hot Soup...

Capitaland was S$4.20 recently before falling to S$3.86 on 26 Jan 2010, or a drop of 8%.

If we look at the historical chart, highest price was S$5 in year 2007, lowest price was S$1.80 in year 2009. At S$4.20, how's the Upside Potential vs the Downside Risks?

Its Net Asset Value is S$2.96, at S$4.20, Price to Book Ratio is 1.42 times...not low.

It just announced buying Oriental Overseas (International) for S$3 billion in Cash, which owns alot of properties in China.

Currently, China Property Market is already very hot and a property bubble is forming.....any measures by China to cool down property market in China would be negative news....

Thus, Capitaland now has "added China risk/exposure/potential.....which can work for it or against it.....

The CEO of Capitaland probably has no choice, as he disclosed that it is Capitaland's target to increase its proportion of assets to China market to 45% from 25% before the purchase. (Purchase of Orental will increase percentage to about 35%) he is somewhat constrained by their company's strategic direction, and BIG deals like this do not come often.

Why Capitaland has so much Cash? Becos smart investors (or is it foolish investors) bought the Capmall Asia it listed at 1.7 times Book Value recently.

Anyway, I personally would not be thinking of buying China property or China property related stocks becos I learned from "bitter lessons in the past that " chasing Hot Stocks or Hot Funds typically lands one in Hot Soup.

I don't like Hot Stocks, I like Cold Stocks, becos I can buy at low prices for Cold Stocks, but must pay High Prices for Hot Stocks. Please don't forget that one simple way to make money in investing is Buy Low, Sell High.


Dennis Ng,

The purchase of the Orient Overseas Developments Ltd. unit includes seven sites in Shanghai, Kunshan and Tianjin, with about 1.48 million square meters of floor space, the Singapore- based developer said in a statement after markets closed yesterday. About half is residential and the rest is office, retail and hotel space, CapitaLand said.

CapitaLand has cash after it raised S$2.8 billion ($2 billion) from the initial public offering of CapitaMalls Asia Ltd. in November. Orient Overseas, Hong Kong’s biggest container line, is exiting real estate projects in China after a slump in global trade and excessive capacity in the shipping industry led to its first loss in 10 years. Orient Overseas posted a $231.8 million loss in the first half ended June 30.

Orient Overseas said in a statement yesterday that the property unit has lost money in the past two years. Orient Overseas said it will keep a 7.9 percent stake in Beijing Oriental Plaza in the Chinese capital and its wholly owned Wall Street Plaza in New York City after the deal.

Orient Overseas, controlled by the family of former Hong Kong Chief Executive Tung Chee-hwa, had revenue from property development of HK$14 million in the first half of 2009, or less than 1 percent of total sales of HK$2.07 billion ($267 million). Tung was Hong Kong’s first post-colonial leader after Britain handed the colony back to China in 1997.

The deal with CapitaLand is Orient Overseas’ biggest asset sale since it agreed in November 2006 to sell four container terminals in the U.S. and Canada to Ontario Teacher’ Pension Plan for $2.35 billion.