Markets sentiments are susceptible to political, economical and social unrest. It sounds commonsensical but it is actually overlooked by many people. This is because when one is vested in shares, one might hope that their picks will not be affected by current affairs either locally or abroad. This post will share some of the common sources of news and information which will provide some telltale signs for the next trading day for Singapore Shares.

American indices (E.g. DJI, NASDAQ, S&P 500)

• Dow Jones Index (DJI) is an index that tracks the performance of 30 of the larger companies in America.
• NASDAQ is the “SGX” equivalent of Singapore.
• S&P 500 is an index that tracks the performance of 500 companies of America

These three main counters in America have a significant impact on the Singapore market especially when the US market closed on a “DEEP RED” signifying fear, lack of confidence in the market. Furthermore, since our market opens after the US market closes, we will be able to predict with some level of confidence that SG markets will have similar performance for a particular trading day. This similarity is especially true between Dow Jones Index (DJI) and Straits Times Index (STI)

News, Expansion plans, debt situation and net profits

Currency (News) of a Country relates to a Country’s Currency ($)

ME

• News will always cover the latest and juiciest stories and reports of particular companies. If the news affects revenue, profits, tax scandals, defaults, drop in dividend payouts, retrenchments, etc; it means the market sentiments will be affects either in a positive or negative way.
  • Market reaction might not always be logical but just be sure that news and rumours will always lead to increase in volatility hence greater price fluctuations
• Economic growth and downturn of a country will also give you an idea of how players in the market would react in the market, either pulling out or rushing in, which will in turn affect prices of shares.
• Increase or decrease in relevance of a particular service provided by a listed company
  • If the services faces high levels of competition, prices of the services will be negatively affected therefore causing a dip in confidence that the price of a particular share counter might trend lower

Financial Reports and Fundamentals of The Share Counter

• Earnings per Share (EPS)
  • How much profits a company earn in a Financial year over the total number of shares in the market
• Price to Earnings ratio (PE Ratio)
  • The current price compared with the EPS of the Share counter
  • How many years does a company take to earn the “current price of shares which you purchased at”
• Dividends per share (DPS)
  • How many cents per share is deducted per year from shares to give out to shareholders per year
• Payout ratio
  • Annual distribution via dividends back to shareholders divided by Net income
  • Higher payout ratio signals unsustainable dividend payouts as companies still need profits to pay interest to banks, expand their company, etc.
• Net Asset Value (NAV) or Book Value (BV)
  • How much a company is worth dividend by the number of shares
• Price per NAV/BV or P/Bv
  • How many times is the traded price divided by the NAV
  • How expensive is the share at the moment
• Debt per NAV
  • How many times is the debt compared to the Net Assets of the company (relative terms)
• Return of Equity (ROE)
  • The ratio of net income divided by shareholders’ equity
  • Normally, a double digit ROE shows that a company is managing the assets well thus earning higher returns in comparison to their shareholder’s investments in the company

Understanding these terminologies will provide you with a better idea of the financial conditions of a particular company. Evidently, when a company is riddled with debt and yet it is still expanding aggressively, it will be less favoured by the market as it might not be able to cope with their liabilities. Conversely if a company earns a decent amount; pays out 3-5% dividend yield and still has profits left to expand, then it might be doing much better hence commanding a higher price as well.

Do take note that apart from news and how larger economies affects the Singapore market, we also have to take into account the technical analysis portion of the market. (Click here) to get a basic introduction to Technical Analysis.