The Unprecedented Impact of COVID-19 on Businesses & Personal Life

In just 1 month since my last post, the COVID-19 situation has become much worse putting the world in lock-down mode in almost every country. Singapore is not spared either as non essential shops and workplaces were forced to shutdown and the streets become quiet. Dining in at restaurants and hawker centres are also no longer allowed. Most of us will have to work from home and public transport becomes virtually empty.

I am writing this experience down as a record for the future me to refer back to what we have all went through in unprecedented times like this. Neither me or my parents or anyone possibly alive now has lived through times like this unless you went through world war 2 back then. During the SARS outbreak back in 2003, we didn't experience such lock down like what we have experienced now also.

Businesses are affected badly in all aspects. It started with tourism when borders of countries closed, then lock downs happened to restrict social gatherings and movement of people within the country. Without the demand of spending from people, businesses are definitely affected. No revenue, no profits, increased losses. This is what is happening.

Stocks have fallen from their peak to a low of 2230 for STI. It has now recovered to above 2500. Many people will be wondering is this a real recovery or just a dead cat bounce? Unfortunately, I do not have the answer though. Through the ups and downs of the market, I admit I did have fears about whether I should be buying more stocks. Many stocks were at attractive valuations when it dropped at the start but it continued to dropped more to the tune of 20-30%.

Talking about valuations, during a market crash, it also becomes difficult to value a company. If you're buying REITs, many are at attractive dividend yield and price to book of 0.50-0.70. This is 50% lower than its book value. Dividend yield for most REITs are as high as 7-8% and even more than 10%. However, as businesses are affected, dividends will definitely be reduced. Think about shopping centres owned by REITs, most of the shops have to close and some may even shut down completely if they become insolvent. This will affect the rental the REITs receive from their tenants and in turn affect dividends given to shareholders. Dividends can be cut 50% or more depending on the severity.

The tourism industry suffered the greatest hit in this crisis and may take the longest to recover. This is probably why hospitality REITs took the worst dive in this downturn. Hotels have their occupancy dropped to 20-30% only from the high of 90% as tourists disappear. Stocks like SIA, SATS, Genting Singapore which are all tourism related are affected too. Nevertheless, I bought more of tourism related stocks and also other REITs as I believe this will recover when the whole virus situation is over, borders are opened again and we can go on with our daily lives. This will minimally take 1 year and as long as 2-3 years to recover so if you're buying stocks, do be prepared for the long road ahead.

The key in investing during such a crisis is to make sure the companies you invest in will survive. If the company becomes insolvent, then you may potentially lose all the money you invested. One example of a REIT which became insolvent is Eagle Hospitality trust. Invest in bigger companies with strong foundation, more cash and lesser debt is crucial during this period. If you do not know which company to pick, just invest in STI ETF or other index ETFs is also another choice. It is almost guaranteed that if you invest in index ETF during this period, you'll be able to see profits when the economy recovers.

We are now in circuit breaker mode in Singapore which the government calls it. This is essentially a lock down which we are experiencing. Social gatherings of any size is now ban in Singapore both in public and private places. The law is so strict that under the infectious control act, it states that a person must not meet another individual not living in the same place of residence for any social purpose. This means no meeting of your grandparents, parents, siblings, relatives and even boyfriend or girlfriend who are not living in the same place of residence as you. Failure to do so will result in a fine of up to $10,000 and jail of up to 6 months under the infectious disease act.

The broader purpose of the circuit breaker is to reduce the number of infections of COVID-19 so we can get back to our normal lives as fast as possible. This will need the cooperation of everyone to make it happen. A single gathering at Hero's pub of 9 people in Singapore lead to a spread of the virus to 12 others at an international school and Singapore cricket club and causing 1 of them to die from the virus itself. If we all do our part to stay at home as much as possible during this period, we can all help to break the transmission of the virus once and for all.

Let's all stay safe, stay at home and keep calm during this period

Investing During A Crisis - Are you ready for this ride?

By now, most of us should have experienced both excitement and fear in one way or another. Fear due to the virus and the economic recession, excitement due to having the opportunity to invest at low prices but at the same time still having the fear that stock prices can go lower. This is what I have been preparing for all these years but still when this hits, its hard to stomach the situation at one go.

To be honest, since I started investing about 10 years ago, I've not seen such a wild ride in the stock market before. This is worse than the European debt crisis when many European countries faced the possibility of bankruptcy which I've experienced in 2015. There were -100 points drop back then but it didn't occur so many times in a week as what we experienced just recently.

Is this worse than the last Global Financial Crisis in 2008?

During the last global financial crisis back in 2008 which is known to us as GFC, I was still in army and didn't have the money to invest. In a way, I was sheltered from what was going on and the only news source which I had was from the Straits Times newspaper which was delivered to the army camp everyday. Back then, smart phones were not so common and were not allowed in army camps also. However, I later on learned about the GFC from my university economics course and know that it was essentially a collapse of the financial system due to high leverage debt of corporations and individuals and most importantly junk debt. Many banks such as Bank of America and Citibank and even insurance company AIC almost collapsed. Eventually, one famous bank, Lehman Brothers did collapsed and the rest is history.

Now, the crisis we are facing now was started due to the COVID-19 virus. This is different from what we experienced before such as SARS which was not so infectious. This time, the virus caused many cities to go into lock down such as China's Hubei province, some cities in South Korea and even Italy lock down their whole country. Singapore also restricted access for foreigners coming from China, South Korea, Iran and many other European countries. This affected tourism quite a lot at an unprecedented scale. Then, Russia and Saudi Arabia didn't manage to agreed on oil prices and this sent the oil price nose diving rapidly. Oil prices is important to countries whose economy depend on its export and many countries will go into recession because of this also. Singapore too will not be spared. Singapore's Prime Minister Lee also mentioned that this crisis may affect Singapore worse than the GFC in 2008. This was reported in Bloomberg news here.


Are you ready for this ride?

Those who have been preparing for this crisis and saving up money for investment will benefit from it. I have started buying some stocks last week as valuations reached attractive levels. Many of the REITS also fell sharply which presents an opportunity to buy some of them such as CDL Htrust, Suntec and also bank stocks such as OCBC. These stocks are all trading below book value now with dividend yield of more than 5-6%.

Do I think the stocks will drop more? Honestly nobody will know the answer and if we're just waiting to catch the lowest price, then we might just miss out when stocks begin to recover. Over the many years of investing, I learnt that it is never easy to catch the lowest and when price starts to go up, we will be hoping or thinking that it might go down again then we do not dare to invest at all until the bull market begins again. This is psychology at play which is quite common for all investors.


Keep calm and invest in companies with attractive valuations and strong balance sheet

I am now 60% invested with 40% war chest left to accumulate slowly. There are just too many stocks to buy with attractive valuations of trading below book value and low PE ratio but now its also about the companies having a strong balance sheet to ride out this crisis. We do not want to invest in a company with weak balance sheet and they end up collapsing. It can happen and it will happen.

Diversification is also important which I always believe in. Sometimes no matter how good we are in reading financial statements, things can still turn drastically bad for a company in a short time which we won't even have time to react. When a company we invested in collapses, we should still be doing well because we have diversified our portfolio into different stocks. Then again, its about managing risks so we can invest more into stable companies and allocate less to more risky companies in our portfolio.

STI has dropped almost to a 5 year low at 2634 now. This is near to the 2015-2016 prices which I bought some stocks during the European debt crisis at attractive valuations. This is part of the reason why I've started accumulating some stocks again.

If we extend the chart to 2002, we can see the drop during the GFC in 2008 was about 50% from the high. STI drop now is about 25% from the high. Will we see another 50% drop this time? Its anybody's guess now. The question we should ask ourselves is if it drops another 25%, are we still prepared for it?

My own thoughts is the drop may not be the end for now. If it drops more, I'll be happy to accumulate again. Psychologically, we all need to be prepared for more drops and stocks prices may stay depressed for a few months and maybe even more than a year. Nevertheless, if we have invested in good companies at great valuations, we will mostly be assured to ride this out and have good returns from the stock market. Are you ready for this ride?

Enjoyed my articles? 

You can Subscribe to SG Young Investment by Email 

or follow me on my Facebook page and get notified about new posts.

COVID-19 and the opportunity to invest

It has been almost 2 months since I wrote something on my blog. Due to the COVID-19, I was so busy with work that I forgot about time totally. Regular readers would remember that I joined the healthcare industry in end 2018 and now due to this disease outbreak, I had to work extra hours with lots of extra work too. The business as usual work mostly had to be put down to cater time for this outbreak.

Honestly, this is the first time as an adult I've encountered such crisis before. During SARS back in 2003, I was still in secondary school then so I wouldn't know what is happening in the economy. This time, this COVID-19 has caused fears in people where we have seen people rushing to buy stuff at supermarket, face masks and hand sanitisers being sold out in most retail shops etc. The greater impact which I see is on the broader economy due to the travel ban where tourism will be severely impacted. We have seen companies such as Temasek, Capitaland, SMRT, SIA and SATS announcing pay cuts, pay freeze and reduced bonuses etc. Some of the companies even ask their workers to go on voluntary no pay leave. I believe retrenchment will come later as companies struggle with their bottom line so there is genuine concern on everyone's rice bowl here.

Singapore just announced more travel ban for visitors from South Korea, northern Italy and Iran. This is on top of the travel ban for visitors from Mainland China. With every crisis, there is always opportunities especially in the stock market. Stocks should go down further if situation continues to get worse. The impact will be greater as each day passes with the travel ban and lesser tourists in Singapore and around the world.

Stocks which I'm monitoring to buy and have bought some includes CDL Htrust, SATS, Far East Htrust, Dairy Farm and Comfort Delgro. These are the companies which are impacted by the COVID-19 in one way or another. I'm also looking to accumulate more REITS such as Suntec, Capitaland Mall trust and Ascott Residence Trust if it goes lower. I've been researching and monitoring some of these stocks for years and do have some stake in some of the companies. This is the opportunity to accumulate as the stocks drop. I believe by the end of the year, the virus situation should be a non event already and stocks would have already recovered.

Investing during crisis is not that easy at all. It involves seeing losses in your portfolio and still believing in your conviction that the stocks you invest in are correct. It may take months for us to see our portfolio back to profits again. Those who buy the right companies and hold on throughout will be the winners at the end.

On a side note, being in the healthcare industry lets me see the good in people in times of crisis. There are many individuals and companies who have reached out to donate stuff to support healthcare workers fighting this virus at the front line. It is heartwarming to see such acts of kindness. To be honest, all these kind gestures do help to put a smile in the healthcare workers faces and keep them going as I've seen it myself. Some of them have to work long hours and even on weekends and sacrifice family time. Thanks to all who have supported!

I'll keep this post short and back to my busy life again. Stay safe everyone!

Enjoyed my articles? 

You can Subscribe to SG Young Investment by Email 

or follow me on my Facebook page and get notified about new posts.