June[3] - STI ETF (Bargain Hunting)

COUNTER: STI ETF

OVERVIEW: 

SPDR funds are a family of exchange-traded funds (ETF) traded in US, Europe and Asia Pacific and managed by State Street Global Advisor. SPDR® Sraits Time Index ETF ("STI ETF") is Singapore's first locally created ETF which can be traded like any listed share. It seeks to generate return that closely correspond to the performance of Sraits Time Index ("STI"). 

Adopting physical replication model, STI ETF actually buy into constituents of STI so as to track its price movement. It releases dividend bi-annually with annual yield about 2.8%.

INVESTMENT THEME:

(A) Looking into the following chart, the forward Price to Earning ratio (P/E) of STI used to be swinging within 13.0x to 14.5x or even bigger since 2013. Current STI valuation touched forward P/E about 13.02 which is at the lower end of the swinging range. So opportunity is present for bargain hunting.

(B) US might not raise up interest rate drastically by end of 2015. Local market could welcome next "spring" in mid term.

(C) General election is widely expected to be around the corner. Market sentiment could give a boost to the local index.

ENTRY PRICE:
It is suggested to put STI ETF into one's shares portfolio so as to enjoy with overall market growth instead of picking individual counter. It is for mid-long term holding. Currently, STI ETF is testing support ~3.35 second time. Should STI return to its average forward P/E about 13.7x, investor could target 3.5 as exit price. 

Suggestion is to accumulate ~3.35. Next support is 3.21. Provided general earning prospect from STI constituents retains, investor could buy again.