Singapore Blue-Chip Bargains

Every now and again something happens in the market that could provide good buying opportunities for us long-term investors. We are currently experiencing one of those special “moments”.

The headline in today’s Business Times says it all: “It’s a RRRout as rupee, rupiah, ringgit get hit.” It seems that international investors are falling over each other as they indiscriminately bail out of emerging markets.

I suspect these might be the same international investors who piled into emerging market assets when Western central banks were force-feeding them freshly created dollars, pounds and euros.

But as the financial broadsheet also pointed out, Asia is not in dire straits. This was my message to ChannelNewsAsia viewers, too. In fact I went one step further by pointing out that when nervous investors chaotically sell shares, it can provide a good opportunity for discerning private investors with greater local knowledge to cherry pick shares on the cheap.

A quick trawl of the Straits Times Index (SGX: ^STI) reveals that there around a dozen blue chips are valued at less than 12 times earnings. This means that investors are paying less than $12 for every dollar of profit that these companies make. They include the Jardine blue-chip triumvirate Jardine Matheson Holdings (SGX: J36), Jardine Strategic Holdings (SGX: J37) and Jardine Cycle & Carriage (SGX: C07). Elsewhere, DBS and Oversea-Chinese Banking Corporation (SGX: O39) are valued at around ten times earnings.

If you believe, like me, that investing is about buying good-value assets at knock-down prices, then now could be a good time to trawl through the markets.

Remember that cash is a very liquid asset. Provided sovereign states don’t panic and impose drastic and counterproductive exchange controls, money can flow in and out easily. So just as money is currently flowing out of Asia, it can just as easily flow back in again,

The flow of money can impact the market value of assets such as shares. But what it cannot affect is the intrinsic or the underlying value of the asset. Our job as private investors is, therefore, to seek out shares that are selling at below their intrinsic values.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.