Wednesday, March 26, 2008

Banks - Are they a good buy right now?

During these days, bank stocks are coming at a cheap deal, especially with the economic crunch that have engulfed the regions and the American market. All these sentiments cause a knock on effect across the board be it on the NYSE Main Board or Dow Jones Index or London Stock Exchange par to the Financial Times Index or you are a trader in Singapore or Malaysia or even Hong Kong, stocks are plummeting as far as 34% over the last 30 days.

I am a small time buyer, not willing to risk everything on the expensive stocks pegged to the index as each stock cost at least in the double digits, tens of dollars or some costing over the hundred dollar mark each. Any changes in the sentiments will cause me to loose a chunk of money. However, it is the best time to pick out the ripe stocks for keep sake, as the dollar slide against the other currencies and the index are dipping as gradual as possible.

Take for example Malayan Banking Berhad, aka May Bank in Malaysia, one of the oldest and biggest bank in the South East Asia market, as old as Hong Kong Shanghai Banking Corporation HSBC and at par even with London Based Standard Chartered Bank aka StanChart. They announced yesterday that they are acquiring Bank International Indonesia BII for US$2.1 Billion from Singapore Government's Investment Arm Temasek Holdings making them the biggest bank in the South East Asia. Does that mean it is going up? Supposingly. However, due to poor market sentiments today and the fact that the bank will be using up all their financial backing to purchase the other entity sent the trigger signals today creating a landslide of more than 10.6% dive in it's value. The bank has to hold at least $2.3 Billion in cash for their Singapore Based license as they are the Foreign Local Bank, just like Oversea Chinese Banking Corporation OCBC and the United Overseas Bank UOB Group in Malaysia.

So, is it a good buy? Yes, as the banks are stable here, they will call for dividends and with projections issued out this year, it calls on profits over $1.17 Billion before tax and even when the prices dip a little bit, you should buy more to cover your positions and wait for your bonus issues. As for American Banks, they are over priced too much and they should dip another 12 - 22% before I call it a worthy price, as they are suffering as what the Dot Com are facing 10 years back, with over inflated prices. Returns of the IRA and CD are not working out well, so it's time to dip into those funds and liquidate them, going for gold and overseas financial stocks like Halifax Bank of Scotland HBOS or HSBC or even Malaysian and Singapore stocks. They kept on merging and going into alliances so it's the best time to buy as US Dollar is losing their par value.

Good Hunting

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