Last week, the big boys, the so-called “whales” are in action again. Keppel Corporation was the subject target and was relentlessly shorted in huge volumes. The short sell orders executed were:
- 25 January 2016: Short sale volume: 4,918,000 worth SGD 24,158,094
- 26 January 2016: Short sale volume: 5,875,800 worth SGD 27,831,381
- 27 January 2016: Short sale volume: 3,895,600 worth SGD 18,456,686
It seems like the whales are hell-bent on lowering the value of Keppel Corporation as oil prices crash to a 14-year low. Due to the oil crisis, Keppel Corp latest Q4 profit fell 44% and its 2015 profit dropped to a 5-year low. Incidentally, Keppel Corp is also a conglomerate with stakes in the property sector, which is also facing a slowdown. The double-whammy gave the whales the perfect opportunity to “wallop” Keppel Corporation and short the counter like nobody’s business.
Of course there were other blue chips which suffered from the recent whales’ attacks but the data from SGX’s Marking of Selling Orders revealed that Keppel Corporation was consistently being shorted for practically the whole of last month. If you are holding on to Keppel Corp shares, you have to be careful because this is abnormal. If the whales consistently targeted and whacked your stocks ferociously, it could mean something big is looming. I am not trying to spread fear but just pointing out the cold hard data in an objective manner. Investors who are tempted to buy in the counter may want to think twice in case of catching a falling knife.
Unless you have the circle of competence, investors should always avoid investing in the oil and gas sector, which typically encounter cycles of ups and downs. Keppel Corp, for all its investment moats is no different and as a matter of fact, they have announced staff headcount reduction of 6000 staff. This signals a very long and tough winter for the company. Investors who had bought Keppel Corp shares during the bull-run must either be prepared to hold for a very long time or be prepared to cut loss to prevent the rot from festering in their portfolios.
Is Keppel Corp worth buying now? To be frank, I don’t know because I don’t work in the oil and gas sector, and thus do not know the industry’s outlook. But one thing that I can highlight is that you don’t stand in the way of the whales. When they are off-loading or shorting shares in massive volume, going against them may not be wise, especially if you don’t have deep pockets. An alternative route to make money from the market mayhem may be to change your strategy and join the whales. However, it should be noted that there are risks involved in such approach and you need to learn the ropes before attempting to do short selling.
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SG Wealth Builder