NUS Investment Society Year Book 2019

INVEST Annual Yearbook 2019 ©NUS Investment Society

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Contents 01 Introduction 04 President’s Message 06 Vision & Mission 07 Departments 08 Organisation Structure 02 Interviews 09 Tee Leng 12 Scott Prebola 03 Research 14 A Recapitulation of the Trading Multiples Approach to Equity Valuation 16 Global Macro Research 18 Relative Strength Strategies for Investing 04 Our Events 22 NUS SGX Stock Pitch Competition 23 Fundamental Analysis 101 24 Foreign Exchange 101 25 Quantiative Finance 101 26 Weekly Combined Meetings 05 Credits 3

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President’s Message - Sagar Shah Dear Readers & Friends of NUS from previous years, where we of our dedicated members, I am Investment Society, made it a point to not only have these speakers present their confident that these plans will This academic year, 2018 – view of the current market but 2019, NUS Investment Society also review and critique our materialize in the future. It aligns continued to push itself to research, showing us how to new heights and remain an improve ourselves to standards with our intention to grow the organization of value. We required by the industry. continued with new iterations society as a recognized brand of key projects and events from Our operations and project previous years while stepping teams handled a high volume that is a positive, enabling force forward with fresh experiences of events this academic year, in an attempt to diversify and with the continuation of the for all university students – a refine our approach toward flagship NUS-SGX Stock Pitch learning about the financial Competition, where we achieved “bridge” between academia and world and preparing our a record high number of sign- members for a career in related ups from tertiary students the industry. fields. However, before I shed around Singapore. Beyond this, some light on the happenings for the focus of our events this year On a personal level, watching the year, I would like to express was geared toward personal my sincere gratitude and development of our members each member display their appreciation for the continued where we engaged alumni as support of our members, peers mentors for them and as well dedication toward the society, and collaborators throughout as partnering with full-time the year. Without this, none of industry professionals to come working together toward our accomplishments would down for training sessions, have been possible. especially in the quantitative landmark achievements, finance space, since it is a rapidly Our research departments growing area. Additionally, we made me extremely proud to made tremendous development conducted school-wide and in improving the quality of cross-department training work alongside them. It was research that we produce. sessions such as financial Our publications, written by modelling, macro-research and my pleasure to serve as the our community of top-quality resume building for the benefit student investment analysts, of all. President alongside this batch also continued to address every major theme moving the Apart from this, the team this of members and sincerely markets – all the way from large year also put in place the corner macro-economic trends to stones for our plans in the hope that future committees ground level research on specific future. One of our aims for the equities. The knowledge of our future is to solidify and enhance not only take inspiration from members was supplemented the tangible output from our by constant engagement with members so that their skills, past work, but also learn from external companies, especially experiences and ambitions can those involved in the asset be translated in an effective our shortcomings to help NUS management, private equity and manner to external parties such owner-investing space. We also as employers. With the support Investment Society achieve took a slightly different approach of our mentors and hard work its absolute full potential in the years to come. Thank you! Sagar Shah President, NUS Investment Society NUS Business School 5

Our Vision To be a globally recognized investment club dedicated to providing premier investor education and honing talented students for the investment and finance world. Our Mission To promote financial literacy and investment knowledge among student investment enthusiasts. To create networking opportunities and interactions between industry professionals and students. To empower students dedicated to pursuing a career in finance with skills valued in the industry including the use of financial and analytics software. 6

Our Departments EQUITY GLOBAL QUANTITATIVE RESEARCH MACRO FINANCE The Equity Research (ER) The Global Macro (GM) The Quantitative Finance (QF) department seeks to share department was established department seeks to explore knowledge and equity analysis to provide a platform for both quantitative investment and in the global equities markets. students and the community algorithmic trading strategies, ER analysts will serve to to share and discuss trading grounded in mathematics and provide quality reports on knowledge, trade management statistics. More academically- stocks and industries to add and global macro economic inclined, we keep ourselves value to subscribers. The trends which includes the at the forefront of academic department also aims to kick Forex market, central bank research whilst conducting start its first ever virtual fund policies. GM aims to encourage our very own in-house management to allow NUS students to expand and research. Away from the ivory Invest students to learn and deepen their trading literacy tower, a strong emphasis on transit to the finance world through workshops, weekly implementation equips our through experimenting and research meetings, and various members with knowledge and sharing investment ideas. networking events. skills employed by industry professionals today. PROJECT MARKETING & HUMAN MANAGEMENT COMMUNICATIONS RESOURCE The Project Management The Marketing and The Human Resource (HR) (PM) Department aims to Communications (Marcomms) department is in charge of bring NUS Invest to the departments aims to bring constructing and executing forefront of imparting NUS Invest to greater heights policies that enhance our financial education to the by marketing our brand name members’ welfare. Valuing student population in NUS to external parties. Marcomms our alumni, it is also our top and beyond. By connecting actively collaborates with priority to foster and maintain external companies and industry professionals of strongconnectionswiththem, budding student investors increasing influence to give bringinginindustryknowledge through organising a wide both internal members and the into the Society and forging variety of events, we hope to student community insights a stronger network for our create a productive platform to the finance world. Through members and the club. We for the sharing of investment utmost determination and also seek to administrate the knowledge and expertise, and passion, we serve to spearhead Society’s Recruitment Drive establishstrongnetworkswith marketing efforts and promotion and relevant events to bring in the industry professionals. of events to help the Society thebestindividuals tojoinus. achieveits goals andvision. 7

Organisational Structure President Vice Vice Vice Secretary President President President Treasurer (Operations) (Research) (External) - Marcomms -Quantiative Finance - Project Management - EquityResearch -Global Macro - Human Resource 8

TEE LENG. Please tell us about Portfolio Manager of Heritage Global Capital Fund yourself, an introduction of who you are, what did you study and what are you working on right now? I am the portfolio manager of Heritage Global Capital Fund, a value-focused and research- driven investment fund based in Singapore, with more than 5 years of experience. Additionally, I am a frequent guest speaker at institutions such as University CollegeLondon(UCL)andSingapore Management University (SMU), and at investment conferences and workshops held in Singapore and Jakarta. I graduated from University College London (UCL), majoringinEconomics.Asidesfrom managing the fund, I work on my blog–InvestingNook,duringmyfree time to promote financial literacy. How did you start your journey as an investor/portfolio manager? My journey began when I was still serving National Service (NS) in 2011. Given medical conditions, I was downgraded to a clerical role. Being capped with a Corporal allowance, I thought of additional ways to supplement that allowance and that led me to investing. Thankfully, the first book I picked up was ‘Intelligent Investor’ by Benjamin Graham and that allowed me to avoid most of the S-Chip Saga that happened in Singapore back at that point in time. What is your personal investing philosophy? I seek companies trading at a price fractional of their liquidation or fair values, as I believe that over time, the price of the security will eventually reflect the fair value of the underlying business. However, at the heart of the investment philosophy, it’s the emphasis on the capital cycles. It is based on the idea that the prospect of high returns will attract excessive capital; hence huge competition, just as low returns repel them. The resulting ebb and flow of capital affects long-term returns for shareholders in often predictable ways, what is termed as the capital cycle. After identifying sectors that are in its down cycle and that are starved of capital, this is followed by detailed research-based analysis of the fundamentals of the companies and behavioral insights within this sector to uncover publicly-listed companies that are selling at a significant discount to its intrinsic value historically. 9

What are some difficulties you faced as a portfolio manager? One of the biggest challenges as a portfolio manager is conveying the investment philosophy to the clients, who rarely have much financial background. Having clients who have a mindset of patient capital is extremely crucial to portfolio managers. Reason being, during market corrections, having client withdrawals can cripple the fund. Hence, this is one of the biggest difficulties I faced as a portfolio manager, especially since we have to convey something very technical into layman terms where the client is able to understand. What is your best investment and what is the logic behind it? One of the best investment ideas was City Developments Limited (CDL), a Singapore-listed company in 2016. Back in 2016, which was Singapore’s property downturn, everyone was shunning property developersandphysicalpropertiesingeneral.However, thatwasthebesttimetobeinvestinginsuchcompanies to make outsized gains. If one were to deep-dive into the industry outlook, residential supply was going to start trending down from 2017 onwards, and be cut by approximately 50% in 2018 – 2020. Therefore, Spring maynotbeherebutWinterisdefinitelyover.Essentially, it was investing into a company at the tail-end of the capital cycle, with a strong balance sheet and cheap valuation. Fast forward to late 2017, we started seeing the recovery in the Singapore property market with all the news of enbloc deals and new property launches. What is one mistake you made while investing? What did you learn from it? One mistake I made while investing was not noticing the huge shift in the retail industry. The company in question was Debenhams, a UK-listed retailer operating under a departmental store format, traded at extremely cheap valuations of approximately 20% free cash flow yield. With technology today, pricing information is readily available at our finger tips. Customers are able to easily browse clothing at Debenhams but purchase them online, such as Net-a-Porter/Mr. Porter, Farfetch and Stylebop to name a few, at a much cheaper price. Essentially, it was the death of retailing. That would probably be one of the biggest mistakes that I have made where the stock price declined close to 90%. However, from experience in problematic retailing companies such as Sears Holdings, they are unable to turn 10

themselves around more often than not. Therefore, What are some trends that we can we kept the position sizing in the company extremely small of about 0.3% and with the stock decline, it expect in your industry for the next did not impact the overall portfolio significantly. 5 years? What is your motivation to blog since 2014? What do you usually One of the biggest trends I see within the asset blog about? management industry is fee compressions. With companies like Fidelity moving towards a no-fee index The motivation to blog initially started out when I fund,itisdefinitelyshakinguptheindustry,whereother decided to document my learning journey in the form asset managers are feeling the pressure to eliminate of an online diary. The blog has seen a few iterations base management fees – or keep them very low – and renaming from ValueEdge to InvestingNook; however, instead charge performance fees. at its core, it has always been about the journey of learning and sharing timeless investing wisdom. What are some essential traits to Hopefully, through my thought process, readers will be able to find some value in their own investing journey. excel as a portfolio manager? What advice would you give to a Whether as a portfolio manager or individual investor, novice investor? I find that the essential traits required are pretty much similar.Firstly,itisaboutsecondlevelthinking.Investing, Experience is what you gain when you do not achieve like economics, is more art than science. It requires what you expected. It is the ultimate key in becoming you to make a judgement when things are ambiguous. a successful investor. Making mistakes is extremely What this suggests is that you should be thinking one commonifyouareplanningacareerininvesting;hence, step ahead and deeper than the crowd if you want to commit such mistakes when you are still young and have any chance of beating the market. Secondly, it is when it is still not that costly. Just ensure that you know about your thinking being oriented towards margin of whatwentwrongandmakesureyoudonotrepeatthem. safety. This is because margin of safety, allows room for imprecision, bad luck, or analytical error in order to avoid sizable losses over time. A margin of safety is necessary because valuation is an imprecise art, the future is unpredictable, and investors are human and do make mistakes. It is adherence to the concept of a margin of safety that best distinguishes investors from all others, who are not as concerned about loss. 11

SCOTT PREBOLA. ASIAN EQUITY SALES & RELATIONSHIP MANAGEMENT INSTITUTIONAL & TREASURY COVERAGE Scott has been with Deutsche Bank since 2004 where he spent 7 years in Tokyo before relocating to HK in 2011. He was then asked to move to Singapore in 2014. Scott provides regional equity sales coverage to institutional clients and more recently added cross-product relationship management to his remit. His previous industry experience was with Goldman Sachs which he joined in 1996 and where he had the opportunity to work in New York, Tokyo and Los Angeles. Scott graduated from Bucknell University with a B.A. in Economics and Japanese Studies. 12

Please tell us about how your career What are some unique traits started and how you managed to for fresh graduates to excel progress into Deutsche Bank as under Equity Sales and Markets a Director for Asian Equities and Relationship Management? Markets Relationship Management? To be successful in Equity Sales one needs to have an I started my career in finance in New York as an innate curiosity of not only markets but companies, an analyst with Goldman Sachs where roles brought me ability to multi-task, and ultimately understand what to Tokyo and Los Angeles. I then took “a break” with a your clients need. In some ways, the most effective stint working in professional sports before returning equity salespeople follow the mantra made famous to the finance industry with Deutsche Bank in Tokyo. in the movie, Jerry Maguire, and that is “Help me, help Since joining Deutsche Bank, I’ve worked in roles you!” from managing the daily research meeting, selling both Japanese & Asian Equities and more recently What are some trends that we helping manage cross-product relationships with can expect to see in the finance some of the firm’s most important institutional clients. industry for the coming 5 years? This has also given me the opportunity to not only work in Tokyo but in Hong Kong and now Singapore. While the finance industry has a history of innovation, the purpose of finance will always remain the same. It What are some difficulties you allows people to save, manage and raise money. While faced and overcome throughout the role of bank tellers and ATMs are being replaced by your journey in Equity Sales? digital means, it is hard to guess what is in store for the industry in the coming 5 years. As former British Prime Rather than my specific role in Equity Sales, I’d say the Minister Winston Churchill once said, “It is always wise challenges faced in my career have been more about to look ahead but difficult to look further than you can having to adapt to constant change in the Finance see.” While there is much debate on the legitimacy of industry, whether after the Global Financial Crisis cryptocurrency, there is no doubt that the technology of 2008, the ongoing electronification of Trading, or behind it, blockchain, is here to stay with potential the changes to the regulatory framework in Europe. applications farbeyondcryptocurrency. What is your outlook on the Asian What advice would you give to your Equities market? (i.e. Market younger self who is planning to sentiment) enter into your industry? The US/China trade and currency dispute has been an Read the Financial news, invest in the market (whether overhang on Asian Markets and will continue to be so in on paper or a real portfolio), try to get relevant work one form or another for the foreseeable future. Barring experience and never hesitate to ask questions. that, opportunities for further development of financial markets in India and ASEAN should remain a focus. Is there anything that you would like to say to the students of NUS? While studying hard and doing well academically is important, don’t forget to have hobbies and interests apart fromschool. It’sallabout balance! 13

A RECAPITULATION OF THE TRADING MULTIPLES APPROACH TO EQUITY VALUATION The divisive matter of equity valuation is once multiple. Performance considerations include, again brought forth in this issue of our yearbook. but are not limited to, growth profile, operational Remaining mindful of the perennial schism scope and even intrinsic competitive advantages. between theoretical validation and empirical Customarily, a firm with superior business practice, we briefly explicate the trading multiples performance should command a premium over approach as an equity valuation methodology. lesser competitors. Trading multiples are always forward-looking and should be derived from A highly accessible and practical apparatus, the expected future financial metrics (eg. 20x +1FY P/E). trading multiples approach, also known as relative valuation, evaluates a company through comparison While ostensibly straightforward, practitioners of its trading multiples with fundamentally similar of Relative Valuation should be aware of potential peers. Relative valuation is based on the underlying pitfalls in its application. A preeminent conundrum premise that companies in the same industry relates to the notions of ‘cheap’ or ‘expensive’ in are exposed to the same market conditions and relation to trading multiples. High multiples are not therefore share similar financial characteristics, necessarily constitutive of overvaluation, and the performance drivers and risks. Trading multiples converse is also true for cheaply-valued equities. include the price-to-earnings ratio (P/E ratio), Fundamental considerations in carrying out analysis enterprise value-to-EBITDA ratio (EV/EBITDA) and should therefore first entail how the current trading dividend yield. Other metrics include enterprise multiple is commensurate with all that is known value-to-sales (EV/Sales) or enterprise-value to free aboutafirm’sbusinessprospects,andwhetherthere cash flow (EV/FCF). While more commonly utilized, could be any mis-pricing by the market in assigning these institutionalized metrics are not necessarily such a multiple at present. In this light, stocks trading exhaustive and therefore Street convention in at valuation premiums to peers may be justified choice of metric should first be ascertained. by fundamental reasons, such as superior future growth or profit margin expansion. Likewise, low The archetypical process of relative valuation trading multiples could result from dim prospects. begins with discovering the universe of comparable Practitioners should therefore first investigate the companies, determining the trading metrics used underlying reason for a stock’s current valuation and for comparison, before benchmarking the peer determine the validity of the current trading multiple, group and determining a suitable trading multiple before castigating any stock as over or undervalued. for the target company. Alternatively, the historical performance of one trading multiple (eg. P/E ratio) Additionally, a firm’s trading multiples reflexively could be retrospectively analysed to determine change over time, for reasons including changes in a suitable multiple for the target company at the the macro environment, fluctuations in the business present time. A target multiple is then applied to cycle, or potential changes to the firm. For instance, the target company to derive the target price. a low-interest rate macro environment tends to beget higher trading multiples due to confluence Bearing in mind the colloquial apples-to-apples of easy money fomenting higher business analogy, the target’s business performance growth and the relative attractiveness of equities should be evaluated against peers operating in versus fixed income under low-rate conditions. a similar industry to justify a suitable a target Trading multiples also fluctuate over the course of a 14

business cycle, which may or may not correlate to the broader economic cycle. Firms in cyclical operating environments tend to exhibit peaks and troughs in their multiples, depending on their point in the cycle. For this reason, highly cyclical industries such as Autos tend to command low trading multiples than those with lower levels of cyclicality, such as Utilities. Finally, changing idiosyncratic prospects result in trading multiple expansion or contraction. Transition into a period of growth inflexion or margin expansion could result in trading multiples inflating sharply, as is the case in fast-growing industries such as Enterprise Software. Likewise, a retrogression of business prospects, including disappointing earnings or management guidance, could drive the multiple de-rating of a stock. We hope that our conspectus of the trading multiples approachtoequityvaluationhasprovidedinsighttothe subject matter. As with any apparatus of valuation, its limitations should be promulgated as well. Proponents of intrinsic valuation dispute the corporeality of using trading multiples, deliberating their usefulness in determining the true monetary worth of a business. Trading multiples can be subject to external determinants rather than business fundamentals, as elucidated by easy monetary policy potentially inflating trading multiples. Sentiment-driven and subject to the whims of market-movements, trading multiples are contentedly only representative of what market participants are willing to pay for a stock and it may deviate substantially from its ‘true’ worth. Ingeminating the cliché of valuation being an art rather thanascience,nomethodologywilleverconstitutethe be-all and end-all of equity valuation. It is therefore up to the practitioner to utilize these established methods for analysis and definition of his or her justified point of view, before making investment decisions. 15

GLOBAL MACRO RESEARCH The EURUSD furthered extended its decline upon the 98 handle. Fears of a recession and slowdown in startof2019followingaweak2018. Yeartodate,itisdown growth following the late 2018 market selloff has 2.5%after afallof 10% from its 2018high. prompted the Fed to pivot away from its hawkish stance to a neutral one. Despite so, the dollar continues to march on and exhibit strength in light of strong jobs data and most recently the surprising 3.2% in GDP growth as compared to the expected 2.5%. The greenback’s persistent strength comes from its relative strength as compared to its other counterparts worldwide who are all observing slowing growth. Hence, despite the dovish stance the Fed is taking, USD should expect to see further strengthoveramacroeconomicclimateofconcerns overamajorslowdowninmany otherregions. Concerns over global growth continue to weigh down The trade talk narrative is one that is always spoken on the pair. European PMI numbers have been less than about when considering about not just the dollar but optimistic with the numbers staying below 50 over the the global economic climate and outlook. The threat course of 2019. The IMF also decreased its forecast for and the uncertainty of the trade talks between USA Eurozone growth to 1.3% this year, down by 0.3% from and China remains. While breakthroughs in talks its outlook 3 months ago. Even looking at its member between both parties and tensions easing have countries, weak demand continues to persist, without been seen, there is no certainty or any confirmation any sign of abatement. Debt problems in Italy continue to on which direction talks with [will] turn to, giving the weigh down on domestic demand and street protests in numerous aspects with regards to the negotiation Francehavesincedepressedgrowth.Brexitisalsoanother from soybeans to technology. Hence, trade aspect that continues to drag theeuro downwards. uncertainty continues to bode well for the dollar, actingas asafehaven. GiventhepoorgrowthoutlookgoingforwardtheEurozone, the ECB has been forced to hold back on its tightening Going forward, monetary policy stances for both policy going forward. Despite promising an end to its bond central banks should continue to drive movements buying program by 2019, fears of economic gloom have in the currency pair. Any pickups in the economy caused the ECB to push back the timing of its rate hike especially for the Euro region should see a reversal until 2020 in an effort to promote and steer growth in the and a change in bearish sentiment to bullish for region. This has placed pressure on the euro, contributing the pair. Trade war negotiations should be closely to its decline. monitored as well to determine any directional bias for the greenback. Onthetechnicalaspect, overthepastyear,wehave seen price break through various levels of support from its 2018 high of 1.2556, even breaking it most recentsupportlevel of 1.12. In 2019, the dollar continues to ride on its strength and momentum in 2018, with the dollar index breaking the 16

Zooming in closer, we can see price trading in a downwards channel and well under the 50, 100- and 200-day moving averages with immediate resistance at the 1.13 psychological handle. The pair is expected to continue to move within this downwards channel targeting the support level at 1.10. Overall, a blend of weakness in the Eurozone and dollar strength should continue to dictate direction for this pair. A further move to the downside is expected amidst the current conditions and the pair should continue to trade within the price channel moving forward and retracements towards the upper end of the price channel serves as potential entry points to take a bearish position for the next 6 months. 17

RELATIVE STRENGTH STRATEGIES FOR INVESTING Relative Strength (RS) is a measure of how strong a security’s price trend is compared to the performance of a selectedbenchmark,suchasamarketindex(S&P500beingafavoritebenchmark)orsimilarsecurities.RSfallsunder the momentum investing discipline, meaning that RS seekers intend to buy high and sell higher. Being an investing strategy on its own, it can also be applied to more complex strategies such as pairs trading. This writing aims to discuss a simple quantitative method that long term investors can employ to improve risk-adjusted returns. Also, a comparisonbetween different types of RSstrategies aregiventoprovideinvestors withbetterunderstanding. DATA The strategy in discussion was tested in US equity sector from 1928 through 2009, using data from French-Farma CPSP Data Library. Specifically, it involved ten Industry Portfolios from the following sectors: Consumer Non- Durables, Consumer Durables, Manufacturing, Energy, Technology, Telecommunications, Shops, Health, Utilities and Others. STRATEGY RULES The industry portfolios from the 10 sectors will first be ranked according to their trailing total returns including dividends. If the investor decides to observe the relative strength at K month interval, the sectors will be sorted according tothe total returns in theK month period. The strategy will then invest in the top X sectors. If X is 1, the system will invested entirely in the sector at the highest rank.Otherwise,thesystem will invest equallyintheselectedX numberof topsectors. The sectors will be rebalanced at the end of every K months. Any sector falling out of the first X position will be sold andsubstitutedwith theupdated first Xpositions. PERFORMANCE Thestrategy wasevaluated using a combinationof differentK andX values. Theheat map aboverepresents the Compound Annual Growthratewithvaryingvalues of K andX. The outcome reveals that the returns are more likely to be higher for less frequent rebalance period and more stringent selection criteria. On the other hand, investors looking to trade on a monthly basis may may select the top three or four performers to gain optimum return rate. There is generally greater unpredictability as the rebalance 18

periodincreases,increasing thenumber of portfolios may helptomitigatetheuncertainty. DRAWBACKS & MITIGATION A major drawback of Relative Strength system is due to the portfolio’s exposure to the risks of the particular asset beta, which is US stock risk in this case, as the portfolio is long-only and fully invested. The paper raised two ways to mitigate lossesanddrawdowns: 1. Hedging, and 2.Addingnon-correlated asset classes. HEDGING Hedging helps to reduce risks by acquiring a position that is negatively correlated to the risks that the investor is currently exposed to. Simply put, invest in another set of portfolios such that the price will increase if your main portfolio decreases, vice versa. Although the risks are mitigated using hedging but hedging are mostly expensive duetoextratradingcosts involved and theinvestors will alsoearnless whenprices aregoingup. Static hedge: Also known as hedge and forget, construct an offsetting replicating portfolio that does not need to be rebalanced as the price and volatilities of instruments being hedged change over time. The portfolio can hedge partofthe portfolioorthe entire portfolio. This approach does protect against all declines and shocks (stock index futures contract and options can be used toachieve thisaim),but it has thedrawback of hedgingtheportfolioeventhenthemarketis appreciating. Dynamic hedge: One that requires constant rebalancing. In this case, long-term moving average is used to hedge when conditions are more favorable to market declines. Theportfoliosare moved entirelyto cash (T-Bills) whentheS&P 500 is below its 10-monthSimpleMovingAverage. Employing dynamic hedge, most portfolios are shown to preserve their returns while having reduced volatility and drawdowns. BeforeDynamic hedging AfterDynamic hedging ADDING NON-CORRELATED ASSETS Another possible solutions is to add non-correlated global asset classes to the portfolio. The author added foreign stocks, bonds, REITS and commodities to construct a five-asset-class portfolio. The buy and hold benchmark is settobe anequal-weighted portfolio of these five assetclasses,rebalancedmonthly. The result shows that Relative Strength method works for period of 1,3,6,9 and 12 months as well as a combination 19

oftime periods. Itoutperforms buyand hold foraround70% of all years from 1973to2009. Combination of dynamic hedging using long-term moving average and addition of global asset classes is showntosignificantlyreduce drawdown andslightly improveSharpeRatioandreturnforportfolios with more asset classes. THINGS TO TAKE NOTE IN REAL WORLD SCENARIO Compared to the 1920s when transact in shares of underlying companies when actively managing the portfolio wouldbetooexpensive,practitionerstodaycanchoosefromvariousMutualfunds,ETFsandclosed-endfunds. However, one still needs to take note and trade off between factors such as liquidity issue and management feeswhenselecting funds COMPARISON OF DIFFERENT WAYS TO APPLY RELATIVE STRENGTH METHOD There are generally three main ways to apply a relative strength strategy: Relative Index Strength, Relative Commodity Strength and RelativeSector/Industry Strength. Relative IndexStrength RelativeIndexStrengthisthemostcommonandmostsimplestrategy.It comparesagivenstocktothelarger index which it is apart of, such as comparing Starbucks (SBUX) to the S&P 500. The theory is that by comparing to the index chosen, which is an average of a larger amount of stocks, if the target stock is outperforming, there isasignofstrength. The drawback is that usually at any given time, there are hundreds of stocks outperforming their indexes. Therefore,RIS isoften used as a confirmation indicatorinsteadof astandalonetradingindicator. Relative Sector/IndustryStrength Relative Sector/Industry Strength is also a very common relative strength strategy, and it is often used in conjunctionwithother strategies.It compares astocktothesectororindustry thatit’s partof. In many cases, it’s a more accurate representation of relative strength. For example, comparing a REIT to the average of its peers is more appropriate than to S&P 500 or Russell 2000 because REITs distribute a large portion of their earnings in dividends to their investors, while most companies in the stock market reinvest their earnings into R&D and scaling their business, harmonious with the growth movement of the last few decades. Therefore, Relative Sector/Industry Strength is more accurate compared with [to] other relative strength strategies. Relative CommodityStrength In addition to being a momentum strategy, Relative Commodity Strength also gives insights to a company’s business savvy and their ability to circumvent the volatility of their commodity correlation. However, the main limitation for Relative Commodity Strength is that it can be only used for stocks that are highly correlated to a commodity’sprice.Thus, compared with otherstrategies,RelativeCommodity Strengthis less used. In summary, relative strength is a cut-and-dry strategy that does not need to wait for technical indicators to reach arbitrary values, nor does it make any judgements. It just assume a stock is a good investment as long as it outperformed the benchmark chosen. Go [Going] back to the strategy purposed in this paper, it does not just consider one stock and a specific observation period. Instead it compares the compound annual growth rate with varying stocks from different sectors and varying observation period. This can draw a more comprehensive picture of theprofits of differentinvestment. 20

OUR EVENTS NUS SGX STOCK PITCH COMPETITION Writtenby JingKai,Marcomms Executive The NUS-SGX Stock Pitch Challenge is an annual competition which connects the corporate and academic worlds of equity research. Now into its sixth year, NUS-SGX Stock Pitch Challenge saw a record 117 teams from 11 pre-tertiary and tertiary institutions participating in this year’s competition. The participating tertiary institutions include National University of Singapore (NUS), Nanyang Technological University (NTU), Singapore Management University (SMU), Singapore Institute of Management (SIM), Singapore University of Technology and Design (SUTD),University of London,andYorkUniversity Co-organized by NUS Investment Society and SGX, the competition once again provided students the opportunity to showcase their equity research skills to the panel of judges. This year, the panel of esteemed judges include Mr David Mok, Head, Fund Management,InvestmentandResearch,IPPFinancial Advisors; Mr Niraj Athavle, Managing Director, Global Investor Sales, J.P. Morgan; Mr Scott Prebola, Asian Equity Sales & Markets Relationship Management, Deutsche Bank; and Professor Hon Sing Lee, Senior Lecturer and Deputy Head of Finance Department, NUS Business School. Among the eight finalists, a team representing Singapore Management University (SMU) emerged as champions, continuing its winning streak. The team, which placed 1st runner up, was from NUS Investment Society, which had pitched a buy call for Comfort Delgro. Many members of the NUS Investment Society from various departments also went to the final presentation at SGX Auditorium to show support for their counterparts. Those who went saw 8 distinct and interesting pitches and managed to gain much knowledge and insights on investment management and equity research. It was meaningful to me because I was able to experience how it was like to be in a competition setting, pitching ideas to a crowd. The idea of doing it seems very overwhelming to me, but aftercominghere,IfeltlikeIhavegainedmanyinsights and it excites me. I would certainly want to give it a try next year. 21

OUR EVENTS FUNDAMENTAL ANALYSIS 101 Writtenby TingTing,Marcomms Executive Based on past years’ success and popularity, NUS Investment Society kicked off the exciting year with our first event – the Fundamental Analysis (FA 101) course. This year had once again saw an overwhelming response of over 100 keen participants for FA 101. This event welcomes both like-minded students and members of public to take part and gain further exposuretothevastworldof financial literacy. The agenda for FA 101 covers the following. (1) fundamental analysis (2) basic financial accounting (3) ratios, multiples and valuation methods (4) interpreting research reports. FA 101 is a half-dayeducationalcourseconductedbyourveryownEquity Research Department who are well versed in the knowledge and understanding of global equity market analysis and provide quality reports on stocks and industries. Insightful sharing, coupled with a hands-on interactive session, have once again drawn in the interest of our participants. The materials prepared were insightful, well-structured, and comprehensive. Even without much prior knowledge, participants were able to follow through the course. A buffet refreshment was also provided during the intermission which allowed participants to network and clarify any doubts which they hadinthecourse. NUS Invest also had the honor to invite guest speaker Mr. Bernard Soo (Director and Head, Wealth Proposition and Equities, Standard Charted Bank) to share about his personal experience and field of expertise in the equity market with our young budding and earnest potential investors. This had without a doubt provided participants with a greater insight whilst engaging them. FA 101 provides a good start to the investing journey for the participants. We are proud to mention that it was successful in attracting a large crowd of participants once again. FA 101 is likely to continue the Society’s legacy of our pursuit to spread financial literacy andinvestinginthefinancial market. 22

OUR EVENTS FOREIGN EXCHANGE 101 Writtenby LiYun,Marcomms Executive Initiated in 2014, FX101 is an annual introductory workshop organized by our Global Macro (GM) Research Department. The event aims to introduce the basics of Foreign Exchange (FX) trading to all like-minded individuals and equip them with financial literacy tokickstarttheirowntradingjourney. It was a half-day course where slide decks were prepared for all attendees to follow the presentation with ease, and timely breaks were given to clarify any doubts with the presenters. The Global Macro started theworkshopwithanintroductiononfundamentalsof FX trading, followed by technical and macroeconomic analysis where various methods of high probability set-ups and trading strategies were introduced. This allowed the participants to be equipped with basic knowledge on FX trading. The event ended with a sharing by our guest speaker, Ang Kar Yong, from AlphaPlay, who shared valuable insights in regard to histradingexperiencesandstrategieswiththecrowd. We were fortunate to invite him as a guest speaker again for FX101 after his insightful sharing last year. Kar Yong is a notable NUS Business school alumnus who was once featured in Channel News Asia’s Money Mind Young Investor. He is currently a full-time trader and runs his own FX trading school, AlphaPlay. During his sharing, his experience of teaching trading strategies was on full display as he demonstrated unique methods to share his insights on trading strategies, whilst fully engaging the attendees. It was truly a valuable opportunity to learn from him and the attendees enjoyedhissharing. 23

OUR EVENTS QUANTIATIVE FINANCE 101 Writtenby QiKang,Marcomms Executive Due to the overwhelming response QF101 received duringitsinaugurationlastyear,theQuantitativeFinance Department had again organized it this year and had receivedover70 interestedapplicants. This course covers the basics of Quantitative Finance and the application of Visual Basic Application via Excel used in the financial industry. Beyond that, the workshop includes an introduction to algorithmic trading, as well as back testing in Python, both of which are very useful tools usedby many analysts. Kickstarting the session was on the topic of algorithmic trading. The QF analyst covered the basics, as well as several application methods of execution after the trading strategy have been developed using Python and how itcouldbeauseful tool fortheirownpersonaluse. To top it off this year, we had the honour to have specially invited a speaker from QuantInsti, the pioneer training institute of Algorithmic and Quantitative Trading, to discuss the benefits of setting up an Algo Trading Desk, the various automated trading strategies, and the prospects of beinganalgorithmictrader. In conjunction with FX101 as well as FA101, the society is immensely proud to have met with such heart-warming success in drawing students not just from NUS but from other tertiary institutes. Thanks to its resounding response, it provides the QF department to be highly motivated to continue providing new knowledge and experiences topiquestudentinterestininvesting. 24

OUR EVENTS WEEKLY COMBINED MEETINGS Writtenby TingTing,Marcomms Executive NUS Investment Society’s Weekly Combined Meetings serve the function of equipping members with analysis and fundamentalinvestmentaswellasnetworkingopportunities with speakers from various prestigious banks and asset management firms. These weekly sessions are typically kicked off with sharing sessions conducted by the analysts from the research departments, namely Equity Research (ER), Global Macro (GM), as well as Quantitative Finance (QF) where they share more about the latest research reports they have completed and their investments methodology. On top of these sharing sessions, the Equity Research team also carry out financial modeling workshops for the club which expose club members to the various aspects of financial literacy with hands-on activities. The society members are provided with ample opportunities to share personal experiences with each other, whilst building up their confidence in public speaking. At the same time, to promote a dynamic and holistic club, the Operations Departments have also initiated activities for the members to learn and get new skills. Every alternate week, the Marketing and Communications department have organized a basic financial literacy workshop to share knowledges to members who are a beginner to the finance industry. Moreover, they have also initiated a photoshop and illustrator workshop for members to learn more about designing which could potentially benefit students in their schoolwork. This helps to promote our Investment Society as a club that involves members who are all like-minded individuals and share opportunities to learn new things together Apart from imparting technical knowledge, Saturday meetings conclude with a guest speaker. These invited speakers are from well-known investment firms such as Goldman Sachs and TrackRecord Asia. During the engagement, speakers share about their background and experience in the finance industry and also teach skills and insightful knowledge needed to succeed in the finance industry. The speakers provide the analysts with valuable insights on the challenges and opportunities from within the industry. In addition, society members are given exclusive information sessions regarding internship opportunities with such firms. All in all, through interacting with the speakers, members and analyst are able to acquire valuable knowledge regarding the finance sector which will greatly benefitthem intheirjourney intheindustry. 25

CREDITS NUS Investment Society Yearbook 2019 Proudly brought to you by: KENNY WONG JI WEI NUR LIYANA HONG JUN JIE DIRECTOR, 16TH MARCOMMS EXECUTIVE DEPUTY DIRECTOR, 16TH EXCO, MARKETING & EXCO, MARKETING & COMMUNICATIONS COMMUNICATIONS Special thanks to our contributors: Sagar Nilesh Shah (President) Chen Tingting(Marcomms Executive) Low Qi Kang (Alex)(Marcomms Executive) Chen QiuQi(Marcomms Executive) SzeJing Kai(Marcomms Executive) Jin Yuge(Marcomms Executive) Ng Li Yun(Marcomms Executive) Donovan Chua(Global MacroDirector) Lei Yu Chong(Equity ResearchDirector) Nicklaus Ong (Equity ResearchDeputy Director) Ryan Soh (Equity ResearchDeputy Director) Jiangyue (QuantitativeFinanceDirector) Wu Hao (QuantitativeFinanceDeputy Director) Syakyr (QuantitativeFinanceDeputy Director) 26

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