Price action prediction of undervalued SGX stocks (finance and conglomerates)

• Main Author: Loo, Gan Wee
• Other Authors: Wong Jia Yiing, Patricia
• Format: Final Year Project
• Language: English
• Published: Nanyang Technological University 2021
• Subjects: Engineering::Electrical and electronic engineering
• Online Access: https://hdl.handle.net/10356/149775
• Institution: Nanyang Technological University

Fundamental analysis focuses on a company's financial and business revenues, while technical analysis disregards business fundamentals and focuses solely on price and market movements. Increased market volatility when key events are nearing, prompted for an additional form of news analysis on market sentiments to be done. This study focused on evaluating the 3 different forms of analysis on multiple time periods and timeframes. The research was conducted on finance and conglomerate companies listed on the Singapore Exchange. Effectiveness of fundamental, technical and news analyses were studied from Years 2011 to 2020, with overall win rate and return on equity as performance indicators. A stock ranking system created which encompassed qualitative and quantitative aspects of fundamental analysis was used to separate strong and weak companies into different baskets. The technical strategy was conceptualized to identify trends in the stock market and used technical patterns and indicators on multiple timeframes. Opportunities to scale into trades were supplemented by news analysis related to ex-dividend dates and quarterly financial earnings. Results showed that the strategy created using technical analysis was effective at identifying key entry and exit points. The effectiveness of fundamental analysis was evident from the rise in overall percentage profits and overall win rates when trading on the stronger stocks previously identified as opposed to trading indiscriminately. However, underperforming stocks were unable to match overperforming stocks. In addition, entering trades prior to ex-dividend dates and exiting after taking dividends proved profitable. Scaling in immediately after quarterly reports were announced and exiting within 5 days during the testing period also showed potential for excess returns. Frequency which fundamental analysis should be conducted, best timeframe to conduct technical analysis as well as timings to enter and exit using news analysis are discussed.