Wednesday, September 12, 2007

COE Prediction: Sep 2nd Bidding

Did you track the last bidding exercise? It was interesting as the quota premiums for Categories A and B were at $16K and $17K at 2pm on Sep 5, 2 hours before the closing of the bidding. After report of the computer gliche resulting in a low Category A quota premium of $8,118 in the previous bidding exercise, many dealers were not taking risk to put in last minute bids and this may have resulted in the spike.

There are 1,444 and 458 unsuccessful bids in the respective Categories A and B. I think some of the dealers may have priced their selling price a little too low and attracted too many orders. Is that a problem for them? No, they can always not put in a winning bid and the order will automatically expire after the stated attempts in the sales agreement. Another common tactic is to ask the buyers to top up for a higher bid. At the end of the day, the dealer will still make their profits; it is just a matter of how much margin they can realize.

With the large number of unsuccessful bids and the news of reduced quota for COEs in the next half year, the demand will keep the quota premium sustained at current level. So here is my prediction:

Prediction on September 12:
Category A: $17,000-18,000
Category B: $18,000-19,000

Verdict on September 19:
Category A: $17,941
Category B: $19,589

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