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Archive for May, 2012|Monthly archive page

How times have changed since the late 70s (Dividends)

In Financial competency, Financial planning on 31/05/2012 at 6:03 am

No this is not going to be a piece abt the governing PAP.  When I first started work, US stocks paid big dividends , and local stocks yields were “peanuts”.

iShares offers its longstanding MSCI Singapore Index Fund and more recently rolled out the MSCI Singapore Small Cap Index Fund. Both funds are heaviest in financial stocks, at 45% and 51% respectively, followed by 24% in industrials for EWS and 13% in that sector for EWSS.

Singaporean equities tend to have high dividend yields, which are somewhat reflected in EWS’ trailing yield of 2.74%. The iShares Web site shows an SEC yield of 4.14% for EWSS, but the fund is too new to have paid any actual dividends yet. This compares to a dividend yield of 2.01% for the SPDR S&P 500.

Bending low: a journalistic skill that ST teaches students?

In Humour on 30/05/2012 at 6:12 am

When I saw the photo (B7 of today’s ST) that accompanied the headline “Students pick up journalism skills at ST camp”, I did a double take.

There was a huge photo of a young person crouching low, almost kneeling (OK, OK I exaggerate, but only a bit. I tot, “Wow, what a revealation abt what happens at ST”. Err wonder if those allegations abt “sucking or licking bums and sexual organs” are true”?

Well turns out he was crouching to take a photo. Then I tot, bit like posture needed to promote nation-building, and constructive criticism of the government.

BTW, a gd source for gossip in SPH tells me that SPH is finding it difficult to recruit young, smart S’poreans as journalists despite a starting pay of above $3,000 a month. They are too ashamed to work for SPH. So SPH is recruiting young, smart M’sian Chinese and Indians instead. Why not go for PRCs and Aryan FTs? Apparently,they don’t blend into the local scene so easily. Given the anti-FT mood, they could be the subject of the news, rather than the reporting of it.

Facebook: Not in prospectus

In Financial competency, Media on 30/05/2012 at 5:30 am

With its share price falling, time to revisit its prospectus?

http://dealbook.nytimes.com/2012/05/17/facebooks-missing-risk-factor/?nl=business&emc=edit_dlbkpm_20120517

Facebook’s enlightened self-interest approach to running its business is highly unusual in corporate America and may in fact prove impossible to sustain over the long term.

So desperate to slime WP that say this?

In Political governance on 29/05/2012 at 6:50 am

In another of his meaningless analysis pieces, NMP Eugene Tan, wrote in Today abt the PAP and WP “will need to raise their game”. As usual I was skimming thru it on the off-chance that it would contain shumething I didn’t know, something interesting, or a valuable insight. Yup, pigs would usually fly first.

Well today there was this, “The WP would also have to demonstrate that it does not seek special treatment and condone in what I call banal acts of lawlessness.”

Waz this I tot? Turned out to be,  “[T]he WP did not end its by-election rallies on time and overran by 10-15 minutes … extremely challenging for the police to intervene to ensure that the rules governing the issue of the rally permits are observed.”

So very petty. Being more PAP than the PAP. If the police and PAP didn’t kick up a fuss, why should anyone else?

And then this, “Further, in launching a stinging attack on the mainstream media for being a “political tool” of the PAP’s election campaign, the WP did not adequately substantiate its case.

‘Not only was this an attempt to capitalise on the by-election victory to make political points, the WP was also effectively asking the media for nothing but favourable coverage of its party and its candidates.”

Pls leh, WP doesn’t need to substantiate because it is so self-evident that SPH’s and MediaCorp’s coverage was so slanted. My observations on ST’s photojournalism. Another annoyed blogger who juz happens to be a grass-root activist in a PAP ward. I take his presence there as showing the PAP can change, or at least one MP is open-minded.

And this is the NMP who took on two PAP MP lawyers on the issue of prime ministerial discretion to call a by-election. As I wrote then, he was so out of character then.

Trying to move on to ST? After all, today’s ST editorial is pretty decent abt the WP. I could have said most of those things myself. ST’s standards dropping?

“Hank” makes LKY, Li Ka-shing and Warren Buffett look like wimps

In Private Equity on 29/05/2012 at 5:10 am
Maurice “Hank” Greenberg, the 87- year-old former head of American International Group Inc., plans to seek investors to help him fund private-equity deals lasting a decade or more. Starr Principal Holdings LLC, said it plans to raise money from institutional investors such as sovereign-wealth funds and ultra-high-net-worth family offices, without specifying how much.
 
 
He held a 12% stake in AIG valued at about US$21 billion as of March 2006. Sold most of his AIG shares for “peanuts” after the US government took an 8o% stake in AIG during the 2008 financial crisis.
 

Unexpected bad April nos. for S’pore, Thailand: M’sia to follow

In Economy on 28/05/2012 at 7:09 am

On Friday, the Economic Development Board (EDB) said April’s manufacturing output shrank 0.3%  from a year ago, after a revised 3.1% drop in March.

This poor showing surprised economists, whose consensus forecast was for manufacturing to grow 4.1%  and could not be blamed entirely on the 7.6%  fall in volatile pharmaceuticals output. The poor showing is because of falling demand from key markets such as Europe and the US especially for electronics.

Thailand has reported a surprise fall in its exports for April because of falling demand from key markets such as Europe and the US. Shipments fell 3.7% from a year earlier. Many analysts had forecast an increase of more than 3% http://www.bbc.co.uk/news/business-18203209. Remember that Thailand has replaced S’pore as the world’s manufacturing hub for hard disks.

Expect weak manufacturing numbers for M’sia.  It too is a big manufacturer of electronics for export. And Najib is planning an election later this yr.

Hougang: Only up to a point Lucky

In Political governance on 28/05/2012 at 5:27 am

(Or “WP must walk the walk on manifesto, not juz talk the talk”)

Ah so the WP got 62.1% of the popular vote in Hougang, a 3%age point drop from what the WP’s rutting stag achieved: statistically insignificant.  As Yawning Bread put it, “Png’s vote-share was only a shade lower than the 64.8% that Yaw Shin Leong won in the general election of 2011 and hardly different from Low Thia Khiang’s 62.7% in the 2006 general election.”

So let’s move on, shall we?

I agree with Lucky Tan when he wrote, “Vote for PAP men like Desmond Choo and he will fix the little pothole in your estate but you will find yourself unable to retire and financially strained when you get sick.”

And while Png and, Low and the WP are capable of looking after Hougang as well, if not better, than the PAP, I’m not so sure if the WP will be any better when it comes to helping S’poreans retire or coping with the costs of health care, if WP comes into power by itself, or in coalition.

While I disagree with DPM Teo’s comments on Png not being gd enough to be selected as NCMP so why shld voters “gift” him a seat as MP; on Png’s  character; and that the WP took the people of Hougang for granted (WP has “Always been there”even  before Desmond put on long pants), he has some gd points abt WP’s policy flip-flops: his rant below.

In addition to the flip-flops on the benchmarking of ministerial salaries, FTs, and agreeing to the Budget (I didn’t realise all the WP MPs voted for it despite bitching abt it both before and after), the WP has quietly ditched its manifesto call to privatise public transport. In effect, it now agrees with the governing PAP that the current rojak system is the “betterest”. This flip-flop when S’poreans know that the current model ain’t working, and want something better; when the government while talking the talk on the efficency of public tpt being in the private sector*, is pumping $1.1bn and more into the system; and when the WP had tot up of an alternative, long before anyone tot there was a need.   

What else will the WP quietly ditch, and which will not be in the interest of the governing PAP to alert tell us to? Neither party wants to talk abt public tpt nationalisation. The governing PAP wants to avoid it because it would show that it had one dud of a multi-millionaire minister (Raymond Lim) and because it would show that the PAP can do dumb policies. As to why the WP doesn’t want to talk abt it, yr guess is as gd as mine? Maybe it was the price that the WP had to pay to ensure that PM called a by-election in Hougang?

 Or is it a concrete example of what Low said,”Workers’ Party will move on from this election and work together with the ruling party for the betterment of Singapore.”

Be afraid, very afraid of a WP sell-out, when it sniffs power.

So the WP should start showing us that that manifesto calls are to be adhered to or openly dropped, not quietly ditched, and that it will be more open and transparent when it comes to communicating with the public on its internal affairs. Otherwise the 2016 GE will be like the 1996 GE, when voters threw out two SDP “bums”, showing that 19991 was a false dawn. I don’t want another false dawn; I’m in my late 50s.

———————–

Excerpt from Today’s report on DPM’s rant:

Citing the issues of ministerial salaries and foreign workers, Mr Teo, who is also the PAP first assistant secretary-general, questioned the WP’s flip-flop on national issues.

He said: “The WP had previously argued for less foreign workers, but in the recent Budget debate in Parliament, it suddenly changed its mind. The WP now says we should not reduce foreign workers in several major sectors, major industries.”

Mr Teo also noted that the WP had spoken “loudly and fiercely” on ministerial salaries at the election rallies just last year. “But in Parliament this year, they quietly abandoned their position. They gave up their previous drastic proposals, they didn’t explain why,” he said.

Referring to WP chief Low Thia Khiang and party chairman Sylvia Lim, Mr Teo added: “Their top two leaders remained totally silent throughout the Parliament debate.”

Members of Parliament (MPs) from the WP had also unanimously voted for this year’s Budget and “agreed with the (Government’s) measures and programmes” for the year, said Mr Teo. “But now on the rally stage, they’re posturing, making criticisms.”

“Are they changing the tune again, doing the twists, playing their guitars, and singing songs which will give them the most appeal to the audience? But are they speaking honestly – honestly for the good of Singaporeans?”

*Despite Temasek owning 54% of SMRT, and a stat board being the single largest shareholder (12%) in ComfortDelgro.

Temasek: the gd, the bad and the ugly

In Energy, Temasek on 27/05/2012 at 9:27 am

Ang  moh financial commentator says nice things abt Temasek (Bang yr balls SDP, Chris Balding, KennethJ and TRE. I hope TRE reflects that its heloo TJS has never said the nasty things that the others have said abt our SWFs. In fact by saying that S$60bn is “small change”, he implies that they are doing a gd job. But how would he know? He was in the loop over 20 years ago.)

http://blogs.reuters.com/breakingviews/2012/05/09/temaseks-triple-personality-bodes-well-for-returns/

As I said yesterday, our SWFs didn’t do extractive industries presumably because one LKY didn’t understand “miners”, he said a few yrs ago. Gd advice: given this (credit downgrade) a few weeks ago;  and this (billionaire stalker of underperforming US cos) revealed yesterday that he had bought a 7.6% stake in Chesapeake Energy Corp and called for the natural gas producer to replace at least four directors, saying the board has failed “in a dramatic fashion” in its oversight of management).

The background and details on Temasek’s stake: http://www.tremeritus.com/2012/04/29/temasek-flops-again/

Maybe, balls-up like this resulted in Temasek last week naming Boon Sim, former global head of mergers and acquisitions at Credit Suisse Group AG, as its president for North America. He will also work closely with teams to support its interests in Latin America and Europe.

Temasek … said it expects the markets to enter a “period of stress” for the next one to two years amid the European debt crisis, adding risks to investments http://www.bloomberg.com/news/2012-05-22/temasek-says-markets-entering-period-of-stress-in-next-2-years.html.

Thai energy explorer outbids Shell in East Africa

In Energy on 26/05/2012 at 6:29 am

 The oil and natural gas exploration company Cove Energy has accepted a $1.91 billion takeover offer from PTT Exploration and Production of Thailand, which trumps a rival bid from Royal Dutch Shell.

http://dealbook.nytimes.com/2012/05/23/ptt-outbids-royal-dutch-shell-for-cove-energy/?nl=business&emc=edit_dlbkpm_20120523

Our SWFs didn’t do extractive industries presumably because one LKY didn’t understand “miners”, he said a few yrs ago, explaining why GIC didn’t go into miners in a big way to ride the commodities boom.

With ex-general, scholar at helm, NOL still underperforms Maersk

In Shipping on 25/05/2012 at 10:12 am

I was looking forward to comparing the 1Q results of NOL (world’s 6th largest container shipping co) and Maersk’s container division (largest in the world) because as a holder of a few NOL shares (“peanuts” but gd yield) I was interested in seeing how ex-defence chief Ng Yat Chung (and ex-Temasek senior MD) would perform. Mr Ng took over as CEO on I January 2012. He was made made executive director in April 2011. The retired CEO, a shipping man thru and thru, is now an adviser to the CEO.

At the time I asked, “Wonder what relevant experience he brings to the shipping co? I can only think of the experience in a managing big complex organisation. But then I couldn’t think of any reason for his becoming a senior MD at Temasek.”

Well NOL, and Maersk’s container division both came out with unexpectedly very bad sets of results, showing that the container shipping industry is in worse shape than expected with a weak global economy, expensive fuel and plenty of capacity coming on-line.

But NOL’s numbers were still worse than Maersk despite its focus on moving stuff between East Asia and the the US. Maersk also moves a lot of stuff to from East Asia Europe, in addition to the US.  As readers will know, the US economy has performed better than the European economies in 1Q 2012.

Maesrk’s revenue was up 7% to US$6.31bn, while NOL’s revenue fell 3% to US$2.38bn. As to losses, NOL lost US$254m, while Maersk lost US$537m. Simplisticly, if Maersk had NOL’s revenue, it would have lost US$203m, i.e. 20% lower. But then along the same lines, NOL shld have made money, not lose money (US$10m) in 1Q2011.

Whatever it is, having a scholar, ex-senior MD from Temasek, and retired general as CEO of NOL, is of no benefit whatsoever when it comes to shareholder value. SIGH.

Let’s hope it’s different in the cabinet, where we have as newbies one ex-admiral and one ex-general, both of whom are scholars.

Maybe relevant, related post?

http://atans1.wordpress.com/2012/05/11/smrt-mgt-failures-what-does-it-say-abt-saf/

Will Hougang make the PAP moan the inflation blues, not joke abt it?

In Economy on 25/05/2012 at 5:41 am

(Or, “Isn’t high inflation and misrepresenting its effects a local issue, Desmond, Tharman & PM?”)

Update on 27 May: The PAP are singing the blues! Gd for you 62.1% of voting Hougangers))))

Should rich kid Tharman (he from ACS) and poor RI  boy, but now multi-millionaire, Hng Kiang (The model examplar that ministerial performance is irrelevant so long as the voters don’t get too upset?) be punished by the voters of Hougang for their tasteless jokes on inflation? Latest stats: inflation at 5.4% (even higher than March’s 5.2%)

Deputy Prime Minister Tharman had said the “average Singapore” will not be affected by the high inflation after the latest set of Consumer Price Index (CPI) figures for March was announced only http://atans1.wordpress.com/2012/05/03/telling-coc-jokes-ministerial-coc-needed/.

Minister Lim Hng Kiang when explaining in Parliament why most of  will not be ‘directly’ affected by inflation said, “The two largest contributors to CPI inflation are expected to be imputed rentals on owner-occupied accommodation and car prices. Together, they will account for more than half of the inflation this year. As the majority of resident households in Singapore own their homes, they do not actually incur rental expenditure. Likewise, the majority of resident households will not be directly affected by the rise in COE premiums as new car buyers make up a small proportion of all resident households. “

And a few years ago, when the price oil rise was leading to higher inflation, he recommended that people switch to “cheaper” brands, as if people don’t know that already.

According to Jentrified Citizen:Every average person whom I have talked to from the aunty who makes my favourite teh tarik to the taxi-driver say that they are feeling the pinch of inflation every single day. Most Singaporeans who pay their own bills would know just how hard inflation has hit them. The list of prices increase seems to get longer every day – the infamous housing and car/COE prices, the higher charges for public transportation (yes including taxis as they are a commonly used form of public transport),  petrol, car-parking, healthcare, vitamins, medicine, groceries, food and electricity and water bills.

They are not trying to be comedians, I think and hope.  Trying to be fair to them, their comments show the difficulty of representing complex arguments over policy in terms that average voters can get their heads around. Problem is that they are so out-of-touch that they end up insulting our intelligence.

But I’m sure by DPM Teo’s, extremely high standards (DPM, Png made “an honest mistake”, he is no lawyer or scholar, juz one of the “little people”, so a little inaccuracy is surely acceptable?) , they would not be men of intregity, if they were not PAP cadres and leaders.

United Engrs and Desmond Choo

In Financial competency, Humour on 24/05/2012 at 9:02 am

When a stock is at a deep discount to RNAV, there are always some hard-core lovers whose love is never returned: bit like Desmond Choo’s love for Hougang voters who rejected him decisively in 2011 and who will reject him again soon.

http://sgstockscreener.blogspot.com/2012/05/united-engineers-outperform-by-cimb.html

What I wrote abt CIMB’s love for it in 2009

http://atans1.wordpress.com/2009/12/17/the-perils-of-buying-on-nta-calculations/

United Engrs is another tan ku ku stock like Haw Par. Except that the controlling shareholder behind Haw Par is the Wee family behind UOB. Behind United Engrs is Ms Chew Gek Khim. Her track record is unproven, her bet on Straits Trading has yet to pay off. Her chief claim to fame is that she is the granddaughter of Tan Chin Tuan (Tony Tan’s uncle), a mythical figure in local business.

I mean she could turn out to be like Yaw, disappointing investors, rather than the people of Hougang.

Hougang: Random Tots & Facts

In Humour, Political governance on 24/05/2012 at 6:16 am

Wonder why Bill Ng, chairman of Hougang FC, the “Cheetahs” aka the “Hougang Hooligans” (youth team fought with SAF youth recently reinforcing club’s rowdy branding) is not endorsing either candidate? Endorse PAP and get money but lose supporters, endorse WP and Hougang Stadium will be off-limits. BTW, A S’pore family trust is part of the consortium that won the bid for Glasgow Rangers. Bill Ng’s family trust? He is part of the Ong family of stockbrokers (maternal side unfortunately for him).

Wonder if voters will remember that from 1991 to polling day in 2006 GE, the PAP were not “Always there for you”. In fact, it was trying to turn Hougang into a slum whose inhabitants would repent for voting WP. Remember one’s GCT’s threats in 2006 GE campaigning?

We might as well ask the PAP to account for why, if it felt Mr Desmond Choo was such a good candidate, was he not roped into a GRC team and allowed to enter Parliament by riding the coat-tails of a cabinet minister, Ng E-Jay, Sgpolitics.net. Taz why WP was so dumb to respond in way it did to DPM Teo. Shld have left it to “inhabitants of cowboy towns”.

Anyway no harm done, even if WP “malfunctioned” Wonder if TKL, KennethJ, GSM and Lina Chiam were sacked from PAP campaign team, and they “moved on” to WP?

Hope you eaten the free teochew mui. Might no longer be available from this Sunday.

Saw ST’s photo of Png “the dummy” between Low and Sylvia in Wednesday’s ST. A gd explanation why ST has reverted to “PAP is S’pore, S’pore is PAP” mode. Writer is a grass-root activist in Taman Jurong. With a  grass-root activist like him, the PAP does not need enemies.

Three cheers for Eric Tan who came out to say that Png told him before meeting to choose NMP NCMP that he didn’t want post. Credible witness to rebut DPM Teo’s rants on Png’s untruthfulness as he bears no love for Low and other CEC members. He resigned in a huff when he was passed over as NMP NCMP. Low has admitted indirectly that he had promised Eric his support for post by admitting he changed his mind. Eric was team leader in East Coast GRC, and is a friend.

I don’t think that DPM Teo realises that his nitpicking and parsing of Png’s words shows the gap between Teo the scholar and rich kid (dad was a senior bank executive at OCBC who helped me, and who later became CEO*); and Png, the ordinary S’porean. A scholar always chooses his words carefully, like a lawyer, accountant or banker: while the non-scholar uses words more casually, like most of us “lesser mortals”.

——

*and chairman (updated)

Private equity in Asia: Chasing investors

In Private Equity on 24/05/2012 at 5:10 am

Fifty-three funds were attempting to raise a total of $22.3 billion to invest exclusively in Asia as of April 2012, according to data compiled by Preqin Ltd., a London-based research firm.

Northern ASEAN: Dark clouds threaten the sunny weather

In Emerging markets on 23/05/2012 at 7:09 am

Thailand’s recovering from late last yr’s floods. GDP up 11% Q on Q. http://www.bbc.co.uk/news/business-18141171.

But inflation is a problem that the govmin is trying hard to solve, not make sick jokes* like our finance and trade ministers (also governor and deputy governor of central bank). But then if Thais get angry, they riot, not juz bitch anonymous online abt it.

(BTW, the int’l manufacturing hub hard disk drive industry is now in Thailand http://www.bbc.com/news/technology-17299249. It was once here.)

Money will pour into Burma but the country is ill-prepared to cope with the resulting floods http://blogs.reuters.com/breakingviews/2012/05/18/myanmar-must-brace-for-post-sanctions-cash-deluge/

——–

*Because more than half of the headline inflation rate of 5.2% came from higher COEs for cars and the effect of higher market rent on houses, most S’poreans would not be affected by inflation. The vast majority of Singaporeans who already own their homes and are not buying new cars would not feel the effects of these sharp increases. And the increase in prices of daily necessities and essential services such as food and clothing have actually been much more moderate at 3% or lower.

PngGate: Nothing more than a distracting sideshow

In Political economy on 23/05/2012 at 6:37 am

Ah so, so selling one’s soul is pointless. The person who leaked the WP’s minutes of meeting which showed that Png had misrepresented when he said he had removed his name from the ballot must be banging his balls in frustration. Png and WP cocked-up in the handling of DPM’s Teo comments abt Png, but thaz abt all. I doubt this would affect the voters views, even though the constructive, nation-building media (see today’s ST) is bitching about “dishonesty”, being more PAP than DPM Teo.

I have a shrewd guess on who leaked it. His hatred of Low has perverted the character of a decent, fair chap, turning him into a “I hate Low” zombie. I wish him a speedy recovery from his fixation.

On a separate issue, what I found most interesting abt the minutes was that it showed that Eric Tan had decent support for his bid to be NCMP but that GG had more votes. So Eric had supporters on the central executive council who appreciated his hard work and wanted to recognise his efforts. And not all the WP CEC members are cold, rational, calculating machines (Let’s face it, even as Eric’s friend, I think that giving the post to GG was in WP’s long-term interest, and still do despite GG’s “C-” performance in parly), or Low’s acolytes.

Back to Png and WP. WP has “malfunctioned” again, despite, or because of, having three lawyers as MPs. I hope the WP starts repairing and oiling its machine ASAP before something serious happens like getting disqualified in an election (2001). Both in the handling of YawGate and PngGate it made silly, avoidable mistakes. WP needs to get the machine to function as it did in 2006 (Garbra Gomez’s antics notwithstanding: BTW he took responsibility for the 2001 mess-up) and 2011 GEs.

Update

Nice to hear that Eric Tan has confirmed that Png told him before meeting that he didn’t want NCMP post.

Euro crisis R perpetual securities & our local banks

In Banks, Financial competency on 22/05/2012 at 9:45 am

(or “The next, next disaster for retail investors & DBS”)

While reading this , I saw Calvin Yeo’s reply to a question on why corporates were issuing perps

 … one reason is to diversify the sources of funding. Another reason is that the market cannot withdraw the financing facility like the bank can in a credit crunch. Investors also have generally less bargaining power than the banks, so it is harder for them to take action against the issuer or place restrictive covenants. As you see, the terms of the bond are drawn up by the issuer rather than the lender. For most loans, banks tend to be the ones giving the terms of the loan.

Another main reason is that banks don’t normally issue perpetual loans, you would have to issue perpetual bonds or preferred stocks for that.

On the issue of diversification, most European banks have been cutting back their lending outside their home markets because they are shrinking their balance sheets to meet the new capital rules. No-one wants to invest in them (on terms acceptable to the banks) because of the Euro crisis.

In Asia, the French banks (like Soc Gen, BNP and Credit Agricole) were once very big USD lenders, the currency of choice, to corporates. They have now withdrawn*. So corporates that used them, now have to find other lenders. Seems to have found a new source of suckers in the retail mkt here.

See related post on central bank’s concerns.

Asian banks (including our DBS, OCBC and UOB) are increasing their USD lending to these corporates as the European withdrawal have improved USD lending margins (the Frogs were very, very aggressive) .

Let’s hope DBS doesn’t get too aggressive in USD lending. Not concerned by OCBC’s and UOB’s increased lending (I own Haw Par shares as partly as a play into UOB). They have conservative controlling shareholders and mgt (I’m assuming the newish CEO of OCBC is as conservative as O’Connor**). Can’t say the same abt the cowboys at DBS and Temasek, though DBS’s chairman and CEO have reputations as conservative bank executives. The Bank Danamon deal shows otherwise in my view.

——

*But European banks still have lots of exposure to S’pore or rather the other way round. See chart in http://www.zerohedge.com/news/why-stability-stalwart-singapore-should-be-scared-if-feta-truly-accompli. Nothing to worry abt as most of this exposure is not to locals because it’s offshored in turn. Do remember that S’pore is a major global financial market.

**Anyway someone in OCBC is a tough taskmaster. O’Connor earlier this yr said that working in OCBC for 10 yrs felt like 40 yrs. No wonder Tony Tan and Yong Pang How (remember him?) preferred to be cabinet minister and chief justice respectively. And remember O’Connor was from Citibank, not known for its relaxed style.

Hougang: ST photo coverage

In Political governance on 22/05/2012 at 5:35 am

Don’t know whether you noticed, but ST has, in my opinion, a very subtle agenda in its photo coverage. Practically every photo of Desmond Choo shows him with “lesser mortals” (i.e. the “little people” he, and his bosses, claim he (and they and the PAP) wants to help. But when it comes to Png, the photos are a mixed bag. Quite a number show him with party leaders. There was one that showed him in the background, clearly visible, but in the foreground was Low. And to make it worse for Png, there was beside it, a big photo, of Desmond Choo with a “lesser mortal”: Png is Low’s proxy but Desmond cares for the people seems to be the message.

And on Sunday, there was a photo of Desmond, friend of the “little people”, juxtaposed with one of a “triumphalist” Png waving to WP supporters with party leaders in the background.

All in all ST is getting more subtle. Remember in 2006, it was caught “fixing” a photo on the size of the crowd at a WP rally. It was Alex Au who pointed out that the shot gave a misleading impression of the size of the crowd.

As for Today, its photos of Desmond also tend to show him as “Desmond the compassionate, caring”. But there isn’t the attempt to paint Png as a Low’s “proxy”.

Buy yen: pros & cons

In Japan on 21/05/2012 at 6:04 am

“The idea that the yen is a safe haven is about the most unsafe safe haven I’ve ever heard of. This is a country whose fiscal arithmetic makes Greece look like Switzerland,” independent strategist David Roche told CNBC.

But Eisuke Sakakibara, Japan’s former vice finance minister, also known as “Mr. Yen” said that while it was true that Japan’s government debt was 180% of gross domestic product, its household financial assets were about 240 percent of GDP.

“We will not have a financial crisis for another four-five years”.

While many “experts” say the market was likely to try to push the yen higher to test the Japanese authorities’ willingness to intervene, as the Swiss central bank did when it believed the Swiss franc’s strength was hurting exports. But Sakakibara said Japanese exporters could survive with a yen around 80 for the dollar and 100 for the euro, and only if it appreciated in the low 70s or 60s against the dollar would it become a problem.

“I don’t think it will go down to 72, but it is likely that the yen-dollar rate will go into the 70s and probably will hover around 78, 79 for a while and that wouldn’t be a major blow to the Japanese exporting companies,” he said.

“Japan is a much bigger country than Switzerland and we cannot do what Switzerland has done,” Sakakibara said, adding that intervention was unlikely to take place at the rate of 78-79 to the dollar but only if the yen goes as high as 72.

Heck, still to S$.

More bad news for Noble, Olam and Wilmar

In China, Commodities, Logistics on 21/05/2012 at 5:48 am

The FT reports that Chinese importers are requesting trading houses to defer shipments of commodities. Sometimes they have broken agreements by refusing to accept deliveries.

Commodities specifically mentioned are iron ore and thermal coal (Noble’s specialities), cotton (Olam speciality) and soyabeans (Wilmar is world’s boiggest crusher). No wonder the price of these stocks keep weakening.

BTW, until I read below, I didn’t realise Noble is a big player in coffee and cocoa (but revenue is “peanuts” compared to iron ore and energy).

http://seekingalpha.com/article/572831-commodity-trading-firms-bunge-and-noble-offer-investors-good-value

LOL: Expelling Yaw “took courage”

In Political governance on 21/05/2012 at 5:33 am

Well if that is how Low wants to spin it, then I’m putting him into the same category as Tharman and Hng Kiang who tell us that 5.2% inflation doesn’t affect us “lesser mortals” because we don’t rent apartments or buy new cars.

The WP expelled Yaw because he was becoming a liability to the WP and, in particular, to Low his mentor. That doesn’t require courage: only selfishness and self-preservation.

And he became a liability because of the cack-handled way the WP handled the allegations of his rutting. When the rumours became public instead of either coming out to say that the matter was a private one (and thereby incurring the anger of the moralists*) or saying that the WP was investigating the matter, the WP opted for stonewalling silence and evasion (Examples**). This from a party that fought a general election on the need for transparency, openness and accountability, and the need for a first-world parliament.

When the noise got extremely loud, the WP announced Yaw’s expulsion from the WP. Low explained, “[A]lmost a month had passed between the first media allegations and the WP’s decision to expel Mr Yaw Shin Leong. Mr Yaw continued to remain silent on the matter, and refused to account to the WP Central Executive Council (CEC). The WP had no choice but to invoke clause 22(a) of the WP Constitution to expel him.”

This reduced the noise considerably, as otherwise rational netizens, and the usual WP and Opposition groupies rushed to blog that the WP was “whiter than white” or at least “whiter than the PAP”. And that Low was a strategist, the equivalent of Mao, Sun Tzu, Sun Pin, Chuko Liang or Fan Li. (One of these days, I’ll blog on why Low is not a great strategist. But I’ll wait until he is riding the crest of a wave again: if the WP retains Hougang with a 70% majority.)

When ex-PAP MP Ho Kah Leong bitched in Lianhe Zaobao’s forum page that Low should take responsibility for the matter,instead of his usual silence when attacked (remember his silences in parly when asked to state his views on certain issues), Mr Silence became Mr Chatterbox, replying, “Even though I was familiar with Yaw Shin Leong’s background and I have met his family and attended his two wedding ceremonies, I have no way and no authority to inspect his private matters and personal life. I am a Member of Parliament, not a private investigator! Ho … said I should take responsibility for the Yaw … saga. May I ask how I should take responsibility?”.

Well he may not be a “private investigator”, but having worked with and mentored Yaw for many a year, he has to accept the responsibility of being partly responsible for choosing Yaw to defend Hougang for the WP. He also has to accept part of the responsibility of the WP’s stonewalling silence and evasion. Finally as leader of the WP, he has to accept responsibility (albeit partially) for a systems failure. “The Workers’ Party has a system to select its candidates,” he said, so that Yaw could become a candidate shows some flaw in the system surely? PM is right to point this out, though much gd that would do to help Desmond Choo’s campaign.

All in all, Low’s performance was less than satisfactory, and he should juz “shut up and sit down”, not try to spin it to his or WP’s advantage.

Especially as no lasting damage has been done to him or the WP. Certain ex-WP members were crowing abt Low’s imminent fall. They are now banging their balls in frustration.

They underestimated the goodwill he has from S’poreans, even from critics like me (Even I have said nice things about him). It will take a lot of mistakes to make him lose that goodwill. S’poreans will readily forgive him, or give him the benefit of the doubt. Remember, S’poreans were very forgiving of the PAP, when they perceived it as the equivalent of a bad-tempered and mean hawker who sold delicious food at very reasonable prices, while giving his enemies food poisoning that sometimes hurt accidentally an innocent customer. Even after the food ceased to delicious or good value, S’poreans supported the PAP. In economics, this is called “stickiness”. Low now has stickiness.

——-

*But the WP would be tapping a new source of voters: the New Paper recently reported that 20% of Singapore women cheat on their husbands based on a survey done recently. And as Lucky Tan said, “For husbands the number is likely to be worse – you can take the 20% and double or triple it.”

**

– “if it is rumours …” (Yaw),

– “You said yourself that these are rumours, why are you still asking me?” (Low himself), and

– “We have to think carefully about our response” (deputy treasurer of the WP, a Mr Png).

These comments left me wondering if the Law Minister had been moonlighting after his pay cut, or if MP Baey’s PR firm had been advising the WP.

I/C security: Dumb, non-answer from govmin agency

In Humour, Political governance on 20/05/2012 at 9:29 am

“The national registration identity card (NRIC) is an important document used for identification purposes. NRIC holders have the responsibility of safekeeping their NRICs and the information on it to avoid being potential victims of crime.”

What the FISH!

Same agency (or is it its predecessor?) also says that when companies etc ask for our i/c or the i/c’s number, it’s contractual, nothing to do with the government. But given that every business wants i/c number for anything (even for lucky draw) , and every security guard and dog, requires us to provide the i/c to enter “secured” premises, how can “NRIC holders have the responsibility of safekeeping their NRICs and the information on it to avoid being potential victims of crime”, Koh Wee Sing, Head, Public & Internal Communications, Corporate Communications Division, Immigration & Checkpoints Authority, pray tell us?

Maybe he is practicising to become a PAP candidate MP at the next GE? Remember Kate Spade, and “Fool me” Foo and Puthu the FTs? And Tharman, and Hng Kiang and their tastless jokes on inflation?

Friend who was from ST and MediaCorp who joined the PR industry (Yup, he has been always working for the Dark Side despite protestations that he is an idealist and do-gooder) and while in PR worked on stat board accounts, told me that it takes 25 drafts to finalise a media release and the result is always as per first draft prepared by the stat board. What a waste of money.

SMRT: OCBC further justifies its “Hold” call

In Infrastructure on 20/05/2012 at 5:16 am

Remember that with the exception of JP Morgan and OCBC, all other brokers are calling a “sell” on SMRT. Only Morgan And OCBC were SMRT bulls.

Share price has held steady since results

As for SMRT’s share price, it has held steady despite initial selling pressure following its weak FY12 results, and has managed to outperform the FTSE STI Index over the past two and a half weeks (-0.9% vs. -5.3%). While the COI continues its public hearings, we deem the possibility of further sharp sell-offs to be remote as SMRT services and its operational cash flows remain in demand and resilient.

Maintain HOLD

We reiterate our belief that SMRT will not have difficulty addressing its higher capital outlay requirements given its existing net cash position and available MTN programme, and leave our conservative 60% PATMI dividend payout ratio estimates unchanged. Maintain HOLD with a fair value estimate of S$1.71.

http://yieldstocks.reitdata.com/2012/05/17/smrt-ocbc-3/

Hougang: PAP, scared huh?

In Humour on 19/05/2012 at 7:06 am

I juz read that the PAP has not yet announced rally dates, and that Desmond Choo said he would announce his rally dates “in due course” and he would have “as many as needed”.

Juz wondering if PAP scared that no-one will turn up, and that ST cannot help “fix” the pixs of the rally crowds.

Now this is going to cost the PAP dear. “We see ourselves as a multicultural Hougang. It’s not going to be just a Chinese place, a Teochew place, it’s a place for everyone to be in,” said Choo. The Teochews in Hougang, or so I’m told, see it as Teochew land, though they have no problems with other Chinese or races living there.

And the other dumb thing was that he said it to a Malay audience (7% of Hougang) who turned against the PAP in 2011, costing the PAP Aljunied, despite the PAP promising to make aMalay jnr minister standing in Aljunied, Parly Speaker if PAP won Aljunied.

He shld have tried an Indian audience, given the prominence that TOC has given to allegations by an ex-WP MP candidate that Sylvia Lim made an anti-Indian remark. The WP denied she made the remark and even our constructive, nation-building local media reported the denial. Not so TOC. It followed up the initial statement by said Indian by another statement where, among other things, he said that he did not accuse the WP of being racist. Right, and he is as white-skinned as a Chinese beauty from Suchou.   

Keep us entertained Desmond.

Call me: Software powers a Philippines success

In Emerging markets on 19/05/2012 at 6:22 am

(Or “Why the Philippines is the country to watch”)

Last year, with more than 600,000 call centre workers, the Philippines officially overtook India as the world’s call centre capital.

If you phone up to book a flight, buy a theatre ticket or complain that water is cascading out of your washing machine, you’re now more likely to speak to a Filipino than an Indian.

The Philippines has a number of obvious advantages when it comes to call centres. Wages are low and most Filipinos speak English in an accent which, given the American colonial influence here, is easy for US customers to understand.

Filipinos also pride themselves on being approachable and friendly – a trait which is essential for speaking to strangers on the phone every day.

But its also high tech software that plays a big part.

http://www.bbc.co.uk/news/business-18061909

But the Filipinos are ambitious. Going for Business Process Outsourcing

The Philippines may have more call centre agents, but India still has more BPO employees – and every year a great proportion of them work in the more lucrative and more skilled non-voice-based services.

Looking at the returns, it’s easy to see why the Philippines wants to follow India down this route. In 2010, India’s overall BPO revenue was $70bn, compared to just $9bn in the Philippines.

A move away from voice-based services will need more staff, more training and more hardware.

But Jojo Uligan, head of the Contact Center Association of the Philippines, is bullish about the future.

His projections show the Philippines more than doubling its BPO employees by 2016 – from about 600,000 to 1.3 million people. Take this projection with a latge pinch of salt, Filipinos love to talk big. But the trend is right.

Hougang: Why PAP’s sliming will widen its losing margin

In Humour, Political governance on 18/05/2012 at 5:46 am

(Or “Is TKL, GMS or KennethJ running the PAP’s Hougang campaign?”

PM set the tone of the PAP’s campaign by saying in his prime ministerial statement* announcing the by-election: In January this year, news surfaced of personal indiscretions by Mr Yaw … The WP first kept totally silent, then supported Mr Yaw, and then three weeks later suddenly expelled him from the party. Until now the WP has not given Singa­poreans a full and proper account of what happened, or why it acted in this way. Mr Yaw …  has said nothing, either to explain or to apologise for his behaviour, and has reportedly left the country. Both the WP and Mr Yaw have let down all those who voted for him.

He is factually correct but being factually correct will not convince any of the 65% of voters who voted WP in 2011 to vote PAP. It might even cause some of the 35% that voted PAP to vote WP. In the days before new media, with the constructive nation-building local media parroting the theme of  WP “letting down” the voters, PM’s sliming would be effective.

But this is the age of Web 2.0 and anti-PAP netizens are reminding other netizens of the  following points and netizens who are not PAP friendly (the vast majority) will likely use these as talking points when conversing with their less internet savvy parents and other relations, and friends:

– The PAP too has “black sheep” MPs who “let down” voters. These  include ex-ministers Tan Kia Gan, Wee Toon Boon and Teh Cheang Wan. Then there is a Malay MP (whose name escapes me) and Desmond Choo’s uncle (and his “inspiration”)

– Choo Wee Khiang, Desmond’s uncle is a “let down” par excellent:

  — while a PAP MP, he was suspended from his golf club for intentionally hitting a golf ball at a flight in front of his group;

  — then he said in parly there were too many Indians in little India that he needed light for which he was censured by parliament;

  — in 1999, he was charged, convicted and jailed for cheating; and

  — he is again being charged. When president of Singapore Table Tennis Association, he is alleged to have committed three counts of corruption and one count of criminal breach of trust.

(And Goh Chok Tong asked us to forgive him and “move on”? Presumably because he was a PAP MP?)

Despite this really black track record, he is a role model for Desmond, “He has always been a source of counsel … About his past, that’s history, we look ahead. Whether that has stopped him from being an inspiration to me, never”.

–  One can reasonably make out the case that Desmond Choo’s uncle will inspire him to “attack” other golfers, make racist comments and cheat people. Perhap’s Desmond’s pledge “to be a ‘independent and objective voice’ for residents in Parliament if elected – even if it might mean differing from the government” was inspired or counseled by uncle Choo the cheat? There is such a thing as the party whip? And that he would make sure Hougang remains intact “as long as I’m here”. How can he promise this when he is not a senior PAP leader? Now, “So do not mix up the democracy part with providing alternative voices and the real purpose of this by-election, which is that Hougang residents need somebody to take care of them.” So very much like the cheat Uncle Choo.

– Raymond Lim, when he was transport minister, let down all those S’poreans and FTs who rely on the public transport systems especially MRT users.

– Mah Bow Tan, when he was HDB minister, let down young S’poreans who wanted her very own affordable HDB flat.

– the then DPM Wong, who let down S’poreans, over the escape and failure to recapture a terrorist suspect.

Add to that, remember the PAP’s boast that the “PAP and the state are one”? (Or shumething like that). Well two senior ranking Home Team members were investigated (results pending) by the Corrupt Practices Investigation Bureau for corruption and “cheating” on their wives. And what abt the ex-principal, scholar-teacher, ex-stat board lawyer and naval officer charged with sexual misconduct with a minor?

All in all, being negative abt WP, Low and Yaw doesn’t seem to be a gd idea.

Anyway, the campaign seems to be run by the likes ofTan Kin Lian, KennethJ, Goh Meng Seng, George Yeo and Lina Chiam. It is so dysfunctional and incompetent.

Examples:

– Early last week, CNA reported, “Prime Minister Lee Hsien Loong has said the Hougang by-election should not distract the country from focusing on national priorities and building an inclusive Singapore.”

But then, The by-election in Hougang is strictly about choosing the MP who can best help its residents solve their problems, said Deputy Prime Minister Tharman …‘This by-election is a local election,’ he stressed at a press conference held to introduce PAP candidate Desmond Choo, ST reported last Friday.

Is Tharman saying that the voters of Hougang should not think about “national priorities and building an inclusive Singapore” i.e. national issues when voting?

– Then we had this https://www.facebook.com/#!/photo.php?fbid=419238791433672&set=a.317075431650009.80936.315021665188719&type=1&theater

– And Desmond Choo telling us he didn’t want PAP big-shots campaigning for him, when they were flanking him at a media conference. The latest is that he said he would readily welcome support from his party’s senior leadership. Make up yr mind boy!

He also seems to have altered his appearance. Get a photo of Yaw and compare it to a recent one of Desmond: to my eyes Desmond has adopted Yaw’s glasses and hairstyle. Trying to get the gals, Desmond? Wife only god for cooking?

Finally what could the other DPM be thinking when he suggested, imitating, an old opposition witticism that voters should vote PAP because then they will get both the WP and PAP helping them. Is he implying that if the PAP loses, the PAP will no longer be “Always Here” for the voters of Hougang. Or did he run out of things to joke about? Or out of something original to say?

LKY must be frustrated at the way the campaign is being run.  Things were better run when he was the PM.

BTW, wondering where’s the ISD arrests? So asking for the ISA to be abolished is a distraction.

———

*Err isn’t it unprime ministerial to use an official government statement to try to slime people that oppose the governing PAP?

.

Reits R financial engineering

In Financial competency, Property, Reits on 17/05/2012 at 10:52 am

Reits have a new tool to juice up returns: perpetual securitiesor perps. Could “leverage up” without “debt”. Shld not technically use the word “bonds” even though they are effectively bonds.

http://www.todayonline.com/Business/Property/EDC120504-0000036/Perpetual-bonds–A-boon-to-Singapore-REITs

Could be burps if shumething goes wrong.

The central bank is worried that retail investors may not understand perps*. I’m worried reit managers may be seduced by investment bankers to use perps indiscrimately. Us investors get shafted. So invest in reits where the sponsor is big, stodgy and conservative (like F&N, or AMP), and has a big stake in reit.  If sponsor doesn’t meet the first criteria, think long and hard. I did in case of LMRT, and bot in.

Update: Comments on ST article abt central babk’s stance.

———————————–

*Bankers said MAS officials had voiced their concerns over retail holdings of perpetual bonds during at least two informal meetings in recent weeks.

The central bank’s scrutiny is preliminary and there is no suggestion of any wrongdoing on the part of the banks or companies involved in the recent flurry of perpetual bond issues. But the discussions show that the regulator is worried individual investors may be taking on too much risk without a full understanding of the product.

http://www.todayonline.com/Business/EDC120515-0000049/Perpetual-bond-rush-causes-alarm-in-Spore

MIIF & FCT: Useful updates

In China, Property, Reits on 17/05/2012 at 6:51 am

Never summed up the courage to buy MIIF because although it is a China infrastructure play, yirld is super, and MIIF is net cash, its underlying investments are up to their eyebrows in debt: could affect MIIF’s payouts, NAV and price. But chk out for yrself  http://www.investmentmoats.com/money-management/dividend-investing/amfraser-have-some-seriously-optimistic-cash-flow-projections-for-miif/

For the working stiffs who got cashflow from day jobs. Not for retiree who gambled his cashflow.

 CIMB likes Frasers Commercial Trust I own shume.

Update: DBSV likes FCT too http://sreit.reitdata.com/2012/05/18/fcot-dbsv-3/

What a sick joke on Olam

In Commodities on 16/05/2012 at 3:12 pm

Stock has collapsed today because analysts warned of cuts to full-year estimates after the commodity trader reported disappointing earnings  (Q3 net profit falls 22.5%  to S$98.7 million) and warned of a weak outlook.

The sick joke is that 0ut of 24 analysts tracking Olam, 18 had a buy or strong buy rating, four rated it a hold and only two had a sell rating, according to Thomson Reuters data as of Tuesday (yesterday).

Two examples of how ST covers FTs

In Media on 16/05/2012 at 6:03 am

(Or “Why misbehaving FTs should be glad that they are still alive” or “Yaacob’s “Three steps” to Heaven”: Analysing Step 3″)

Is this what Yaacob wants the constructive, nation-building local media to teach bloggers: FTs are never ever in the wrong?

Sorry, some background first.

There are three steps that Yaacob wants taken to tame “cowboy towns”:

Step 1: “The Internet community creates a code of conduct for responsible online behaviour”

Step 2: “Citizens set up websites that offer constructive viewpoint” i.e. he said that the best way to go is to encourage other sites to emerge, “that can continue to offer constructive ideas and useful suggestions”.

Step 3: “Major media cos could help set the right tone online”

(I’ve covered Steps 1 and 2 here and here’s my analysis of step 3. Yes I promised it yonks ago, but my examples would have been historical. These examples are contemporary.) 

In the space of about a week, ST carried two sets of stories where FTs were portrayed as being in the right despite evidence to the contrary. (Note I’ll be linking to non-ST reports because ST is behind a pay wall.) 

First, even though M’sian TV showed (a M’sian friend told me)  a video of FTs from S’pore misbehaving, before being beaten up for their pains, not shown, ST never carried that version. It had earlier reported the following : report from M’sian Star copied bt TRE http://www.tremeritus.com/2012/05/12/sg-expats-claim-assault-by-bodyguards-of-royalty-off-johor-island/

Then there is the report on an accident where the PRC driver of a Ferrari, a taxi driver and a taxi passenger died. The ST story seemed to me to defend the Ferrari driver and flaunted his weath. I’m not the only one.

So this is what Yaacob wants from a Coc?

Apart from ST’s reporting which shows that the constructive, nation-building local media’s objectivity when covering FTs, the Johor incident shows that some ang moh FTs are so used to misbehaving here and getting away with it (remember the Suntec incident?) that they do the same when they visit M’sia. They think they can get way with annoying Johor royalty because they think ang moh tua kee. They shld be glad that they are still alive to tell us their tall stories.

Felda’s cornerstone investor: Louis Dreyfus

In Commodities on 15/05/2012 at 10:34 am

Commodities group Louis Dreyfus has agreed to take a minority stake in Malaysian palm oil firm Felda, it said on Monday, conditional on a successful June stock market float for Felda. The amount could be US$150m.

http://www.reuters.com/article/2012/05/14/us-dreyfus-felda-idUSBRE84D0XG20120514

Louis Dreyfus Commodities told FT it was planning to take part in the wave of consolidation among agribusinesses, unveiling a US$7bn warchest, underpinned by cashflow and the trader’s first access to capital markets in its 160-year history. It is likely to raise US$500m in bonds soon.

The farm commodities trading giant, which earlier this month agreed to buy US sugar refiner Imperial Sugar for US$203m including debt, said it was to spend US$7bn building assets and buying companies, following investment of $4.9bn in the 2006-11 timespan.

It plans to move from middleman to a vertically integrated trading house: like Wilmar. Seems to be the fashion. Olam is doing this too.

Update on !7 May 2012:

Fidelity and Hong Kong-based Value Partners Group have agreed to become cornerstone investors of Felda Global Ventures Holdings’ US$3.3 billion (S$4.2 billion) initial public offering (IPO) in Malaysia, the Edge daily reported yesterday, citing unnamed financial executives involved in the listing.

Other cornerstone investors include Malaysian tycoons Quek Leng Chan and Chua Ma Yu, pension fund Employees Provident Fund and state-owned asset manager Permodalan Nasional, the report cited the executives as saying.

OCBC: KPI for new CEO?

In Banks, Corporate governance on 15/05/2012 at 8:33 am

OCBC Bank was recently named as the world’s strongest bank for the second straight year by Bloomberg Markets Magazine. (The ranking featured 78 global banks with at least US$100 billion in total assets.They were assessed based on factors such as their Tier 1 capital ratio, loan-to-deposit ratio, ratio of non-performing assets to total assets and their efficiency ratio, which compares costs with revenues.)

OCBC said the bank’s strength is partly built on its “disciplined credit management practices and robust risk management capabilities”.

If I were the controlling shareholder of OCBC, I’d be very upset at this ranking because what it means is that OCBC is not making its assets work: it has too much capital. I’d tell the board that the most impt KPI should be that OCBC drops out of the top 10 on the list.

It can be done. UOB was at seventh place, down from sixth last year, while DBS fell three spots to eighth this year.

UOB and DBS are doing the right thing. Their core market (like that of OCBC) is S’pore and it’s a safe, boring, stable market where margins are only so-so. So not much capital is needed, if one sticks to the basics of banking, and not try to be a hedgie.

As to the right amount of capital, look at StanChart at no.12. It operates in a wide range of emerging markets, some in unstable parts of the world like West Africa and so needs to have capital lying around. If S’porean banks have abt the same level of capital, they should still be safe.

SMRT: “Cowboys” were right

In Corporate governance, Infrastructure on 14/05/2012 at 8:52 am

Since the trains started breaking down towards the end of last yr, bloggers and posters (not I) have been attacking SMRT for putting profits before safety, and disregarding the engineers’ advice (though without having a clue abt the said advice). Yacoob’s exemplar for the new media, the constructive, nation-building media were deafening in their silence on this national issue. I was silent because I was trying to figure out if I shld go buy some SMRT shares.

Well, based on the comments by the chairman, Koh Yong Gua, reported by ST and ST’s headline on an inside page, the inhabitants of cowboy towns were correct. (Explain that Yacoob and DPM Teo.)

“SMRT to refocus on its engineers” read the headline. This implied that SMRT had lost its focus on engineers somewhere along the line, assuming it once had such a focus.

Mr Koh said that “SMRT will be repositioned an engineering company”, begging the question “What was its earlier positioning?”. Retailer, property developer, financial engineer, or cash cow for Temasek? Since SMRT was listed in 2000, Temasek has received $694.3m in dividends (I’ve including the dividend declared recently).

The promotion of Mr Khoo Hean Siang in March 2011 to COO was meant to show the importance of engineers, he said. The previous COO who was “removed” was not a technical person. Wonder what was he? Ex-SAF officer or financial man? With the CEO a retailer, it surprises me that until 2011, the COO was not a technical man. And that board meetings did not include a very senior engineer in attendance.

Actually, I think Mr Koh still hasn’t got it. SMRT is not an engineering company. It is a company whose main business is moving large numbers of people around S’pore safely, and in reasonable comfort (most of the time). By focusing on engineers and positioning SMRT as an engineering company, he could be laying the seeds for a serious problem somewhere along the track. Investors in the West have found that companies dominated by engineers tend to goldplate processes and systems. Siemens, Rolls-Royce, Westinghouse, Boeing, Airbus and even GE, had to be run by non-engineers before shareholders benefitted.  

Commuters may say so what? So long as it is safer and doesn’t breakdown, power to the engineers. The problem is that goldplating is expensive, and eventually someone has to pay. This is likely to be the commuter (via fare increases) or his avatar or alter ego the taxpayer.

I was planning to buy into a rights issue when one is annced, as I expect. But given the positioning as an “engineering company” and its “refocus on its engineers”, I think I’ll give the stock a miss for the time being. But never ever bet against Temasek when it comes to a local company.

Related post:

http://atans1.wordpress.com/2012/05/06/smrt-quiet-re-nationalisation/

SIA: All the fault of previous CEO?

In Airlines on 13/05/2012 at 2:28 pm

In a posting on SIA’s results, someone in Oz who seems to know the airline biz laid the blame on the previous CEO. I reproduce it because although I know bugger-all abt the airline biz, I know poster was right abt the property sale (can’t remember the dollar values though):

Chew Choon Seng, the previous SIA CEO from 2003 to 2010,sold the SIA building in Singapore for $250 mil, and the new owner sold it away for $550 mil barely 6 months later. He gave ground handling subsidiary SATS to shareholders as an in-specie dividend, thus making millions in the process through this special dividend and losing control of ground handling in his hub.

He barely ordered any aircraft and kept shrinking the airline, in the name of protecting “yields” that he wanted but could never achieve. He introduced an enormous and absolutely space-inefficient business class, and has the lowest density 77W of any airline, as well as the lowest density A380 of any airline (for the all upper-deck business class A380 configuration)

He cut route after route, and refused to acknowledge Emirates as a competitor (which SIA has only done like, yesterday presumably)

Initially, SIA thought they could charge a price premium for those enormous seats, but today they are among the cheapest network carriers out of Australia and Europe in business class. Low density and low fares = disaster for yields

The only thing protecting SIA today is their strong balance sheet, and the fact that they’re sitting on billions of dollars in cash (which they don’t seem to be doing anything with) and no debt – but that was a result of the hard work of the management before Chew Choon Seng.

And the sad thing is, he inherited an airline in 2003 which was unrivalled in terms of profitability, network and inflight product. (Who had heard of Emirates in 2003). The Singapore economy has been booming for the last decade, and tourist arrivals have surged beyond belief. Labour relations in the airline are healthy, their cost base WAS very competitive (without the low density aircraft), and they operate a single hub operation which, compared to QF and other legacy carriers, should theoretically make their operations far more efficient.

They have also had a surging local currency, which should have helped their fuel prices in SGD. (Do note that from 2002 till today, AUD:SGD has been stuck in a 1.20-1.30 range, not withstanding a few months after the Lehman Brothers collapse, so the SGD basically has risen in tandem with the AUD against the USD for the last decade)

And yet SIA has shrunk through the last 10 years. It’s not like they can blame any catastrophe other than themselves for the dismal financial performance last year.

MediaCorp’s weird move

In S'pore Inc on 12/05/2012 at 6:29 am

More than 300,000 titles are on offer at ilovebooks.com, a MediaCorp digital initiative.

The online store offers books in 50 categories for download.

It’s the first Singapore bookstore to sell e-books internationally.

Philippines not safe for PRC nationals warns China

In Casinos, China on 12/05/2012 at 6:26 am

China told its citizens on Thurday  they were not safe in the Philippines and its state media warned of war, as a month-long row over rival claims in the South China Sea continued.

Chinese travel agencies announced they had suspended tours to the Philippines, under government orders, and the embassy in Manila advised its nationals already in the country to stay indoors ahead of protests on Friday. Five hundred protested outside the Chinese embassy, in the event.

And the Philippines wants Chinese gamblers to visit Manila, and the Chinese to invest in the country. What a joke!  Want Chinese money but intent on upsetting China. Filipinos are not realists.

SMRT mgt failures: What does it say abt SAF?

In Infrastructure on 11/05/2012 at 10:19 am

“The experts questioned having the bus bridging services ply a route mirroring the entire train line as this may not be the most effective way to move people. They suggested that the bus bridging services should ferry commuters to one to three stations, or to the next working station.”

Huh? Having been lucky enough not to kanna caught in one of these disruptions (my 87-yr old mum on her only second MRT outing was at a station when a disruption occured), I’m surprised to learn that this wasn’t done or that it isn’t now SOP?

Given that it is a well-known fact, I believe, that retired SAF officers are given senior jobs at SMRT (presumably because they have the experience of managing large and complex organisations), I’m surprised that foreign experts recommended the following “fairly common sense and not rocket science” command and control procedures:

http://www.todayonline.com/Singapore/EDC120510-0000079/Foreign-experts-give-tips-at-SMRT-inquiry

http://www.channelnewsasia.com/stories/singaporelocalnews/view/1200227/1/.html

We need genuine Talents to help us run our public transport systems, not ex-SAF officers, M’sian PRs or PRC bus drivers that we have been getting. And no “ang moh tua kee” attitude when getting Talents please. Hongkies, Japs, Taiwanese and Koreans who speak Inglish should be considered. No PRCs because China’s MRT systems are very new.

As to our defence, are we spending money foolishly on hardware, when what we need are a few good men? The government should be worried. It’s not us “lesser” citizens are at risk. It’s the FTs and rich S’poreans who need protection. An Indonesian pirate chief after reading of SMRT’s failures despite employing retired SAF colonels, may be tempted to raid Sentosa Cove, plunder it and kidnap people.

Remind yrself, not us PM

In Economy, Political economy, Political governance on 11/05/2012 at 5:10 am

(Or “Is PM on the same channel as S’poreans?”)

“Prime Minister Lee Hsien Loong has said the Hougang by-election should not distract the country from focusing on national priorities and building an inclusive Singapore,” CNA reports.

Either this is the latest of PM’s tasteless jokes in his attempt to outdo Tharman as the cabinet’s and PAP’s mgt committee’s stand-up comic, or it shows us that he doesn’t even bother to glance thru the nation-building constructive local media.

Because if he does, he would realise that “national priorities and building an inclusive Singapore” are at the top of most voters’ concerns: the state of the economy and public transport infrastructure, and of family finances. Examples:

– a MRT system that does not breakdown almost every other day,

– less crowded trains and buses,

– lower inflation (even the crown prince of jokers says the latest inflation number is “a high figure” though he quickly quipped that it didn’t affect most of us “lesser mortals” (my words not his),

– how to earn more money,

– how to afford to own a HDB flat on $2,000 a month,

– how to buy a van (what with escalating COE prices), or

– worrying that ”Our system of integration doesn’t work. Why? Because before we were able to integrate those who were received on our territory, others arrived. Having taken in too many people, we paralysed our system of integration.”

A worrying tot has juz struck me. What if his (and the PAP’s) “national priorities and building an inclusive Singapore” are different from us “lesser mortals”? He wants faster economic growth via becoming a low-cost producer as “national priorities”, while “building an inclusive Singapore” means treating FTs better than locals?

Solution to SIA’s problem of higher fuel costs

In Airlines on 10/05/2012 at 11:32 am

US airline buys an oil refinery. Taz thinking out of the box.

Pros and cons

http://www.economist.com/blogs/gulliver/2012/05/delta-air-lines

It’s not as though SIA doesn’t have the cash.

How to make better investment decisions

In Financial competency, Financial planning on 09/05/2012 at 7:06 pm

Think thru the issues in a language in which you are competent but not fluent.

http://www.economist.com/blogs/johnson/2012/05/foreign-languages-and-thinking

The tendency to take risky, irrational bets to avoid losses nearly disappeared for those tested the foreign language …

Mr Kahneman … posits two general systems of thinking:  System 1, intuitive and quick, good for most purposes, but prone to those pesky cognitive traps; and System 2, deliberative and slow, better at higher reasoning but effortful to activate and keep active. The brain, which minimises effort where it can, leans on System 1 wherever possible. But modern life presents many problems better suited to System 2. 

The hypothesis behind the “foreign-language effect” is that speaking the foreign language activates System 2 in advance of tackling the tricky questions … Another possible result might have been that using the foreign language tires the brain, and that this fatigue might make people more, not less, prone to mistakes. Mr Kahneman, after all, describes “ego depletion” leading to bad choices in other studies. But in this study, the effect of priming System 2 appears to have been stronger than any fatigue effect.

Vietnam: Getting fashionable again & Yaw’s there

In Vietnam on 09/05/2012 at 6:59 pm

So Yaw, the mystery man from Hougang is reported to be in Hanoi. Pity his Mrs because I hear that the gals in Hanoi are pretty horny.

Seriously, if the report in ST is true, he is smart to try his hand there. Vietnam is back on the radar of int’l investors, and Hanoi, is a less competitive, less int’l place than Ho Chi Minh City. Gd place for someone savvy like Yaw.

While until recently, non-manufacturing investors (like “paper” investors, and those who invest in property) have been giving Vietnam a miss because of inflation, problems in the banking sector, and a downturn in property, Vietnam’s economy has continued to grow by about 6% a year. Largely because of manufacturing: 41% of the economy.

MNCs who make things love the country. Vietnam is Nike’s biggest production centre, Intel has a major chip facility. HP has plants here. Samsung will invest US$1.5 billion in an information technology complex that will bring in 30 more related companies. Nokia is investing about US$300 million in a plant for mobile phones.

No wonder, Singapore’s four joint industrial parks in Vietnam have draw investments worth some US$5.3 billion since the first one started in 1996. Per hectare, the parks now attract US$6 million in investments, nearly twice higher than the national average of US$3.5 million.

And no wonder, Sembcorp Industries recently announced that it has obtained approval to proceed with a $337.82 million industrial park and 1,200-megawatt power plant.A Vietnamese-Singapore joint venture involving Sembcorp will develop the industrial park in Quang Ngai Province in central Vietnam, Sembcorp said.

The Vietnam-Singapore Industrial Park Quang Ngai will comprise a 600-hectare industrial park as well as a 520-hectare site zoned for commercial and residential development. The park will be the Sembcorp-led consortium’s fifth in the country.

Why the other investors are returning to Vietnam:

 http://www.todayonline.com/Commentary/EDC120503-0000002/Vietnam-bounces-back,-for-now

 http://www.todayonline.com/Commentary/EDC120504-0000004/Driving-the-Vietnam-growth-train

DPM Teo & GG (or WP): gentle reminders for next week

In Humour, Political governance on 08/05/2012 at 7:23 pm

DPM Teo has been busy in April, what with opening a temporary carpark in Hougang, praising Desmond Choo (assumed PAP candidate there), talking abt the dangers of the internet, and pushing onto us the task of integrating FTs onto us, despite many of us wanting first-world FTs, not the garbage we’ve been getting in ever increasing truck loads, I’d tot I’d remind him of shumething he said in March concerning violent, ang moh FTs.

In March,  in parliament to a question from “Kate Spade” (the real people’s princess, not that NSP, TJS groupie gal who was from RP and who is looking to move on from NSP, not her boy friend: I mean tin looks ordinary, Nicole has star quality), he told us very upset S’poreans that Home Team was conducting an internal investigation on why two violent ang moh FTS who beat up two S’poreans badly in 2010 were allowed to post “peanuts” in bail; and why the police investigation took so long? They took the opportunity to cock a snook at S’pore by moving on.

He said the investigation would be completed in April, and implied that we would told the conclusions.

As it’s now May and parly sits next week, he should be abt to tell us abt the conclusions. And if the investigation has yet to be concluded, why not?

Tot he might need reminding as he seems to be trying hard to join Tharman, Sailor Lui, $8 Khaw and PM, as a teller of jokes in bad taste.

And I hope Gerald Giam (the apprentice who overthrew his si-fu Eric Tan) remembers that the WP called for the nationalisation of the bus and MRT systems in its 2011 GE manifesto, and that he wrote this on nationalising the public tpt system in July 2011.

If neither he nor any other WP MP raises this issue in parly next week, or explains why the WP has changed its mind of nationalisation (despite the apparent failure of the government’s model and the voters’ disgust with the government on this issue), the WP should have the decency to take down the manifesto from the WP website. First, the WP changed its benchmark that the WP wanted ministerial salaries to be referenced to, and now this. Said manifesto isn’t worth the paper it is written on even before the WP comes into power.  In first-world democracies, manifesto promises are ditched after the party wins power, not before: another WP first? Other firsts https://www.facebook.com/#!/photo.php?fbid=449379458422514&set=at.281804541846674.87911.280285461998582.555162557&type=1&theater

Tharman has a point

In Humour, Political governance on 08/05/2012 at 7:11 pm

 Sometime ago, when defending the constructive, nation-building local media against comments that it was pro-government, he said that he tot he didn’t get much favours (my words not his) from the media. Well I laughed at this. I tot it was one of his stand-up routines.

He has a point or at least he did not misrepresented the facts in this instance. Tharman, last week, told us high COE prices doesn’t have an impact on us “lesser mortals” because the vast majority of  us don’t buy new cars. Netizens well and truly roughed him up. And this is what our constructive, nation-building BT reported on Monday:

Rising COE premiums put brakes on business
Some firms put expansion plans on hold as lorries and vans become more expensive

Soaring certificate of entitlement (COE) premiums are bearing down on businesses and forcing them to put the brakes on growth.

Since the start of the year, the workhorses of the road – lorries, vans and motorcycles – have become more expensive at a staggering rate, derailing the expansion plans of vehicle-reliant firms.

Category C premiums – which are for goods vehicles and buses – are now pushing $58,000, up 49 per cent from the start of this year. A year ago, the premium was just below $24,000.

Supply chain firm Sin-Freight International had planned to scrap two of its existing lorries to buy two new lorries with more tonnage, but the stratospheric COE premiums have put paid to its plans.

If this isn’t BT telling Tharman off, I don’t know what is?

Next time, Tharman tells us that he will soon have a head of hair, we’d better believe him, rather than put it down to his ambition to be a stand-up comic.

Ascendas India: DBS is bullish

In India, Property, Reits on 08/05/2012 at 6:06 pm

http://sreit.reitdata.com/2012/05/02/a-itrust-dbsv/ (Ya I know technically it’s not a Reit, but it looks like one.)

So am I. )))). BTW, the Indian rupee has strengthened after the government said on Monday that it would delay proposed laws targeting tax avoidance by one year.

But five things wrong with the Indian economy.

Gd Reit table

In Property, Reits on 07/05/2012 at 7:06 pm

http://mystocksinvesting.com/wp-content/uploads/2012/05/Singapore-undervalued-REIT-stock-comparison-5-May-2012.png

Thanks to complier.

Lippo Reit: OCBC is bullish, but Indon economy is slowing

In Indonesia, Property, Reits on 07/05/2012 at 6:25 pm

http://sreit.reitdata.com/2012/05/02/lmir-ocbc-14/

So am I. But Indonesia’s economy grew at its slowest pace in 18 months amid a slowdown in exports as demand from key markets such as the US, Europe, China and India weakened.

Worse, the Indonesian rupiah has fallen 8% against the US dollar in the last twelve months: a weak currency may hurt the purchasing power of domestic consumers and dent demand. Remember domestic consumption accounts for nearly 60% of its economy. http://www.bbc.co.uk/news/business-17980123

Other analysis, info on LMIRT:

http://s-reitinvestmentblog.blogspot.com/2012/05/analysis-of-lmir.html

http://diyvalueinvesting.blogspot.com/2012/04/lmir-q1fy2012.html

SMRT: Quiet re-nationalisation

In Infrastructure, Political governance, Temasek on 06/05/2012 at 7:34 pm

(Or “SMRT: Has the government and WP switched positions on the quiet)

On Friday, SMRT reversed its recent losses and was up 0.9% to 1.65. It was at 1.81 juz on 24 April.

Interestingly among the slew of brokers’ reports calling it a “sell”, “nationalisation” seems to be a dirty word, never raised except by two honourable brokers. Only Citigroup was willing to hint at re-nationalisation, “We’d even dare conjecture a Government-led end game, while only Kim Eng suggested that “selective nationalisation” is already taking shape, “A hybrid model, where the Government comes in to inject money, is perhaps the best model possible under the circumstances … like selective nationalisation where the Government pumps in money in certain areas … being done already – take for example, the Government co-paying for the buses to help operators expand the fleet.”

UBS said SMRT is highly likely to move to a new rail-network financing framework where it would pay the government for an operating lease instead of owning train assets,

And only Citigroup is willing to hint at, “We sense more drastic actions are needed, perhaps raising capital to shore up finances.” In simple English, it says a rights issue is possible. Everyone else was silent on this pink elephant in the room.

I think a rights issue is very highly probable.

Let’s go thru some numbers. At Friday’s close, the mkt cap of SMRT was $2.49bn., of which $1.35bn can be attributed to Temasek (It owns 54.3% of SMRT).

Now SMRT has plans to spend $900m over the next eight years and it wants LTA (i.e. the taxpayer) to share the cost. What if the government tells SMRT that it shld fund two-thirds of the cost because the Commission of Inquiry finds that SMRT was not maintaining the tracks properly. (I’m assuming the COI makes this finding based on the way the inquiry is going).

To fund this $600m, SMRT’s directors call for a deeply discounted rights issue to raise $600m (about 24.1% of SMRT’s mkt cap as of Friday). Add to that they say that dividends will have to be cut drastically*, and that Temasek has agreed to underwrite any shares that minority shareholders refuse to take up. Temasek will say that its decision to support the rights issue is a “commercial decision” of a long-term shareholder. Right, and pigs can fly, a leopard can change its spots, KennethJ and TJS can stop boasting, Chiam can renew the SPP’s leadership, and Yaacob can tame the internet tsunami by building a CoC flood wall.

In such a scenario, Temasek could end up with 75-80% of SMRT, as many minority shareholders decline to take up their shares because of the reduced dividend payments.

Ain’t this partial re-nationalisation? And Temasek can have its cake and eat it too, depending on whether the other shareholders subscribe to the rights. Since SMRT was listed in 2000, Temasek has received $694.3m in dividends (I’m including the dividend declared recently). A $600m rights issue and assuming it has to take up all the rights shares still leaves Temasek $94.3m ahead. Might as well make it $700m rights call then, shall we?

Ain’t nationalisation of the public tpt system in the WP’s manifesto (I’ve blogged on this and that the transport minister parrots his predecessors’ defence of the rojak “for profits” system). Lucky Tan has this video of my friend Eric Tan then a WP member (and treasurer) talking abt nationalisation at the last GE. So the silence of the WP which I’ve raised before) is strange, and in the longer term worrying (No can trust its manifesto promises, why shld voters trust the WP?).

So I hope in the May session of parly, GG for one can raise the issue of nationalisation and put the government on the defensive. Why GG? In July last yr, he wrote this on nationalising the public tpt system. This was after Eric Tan had left WP in a huff, so the call for nationalisation of the public tpt system did not end when Eric Tan left.

If the WP remains silent on nationalisation of the public tpt system, it would remind me of a Sherlock Holmes mystery:

Detective: “Is there any other point to which you would wish to draw my attention?”

Holmes: “To the curious incident of the dog in the night-time.”

Gregory: “The dog did nothing in the night-time.”

Holmes: “That was the curious incident.”

BTW, OCBC (a ex-bull on SMRT) is still relatively bullish. It downgraded SMRT to hold from “buy” and lowered its target price to S$1.71 from S$2.04, citing weaker-than-expected earnings for 2012 because it estimated that SMRT’s capital expenditure in 2013 will rise to S$500 million due to higher expenses needed for upgrading its assets.

CIMB cut its target price from $1.68 to $1.50, suggesting a switch to ComfortDelGro to maintain an exposure to the land transport sector. Deutsche cut its target price to $1.61 from $1.75 while J P Morgan downgraded the stock from “overweight” to “neutral” with a target price of $1.60. Phillips cut its target price to $1.33, maintaining its “sell” call. I suspect Phillips is right. A rights issue will be priced at around the $1.33 level.

I’d buy some shares then. Never bet against Temasek when it comes to a local counter.

——

*”Some [analysts] expect SMRT to cut its dividend payout from 70-80 per cent of profits historically to at least 60 per cent.” (BT). What if this was reduced to 25%?

LKY isn’t always wrong

In Humour on 06/05/2012 at 6:13 pm

Being bilingual ‘boosts brain power’ Learning a second language can boost brain power, scientists believe.

http://www.bbc.co.uk/news/health-17892521

My serious and sad point is that netizens of cowboy towns instinctively think he is wrong, juz the opposite of the constructive, nation-building media who refuse to believe that he can ever be wrong, until he comes out to say he is wrong.

The truth is somewhere in between. Although he cannot be compared to Mao (juz as S’pore cannot be compared to China), what the Chinese Communist Party says of Mao can be applied to LKY: he got more things right than wrong.

Don’t buy bonds, buy stocks that pay gd dividends

In Financial competency on 05/05/2012 at 6:25 pm

Don’t buy bonds. Don’t focus solely on dividend yield, and avoid highly leveraged firms is the message that BlackRock gave investors a few weeks ago when it spooke to BT. Relevant exceprts from BT article from yonks ago I rediscovered.

Michael Steinhardt, whose hedge funds returned more than 20% a year for almost three decades, also doesn’t believe in bonds

“Bonds are no place to be,” Steinhardt, 71, who is now chairman of New York-based WisdomTree Investments Inc., said in an interview today on Bloomberg Television’s “Money Moves” with Carol Massar. “Equities are cheap by historic standards. Equities that pay high dividends relative to bonds, relative to the stock market, I think that’s a good place to be.”

http://www.bloomberg.com/news/2012-04-12/wisdomtree-s-steinhardt-says-bonds-are-no-place-to-be-.html

And so does Abby Joseph Cohen, senior U.S. investment strategist at Goldman Sachs. In mid-April, she  said equities will give better returns than bonds in the mid-to-long term as companies look to emerging markets for growth.

“You need to go back to the late 1950s to see a situation which equities were priced as attractively as they are now relative to bonds,” she said in a Bloomberg Radio interview. “1958-1959 was a period in which investors were very concerned about the economy and the yields on many equities exceeded the yields on fixed income at that point and — as you know — we moved into a multidecade bull market in equities.”

——————-

HIGH dividend yields should not be the sole focus in assessing equity returns over time, said Stuart Reeve, managing director and portfolio manager at BlackRock.

According to Mr Reeve, data collated over the last 31 years has indicated that more than 90 per cent of long-term equity returns can be jointly attributed to both dividend yield and dividend growth drive.

Generating long-term equity returns successfully thus requires identifying companies with attractive yields that are competitively advantaged and have the ability to sustain business growth.

To ensure a company is able to invest and grow its business, Mr Reeve stressed the need to factor in cost and cash available to a company to fund these developments.

‘That is so often a question that people do not ask in this space. What is the cost of growth? In different industries, it is different,’ he emphasised.

‘In a more stable industry, where the rate of change of the industry dynamic is not significant and not very fast, and you are competitively advantaged, your cost of growth tends to be relatively low.’

Identifying a company with low growth costs has its merits as it enables the company to reinvest and grow its business, with the company better positioned to commit some of that cash back to shareholders in the form of a dividend stream.

Investors should also exercise patience in order for results to materialise.

‘You must be willing to buy these investments at fair value and let the yield and growth compound for you and deliver great returns with lower volatility over medium to long-term horizons,’ said Mr Reeve.

Investors should also steer clear from companies which are leveraged to the tilt, he cautioned, citing the significant correlation between high leverage and cuts to dividends.

The focus on equity investment comes on the back of BlackRock chief executive Larry Fink’s message urging investors to scrap the inadequate 60/40 portfolio mix of stocks and bonds.

Mr Fink personally advocated a 100 per cent investment in equities owing to valuations and higher returns than bonds.

‘Virtually every investor has to find ways to achieve better returns than they’ll get in cash or government bonds for the foreseeable future,’ said Mr Fink. [ BTW, Kapito, a co-founder and president of the firm, told CNN Money last month that he has about 70% of his investment portfolio in dividend-paying global stocks. ]

BlackRock, the world’s largest asset manager with assets under management totalling US$3.51 trillion as at Dec 31, 2011, has increasingly set its sights on growing in Asia.

The Philippines: Other side

In Emerging markets on 04/05/2012 at 6:17 pm

Last Saturday, I blogged that it’s day in the sun may finally be coming.

Hopefully, for the poor, that day will become soon. These pixs brought back memories (I was a stockbroker in Manila in1996-1997, living off the fat of the land) of how poor the poor are in the Philippines, and how the rich and poor live literally beside one another.

If the government wants to make sure of the PAP retaining power, one gd way would be to organise school trips to the slums of Manila, and then lecture the impressionable minds abt the perils of too much democracy. Yes, of course taz a dumb way of summarising the reasons for the poverty there, but the young wouldn’t know.

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