atans1

Posts Tagged ‘risk’

Our SWFs: What our MPs are not asking

In GIC, Temasek on 15/03/2010 at 4:35 am

In the US, there is growing concern that public pension funds are taking excessive risk to meet their targeted returns. –NYT article.

Our MPs should be asking ministers about the risks our SWFs are taking relative to their returns, not easily batted away questions on losses. In the context of the portfolios, the losses are as Mrs SM could have said (but didn’t),”Peanuts”, and as any CFAer could tell you, “Look at total portfolio return, not individual items”.

And asking if they are aware that Norway’s SWF commissioned a report by three business-school academics—Andrew Ang, William Goetzmann and Stephen Schaefer from Columbia, Yale and London respectively – that found that taking the recent crash into account, the fund’s performance was essentially indistinguishable from that of a passively managed index fund.

And what is the experience of Temasek and GIC in this passive versus active debate.

I don’t expect PAP MPs (hey they can be disciplined for being difficult and anyway there is such a thing as loyalty) or Chiam (he is sick) to make life difficult for ministers. But where is Low (Waiting for pension?), or Sylvia (Waiting to be given Low’s seat?);  and NMPs for?

Or for that matter the SDP? I don’t incude RP or KJ  because to do the economic analysis they are doing (and put it into understandable language)  is not easy, so let’s cut them some slack.

Miss Siew Kum Hong. His ideas of human rights did not only encompass gay and feminist issues like “anal sex is OK”, but also, what the Chinese Communist Party rightly includes as a human right, “economic rights”.  He gave a great speech on CPF and asked the right qns on our SWFs.

Three risks

In Investments on 02/02/2010 at 10:36 am

These three risks apply here too especially the earnings and valuation risks. Note  that they are not the same.

As to political risk, the risk here is not in Singapore but in Malaysia and Indonesia.

If religious tensions escalate; or the Malaysian government cracks down on dissidents or is seen as weak, then foreigners will sell their Malaysian shares, and S’pore will be caught in the backwash.

In Indonesia the issues are the corruption and the unhappiness about it. Thousands of demonstrators have taken part in anti-government protests. Protesters say President Susilo Bambang Yudhoyono has not delivered on his promise to eradicate corruption during the first 100 days of his second term.

These issues could affect the perception of investors about Indonesia (a darling of emerging market investors), again causing spillover effects here.

Buying for dividend yields can be dangerous

In Investments on 10/12/2009 at 11:41 am

Just ask the investors in Global Investments ( GIL, the former Babcock & Brown Structured Finance Fund) and Macquarie International Infrastructure Fund Limited (MIIF)

At the IPO price of S$1.06 in late 2006, GIL was offering a yield of 9%, while MIIF’s prospectus in May 2005 stated “forecast dividends delivering an annualised yield of between 7.1% to 9.0% on the Offering Price for the period ending 31 December 2005 (see ‘‘Financial Forecasts — Assumptions’’)”. Its listing price was S$1.

Well GIL (with lots of CDOs in its portfolio) is now around 24 cents, while MIIF is around 43.5 cents.

The saving grace is that both are trading below their latest available NAV calculations. MIIF’s NAV as at Sept is 80 cents down from June’s 86 cents. GIL’s is 36 cents as at September, up from June’s 35 cents.

The moral of these two stocks is that high yields could be a sign that investors need to be compensated for the risk that the dividends are not sustainable and that the stock price would fall. Of course, if one is lucky, it could simply mean that the market got it wrong — the dividends are sustainable and the stock price undervalues the company.

You place yr bets, and leave it to the cards.

Follow

Get every new post delivered to your Inbox.

Join 209 other followers