Archive for August, 2010|Monthly archive page

Sign another 2008 collapse coming?

In Uncategorized on 31/08/2010 at 6:24 am

In 2008, Khazanah paid S$4.25 a share for a 16% stake  in Parkway, paying a then record historical PE of of 36.1.  A few months thereafter global equity markets collapsed.

Khazanah has juz paid S$3.95 a share paying a  record PE of 37.4, for all the shares that it didn’t own.

Err will we see a collapse in global equity markets again? I certainly hope so, so that I can reinvest my Parkway $.


Bond funds are not BONDS

In Investments on 30/08/2010 at 5:43 am

In search of safe and non-volatile returns, retail investors globally have invested heavily in bond funds, often thinking they are as safe as investing in individual bonds: with the added advantages of diversification (of interest rates, maturities, and default risks); and lower investment costs.

Sadly, they are not the same.

When you invest in a bond, you know the interest rate and the duration (maturity date) of the bond. When interest rates go up, the value of a bond goes down. But you will  get the promised interest and if you  hold the bond until it matures, you will  get your principal back. Bit like a fixed deposit.

You will only lose your principal if you decide to sell it before it matures.

But a bond fund doesn’t work that way because it invests in many bonds, hundreds, possibly thousands. There are many different interest rates and maturities (durations).  So you don’t have a defined interest rate or a maturity date. You have an average interest rate and average duration for all the bonds in the fund.

This may seem an esoteric difference, but believe me, when interest rates rise you will regret not knowing the difference earlier.

You could lose serious money because for any percentage point change in interest rates, the value of the fund will change by the amount of the duration. This sounds complicated but the following illustration will make clear the inconvenient truth.

If the fund holds bonds with an average duration of 10 years, and 10-yr interest rates go up by one percentage point in the capital markets, the value of your fund will drop by 10%. If the fund before the interest rate rise was worth $100m, after the rise, the fund is only worth $90m. BTW, the longer the average duration in the fund, the bigger should be the loss. If the average duration was 40 yrs, the loss would be 40%. Buying shares is safer neh?

Going online to complain to Tan Kin Lian or protesting at Hong Lim Green claiming that you have been cheated is a waste of time. It’s yr fault.

So think twice about investing in a bond fund, if you want safe, steady returns. It may not work out that way.

Finally, came across this interesting quote. “People would rather overpay for bonds than underpay for stocks,” says David Kelly, a strategist for J. P. Morgan Funds. “It’s a function of years of very miserable stock returns. And just a general fog of gloom over the country right now.”

Be Prepared: Mug up on investment ratios

In Uncategorized on 29/08/2010 at 7:23 am

Here’s an article on important investment ratios.

Why mug up on the basics?

For all we know, a gd time to buy stocks may be round the corner.

Tourism plays:CIMB

In Uncategorized on 28/08/2010 at 6:59 am

Our picks to leverage on Singapore’s tourism growth story are Genting (‘buy’, target price or TP of $2.00), SIA (‘buy’, TP $18.62), SIA Engineering (‘buy’, TP $4.60), CDL Hospitality Trusts (‘buy’, TP $2.14), Ascott Reit (‘buy’, TP $1.44), UOL (‘buy’, TP $5.11), and SATS (‘buy’, TP $3.13).

FYI other brokers have almost similar calls.

Productivity: NTUC learn from China?

In Uncategorized on 27/08/2010 at 10:36 am

Christianity is growing in China as never before – and doing so supported by millions of dollars of government funding.


Chinese researchers are considering whether in Western history there is a link between economic prosperity and Protestant Christianity – and they are questioning what that might mean for today’s China.

“It’s very important to find the secret of social development, the so-called potential forces for a nation,” he says.

“When it comes to Western countries, the majority Chinese understanding is that this potential force is Protestant Christianity.”

Christian faith may sound like an unlikely component in China’s future economic success.

But the notion that newfound faith can inspire a workforce to increased levels of productivity is being taken seriously not only by Christian businessmen, but by China’s Communist – and officially atheist – leaders.

Read this and this from BBC.

Dogs? Temasek’s Chinese bank investments

In Banks, China, Temasek on 26/08/2010 at 5:15 am

Might sound dumb to ask given that the Chinese banks that Temasek invests in are some of the largest in the world, and given that China’s economy is growing like the bean stalk in the story Jack and the Bean Stalk.  But then Shin, Merrill Lynch and ABC Learning were “no brainers”.

State agency Central Huijin Investments did something strange recently. It has controlling stakes in nearly all of China’s largest banks, including China Construction Bank (6% owned by Temasek), Agricultural Bank of China (StanChart is a cornerstone investor with abt 1% paying US$500m for this privilege) and Bank of China (4% by Temasek) . Temasek owns 18% of StanChart.

Huijin just raised Rmb40bn (US$5.9bn) as part of  a Rmb187.5bn fund raisng. The aim of raising the Rmb187.5bn is to recapitalise  Chinese banks it controlled.

Sounds prudent given the explosive loan growth rates of the banks brought about by Chinese attempts to stimulate the economy.

But this is the weird bit: the state-controlled banks were estimated to have bought more than 80% of Huijin’s first bond issue, on orders from their shareholder. If this is repeated, this means the Chinese banks are lending money to their controlling shareholder so that the shareholder can buy shares in them.  No new cash is invested by the controlling shareholder.

Sounds something that only Wall Street cowboys would dream of doing.

Except that the Wall Street cowboys would be in jail for pulling off this stunt, unless of course, if a Texan is president.

Temasek: An inability to move on?

In Uncategorized on 25/08/2010 at 5:35 am

In its appointment as Mr Gregory Curl as one of a triumvirate of presidents, one gets an impression that Temasek cannot move on from its Merrill Lynch debacle.

Gregory Curl was a long-time adviser to Ken Lewis, BoA’s CEO, who  made a bid for  Merrill Lynch, when Lehman was failing. Temasek had previously invested twice in ML, and later realised several billions of dollars of losses when it sold the BoA shares it had gotten for its ML shares  when the market was turning in March 2009.  Later when Ken Lewis was forced to retire, he pushed for Curl to replace him. The BoA board preferred someone else rightly as Gregory Curl was believed to be tainted with the ML decision.

Isn’t it time for Temasek to move on from the ML fiasco?

Buying for dividends: Know the co’s balance sheet

In Uncategorized on 24/08/2010 at 8:48 am

As readers of this blog know, I’ve been ranting a long time abt buying stocks that pay good, steady dividends that way exceed the interest rates available from banks (practically zero) or government or corporate bonds.

The problem is that buying for yield requires one to understand a company’s or reit’s or business trust’s balance sheet. Here’s a gd intro into the topic.

There be gloom

In Uncategorized on 23/08/2010 at 5:49 am

Fund managers are at their gloomiest about US stocks since before Lehman Brothers collapsed and they have voted Japan their least favoured region – even as they became more positive on global growth for the first time this year.

Investors swung from being collectively overweight in US equities in July to a net underweight of 14 per cent this month – their most extreme negative stand since January 2008.

For Japan, a net 27 per cent of investors were underweight compared with 11 per cent in July, which made Japan the least-favoured investment destination.

..  Europe, however, the report showed that fund managers had swung sharply from being collectively underweight to positive – for the first time since November last year.

Excerpts from FT’s article of Bank of America Merrill Lynch’s monthly fund manager survey,

Is there value in vintage wines?

In Uncategorized on 22/08/2010 at 7:27 am

Wine is more resilient than gold and often outperforms stock markets and hedge funds, at least taz what the manager of a wine fund claims. Funnily while vintage wines are stored for years to mature, his outperformance is based on short-term horizons.

US IPO that lives to up to name

In Uncategorized on 21/08/2010 at 6:40 am

The IPO of  MakeMyTrip Ltd. soared 89% on Thursday as the Indian travel agency made its debut on the U.S. market, in another sign of strength for online travel booking servicesArticle

How to spot mergers that can work

In Uncategorized on 20/08/2010 at 6:15 am

Recently I blogged on why investors hated cos that do big M&A deals: they usually flop.

Based on the success of the BHP merger with with Billton  to create the largext mining group in the world, and the takeover of OUB by UOB to create the largest and most well run bank in Singapore, here are some “rules”, that investors and mgrs could use to evaluate (OK better guess) whether a deal could add value rather than destroy value:

Overlapping businesses that allow costs to be slashed,

a modest price premium justified by the synergies,

clear governance and control, and

investors getting a decent share of the gains.

YOG: How Super Vivian can turn it round

In Uncategorized on 19/08/2010 at 7:48 am

Take a leaf from Obama on how to turn the failures in Iraq and Afghanistan in a success: declare ‘Victory” and move on.

Or if the failure cannot be disguised (All those empty seats, getting the budget badly wrong,  misrepresenting that S’poreans are being negative over volunteers and participants), here’s another Obama trick: Tell us you are looking for “ass to kick”.

The problem is that what if it is yr arse that you got to kick?

Can you trust yr bank? Part II

In Banks on 19/08/2010 at 7:37 am

If you still believe that yr bank has your best interests at either because either you are that kind of person, or because you think that its in the bank’s interest to treat you fairly, read  this.

Its about alleged double dealing by an American bank. The bank’s behaviour towards a long-time client is staggering to a cynic like me.

A judge found that  JPMorgan’s  deal with Inbursa was “an end-run, if not a downright sham” that was intended to circumvent Cablevision’s right to veto the loan’s sale. Note Cablevision and Inbursa belong to rival Mexican conglomerates, who row incessantly in Mexico. Read the rest of this entry »

Can you trust yr bank? Part I

In Banks on 18/08/2010 at 4:59 am

If youbelieve that yr friendly consumer bank has your best interests at either because either you are that kind of person, or because you think that its in the bank’s interest to treat you fairly, read

A S’porean relates her experiences in getting a bank to release her from a guarantee on a loan that had been repaid. The bank kept making misrepresentations to her.  Only her persistance and complaints to MAS resulted in the bank giving something which it had a duty to give to her.

If you think she is a trouble maker, remember this: The bank didn’t want to release her because it wanted to hold her liable for other possible debts in the future, even though the debt she had acted for as guarantor had been repaid. Taz how two-timing banks can be.

Genting S’pore: Still trust analysts?

In Casinos on 17/08/2010 at 5:18 am

Genting S’pore is flying as bearish analysts calling “sell” when it was much lower, are calling it a “buy” when it is flying. Sell low, buy high?

I don’t track this stock but I’m wondering who are the gullible fund mgrs who having sold stock or refrained from buying earlier on their brokers’ recommendation, have now turned buyers at higher prices.

And why they trust the analysis of people who got it wrong only weeks ago? I mean would you trust an astrologer who got it wrong a few weeks ago when you visited him?

Let’s hope its not a case of “Buy high, sell low”.

YOG: Can S’pore see a monetary return?

In Uncategorized on 16/08/2010 at 7:01 am

The IOC is experimenting with brand extension: renaming the little-known Youth Games as the Youth Olympic Games. Money must be the motive. Likewise S’pore’s bid to host the first YOG. It wants publicity, $ and to see if it has the organisational abilities to stage mega-events like footie world cup or Olympics.

What both ignored is that unlike footie world cup and Olympic; the best eligible athletes are not here for YOG.

Would anyone want to see anything less than the best in this age of live sport on tv?

Remember the Olympics almost became irrelevant when amateurs turned pro because of the $ and were barred from Olympics. Pro athletes were let in to keep the interest in Olympics.

Bottom line on publicity: zero.  Seen anything on major int’l or US networks or websites?

On money: based on what VB has said, unlikely. Organisational skills: err saw opening ceremony balls-up?

BBC article on whether S’pore will see a return on investment.

Why investors don’t like acquirers

In Uncategorized on 16/08/2010 at 6:35 am

The reason: most deals destroy value for acquirers. The evidence.

And think of DBS’s purchase of Dao Heng, and PosBank. And even Singtel’s purchase of Optus. A dirty secret that the public are not aware of is that value of Optus is less than what SingTel paid for it.

DBS: A home grown talent to poach?

In Banks on 15/08/2010 at 11:30 am

Standard Chartered moved V. Shankar from S’pore to Dubai, a few months ago, to head the bank’s Gulf base in the Dubai International Financial Centre. He is chief executive responsible for Europe, the Middle East, Africa and the Americas.

He is a S’porean, home-grown talent, I’ve been assured by people from Stan Chart.

Outlook for S’pore’s major export

In Economy on 14/08/2010 at 10:51 am

The near-term outlook for the information, communication and technology (ICT) sector is stable. The North American semiconductor book-to-bill ratio stood at 1.12 in May 2010. This  indicates that orders are still stronger than shipments and point to an expansion in the months ahead.

This is continued good news for  Singapore, and Malaysia and Thailand, which also have sizeable ICT sectors.

China: Rerun of US Sub Prime? Part II

In Banks, China on 13/08/2010 at 5:25 am

Chinese banks have been ordered to account for around Rmb2,300bn ($340bn) in off-balance sheet loans in a move that could put some lenders under serious stress and require another large round of capital-raising, reports FT.

Lenders must put all loans sold or transferred to lightly regulated Chinese trust companies back on their books by the end of 2011. And must stop using “informal securitisation” to evade regulatory requirements.

Trying to ensure that banks don’t do what Citi, Merrill Lynch and other US banks were doing? Concealing their leverage albeit legally.

Reminder: Other big problematic numbers are loans to local governments, more than US$230bn of which are considered to be at serious risk of default, and real estate exposure, which accounts for roughly one-tenth of the big banks’ corporate loan books. FT

We live in interesting times.

China: Rerun of US Sub Prime? Part I

In China, Property on 12/08/2010 at 5:43 am

In 2009,  banks were ordered to increase their loan books by a third.  The result has been a sharp rise  in real estate prices and the pace of construction.

A recent National Bureau of Economic Research paper, “Evaluating Conditions in Major Chinese Housing Markets”, notes that Beijing land prices have nearly tripled since early 2008. Land sales have become the main source of income for local governments.

Some Rmb10,000bn (£946bn, €1,129bn, $1,475bn) of bank loans have been made local government infrastructure projects. Meanwhile, Chinese banks are repackaging their loans and selling them on to investors, says Fitch.

Sounds a bit too close to what was happening in US, where everything depended on rising house prices.

We shall see if the results are the same.

Temasek, CapLand: What abt these Chinese property charts?

In China, Property, Temasek on 11/08/2010 at 5:15 am

Courtesy of this blog. And look at the money supply charts too.

No wonder China’s banking regulator told lenders last month to conduct a new round of stress tests to gauge the impact of residential property prices falling as much as 6o% in the hardest-hit markets. Banks were instructed to include worst-case scenarios of prices dropping 50- 60% in cities where they have risen excessively. Previous stress tests carried out in the past year assumed home-price declines of as much as 30%.

Expectations seem to be for a sharp decline in Chinese property prices over the next two years, with some, and perhaps significant, impact on Chinese banks.

Some time back it was reported that Temasek had emerged as one of the top 10 acquirers in the Greater China region,

after doing six deals worth US$1.47 billion since 2005. According to a market M&A report commissioned by Deloitte, Temasek is ranked No 9 – after Morgan Stanley and Goldman Sachs, which are No 7 and No 8 respectively. The report Read the rest of this entry »

S’poreans got $ to buy London property

In Property on 10/08/2010 at 7:49 am

We account for 10%, China/ HK is abt 1% more, and we juz little red speck.

National Day and Flag flying.

In Uncategorized on 09/08/2010 at 10:37 am

I live opposite Neptune Court and over the last few years the number of flags flying around this time has decreased. Today i don’t see any flying and this in a housing estate still full of civil servants. Maybe MoF refuses to price the land low enough to enable the residents to make a killing by doing an en-bloc sale?

Seriously, the view on the Net is that S’poreans are fed up with the PAP, and because the PAP wraps itself around the flag, S’preans don’t fly the flag around this time, as a form of silent protest against the PAP.

Could be true for all I know.

But here’s a way to show that we are loyal to S’pore and celebrate its achievements: fly a different flag that is not associated with brand PAP? Take a leaf from the book of the MU fans that love MU but hate the owners, the Glazers: they wear scaves, caps etc in gold and green, the colours of Newton Heath, the club that MU can trace its roots to.

Why doesn’t a socio-political website start a competition to choose a flag that S’poreans can fly to show that they are loyal to S’pore and want to celebrate its achievements, free from any political ideology.

Take on SM’s “Be cheerful”

In Uncategorized on 09/08/2010 at 6:50 am

Telling us to be cheerful immediately made me think of a movie that was banned here (but which was available for hire in a video shop — uniquely S’porean.)

The movie was “Life of Brian” and was about one Brian Cohen who was born beside Jesus on Christmas Day and whose life mirrored (in a distorted way) that of Jesus: Brian was a liberation fighter again Roman rule. At the film’s end, Brian is crucified along with a group of other Jewish “terrorists”. To cheer themselves up as they are dying in pain, they sing, “Always Look on the Bright Side of Life”.

Today young S’poreans  have the burden of having to take out large mortgages to buy their entry-level HDB flats. So far prices have risen despite a recession. But what will happen when prices slump and they have to finance flats whose value is less than what they have paid and will continue to pay? Remember that affordability is officially calculated on repayment over 30 years. Being S’poreans, they are likely to suffer in silence publicly, withthe braver ones bitching online.

But what of the FTs that bought into the PAP’s vision of S’pore? That of contented worker ants living in apartments that are forever rising in value.  They may riot if the value of their homes come down.

With this worrying tots, enjoy the National Day spectacle. You paid for it.

One Big Thing We Don’t Know About Stocks

In ETFs, Investments on 08/08/2010 at 6:54 am

Sumething to think about if you are investing in equities for the long term, esp if you are doing it via ETFs or other low-cost index funds.

The only reason we invest in stocks is to earn more than we would get from cash or bonds. The amount you are supposed to earn by taking the additional risk of owning stocks is called the risk premium. If you don’t get paid more for taking the risk, you should put your money in bonds.

Over the last 207 years you got paid 2.5 percentage points more each year (on average) to invest in stocks than you did in bonds.

But you know what they say about statistics, right? In the real world, we have to deal with the fact that, like all averages, this one has some serious problems. Sometimes the risk premium is higher than 2.5 percent, and sometimes it goes away or is hugely negative (say, in a bear market).

Until recently, most of us thought of bear markets as those three- to five-year periods where you grit you teeth and hang on. But recent experience is more painful than that. Read the rest of this entry »

What abt High Notes SM Goh?

In Banks, Temasek on 06/08/2010 at 5:22 am

The central bank has given DBS Bank an unprecedented public censure and instructed the 27%-owned Temasek bank to put aside S$230m  to cover its operational risks. Gd for MAS, and SM Goh (chairman of MAS), Tharman and Hng Kiang. The last two ministers also sit on MAS’ board.

There is another thing to be put right, SM, Tharman and Hng Kiang.

DBS’ Hong Kong unit recently agreed to pay out HK$651 million or about S$115 million to some clients who bought products linked to Lehman Brothers. As HK$1.3 billion of notes were sold, the compensation received works out to 49% of amount invested.

In S’pore, it sold a similar product, HN5 Notes. DBS issued, arranged and distributed HN5. A total of S$103.7 million worth of HN5 were sold to 1,083 retail clients between 30 March and 30 April 2007, according to a July 2009 MAS report.

The same report said DBS compensated investors S$7.8 million.

What this works out to is 7.5% of amount investments versus 49% in HK. Is this fair? Product is the same.

Force DBS to treat the S’porean investors fairly,  ministers. You have the moral authority.

If you do, I’m sure the compensated HN5 investors, family and friends will remember the good deed when the GE comes. It’s “win, win” except for DBS. And even then its a peanutty S$51m, 44% of amount paid to the HongKies.

BTW I did not buy any of the credit-linked notes that failed. Not that “greedy”.

Related post

Mkt falls are common in Aug — Oct

In Uncategorized on 05/08/2010 at 5:24 am

Arch Crawford, an astrologer in the US who focuses on the markets and who has been interviewed by Barron’s, Wall Street Journal and others said last week, “I put the best guess at a market crash between May 1st and November 1st. Specifically the period of time to be concerned with is August 1 to the end of March 2011… I think the crash is going to be sooner rather than later …  a study of all big down days in history from 1928 or so … and 2/3rds of the biggest down days took place in one third of the calendar year, centered on the fall equinox. In light of all these negatives, this summer and fall could be one we’ll never forget”. Read the rest of this entry »

Swee Say said that gd Temasek lost billions?

In Banks, Temasek on 04/08/2010 at 5:27 am

Cabinet minister and NTUC’s Secretary General Lim Swee Say  is confident that Singapore will be able to replenish the S$4.5 billion drawn from the reserves over two to three years. He said  Singapore makes sure that every dollar is put to good use and every extra dollar is put back into the reserves.

So is he saying the realised losses on Merrill Lynch (may have totalled US  $4.6 billion) and Barclays (possibly 800 million pounds)  were a good use of the reserves? BTW they total S$8bn at today’s rates. Almost more than double the amounts drawn down for WorkFare.

More to the point, how long will Temasek need to make up for the losses on just these two stocks? Remember its profits have fallen two years running.

DBS: Analysing the write-off

In Banks on 03/08/2010 at 5:22 am

The market is taking DBS’s write-off of another S$1 bn (S$1.3bn in 2005) on its S$10bn Dao Heng purchase of almost 10 yrs ago pretty well. The stock was up 0.20 to 14.60. Without the one-time charge, DBS would have reported earnings of S$718m, a record.

I’m surprised that market is not reacting badly to the reason for the write-off: difficulty in getting funding in the HK inter-bank market is how I interpret the gibberish put out on the write-off*.

The spin suggests  DBS HK is a net borrower in the  inter-bank market. Surprising as a local bank usually  is a  net lender. So either DBS HK is anaggressive lender to consumers, or locals don’t want to deposit money. Or both.

If this imbalance in deposits to loans sounds esoteric, remember why RBS had to rescued and Black Rock was nationalised by the British government:they were too dependent on inter-bank loans to fund their loan expanding books, funding which dried up.

As HK makes up about 20% of DBS Gp’s income, net profit and total assets, problems in HK will affect the Gp. Read the rest of this entry »

How PAP burdens future generations

In Uncategorized on 02/08/2010 at 8:16 am

“[DPM Teo] pointed out that Singapore has built up its reserves which has enabled it to draw on them during the economic crisis, without burdening future generations.”

True but they are burdened with big mortgages from almost the start of their working lives, and it’s not as though their futures are secure with wages always going up. Remember the FTs brought in to keep wages “competive”. And if 30 yrs down the road, S’pore is in economic decline, what then? Remember we may not have MightyMind to keep prices rising even in a recession.

[Update ^ August — Here’s why mkt forces don’t operate in the work in the public housing market

Meanwhile past and present generations are burdened by having to put up with less than optimal govmin spending because of the need to have budget surpluses to build up the reserves.

Truly uniquely S’porean: everyone gets screwed.

Ya foul mood.

Parkway: What to do?

In Uncategorized on 02/08/2010 at 5:16 am

I’ve got an economic interest in some Parkway shares, and I’ll arrange to accept the offer as regards these shares.

Why? When the partial offer of S$3.78 was made, the analysts were saying that 12 months down the line, the shares would be worth around S$4 (each broker had its preferred number). Well in three months, this target has been reached with  S$3.95 being offered.

Secondly,the two persons most associated with Parkway’s success are likely to leave. Director and ex-CEO  Lim Cheok Peng, and the the current CEO Tan Lee Seng had allied themselves with Fortis in return for “the right to participate in certain economic benefits”, and even if Khazanah wants them to stay, it is hard to see them staying.

Value in whisky?

In Uncategorized on 01/08/2010 at 7:12 am

UK drinks maker fills hole in pension fund with whisky.

BBC Online article

Taiwanese build whisky distillery. Beats Scotch in blind tasting. Indian whisky and Indian billionaire in 2007 bot a gd brand for several hundred million USD.

Looks like some Asians see value in whisky as an investment.

BTW English whisky , Welch whisky.