More than 7,000 new flats expected over next 7 months
Newly-weds need not worry about not having a new HDB roof over their heads. To cater to different income groups, flats on the drawing board range from the humble two-room flat to privately-designed estates and executive condominiums.
Tan Hui YeeThu, Nov 29, 2007The Straits Times
NEWLY-WEDS need not worry about not having a new HDB roof over their heads.
More than 7,000 new Housing Board flats will be offered for sale over the next seven months, as well as seven plots of land which could boast another 3,200 units.
To cater to different income groups, flats on the drawing board range from the humble two-room flat to privately-designed estates and executive condominiums.
This increase in flat supply, the biggest in recent years, is expected to ease the bottleneck that has emerged in recent months as buyers, put off by the high prices of private homes and resale flats, turned to new subsidised HDB flats.
Prices of resale HDB flats grew by 11 per cent in the first nine months of this year, while prices of private homes shot up 22.9 per cent.
An indication of the rush for new flats: the HDB recently received almost 8,000 applications for just 400 flats in Telok Blangah and more than 1,600 applications for 516 homes in Punggol.
National Development Minister Mah Bow Tan yesterday made clear the HDB was stepping up flat building 'in a very major way'.
At 4,800 units, the number of HDB's build-to-order flats offered by the end of this year is already more than double the number launched last year.
Property agents say the move will also encourage HDB flat sellers to be more realistic about their asking prices.
Mr Albert Lu, managing director of C&H Realty, thinks that prices may drop. 'But it's a good thing, as more people will be able to afford flats,' he added.
Two build-to-order projects were launched yesterday:
Segar Meadows in Bukit Panjang Ring Road, comprising 412 three- and four-room flats.
Compassvale Beacon in Punggol Road, comprising 750 two-, three-, and four-room flats.
From next month till June, the HDB will also launch for sale another 6,000 new flats under the build-to-order system, where projects are built only if the majority of flats are booked.
It will also launch for sale four plots of land in Bishan, Simei, Toa Payoh and Bedok for flats to be built and sold by private developers. Another three sites - in Yishun, Jurong, and Sengkang - will be made available next year for development of executive condominiums.
Mr Mah reassured homebuyers - especially those buying their first subsidised home - that there were enough flats as well as a variety of properties to meet their needs.
About 80 to 90 per cent of applicants for each build-to-order project are such 'first-timers', many of whom are newly-weds. In the two recent balloting sales exercises, 92 per cent of shortlisted buyers fell into that category.
He urged them: 'Don't be too choosy...It's not possible or realistic for the HDB to offer only new flats in mature estates in the heart of the city.'
The boost in supply buoyed buyers like Ms Affizah Aziz, 40, who turned to the HDB resale market after failing to get a new flat in a recent ballot. The housewife said: 'I still would like to have a new flat. Its surroundings and atmosphere are much better.'
Mr Mah promised that new flats will remain affordable. Their prices, long pegged to the values of resale HDB flats, will not be affected by a rise in building costs.
He also rejected suggestions that the release of the flats was meant to prevent a property bubble from forming. 'I don't see any bubble forming,' he said. Unlike the private property sector, the HDB market is a much bigger and more stable. 'The growth we are seeing is a healthy one in the resale market,' he said.
Thursday, November 29, 2007
ST: Paying a premium for ocean views
Paying a premium for ocean views
Ageing five-room HDB flat in Marine Parade has been snapped up for a record price of $750,888 - and all because of its sweeping ocean views.
Joyce TeoWed, Nov 28, 2007The Straits Times
AN AGEING five-room HDB flat in Marine Parade has been snapped up for a record price of $750,888 - and all because of its sweeping ocean views.
The buyers, who paid cash, bought the 32-year-old Marine Terrace flat as their retirement home.
They had the field to themselves as the high asking price of $800,000 deterred many prospective buyers.
Agent Francis Ng from HSR Property Group said the couple were the only ones to view the flat.
Mr Ng said the flat has had its walls knocked out to make an expansive living room that takes advantage of the sea view, so there is only one bedroom.
Owner Sally Sim, who lives in a landed property, renovated the flat about two years ago at the cost of just over $80,000.
She kept the property as an extra home that could one day be used as a retirement haven or for her children's use.
'But since the market is good, I might as well sell it,' she said in Mandarin. 'It's quite tiring keeping it clean.'
ERA Singapore's assistant vice-president, Mr Eugene Lim, said: 'People who buy HDB flats at such record prices are not your typical HDB buyers.
'They are cash-rich and most of them are looking for unique features, such as a full sea view.'
The Marine Parade flat is about 1,300 sq ft in size, which would put its price at $577 per sq ft (psf).
HDB flats are not usually measured on a psf basis, but pricing it this way does give an idea of how much the property is worth when compared with private housing. Mass market condominiums now cost $650 to $700 psf on average.
Executive flats, which are limited in number, have sold for a bit more but are far bigger in size. Take the seemingly stratospheric price achieved for an executive HDB flat in Mei Ling Street. It went for $755,000 but cost only $474 on a psf basis.
But such deals are certainly are not reflective of the market, which is operating at a more moderate level, said Mr Lim.
HSR executive director Eric Cheng said the market was crazier back in the mid-90s. It is rather calm currently, except for sporadic record deals, he said.
Ageing five-room HDB flat in Marine Parade has been snapped up for a record price of $750,888 - and all because of its sweeping ocean views.
Joyce TeoWed, Nov 28, 2007The Straits Times
AN AGEING five-room HDB flat in Marine Parade has been snapped up for a record price of $750,888 - and all because of its sweeping ocean views.
The buyers, who paid cash, bought the 32-year-old Marine Terrace flat as their retirement home.
They had the field to themselves as the high asking price of $800,000 deterred many prospective buyers.
Agent Francis Ng from HSR Property Group said the couple were the only ones to view the flat.
Mr Ng said the flat has had its walls knocked out to make an expansive living room that takes advantage of the sea view, so there is only one bedroom.
Owner Sally Sim, who lives in a landed property, renovated the flat about two years ago at the cost of just over $80,000.
She kept the property as an extra home that could one day be used as a retirement haven or for her children's use.
'But since the market is good, I might as well sell it,' she said in Mandarin. 'It's quite tiring keeping it clean.'
ERA Singapore's assistant vice-president, Mr Eugene Lim, said: 'People who buy HDB flats at such record prices are not your typical HDB buyers.
'They are cash-rich and most of them are looking for unique features, such as a full sea view.'
The Marine Parade flat is about 1,300 sq ft in size, which would put its price at $577 per sq ft (psf).
HDB flats are not usually measured on a psf basis, but pricing it this way does give an idea of how much the property is worth when compared with private housing. Mass market condominiums now cost $650 to $700 psf on average.
Executive flats, which are limited in number, have sold for a bit more but are far bigger in size. Take the seemingly stratospheric price achieved for an executive HDB flat in Mei Ling Street. It went for $755,000 but cost only $474 on a psf basis.
But such deals are certainly are not reflective of the market, which is operating at a more moderate level, said Mr Lim.
HSR executive director Eric Cheng said the market was crazier back in the mid-90s. It is rather calm currently, except for sporadic record deals, he said.
ST: ECs gain appeal as HDB, private home price gap widens
ECs gain appeal as HDB, private home price gap widens
Reason: Widening gap between prices of resale HDB flats and those of private condos.
Tan Hui YeeThu, Nov 22, 2007 The Straits Times
THE rising property market has brought executive condominiums (ECs) back from the brink of extinction.
These homes - which are halfway between public housing and private condominiums - suddenly looked much more appealing after rules for buyers were relaxed on Tuesday.
Property consultants now expect that more plots for ECs, such as the 2.27ha site placed on the market on Tuesday, will soon be offered.
The main reason: the widening gap between prices of resale Housing Board flats and those of private condos. ECs, which come with condo facilities but with sale restrictions similar to those for public housing, were introduced in 1995 to bridge this gap.
They became relatively unpopular, however, after the property market plunged a few years later, making private condos more affordable.In fact, when the first few ECs hit the resale market in 2004 after the minimum five-year occupation period, many were sold at a loss or at breakeven prices. This was because they were booked when prices were at their peak in 1996.
Many people expected Far East Organization's La Casa in Woodlands to be the last EC project on the market when it was launched for sale in 2005.
'Mass market condo prices were in the doldrums, making ECs redundant. Today, that's a different story,' said Colliers International's director of research and consultancy, Ms Tay Huey Ying.
Private home prices surged 22.9 per cent in the first nine months of the year - more than twice the rate achieved by resale HDB flats.
Lower-priced ECs are more attractive now because prices of condos in the suburbs - where ECs tend to be sited - have started to move up significantly. In the July-
September period, prices of non-landed homes outside the central region rose 7.9 per cent.
Consultants expect this growth to continue.
The easing of EC rules is also expected to increase demand from people looking to move from HDB flats. The HDB removed a hurdle for upgraders by scrapping a resale levy payable by EC buyers who had previously bought government-subsidised flats.
Buyers of new EC units are also no longer barred from buying second new EC units or new flats. In addition, the HDB now requires developers to reserve 90 per cent of units for first-time buyers in the first month of sale.
Although ECs still cannot be sold within the first five years and remain out of bounds to foreigners within the first 10 years, the easing of rules has helped ECs shake off their tag as second-rate condos, said Mr Eric Cheng, the executive director of the HSR property group.
Potential buyers include property agent Lester Tan, 27, who has been living with his parents for the past five years since he got married.
He and his wife started looking for a condo about two years ago, but regretted waiting so long to buy one, as prices have shot up.
He said: 'We heard that the Punggol EC may be launched, and we are quite excited about it.'
Growing interest
The HDB has removed a hurdle for upgraders by scrapping a resale levy that executive condo (EC) buyers who already own HDB flats have to pay.
ECs bridge the price gap between HDB flats and private homes. Private home prices rose 22.9 per cent in the first nine months of the year - more than twice the rate achieved by HDB flats.
ECs are more attractive now because prices of condos in the suburbs - where they tend to be sited - have started to move up significantly.
Potential upgraders like Ms Elsie Cheng, 31, are also eyeing the future EC in Punggol. The teacher - who lives with her husband, seven-month-old son and maid in a two-bedroom EC unit in Tampines - is looking to move into a bigger EC.
'Why pay so much for a private condo?' she asked.
Knight Frank's head of research and consultancy, Mr Nicholas Mak, said the changes were likely to raise the proportion of upgraders among EC buyers, from an estimated 5 per cent to 10 per cent, to 20 per cent to 25 per cent.
Developers such as Frasers Centrepoint Homes, which built the Lilydale and Quintet ECs, are optimistic. Its chief operating officer, Mr Cheang Kok Kheong, told The Straits Times: 'The EC will do well in today's market as a hybrid property - apartments with condo facilities but without private condo price tags.'
He added: 'As a reflection of the strong confidence and growth potential of the EC market, we expect to see increased competition in this market segment and more developers taking part in upcoming EC land tenders.'
Buyers hoping to make a quick buck from ECs, however, should take heed. 'The (full) value of the EC will not be realised immediately but in 10 years, subject to the property market being buoyant at that time,' said PropNex chief executive Mohamed Ismail.
For now, all eyes are on the EC site in Punggol Field. Estimated to be able to fit about 620 homes, it will be put up for tender once a developer commits to a minimum bid that meets the Government's reserve price.
The EC units, however, will meet only a small portion of the current demand for new homes. In a recent HDB sales exercise, almost 8,000 families applied for just 400 flats in Telok Blangah, while more than 1,600 applied for 516 homes in Punggol.
Reason: Widening gap between prices of resale HDB flats and those of private condos.
Tan Hui YeeThu, Nov 22, 2007 The Straits Times
THE rising property market has brought executive condominiums (ECs) back from the brink of extinction.
These homes - which are halfway between public housing and private condominiums - suddenly looked much more appealing after rules for buyers were relaxed on Tuesday.
Property consultants now expect that more plots for ECs, such as the 2.27ha site placed on the market on Tuesday, will soon be offered.
The main reason: the widening gap between prices of resale Housing Board flats and those of private condos. ECs, which come with condo facilities but with sale restrictions similar to those for public housing, were introduced in 1995 to bridge this gap.
They became relatively unpopular, however, after the property market plunged a few years later, making private condos more affordable.In fact, when the first few ECs hit the resale market in 2004 after the minimum five-year occupation period, many were sold at a loss or at breakeven prices. This was because they were booked when prices were at their peak in 1996.
Many people expected Far East Organization's La Casa in Woodlands to be the last EC project on the market when it was launched for sale in 2005.
'Mass market condo prices were in the doldrums, making ECs redundant. Today, that's a different story,' said Colliers International's director of research and consultancy, Ms Tay Huey Ying.
Private home prices surged 22.9 per cent in the first nine months of the year - more than twice the rate achieved by resale HDB flats.
Lower-priced ECs are more attractive now because prices of condos in the suburbs - where ECs tend to be sited - have started to move up significantly. In the July-
September period, prices of non-landed homes outside the central region rose 7.9 per cent.
Consultants expect this growth to continue.
The easing of EC rules is also expected to increase demand from people looking to move from HDB flats. The HDB removed a hurdle for upgraders by scrapping a resale levy payable by EC buyers who had previously bought government-subsidised flats.
Buyers of new EC units are also no longer barred from buying second new EC units or new flats. In addition, the HDB now requires developers to reserve 90 per cent of units for first-time buyers in the first month of sale.
Although ECs still cannot be sold within the first five years and remain out of bounds to foreigners within the first 10 years, the easing of rules has helped ECs shake off their tag as second-rate condos, said Mr Eric Cheng, the executive director of the HSR property group.
Potential buyers include property agent Lester Tan, 27, who has been living with his parents for the past five years since he got married.
He and his wife started looking for a condo about two years ago, but regretted waiting so long to buy one, as prices have shot up.
He said: 'We heard that the Punggol EC may be launched, and we are quite excited about it.'
Growing interest
The HDB has removed a hurdle for upgraders by scrapping a resale levy that executive condo (EC) buyers who already own HDB flats have to pay.
ECs bridge the price gap between HDB flats and private homes. Private home prices rose 22.9 per cent in the first nine months of the year - more than twice the rate achieved by HDB flats.
ECs are more attractive now because prices of condos in the suburbs - where they tend to be sited - have started to move up significantly.
Potential upgraders like Ms Elsie Cheng, 31, are also eyeing the future EC in Punggol. The teacher - who lives with her husband, seven-month-old son and maid in a two-bedroom EC unit in Tampines - is looking to move into a bigger EC.
'Why pay so much for a private condo?' she asked.
Knight Frank's head of research and consultancy, Mr Nicholas Mak, said the changes were likely to raise the proportion of upgraders among EC buyers, from an estimated 5 per cent to 10 per cent, to 20 per cent to 25 per cent.
Developers such as Frasers Centrepoint Homes, which built the Lilydale and Quintet ECs, are optimistic. Its chief operating officer, Mr Cheang Kok Kheong, told The Straits Times: 'The EC will do well in today's market as a hybrid property - apartments with condo facilities but without private condo price tags.'
He added: 'As a reflection of the strong confidence and growth potential of the EC market, we expect to see increased competition in this market segment and more developers taking part in upcoming EC land tenders.'
Buyers hoping to make a quick buck from ECs, however, should take heed. 'The (full) value of the EC will not be realised immediately but in 10 years, subject to the property market being buoyant at that time,' said PropNex chief executive Mohamed Ismail.
For now, all eyes are on the EC site in Punggol Field. Estimated to be able to fit about 620 homes, it will be put up for tender once a developer commits to a minimum bid that meets the Government's reserve price.
The EC units, however, will meet only a small portion of the current demand for new homes. In a recent HDB sales exercise, almost 8,000 families applied for just 400 flats in Telok Blangah, while more than 1,600 applied for 516 homes in Punggol.
Monday, November 26, 2007
MARKET TALK: CIMB Starts ICBC At Outperform; Targets HK$7.34
Date: 2007/11/21 11:28
MARKET TALK: CIMB Starts ICBC At Outperform; Targets HK$7.34
0328 GMT [Dow Jones] STOCK CALL: CIMB starts ICBC (1398.HK) at Outperform with target price HK$7.34. Says ICBC is attractive investment given its M&A potential, imminent re-rating due to its net interest margin and ROE improvement. Tips more negative newsflow for sector until FY08, particularly on macro tightening measures. Adds "despite increased talk of more stringent monetary tightening measures, we are still upbeat on the banking sector's earnings outlook." Says ICBC is most active in seeking M&A deals, it may buck trend, benefit from positive newsflow if new deals arise. CIMB off 3.6% at HK$5.90. (YWM)
Contact us in Hong Kong. 852 2802 7002;
MarketTalk@dowjones.com
(END) Dow Jones Newswires
MARKET TALK: CIMB Starts ICBC At Outperform; Targets HK$7.34
0328 GMT [Dow Jones] STOCK CALL: CIMB starts ICBC (1398.HK) at Outperform with target price HK$7.34. Says ICBC is attractive investment given its M&A potential, imminent re-rating due to its net interest margin and ROE improvement. Tips more negative newsflow for sector until FY08, particularly on macro tightening measures. Adds "despite increased talk of more stringent monetary tightening measures, we are still upbeat on the banking sector's earnings outlook." Says ICBC is most active in seeking M&A deals, it may buck trend, benefit from positive newsflow if new deals arise. CIMB off 3.6% at HK$5.90. (YWM)
Contact us in Hong Kong. 852 2802 7002;
MarketTalk@dowjones.com
(END) Dow Jones Newswires
XFNA: 工行：希望將海外資產總額提高至10%
My note: At present, ICBC total oversea revenue and profits weighs only 3% and it is looking at 10% expansion in near future. I can reckon that ICBC has more and more room for expansion via overseas M&A activities in the foreseeable years!! ICBC future growth prospect is bright!!!
工行：希望將海外資產總額提高至10%
2007年11月26日 08:35:00 a.m. HKT, XFNA
香港 (XFN-ASIA) - 工商銀行(1398.HK)行長楊凱生告訴本社，工行已經實現資本和業務的國際化，下一步希望在機構設置和業務推進上進一步體現“全球化”。 他透露，目前工行的海外資產總額和業務利潤總額佔全行整個業務比重近3%左右，希望今後能提高至10%。工行將以機構增設和收購兼併的發展模式來拓展海外業務。 他透露，工行在美國紐約，中東地區的迪拜、多哈，以及澳洲悉尼的分支機搆申設工作正在進行中。 yk/ AFN
新聞由 XFNA 提供
工行：希望將海外資產總額提高至10%
2007年11月26日 08:35:00 a.m. HKT, XFNA
香港 (XFN-ASIA) - 工商銀行(1398.HK)行長楊凱生告訴本社，工行已經實現資本和業務的國際化，下一步希望在機構設置和業務推進上進一步體現“全球化”。 他透露，目前工行的海外資產總額和業務利潤總額佔全行整個業務比重近3%左右，希望今後能提高至10%。工行將以機構增設和收購兼併的發展模式來拓展海外業務。 他透露，工行在美國紐約，中東地區的迪拜、多哈，以及澳洲悉尼的分支機搆申設工作正在進行中。 yk/ AFN
新聞由 XFNA 提供
Bloomberg: ICBC seeks to expand investments overseas
Business Times - 26 Nov 2007
ICBC seeks to expand investments overseas
Chief denies bank plans to buy stake in Standard Chartered
(BEIJING) Industrial and Commercial Bank of China Ltd has 'insufficient' assets overseas and seeks more investments abroad, president Yang Kaisheng said, even as he denied the lender plans to buy a stake in Standard Chartered plc.
'ICBC will pursue a combined strategy of acquisitions and new projects in expanding overseas,' Mr Yang said on Saturday at a finance conference in Beijing. 'Overseas diversification is an important way for Chinese banks to spread risks against cyclical economic downturns.'
Having raised US$22 billion in the world's largest share sale a year ago, ICBC, the world's biggest bank by market value, is expanding more aggressively than peers such as Bank of China Ltd. ICBC's 36.7 billion rand (S$7.7 billion) purchase of a 20 per cent stake in South Africa's Standard Bank Group Ltd is the biggest overseas investment by a Chinese company.
'Overseas expansion is likely to continue as Chinese banks are seeking to build up their global presence,' Bill Stacey, a Hong Kong-based analyst at Credit Suisse, said, citing ICBC's forays in Indonesia and Macau.
Mr Yang joined China Construction Bank Corp deputy president Luo Zhefu in denying a newspaper report that their banks planned to acquire a stake in Standard Chartered from Temasek Holdings.
'We have no plans to buy a stake in Standard Chartered,' Mr Luo said at the Beijing conference, while Mr Yang said the report was 'just a rumour.'
The Financial Times reported earlier that China's three largest banks - ICBC, Construction Bank and Bank of China - had approached Temasek about buying its 17.2 per cent stake in the UK company. Temasek has declined to comment on the FT report.
Chinese banks, flush with cash after raising US$63 billion selling stock in the past two years, are seeking takeover targets. ICBC's agreement to buy a stake in Standard Bank is the company's third acquisition outside China in less than a year.
In December last year, ICBC announced its first acquisition of a foreign bank, buying 90 per cent of PT Bank Halim Indonesia for 90 billion rupiah (S$13.8 million) with an option to purchase the remaining shares after three years.
-- Bloomberg
ICBC seeks to expand investments overseas
Chief denies bank plans to buy stake in Standard Chartered
(BEIJING) Industrial and Commercial Bank of China Ltd has 'insufficient' assets overseas and seeks more investments abroad, president Yang Kaisheng said, even as he denied the lender plans to buy a stake in Standard Chartered plc.
'ICBC will pursue a combined strategy of acquisitions and new projects in expanding overseas,' Mr Yang said on Saturday at a finance conference in Beijing. 'Overseas diversification is an important way for Chinese banks to spread risks against cyclical economic downturns.'
Having raised US$22 billion in the world's largest share sale a year ago, ICBC, the world's biggest bank by market value, is expanding more aggressively than peers such as Bank of China Ltd. ICBC's 36.7 billion rand (S$7.7 billion) purchase of a 20 per cent stake in South Africa's Standard Bank Group Ltd is the biggest overseas investment by a Chinese company.
'Overseas expansion is likely to continue as Chinese banks are seeking to build up their global presence,' Bill Stacey, a Hong Kong-based analyst at Credit Suisse, said, citing ICBC's forays in Indonesia and Macau.
Mr Yang joined China Construction Bank Corp deputy president Luo Zhefu in denying a newspaper report that their banks planned to acquire a stake in Standard Chartered from Temasek Holdings.
'We have no plans to buy a stake in Standard Chartered,' Mr Luo said at the Beijing conference, while Mr Yang said the report was 'just a rumour.'
The Financial Times reported earlier that China's three largest banks - ICBC, Construction Bank and Bank of China - had approached Temasek about buying its 17.2 per cent stake in the UK company. Temasek has declined to comment on the FT report.
Chinese banks, flush with cash after raising US$63 billion selling stock in the past two years, are seeking takeover targets. ICBC's agreement to buy a stake in Standard Bank is the company's third acquisition outside China in less than a year.
In December last year, ICBC announced its first acquisition of a foreign bank, buying 90 per cent of PT Bank Halim Indonesia for 90 billion rupiah (S$13.8 million) with an option to purchase the remaining shares after three years.
-- Bloomberg
BT: Taking the pulse of a nation
Business Times - 26 Nov 2007
Taking the pulse of a nation
CHEN HUIFEN highlights some key economic data and explains what they reveal about a country's commercial performance
IN PREVIOUS instalments of this section, we looked at how companies' annual reports and financial ratios can help give an idea of the value of individual firms.
Those are very specific, and sometimes narrow, assessments of the well-being of a particular model. Very often, research into individual firms has to be undertaken with a larger perspective of what is happening in the industry or in the economy.
In Singapore, various government agencies are in charge of publishing different economic data. Some such historical data is published monthly, and some, quarterly. You can either access this information through the websites of the respective government agencies or, like many readers, count on financial newspapers like The Business Times to sieve through the information for you.
But with so much information overload, which are the key data to watch out for? We list below the first of two sets of major economic indicators that could have a bearing on the commercial health of a nation. The second set will be discussed and explained next week.
Gross Domestic Product
The GDP measures the aggregate sum of goods and services produced by a country, expressed in terms of their market value. It is usually stated in percentage terms to indicate how much the economy has grown from the previous year.
In Singapore, this data is released by the Ministry of Trade and Industry (www.mti.gov.sg) on a quarterly basis. The quarterly flash estimate - based on data in the first two months of the quarter - is usually available within two weeks from the end of the quarter. The actual growth figure comes out roughly two months later.
Observers tend to look at the real GDP figure, as this has been adjusted for inflation. For fast-growing emerging markets like China, India and Vietnam, GDP growth of 7-10 per cent is not unusual. But beyond a certain point, analysts would question if the economy is overheating.
This means that the demand for its goods and services is far more than what it can do to supply them. This could lead to higher prices, which in turn could cause reduced consumption and investment.
On the other hand, negative GDP growth for two or more continuous quarters would also raise alarm bells as the trend is indicative of a recession.
Consumer Price Index
Closely monitored with the GDP, the CPI measures inflation. In Singapore, the monthly data is released by the Department of Statistics (www.singstat.gov.sg), usually within three weeks of the following month.
It tracks the change in prices in a fixed basket of goods and services commonly purchased by the majority of households here.
Conventionally tracked in year-on-year terms, Singapore's inflation rate has been maintained at around 0-2 per cent in the last 10 years (with the exception of 1998 and 2002, when falling prices were actually recorded).
However, that figure is expected to hit as high as 5 per cent in the first half of next year, driven by record oil prices, rising food, transport, and housing costs, as well as adjustments for the 2 per cent hike in GST since July this year.
Generally speaking, high inflation rates disincentivises savings and may induce people to take up riskier investments with the goal of reaping returns that will beat the inflation rate.
High inflation may also make a country's exports more expensive, and prompt a country's monetary authorities to adjust its currency exchange rate, as a way to manage the demand for its exports.
Manufacturing output
With the manufacturing sector accounting for a quarter of Singapore's GDP, the sector's health is thus an important economic indicator.
Also referred to as industrial production, Singapore's manufacturing output data is released by the Economic Development Board (www.sedb.gov.sg) every month. It gives the raw value of goods produced by factories and plants in Singapore and is often expressed in terms of percentage growth.
Within this report, the output is further segmented into their respective industries. Analysts will be able to tell which are the ones that are suffering and which ones are driving the growth. The big three sub-groups of the manufacturing sector are electronics, biomedical sciences and the chemicals.
In Singapore, the biomedical sciences manufacturing industry is very volatile. It can swing the total manufacturing output into very high growth or drag the sector down with a double-digit contraction.
External trade figures
Data on non-oil domestic exports (NODX) is delivered monthly by International Enterprise Singapore (www.iesingapore.gov.sg), formerly known as the Trade Development Board.
The NODX tracks the shipment value of made-in-Singapore products to overseas markets. Oil exports are left out because Singapore does not produce oil on its own, but is a major transhipment centre for oil products.
Usually expressed in percentage growth terms, the NODX gives an idea of where the demand for Singapore goods is coming from, the types of goods that are popular and those losing their demand during a period.
Jobs data
The Ministry of Manpower (www.mom.gov.sg) looks after the jobs data in Singapore, including employment, jobless figures and the retrenchment rate. They provide a barometer of the labour situation.
When the market approaches full employment, it means that the job market is good, and bosses may have to offer higher wages to prevent their workers from hopping to competitors.
More people being employed also means a greater number of consumers who would be able to buy goods and services. And if wages are also rising in tandem, workers would have higher disposable incomes to fuel demand for consumption goods.
Conversely, a rising jobless rate could also reflect a weakening economy, especially if the retrenchment rate is high and the number of jobs created is low.
Taking the pulse of a nation
CHEN HUIFEN highlights some key economic data and explains what they reveal about a country's commercial performance
IN PREVIOUS instalments of this section, we looked at how companies' annual reports and financial ratios can help give an idea of the value of individual firms.
Those are very specific, and sometimes narrow, assessments of the well-being of a particular model. Very often, research into individual firms has to be undertaken with a larger perspective of what is happening in the industry or in the economy.
In Singapore, various government agencies are in charge of publishing different economic data. Some such historical data is published monthly, and some, quarterly. You can either access this information through the websites of the respective government agencies or, like many readers, count on financial newspapers like The Business Times to sieve through the information for you.
But with so much information overload, which are the key data to watch out for? We list below the first of two sets of major economic indicators that could have a bearing on the commercial health of a nation. The second set will be discussed and explained next week.
Gross Domestic Product
The GDP measures the aggregate sum of goods and services produced by a country, expressed in terms of their market value. It is usually stated in percentage terms to indicate how much the economy has grown from the previous year.
In Singapore, this data is released by the Ministry of Trade and Industry (www.mti.gov.sg) on a quarterly basis. The quarterly flash estimate - based on data in the first two months of the quarter - is usually available within two weeks from the end of the quarter. The actual growth figure comes out roughly two months later.
Observers tend to look at the real GDP figure, as this has been adjusted for inflation. For fast-growing emerging markets like China, India and Vietnam, GDP growth of 7-10 per cent is not unusual. But beyond a certain point, analysts would question if the economy is overheating.
This means that the demand for its goods and services is far more than what it can do to supply them. This could lead to higher prices, which in turn could cause reduced consumption and investment.
On the other hand, negative GDP growth for two or more continuous quarters would also raise alarm bells as the trend is indicative of a recession.
Consumer Price Index
Closely monitored with the GDP, the CPI measures inflation. In Singapore, the monthly data is released by the Department of Statistics (www.singstat.gov.sg), usually within three weeks of the following month.
It tracks the change in prices in a fixed basket of goods and services commonly purchased by the majority of households here.
Conventionally tracked in year-on-year terms, Singapore's inflation rate has been maintained at around 0-2 per cent in the last 10 years (with the exception of 1998 and 2002, when falling prices were actually recorded).
However, that figure is expected to hit as high as 5 per cent in the first half of next year, driven by record oil prices, rising food, transport, and housing costs, as well as adjustments for the 2 per cent hike in GST since July this year.
Generally speaking, high inflation rates disincentivises savings and may induce people to take up riskier investments with the goal of reaping returns that will beat the inflation rate.
High inflation may also make a country's exports more expensive, and prompt a country's monetary authorities to adjust its currency exchange rate, as a way to manage the demand for its exports.
Manufacturing output
With the manufacturing sector accounting for a quarter of Singapore's GDP, the sector's health is thus an important economic indicator.
Also referred to as industrial production, Singapore's manufacturing output data is released by the Economic Development Board (www.sedb.gov.sg) every month. It gives the raw value of goods produced by factories and plants in Singapore and is often expressed in terms of percentage growth.
Within this report, the output is further segmented into their respective industries. Analysts will be able to tell which are the ones that are suffering and which ones are driving the growth. The big three sub-groups of the manufacturing sector are electronics, biomedical sciences and the chemicals.
In Singapore, the biomedical sciences manufacturing industry is very volatile. It can swing the total manufacturing output into very high growth or drag the sector down with a double-digit contraction.
External trade figures
Data on non-oil domestic exports (NODX) is delivered monthly by International Enterprise Singapore (www.iesingapore.gov.sg), formerly known as the Trade Development Board.
The NODX tracks the shipment value of made-in-Singapore products to overseas markets. Oil exports are left out because Singapore does not produce oil on its own, but is a major transhipment centre for oil products.
Usually expressed in percentage growth terms, the NODX gives an idea of where the demand for Singapore goods is coming from, the types of goods that are popular and those losing their demand during a period.
Jobs data
The Ministry of Manpower (www.mom.gov.sg) looks after the jobs data in Singapore, including employment, jobless figures and the retrenchment rate. They provide a barometer of the labour situation.
When the market approaches full employment, it means that the job market is good, and bosses may have to offer higher wages to prevent their workers from hopping to competitors.
More people being employed also means a greater number of consumers who would be able to buy goods and services. And if wages are also rising in tandem, workers would have higher disposable incomes to fuel demand for consumption goods.
Conversely, a rising jobless rate could also reflect a weakening economy, especially if the retrenchment rate is high and the number of jobs created is low.
Friday, November 23, 2007
標普調高四間中資銀行評級
標普調高四間中資銀行評級
2007年11月23日 11:17:23 a.m. HKT, AAFN
評級機構標準普爾宣布，同時調高4間中資銀行股包括建行<0939.hk>、 工行<1398.hk>、交銀<3328.hk>及中行<3988.hk>長期對手信貸評級，反映其致力提升財務實力，風險管理及業務組合開始見成效。標普分別將建行、工行及中行長期對手信貸評級由「BBB+」調高至「A-」；交銀長期對手信貸「BBB」評級展望由「穩定」調高至「正面」。同時，重申四行基本實力「C」評級」。
(de)阿思達克財經新聞組
2007年11月23日 11:17:23 a.m. HKT, AAFN
評級機構標準普爾宣布，同時調高4間中資銀行股包括建行<0939.hk>、 工行<1398.hk>、交銀<3328.hk>及中行<3988.hk>長期對手信貸評級，反映其致力提升財務實力，風險管理及業務組合開始見成效。標普分別將建行、工行及中行長期對手信貸評級由「BBB+」調高至「A-」；交銀長期對手信貸「BBB」評級展望由「穩定」調高至「正面」。同時，重申四行基本實力「C」評級」。
(de)阿思達克財經新聞組
Thursday, November 22, 2007
BNP 調高工行目標價至8.31元，維持「買入」
BNP調高工行<1398.hk>目標價至8.31元，維持「買入」
2007年11月22日 02:05:52 p.m. HKT, AAFN
BNP將工商銀行<1398.hk>目標價由7.28調高至8.31元，主要受較高淨息差及服務費收入強勁預測支持，評級維持「買入」。
報告指出，面對內地宏調緊縮政策，工行貸款增長穩定及具質素基礎客戶提供最佳防守性。另一方面，淨息差擴闊將支持07及08年盈利增長70%及36%；加上預期08年海外併購活動持續，令工行成為BNP中資銀行股首選。
同時，將工行07-08年盈利預測調高2.6%、9.7%及12.9%，分別至每股0.25元、0.34元及0.4元人民幣。(de)阿思達克財經新聞組
2007年11月22日 02:05:52 p.m. HKT, AAFN
BNP將工商銀行<1398.hk>目標價由7.28調高至8.31元，主要受較高淨息差及服務費收入強勁預測支持，評級維持「買入」。
報告指出，面對內地宏調緊縮政策，工行貸款增長穩定及具質素基礎客戶提供最佳防守性。另一方面，淨息差擴闊將支持07及08年盈利增長70%及36%；加上預期08年海外併購活動持續，令工行成為BNP中資銀行股首選。
同時，將工行07-08年盈利預測調高2.6%、9.7%及12.9%，分別至每股0.25元、0.34元及0.4元人民幣。(de)阿思達克財經新聞組
UOB KH: PLife Reit - An oasis in sea of turbulence
UOB KayHian
27 Aug 2007
An oasis in sea of turbulence
Parkway Life REIT invests in income-producing real estate assets in the Asia Pacific region used primarily for healthcare and related purposes. They include hospitals, ambulatory surgery centres, primary clinics, medical office building, step-down care facilities, research & development facilities and pharmaceutical facilities in China, India, South East Asia and the Middle East.
The initial portfolio comprising Mount Elizabeth Hospital, Gleneagles Hospital and East Shore Hospital represents the largest portfolio of private hospitals in Singapore. Mount Elizabeth Hospital and Gleneagles Hospital, in particular, are located in the heart of prime Orchard Road shopping district.
Riding on growing demand for healthcare. Parkway Holdings will lease the three hospitals from Parkway Life REIT for an initial term of 15 years with an option to extend for another 15 years. The annual rental for each of the properties comprises a base rent (S$30m) and a variable rent (3.8% of adjusted hospital revenue). The variable rent component is linked to adjusted hospital revenue, allowing unitholders to participate in growth of the healthcare industry.
Singapore is a healthcare-hub in Asia.
Parkway Life REIT also benefits from the growth in medical tourism. International patient inflow in Singapore has increased at CAGR of 35.4% from 98,700 in 2001 to 448,800 in 2006 (source: The population in Singapore is ageing. The life expectancy for male has increase from 76 years in 2000 to 78 years in 2006. The life expectancy for female has correspondingly increased from 80 years to 81.8 years (source: Ministry of Health). The proportion of people aged 65 or older is projected to increase from 6.9% of total population in 2006 to 18.9% by 2030. Already, Parkway Holdings?s revenue per patient day has increased at CAGR of 16.2% from S$1,258 in 2004 to S$1,699 in 2006.MOH and Frost & Sullivan). Singapore aims to attract 1m foreign patient visitors by year 2012.
Acquisition growth strategy. Parkway Life REIT will source and acquire assets in the Asia Pacific region, which are distribution yield accretive and have potential for future earnings and capital growth. Parkway Life REIT will also seek to improve portfolio diversification and asset quality. It is already evaluating opportunities for acquisitions in Singapore, Malaysia, India and China. Parkway Life REIT has been granted the right of first refusal by Parkway Holdings over future sale of healthcare and related facilities located in the Asia Pacific region. Parkway Holdings operates 15 hospitals in Singapore, Brunei, India and Malaysia. It also operates an ambulatory surgical centre and clinics in China and an aesthetics clinic in Vietnam. These assets provide a pipeline of potential future acquisitions. Parkway Life REIT will also identify greenfield sites for development of hospital and healthcare-related facilities. It also seeks to acquire third party hospital and healthcare-related properties.
Parkway Life REIT offers attractive yield. Parkway Life?s yield is comparable to hospitality REITs such as CDL Hospitality Trust and Ascott REIT. Its yield is nevertheless much more attractive when compared to REITs investing in commercial, retail or industrial properties.
27 Aug 2007
An oasis in sea of turbulence
Parkway Life REIT invests in income-producing real estate assets in the Asia Pacific region used primarily for healthcare and related purposes. They include hospitals, ambulatory surgery centres, primary clinics, medical office building, step-down care facilities, research & development facilities and pharmaceutical facilities in China, India, South East Asia and the Middle East.
The initial portfolio comprising Mount Elizabeth Hospital, Gleneagles Hospital and East Shore Hospital represents the largest portfolio of private hospitals in Singapore. Mount Elizabeth Hospital and Gleneagles Hospital, in particular, are located in the heart of prime Orchard Road shopping district.
Riding on growing demand for healthcare. Parkway Holdings will lease the three hospitals from Parkway Life REIT for an initial term of 15 years with an option to extend for another 15 years. The annual rental for each of the properties comprises a base rent (S$30m) and a variable rent (3.8% of adjusted hospital revenue). The variable rent component is linked to adjusted hospital revenue, allowing unitholders to participate in growth of the healthcare industry.
Singapore is a healthcare-hub in Asia.
Parkway Life REIT also benefits from the growth in medical tourism. International patient inflow in Singapore has increased at CAGR of 35.4% from 98,700 in 2001 to 448,800 in 2006 (source: The population in Singapore is ageing. The life expectancy for male has increase from 76 years in 2000 to 78 years in 2006. The life expectancy for female has correspondingly increased from 80 years to 81.8 years (source: Ministry of Health). The proportion of people aged 65 or older is projected to increase from 6.9% of total population in 2006 to 18.9% by 2030. Already, Parkway Holdings?s revenue per patient day has increased at CAGR of 16.2% from S$1,258 in 2004 to S$1,699 in 2006.MOH and Frost & Sullivan). Singapore aims to attract 1m foreign patient visitors by year 2012.
Acquisition growth strategy. Parkway Life REIT will source and acquire assets in the Asia Pacific region, which are distribution yield accretive and have potential for future earnings and capital growth. Parkway Life REIT will also seek to improve portfolio diversification and asset quality. It is already evaluating opportunities for acquisitions in Singapore, Malaysia, India and China. Parkway Life REIT has been granted the right of first refusal by Parkway Holdings over future sale of healthcare and related facilities located in the Asia Pacific region. Parkway Holdings operates 15 hospitals in Singapore, Brunei, India and Malaysia. It also operates an ambulatory surgical centre and clinics in China and an aesthetics clinic in Vietnam. These assets provide a pipeline of potential future acquisitions. Parkway Life REIT will also identify greenfield sites for development of hospital and healthcare-related facilities. It also seeks to acquire third party hospital and healthcare-related properties.
Parkway Life REIT offers attractive yield. Parkway Life?s yield is comparable to hospitality REITs such as CDL Hospitality Trust and Ascott REIT. Its yield is nevertheless much more attractive when compared to REITs investing in commercial, retail or industrial properties.
Wednesday, November 21, 2007
阿思達克財經: 建行, 工行, 招行 獲企業年金受託人資格
建行, 工行, 招行 獲企業年金受託人資格 2007年11月20日
02:58:19 p.m. HKT, AAFN
建行<0939.hk>、工行<1398.hk>及招行<3968.hk>獲得勞保部批出企業年金受託人資格，意味銀行不用設立養老金管理公司，便能成為企業年金基金受托人。(wr)阿思達克財經新聞組
02:58:19 p.m. HKT, AAFN
建行<0939.hk>、工行<1398.hk>及招行<3968.hk>獲得勞保部批出企業年金受託人資格，意味銀行不用設立養老金管理公司，便能成為企業年金基金受托人。(wr)阿思達克財經新聞組
Tuesday, November 20, 2007
ICBC Business Review - For the year ended December 31 2006
ICBC are the largest commercial bank in China in terms of total assets loans and deposits. Primarily operate in China and provide an extensive range of commercial banking products and services.
Business Review - For the year ended December 31 2006
In 2006 ICBC completed its listings in both domestic and overseas capital markets while also successfully achieved its annual business objectives. The Group¡¦s profit after tax reached RMB49.88 billion representing a year-on-year growth of 31.2%. The return on average total assets amounted to 0.71% and the return on weighted average equity reached 15.37%.
The Bank began to implement a new strategic development plan in 2006. Our operations and growth prospects became more robust and positive. The structure of our business income distribution channels and our customer portfolio improved markedly. Our level of competitiveness and management also reached new heights.
The Bank increased its profitability of asset and liability business. Deposits increased by RMB614557 million representing a growth of 10.7%. Loans increased by RMB341618 million representing a growth of 10.4% mainly due to the rapid increase in loans to fast-growing industries such as transportation energy infrastructure and loans to small enterprises and individuals with high returns. Loans to domestic small enterprises and individuals increased by RMB59700 million and RMB61067 million respectively representing a growth of 71.8% and 11.9% respectively. The structure of our bond investment portfolio further improved with interest income from securities investment hitting a record RMB66883 million. Our asset and liability business continued to grow based on our optimized structure and produced a stable source of income. Net interest income reached RMB163118 million representing an increase of 6.2% from the previous year.
Fee based businesses and new businesses grew rapidly. ICBC introduced various wealth management products to meet the needs of its customers and sold RMB432.8 billion of such products in 2006 representing a year-on-year increase of 93%.
It was the first among all banks in China to issue more than 10 million credit cards with total annual spending of over RMB100 billion. The amounts of RMB settlement with corporations and international settlement reached RMB260 trillion and USD399.6 billion respectively further expanding the advantages of ICBC as the leading settlement bank in China. The respective advantages in asset custody annuity management and cash management businesses were consolidated. Electronic banking transactions amounted to RMB45.2 trillion with the proportion of business volume conducted off-the-counter increased by 4.2 percentage points to 30.1% of total business volume and the functions of electronic marketing and the diversification of business channels continued to improve. The rapid development of these businesses significantly increased the net fee and commission income of the Bank which increased by 55.0% to RMB16344 million accounting for 9.0% of the Bank¡¦s operating income a year-on-year increase of 2.9 percentage points. The income structure of the Bank has further improved.
The contribution of retail banking to total profits of the Bank increased continuously. The Bank has traditionally had a competitive advantage in retail banking business which is one of the strategic businesses supporting the future continuous business development of the Bank. Last year ICBC implemented the best retail bank strategy and fully accelerated product innovation service upgrade and market development of its personal banking business. As a result income from personal banking business reached RMB62257 million accounting for 34.3% of the income of all businesses.
Notable advantage of being technologically advanced. After becoming the first bank in China to complete data integration ICBC also led the way in completing data logic integration for corporate banking and private banking businesses in 2006 and proactively established its core business application platform to satisfy its future business development needs. Application systems such as customer information systems and risk management systems were continuously introduced and put into operation such that the Bank¡¦s advantage in information technology was further translated into improved productivity thereby enhancing its support and promotional function for the business development of the Bank.
The Bank enhanced its costs control and risk management capabilities. We allocated cost resources based on EVA and strengthened our comprehensive costs control capability. Our cost to income ratio was maintained at a healthy level of 36.3%. Our comprehensive risk management system continued to improve. The internal rating-based approach was adopted in the area of nonretail loans thereby strengthening our credit risk management capability. The NPL balance of the Bank continued to decrease to an NPL ratio of 3.79%. The NPL reserve ratio reached 70.56% representing a year-on-year increase of 16.36 percentage points. In order to adapt to the marketbased interest rate reforms and RMB exchange-rate regime reforms ICBC continued to improve its market-risk and liquidity-risk management mechanisms. The internal control system was further solidified and our control of operational risks is at a relatively high level among international banks.
We fully implemented the human capital strategy. To meet the needs of the development of a listed bank ICBC adjusted and consolidated management at all levels. A large pool of talented individuals with good operational skills and understanding of our business emerged to play a greater role in the operation and management of the Bank. ICBC conducted training for staff of all levels and provided specialised trainings for management personnels and professionals at all levels and business lines.
In the past year new reforms and development achievements of ICBC won wide recognition from all circles in China and abroad. The Bank won various awards including 'Bank of the Year 2006 Emerging Market' 'Bank of the Year 2006 China' 'Best National Retail Bank' 'Best Consumer Internet Bank' 'Best Domestic Custodian' and 'Best Local Currency Cash Management Services (By Currency)'. International rating agencies such as Moody¡¦s Standard and Poor¡¦s and Fitch Ratings all raised their credit ratings for ICBC.
Source: ICBC (1398) Annual Results Announcement
Business Review - For the year ended December 31 2006
In 2006 ICBC completed its listings in both domestic and overseas capital markets while also successfully achieved its annual business objectives. The Group¡¦s profit after tax reached RMB49.88 billion representing a year-on-year growth of 31.2%. The return on average total assets amounted to 0.71% and the return on weighted average equity reached 15.37%.
The Bank began to implement a new strategic development plan in 2006. Our operations and growth prospects became more robust and positive. The structure of our business income distribution channels and our customer portfolio improved markedly. Our level of competitiveness and management also reached new heights.
The Bank increased its profitability of asset and liability business. Deposits increased by RMB614557 million representing a growth of 10.7%. Loans increased by RMB341618 million representing a growth of 10.4% mainly due to the rapid increase in loans to fast-growing industries such as transportation energy infrastructure and loans to small enterprises and individuals with high returns. Loans to domestic small enterprises and individuals increased by RMB59700 million and RMB61067 million respectively representing a growth of 71.8% and 11.9% respectively. The structure of our bond investment portfolio further improved with interest income from securities investment hitting a record RMB66883 million. Our asset and liability business continued to grow based on our optimized structure and produced a stable source of income. Net interest income reached RMB163118 million representing an increase of 6.2% from the previous year.
Fee based businesses and new businesses grew rapidly. ICBC introduced various wealth management products to meet the needs of its customers and sold RMB432.8 billion of such products in 2006 representing a year-on-year increase of 93%.
It was the first among all banks in China to issue more than 10 million credit cards with total annual spending of over RMB100 billion. The amounts of RMB settlement with corporations and international settlement reached RMB260 trillion and USD399.6 billion respectively further expanding the advantages of ICBC as the leading settlement bank in China. The respective advantages in asset custody annuity management and cash management businesses were consolidated. Electronic banking transactions amounted to RMB45.2 trillion with the proportion of business volume conducted off-the-counter increased by 4.2 percentage points to 30.1% of total business volume and the functions of electronic marketing and the diversification of business channels continued to improve. The rapid development of these businesses significantly increased the net fee and commission income of the Bank which increased by 55.0% to RMB16344 million accounting for 9.0% of the Bank¡¦s operating income a year-on-year increase of 2.9 percentage points. The income structure of the Bank has further improved.
The contribution of retail banking to total profits of the Bank increased continuously. The Bank has traditionally had a competitive advantage in retail banking business which is one of the strategic businesses supporting the future continuous business development of the Bank. Last year ICBC implemented the best retail bank strategy and fully accelerated product innovation service upgrade and market development of its personal banking business. As a result income from personal banking business reached RMB62257 million accounting for 34.3% of the income of all businesses.
Notable advantage of being technologically advanced. After becoming the first bank in China to complete data integration ICBC also led the way in completing data logic integration for corporate banking and private banking businesses in 2006 and proactively established its core business application platform to satisfy its future business development needs. Application systems such as customer information systems and risk management systems were continuously introduced and put into operation such that the Bank¡¦s advantage in information technology was further translated into improved productivity thereby enhancing its support and promotional function for the business development of the Bank.
The Bank enhanced its costs control and risk management capabilities. We allocated cost resources based on EVA and strengthened our comprehensive costs control capability. Our cost to income ratio was maintained at a healthy level of 36.3%. Our comprehensive risk management system continued to improve. The internal rating-based approach was adopted in the area of nonretail loans thereby strengthening our credit risk management capability. The NPL balance of the Bank continued to decrease to an NPL ratio of 3.79%. The NPL reserve ratio reached 70.56% representing a year-on-year increase of 16.36 percentage points. In order to adapt to the marketbased interest rate reforms and RMB exchange-rate regime reforms ICBC continued to improve its market-risk and liquidity-risk management mechanisms. The internal control system was further solidified and our control of operational risks is at a relatively high level among international banks.
We fully implemented the human capital strategy. To meet the needs of the development of a listed bank ICBC adjusted and consolidated management at all levels. A large pool of talented individuals with good operational skills and understanding of our business emerged to play a greater role in the operation and management of the Bank. ICBC conducted training for staff of all levels and provided specialised trainings for management personnels and professionals at all levels and business lines.
In the past year new reforms and development achievements of ICBC won wide recognition from all circles in China and abroad. The Bank won various awards including 'Bank of the Year 2006 Emerging Market' 'Bank of the Year 2006 China' 'Best National Retail Bank' 'Best Consumer Internet Bank' 'Best Domestic Custodian' and 'Best Local Currency Cash Management Services (By Currency)'. International rating agencies such as Moody¡¦s Standard and Poor¡¦s and Fitch Ratings all raised their credit ratings for ICBC.
Source: ICBC (1398) Annual Results Announcement
Bloomberg: China's Banks Seek Standard Chartered Stake, FT Says (Update1)
China's Banks Seek Standard Chartered Stake, FT Says (Update1)
By Clare Cheung and Chia-Peck Wong
Nov. 19 (Bloomberg) -- China's three largest banks approached Temasek Holdings Pte about buying its 17 percent stake in Standard Chartered Plc, the Financial Times reported, citing unidentified people familiar with the matter.
Industrial and Commercial Bank of China Ltd., Bank of China Ltd. and China Construction Bank Corp. have made ``informal and discreet'' contact with senior personnel at Temasek about the deal in recent months, the FT said.
Chinese banks, flush with cash after raising $63 billion selling stock in the past two years, are seeking takeover targets overseas. Temasek's stake in Standard Chartered was worth about $8.3 billion at the Nov. 16 closing price in London, more than the $5.5 billion ICBC will pay for 20 percent of South Africa's Standard Bank Group Ltd.
Standard Chartered ``is quite diversified, so it's definitely something that the Chinese banks would be looking for, in terms of expansion in Asia and other emerging markets,'' Mona Chung, who helps manage $2.5 billion at Daiwa Asset Management Ltd. in Hong Kong, said today in a phone interview.
Temasek rejected the proposal, the Financial Times said. The Singapore state-owned investment company owns 17.2 percent of Standard Chartered, the London-based bank said Sept. 13. ``It is inappropriate for Temasek to comment on market speculation,'' the state-owned company said in an e-mailed response to questions.
ICBC
ICBC, the world's largest bank by market value, agreed last month to buy 20 percent of Standard Bank, Africa's largest, in the biggest overseas investment by a Chinese company. Standard Chartered, which gets most of its profit from Asia, said last week it will buy 5.3 percent of South Korea's Kyobo Life Insurance Co.
Standard Chartered spokeswomen in Hong Kong and Singapore weren't immediately available for comment. Spokesmen at ICBC, Bank of China and China Construction Bank declined to comment on ``market speculation'' when contacted today.
The Hong Kong shares of Standard Chartered fell 0.5 percent to HK$271.60 at 12:08 p.m. local time. They have gained 18 percent this year, compared with larger rival HSBC Holdings Plc.'s 5 percent decline.
To contact the reporters on this story: Clare Cheung in Hong Kong at scheung4@bloomberg.net ; Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net
Last Updated: November 18, 2007 23:16 EST
By Clare Cheung and Chia-Peck Wong
Nov. 19 (Bloomberg) -- China's three largest banks approached Temasek Holdings Pte about buying its 17 percent stake in Standard Chartered Plc, the Financial Times reported, citing unidentified people familiar with the matter.
Industrial and Commercial Bank of China Ltd., Bank of China Ltd. and China Construction Bank Corp. have made ``informal and discreet'' contact with senior personnel at Temasek about the deal in recent months, the FT said.
Chinese banks, flush with cash after raising $63 billion selling stock in the past two years, are seeking takeover targets overseas. Temasek's stake in Standard Chartered was worth about $8.3 billion at the Nov. 16 closing price in London, more than the $5.5 billion ICBC will pay for 20 percent of South Africa's Standard Bank Group Ltd.
Standard Chartered ``is quite diversified, so it's definitely something that the Chinese banks would be looking for, in terms of expansion in Asia and other emerging markets,'' Mona Chung, who helps manage $2.5 billion at Daiwa Asset Management Ltd. in Hong Kong, said today in a phone interview.
Temasek rejected the proposal, the Financial Times said. The Singapore state-owned investment company owns 17.2 percent of Standard Chartered, the London-based bank said Sept. 13. ``It is inappropriate for Temasek to comment on market speculation,'' the state-owned company said in an e-mailed response to questions.
ICBC
ICBC, the world's largest bank by market value, agreed last month to buy 20 percent of Standard Bank, Africa's largest, in the biggest overseas investment by a Chinese company. Standard Chartered, which gets most of its profit from Asia, said last week it will buy 5.3 percent of South Korea's Kyobo Life Insurance Co.
Standard Chartered spokeswomen in Hong Kong and Singapore weren't immediately available for comment. Spokesmen at ICBC, Bank of China and China Construction Bank declined to comment on ``market speculation'' when contacted today.
The Hong Kong shares of Standard Chartered fell 0.5 percent to HK$271.60 at 12:08 p.m. local time. They have gained 18 percent this year, compared with larger rival HSBC Holdings Plc.'s 5 percent decline.
To contact the reporters on this story: Clare Cheung in Hong Kong at scheung4@bloomberg.net ; Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net
Last Updated: November 18, 2007 23:16 EST
Chinese banks look to invest in Standard Chartered: report
Tuesday November 20, 1:44 AM
Chinese banks look to invest in Standard Chartered: report
China's three leading banks have approached Temasek, Singapore's state investment agency, over the acquisition of its stake in Standard Chartered, the emerging-markets lender, the Financial Times said Monday.
Industrial and Commercial Bank of China (ICBC), Bank of China and China Construction Bank had in recent months made "informal and discreet" contact with senior Temasek personnel about a possible deal for the group's 17 percent stake in Standard Chartered, the Britain-based emerging-markets bank.
Temasek is understood to have rebuffed the advances because it considers its stake in Standard Chartered to be of financial and strategic importance, according to people familiar with the matter, the FT said.
But Wang Zhenning, a Beijing-based spokesman for ICBC, denied the Chinese bank had approached Temasek regarding possible investment in Standard.
"ICBC hasn't had any contact with Temasek concerning this issue," he said. Bank of China and China Construction Bank could not immediately be reached, while Standard Chartered also declined to confirm the story.
Standard Chartered is attractive to the Chinese banks because of its profitable and expanding operations in Africa, the Middle East and Asia, added the business daily.
Temasek is Standard Chartered's largest shareholder.
Chinese banks look to invest in Standard Chartered: report
China's three leading banks have approached Temasek, Singapore's state investment agency, over the acquisition of its stake in Standard Chartered, the emerging-markets lender, the Financial Times said Monday.
Industrial and Commercial Bank of China (ICBC), Bank of China and China Construction Bank had in recent months made "informal and discreet" contact with senior Temasek personnel about a possible deal for the group's 17 percent stake in Standard Chartered, the Britain-based emerging-markets bank.
Temasek is understood to have rebuffed the advances because it considers its stake in Standard Chartered to be of financial and strategic importance, according to people familiar with the matter, the FT said.
But Wang Zhenning, a Beijing-based spokesman for ICBC, denied the Chinese bank had approached Temasek regarding possible investment in Standard.
"ICBC hasn't had any contact with Temasek concerning this issue," he said. Bank of China and China Construction Bank could not immediately be reached, while Standard Chartered also declined to confirm the story.
Standard Chartered is attractive to the Chinese banks because of its profitable and expanding operations in Africa, the Middle East and Asia, added the business daily.
Temasek is Standard Chartered's largest shareholder.
BT: MTI raises '08 forecast for 'hotter' economy
Business Times - 20 Nov 2007
MTI raises '08 forecast for 'hotter' economy
Easing resource crunch, cyclical downturn will prevent overheating: officials
By ANNA TEO
(SINGAPORE) The Ministry of Trade & Industry has raised slightly its forecast of GDP growth in 2008, but maintains that the economy has not become 'too hot'.
In a somewhat unusual move, it has upped the 2008 growth forecast by half a point to 4.5-6.5 per cent. For 2007, with the year's growth pretty much in the bag, MTI has narrowed the forecast to 7.5-8 per cent.
GDP growth in the third quarter has turned out a slower-than-expected 8.9 per cent - lower than the flash estimate of 9.4 per cent, due mainly to weaker manufacturing growth. This brings GDP expansion in the first nine months of 2007 to 8.1 per cent, which spells, going by the official forecast, a slowdown in Q4. But MTI says it expects the growth momentum to continue into Q4 as sustained growth in the EU and Asia offset a somewhat softer pace in the US.
Related links:
Click here for MTI's media release
Economic Survey of Singapore - Third Quarter 2007
MTI's forecast for 2008, however, amounts to a 'moderation in growth towards the economy's underlying potential rate after four years of above-trend growth', the ministry says.
The economy should grow in the upper half of the 4.5-6.5 per cent range next year if - as the market consensus expects - the US economy rebounds in the second half of 2008 from a first-half slowdown, MTI says.
But, if the US sub-prime problems worsen or if oil prices continue to soar, and a sharp, protracted US slump ensues, Singapore's growth could be nearer the lower end of the forecast.
At a briefing on the Q3 GDP data yesterday, MTI's second permanent secretary Ravi Menon told reporters that Singapore's 2008 growth forecast should be intact even if US economic growth slows to about 1.5 per cent next year.
MTI's forecast also assumes that oil prices will round out the rest of the year at an average US$90 a barrel, and ease to US$80-85 in 2008.
As for the weak US dollar, Mr Menon said the concern, if any, is not so much on any impact on Singapore's exports, but if it should see a precipitous decline that triggers off massive selloffs in the financial markets and second-round effects on the global economy. 'It's one of the wild cards,' he added.
For now, the key concern here remains centred on rising price pressures, though Mr Menon reiterates the government's assessment that there is no overheating in the system.
Resource constraints are being eased as supply catches up with demand, he said, citing the release of vacant land and state buildings for lease, and increased land sales in business parks for companies' backroom operations, all of which should check the rise in office rental costs.
Foreign worker quotas will also be increased to ease the labour bottlenecks in construction.
Not least, a cyclical slowdown in the economy next year will help cool demand pressures, Mr Menon said.
'Has the economy gotten hotter? Yes,' he said. 'Has it got too hot? No.'
Singapore's short and medium-term economic prognosis remains good, he added.
The Monetary Authority of Singapore's officials at the briefing also maintained that - apart from the one-off technical effects of the Goods and Services Tax hike and the taxman's upcoming revision of the annual values of HDB flats, which will boost the consumer price index - underlying cost pressures haven't gone out of whack.
The underlying inflation rate - excluding housing and private road transport costs - is still expected to average 1.5-2 per cent this year and next.
MAS deputy managing director Ong Chong Tee said its monetary policy stance 'remains appropriate' and will be reviewed, as scheduled, next April.
Economists such as Citigroup's Chua Hak Bin reckon the risk of further MAS tightening is high early next year, as the move to a 'slightly' steeper slope last month 'may be too gentle a move'.
Citigroup has raised its 2008 inflation forecast to 3.8 per cent from 3 per cent. It expects CPI inflation to swing from a 5 per cent average in the first half of 2008 to 2.8 per cent in the second half. A 20 per cent rise in imputed rents could drive up headline CPI by 1.5-2 percentage points, Dr Chua estimates.
Merrill Lynch's Emerging Asia currency strategist, Simon Flint, says he is not concerned about overheating risks here.
'MAS reacted very quickly to rising price pressures,' he said, referring to last month's monetary tightening. 'They're being reasonably prudent about inflationary threats.
'I'm optimistic about sustainable growth,' he added.
MTI raises '08 forecast for 'hotter' economy
Easing resource crunch, cyclical downturn will prevent overheating: officials
By ANNA TEO
(SINGAPORE) The Ministry of Trade & Industry has raised slightly its forecast of GDP growth in 2008, but maintains that the economy has not become 'too hot'.
In a somewhat unusual move, it has upped the 2008 growth forecast by half a point to 4.5-6.5 per cent. For 2007, with the year's growth pretty much in the bag, MTI has narrowed the forecast to 7.5-8 per cent.
GDP growth in the third quarter has turned out a slower-than-expected 8.9 per cent - lower than the flash estimate of 9.4 per cent, due mainly to weaker manufacturing growth. This brings GDP expansion in the first nine months of 2007 to 8.1 per cent, which spells, going by the official forecast, a slowdown in Q4. But MTI says it expects the growth momentum to continue into Q4 as sustained growth in the EU and Asia offset a somewhat softer pace in the US.
Related links:
Click here for MTI's media release
Economic Survey of Singapore - Third Quarter 2007
MTI's forecast for 2008, however, amounts to a 'moderation in growth towards the economy's underlying potential rate after four years of above-trend growth', the ministry says.
The economy should grow in the upper half of the 4.5-6.5 per cent range next year if - as the market consensus expects - the US economy rebounds in the second half of 2008 from a first-half slowdown, MTI says.
But, if the US sub-prime problems worsen or if oil prices continue to soar, and a sharp, protracted US slump ensues, Singapore's growth could be nearer the lower end of the forecast.
At a briefing on the Q3 GDP data yesterday, MTI's second permanent secretary Ravi Menon told reporters that Singapore's 2008 growth forecast should be intact even if US economic growth slows to about 1.5 per cent next year.
MTI's forecast also assumes that oil prices will round out the rest of the year at an average US$90 a barrel, and ease to US$80-85 in 2008.
As for the weak US dollar, Mr Menon said the concern, if any, is not so much on any impact on Singapore's exports, but if it should see a precipitous decline that triggers off massive selloffs in the financial markets and second-round effects on the global economy. 'It's one of the wild cards,' he added.
For now, the key concern here remains centred on rising price pressures, though Mr Menon reiterates the government's assessment that there is no overheating in the system.
Resource constraints are being eased as supply catches up with demand, he said, citing the release of vacant land and state buildings for lease, and increased land sales in business parks for companies' backroom operations, all of which should check the rise in office rental costs.
Foreign worker quotas will also be increased to ease the labour bottlenecks in construction.
Not least, a cyclical slowdown in the economy next year will help cool demand pressures, Mr Menon said.
'Has the economy gotten hotter? Yes,' he said. 'Has it got too hot? No.'
Singapore's short and medium-term economic prognosis remains good, he added.
The Monetary Authority of Singapore's officials at the briefing also maintained that - apart from the one-off technical effects of the Goods and Services Tax hike and the taxman's upcoming revision of the annual values of HDB flats, which will boost the consumer price index - underlying cost pressures haven't gone out of whack.
The underlying inflation rate - excluding housing and private road transport costs - is still expected to average 1.5-2 per cent this year and next.
MAS deputy managing director Ong Chong Tee said its monetary policy stance 'remains appropriate' and will be reviewed, as scheduled, next April.
Economists such as Citigroup's Chua Hak Bin reckon the risk of further MAS tightening is high early next year, as the move to a 'slightly' steeper slope last month 'may be too gentle a move'.
Citigroup has raised its 2008 inflation forecast to 3.8 per cent from 3 per cent. It expects CPI inflation to swing from a 5 per cent average in the first half of 2008 to 2.8 per cent in the second half. A 20 per cent rise in imputed rents could drive up headline CPI by 1.5-2 percentage points, Dr Chua estimates.
Merrill Lynch's Emerging Asia currency strategist, Simon Flint, says he is not concerned about overheating risks here.
'MAS reacted very quickly to rising price pressures,' he said, referring to last month's monetary tightening. 'They're being reasonably prudent about inflationary threats.
'I'm optimistic about sustainable growth,' he added.
Monday, November 19, 2007
BT: Ratios to judge a firm's health
Business Times - 19 Nov 2007
Ratios to judge a firm's health
CHEN HUIFEN looks at key financial ratios that can help to evaluate the comparative performance of companies
IN OUR previous two instalments, we discussed the value of annual reports, and how investors can pick out useful information from both the prose and numbers.
We also looked at the fundamentals behind the three main financial statements - the profit and loss statement, the balance sheet and the cash flow.
Based on the information above, analysts can derive key financial ratios that help them in their assessment of a company's past and current health. To draw a simple analogy, some consumers base their car buying decisions on the fuel mileage they can get. Similarly, financial ratios are tools to judge the comparative performance of companies.
There are probably some 20 major financial ratios that analysts can churn out when they evaluate the operating performance and capital structure of companies. Here, we pick out some of the key ones.
Net profit margin
Net profit margin measures the amount of money a company makes for every dollar of sales generated. So, the higher the number, the better. It is typically presented in percentage terms. For example, Singapore Press Holdings (SPH) recently reported a full year net profit of $506.2 million, on a revenue of $1.16 billion. Its net profit margin is therefore
Net profit/revenue = $506.2 million/$1,160 million
= 43.6 per cent.
Return on equity
Commonly referred to as ROE, return on equity indicates how effectively a company generates profits out of its shareholders' funds compared to its peers in the same industry. There is more than one way of calculating ROE. The simplest is
ROE = Net profit/Shareholders' equity
So if a company makes $506.2 million and has shareholders' equity of about $2.2 billion, then its
ROE = $506.2 million/$2,200 million
= 23 per cent
Earnings per share
One of the key indicators of profitability, earnings per share or EPS is derived by dividing the net profit by the number of shares issued. So if a company makes $506.2 million and has 1.58 billion shares, then its
EPS = net profit/total weighted average number of shares
= $506.2 million/1,580 million shares
= $0.32 (or 32 cents)
Price to earnings ratio
With the EPS derived above, you can generate the price to earnings (PE) ratio. Analysts usually compare the PE ratios of companies in the same industry to judge if they are expensive or cheap when benchmarked against their peers. Note that the PE is influenced by a number of factors, including the price volatility of the company's share on the stock market and its earnings growth. Typically, the higher the PE, the greater the expectations of a company's future outlook.
Hence, if a company is trading at $4.50 and has an EPS of $0.32, then its
PE = Share price/EPS
= 4.50/0.32
= 14
Price to book value
Like the PE ratio, the price to book value (or PTB) is often used to compute stock values. The 'price' in PTB refers to the common stock price, while the 'book' is the book value of equity - the difference between a company's assets and its liabilities. In other words,
PTB = Market capitalisation/Total book value of its equity
One of the disadvantages of using PTB is that it is subject to accounting decisions on depreciation and other variables. On the other hand, it provides an alternative ratio to look at if a company is in the red, and therefore has no PE ratio to speak of.
Dividend yield
Dividend yield is the amount of dividend a shareholder can collect for every share that he owns.
Hence,
Dividend yield = Annual dividends received per share/Share price of the stock
As an example, SPH will be paying out 26 cents per share this year, so its dividend yield is therefore
26 cents/448 cents (price of stock as of Friday) = 5.8%
Gearing
Also known as financial leverage, gearing gives an idea of how a company funds its business - what proportion of its operations is being financed through debt, against shareholders' funds?
Gearing = Long-term liabilities/Shareholders' funds
Bear in mind that financial ratios should be evaluated together with knowledge of the company's operations, strategies and trends in the industry. None of them is meaningful on its own and should not be taken as the ultimate guide to a company's value. They should be looked at in conjunction with developments of the company, the performance of its peers, and not least, macroeconomic trends.
Ratios to judge a firm's health
CHEN HUIFEN looks at key financial ratios that can help to evaluate the comparative performance of companies
IN OUR previous two instalments, we discussed the value of annual reports, and how investors can pick out useful information from both the prose and numbers.
We also looked at the fundamentals behind the three main financial statements - the profit and loss statement, the balance sheet and the cash flow.
Based on the information above, analysts can derive key financial ratios that help them in their assessment of a company's past and current health. To draw a simple analogy, some consumers base their car buying decisions on the fuel mileage they can get. Similarly, financial ratios are tools to judge the comparative performance of companies.
There are probably some 20 major financial ratios that analysts can churn out when they evaluate the operating performance and capital structure of companies. Here, we pick out some of the key ones.
Net profit margin
Net profit margin measures the amount of money a company makes for every dollar of sales generated. So, the higher the number, the better. It is typically presented in percentage terms. For example, Singapore Press Holdings (SPH) recently reported a full year net profit of $506.2 million, on a revenue of $1.16 billion. Its net profit margin is therefore
Net profit/revenue = $506.2 million/$1,160 million
= 43.6 per cent.
Return on equity
Commonly referred to as ROE, return on equity indicates how effectively a company generates profits out of its shareholders' funds compared to its peers in the same industry. There is more than one way of calculating ROE. The simplest is
ROE = Net profit/Shareholders' equity
So if a company makes $506.2 million and has shareholders' equity of about $2.2 billion, then its
ROE = $506.2 million/$2,200 million
= 23 per cent
Earnings per share
One of the key indicators of profitability, earnings per share or EPS is derived by dividing the net profit by the number of shares issued. So if a company makes $506.2 million and has 1.58 billion shares, then its
EPS = net profit/total weighted average number of shares
= $506.2 million/1,580 million shares
= $0.32 (or 32 cents)
Price to earnings ratio
With the EPS derived above, you can generate the price to earnings (PE) ratio. Analysts usually compare the PE ratios of companies in the same industry to judge if they are expensive or cheap when benchmarked against their peers. Note that the PE is influenced by a number of factors, including the price volatility of the company's share on the stock market and its earnings growth. Typically, the higher the PE, the greater the expectations of a company's future outlook.
Hence, if a company is trading at $4.50 and has an EPS of $0.32, then its
PE = Share price/EPS
= 4.50/0.32
= 14
Price to book value
Like the PE ratio, the price to book value (or PTB) is often used to compute stock values. The 'price' in PTB refers to the common stock price, while the 'book' is the book value of equity - the difference between a company's assets and its liabilities. In other words,
PTB = Market capitalisation/Total book value of its equity
One of the disadvantages of using PTB is that it is subject to accounting decisions on depreciation and other variables. On the other hand, it provides an alternative ratio to look at if a company is in the red, and therefore has no PE ratio to speak of.
Dividend yield
Dividend yield is the amount of dividend a shareholder can collect for every share that he owns.
Hence,
Dividend yield = Annual dividends received per share/Share price of the stock
As an example, SPH will be paying out 26 cents per share this year, so its dividend yield is therefore
26 cents/448 cents (price of stock as of Friday) = 5.8%
Gearing
Also known as financial leverage, gearing gives an idea of how a company funds its business - what proportion of its operations is being financed through debt, against shareholders' funds?
Gearing = Long-term liabilities/Shareholders' funds
Bear in mind that financial ratios should be evaluated together with knowledge of the company's operations, strategies and trends in the industry. None of them is meaningful on its own and should not be taken as the ultimate guide to a company's value. They should be looked at in conjunction with developments of the company, the performance of its peers, and not least, macroeconomic trends.
BT: Jasper unit buys 55% stake in offshore oil firm Neptune Marine
Business Times - 19 Nov 2007
Jasper unit buys 55% stake in offshore oil firm Neptune Marine
SINGAPORE - Singapore-listed Jasper Investments said on Monday that its unit will buy a controlling stake in Cyprus-based Neptune Marine Oil and Gas for US$198.4 million.
A company statement said that Jasper's unit Turquoise has agreed to buy a 55.44 per cent stake in Neptune.
Related link:
Click here for Jasper's press release
Neptune, which trades in Norway's over-the-counter market, acquires older low-cost offshore drilling rigs, refurbishes them with the latest drilling equipment and then contracts them out to major oil and gas exploration and production companies.
Singapore has seen a number of acquisitions in the offshore oil industry as interest in rig-building assets heats up amid record oil prices.
Dubai Drydocks World last month agreed to buy Labroy Marine for US$1.63 billion - its second acquisition in Singapore after it bought shipyard operator Pan-United Marine.
-- REUTERS
Jasper unit buys 55% stake in offshore oil firm Neptune Marine
SINGAPORE - Singapore-listed Jasper Investments said on Monday that its unit will buy a controlling stake in Cyprus-based Neptune Marine Oil and Gas for US$198.4 million.
A company statement said that Jasper's unit Turquoise has agreed to buy a 55.44 per cent stake in Neptune.
Related link:
Click here for Jasper's press release
Neptune, which trades in Norway's over-the-counter market, acquires older low-cost offshore drilling rigs, refurbishes them with the latest drilling equipment and then contracts them out to major oil and gas exploration and production companies.
Singapore has seen a number of acquisitions in the offshore oil industry as interest in rig-building assets heats up amid record oil prices.
Dubai Drydocks World last month agreed to buy Labroy Marine for US$1.63 billion - its second acquisition in Singapore after it bought shipyard operator Pan-United Marine.
-- REUTERS
PM Lee says '08 growth to slow: CNBC
Business Times - 16 Nov 2007
PM Lee says '08 growth to slow: CNBC
SINGAPORE - Singapore's prime minister expects economic growth to slow next year and predicts inflation will run at 4-5 per cent 'for some time' in 2008, CNBC television quoted him as saying in remarks released on Friday.
'I don't expect that we will go into a recession, but it won't be like this year,' Prime Minister Lee Hsien Loong said, according to an extract from an interview with CNBC to be broadcast on Saturday.
Singapore will release final third-quarter GDP data on Monday and a Reuters poll of economists predicts the economy grew at an annualised rate of 6.4 per cent in the quarter, matching an official advance estimate, as booming construction and services offset manufacturing weakness.
Mr Lee reiterated the government's forecast for the economy to expand at the high end of a 7-8 per cent range this year compared with 7.9 per cent in 2006.
The government's growth forecast for next year is 4-6 per cent and Mr Lee said he expected an update on the official forecast within days.
Mr Lee, who is also Singapore's finance minister, said he was watching inflation carefully, adding that the effect of higher prices for oil, food and the impact from a rise in sales tax on July 1 would become visible in the consumer price index in the coming quarters.
'I expect that the property prices will also show up in the CPI ... and therefore I think next year the CPI will be 4-5 per cent for some time.'
-- REUTERS
PM Lee says '08 growth to slow: CNBC
SINGAPORE - Singapore's prime minister expects economic growth to slow next year and predicts inflation will run at 4-5 per cent 'for some time' in 2008, CNBC television quoted him as saying in remarks released on Friday.
'I don't expect that we will go into a recession, but it won't be like this year,' Prime Minister Lee Hsien Loong said, according to an extract from an interview with CNBC to be broadcast on Saturday.
Singapore will release final third-quarter GDP data on Monday and a Reuters poll of economists predicts the economy grew at an annualised rate of 6.4 per cent in the quarter, matching an official advance estimate, as booming construction and services offset manufacturing weakness.
Mr Lee reiterated the government's forecast for the economy to expand at the high end of a 7-8 per cent range this year compared with 7.9 per cent in 2006.
The government's growth forecast for next year is 4-6 per cent and Mr Lee said he expected an update on the official forecast within days.
Mr Lee, who is also Singapore's finance minister, said he was watching inflation carefully, adding that the effect of higher prices for oil, food and the impact from a rise in sales tax on July 1 would become visible in the consumer price index in the coming quarters.
'I expect that the property prices will also show up in the CPI ... and therefore I think next year the CPI will be 4-5 per cent for some time.'
-- REUTERS
Saturday, November 17, 2007
Analyst report on CSC
CSC Holdings - Sterling Results (Results)
15 Nov 2007
In 1H08, revenue jumped 245% YOY to S$185m while net profit surged 296% to S$19.1m.
Strong organic growth resulting from the buoyant Singapore construction sector, coupled with the acquisition of L&M Foundation, Soil Investigation and G-Pile Sistem, contributed to the stellar performance.
Construction counters are trading at an average forward PE07 of 21.8x and PE08 of 10.7x. However, most of them have December as their fiscal year-end and are currently towards the end of FY07 while CSC Holdings year-end is in March and is currently in FY08.
Given positive developments at CSC, we use a PE08 of 14x, and its diluted EPS of 3.18, to value CSC Holdings at 44.5 cts. Hence, we upgrade CSC Holdings to a BUY recommendation.
15 Nov 2007
In 1H08, revenue jumped 245% YOY to S$185m while net profit surged 296% to S$19.1m.
Strong organic growth resulting from the buoyant Singapore construction sector, coupled with the acquisition of L&M Foundation, Soil Investigation and G-Pile Sistem, contributed to the stellar performance.
Construction counters are trading at an average forward PE07 of 21.8x and PE08 of 10.7x. However, most of them have December as their fiscal year-end and are currently towards the end of FY07 while CSC Holdings year-end is in March and is currently in FY08.
Given positive developments at CSC, we use a PE08 of 14x, and its diluted EPS of 3.18, to value CSC Holdings at 44.5 cts. Hence, we upgrade CSC Holdings to a BUY recommendation.
Wednesday, November 14, 2007
BT: How much is enough for retirement?
Business Times - 14 Nov 2007
How much is enough for retirement?
By TOI SEE JONG
LIFE insurance is the cornerstone of sound financial planning to enable us and our loved ones to continue to enjoy a preferred standard of living through protection for longevity (living benefits), mortality (death benefits) and morbidity (sick or disability benefits). With the right supplement of riders to these insurance policies, other likely risks and protection needs can also be fully covered.
Retirement planning
In Singapore, those in the 30s often face conflicting and insatiable demands on their hard-earned income. The foremost priority is putting aside enough money in preparation for marriage, children and condominium (or HDB housing), a car, and club membership.
Singaporeans are among the most conscientious among Asians in purchasing protection coverage in the form of whole life or endowment plans. However, there remains a sizeable number who believe that they can sustain their living and lifestyle needs through the golden years of retirement solely on their Central Provident Fund (CPF) savings or at the appropriate time in the future in downgrading their HDB apartment to generate the necessary cashflow.
CPF causing lethargy?
Why do many Singaporeans not realise the necessity for retirement planning? That it is something to be planned proactively and provided for from a young age? It could be because many hang on to a 'make-d' attitude until the later part of their life since retirement is a long way away, or they are happy to face the situation when the time arrives.
Do Singaporeans between 55 and 60 have sufficient CPF balance? The right answer is more likely to be that many are (rightly or falsely) lulled into the belief that there is always the CPF to rely on. However, among the lower and middle classes it may be that there is insufficient CPF to tide through the entire retirement period.
Financial planning
So exactly how much is sufficient planning for retirement for an individual currently in his 30s?
The best way to ensure one has the right balance of protection and savings is to speak to a qualified financial planner to assess your financial needs. The aim is to identify the right proportion that needs to be regularly invested. For example, this could be a percentage of one's income, varying from 10 per cent to 20 per cent, depending on the individual's intended outcome and on the right combination of insurance, savings and investment plans. The aim also would be to result in retirement savings enough to afford monthly payouts after retirement equal to about two-thirds of the last drawn salary before retirement.
Why two-thirds and not the full sum? At retirement age, it is likely that the individual has paid off all mortgages, the children have completed their education and 'flown the coop'; there are no more dependent elderly parents to take care of, etc. Thus he/she may no longer need the full sum of his/her last drawn salary to enjoy the same lifestyle standards. The exact sum that an individual needs to put aside for a targeted cashflow in the future may vary from individual to individual and all depends on the financial goals.
In a 2006 Research on Protection Policies conducted by Saffron Hill Research for the Life Insurance Association of Singapore, some startling facts were laid bare:
Two-thirds of Singaporeans have some form of insurance.
Conversely, three in 10 do not have any. A lot of room for growth still.
Half of those who own insurance think they do not have enough of it
Between 15 to 30 per cent of all respondents indicated interest to buy insurance.
So how much insurance is sufficient insurance for an individual? Most who took part in the survey felt unsure about how much insurance protection is sufficient for their family. There were no clear 'formulas' to determine the right amount that is sufficient. Most take household expenses as a gauge but are unsure if this is the right measure. They also felt that their family will likely adjust their lifestyle depending on the household income.
It also seems that among those who feel they have 'sufficient' insurance cover, they estimate that between 4 to 7 times of their annual income in savings and protection is sufficient; while those who are 'well-covered' point to an insurance coverage between eight to 10 times annual income.
As a rule of thumb, when considering financial planning for the first time in your early thirties (when your commitments are still relatively low) you may want to look minimally at five to 10 times your annual income as a target to put aside in protection and savings.
Periodic review
In any financial planning, it is vital to take into account attendant and expected inflation; and cost of living increases so that there is no erosion of value on expected future benefits. A regular annual review with your financial planner is recommended. The review should take into account the most current scenario, including your current income, changes in personal or family situation and changes in planning needs.
Popular instruments
We highlight some of the key products and instruments in insurance, savings and investments available in Singapore.
Annuity
Deferred annuity offers a forced discipline to put aside a fixed lump sum now in order to receive a guaranteed monthly sum (some policies are inflation adjusted) starting from the vesting age (eg retirement age of 62 or 65) and through the rest of one's life or for a fixed period (eg 20 years) as stated in the policy purchased.
Immediate annuity on the other hand involves a fixed sum investment made immediately prior (usually a year) to retirement age, where a monthly sum is paid over the rest of the lifetime or for a fixed period (eg 20 years).
Deposits
Deposits are savings or funds placed with a financial institution over time that earns interest (simple or compounded), and is a source of preparedness for future use or in the event of emergency or periodic spending needs.
Unit trust
Unit trust allows you to invest in various funds. These funds could be invested in various financial instruments such as bonds, equities etc or a combination of them. The underlying value of the investment assets depends on the fund's objectives and the performance of those assets. For instance, a fund invested in equities may be more volatile compared to one invested in government bonds.
Investment-linked products
Following close on the heals of unit trusts are ILPs, these are similar to unit trusts, and thus allow you to invest in various funds, but they have the added feature of a life insurance cover. ILPs also allow for regular premium on top of single premium.
Insurance plans
Other common life insurance plans are term, whole life and endowment plans. Term insurance plan offers relatively high life protection (sum assured) at the lowest possible premium for a fix period. Whole life plans provide insurance coverage for the entire life. These plans would accumulate a cash value after several years (depending on the plan) and can also be a source of cash if one lives past a certain age and is prepared to draw on the cash value. Premium payments are usually for limited period or whole of life.
Endowment plans, on the other hand, offer a combination of savings and life cover. Basically it provides you cover for the duration of the plan and at the end of the term there is a savings amount payable in a lump sum. The premiums are payable for a limited period only.
Risk appetite
There are many possible combinations of protection, savings and investment plans available when looking at financial planning. There is no single one-plan-fits-all solution. Individual needs will change over the life span depending on your priorities and affordability. You should start financial planning early in life and conduct periodic reviews (perhaps as regularly as annually) to ensure optimal coverage and savings throughout your life span. Needs and expectations of lifestyle do change over time.
There is a need to proactively plan ahead for retirement, and more so to start this planning from as early as the age of 30. The best way to do this is with the help of a professional financial planner. This way you will not only have adequate protection and savings, but also the right mix of investment that would prepare you for the retirement at the age of your choice and the retirement lifestyle of your dream.
There is a sizeable proportion of the population that does not see the need for insurance and financial planning. All of us must ask ourselves the question: Do I fall into this category?
Statistics indicate that the trend is for people to continue to enjoy longer lifespan (both males and females) in Singapore. To state an example, any retirement payout plans that restrict the period to 20 years (or up to the age of 85) may not be providing for the chance that you may outlive this time horizon. If that happens you may become dependent on your loved ones.
Therefore, presently life annuities are one of the best options when planning for retirement income. One way to achieve the lifestyle of one's choice is to plan early and contribute towards a deferred annuity from an early age (say 30 years), and get a regular income of the desired amount each month after retirement.
Toi See Jong is managing director, UOB Life Assurance Limited
How much is enough for retirement?
By TOI SEE JONG
LIFE insurance is the cornerstone of sound financial planning to enable us and our loved ones to continue to enjoy a preferred standard of living through protection for longevity (living benefits), mortality (death benefits) and morbidity (sick or disability benefits). With the right supplement of riders to these insurance policies, other likely risks and protection needs can also be fully covered.
Retirement planning
In Singapore, those in the 30s often face conflicting and insatiable demands on their hard-earned income. The foremost priority is putting aside enough money in preparation for marriage, children and condominium (or HDB housing), a car, and club membership.
Singaporeans are among the most conscientious among Asians in purchasing protection coverage in the form of whole life or endowment plans. However, there remains a sizeable number who believe that they can sustain their living and lifestyle needs through the golden years of retirement solely on their Central Provident Fund (CPF) savings or at the appropriate time in the future in downgrading their HDB apartment to generate the necessary cashflow.
CPF causing lethargy?
Why do many Singaporeans not realise the necessity for retirement planning? That it is something to be planned proactively and provided for from a young age? It could be because many hang on to a 'make-d' attitude until the later part of their life since retirement is a long way away, or they are happy to face the situation when the time arrives.
Do Singaporeans between 55 and 60 have sufficient CPF balance? The right answer is more likely to be that many are (rightly or falsely) lulled into the belief that there is always the CPF to rely on. However, among the lower and middle classes it may be that there is insufficient CPF to tide through the entire retirement period.
Financial planning
So exactly how much is sufficient planning for retirement for an individual currently in his 30s?
The best way to ensure one has the right balance of protection and savings is to speak to a qualified financial planner to assess your financial needs. The aim is to identify the right proportion that needs to be regularly invested. For example, this could be a percentage of one's income, varying from 10 per cent to 20 per cent, depending on the individual's intended outcome and on the right combination of insurance, savings and investment plans. The aim also would be to result in retirement savings enough to afford monthly payouts after retirement equal to about two-thirds of the last drawn salary before retirement.
Why two-thirds and not the full sum? At retirement age, it is likely that the individual has paid off all mortgages, the children have completed their education and 'flown the coop'; there are no more dependent elderly parents to take care of, etc. Thus he/she may no longer need the full sum of his/her last drawn salary to enjoy the same lifestyle standards. The exact sum that an individual needs to put aside for a targeted cashflow in the future may vary from individual to individual and all depends on the financial goals.
In a 2006 Research on Protection Policies conducted by Saffron Hill Research for the Life Insurance Association of Singapore, some startling facts were laid bare:
Two-thirds of Singaporeans have some form of insurance.
Conversely, three in 10 do not have any. A lot of room for growth still.
Half of those who own insurance think they do not have enough of it
Between 15 to 30 per cent of all respondents indicated interest to buy insurance.
So how much insurance is sufficient insurance for an individual? Most who took part in the survey felt unsure about how much insurance protection is sufficient for their family. There were no clear 'formulas' to determine the right amount that is sufficient. Most take household expenses as a gauge but are unsure if this is the right measure. They also felt that their family will likely adjust their lifestyle depending on the household income.
It also seems that among those who feel they have 'sufficient' insurance cover, they estimate that between 4 to 7 times of their annual income in savings and protection is sufficient; while those who are 'well-covered' point to an insurance coverage between eight to 10 times annual income.
As a rule of thumb, when considering financial planning for the first time in your early thirties (when your commitments are still relatively low) you may want to look minimally at five to 10 times your annual income as a target to put aside in protection and savings.
Periodic review
In any financial planning, it is vital to take into account attendant and expected inflation; and cost of living increases so that there is no erosion of value on expected future benefits. A regular annual review with your financial planner is recommended. The review should take into account the most current scenario, including your current income, changes in personal or family situation and changes in planning needs.
Popular instruments
We highlight some of the key products and instruments in insurance, savings and investments available in Singapore.
Annuity
Deferred annuity offers a forced discipline to put aside a fixed lump sum now in order to receive a guaranteed monthly sum (some policies are inflation adjusted) starting from the vesting age (eg retirement age of 62 or 65) and through the rest of one's life or for a fixed period (eg 20 years) as stated in the policy purchased.
Immediate annuity on the other hand involves a fixed sum investment made immediately prior (usually a year) to retirement age, where a monthly sum is paid over the rest of the lifetime or for a fixed period (eg 20 years).
Deposits
Deposits are savings or funds placed with a financial institution over time that earns interest (simple or compounded), and is a source of preparedness for future use or in the event of emergency or periodic spending needs.
Unit trust
Unit trust allows you to invest in various funds. These funds could be invested in various financial instruments such as bonds, equities etc or a combination of them. The underlying value of the investment assets depends on the fund's objectives and the performance of those assets. For instance, a fund invested in equities may be more volatile compared to one invested in government bonds.
Investment-linked products
Following close on the heals of unit trusts are ILPs, these are similar to unit trusts, and thus allow you to invest in various funds, but they have the added feature of a life insurance cover. ILPs also allow for regular premium on top of single premium.
Insurance plans
Other common life insurance plans are term, whole life and endowment plans. Term insurance plan offers relatively high life protection (sum assured) at the lowest possible premium for a fix period. Whole life plans provide insurance coverage for the entire life. These plans would accumulate a cash value after several years (depending on the plan) and can also be a source of cash if one lives past a certain age and is prepared to draw on the cash value. Premium payments are usually for limited period or whole of life.
Endowment plans, on the other hand, offer a combination of savings and life cover. Basically it provides you cover for the duration of the plan and at the end of the term there is a savings amount payable in a lump sum. The premiums are payable for a limited period only.
Risk appetite
There are many possible combinations of protection, savings and investment plans available when looking at financial planning. There is no single one-plan-fits-all solution. Individual needs will change over the life span depending on your priorities and affordability. You should start financial planning early in life and conduct periodic reviews (perhaps as regularly as annually) to ensure optimal coverage and savings throughout your life span. Needs and expectations of lifestyle do change over time.
There is a need to proactively plan ahead for retirement, and more so to start this planning from as early as the age of 30. The best way to do this is with the help of a professional financial planner. This way you will not only have adequate protection and savings, but also the right mix of investment that would prepare you for the retirement at the age of your choice and the retirement lifestyle of your dream.
There is a sizeable proportion of the population that does not see the need for insurance and financial planning. All of us must ask ourselves the question: Do I fall into this category?
Statistics indicate that the trend is for people to continue to enjoy longer lifespan (both males and females) in Singapore. To state an example, any retirement payout plans that restrict the period to 20 years (or up to the age of 85) may not be providing for the chance that you may outlive this time horizon. If that happens you may become dependent on your loved ones.
Therefore, presently life annuities are one of the best options when planning for retirement income. One way to achieve the lifestyle of one's choice is to plan early and contribute towards a deferred annuity from an early age (say 30 years), and get a regular income of the desired amount each month after retirement.
Toi See Jong is managing director, UOB Life Assurance Limited
BT: Time to redraw your retirement plan
Business Times - 14 Nov 2007
Time to redraw your retirement plan
Longer life expectancy and erosion of traditional pension schemes signal that retirees may outlive their assets, says KURT REIMAN
RETIREMENTS are becoming ever longer and more costly. Pensioners need to save enough to fund a comfortable life and to ensure they can leave assets to the next generation.
Retirement, in its current form, will soon be a thing of the past as demographic, financial and lifestyle factors lay siege to the traditional models. Pension plans, both public and private, face a squeeze from fewer people working and more people retiring. Meanwhile, medical and healthcare spending are rising, putting government finances under additional strain.
Yet most people expect to lead active and healthy lives during retirement, with some hoping to combine relaxation with a job, part-time or otherwise. Together, these trends are reshaping our thinking about careers and how to pay for what comes afterwards. Retirement, in short, is evolving into something completely new.
Traditionally - and particularly in places other than Singapore - retirees have relied primarily on government and corporate pension plans and think of their personal savings as an extra resource for additional or unforeseen expenditure. But the health of state-run pension programmes is under scrutiny, forcing individuals to take more responsibility for their well-being in old age. Against this background, living too long and spending too much have emerged as major risk factors. The latter hazard is accentuated by the ever more active lifestyle of senior citizens. If enterprising and adventurous pensioners want to enjoy their third age to the full, however, they need to ensure that their assets will stay the course.
Will I outlive my assets?
According to the United Nations, people born today in developed countries can expect to live 75.6 years on average, up from 66.1 years for those born in the 1950s. Moreover, today's 60-year-olds can expect to live even longer than these statistics suggest, having survived the high risk periods of infancy and early youth. Indeed, they might well live another twenty years on average, and this life expectancy continues to lengthen (see Figure 1).
Longer lives and the erosion of traditional pension schemes add to the danger that retirees will simply outlive their assets. So does the fact that life expectancy estimates have often erred on the low side in the past: that is, people have tended to live far longer than the statisticians have predicted.
All this increases the uncertainty surrounding the key question - how long they will live - that individuals need in planning for retirement. Nor do life expectancy forecasts account for the important differences stemming from gender, status, occupation, educational attainment, and country of residence.
If they rely on average life expectancy statistics, five people out of 10 run the risk of living longer than their assets will last. To mitigate that risk while they are still earning and saving money, investors would be best advised to calculate their retirement horizon conservatively (that is, by assuming a rather high life expectancy).
At the same time, they should factor in any relevant variables such as their physical condition and family medical history. A realistic perspective on one's personal life expectancy can go a long way to mitigating longevity risk.
Once they have accumulated the assets which will pay for their retirement, investors can also reduce that risk by purchasing an annuity, which comprises a series of payments of set size and frequency during the life of the holder. Although annuities are not risk-free - they are, for example, exposed to the hazards of inflation or the failure of the providing institution - they do ensure a constant nominal income stream regardless of how long the holder lives.
Demand for such instruments is on the increase as pension schemes become less generous. However, the amount of money that should be invested in an annuity remains a highly personal choice and it should always be borne in mind that committing assets to an annuity can reduce the amount of a portfolio that can be passed on to the next generation.
Will I overspend my assets?
The danger that one might live beyond one's means, also known as liability risk, is another increasingly relevant factor in retirement planning. It is linked to the fact that people are living longer and arises partly from the trend towards increased individual responsibility for healthcare. Additional factors include the growing taste for more ambitious lifestyle goals, such as frequent travel and staying young and fit.
There are numerous ways to reduce liability risk. One can continue to work longer or relocate to a country with a lower cost of living (see Figure 2). This also helps to reduce the chance that you will live longer than your assets last. Each extra year of spending that is funded from employment income represents an additional year that retirement withdrawals can be postponed and investments can continue to grow.
Another option is to limit the uncertainty related to future costs by purchasing elderly and long-term healthcare insurance. Without this insurance, individuals may need to plan for worst-case scenarios for healthcare liabilities, or face the prospect that healthcare costs will erode assets that would otherwise be passed on to the next generation. Individuals can also pay down debt before they retire in order to increase their net worth.
Mandatory v discretionary
needs When it comes to reckoning up the total income a retiree will need, expenses should be classified into mandatory and discretionary. Mandatory expenses are those related to basic daily needs, including housing (mortgages, taxes, and maintenance fees), food, and medical care.
Discretionary expenses are everything else, accounting for the remainder of the total income requirement.
To estimate how much income you might need, consider the things that you really cannot do without and the things you might be able to sacrifice or scale down. An apartment, for example, might be more convenient and cheaper than maintaining a house, and holidays at home might be less costly than travelling. Downsizing your lifestyle might be an option if you fear that your assets might melt away too soon. A solid estimate of your mandatory needs also helps you to determine the amount of assets that should be invested in an annuity, if any.
Figure 3 shows a hypothetical income and expense framework during retirement. Mandatory expenses are met with pension and annuity income, while discretionary needs are funded by assets allocated first to an absolute return portfolio. Other discretionary income sources could also include rental income, royalty payments, or other alternative income streams. Assets above and beyond these mandates are contained in a growth portfolio, which can be allocated in line with investors' longer-term goals.
When there is a high probability or desire to leave a bequest, assets can be allocated with the beneficiaries' time horizon in mind. Consider also that bequest motives require prudent estate planning; holding rapidly appreciating assets can significantly increase estate tax liability.
Review regularly
No estimate or forecast can be safely relied upon unless it is regularly reviewed in the light of changing economic, financial, regulatory, demographic, and personal circumstances. Without such a review, even the most finely tuned income scheme may quickly lose its relevance. It is important to keep track of realized investment returns, as well as expenditure, and to adjust spending habits and lifestyle as necessary. Retirees should, therefore, review their retirement plans regularly and discuss their plans with their client advisers.
Kurt Reiman is head of thematic research at UBS Wealth Management Research. He can be contacted at kurt.reiman@ubs.com
BT: Tactical asset allocation models cut risks
Business Times - 14 Nov 2007
Tactical asset allocation models cut risks
ARJUNA MAHENDRAN examines the use of total return strategies as a way of riding out turbulent stock markets
THE stock market boom that started back in 2003 is expected to continue in the medium term. However, an analysis of longer-term market cycles shows that equity investors must brace themselves for more volatility in the short term.
Historically, bull markets have been spread over several decades. Examples of this are the sustained boom that followed the US Civil War and lasted until the beginning of the 20th century, the period after World War II to the end of the 1960s, as well as the phase from the beginning of the 1980s until the Internet bubble burst in 2000. These boom phases were all driven by fundamental innovations such as the railway, electricity, automobiles, aviation, and modern telecommunications.
By contrast, bear markets - when equity prices tumble as they did in 2000-2003 - tend to last two to three years, and result in cumulative losses of between 40 per cent and 80 per cent.
They historically turn into a new bull phase with relatively small and mild corrections in the first four to six years, the most recent of these periods probably being from 2003 to mid-2007. The second phase of a long-lasting bull market usually sees a correction of 15-20 per cent before the boom continues.
The current economic and societal changes clearly indicate the continuation of the bull market. New technologies (digital communication, nanotechnology), the rapid industrialisation of emerging markets such as China, and demographic changes (urbanisation in Asia, ageing populations in many industrialised countries) provide favourable conditions for growth.
However, concerns about dwindling energy resources, geopolitical tensions and environmental problems mean that it will not all be smooth sailing.
Investment strategies must, therefore, also factor in potential crises. In the current environment, the question is whether investors should adopt a passive strategy. Too much short-term switching in a portfolio will eat into returns, but a purely passive strategy when prices are falling could also lead to (book) losses of between 40 per cent and 80 per cent over several years.
Between 1926 and 2006, it sometimes took more than 20 years to earn a higher annualised return on Swiss equities than on Swiss bonds. The figures for the US tell a similar story. In the long run, equity investors are the most successful, but at the same time are exposed to considerable fluctuations in value. Investors with a strong stomach and the courage to buy in weak market phases can achieve handsome returns.
But the loss risk that comes from buying near the end of a boom phase should not be under-estimated. The markets are prone to exaggeration: One of the best-known examples is the equity and property bubble in Japan at the end of the 1980s when the Imperial Palace in Tokyo was estimated to be worth as much as the whole of California. Or the technology and Internet bubble in 2000 which saw breathtaking leaps in the market capitalisation of companies that often did not turn a profit and in some cases did not even report any turnover.
Our analyses show that simple indicators such as seasonality (sell in May and go away), momentum, central bank monetary policy, and interest-rate structures on the capital markets can be a useful source of investment tips. A combination of these factors has led to higher returns with a lower downside risk.
These results suggest that sophisticated tactical asset allocation models can offer attractive returns while at the same time substantially reducing the loss risk, otherwise known as total return strategies. Total return, or absolute return, strategies have two objectives: to achieve a minimum return, often equal to the money market return plus 2-3 per cent; and at the same time to minimise the loss risk. Most of these strategies aim to generate a positive return over a 12-month period.
Total return strategies draw on a dynamic investment approach and diversification to reach their objectives. Demand for these strategies tends to increase when the markets become volatile.
Relative return strategies, by contrast, track their performance against a benchmark. This approach means that fund managers can beat the benchmark despite making net losses for their clients, for example, if the fund loses 12 per cent but the benchmark index falls 20 per cent.
The situation is reversed if the total return strategy achieves 10 per cent while the equity market gains 20 per cent in a given year. Investors must be aware that it is not only the returns that vary; the risks are also different.
In practice, total return and relative return strategies are not mutually exclusive. Many clients want active risk monitoring for part of their investments, but at the same time are mindful of the returns achieved in relation to traditional investment forms such as equities and bonds.
Arjuna Mahendran is chief economist and strategist, Asia-Pacific, Credit Suisse Private Banking
Tactical asset allocation models cut risks
ARJUNA MAHENDRAN examines the use of total return strategies as a way of riding out turbulent stock markets
THE stock market boom that started back in 2003 is expected to continue in the medium term. However, an analysis of longer-term market cycles shows that equity investors must brace themselves for more volatility in the short term.
Historically, bull markets have been spread over several decades. Examples of this are the sustained boom that followed the US Civil War and lasted until the beginning of the 20th century, the period after World War II to the end of the 1960s, as well as the phase from the beginning of the 1980s until the Internet bubble burst in 2000. These boom phases were all driven by fundamental innovations such as the railway, electricity, automobiles, aviation, and modern telecommunications.
By contrast, bear markets - when equity prices tumble as they did in 2000-2003 - tend to last two to three years, and result in cumulative losses of between 40 per cent and 80 per cent.
They historically turn into a new bull phase with relatively small and mild corrections in the first four to six years, the most recent of these periods probably being from 2003 to mid-2007. The second phase of a long-lasting bull market usually sees a correction of 15-20 per cent before the boom continues.
The current economic and societal changes clearly indicate the continuation of the bull market. New technologies (digital communication, nanotechnology), the rapid industrialisation of emerging markets such as China, and demographic changes (urbanisation in Asia, ageing populations in many industrialised countries) provide favourable conditions for growth.
However, concerns about dwindling energy resources, geopolitical tensions and environmental problems mean that it will not all be smooth sailing.
Investment strategies must, therefore, also factor in potential crises. In the current environment, the question is whether investors should adopt a passive strategy. Too much short-term switching in a portfolio will eat into returns, but a purely passive strategy when prices are falling could also lead to (book) losses of between 40 per cent and 80 per cent over several years.
Between 1926 and 2006, it sometimes took more than 20 years to earn a higher annualised return on Swiss equities than on Swiss bonds. The figures for the US tell a similar story. In the long run, equity investors are the most successful, but at the same time are exposed to considerable fluctuations in value. Investors with a strong stomach and the courage to buy in weak market phases can achieve handsome returns.
But the loss risk that comes from buying near the end of a boom phase should not be under-estimated. The markets are prone to exaggeration: One of the best-known examples is the equity and property bubble in Japan at the end of the 1980s when the Imperial Palace in Tokyo was estimated to be worth as much as the whole of California. Or the technology and Internet bubble in 2000 which saw breathtaking leaps in the market capitalisation of companies that often did not turn a profit and in some cases did not even report any turnover.
Our analyses show that simple indicators such as seasonality (sell in May and go away), momentum, central bank monetary policy, and interest-rate structures on the capital markets can be a useful source of investment tips. A combination of these factors has led to higher returns with a lower downside risk.
These results suggest that sophisticated tactical asset allocation models can offer attractive returns while at the same time substantially reducing the loss risk, otherwise known as total return strategies. Total return, or absolute return, strategies have two objectives: to achieve a minimum return, often equal to the money market return plus 2-3 per cent; and at the same time to minimise the loss risk. Most of these strategies aim to generate a positive return over a 12-month period.
Total return strategies draw on a dynamic investment approach and diversification to reach their objectives. Demand for these strategies tends to increase when the markets become volatile.
Relative return strategies, by contrast, track their performance against a benchmark. This approach means that fund managers can beat the benchmark despite making net losses for their clients, for example, if the fund loses 12 per cent but the benchmark index falls 20 per cent.
The situation is reversed if the total return strategy achieves 10 per cent while the equity market gains 20 per cent in a given year. Investors must be aware that it is not only the returns that vary; the risks are also different.
In practice, total return and relative return strategies are not mutually exclusive. Many clients want active risk monitoring for part of their investments, but at the same time are mindful of the returns achieved in relation to traditional investment forms such as equities and bonds.
Arjuna Mahendran is chief economist and strategist, Asia-Pacific, Credit Suisse Private Banking
BT: Beyond the realm of stocks & bonds
Business Times - 14 Nov 2007
Beyond the realm of stocks & bonds
Alternative investments like private equity, hedge funds and real estate are now significant portfolio components, writes SALMAN HAIDER
ALTERNATIVE investments, particularly hedge funds, are attracting growing interest from global institutional funds to high net worth and retail investors. Considering the volatility investors have seen this year, it is little wonder they are seeking alternative investments - not only for new avenues of return opportunities, but also as a way of controlling risk. The promise of positive returns certainly plays a part. Ever-rising gold and property prices come to mind as well as the increasing resilience to risk as investors invest heavily into emerging markets.
Increasingly, however, astute investors are also realising that allocating across stock and bond markets alone may not be the most effective way to manage their portfolios.
In fact, private equity, hedge funds and real estate are evolving to become significant components of many investors' portfolios. A recent Asia-Pacific Wealth Report published by Capgemini and Merrill Lynch found that Singapore's high net worth individuals had the highest allocation to alternative investments in the region, at 37 per cent. No longer confined to the universe of traditional long-only investments, investors today are bravely exploring the 'alternative' space beyond. Simply put, alternative investments include strategies other than just buying stocks and bonds. Though limited only by the creativity of the investment managers themselves, common examples of alternative investments include hedge funds, which can take both long and short positions); commodities and real estate (the 'traditional' alternatives), and private equity funds, which can also invest in non-public companies (see table).
The universe of alternative investments is greater for high net worth investors, but even retail investors are spoilt for choice these days. What is interesting from a portfolio perspective is that alternative investments have historically shown low-to-moderate correlation to traditional assets and to each other. In other words, they do not always move up or down in lockstep. While this may not seem particularly exciting when markets are moving in one direction (ie, up), diversification becomes highly valued in times of volatility, and over longer time horizons as market leadership shifts from one asset class/market to another.
Of course, these benefits cannot be guaranteed and investing in alternatives carries varying degrees of risk. But for a typical investor, incorporating some alternative investments to a portfolio of stocks and bonds could help improve the portfolio's return for each level of risk (see chart). This helps to reduce overall volatility which, in turn, leads to faster compounding of returns over time.
At the same time, alternative investments provide qualified investors with exposure to less efficient private and public markets and investment strategies that cannot be accessed through traditional fixed income and equity markets, for example, having sufficient ownership through a private equity fund, to influence the management of a company. It is important to realise that the world of alternatives is diverse, comprising a wide range of options with different risk-return characteristics. At Citibank, our model portfolios factor in some allocation to alternative investments, depending on a client's risk profile and suitability. But as with all investments, there are key areas and risks that investors need to consider before deciding to invest.
Besides the usual risks that apply to traditional assets - such as market risk, where the value of securities, commodities and currencies may fluctuate reflecting a variety of factors, including changes in outlook, and political and economic environments - there may be other specific risks that apply to alternative investments.
It may not be feasible to observe market prices for investments such as private equity or private real estate. This challenge makes it difficult to compare the risk-return profiles.
Moreover, some managers may receive additional performance compensation for the value of their expertise and exclusive access to markets or other managers. Despite the rising popularity of alternative investments in recent years, investors should first look at their own overall risk appetite and suitability, time horizon and liquidity needs before investing. Speak to your financial adviser about how the investment would fit into your investment objectives and existing portfolio.
Although alternatives may reduce overall portfolio volatility, some have risks other than those associated with traditional stocks and bonds, including:
Lack of liquidity: Alternative investments are generally not readily marketable, sometimes not redeemable and are transferable only in limited circumstances.
Specialised trading: Special investment techniques such as leveraging, short selling and investing in derivatives may result in significant losses, including the loss of principal.
Strategy risk: Investment strategies may at times be out of market favour for considerable periods, with adverse effects on the investment. Because of these risks, and the largely unregulated nature of the alternative investment industry, laws restrict those eligible to invest in alternatives. Criteria generally include income and net worth thresholds, as well as investment expertise and the ability to understand and tolerate risk.
Valuation: Valuation procedures may be subjective in nature, may not conform to any industry standard or reflect the values that are ultimately realised. However, the valuations of these positions may affect asset-based management fees and performance-based fees.
Salman Haider is head of investments, Citibank Singapore Ltd
Beyond the realm of stocks & bonds
Alternative investments like private equity, hedge funds and real estate are now significant portfolio components, writes SALMAN HAIDER
ALTERNATIVE investments, particularly hedge funds, are attracting growing interest from global institutional funds to high net worth and retail investors. Considering the volatility investors have seen this year, it is little wonder they are seeking alternative investments - not only for new avenues of return opportunities, but also as a way of controlling risk. The promise of positive returns certainly plays a part. Ever-rising gold and property prices come to mind as well as the increasing resilience to risk as investors invest heavily into emerging markets.
Increasingly, however, astute investors are also realising that allocating across stock and bond markets alone may not be the most effective way to manage their portfolios.
In fact, private equity, hedge funds and real estate are evolving to become significant components of many investors' portfolios. A recent Asia-Pacific Wealth Report published by Capgemini and Merrill Lynch found that Singapore's high net worth individuals had the highest allocation to alternative investments in the region, at 37 per cent. No longer confined to the universe of traditional long-only investments, investors today are bravely exploring the 'alternative' space beyond. Simply put, alternative investments include strategies other than just buying stocks and bonds. Though limited only by the creativity of the investment managers themselves, common examples of alternative investments include hedge funds, which can take both long and short positions); commodities and real estate (the 'traditional' alternatives), and private equity funds, which can also invest in non-public companies (see table).
The universe of alternative investments is greater for high net worth investors, but even retail investors are spoilt for choice these days. What is interesting from a portfolio perspective is that alternative investments have historically shown low-to-moderate correlation to traditional assets and to each other. In other words, they do not always move up or down in lockstep. While this may not seem particularly exciting when markets are moving in one direction (ie, up), diversification becomes highly valued in times of volatility, and over longer time horizons as market leadership shifts from one asset class/market to another.
Of course, these benefits cannot be guaranteed and investing in alternatives carries varying degrees of risk. But for a typical investor, incorporating some alternative investments to a portfolio of stocks and bonds could help improve the portfolio's return for each level of risk (see chart). This helps to reduce overall volatility which, in turn, leads to faster compounding of returns over time.
At the same time, alternative investments provide qualified investors with exposure to less efficient private and public markets and investment strategies that cannot be accessed through traditional fixed income and equity markets, for example, having sufficient ownership through a private equity fund, to influence the management of a company. It is important to realise that the world of alternatives is diverse, comprising a wide range of options with different risk-return characteristics. At Citibank, our model portfolios factor in some allocation to alternative investments, depending on a client's risk profile and suitability. But as with all investments, there are key areas and risks that investors need to consider before deciding to invest.
Besides the usual risks that apply to traditional assets - such as market risk, where the value of securities, commodities and currencies may fluctuate reflecting a variety of factors, including changes in outlook, and political and economic environments - there may be other specific risks that apply to alternative investments.
It may not be feasible to observe market prices for investments such as private equity or private real estate. This challenge makes it difficult to compare the risk-return profiles.
Moreover, some managers may receive additional performance compensation for the value of their expertise and exclusive access to markets or other managers. Despite the rising popularity of alternative investments in recent years, investors should first look at their own overall risk appetite and suitability, time horizon and liquidity needs before investing. Speak to your financial adviser about how the investment would fit into your investment objectives and existing portfolio.
Although alternatives may reduce overall portfolio volatility, some have risks other than those associated with traditional stocks and bonds, including:
Lack of liquidity: Alternative investments are generally not readily marketable, sometimes not redeemable and are transferable only in limited circumstances.
Specialised trading: Special investment techniques such as leveraging, short selling and investing in derivatives may result in significant losses, including the loss of principal.
Strategy risk: Investment strategies may at times be out of market favour for considerable periods, with adverse effects on the investment. Because of these risks, and the largely unregulated nature of the alternative investment industry, laws restrict those eligible to invest in alternatives. Criteria generally include income and net worth thresholds, as well as investment expertise and the ability to understand and tolerate risk.
Valuation: Valuation procedures may be subjective in nature, may not conform to any industry standard or reflect the values that are ultimately realised. However, the valuations of these positions may affect asset-based management fees and performance-based fees.
Salman Haider is head of investments, Citibank Singapore Ltd
BT: Understanding currency markets
Business Times - 14 Nov 2007
Understanding currency markets
K DUKER discusses the four main drivers of currency markets that investors need to follow closely: central bank behaviour, a nation's trade balance, commodity prices, and domestic equity market strength
THE popularity of foreign exchange as an asset class continues to grow. Pension funds, institutional and retail investors are increasingly using this market to potentially generate excess returns and improve portfolio diversification. However, growth in the popularity of FX has not necessarily been matched by a greater understanding of how this market works.
Foreign exchange is not easy. It requires research and a degree of expertise.
A sensible approach requires investors to first understand who participates in currency markets, how excess returns are generated and what drives valuations. Trading decisions should be supported by three key elements: access to comprehensive, timely and informed research; a personal definition of risk; and a platform that allows you to trade quickly, efficiently and in all market conditions.
First, the market. Trading volumes in currency markets have grown significantly over the past three years. The Bank for International Settlements (BIS), the bank for central banks, points to an unprecedented 71 per cent increase in average daily turnover in global FX markets between April 2004 and April 2007 to US$3.2 trillion, based on current exchange rates.
What has driven this growth? A key contributor has been an increase in global trade. As more goods and services move across borders, the need for companies to hedge their foreign exchange risk grows. Notable, however, is what the BIS describes as 'a significant expansion in the activity of investor groups including hedge funds, which was partially facilitated by substantial growth in the use of prime brokerage, and retail investors'.
In other words, a greater number of participants in global FX markets are seeking to generate investment returns rather than simply manage currency risks. This is concurrent with Deutsche Bank research that shows the market is made up of two main participants: liquidity seekers, such as companies, that use FX to manage currency risks related to their operations; and profit seekers, which participate in currency markets to make money.
The growth in volumes attributed to profit seekers has been the most significant development in global currency markets in recent years. Deutsche Bank estimates that these participants now account for approximately 25-50 per cent of all market activity.
It is the difference in priorities between liquidity seekers and profit seekers which generates excess returns from currency markets. Liquidity seekers don't mind paying to manage currency risks - a service that profit seekers are all too happy to provide in the hope of generating a return.
There are a number of factors that drive currency markets. Changes in a country's macroeconomic situation have a major short-term influence. Economic data releases, policy decisions and political events cause economists and traders alike to re-appraise their outlook on a country's currency daily. Long term, the perceived strength of a nation's economy is often reflected in its currency. An economy that is growing quickly will likely attract investors from abroad seeking higher returns.
There are four main drivers of currency markets that investors need to follow closely: central bank behaviour, a nation's trade balance, commodity prices, and domestic equity market strength.
Interest rates
Central bank rates are probably the most influential factor in determining a currency's value. Higher interest rates drive demand for government bonds, attracting foreign investment and encouraging the repatriation of overseas funds. This increases demand for the currency and makes it stronger. Therefore, any move to increase interest rates - or any development that could cause a central bank to increase interest rates - will tend to make traders bullish on that currency. The reverse also applies.
A nation's trade balance is a key indicator of a country's economic health. A trade deficit causes a weakening of the currency as more financial resources flow out of the country than what flow in.
For foreign exchange markets, any unexpected move away from a nation's trade balance benchmark will usually trigger increased trading and a price movement.
Another major international influence on a currency's value is the price of commodities - particularly petroleum. A rise, especially a sharp unexpected spike, in the price of oil will negatively affect the currency of oil-importing nations, such as the United States, and positively strengthen the currency of an oil exporter, such as Canada. High global demand for commodities has also benefited commodity exporters such as Australia, which has seen its currency hit 18-year highs against the US dollar.
The overall direction in equity prices and dramatic short-term market moves tend to have an impact on currency valuations, as money flows into countries with rising equity markets and vice versa. Equity markets also tend to serve as a sentiment barometer for a country's economic prospects - the more positive the sentiment for a country's economy, the greater the demand for its assets.
Following and understanding these developments is time intensive and requires a great deal of expertise. This brings us to the first key element required to trade currencies - research.
Credible, timely and relevant research is critical for FX investors in keeping abreast of the latest developments in global currency markets. Research is available in many forms, either through brokerage firms or research houses.
As data is released daily and from a variety of sources, access to a single resource is advantageous. It is important to make sure your trading system or broker can provide this service.
The second key element - risk - is less tangible and highly personal. All markets require a degree of risk in order to produce returns and currency markets are no different. What is important is to understand these risks and your aversion to them.
In practical terms, investors can apply a range of measures to limit their risk. Trading positions can be structured with stop-loss limits, whereby a position will unwind if losses reach a certain level. Diversification across currencies and markets can also be an effective way to manage risk. This could involve diversifying positions across different regions or investing in currencies from countries that do not share close economic links or major trading partners.
Counter-party
The third and final element is choosing the right counter-party. This falls into two parts: price and market access.
Currency markets are the most liquid of the world's financial markets and also the fastest moving. Investors, therefore, need access to consistent, streaming prices and the ability to execute trades in all market conditions. Choosing the wrong counter-party could mean losing the ability to trade when you need it most. In general, a good counter-party can be described as one that has 24-hour access to global currency markets, manages large institutional trading flows and has the ability to offer prices during difficult market conditions.
For investors that do not have access to industry trading systems, technological advances have allowed Web-based trading platforms to provide seamless access to global currency markets, six days a week, 24 hours a day. There are a number of electronic trading platforms available in the market; however, not all are equal. Ensure you understand how to use your trading system, what resources it offers in terms of information and research and, crucially, the level of ongoing support.
Investors, both institutional and retail, are still coming to terms with how to use foreign exchange as an asset class. The diversification and potential yield benefits offered by FX markets are, however, clear.
Trading FX is not easy. But if you are prepared to learn, currency markets can offer fantastic potential for enhancing returns and improving diversification in your investment portfolio.
K Duker is director, dbFX - Asia Pacific, Deutsche Bank
Understanding currency markets
K DUKER discusses the four main drivers of currency markets that investors need to follow closely: central bank behaviour, a nation's trade balance, commodity prices, and domestic equity market strength
THE popularity of foreign exchange as an asset class continues to grow. Pension funds, institutional and retail investors are increasingly using this market to potentially generate excess returns and improve portfolio diversification. However, growth in the popularity of FX has not necessarily been matched by a greater understanding of how this market works.
Foreign exchange is not easy. It requires research and a degree of expertise.
A sensible approach requires investors to first understand who participates in currency markets, how excess returns are generated and what drives valuations. Trading decisions should be supported by three key elements: access to comprehensive, timely and informed research; a personal definition of risk; and a platform that allows you to trade quickly, efficiently and in all market conditions.
First, the market. Trading volumes in currency markets have grown significantly over the past three years. The Bank for International Settlements (BIS), the bank for central banks, points to an unprecedented 71 per cent increase in average daily turnover in global FX markets between April 2004 and April 2007 to US$3.2 trillion, based on current exchange rates.
What has driven this growth? A key contributor has been an increase in global trade. As more goods and services move across borders, the need for companies to hedge their foreign exchange risk grows. Notable, however, is what the BIS describes as 'a significant expansion in the activity of investor groups including hedge funds, which was partially facilitated by substantial growth in the use of prime brokerage, and retail investors'.
In other words, a greater number of participants in global FX markets are seeking to generate investment returns rather than simply manage currency risks. This is concurrent with Deutsche Bank research that shows the market is made up of two main participants: liquidity seekers, such as companies, that use FX to manage currency risks related to their operations; and profit seekers, which participate in currency markets to make money.
The growth in volumes attributed to profit seekers has been the most significant development in global currency markets in recent years. Deutsche Bank estimates that these participants now account for approximately 25-50 per cent of all market activity.
It is the difference in priorities between liquidity seekers and profit seekers which generates excess returns from currency markets. Liquidity seekers don't mind paying to manage currency risks - a service that profit seekers are all too happy to provide in the hope of generating a return.
There are a number of factors that drive currency markets. Changes in a country's macroeconomic situation have a major short-term influence. Economic data releases, policy decisions and political events cause economists and traders alike to re-appraise their outlook on a country's currency daily. Long term, the perceived strength of a nation's economy is often reflected in its currency. An economy that is growing quickly will likely attract investors from abroad seeking higher returns.
There are four main drivers of currency markets that investors need to follow closely: central bank behaviour, a nation's trade balance, commodity prices, and domestic equity market strength.
Interest rates
Central bank rates are probably the most influential factor in determining a currency's value. Higher interest rates drive demand for government bonds, attracting foreign investment and encouraging the repatriation of overseas funds. This increases demand for the currency and makes it stronger. Therefore, any move to increase interest rates - or any development that could cause a central bank to increase interest rates - will tend to make traders bullish on that currency. The reverse also applies.
A nation's trade balance is a key indicator of a country's economic health. A trade deficit causes a weakening of the currency as more financial resources flow out of the country than what flow in.
For foreign exchange markets, any unexpected move away from a nation's trade balance benchmark will usually trigger increased trading and a price movement.
Another major international influence on a currency's value is the price of commodities - particularly petroleum. A rise, especially a sharp unexpected spike, in the price of oil will negatively affect the currency of oil-importing nations, such as the United States, and positively strengthen the currency of an oil exporter, such as Canada. High global demand for commodities has also benefited commodity exporters such as Australia, which has seen its currency hit 18-year highs against the US dollar.
The overall direction in equity prices and dramatic short-term market moves tend to have an impact on currency valuations, as money flows into countries with rising equity markets and vice versa. Equity markets also tend to serve as a sentiment barometer for a country's economic prospects - the more positive the sentiment for a country's economy, the greater the demand for its assets.
Following and understanding these developments is time intensive and requires a great deal of expertise. This brings us to the first key element required to trade currencies - research.
Credible, timely and relevant research is critical for FX investors in keeping abreast of the latest developments in global currency markets. Research is available in many forms, either through brokerage firms or research houses.
As data is released daily and from a variety of sources, access to a single resource is advantageous. It is important to make sure your trading system or broker can provide this service.
The second key element - risk - is less tangible and highly personal. All markets require a degree of risk in order to produce returns and currency markets are no different. What is important is to understand these risks and your aversion to them.
In practical terms, investors can apply a range of measures to limit their risk. Trading positions can be structured with stop-loss limits, whereby a position will unwind if losses reach a certain level. Diversification across currencies and markets can also be an effective way to manage risk. This could involve diversifying positions across different regions or investing in currencies from countries that do not share close economic links or major trading partners.
Counter-party
The third and final element is choosing the right counter-party. This falls into two parts: price and market access.
Currency markets are the most liquid of the world's financial markets and also the fastest moving. Investors, therefore, need access to consistent, streaming prices and the ability to execute trades in all market conditions. Choosing the wrong counter-party could mean losing the ability to trade when you need it most. In general, a good counter-party can be described as one that has 24-hour access to global currency markets, manages large institutional trading flows and has the ability to offer prices during difficult market conditions.
For investors that do not have access to industry trading systems, technological advances have allowed Web-based trading platforms to provide seamless access to global currency markets, six days a week, 24 hours a day. There are a number of electronic trading platforms available in the market; however, not all are equal. Ensure you understand how to use your trading system, what resources it offers in terms of information and research and, crucially, the level of ongoing support.
Investors, both institutional and retail, are still coming to terms with how to use foreign exchange as an asset class. The diversification and potential yield benefits offered by FX markets are, however, clear.
Trading FX is not easy. But if you are prepared to learn, currency markets can offer fantastic potential for enhancing returns and improving diversification in your investment portfolio.
K Duker is director, dbFX - Asia Pacific, Deutsche Bank
BT: Five virtues of a successful investor
Business Times - 14 Nov 2007
Five virtues of a successful investor
LIM MENG TAT explains why volatility is not the long-term investor's concern
IN THE current market, the old adage 'what goes up must come down' could probably be updated. These days, what goes up not only comes down, but goes back up and then down again.
It's called volatility and for better or worse, it's an integral part of stock market investing.
In volatile market conditions, investors get jumpy and try and predict where the market is going, selling off equities or becoming too nervous to invest at all.
Investing doesn't have to be like this. Despite what market 'experts' say, investing is not a game or a contest, it is a continuous process that lasts a lifetime. Whether you are winning or losing at any given moment is beside the point. As such, volatility is not the long-term investor's concern.
The only thing that matters is whether you prevail in the end. And the factors that determine long-term victory are probably the exact opposite of the ones that create short-term success.
In the short run, the investors who can't let go - who track every market move - can occasionally come out on top. But the longer they keep at it, the more likely it is that these same people will lose. That's because obsessing over the market leads you to think you can foretell the financial future. You then make increasingly aggressive bets. Sooner or later you'll experience either heartburn or heartache. Fortunately, you can break this destructive pattern with a secret weapon based on self-control. At Russell, we call it 'virtuous investing'.
When it comes to investing many of us apply principles such as risk and reward and fall prey to greed although we may not admit it. When we check how the markets are doing, we don't think about the admirable qualities we need to be investors. We just want to know how much we have made or lost. But the qualities we need in our daily lives also apply to investing.
Have courage: Investing in shares is risky but it is a calculated risk. Think about recent market gyrations as the outcome of a dice, but one with more than six sides. And the good thing about this 'super die' is that it has more positive sides than negative ones. Each time market forces roll this dice, you take a chance on the outcome. In the 12 months to June 2007, there was an amazing run of the die: The Singapore stock market (STI) saw positive returns in the past four quarters. Risks appeared to have disappeared. But don't forget the die does have negative sides - we just haven't seen them in a while. So July and August brought us negative results. As the die is rolled in the next month, quarter or year, we take the risk that it could again land with a negative side facing up. But our chances of seeing a positive number next time are greater than the chance of a negative. The stock market's positive numbers have outweighed the negative numbers over long periods of time. There is no reason to believe that they will not continue to do so in the future.
Be honest: Be honest with yourself about how much you really know. Be honest about - and constantly test - what you don't know. Decades of research by the world's leading psychologists have shown that over-confidence - thinking you know more than you do or that you are more skilful than you actually are - is one of the most fundamental aspects of human nature.
Back in 1999, when you could dump all your money into just about any tech stock and watch it triple in two days, it was easy for an investor to feel like a genius. In fact, anyone who made money trading shares without first studying the underlying companies had a lot of dumb luck but not an ounce of genius!
Successful investors accept not just the possibility - but the certainty - that they will be wrong a lot of the time. You need to protect yourself against being wrong in two dimensions: space (picking the wrong investments) and time (buying when you should sell or vice versa). Over-confident investors are convinced they're right in both dimensions - just when they are most likely to be wrong. Fortunately, powerful protection tools are available and putting all these protective tools to work at once will provide you with the closest thing to real peace of mind as an investor. These are the ways to get 'power protection':
Diversify in space by investing some of your money in local investments and some internationally, in shares, bonds and cash. Draw up an asset allocation plan by deciding what percentage you want in various asset classes - for example, 60 per cent in shares, 10 per cent in property, 20 per cent in bonds and 10 per cent in cash. Knowing that the gain or loss in any one individual investment is just a small piece of your investment pie should help you keep your cool.
Bet only on the side. If you're sure a security, fund or industry sector is a good bet, put only a small piece of your total assets there, say, 5-10 per cent at most. And never add more, no matter what.
Dollar cost average. Diversify the risk of time by investing the same amount every month through a dollar cost averaging programme. That way, you'll never put all your money in the market right before a crash or have nothing invested right before the market soars.
Rebalance. Finally, once or twice a year, adjust your assets so that they match the target percentages you picked earlier. That will force you to sell a bit of whatever has gone up and buy a bit of whatever has gone down. This reverses the tragic buy-high, sell-low pattern that plagues most investors.
Be detached. Armed with a balanced portfolio, you will never be afraid to read the headlines. There is a tendency for the mass media to excite its audience about short-term fluctuations in the market and get investors hot and bothered about the fortunes of individual securities, countries and sectors.
You don't have to look far to find examples of financial shock therapy in the daily news. The stock market plummets and the headlines warn of economic Armageddon. Oil prices soar and another investment 'expert' touts the need to buy shares in energy companies. Investors are far better served by being detached from the constant noise coming from the media.
In the long-term ride to wealth accumulation or preservation, an honest confrontation with risk and reward - implemented via a carefully selected asset allocation plan - is the only way to prepare for unpredictable volatility. Accept that the value of your investments will rise and fall in the short term based on market behaviour. And remember that what matters most is the size of your account on retirement day.
Be disciplined. Don't let emotions rule your investment strategy. It's easy to let short-term market movements affect and even dictate your investment decisions. Which is why it's important to understand the role that investor sentiment and emotion plays in the cyclical nature of equity markets. How often have you seen an investor who, during a strong market upswing, rushes to buy so as 'not to be left out of the gains'. Conversely, during a strong downturn investors will feel compelled to sell so as 'not to be left bearing the losses'.
Be committed. Keep your eye on the prize and ignore short-term market events. History shows that moving in and out of the market may reduce returns, so don't bail out. Consider a 'holder', a hypothetical investor who invested $100,000 in a diversified portfolio** comprising 20 per cent Singapore shares, 30 per cent international shares, 5 per cent Singapore bonds, 15 per cent international bonds, 30 per cent property in January 1996 and stuck with it through to December 2006. His average annual return would have been 10.65 per cent and his investment would have been worth $304,332 at the end of that period.
Now consider a 'bailer' or 'chaser' - a hypothetical investor also starting with $100,000 in 1996 - who chases the top performing asset sector each year and switches on Jan 1 every year. During the same period, this investor would have changed his asset allocation 11 times. By the end of 2006, his average return would have been 8.74 per cent and his investment worth $251,463.
Our 'holder' fared much better.
Hopefully, you've chosen your investment strategy based on your risk tolerance, age, how long you plan to work, financial circumstances, retirement goals, and attitude to investing. Stay committed to your strategy and don't alter it unless your life changes.
The point? These simple virtues may not make you wealthy but they will help you handle your investments with the same grace we strive for in other aspects of life. So keep these five virtues in mind the next time the market dives or you're tempted to act on a 'hot tip' from a friend.
As Socrates said: 'Virtue does not come from wealth, but wealth, and every other good thing which men have, comes from virtue.'
**Hypothetical performance calculated by using the following index returns. Singapore Shares: STI, Singapore Bonds: UOB Govt Bond Index (SIBID prior to January 1999), International Shares: MSCI AC World, International Bonds: LB Global Agg, Property: FTNAR EQ Reit.
Lim Meng Tat is director, Russell Investment Group
Five virtues of a successful investor
LIM MENG TAT explains why volatility is not the long-term investor's concern
IN THE current market, the old adage 'what goes up must come down' could probably be updated. These days, what goes up not only comes down, but goes back up and then down again.
It's called volatility and for better or worse, it's an integral part of stock market investing.
In volatile market conditions, investors get jumpy and try and predict where the market is going, selling off equities or becoming too nervous to invest at all.
Investing doesn't have to be like this. Despite what market 'experts' say, investing is not a game or a contest, it is a continuous process that lasts a lifetime. Whether you are winning or losing at any given moment is beside the point. As such, volatility is not the long-term investor's concern.
The only thing that matters is whether you prevail in the end. And the factors that determine long-term victory are probably the exact opposite of the ones that create short-term success.
In the short run, the investors who can't let go - who track every market move - can occasionally come out on top. But the longer they keep at it, the more likely it is that these same people will lose. That's because obsessing over the market leads you to think you can foretell the financial future. You then make increasingly aggressive bets. Sooner or later you'll experience either heartburn or heartache. Fortunately, you can break this destructive pattern with a secret weapon based on self-control. At Russell, we call it 'virtuous investing'.
When it comes to investing many of us apply principles such as risk and reward and fall prey to greed although we may not admit it. When we check how the markets are doing, we don't think about the admirable qualities we need to be investors. We just want to know how much we have made or lost. But the qualities we need in our daily lives also apply to investing.
Have courage: Investing in shares is risky but it is a calculated risk. Think about recent market gyrations as the outcome of a dice, but one with more than six sides. And the good thing about this 'super die' is that it has more positive sides than negative ones. Each time market forces roll this dice, you take a chance on the outcome. In the 12 months to June 2007, there was an amazing run of the die: The Singapore stock market (STI) saw positive returns in the past four quarters. Risks appeared to have disappeared. But don't forget the die does have negative sides - we just haven't seen them in a while. So July and August brought us negative results. As the die is rolled in the next month, quarter or year, we take the risk that it could again land with a negative side facing up. But our chances of seeing a positive number next time are greater than the chance of a negative. The stock market's positive numbers have outweighed the negative numbers over long periods of time. There is no reason to believe that they will not continue to do so in the future.
Be honest: Be honest with yourself about how much you really know. Be honest about - and constantly test - what you don't know. Decades of research by the world's leading psychologists have shown that over-confidence - thinking you know more than you do or that you are more skilful than you actually are - is one of the most fundamental aspects of human nature.
Back in 1999, when you could dump all your money into just about any tech stock and watch it triple in two days, it was easy for an investor to feel like a genius. In fact, anyone who made money trading shares without first studying the underlying companies had a lot of dumb luck but not an ounce of genius!
Successful investors accept not just the possibility - but the certainty - that they will be wrong a lot of the time. You need to protect yourself against being wrong in two dimensions: space (picking the wrong investments) and time (buying when you should sell or vice versa). Over-confident investors are convinced they're right in both dimensions - just when they are most likely to be wrong. Fortunately, powerful protection tools are available and putting all these protective tools to work at once will provide you with the closest thing to real peace of mind as an investor. These are the ways to get 'power protection':
Diversify in space by investing some of your money in local investments and some internationally, in shares, bonds and cash. Draw up an asset allocation plan by deciding what percentage you want in various asset classes - for example, 60 per cent in shares, 10 per cent in property, 20 per cent in bonds and 10 per cent in cash. Knowing that the gain or loss in any one individual investment is just a small piece of your investment pie should help you keep your cool.
Bet only on the side. If you're sure a security, fund or industry sector is a good bet, put only a small piece of your total assets there, say, 5-10 per cent at most. And never add more, no matter what.
Dollar cost average. Diversify the risk of time by investing the same amount every month through a dollar cost averaging programme. That way, you'll never put all your money in the market right before a crash or have nothing invested right before the market soars.
Rebalance. Finally, once or twice a year, adjust your assets so that they match the target percentages you picked earlier. That will force you to sell a bit of whatever has gone up and buy a bit of whatever has gone down. This reverses the tragic buy-high, sell-low pattern that plagues most investors.
Be detached. Armed with a balanced portfolio, you will never be afraid to read the headlines. There is a tendency for the mass media to excite its audience about short-term fluctuations in the market and get investors hot and bothered about the fortunes of individual securities, countries and sectors.
You don't have to look far to find examples of financial shock therapy in the daily news. The stock market plummets and the headlines warn of economic Armageddon. Oil prices soar and another investment 'expert' touts the need to buy shares in energy companies. Investors are far better served by being detached from the constant noise coming from the media.
In the long-term ride to wealth accumulation or preservation, an honest confrontation with risk and reward - implemented via a carefully selected asset allocation plan - is the only way to prepare for unpredictable volatility. Accept that the value of your investments will rise and fall in the short term based on market behaviour. And remember that what matters most is the size of your account on retirement day.
Be disciplined. Don't let emotions rule your investment strategy. It's easy to let short-term market movements affect and even dictate your investment decisions. Which is why it's important to understand the role that investor sentiment and emotion plays in the cyclical nature of equity markets. How often have you seen an investor who, during a strong market upswing, rushes to buy so as 'not to be left out of the gains'. Conversely, during a strong downturn investors will feel compelled to sell so as 'not to be left bearing the losses'.
Be committed. Keep your eye on the prize and ignore short-term market events. History shows that moving in and out of the market may reduce returns, so don't bail out. Consider a 'holder', a hypothetical investor who invested $100,000 in a diversified portfolio** comprising 20 per cent Singapore shares, 30 per cent international shares, 5 per cent Singapore bonds, 15 per cent international bonds, 30 per cent property in January 1996 and stuck with it through to December 2006. His average annual return would have been 10.65 per cent and his investment would have been worth $304,332 at the end of that period.
Now consider a 'bailer' or 'chaser' - a hypothetical investor also starting with $100,000 in 1996 - who chases the top performing asset sector each year and switches on Jan 1 every year. During the same period, this investor would have changed his asset allocation 11 times. By the end of 2006, his average return would have been 8.74 per cent and his investment worth $251,463.
Our 'holder' fared much better.
Hopefully, you've chosen your investment strategy based on your risk tolerance, age, how long you plan to work, financial circumstances, retirement goals, and attitude to investing. Stay committed to your strategy and don't alter it unless your life changes.
The point? These simple virtues may not make you wealthy but they will help you handle your investments with the same grace we strive for in other aspects of life. So keep these five virtues in mind the next time the market dives or you're tempted to act on a 'hot tip' from a friend.
As Socrates said: 'Virtue does not come from wealth, but wealth, and every other good thing which men have, comes from virtue.'
**Hypothetical performance calculated by using the following index returns. Singapore Shares: STI, Singapore Bonds: UOB Govt Bond Index (SIBID prior to January 1999), International Shares: MSCI AC World, International Bonds: LB Global Agg, Property: FTNAR EQ Reit.
Lim Meng Tat is director, Russell Investment Group
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