Singapore Money Matters Rss

Featured Posts

Why you should not buy IPOs As Sheng Siong is launching its IPO next month, I expected a few calls as whenever an IPO is launching. And if you are my client, you know my answer. I decide to write this article so everybody can benefit...

Read more

Questions to ask your Financial Adviser Every Sunday morning when I read the newspapers, I always see articles or advertisements regarding "Financial Advisers". Nowadays, just like the once prestigious word "Banker", which is misused in the...

Read more

Revision to Nomination of Insurance Nominees Regulation With the onset of the Mental Capacity Act ("MCA") coming into effect on 1st March 2010, the Insurance (Nomination of Beneficiaries) Regulations 2009 ("the Regulations") will be amended to effect 2 changes: The...

Read more

The ABCs of the Financial Advisers Act The title, Financial Adviser, is always mis-used in the industry and misunderstood by the consumers. On 10 October 2002, the Financial Advisers Act came into effect and all financial institutions are...

Read more

Moratorium Underwriting by Aviva It is a common that insurance companies do not cover pre-existing condition. Typically, pre-existing conditions will be excluded with little or no chance of them being covered, even after a number of treatment-free...

Read more

Singapore Inflation Eases and Strength of Singapore Dollar

Posted by Ivan Guan | Posted on 29-08-2012

Category : Currency, Macro Economics

Tags: ,

Singapore CPI dropped to 4% year on year, lower than the market’s expectation, due to a more moderate increase in costs of accommodation, private road transport and oil-related items.

The Monetary Authority of Singapore (MAS) lowered its forecast for core inflation to 2.5%-3% for the whole year as overall global commodity prices remain below year-ago levels, keeping domestic oil and food inflation contained.

In the past, MAS has been continuing with the policy of modest and gradual appreciation of the Singapore dollar to combat inflation. Given easing inflation and less risk of a technical recession, I think there is an increased possibility that MAS will slow the pace of SGD appreciation at its October meeting.

Below is the historical chart of SGD/USD for the past 2 years.

The Rise of Agriculture Commodity Market

Posted by Ivan Guan | Posted on 19-07-2012

Category : Commodities

Tags:

While many are still arguing whether a bull or bear stock market is ahead, whether euro bond is the only solution of Europe crisis. The much overlooked agriculture commodity market is quietly shooting up to a new level.

Let’s take a look at the S&P GSCI® Agriculture Index which provides investors with a reliable benchmark for investment performance in the agricultural commodity markets. As of December 30, 2011, it consists of agriculture commodities shown in the chart on the left.

If you have been following my blog, in Sep 2010, when agriculture commodity markets were still relatively quiet, I was advocating using agriculture commodity to diversify the portfolio. True enough, global food-price index hit record high in early 2011, and many of my clients have made decent returns.

I still remember vividly that at the time, many new “agriculture funds” were launched. The bullish future of agriculture commodity were reported in newspaper every week just before the markets crashed and many investors were stuck in the funds since then. (you can refer to the chart below for historical performance of the agriculture index).

Ironically, I rarely see this kind of reports on this lately when the market rallied more than 20% in weeks, neither does any fund manager talk about it. Everybody is talking about Europe debt crisis but the stock market never went to the way it was “supposed” to.

When next time you start to see interviews of grand future of agriculture commodity market, you should know what to expect.

2012 Performance of SGX IPOs

Posted by Ivan Guan | Posted on 17-07-2012

Category : Stocks

Tags:

Despite much frustration in global stock markets, Singapore IPO has been hot for this year.

Over 2012, Singapore Exchange (SGX) has listed five new companies on the Mainboard and three new companies on Catalist. The next company to be added to the Mainboard is IHH Healthcare Berhad which is scheduled to list on 25 July.

Post IPO Performance of SGX Main Board and Catalist

Company ListingDate IPO Price 1st Day Closing Gain/LossOnListing

Date

 Closing Price on 12 July 2012 Gain/Loss to offer Price
Cordlife Group Ltd 29-Mar-12 0.495 0.680 +37% 0.530 +7.1%
Bumitama Agri. Ltd 12-Apr-12 0.745 0.980 +32% 1.07 +43.6%
Civmec Ltd 13-Apr-12 0.400 0.555 +39% 0.985 +146.3%
Global Premium Hotels Ltd 26-Apr-12 0.260 0.285 +10% 0.245 -5.8%
Starland Holdings Ltd (Catalist) 27-Apr-12 0.220 0.315 +43% 0.114 -48.2%
Swee Hong Ltd 23-May-12 0.225 0.275 +22% 0.265 +17.8%
Maxi-Cash Financial Services Corporation Ltd (Catalist) 22-Jun-12 0.300 0.390 +30% 0.435 +45.0%
Neo Group Ltd (Catalist) 11-Jul-12 0.300 0.465 +55% 0.415 +38.3%

Source: SGX, close of business 12 July 2012

IPO Fever is Back

Posted by Ivan Guan | Posted on 12-07-2012

Category : Stocks

Tags:

Just one month ago, TheEdge wrote an article “IPOs have ’0′ friends right now“, quoting the keenly-anticipated initial public offering of Formula One had been shelved and London-based jeweller Graff Diamond pulled its Hong Kong US$1 billion IPO 24 hours before its was expected to be priced.

In Singapore, the IPO fever is just getting hotter. Food catering group Neo Group jumped 55% from its IPO price $0.30 to $0.465 on its first day of debut.  Maxi-Cash, which was listed end of last month, is also trading more than 40% above its IPO price now.

The mega dual listing of Asia’s largest health- care operator IHH Healthcare has been over-subscribed by a whopping 100 times!

People just have short memories. It seems everybody has forgot how disastrous the very recent Facebook IPO %sC/strong>was and how poorly many other IPOs in Singapore have performed in the past.

Well, the musical chair game has begun.

OCBC Bank Another $1b Preference Share Sale

2

Posted by Ivan Guan | Posted on 05-07-2012

Category : Stocks

Tags: , ,

OCBC Bank plans to sell $1 billion worth of preference shares to major investors in the next few days to shore up liquidity. The last issue was in June 2008 and August 2008, right before global financial crisis.

The bank will be offering a coupon rate at 4% that will be paid twice-yearly.

The payout is non-cumulative, which means that if the bank does not pay dividends this year, it is not obliged to make it up the following year. The shares will be callable after 5 1/2 years in 2018. This placement will be offered only to institutional investors and sophisticated investors, with a minimum tranche of $250,000.

Preference shares and other perpetual securities have been very popular with retail investors lately, but many do not understand the risk of investing in preference shares.

If you think Preference Share price will not drop, take a look at how OCBC 5.1% Preference Share performed since inception. It has dropped as much as 15% during financial crisis.

Below are past preference shares issued by OCBC:

  1. January 2003 – Amount: $500 million; Dividend: 4.5 per cent
  2. May 2003 – Amount: $396 million; Dividend: 4.2 per cent
  3. January 2005 - Amount: $400 million; Dividend: 3.93 per cent
  4. June 2008 - Amount: $1.5 billion; Dividend: 5.1 per cent
  5. August 2008 –  Amount: $1.5 billion; Dividend: 5.1 per cent

The Importance of Libor and Sibor

Posted by Ivan Guan | Posted on 05-07-2012

Category : Interest Rate, Investment

Tags: ,

The recent Barclays role in the LIBOR scandal brought a fine of £290 million (S$572.6 million) last week and has already claimed the scalps of chief executive Bob Diamond and others. Several other banks in London have also been implicated.

You may give a yawn to the news but you may not be aware of the impact of interest rate on your personal finances and lifestyles. What happens in the interest rate market affects many aspects of your everyday life in home mortgages, investments, jobs, the economy and even politics.

The LIBOR (London Interbank Offered Rate) is the rate at which the world’s most preferred borrowers are able to borrow money day to day. It is derived from a filtered average of the world’s most creditworthy banks’ (not quite so now) interbank deposit rates for larger loans. In another word, the benchmark of the financial market in the world is set by a few institutions.

Similarly, the rate used in Singapore is called SIBOR (Singapore Interbank Offered Rate) which is set by the Association of Banks in Singapore (ABS).

THERE are 15 banks contributing data to set the Singapore Interbank Offered Rate (Sibor) for the financial year ending March 31, 2013:

  • Bank of America
  • Bank of Tokyo-Mitsubishi UFJ
  • BNP Paribas
  • CA-CIB
  • Citibank
  • Credit Suisse
  • DBS
  • Deutsche Bank
  • HSBC
  • ING
  • JPMorgan Ch!se
  • OCBC
  • RBS
  • Standard Chartered
  • UOB

Most of the mortgage loan packages in Singapore are linked to Sibor. Since majority of Singaporeans use their life savings to pay their houses and interests,  the movement of Sibor will have severe impact on everybody. If you ever think interest rate is as stable as recent years, you will be shocked to know historically, from 1988 until 2012, Singapore Interest Rate averaged 1.70% reaching an all time high of 20% in January of 1990 and a record low of -0.75% in October of 1993.

Fortunately or unfortunately, the relatively small size of the Singapore housing loans market suggests that banks here are unlikely to have enough incentive to risk rigging Sibor. As pointed by ABS director Ong-Ang Ai Boon in today’s news article “Rigging of Sibor ‘is highly unlikely’”, “Sibor is domestic and just for limited usage… it is not an international benchmarking rate, unlike Libor.“

No Eurobonds ‘As Long As I Live’

Posted by Ivan Guan | Posted on 28-06-2012

Category : Market Commentary

Tags: ,

In my April post “Have You Forgotten European Credit Default Swap“, I have shown you the chart of CDS in euro zone when many were talking about “the worst is behind us”.  Now everybody has known how much the market crashed in May.

Let’s be “contrarian” again this time. In the past months, there are many talks about Eurobonds among the “investment professionals” which seems to be the only “magic pill” for this euro debt crisis. To me, if ever the situation can be mitigated, it cannot because of eurobonds, at least not in the currently proposed form.

What is Eurobond?

Imagine you have worked hard and saved a reasonable sum of money.  You have lent $50,000 to one of your neighbors but found he is in fact a gambler and lost all the money in Casino. Your son wanted to start a business but was cheated by his friend, all the $100,000 you gave to him was gone. One of your niece borrowed money from you for “emergency usage” but in fact squandered all into branded bags.

Now all of the three people come to you and say, “We want to pay you back but the banks do not want to lend us money. We all run out of cash. Why don’t we form a company together and take some loans using your name since you have very good credit record with the bank, and we will use the money to pay you back.”

How brilliant! Will you do it?

Do you think the lenders will be so stupid that they do not know one day, these three people will eventually dry up all your money? Haven’t you realized your creditworthiness has been dragged down by the other three?

The same episode is happening in the crucial European Union summit now, Merkel is coming under mounting pressure to soften up Germany’s resistance to the issuing of the so-called eurobonds that would share debt responsibility among the 17 eurozone nations. Italy, Spain, and France are in favor of eurobonds. 

Let’s just take a look at the 5 year bond CDS of these four countries: (CDBR1U5:IND Germany; CFRTR1U5:IND Francis; CITLY1U5:IND Italy; CSPA1U5:IND Spain)

 

A picture speaks a thousand words, no wonder Merkel says Europe would not share total debt liability “as long as I live”.

 

What Are Singapore Government Securities (SGS)?

Posted by Ivan Guan | Posted on 23-06-2012

Category : Financial Terms, Fixed Income

Tags:

Singapore Government Securities (SGS) are marketable debt instruments of the Government of Singapore. These debt instruments take the form of either Treasury bills (T-bills) or bonds, and are considered safe investments, as they are backed by the full faith and credit of the Singapore Government. The terms of issuance are governed by the Local Treasury Bills Act and the Government Securities Act respectively.

The Singapore Government is obliged to pay the holders of SGS a fixed sum of money on the maturity date of the securities. SGS cannot be cashed in before their maturity dates, but investors can always sell them in the SGS market. SGS Primary Dealers are prepared to buy and sell SGS at any time during normal market trading hours.

As the fiscal agent of the Government, the Monetary Authority of Singapore (MAS) acts to undertake the issue and management of SGS on its behalf.

What Are The Types Of SGS?

T-bills are short-term debt securities that mature in one year or less from their issue date. They are bought and sold at a discount, i.e. at a price less than their face (par) value, and when they mature, the Government will pay the holder an amount of S$ equivalent to the face value of the security. Therefore, the interest earned on the T-bill is the difference between its purchase price and face (par) value. They are denominated at nominal values of S$1,000 and traded at a rate of discount basis. The Singapore Government issues T-bills of 3-month and 1-year maturities.

SGS bonds are longer-term debt securities, which pay a fixed rate of interest (called the coupon) every six months for the life of the securities and then their face (par) values upon redemption on maturity. They are generally not issued at a discount unlike T-bills, and have typical maturities of 2, 5, 10, 15 and 20 years.

The most recently issued SGS bonds in each of these tenors, being the benchmark securities, are more actively traded. Older and more seasoned SGS bonds become off-the-run issues and are less actively traded. SGS bonds are also denominated in nominal values of S$1,000 and traded on a price basis expressed in terms of S$100 principal.

Summary Table on SGS

T-bills

Bonds

Issuer

Singapore Government

Singapore Government

Tenor

3M and 1Y

2Y, 5Y, 10Y, 15Y, 20Y

(7Y non-benchmark)

Interest Rate

Discount

Fixed Coupon

Coupon Payments

N/A

Semi-annual

(Every 6 months)

Minimum Denomination

S$1,000

S$1,000

Source: http://www.sgs.gov.sg

Stop your Facebook IPO Dream and Join Goldman Sachs

1

Posted by Ivan Guan | Posted on 22-05-2012

Category : Stocks

Tags: , , ,

Although IPO mania is commonly seen in financial market, the global enthusiasm of Facebook IPO is rare and massive. Months before Facebook listing, people started rubbing their hands to get a slice of the pie. Facebook Pre-IPO shares were trading at $40 at www.sharepost.com. There were even funds set up and marketed as “Facebook fund”, which is in my opinion, just another financial scam.

After all, who does not know Facebook? The story of a young entrepreneur worked his way out from a computer lab and became a billionaire before 30 years old is so sexy and real, the stock is just like a new Lamborghini car which you can touch and feel. If LinkedIn can double its share price on the first of trading, why shouldn’t Facebook?

Unfortunately, the dream never came true. During the second day of trading, the shares sank 11.3% to $33.90 from its IPO price of $38. If you have bought Facebook Pre-IPO shares, you would have lost 15% in a single day.

What went wrong?

I have discussed whether you should buy IPO in my early post, let’s just talk about this IPO money spinning machine today. Who makes money from IPO? Most probably NOT YOU.

When LinkedIn was listed, who got the first bite? $1.6 billion for Reid Hoffman, the co-founder; $39 million for Goldman Sachs, the investment bank.

What happened to Facebook?

Goldman Sachs, the investment bank and the fund manager had planned to raise $1.09 billion selling stock in Facebook IPO, cashing out almost half their stake in the social network. According to bloomberg report.

Goldman Sachs created a special-purpose vehicle to bundle the holdings under one name and sell the stock to wealthy clients. That kept it from running afoul of securities rules mandating that companies with at least 500 investors meet U.S. Securities and Exchange Commission reporting requirements.

Want to get rich overnight? Stop the IPO dream and join Goldman Sachs!

HDB issues Fixed Rate Notes

Posted by Ivan Guan | Posted on 26-04-2012

Category : Financial Product Update, Fixed Income

Tags: ,

In a recent Straits Times article  ”Huge demand for corporate bonds this year“, the author highlighted “Corporate bonds may be rather unexciting to some, but they are selling like hot cakes so far this year – and this month is shaping up as the busiest yet.”

On 25 Apr 2012 Press Release, the Housing and Development Board (“HDB”) has issued Notes under its S$12 billion Multicurrency Medium Term Note (“MTN”) Program.

The issuance comprises two series of Notes:

  • S$360 million 5-year Fixed Rate Notes (the “Notes”) with a coupon of 1.165% per annum payable semi-annually in arrear. The Notes were issued on 24 April 2012 and will mature on 24 April 2017.
  • S$800 million 10-year Fixed Rate Notes (the “Notes”) with a coupon of 2.185% per annum payable semi-annually in arrear. The Notes were issued on 25 April 2012 and will mature on 25 April 2022.

Given the creditability of HDB, the coupon rate is rather pathetic. This kind of offer is more suitable for institutions than retails for different reasons.

I have been consistently receiving queries from clients for “higher interest products”. Recently Hong Leong Finance is promoting a 3 year fixed deposit with mere 1.7% interest rate but attracted much attention.

What is interesting is that in the same day newspaper, the headline news was “Inflation hits 5.2% in March“. I always wonder how do people cope with inflation by putting money into fixed deposits.

Previous