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Where would CPF money go if it is nominated to a bankrupt? When Madam Lim Lye Kiang sought to claim the $102,000 from CPF which her late sister had left her, she would never have expected that the CPF Board transferred the money to the OA (Official Assignee) to...

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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...

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

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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...

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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...

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Has STI rally surprised you?

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Posted by Ivan Guan | Posted on 13-02-2012

Category : Stocks

Tags:

I haven’t blogged for a few weeks as I was overseas. When I was back, I felt so hilarious to see the newspaper headlines every day saying “investors were all surprised by the recent market rally”.

Back in early January, horrible stories covered newspapers every day. “Professionals” and “Analysts” who used to advocate how cheap the stock valuations were have given it up and started to caution investors. Many investors I met have “cashed out” from the stock market. Any new bond issue like CapitaMalls Asia bond was the hottest cake in town.

At that time, I was like an evangelist going around telling people to take the opportunity to top up their equity holdings. However, the message can hardly be communicated through. I was so frustrated and wrote an article called “how can you outperform Warren Buffett in 2011“. How? Holding Cash lor…

Take a look at the STI weekly chart below, the market was yelling at you! (I will not explain how to interpret this chart here) But how many of you chose to believe your emotion and your stock broker’s tips? How many of you ended up selling your stocks at the bottom of the market?

When I visited my home during Chinese New Year, I was shocked to know that my mother’s stock broker asked her to sell all her stocks before the New Year. (Yes, my mother chose to believe her stock broker than me!) He even successfully embedded this strong message into my mother’s mind that any stock cannot be held more than one month. I am sure that this broker had a happy new year counting the big commission he has earned from his “good” advice.

 

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How can you outperform Warren Buffett?

Posted by Ivan Guan | Posted on 20-01-2012

Category : Stocks

Tags: ,

If you have not noticed, Warren Buffett has “underperformed” S&P 500 index in 2011. Buffett’s Berkshire Hathaway slipped 4.7% in 2011, while the Standard & Poor’s 500 index ended essentially unchanged.

What would you have done to outperform Warren Buffett in 2011? Simple, Hold Cash!

This reminds me of an interesting story. Recently, I was doing an investment portfolio review for one of my clients. His portfolio was down 4% in 2011 (wow, it outperformed Warren Buffett!), and he did not seem to be very happy because it was still negative. So I asked him, “what would you have done if I did not manage your portfolio and you were investing on your own”. His replied surprised me, “I would have held cash and I would not have lost money!”

When I recalled his investment risk profile, he indicated that he was balanced and could accept fluctuations with modest return. I also remember that when his portfolio has made some profit in 2010, he came to me to request some top up.

This incident, like some other similar cases, happened in the past few months when the investment market was in chaos. I cannot help thinking that by holding cash in 2011, did you really outperform Warren Buffett?

In Aug 2011, I posted a chart of typical DIY investor behavior as below.

Typical DIY Investor Behavior

Most of the investors will just hold cash at the worst possible time when the market is at the bottom. Straits Times Index has gone up more than 6% year to date. If I were to hold cash for the client, would they ever had these gains?

Many may have forgotten that in 2010, shares of Warren Buffett’s Berkshire Hathaway (Class A) have finished the year with a gain of 21.4 percent for 2010, far outperforming the benchmark S&P’s 12.8 percent gain.

Can any investor make money from the market by not investing?

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Petrol Price and The Golden Cross

Posted by Ivan Guan | Posted on 05-01-2012

Category : Commodities, Stocks

Tags: ,

If you pumped petrol these few days, you may have noticed a big sign board at the petrol station stating “Petrol Price Has Changed!” Today, ExxonMobil Synergy 5000 is selling at $2.12/liter.

If you have been following my blog, I have already warned at end of Nov that investors should not neglect the oil crisis outside euro zone. Brent Crude Oil has shot up since mid of December and has exceeded US$113 per barrel today.

Ironically, when Euro and US are pictured as doomed places and all the “analysts” and “professionals” yell that 2012 is another crisis year, Dow Jones Industrial Average Index has just reached its Golden Cross (a technical bullish indicator) when its 50-day simple moving average crossed above the 200-day simple moving average.

Source: StockCharts.com

Next time when you pump petrol again, don’t just sign the credit card slip. Take a look at the price and see what does it tell you.

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The Dangers and Risks of Investing in REITs

Posted by Ivan Guan | Posted on 24-11-2011

Category : Property, Stocks

Tags: ,

Many financial news recently advocate investing in REITs amid volatile markets. Investors are sold the ideas of high dividend income, downside protection, asset diversification, blah blah. However, the dark side of REIT industry is hardly mentioned.

I am glad to see MAS will consider further guidance to REIT industry as reported in Business Times. “Central to this brewing debate is the $1.57 billion sale of Keppel Land’s entire stake in Ocean Financial Centre to K-Reit Asia – a plan that was criticised by shareholders for both the timing and price.”

This, is a classic example of the conflict of interest between uni-holders of REIT and the REIT sponsors.

While REITs start to gain popularity since beginning of this century in Asia, it is obviously oversold just like the ETF industry. You must understand that the managers’ and shareholders’ interest (especially for minor shareholders) are not always inline.

You should also always bear in mind that REIT, is by nature a security traded in stock exchange. Many investors focus on dividend payouts when investing in REIT, but isn’t Total Return (capital appreciation + dividend) the ultimate objective of any investment?

The shareholders of REITs are always at the mercy of the managers. Whenever the managers need money for acquisition or upgrading, they issue rights or private placements. Share dilution is a constant risk when investing in REITs.

Take CapitaMall Trust for example, on Nov 1, it issued 139,665,000 New Units at an issue price of S$1.79 per New Unit in connection with the Private Placement, the share price tumbled from previous day’s high S$1.925 to as low as $1.775 on the next day. That is more than 8.4% drop in a single day!

Next time when someone tells you REIT is a safer investment, think twice.

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The Mysterious Up and Down of Sheng Siong IPO

Posted by Ivan Guan | Posted on 01-09-2011

Category : Stocks

Tags: ,

Sheng Siong stock crashed 10.71% today!

This is so ironic because today’s news paper headline was “Voracious appetite for Sheng Siong shares“. It cited some “market watchers” trying to explain the 70% run up of the stock since it debuted on Aug 17. The reasons given were like recession-proof, defensive nature and attractive dividends, institutional interest blah blah…

I feel so pitiful for those who chased the news and bought the share at $0.57. Based on $0.50 closing price, that is 14% loss for those people. I am sure from tomorrow, the news will turn around and offer complete different views, on hindsight of course.

Sheng Siong Price since launched (souce: yahoo finance)

I’ve written a few posts cautioning investors against speculative activities in this uncertain time. The crash of gold is a perfect example. I’ve also highlighted the risk involved in investing IPOs.

Many would argue that those who bought at IPO would have already made 60% even after today’s crash. The truth is, as highlighted in today’s news article, that nobody really knows why the IPO has went up 70% before today.

While I definitely “missed the boat” since you know I was not interested in this IPO in the beginning. Given the countless reports of possible recession and gloomy economic outlooks, many retail investors who bought it at the IPO price, in my opinion, would have sold it, with little or no profit, in the first couple of days.

The share was traded with top volumes even when STI is heading south. “The significant price movement.. could attract the attention of some retail and intra-day traders, thus creating a self-reinforcing cycle and contributing to the overall volume.” I’ve heard many unties and uncles bought the stocks in the past two weeks when the price just cannot stop shooting up.

Just think about it, if there is really institutional interest, why Sheng Siong IPO was merely 1.3 times oversubscribed? (If you even call that oversubscribe, how about Mapletree Commercial Trust IPO oversubscribed by 8.38 times?)

Warren Buffett once said: “When the tide goes out, you will find out who is swimming naked.”

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Should I Invest in Sheng Siong IPO?

Posted by Ivan Guan | Posted on 05-08-2011

Category : Stocks

Tags: ,

Today I see a surge of visit to one of my blog entries last month, Sheng Siong seeks up to S$141m in IPO. It is obviously because Sheng Siong made the headlines in today’s Straits Times, “Sheng Siong dangles dividend as carrot in IPO”.

I always caution investors against investing in IPOs not due to the fundamentals of any new IPO company, but because I believe the IPOs in general is oversold and investors often undermine the risks that they are taking.

After my previous blogs, I received an email from a Teenager asking me for opinions about Sheng Siong IPO.Here is what he wrote:

“I would like to know from you whether this a good buy or bad buy. I am actually a teenager and this is my first time buying stocks.”

I was disturbed by the fact that the buyers for the IPO could be a student or a retiree who may not understand what they are buying into.

Anyway, the “indicative price range was S$0.36 to S$0.40 apiece”. Based on today’s news, Sheng Siong will offer 351.5 million shares only at S$0.33 apiece at the launch of the IPO. In my opinion, it shows the market sentiment is bad and the interest in the shares is relatively low. If your intention is hit the jackpot,  you really should think about it twice.

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Sheng Siong seeks up to S$141m in IPO

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Posted by Ivan Guan | Posted on 21-07-2011

Category : Stocks

Tags: ,

Supermarket operator Sheng Siong Group aims to raise up to S$141 million via its initial public offering on the mainboard of the Singapore Exchange expected next month.

Sheng Siong is set to offer about 351 million shares at an indicative price range of S$0.36 to S$0.40 apiece, the sources said. The offer comprises about 201 million new shares and about 150 million vendor shares.

OCBC Bank is the issue manager, underwriter and the placement agent.

Sheng Siong said in the draft prospectus it will use the proceeds mainly to repay debt, develop and expand its grocery business and operations in Singapore and overseas, and for working capital. Agencies

Source: Today Online

The preliminary prospectus can be downloaded from here.

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Sino Forest – Even John Paulson may get it wrong

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Posted by Ivan Guan | Posted on 17-06-2011

Category : Financial Scandals, Stocks

Tags: ,

Prominent hedge-fund investor John Paulson, who runs the $38 billion Paulson & Co., is having a big headache due to the recent collapse in shares of China forestry company Sino-Forest Corp. The timber company has tumbled 80% since late May, which has resulted in a paper loss of more than $500 million for Mr. Paulson’s firm.

Muddy Waters, LLC (“Muddy Waters”) issued a research report on its website on 2nd June 2011, alleging fraud against Sino Forest with a “Strong Sell” rating recommendation. Subsequently, the Company’s stock price dropped approximately 21% on the same day.

The plunge of the share price also hits a few other famous agriculture and timber fund, who have substantial holdings of this stock.

As it is not clear if the allegation is true and what will happen to the stock price, we definitely can learn a few things from this event.

Stock Investing is tough

I have emphasized countless times that it is extremely difficult to succeed for man on the street in investing by buying individual stocks. Even if you are highly successful and experienced investor, and may seem to get everything right by choosing the stocks, such unforeseen event will happen. And when it happens, the impact is big.

Even if, in the best case scenario, the allegation is subsequently cleared, the company’s credibility is still badly damaged. Its ongoing access to the equity and debt markets to continue its growth will be severely affected.

Last year’s BP oil spill was another perfect example.

The Power of Equities Analysts

Accepted it or not, an analyst’s report can change a company’s fate, be it right or wrong.

If you can recall, Olam International was forced into launching a publicity blitz on in Feb 2011 after CLSA analyst Swati Chopra questioned the firm’s reporting standards and internal controls. The company’s shares had fallen by 13 per cent on the day the report was released.

A similar incident occurred in 2007, when OCBC Investment Research issued a report about Cougar Logistics that caused Cougar’s shares to drop almost 17 per cent over three days. That report contained several factual errors, but even the release of an amended report failed to stem the bloodletting.

Diversification, Diversification, Diversification

The stock is approximately 2% of the hedge fund’s holdings. Even in the worse case scenario, while the stock price goes down to zero, the impact to the fund is still limited.  I am always amazed to see many investors put their entire retirement funds into a single stock or any other financial instruments.

Investors were not always as lucky as the Hong Kong investors who can re-coupe their losses from the collapse of minibond. Even so, Hong Kong investors lost as much as $2.5bn in the minibond debacle. But shouldn’t investor be responsible for their own investment decisions?

 

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Perennial China Retail Trust down 12.86% on SGX debut

Posted by Ivan Guan | Posted on 10-06-2011

Category : Stocks

Tags:

Perennial China Retail Trust, which owns shopping mall assets in China, closed at 61 cents on its debut in SGX yesterday – 12.86% below its IPO price.

In just a day, the stock lost $101 million in value (the initial investors’ money).

I’ve already hinted last week that investors should never buy IPO and DREAM to become rich overnight.

This year, three IPOs in Singapore prior to Perennial’s listing, namely, Hutchison Port Holdings Trust, Mapletree Commercial Trust and Chew’s Group have all dipped below their offer prices.

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Is Perennial China Retail Trust a good buy?

Posted by Ivan Guan | Posted on 31-05-2011

Category : Stocks

Tags:

It has become a phenomena that every time an IPO is launching, I will receive a few calls asking if it is a good buy. Investors always have this interesting perception that they buy IPO at discounted price of the stock. Many investors DREAM to become overnight new rich by buying IPOs.

The most recent IPO is Perennial China Retail Trust (PCRT), which deals in retail space in China. The IPO is planning to raising S$776.2 million with units priced at S$0.70 each. This is significantly lower than the $1 per unit which it had planned previously. It were shelved due to concerns of slow growth in China as well as the worsening debt situation in Europe.

Let’s just exam the fates of the hot IPOs in the past; Green lines refer to Straits Times Index, Orange Lines represent the performance of the IPOs.

Mapletree Commercial Trust vs STI (as May 30, 2011)

  • Hutchison Port Holdings Trust

Hutchison Port Holdings Trust vs STI (as May 30, 2011)

CapitaMalls Asia Ltd vs STI (as 30 May 2011)

So I will leave it for you to decide yourself on the fate of Perennial China Retail Trust.

But wait, isn’t LinkedIn IPO which just doubled its price since Thursday debut? Of course, check out who are the winners of the game.

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