mchandra11

Pullback A Healthy Sign For Stock ETFs

2009-03-28T17:35:00.000+08:00

Jerry Slusiewicz
Saturday March 28, 2009, 3:00 am EDT

http://finance.yahoo.com/news/Pullback-A-Healthy-Sign-For-indexuniverse-14784640.html

The S&P 500 pulled back a bit on Friday. But volume on major stock exchanges was relatively low, which is actually a healthy sign.

In fact, we'd like to see the blue chip index fall to around the 750-790 range in coming weeks, from the current level of 820.

The current rally, which started on March 6, has just come too far in too fast of a time frame. It has been a fairly broad rally, though. If the month ended right now, we'd be looking at the best monthly returns since 1974. In the past three weeks, the S&P 500 index has jumped 22.4%.

While that's great, it's more constructive at this point to have a moderate retracement. That doesn't mean we need to see the index retest the 666 mark, its 12-year low. But even a pullback of some 8.5% to 750 would still provide support for a longer-term rally.

If stocks continue to climb, technical factors indicate that the S&P 500 will hit considerable resistance at the 875-880 range. That would represent about another 8% rise from current levels.

Today, some 70% of stocks on the New York Stock Exchange have moved above their 50-day moving average. Again, that indicates the market has moved too far and too fast. Look at Jan. 6, when 80% of stocks were trading above their 50-day moving averages. The result was a sharp correction to multiyear lows.

So from a technical perspective, the safe move for a broad-based fund such as the SPDRs S&P 500 ETF (NYSEArca:SPY - News) would be to wait until it's trading around $75 a share. It closed on Friday at $81.59. So we're looking for about an 8% fall to signal a more reasonable entry point.

The same reasoning holds for the PowerShares QQQ (NasdaqGM:QQQQ - News). The Tech-heavy ETF closed at $30.82 per share on Friday. Technically speaking, a better entry point would be $28 per share. On Oct. 24, 2008, the ETF hit a low for this current cycle at $28.09. From early December 2008 through the end of February 2009, its low range was right around $28. And QQQ's 20-day moving average is right at that point now.

Another note of caution is that the market rose 6.2% last week—the first time we've seen three up-weeks in a row in almost a year. Although that's pretty good, it still isn't enough to guarantee that this rally is a new bull market.

S’pore to invest up to $20b in infrastructure projects this year

2009-03-23T13:29:00.002+08:00

Updated: 23rd March 2009, 1000 hrs / 93.8 Live

Singapore will be investing as much as $20 billion in infrastructure projects this year to prepare for recovery and growth.

Senior Minister of State for National Development, Grace Fu, said the projects include the construction of a new International Cruise Terminal at Marina South,
new roads and parks, and the upgrading of schools, sports facilities and our public housing estates throughout Singapore.

She told an industry summit that these investments are not a once-off effort.

In 2010 and 2011, the government will continue to invest another $15 to $17 billion each year in building and infrastructure projects.

The goal is to build Singapore as a distinctive global city, a key node within a network of cities around the world.

Ms Fu said Singapore will be remade within the next five to ten years.

It will be a new city thriving with new opportunities.

Trading 'expert' ordered to refund fees

2009-03-17T01:15:00.001+08:00

Home > Prime News > Story
Trading 'expert' ordered to refund fees
Course trainees were upset that option trading instructor's doctorate came from an unaccredited university
By Sandra Davie, Senior Writer
The Straits Times, Digital HTML
March 17, 2009 Tuesday

A GROUP of 49 people scored a legal victory over a self-styled expert on option trading who turned out to have a dodgy doctorate from an unaccredited American university.

A dozen of the course participants said they had paid Mr Clemen Chiang between $3,600 and $4,000 last year for a three-day course on option trading - a complex and risky investing technique which often amounts to betting on share-price trends.

Several had also forked out another $960 for training software and a handful paid $1,600 to $12,000 more for online tutorials referred to as 'webinars'.

Mr Chiang, a 34-year-old Nanyang Technological University engineering graduate, has been running these seminars for a few years at his Freely Business School in North Bridge Road.

He would tell students his own success story of how he made millions, and he drew hundreds of participants.

He claimed to have a PhD in option trading, a rarity in the finance industry here.

But when it came to light last year that his doctorate was from the unaccredited Preston University in Alabama, the group of 49 wanted their money back.

Yesterday, the Small Claims Tribunal found that Mr Chiang had misrepresented his qualifications. It awarded all participants a refund of close to 80 per cent of their fees for the seminar and a full refund for the cost of the software and 'webinars'.

Mr Chiang, who still calls himself 'Dr', attended the hearing but did not speak to The Straits Times.

The Small Claims Tribunal is part of the Subordinate Courts and can hear claims involving the sale of goods or services not exceeding $10,000.

Outside the tribunal, several participants said they felt cheated when they read a Straits Times expose on degree mills last August. The report named Mr Chiang as having a PhD from an unaccredited university.

Sales representative Terence Tan, 41, said: 'I signed up because of his PhD. Option trading is a complicated thing. I thought this guy should know what he is talking about since he had a PhD in it.

'So imagine my shock when I found out that his degree was not from a recognised university.'

Like some others, he felt the course fell short of providing a good understanding of option trading.

Engineer William Hui, who paid $8,000 for himself and his wife to attend Mr Chiang's course, said: 'He should have called it 'Millionaire mindset', because for a whole day, it was just about how much money he made, his Sentosa Cove bungalow and his wife's Hermes Birkin handbag costing over $10,000.

'When he finally went into his so-called method of trading in options, I found it lacking. And then he tried to sell his software for another $960.'

Mr Chiang still claims to have a PhD on several of his websites, but makes no mention of Preston University, which American education authorities have called a 'degree supplier' offering 'fraudulent or substandard degrees'.

Last August, he told The Straits Times that he was also pursuing another PhD at the University of South Australia.

When asked then why he had opted for a degree from an unaccredited institution, he said he wanted to complete a PhD in double-quick time.

Because Preston University was listed as a partner of a private school registered with the Education Ministry here, he said he thought it was an accredited institution.

It was only later that he realised that Preston was not accredited in the United States, he said.

Like other business people who had bought fake degrees, Mr Chiang said then that it helped to pave the way in business.

Checks last year found more than 200 people - including prominent businessmen and financial consultants - flaunting degrees, MBAs and doctorates from degree mills and unaccredited, substandard institutions.

sandra@sph.com.sg

Gold Futures Rebound in N.Y. on Dollar’s Decline

2009-03-11T23:09:00.000+08:00

By Pham-Duy Nguyen

http://www.bloomberg.com/apps/news?pid=20601081&sid=aDyZ2gge5vg0&refer=australia

March 11 (Bloomberg) -- Gold futures rose, rebounding from the lowest price in a month, as the slumping dollar enhanced the appeal of the precious metal as an alternative investment. Silver gained the most in two weeks.

The dollar fell as much as 1.2 percent against a weighted basket of six major currencies. Gold and the dollar historically have moved in the opposite direction. The correlation hasn’t held this year as investors purchased both assets as a hedge against turmoil in financial markets.

“Gold is still an exceptional buy,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Traders will start looking at more traditional relationships like future inflation, government spending and devaluing of currencies.”

Gold futures for April delivery rose $14.80, or 1.7 percent, to $910.70 an ounce on the Comex division of the New York Mercantile Exchange. Yesterday, the price touched $891.10, the lowest since Feb. 3.

Silver futures for May delivery gained 26 cents, or 2.1 percent, to $12.80 an ounce, the biggest gain since Feb. 20. Gold has gained 3 percent in 2009, while silver is up 13 percent.

Gold reached a record $1,033.90 on March 17 as the dollar headed for an all-time low against the euro. In the second half of 2008, the dollar rallied as investors sought a haven from declining equity markets. Gold gained 5.5 percent last year, while the dollar rose 6 percent against the basket of currencies.

Gold’s gains accelerated today after U.S. equities pared gains. The Standard & Poor’s 500 Index climbed as much as 1.7 percent before dropping. Yesterday, the gauge jumped 6.4 percent, the most this year. Gold fell as low as $892.60 today.

A rebound in equities would “be a bearish development as investment transfers from gold toward riskier assets,” said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago.

Since March 6, investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, has been unchanged at 1,029 metric tons, close to the all-time high.

“It’s becoming evident that the buying in ETFs may have been led by a small group of hedge funds, whose actions can be incredibly difficult to predict,” Pawlicki said. “It’s also likely that they are now under water on those positions.”

Greenlight Capital Inc., the $5.1 billion hedge fund run by David Einhorn, said last month it invested in gold for the first time in the fourth quarter, making a bullion-backed exchange- traded fund its largest holding.

Chartology – Is The Bottom In?

2009-03-11T14:23:00.001+08:00

http://www.cnbc.com/id/29619793
Posted By: Lee Brodie
Topics:Stock Market | Stock Picks
Companies:Morgan Stanley | Sprint Nextel Corp

For months investors have been whispering cautiously about a market bottom. It’s certainly the trillion dollar question – and one that can only be answered with confidence in hindsight.

But you need that information now -- so for insights we turn to Jeff DeGraaf, ISI Head Of Technical Analysis Research. He’s the #1 analyst in his field as ranked by Institutional Investor magazine.

Here’s a summary of DeGraaf's analysis.

First DeGraaf explains that we need a 35% rally just to get back to the 200-day moving average. Looking at a chart of the S&P 500 from 1929-1934, he says not since 1931 has the S&P been so far from its 200-moving day average. DeGraaf interprets the pattern to mean the market is extremely oversold.

Then, he looks at the AAII bear readings from the last 20 years. The patterns reveal that 70% of investors are bearish and that the retail crowd is tuned out.

Also, he tells us the number of new lows on the S&P has been contracting over the past several months. Even though we're 140 points below where we were in October the number of stocks making those lows is about half. That's a bullish divergence.

These are good conditions but they don’t mean anything without a spark. On Tuesday we got the spark, DeGraaf says.

That spark combined with the factors mentioned above should provide a strong under-pinning for some kind of rally.

What’s the bottom line?

At a minimum, we’re in a bear market bounce. Don't be short. To see DeGraaf’s complete interview as well as this charts used in his analysis please watch the video above.

New Red Flag for Markets: Credit Is Tightening Again

2009-03-11T08:57:00.000+08:00

Tuesday March 10, 2009, 2:11 pm EDT

While Wall Street enjoys its relief rally Tuesday, stocks face looming danger from a familiar foe: tightening of credit.

Several metrics that market analysts use to gauge the availability of credit have been signaling trouble in recent days, throwing up a caution flag that tougher times could lie ahead for the availability of cash.

That's a formula that always spells trouble for investors.

"Unless we start seeing a reversal of the widening of a lot of these credit spreads, any equity rally is going to be short-lived," says David Lutz, managing director of institutional trading at Stifel Nicolaus. "Unless the credit markets are cooperating, it's going to be very hard for equities to rise."

A lack of confidence in Obama administration policies, combined with unabated declines in the economy, are fueling banks' renewed reluctance to lend. And that's being reflected in a number of key data points in the credit markets.

"The euphoria over the new administration is out the window at the moment," Lutz says. "We're seeing the fact that since they haven't been able to roll out a comprehensive housing or financial program, it's a sign they don't have the right idea yet."

Among the signs that analysts say point to credit problems are Libor, or the rate banks charge each other for overnight lending; The "Ted spread," which is the difference between 3-month Libor and the 3-month Treasury bill; two-year credit default swap rates; and the Commercial Mortgage-Backed Securities index, or CMBX.

Libor rates have swelled to prices not seen since December, with the trend indicating a June three-month rate of 1.7 percent, Lutz said in a research note. A widening in Libor emanates from lower confidence that institutions have in each other and leads to tighter lending policies. Three-month Libor gained Tuesday to about 1.33 percent.

Similarly, the CMBX and the two-year swap spread both are at four-month highs, while the Ted Spread, which indicates willingness to lend, also is moving lower, falling Tuesday to 1.09 percent.

None of it bodes well for the credit picture in 2009, and if credit tightens up, the stock market will feel the pinch regardless of what Tuesday's sharp rally indicates.

Stocks surged at the open on some encouraging words from Treasury Secretary Ben Bernanke regarding aid for banks in valuing distressed assets. The market punched up further following the government's decision to reinstitute the uptick rule, which requires a move higher in a stock before it can be short-sold.

"With those four things showing more and more strain, there's a disconnect with equities rallying the way they are," Lutz says. "If they keep trading this way it's definitely an indication that there could be another leg down in stocks."

To be sure, the credit indicators are nowhere near the depths of September 2008 or so when lending all but dried up completely.

But the inability of aggressive government action around the globe to eradicate credit issues is disturbing.

"After several months of swift declines and an environment where global central banks continue to cut short-term interest rates, any increase in Libor rates is a troubling reminder of the tension in credit markets," says Greg McBride, senior financial analyst for Bankrate.com. "The equity markets have effectively been behind the curve of what the credit markets have seen and experienced first-hand."

While analysts are quick to point out that the tightening is not at alarming levels at least in the short term, there's concern over the pressure the failing economy will put on lending practices.

Following a year of aggressive money-easing, Fed fund futures now are indicating a 30 percent chance that the central bank will tighten monetary policy by June.

"The underlying economy continues to deteriorate. The default rates on some of these underlying loans has been able to go up," says Mike Larson, an analyst with Weiss Research. "While they've been able to buy a period of calm, we have yet to see if it's a genuine turn and not just driven by Fed largesse."

Other indicators that have analysts concerned include the difference between investment grade bonds and Treasurys, as well as increasing problems in the commercial real estate business that will be reflected in the CMBS rates and other metrics.

Until the government can turn around the news cycle, credit issues likely will remain a significant concern.

"There's a lack of confidence and a tremendous amount of uncertainty over the fact that all the heavy artillery that the Fed, the Treasury and other central banks around the globe have been throwing at the problem has shown little impact thus far," McBride says. "Pessimism rules the day."

Buffett says economy fell off cliff

2009-03-09T23:36:00.000+08:00

Mon Mar 9, 2009 2:50pm EDT
http://www.reuters.com/article/newsOne/idUSTRE5282J820090309
By Jonathan Stempel

NEW YORK (Reuters) - Warren Buffett said on Monday the U.S. economy had "fallen off a cliff" but would eventually recover, although a rebound could kindle inflation worse than that experienced in the late 1970s.

Buffett said Americans, including himself, did not predict the severity of home price declines, which led to problems with securitizations and other debt whose value depended on home prices continuing to rise, or at least not plummet.

He said Wells Fargo & Co and U.S. Bancorp, two large Berkshire holdings, should appear "better than ever" three years from now, while the ailing Citigroup Inc, which Berkshire does not own, would probably keep shrinking.

Bank of America Corp Chief Executive Kenneth Lewis, in a Wall Street Journal opinion piece on Monday, agreed that the vast majority of banks will survive. Berkshire has reported a small stake in Bank of America stock.

Buffett said he still expects Berkshire's derivatives contracts, whose value depends on where four stock indexes trade a decade and more from now, to be profitable. "Over 10 years", he said, "you will do considerably better owning a group of equities" than U.S. Treasuries.

Buffett also defended his imperfectly timed October opinion piece for The New York Times, where he said he was moving non-Berkshire holdings in his personal account to stocks. "I stand by the article," he said. "I just wish I had written it a few months later."

(Reporting by Jonathan Stempel; Additional reporting by Lilla Zuill; Editing by Lisa Von Ahn and John Wallace)

Oil jumps 3 percent on U.S.-China tensions, OPEC

2009-03-09T23:31:00.000+08:00

Mon Mar 9, 2009 3:38pm EDT
By Matthew Robinson

http://www.reuters.com/article/hotStocksNews/idUSTRE5210GO20090309

NEW YORK (Reuters) - Oil jumped more than 3 percent to $47 a barrel on Monday as a naval incident between the United States and China, the world's top oil consumers, boosted geopolitical tensions and as dealers pondered the possibility of deeper production cuts by OPEC.

The U.S. State Department said five Chinese ships, including a naval vessel, harassed an unarmed U.S. Navy ocean surveillance ship in international waters in the South China Sea on Sunday.

"Crude prices are up, I think, in a knee-jerk reaction to the news of Chinese vessels harassing a U.S. Navy ship in the South China Sea," said Phil Flynn, analyst at Alaron Trading in Chicago.

U.S. crude settled up $1.55 at $47.07 a barrel, while London Brent crude fell 72 cents to settle at $44.13 a barrel.

Gold slides more than 2 percent as dollar rises

2009-03-09T17:07:00.000+08:00

Mon Mar 9, 2009 1:00pm EDT
By Jan Harvey

LONDON (Reuters) - Gold prices slipped more than 2 percent on Monday after the dollar rose and data showed a small fall in holdings of exchange traded funds.

Spot gold fell to a low of $913.53 an ounce and was at $916.60/917.60 an ounce at 1629 GMT from $939.60 late in New York on Friday.

"Right now the dollar is a little bit stronger and equity markets (generally) are a bit stronger as well so we don't see much inflows into gold exchange traded funds (ETFs)," said Commerzbank analyst Eugen Weinberg.

The world's largest gold-backed exchange traded fund (ETF) recorded its first decline since January 8. Its holdings dipped 0.3 tonnes to 1,028.99 tonnes as of March 8.

UBS analyst John Reade said the total gold holdings of the nine major ETFs the bank follows fell to 48.30 million ounces on March 6 from a revised total of 48.40 million ounces previously.

The dollar gained across the board as global recession fears and banking sector concerns weighed on world stock markets, spurring safe-haven demand for the greenback.

A higher U.S. currency makes metals priced in dollars more expensive for holders of other currencies. Gold is often also used as an alternative when the dollar falls out of favor.

Earlier a rise in U.S. stocks also weighed on gold, which is used a hedge against financial market instability. .N

SOLID ETF DEMAND

Equity weakness broadly supported gold toward the end of last week, although the precious metal was caught up in a stocks sell-off last Monday as investors sought liquidity.

Demand for the precious metal from ETFs, which issue securities backed by physical stocks of gold, was a major price driver earlier in the year. Taders said expected these inflows to resume as uncertainty grows.

"I think that there will be enough worrying news in the first half of 2009 for ETF demand to remain solid," said David Thurtell, an analyst at Citigroup.

Holdings of Julius Baer's (BAER.VX) gold-backed exchange traded fund rose 109,000 ounces or 18 percent last week, the bank said in a weekly statement on Monday.

Demand for gold from jewelry buyers in traditionally strong markets such as India and China remained weak, however.

Traders said scrap sales also put pressure on premiums for gold bars.

Gold: Weak jewelry demand, strong dollar hit prices

2009-03-09T16:55:00.000+08:00

Weak jewelry demand, strong dollar hit prices
SPDR gold ETF records first outflow since early January
Julius Baer's gold ETF up 18 percent last week (Recasts, updates prices, market activity; adds second byline, dateline, previously LONDON)
By Frank Tang and Jan Harvey

http://www.guardian.co.uk/business/feedarticle/8394276

NEW YORK/LONDON, March 9 (Reuters) - Gold prices dropped more than 2 percent on Monday, as a dollar rise and slight drop of holdings of gold-backed exchange traded funds triggered heavy sell-stop orders.

Higher gold prices and global recession weighed down gold jewelry buying, which accounts for about 60 percent of total gold demand, traders said. "There is a big bull-and-bear disparity in gold. There is investment buying but no jewelry buying, which has dropped sharply," said Jonathan Jossen, a COMEX gold floor trader.

Spot gold fell to a low of $911.95 an ounce and was at $918.15 an ounce at 1:22 p.m. EDT (1722 GMT), down 2.3 percent from its last quote $939.60 in New York late Friday.
Gold for April delivery settled down $24.70, or 2.6 percent, at $918.00 an ounce on the COMEX division of the New York Mercantile Exchange. Demand for gold from jewelry buyers in traditionally strong markets remained weak.

On Monday, the dollar rose amid global recession fears and banking sector concerns, prompting investors to divert money out of gold and into U.S. Treasuries. A stronger dollar makes metals more expensive for holders of other currencies. Gold often rises when the dollar falls.

The world's largest gold-backed exchange traded fund (ETF) recorded its first decline since Jan. 8. Its holdings dipped 0.3 tonnes to 1,028.99 tonnes as of March 8.

Investors also favored oil at the expense of gold on Monday. Oil rallied 4 percent at above $47 per barrel. "A lot of people think gold is much too high compared to where crude is, so they are taking profit," Jossen said.

SOLID ETF DEMAND

Demand for gold from ETFs, which issue securities backed by physical stocks of gold, helped drive bullion higher earlier in the year. Traders said they expected these inflows to resume. "I think that there will be enough worrying news in the first half of 2009 for ETF demand to remain solid," said David Thurtell, an analyst at Citigroup. Holdings of Julius Baer's gold-backed exchange traded fund rose 109,000 ounces or 18 percent last week, the bank said in a weekly statement on Monday.

(Additional reporting by Paul Lauener and Pratima Desai; Editing by David Gregorio)

DOW, STI, HSI, SSE Intra Day Lowest in 2008

2009-03-09T10:51:00.000+08:00

DOW, STI, HSI, SSE Intra Day Lowest in 2008
21/11/08 DOW 7392.27 (Dow already broke...)
28/10/08 STI 1473.77 HERE
27/10/08 HSI 10676.29
28/10/08 SSE 1664.93

Source: Posted by Bangkok Kid in CNA forum

Wall St Week Ahead: GM, banks' fate to keep investors on edge

2009-03-09T10:41:00.000+08:00

NEW YORK (Reuters) - With stocks mired in multi-year lows and the fate of General Motors and banks hanging in the balance, investors are unlikely to curb their flight from risk this week, putting Wall Street on track for another brutal sell-off.

One focal point will be a meeting between the U.S. auto task force and GM, Chrysler and officials from the United Auto Workers in Detroit this week after auditors raised doubts about GM's ability to survive outside bankruptcy.

Uncertainty over the plan to salvage banks will also hang over the struggling sector until more concrete details from Washington are revealed, leaving investors to fret that companies that were once pillars of the financial system will have to be nationalized.

The weak economy will likely be confirmed by a handful of economic reports, including a government report on February retail sales and a survey of consumer sentiment.

"There are, unfortunately, no guideposts to a lot of the market to allow investors to get a better sense of direction of where the market is going, where corporate America is going," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

"Short of that, we're going to likely have to rely on Washington. Unfortunately, it just seems like Washington's relationship with the stock market is strained."

"PAINFUL" MARKET

With the Dow and S&P trading at 12-year lows, and the Nasdaq sliding to six-year lows, market watchers will be looking for signs of whether a bottom has been found, or if indexes still have another leg down to go.

Last week was the fourth week of declines for all three major U.S. stock indexes, as the Dow Jones industrial average dropped 6.2 percent and the Nasdaq composite index fell 6.1 percent. The Standard & Poor's 500 slid 7 percent, its worst week since November.

"I've been in the business since 1963 and I've truthfully never seen a market that is so discouraging or painful," said Carl Birkelbach, chief executive officer of Birkelbach Investment Securities in Chicago.

"I've been through a lot, but this is the worst I've seen."

The Wall Street Journal reported on Friday that about $50 billion of more than $173 billion of U.S. government bailout money poured into American International Group Inc has been paid to at least 24 financial institutions around the world.

Already cheap bank stocks continued their tumble last week. The stock price of Dow component Citigroup, once the world's most valuable bank by market capitalization, fell under $1 for the first time, reigniting anxiety over the bank's health and that of the entire banking sector.

Clarity on how toxic assets will be cleared off banks' balance sheets and how those assets will be valued is key to stabilizing the financial sector and seeing markets manage a sustainable recovery, analysts said.

"In order to move forward, we need (Treasury Secretary) Geithner to come out and tell us the answer to the question: 'How do you value the assets?'," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco.

"We may be happy about it, we may not be happy about it, but at least we'll know."

Members of the U.S. autos task force will visit Detroit this week to meet with GM, Chrysler and officials from the United Auto Workers labor union, an official for the Obama administration said Friday.

GM's failure could trigger round of massive layoffs and hurt companies that supply and manufacture parts, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank in New York.

In all, GM's bankruptcy could lop off 4 percentage points from the U.S. gross domestic product, of which two-thirds is driven by consumer spending, LaVorgna said.

CONSUMER PSYCHOLOGY 101

Ahead of the Fed's policy-making meeting the following week, Federal Reserve Chairman Ben Bernanke is set to address the Council on Foreign Relations on Tuesday. Investors will be watching for any comments on the state of the economy and the outlook for banks.

Economic data on February retail sales on Thursday and a preliminary reading on March consumer sentiment on Friday, coupled with quarterly results from office supplies and electronics retailer Staples Inc on Wednesday, should give a gauge of consumer spending. January's international trade deficit report is due on Friday.

Economists polled by Reuters forecast that retail sales will slip 0.5 percent in February, after January's unexpected gain of 1 percent. They forecast a preliminary March reading on consumer sentiment of 55.0, down from 56.3 for February, from the Reuters/University of Michigan Surveys of Consumers. The international trade deficit is forecast to drop to $38.1 billion in January from $39.93 billion in December.

Last week, U.S. retailers posted better-than-expected same-store sales for February, helped by a strong gain at Wal-Mart, the world's largest retailer and the leading U.S. discount chain. But analysts cautioned that stores will have to show consistent improvement for expectations of weakness to change.

CMFAS M5 Chapter 8: Money Laundering

2009-03-07T11:10:00.007+08:00

Key sections covered:

Customer Due Diligence
Record Keeping
Suspicious Transaction
Internal Policies
Terrorist Financing

DEFINITIONS

AML/CFT - means anti-money laundering and countering the financing of terrorism;
CDD – means customer due diligence;
FATF - means the Financial Action Task Force; is an inter-governmental body founded in 1989 by the G7. The purpose of FATF is to develop policies to combat money laundering and terrorist financing. [Source: Wikipedia]
STR - means suspicious transaction report;
STRO - means the Suspicious Transactions Reporting Office, Commercial Affairs Department of the Singapore Police Force
Beneficial Owner as defined in the MAS Notice on Prevention of Money Laundering and Countering the Financing of Terrorism means the natural person who ultimately owns or controls a customer or the person on whose behalf a transaction is being conducted and includes the person who exercises ultimate effective control over a body corporate or unincorporate.

GUIDELINES TO FINANCIAL ADVISERS
The Notice contains principles that serve as guidelines for the conduct of business:

A financial adviser must exercise due diligence when dealing with customers.
A financial adviser must conduct its business in conformity with high ethical standards.
A financial adviser should cooperate with law enforcement authorities to prevent money laundering and terrorist financing.

1. CUSTOMER DUE DILIGENCE (CDD)

A financial adviser shall perform CDD measures when:

the financial adviser establishes business relations with any customer;
there is a suspicion of money laundering or terrorist financing;
there are doubts about the accuracy or adequacy of any information obtained.

In non-face-to-face situations, the financial adviser shall:

put in place policies to address any related risks that may arise;
shall carry out CDD measures that are as stringent as face-to-face situations

When a financial adviser acquires the business of another financial institution, the acquiring financial adviser shall perform CDD measures on the customers acquired at the time of acquisition EXCEPT where:

there are no concerns about the adequacy of the information;
any due diligence conducted has not raised any doubts about the adequacy of the AML/CFT of the acquired institution.

Verification of customers:

A financial adviser shall complete verification of the identity of the customer and beneficial owner before business relations are established;
A financial adviser may establish business relations before verification if:

the deferral of verification is essential in order not to interrupt business operations; and
the risks of money laundering and terrorist financing can be effectively managed.

If business relations are established before verification, the financial adviser shall complete such verification as soon as possible.

Other pointers:

If CDD Measures are not completed, the financial adviser shall terminate the business relationship and consider if the filing of an STR is warranted.
In the case of joint accounts, a financial adviser shall perform CDD measures on all holders as if each were individual customers.
A financial adviser shall perform CDD measures on its existing customers after assessing materiality and risk.

A financial adviser may perform Simplified CDD measures:

if it is satisfied that the risks of money laundering and terrorist financing are low
but not in relation to customers that are related to countries known to have inadequate AML/CFT measures
in relation to a customer that is a financial institution supervised by the Authority (other than holders of money changer’s and remittance licences)

A financial adviser shall perform Enhanced CDD measures in addition to the standard CDD measures for “high risk” category of customers such as:

Politically Exposed Persons (PEP) – for example, persons with prominent public functions in a foreign country, heads of state and senior military officials.
customers assessed to have a higher risk for money laundering and terrorist financing.
persons from countries known to have inadequate AML/CFT measures.

Performance of CDD Measures by Intermediaries:

A financial adviser may rely on an intermediary to perform CDD measures if:

the financial adviser is satisfied that the intermediary has adequate measures to comply with AML/CFT requirements;
the intermediary has not been precluded by the Authority;
any information needed can be relayed to the financial adviser without delay

The financial adviser shall not rely on an intermediary to conduct ongoing monitoring of customers.
Where a financial adviser relies on an intermediary to perform CDD measures, it shall document the basis except where the intermediary is a financial institution supervised by the Authority.
For the avoidance of doubt, the financial adviser shall remain responsible for AML/CFT obligations to Notice.

2. RECORD KEEPING

(a) A financial adviser shall maintain documentation on its business relations and transactions with customers such that:

legal requirements are met;
any transaction can be reconstructed to provide evidence for prosecution of criminal activity;
the Authorities and auditors of the financial adviser are able to assess transactions and level of compliance; and
the financial adviser can satisfy any enquiry from Authorities for information.

(b) A financial adviser’s record retention policies with regard to customer:

keep records for at least 5 years following the termination of business relations;
keep records for at least 5 years following the completion of transactions.

(c) A financial adviser may retain documents as originals or copies in any form provided they are admissible as evidence in a Singapore court of law.

(d) A financial adviser shall retain records for as long as needed such as in accordance with any request from STRO or other authorities.

3. SUSPICIOUS TRANSACTIONS REPORTING

A financial adviser shall keep in mind the legal provisions regarding Corruption, Drug Trafficking and Terrorism regarding transactions suspected of being connected with money laundering or terrorist financing, including the following:

establish a single reference point within the organisation to whom all staff are instructured to promptly refer all transactions suspected of being connected with money laundering or terrorist financing, for possible referral to STRO via STRs; and
keep records of all transactions referred to STRO, together with all internal findings and analysis done in relation to them.

A financial adviser shall submit reports on suspicious transactions to STRO, and extend a copy to the MAS for information
A financial adviser shall consider if any circumstances are suspicious so as to warrant the filing of an STR

4. INTERNAL POLICIES, COMPLIANCE, AUDIT AND TRAINING

A financial adviser shall implement internal policies to help prevent money laundering and terrorist financing and communicate these to employees.
The policies shall include CDD measures, record retention, detection of suspicious transactions.
A financial adviser shall take into consideration money laundering and terrorist financing threats that may arise from the use of new technologies.

5. TERRORIST FINANCING

Key Concepts of Notice:

Money laundering is a process intended to mask the benefits derived from criminal conduct so that they appear to have originated from a legitimate source.
The CDD function may be outsourced to third party but the financial adviser remains fully accountable.

Stages of money laundering:

Placement - physical disposal of the benefits of criminal conduct;
Layering - separation of the benefits from their source by creating layers of financial transactions designed to disguise the audit trail; and
Integration - provision of apparent legitimacy to the benefits of criminal conduct such that laundered funds return to the economy as “legitimate business funds”.

Placement: Disposal of bulk cash

Smuggling bulk currency
Mix illicit proceeds with legitimate deposits
Deposit amounts in small denominations
Subdivide bank or commercial transactions

Layering: Disguise origin of initial deposit through:

Multiple transfers
Multiple transactions

Integration: Use layered funds to purchase clean, legitimate assets

Terrorism seeks to compel governments into a particular course of action or seeks to intimidate the public. Sources of terrorist financing may be legitimate or illegitimate. Terrorist financing involves amounts that are not always large and the associated transactions may not necessarily be complex given that some sources of terrorist funds may be legitimate

Non-Face-to-Face Verification

As a guide, financial advisers should take one or more of the following measures to mitigate the risk associated with not being able to have face-to-face contact when establishing business relations:

telephone contact with the customers at a residential or business number than can be verified independently
confirmation of customer's address through an exchange of correspondence or other appropriate method
subject to the customer's consent, telephone confirmation of the customer's employment status with the customer's employer's personnel department at a listed business number of the employer.
confirmation of the customer's salary details by requiring the presentation of recent bank statements;
certification of identification documents by lawyers or notary publics presented the customers;
requring the customer to make an initial deposit using a cheque drawn on the customer's personal account with a bank in Singapore; and
any other reliable verification checks adopted by the financial adviser for non-face-to-face provision of financial advisory services.

Compliance

The responsibilties of ALM/CFT compliance officer should include the following:

ensuring speedy and appropriate reaction to ALM/CFT related matter
advising and training on development and implementing internal policies, procedures and controls on AML/CFT;
carrying out ongoing monitoring and sample reviewing of accounts for compliance.
promoting compliance with MAS Notice and Guidelines on AML/CFT.

SUMMARY

1. Definition of Money Laundering: A process intended to mask benefits derived from drug trafficking or criminal conduct so that it appears to originate from a legitimate source

2. The 3 stages of Money Laundering in the following order; Placement, Layering and Integration.

3. Verification of personal customers. If applicant and insured are different people, the applicant’s identity needs to be verified.

4. Non face-to-face identification procedures should be at least as stringent as those of face-to-face verification.

5. For Group Polices

It is the identity of the holder of the master policy that has to be verified
Clubs, societies and charities - constitution of the applicant to be produced
Shell Companies, Trust, Nominee and Fiduciary Accounts – must obtain satisfactory evidence of beneficial owners

6. Record Keeping

Setting Document Retention Policy (retention period: 5 years)
Methods of Retention

7. Systems of Reporting Suspicious Transactions

Licensees are required to set up a system for reporting suspicious transactions.
It is the obligation of the employees to report suspicious transactions.

8. Compliance and Training

Internal Audit should monitor the effectiveness of the measures taken to combat money laundering.
New staff must be trained in specific areas of Money Laundering.
Refresher training should be held at least once every 2 years.

CMFAS M5 Chapter 7: CPF and SRS

2009-03-07T07:04:00.007+08:00

CPF MINIMUM SUM SCHEME (MSS)

A scheme which aims to help CPF members set aside sufficient savings to support a modest standard of living during retirement. All CPF members are required to set aside the Minimum Sum when they turn age 55 and pensioners may apply for exemption from the Minimum Sum.

Options To Meet The MSS Requirement

When a member reaches age 55, the Minimum Sum that he sets aside is kept in a Retirement Account.
Setting aside this Minimum Sum amount is a requirement and the amount increases by $4,000 on 1 July each year until it reaches $120,000 (in 2003 dollars) in year 2013, and will be adjusted yearly for inflation.
(New) The Minimum Sum currently stands at $106,000 (for the period 1-7-2008 and 30-6-2009).
(Old) The Minimum Sum currently was at $94,600 (for the period 1-7-2006 to 30-6-2007).

For members who do not have enough money in their Retirement Account, i.e. below the Minimum Sum amount, the Board allows them the following options:

instead of withdrawing the savings in their OA or SA Accounts which they are entitled to, they may request for them to be transferred to the Retirement Account to make up to the Minimum Sum amount. However, such a transfer is irrevocable;
they can pledge their properties up to 50% of the Minimum Sum (For 1 July 2006 to 30 June 2007, the maximum limit that one can pledge his property is up to a maximum of $47,300);
they can use their future CPF contributions (i.e. if they are working after age 55) to make up the shortfall in the Minimum Sum;
they can top-up their Retirement Account by cash.

Options To Invest The MSS
Members are given the following three options to invest their Minimum Sum when they turn age 55:

buy a life annuity from a participating insurance company;
keep it with a participating bank; or
leave it with the CPF Board.

For all three options, the member will only start to receive a monthly income when he reaches the statutory retirement age (currently at age 62) except for those whose job requires them to retire early, e.g. those in the police force.

Buying a life annuity is the best choice amongst the three options because the monthly payment will continue for as long as the annuitant is alive. As for the other two options, once the Minimum Sum is fully utilised, the monthly payment will be discontinued.

Option For Combined MSS For Married Couples
They can opt to set aside a combined Minimum Sum of 1.5 times the Minimum Sum provided they nominate each other as the beneficiary for the balance of their Minimum Sum. Once the nomination is made, it cannot be revoked. Should one of the account holders die, the deceased’s Minimum Sum would be transferred to the surviving spouse’s Retirement Account to make up the full Minimum Sum. Any excess amount will be paid in a lump sum to the surviving spouse as nominee of the money.

Commencement Date Of Monthly Payout
For members who reach age 55 before 1 January 1999, the Minimum Sum monthly payout will commence from age 60 and for those who reach age 55 on or after 1 January 1999, the Minimum Sum monthly payout will commence from age 62 .

Retirement Age Determined At Age 55
The retirement age is based on the one prevailing at the time a member turns 55 years old. This means to say that whenever the legislated retirement age is changed, it will only affect those who are below 55 years old.

Minimum Sum Plus Scheme (MSPS)
Members who are age 55 and above on or after 1 January 2001 can use the balance in their CPF savings in the Ordinary and Special Accounts as well as Medisave Account in excess of the Medisave Minimum Sum, beyond the Minimum Sum to buy Life Annuities. This is an extension of the Minimum Sum Scheme and is optional. Members who have set aside the full Minimum Sum amount as well as the Medisave Minimum Sum amount may make use of this scheme to buy life annuities when they are eligible for CPF withdrawal.

Topping Up The Minimum Sum
It is intended to help individuals (CPF and non-CPF members) set aside money for their own, their spouses’, parents’ or grandparents’ old age needs. The eligibility criteria for this scheme are as follows:

both parties (i.e. the applicant and the recipient of the top-up) must be Singaporeans or Singapore Permanent Residents;
the recipient of the top-up should be at least 55 years old;
the party whose money will be used for the top-up must have more than 1.5 the prevailing Minimum Sum amount in their Ordinary and Special accounts, including amount withdrawn for investments

Besides the eligibility criteria, the CPF Board also lays down conditions for the use of this scheme as follows:

the amount of top-up must not exceed the maximum limit allowed under the scheme
members must follow the guidelines on the use of cash and/or CPF savings for the topping up

Guidelines On Use Of Cash And/Or CPF Savings For Topping Up

Person* Whose Account Will Be Topped Up	Using CPF Savings	Using Cash
Self		X
Spouse	X	X
Parents	X	X
Grandparents		X

* Must be Singaporeans or Permanent Residents of Singapore

From the above table, it can be seen that members may top-up their own as well as their grandparent’s Retirement Accounts using cash only. As for spouse and parents, they may do so using both cash and CPF savings.

Tax Treatment
MSS: All monthly tax payments are tax free.

MSPS: Amount is also tax free. However if the annuity is discontinued, money will be returned to member and no more exemptions for subsequent investments.

Top Up:

Member who used cash to top up their parents’ or grandparents’ Retirement Account can also claim tax relief up to $7,000 per calendar year for the amount of cash top-up subject to the topping up limits.
Member will also qualify for the relief if the member has made a top-up in cash for his/her non-working spouse who is 55 years old or older and whose income does not exceed $2,000 in the year preceding the year of top-up.
Topping-up of accounts through transfer of funds from the member’s own CPF account to that of his/her own or spouse’s, parent(s)’ or grandparent(s)’ retirement account will not qualify for deduction.

Upon Death Of The Retirement Account Holder

The Minimum Sum (or its balance) will be paid out in a lump sum to his CPF nominees
If there is no nomination, the money would be channelled to the Public Trustee for distribution according to the law of intestacy
Upon death of the member, the remaining balance in annuity or bank deposit would be transferred back to CPF to be distributed to the CPF nominees
In the case of topping-ups by children or grandchildren, the money will be returned proportionately (based on the amount contributed) to the children’s or grandchildren’s respective CPF Accounts
For the combined Minimum Sum cases where an irrevocable nomination had been made, the deceased’s Minimum Sum would be transferred to the surviving spouse to make up the full Minimum Sum for the surviving spouse

CPF FAQ on Minimum Sum Scheme (MSS):
http://ask-us.cpf.gov.sg/explorefaq.asp?category=23004

Q: Can I claim tax relief if I use cash to top up under the Minimum Sum Topping-Up Scheme?

A: You can enjoy tax relief of up to $7,000 per calendar year, if you use cash to top up for yourself and/or receive cash top-ups from your employer. You can enjoy an additional tax relief of up to $7,000 per calendar year if you use cash to top up for your siblings, spouse, parents or grandparents. To qualify for tax relief for cash top-ups for siblings/spouse, the sibling/spouse must have earned $2,000 or less in the preceding year. For cash top-ups made in the year, you can claim tax relief in the following year’s Tax Assessment.

CPF INVESTMENT SCHEME (CPFIS)

The CPFIS comprises the CPF Investment Scheme–Ordinary Account (CPFIS-OA) and CPF Investment Scheme-Special Account (CPFIS-SA).
The purpose of these two schemes is to give CPF members more options to enhance their retirement savings through investments.
Currently, the CPF Board pays a guaranteed minimum interest of 2.5% per annum and 4% per annum on the Ordinary and Special Accounts respectively.

Eligibility Requirement Criteria. All CPF members who meet the following requirements are allowed to participate under the CPFIS:

at least 21 years old;
not undischarged bankrupts; and
have savings in their Ordinary or Special Accounts

Limitations

List Of Investment Instruments Allowed Under CPFIS And The Investment Limits
Buying And Selling Of Investments From Service/Product Providers Under The CPFIS
Mode Of Premium Payment For Life Insurance Products
Admission Criteria for Funds Seeking to be Included under CPFIS

Types Of Investment Instruments And Amount Of Savings Allowed Under CPFIS-OA

Instruments	Investment Limits
Fixed Deposits Singapore Government Bonds Statutory Board Bonds Bonds Guaranteed By Singapore Government Annuities Endowment Insurance Policies Investment-linked Insurance Products Unit Trusts Exchange Traded Funds Fund Management Accounts	The full balance in the Ordinary Account
Shares Corporate Bonds Property Funds (real estate investment trusts)	Up to 35% of investible savings
Gold	Up to 10% of investible savings

Types Of Investment Instruments And Amount Of Savings Allowed Under CPFIS-OA

Instruments	Investment Limits
Fixed Deposits Singapore Government Bonds Statutory Board Bonds Bonds Guaranteed By Singapore Government Annuities Endowment Insurance Policies Selected Investment-linked Insurance Products Selected Unit Trusts Selected Exchange Traded Funds	The full balance in the Special Account

Mode Of Premium Payment For Life Insurance Products. With effect from 1 January 2001, the CPF Board has discontinued the practice of allowing members to use their CPF savings to purchase regular premium policies. Policies taken after this date have to be paid by single premium or recurring single premium. The insurance coverage is limited to three times the single premium paid. Members who had purchased regular premium policies before 1 January 2001 are allowed to continue with their policies on a regular premium payment basis.

Admission Criteria for Funds Seeking to be Included under CPFIS
From 1 Feb 2006, new funds must meet the following criteria for inclusion under CPFIS:

Top 25 percentile in their global peer group
Expense ratio lower than median of existing CPFIS funds in its risk category
Preferably have a track record of at least three years
CPF Board will publish on its website a list of funds which meets these criteria.

PFIS-OA	CPFIS-SA
Need to open an investment account with DBS/OCBC/UOB	No need to open account. Service Provider will liaise with CPF
Sales proceeds will be credited into Investment Account and if inactive for 2 months, money will be transferred to OA	Sales proceeds automatically transferred to SA
Profits cannot be withdrawn	Same
No need to make good loss	Same
Profits and interest earned are not taxable but dividend is taxed at individual tax rate	Same (since shares are not allowed, hence no dividend)
Guaranteed interest at 2.5%	Guaranteed interest at 4%

Release Of Investment Holdings Upon Member Reaching Age 55

A member’s investments will be released to him when he withdraws his CPF savings at age 55 after setting aside the Required CPF Minimum Sum and Medisave Required Amount.
If he is unable to set aside the Required CPF Minimum Sum and Medisave Required Amount, his investments will not be released to him.
Upon liquidation of the investments, the proceeds will be credited to his CPF Investment Account for CPFIS-OA or Special Account for CPFIS-SA.
Up to half of all his new contributions (including his proceeds from the sale of investments) will be transferred to top-up the shortfall in his Retirement and/or Medisave Accounts when he applies to withdraw his CPF savings.

The Funds Performance Tracking Committee (FPTC) was formed after CPF decided to invite the industry parties to play a more active role in funds performance tracking. It comprises of representatives from:

Investment Management Association of Singapore (IMAS)
Life Insurance Association (LIA), and
Security Investors Association of Singapore (SIAS)

Treatment Of CPFIS Investments Upon Member’s Death

When members die (irrespective of whether they were undischarged bankrupts or not), CPF investments and any cash held in their CPF investment account under the CPFIS-OA, as well as investments held under CPFIS-SA, form part of the deceased members’ estate and will be distributed according to applicable laws.
These investments cease to be protected from deceased members’ creditors under the CPF laws and may be used to satisfy creditors’ claims in accordance with the Probate and Administration Act.
This applies whether the deceased member is an undischarged bankrupt or not.

Supplementary Retirement Scheme (SRS)

The SRS was introduced by the government on 1 April 2001 as a voluntary scheme to encourage working individuals to save for their retirement, over and above their CPF savings, i.e. it complements the CPF scheme.

Eligibility Criteria

Singaporeans, PRs and foreigners;
at least 21 years old;
not undischarged bankrupts; and
not of unsound mind.

Maximum Limit Imposed On Amount Of Contributions Made Per Year

All SRS contributions and withdrawals must be made in cash only
Only single premium and recurring single premium polices are allowed
Life cover (including total and permanent disability benefits) capped at three times the single premium
Plans can allow for contribution continuation feature/benefit upon disability
Other types of life insurance, such as Critical Illness Insurance, Health Insurance and Long-term Care Insurance policies are not allowed under the scheme
SRS investments cannot be used as a collateral
SRS balance is not protected from creditors
Flexibility on frequency of contributions and the selling of investments
Withholding tax is imposed on all SRS withdrawals by foreigners and PRs
A participant is not allowed to contribute to SRS after he has started to withdraw from his SRS account at or after retirement, or after he has reach the prevailing statutory retirement age, whichever is earlier

Income Tax Advantages

Summary Of SRS Regulations Pertaining To Withdrawal Of SRS Savings

Situation	Max period* allowed for withdrawal	Amount of withdrawal subject to tax	5% Penalty
On or after the prevailing statutory retirement age at the time of first contribution	10 years**	50%	No
Before the prevailing statutory retirement age at the time of first contribution	N.A.	100%	Yes
Upon Death	N.A.	50%	No
Upon permanent incapacity or on medical grounds 10 years	50%	No
Bankruptcy	N.A.	100%	No
FULL withdrawal by a foreigner who has maintained his SRS account for at least 10 years from date of first contribution	N.A.	50%	No

* Period may be longer if the statutory retirement age has been increased.
** 10-year period does not apply to investments in life annuities. 50% tax concession will apply to annuity streams in perpetuity.

Similarities Between CPFIS And SRS

both are voluntary schemes;
both have eligibility criteria;
investment returns accumulated are tax free except for dividends which are taxed at the individual tax rate (Note: Shares are not one of the CPFIS-SA instruments, hence, no dividend issues where this scheme is concerned);
life insurance cover (including total and permanent disability benefits) is capped at three times the single premium;
most financial instruments (except fixed deposits*) do not guarantee investment return;
both allow investment in single premium and recurrent single premium products including annuities.

*Provided the fixed deposits are not withdrawn prior to its maturity date

Differences Between CPFIS And SRS

CPFIS-OA	CPFIS-SA	SRS
Limits are only set on investments in stock and gold. Members can invest up to the balances in their OA in professionally- managed products allowed under the CPFIS-OA scheme	No limits set on the amount of savings in the SA account that can be used for investment	Sets limits on the amount of contributions that may be made to SRS Account per year
Can only use the savings in the OA for investment	Can only use the money in the SA for investment	Can use earned employment income (excluding directors’ fees) as well as income from self-employment for participation in the SRS
Members need to open an investment account with one of the approved agent banks	Members need not open any investment account	Participants need to open an SRS account with one of the SRS operators
Can only maintain one investment account at any one time	Not applicable	Can only maintain one SRS account at any one time
Members may buy and sell their investments through the service/product providers allowed under the scheme	Members may buy and sell their investments through the service/product providers allowed under the scheme	Participants may buy and sell their investments from any financial institution
Members may buy and sell their investments through the service/product providers allowed under the scheme	Members may buy and sell their investments through the service/product providers allowed under the scheme	Participants may buy and sell their investments from any financial institution
Can only purchase investment instruments approved under the scheme	Can only purchase investment instruments approved under the scheme	Can purchase any investment instruments available in the market
Withdrawal of profits is not allowed	Withdrawal of profits is not allowed	Withdrawals allowed at anytime
Not applicable	Not applicable	Penalty charge imposed on early withdrawal
No charges imposed on the operation of the investment account (Transaction fees and service charges may be imposed by agent banks)	Not applicable	May need to pay charges for operating the SRS account
Withdrawals are tax-free, with the exception of dividends received which are taxable at individual tax rates	Withdrawals are tax-free	Withdrawals on or after retirement (prevailing retirement age at first contribution), 50% of the amount withdrawn will be subject to tax
Not applicable	Not applicable	Withdrawal before the statutory retirement age prevailing at first contribution, 100% of the amount withdrawn is subject to tax
Not applicable	Not applicable	Withholding tax imposed on withdrawals by foreigners and Singapore Permanent Residents based on the rate prevailing at the time of withdrawal
Investments cannot be assigned, pledged or used as collateral for any loan purposes	Investments cannot be assigned, pledged or used as collateral for any loan purposes	SRS account balance cannot be used as collateral, security or guarantee for any financial transaction outside the SRS
Investments will form part of the deceased’s estate except for insurance	Investments will form part of the deceased’s estate except for insurance and fixed deposits	Investments will form part of the deceased’s estate

3 Money Making Bear Market Lessons

2009-03-06T19:39:00.000+08:00

Simon Maierhofer
Friday March 6, 2009, 11:15 am EST

http://finance.yahoo.com/news/3-Money-Making-Bear-Market-etfguide-14566232.html

In fact, our February 2nd article, '11 ETFs For The Dow 6,500 Portfolio' was received with skepticism and mockery at the time. Today however, the Dow is just a few points shy of 6,500. The article outlined three different approaches to combat the bear: 1) ETFs that provide safety 2) ETFs that soften the blow 3) ETFs that make money in a down market.

All ETFs recommended accomplished their mission. The five ETFs recommended as profit centers are all up 20% and more, in a market that has lost more nearly 20%. Those ETFs were: ProShares UltraShort Financials (NYSEArca: SKF - News), ProShares UltraShort Real Estate (NYSEArca: SRS - News), ProShares UltraShort Consumer Services (NYSEArca: SCC - News), ProShares UltraShort S&P 500 (NYSEArca: SDS - News) and the ProShares UltraShort Dow 30 (NYSEArca: DXD - News).

Bear Hug for Gold?

2009-03-06T19:31:00.000+08:00

http://www.minyanville.com/articles/gold-rally-GLD-market-etf-statistics/index/a/21496/from/yahoo

Lance Lewis Mar 06, 2009 2:50 pm

I’ve read some things written by gold bears of late, calling for gold to decline in March due to “seasonal tendencies."

As always with statistics, if one doesn’t know why a particular statistical pattern occurs (as with the “Super Bowl Indicator” for example), one can make incorrect assumptions about future behavior.

In gold’s case, it’s typical seasonality tends to see gold rally in the fall, and then peak in the early spring. But the reason that we typically see this pattern, is due to the seasonality of gold demand coming from the largest gold jewelry consumer on the planet, whose various festivals revolve around gold: India.

However, as I’ve pointed out before, jewelry demand is not what is currently driving the gold price. Indian gold imports in February were virtually 0. Meanwhile, gold rallied $100 during February to $1000 and an 11-month high. As always occurs during a big bull market in gold, investment demand is the primary driver of the gold market, and it displaces jewelry demand. And investment demand is obviously not seasonal.

CMFAS M5 Chapter 6: Financial Needs Analysis

2009-03-06T18:56:00.005+08:00

Financial Needs Analysis (FNA)
A process designed to assist a prospective client in identifying his financial needs and goals so that he can make better informed decisions when deciding on the investment products to purchase that would meet his needs. Generally, this process involves:

fact finding;
identifying and quantifying client’s needs;
product recommendation and presentation; and
conducting a review of the client’s needs periodically

An FNA is not a financial plan although it can result in one. It should be construed as a guide for the representatives to use in deciding how best to attain his client’s financial goals in the areas of:

Accumulation. Planning to pay for children’s education and other financial objectives (e.g. saving to buy a bigger house.
Retirement Planning to provide the additional income needed to supplement CPF, pension plans and existing savings and investments.
Protection Planning to ensure that all financial obligations are met under the following circumstances:

upon death;
upon disablement;
upon the contracting of critical illness;
upon the loss of or damage to property;
when a personal liability arises.

BENEFITS OF CONDUCTING FNA

help to discover your client’s needs and advise the most suitable products to buy and how much to buy;
spend more time on the client’s situation than you do on your product;
if you sell the client additional products based on his plan, he will be able to see how the products fit into his overall plan;
the client will be more committed to keeping to his plan as he understands the rationale for his purchases;
enables you to establish a long-term relationship with your client.

Main Sources Of Money To Meet The Client’s Needs

Central Provident Fund (CPF)
Supplementary Retirement Scheme (SRS)
other savings and investments, e.g. property
client’s existing Life Insurance policy and Disability Income Insurance policy
employee benefits provided by client’s employer

1. FACT FINDING

Before you can perform a proper needs analysis, you must first of all know your client. To do this, you need to gather information from your client which include his:
Personal Details;
Employment Details;
Number of Dependants (this piece of information is required for determining insurance needs);
Financial Information;
Monthly Income and Expenditure: committed (or Fixed) Expenditure and manageable (or Variable) Expenditure
Assets and Liabilities.
Existing Insurance Policies;
Objectives:You need to find out your client’s objectives in order to recommend suitable products to meet their needs
Preferences: Attitudes towards investment risk (risk averter, cautious, balanced, risk seeker;Areas of concern (keep pace with inflation; investment is easy to manage; capital growth; easy access to cash, investment income each year)
Retirement Needs;
Savings Goals.

2. IDENTIFYING AND QUANTIFYING CLIENT’S NEEDS

analyse the data so as to identify and quantify the client’s needs
pick up weaknesses or potential problems that can negatively affect the client’s ability to achieve his objectives
do a detailed analysis of your client’s financial needs and tackle each of the needs that you have uncovered especially those that need immediate attention
help your client to prioritise his needs. This is because the client’s resources are usually limited
quantify your client’s needs

There are 2 methods of quantifying retirement needs, namely [p.177]

the replacement ratio method, which computes the amount of funds required based on a certain percentage of the client's last drawn pay, and
the expense method, which computes the amount of funds required based on the current level of the household expenses projected into the future at the expected inflation rate

For protection needs, you need to determine:

the sum of the client's total liabilities
his immediate expenses at the time of death, and
the amount needed to provide for the dependents for as long as required

There are 2 common methods used for quantifying the amount needed to provide for dependants, namely

the multiple approach, which computes the amount of funds required to meet a client's needs by multiplying the present value of the stream of the client's current yearly gross income (assumed to be constant until his retirement) by a constant future investment rate
the needs approach, which calculates the amount needed by taking into account the specific position of the client. It involves estimating the income needed by the dependants to maintain their standard of living and the available funds that the client has to meet his needs. The difference between the two is the shortfall that the client needs to provide for his dependants.

TYPES OF INVESTMENT PRODUCTS TO MEET THE CLIENT’S OBJECTIVES

Product Recommendations
Product Suitability
Client’s Objectives
Affordability
Taxation
Client’s Risk Tolerance
Prioritisation
Effect of Inflation and Time Value of Money
Investment Instruments for Meeting Accumulation Needs
Investment Products to Meet Retirement Needs
Investment Products to Meet Protection Needs

Two basic principle under product recommendation [p.178]

client need - you should only recommend products if your client needs them
product suitability - you should only recommend products which are the most suitable for your client given his circumstances

Investment Instruments for Meeting Accumulation Needs and the Risk of Losing Capital

Money Market Securities (e.g. Treasury bills, banker’s acceptance and certificate of deposit, commercial paper, repurchase agreement, bank deposits): Low risk
Fixed Income Securities, i.e. bonds: Moderate
Equity Investments, i.e. ordinary and preferred shares: High
Derivative Instruments, e.g. options and futures: High
Property: High
Unit Trusts: Moderate to High
Whole Life Insurance: Low
Endowment: Low
Investment-Linked Products: Low to High depending on the underlying assets (i.e. whether the fund consists of bonds or equities, etc.)
Annuities: Low

Types Of Life And Health Insurance Products For Meeting Protection Needs

Term: Death as well as total and permanent disability
Whole Life: Death as well as total and permanent disability
Endowment Insurance: Death as well as total and permanent disability
Investment-linked Life Insurance: Death as well as total and permanent disability
Riders: To provide financial protection in addition to that of the basic policy at a low cost
Critical Illness Insurance: To provide for a lump sum payment upon contracting one of the covered critical illnesses
Long Term Care Insurance: To provide a regular income when one is unable to perform a specific number of activities of daily living, e.g. bathing
Medical Expense Insurance and Managed Health Care Insurance" To provide protection against ill health
Disability Income Insurance: To provide a monthly income when a person is disabled

General Insurance Products For Meeting Protection Needs

Fire Insurance: For protection of the house against destruction by fire
Householder/Houseowner Insurance: To protect the building or contents in the building
Personal Accident Insurance: For protection against accidental death and disablement
Personal Liability Insurance: To protect one against third party liability

3. PRESENTING YOUR RECOMMENDATIONS

ensure that your client understands the products recommended and the reasons for your recommendations
be able to explain the features and benefits of the recommended products and how these fit into his situation

4. CLIENT REVIEW

The process of identifying and satisfying client needs does not stop with the implementation of the initial recommendations.
Client’s personal circumstances are likely to change (e.g. the birth of a child) and new needs may surface.
Regular review will ensure that your client continues to receive quality service from you and reinforces your relationship with him.
External developments, such as changes to CPF rules may also indicate the need for a client review.
The needs of your clients should be a long-term concern and your relationship with your clients, a continuing one.

CMFAS M5 Chapter 5: Development and Pricing of Insurance Products

2009-03-06T18:43:00.004+08:00

MAS 302 – PRODUCT DEVELOPMENT AND PRICING
Comprises both mandatory requirements and guidelines. This Notice applies to any direct insurer registered to carry on life business.

Part 1 - Mandatory Requirements

Prudent Management Oversight
Approval For New Products
Contravention Of Requirements Imposed

Approval For New Products
An insurer shall obtain written approval from the MAS before offering any product with any feature that does not appear in any product in the insurer’s then-existing business portfolio.
Any request for such approval shall be made in writing and submitted to the MAS no later than 1 month before the proposed official launch date of the product.

The paragraph above shall not apply in respect of:

a short-term accident and health policy; or
a term policy having a duration of 5 years or less.

Information And Product Documents To Be Submitted For Approval Of New Insurance Products

Part 2 – Guidelines
The standards set out in this section are not mandatory in that failure by an insurer to comply with any of the standards shall not of itself render the insurer to be in breach of this Notice.
MAS may take into account a failure to comply with these standards in considering whether to:

approve a new product;
revoke the approval for a product; or
issue directions for the withdrawal of a product.

Notification For Products Launched
An insurer should notify the MAS in writing of any product launched by the insurer that does not require the approval of the MAS. Such notice should be given to the MAS within 7 working days after the official launch date of the product.

MAS 307 – NOTICE ON INVESTMENT-LINKED LIFE INSURANCE POLICIES

The MAS 307 was issued to ensure that insurers adhere to minimum standards of investment and disclosure requirements for ILPs. Under the MAS 307 Notice, an insurer shall seek written approval from the MAS for:

the establishment of any ILP sub-fund; or
any significant change to any ILP sub-fund, such as any change in the manager or investment objective of the ILP sub-fund.

Investment-linked sub-fund refers to each separate sub-fund within an ILP to which a policyholder can choose to allocate his or her premiums under the ILP.

Disclosure Of Information
It is important that all insurers issuing investment-linked policies should ensure that adequate and accurate information about the policies is provided to policyholders

Information For Applicants -Sales Materials/Policy Forms
Information For Policyholders

Statement To Policyholders
Reports To Policyholders

Sales Materials/Policy Forms

Sales materials and brochures shall not be written in language which may confuse or mislead an applicant due to his lack of experience. The shall include {p.155]:

1. a general description of the principal features of the policy;
2. a list of ILP sub-funds
3. investment policy of each sub-fund including:

a description of the investment objectives intended
principal types of investments,
the markets and sectors intend;

4. the risks to be borne by the policyholder;
5. charges to be borne by the policyholders:

initial charge
management fees
mortality cost
any other charges

6. basis for computing all policy benefits
7. basis and frequency for valuing the assets
8. illustrations of benefits payable
9. investment performance of each sub-fund over the last 1-year, 3-year, 5-year, 10 years and since inception.

Statement To Policyholders. All policyholders shall be provided with a statement on the performance and value of their policies at least on an annual basis.

Report To Policyholders [p.157]

All policyholders shall also be entitled to receive from the insurer semi-annual and annual audited reports on the performance of each investment-linked sub-fund. The report shall include:

1.a summary of the financial statement of the sub-fund
2. the net investment performance
3. a list of investments held at market value and as percentage of net asset value
4. the top 10 holdings at market value and as a percentage of net asset value.
5. any charges levied against the sub-fund
6. a statement of any change in

investment objective and the orientation
any restriction or material quantitative or qualitative investment requirement.

Minimum Death Benefits. There is no prescribed minimum death benefit for an Investment-linked Life Insurance policy.

CMFAS M5 Chapter 4: MAS Guidelines

2009-03-06T12:27:00.007+08:00

Guidelines are intended to provide general guidance and are meant to be good practice. They do not create any legally enforceable obligations or duties. MAS has published the following Guidelines in relation to FAA:

Guidelines on criteria for the grant of a Financial Adviser's license and a representative's license;
Guidelines on fit and proper criteria;
Guidelines on license applications and payment of fees
Guidelines on standards of conduct for FA
Guidelines on the use of the term "independent" by FA
Guidelines on applications for approval of Arrangements under Paragraph 11 of the First Schedule of Financial Act.
Guidelines for exemption for specialised units serving High Net Worth individuals under FAA.
Guidelines for conduct of business for execution-related advice
Guidelines on Structure Deposits
Guidelines on switching of designated investment products
Guidelines on prevention of Money Laundering and Countering the Financing of Terrorism.

1. GUIDELINES ON CRITERIA FOR THE GRANT OF A FINANCIAL ADVISER’S LICENCE AND A REPRESENTATIVE’S LICENCE

They are intended to provide guidance on the licensing admission criteria for persons applying for a financial adviser’s and a representative’s licence under the FAA

Who Needs To Apply For A Financial Adviser’s Licence And A Representative’s Licence?
What Are The Admission Criteria For The Grant Of A Financial Adviser’s Licence?
What Are The Admission Criteria For The Grant Of A Representative’s Licence?

Who Needs To Apply For A Financial Adviser’s Licence And A Representative’s Licence?

Corporations, which carry on a business of providing any financial advisory service unless otherwise exempted.
Individuals who are employed by or acting for the corporation to provide any financial advisory service are required to hold a representative’s licence under the FAA.

Those who provide any financial advisory service on behalf of a corporation exempt under Section 23(1) of the FAA are exempt from the requirement to hold a representative’s licence.

The financial advisory services specified in the FAA are as follows:

advising others concerning any investment product;
issuing or promulgating analyses or reports concerning any investment product;
marketing of any collective investment scheme; and
arranging of any contract of insurance in respect of life policies, other than a contract of reinsurance.

What Are The Admission Criteria For The Grant Of A Financial Adviser’s Licence?

Minimum Financial Requirements
Professional Indemnity Insurance
Management Expertise
Track Record
Shareholding
Supervision by Home Regulatory Authority
Systems and Processes
Fit and Proper
Others
Opportunity to be Heard – Requirement of Grant or Renewal of Financial Adviser’s Licence.

Minimum Financial Requirements:

Paid-up capital of $150,000 for those who do not handle futures contracts or foreign exchange (FX) trading.
Paid-up capital of $300,000 for those with futures contracts or FX trading.

Professional Indemnity Insurance

not less than $500,000
deductible allowed not more than 20% of applicant's NAV

Management Expertise

All Executive Directors (ED), including CEO must of minimum of 5 years of relevant working experience.
They must of acceptable academic qualifications and/or professional qualifications
CEO must of at least 3 years of managerial experience in the relevant field.
CEO, ED or Manager must be a tied-agent

Systems and Processes
Applicant should be adequate internal compliance systems and processes to ensure:

compliance with the law
good practices and
professional standards.

This would include access to:

research reports
financial planning tools and services
investment capability

What Are The Admission Criteria For The Grant Of A Representative’s Licence?
A representative’s licence will only be granted to an individual. The MAS may refuse an application for the grant of a representative’s licence if the applicant does not satisfy its requirements in terms of age, competence & education requirements, fit & proper criteria.

2. GUIDELINES ON FIT AND PROPER CRITERIA [p.105]

The MAS will consider a number of factors when assessing if a financial adviser or representative is fit and proper, key among which are:

honesty, integrity and reputation;
financial soundness; and
competence and capability.

GUIDELINES ON LICENCE APPLICATIONS AND PAYMENT OF FEES [p.109]

Procedures For Application For A New Licence
Procedures For Renewal Of Licences
Procedures For Applying Additional Type(s) Of Financial Advisory Service
Annual Licence Fees

The following forms are set out in the FAR for the application of:

Form 1: FA's license;
Form 2: additional types of service FA services under FA's licence
Form 3: renewal of FA's license
Form 6: representative's license
Form 7: additional types of FA service for representative
Form 8: application for renewal of representative's license

GUIDELINES ON STANDARDS OF CONDUCT FOR FINANCIAL ADVISERS [p.112]

This guidelines cover:

1. Integrity

2. Objectivity

3. Confidentiality

4. Competence

5. Due Care and Diligence

Prompt and Best Execution
Supervision of Representatives
Cessation of Business

6. Disclosure to Clients

General Information about the Financial Adviser
Key Features of Products
Warnings, Exclusions and Disclaimers
Clear, Adequate and not False or Misleading
Facts and Opinion
Remuneration

7. Know your Client

General
Reasonable Basis
Record Keeping
Prevention of Money Laundering

8. Conflict of Interest

9. Complaints Handling

10. Compliance with Laws

GUIDELINES ON THE USE OF THE TERM “INDEPENDENT” BY FINANCIAL ADVISERS [p.119]

It gives guidance to financial advisers on the circumstances they may use the term “independent”. It adopt a principles-based approach rather than a detailed prescriptive approach in determining whether a financial adviser can use the term “independent”

Under FAR, no licensed financial adviser or exempt financial adviser shall use the word “independent” , unless the financial adviser:

does not receive any commission or other benefit from a product provider which may create product bias and does not pay any commission to or confer other benefit upon its representatives which may create product bias;
operates free from any direct or indirect restriction relating to any investment product which is recommended; and
operates without any conflict of interest created by any connection to or association with any product provider.

The basic test for independence is whether a reasonable investor, knowing all the relevant facts and circumstances would perceive the financial adviser as having conflicting interests with the investor and for the advice or recommendation not to be objective and impartial. In considering whether a financial adviser is independent, the MAS will consider all relevant facts and circumstances.

The MAS considers that a financial adviser can use the word “independent” if:

it does not receive any of the following:

any commission (apart from commission that is rebated in full to the financial adviser’s clients);
any form of remuneration calculated at a rate or on a basis that varies having regard to all or any of the following: the number of transactions so arranged or effected; or the value of each transaction or of all transactions (for life policies, based on amount of premiums paid or payable or the amount of sum insured. For unit trusts, based on subscriptions paid or payable); and
any gift or other benefit from product providers which may reasonably be expected to influence the financial adviser.

it operates free from any direct or indirect restriction relating to the investment products it provides financial advisory services on; and

it operates without any conflict of interest that may:

arise from its association or relationship with product providers; and
reasonably be expected to influence it in carrying on the business of providing financial advisory services.

Commission and Other Benefits
The mere fact that a financial adviser receives commissions or other benefits from a product provider does not preclude it from calling itself “independent”. The key issue is whether such commission or other benefit is likely to create a bias in favour of a particular investment product, class of investment product or product provider. The guidelines are:

Insignificant Commission or Other Benefits. The commissions received should be insignificant relative to its total revenue.
Same Level of Commission. It should received similar level of commission for similar products.
Commission Sharing Arrangement. Where representatives are entitled to certain percentage of the commission paid by the product providers, the arrangement should be similar for the investment products.
Significant Commissions or Benefits. MAS would consider commissions to be significant if they contribute more than 20% of the total revenue. Differences in the rate of commissions amounting to more than 20% will generally be regarded to significant.

Product Restriction
A financial adviser’s independence may be impaired by any form of product restriction, whether direct or indirect.

Direct Restriction: An agreement between FA and product provider whereby FA is limited to sell only a range of products selected by the product provider.
Indirect Restriction: FA is required to meet sales targets agreed with product provider.

Relationship with a Product Provider
A financial adviser may be a product provider itself, such as a bank, fund management company or life insurance company. Under such circumstances, the financial adviser should not promote its services as being “independent”.

A financial adviser may also be related to a product provider. For instance, it may be a subsidiary of a product provider, the advisory arm of a financial services conglomerate that owns a fund management, life insurance or banking outfit, or a sister company of a product provider. In considering whether these ownership links create a product bias, the MAS will take into account:

the ownership structure of the financial adviser;
its relationship with the product provider;
the products on which advice or recommendation is given

GUIDELINES ON APPLICATIONS FOR APPROVAL OF ARRANGEMENT UNDER PARAGRAPH 11 OF THE FIRST SCHEDULE TO THE FINANCIAL ADVISERS ACT [p125]

Advisory process includes "know your client", needs analysis and product recommendation.

Client Servicing process includes sales, marketing, solicitation, and other pre-contract and pre-transaction activities.

Prospecting refers to the process of searching for clients.

GUIDELINES ON EXEMPTION FOR SPECIALISED UNITS SERVING HIGH NET WORTH INDIVIDUALS UNDER SECTION 100(2) OF THE FINANCIAL ADVISERS ACT [p.129]

These Guidelines elaborate on:

the criteria that the MAS would consider in assessing applications for exemption;
the types of clients that may be served by the Unit; and
the general conditions that will be imposed by the MAS.

High net worth individual:

1. has minimum $1 million of assets in the following items:

bank deposits and structure deposits
capital market products
life policies
other investment products as may be prescribed by MAS;

2. total net personal assets exceed S$2 million in value;
3. annual income not less than S$300,000.
4. who is assessed by the applicant to have the potential to become a person prescribed in (1) within 2 years.

GUIDELINES ON CONDUCT OF BUSINESS FOR EXECUTION RELATED ADVICE [p.131]

Execution activities means any of the following activities:
1. dealing in securities quoted on a securities exchange.
2. trading in futures contracts;
3. foreign exchange trading
4. leverage foreign exchange trading.

GUIDELINES ON STRUCTURED DEPOSITS [p.134]

These Guidelines set out the standards of conduct expected of licensed and exempt financial advisers and their representatives when advising on structured deposits. They provide general guidance and are not intended to replace or override any legislative provisions or written directions issued under the FAA in respect of conduct requirements specifically applicable to licensed or exempt financial advisers and their representatives.

Product Information Disclosure
Although a structured deposit is a relatively safe instrument, returns on such products are variable and often contingent on the performance of complex financial instruments that the average retail investor may not fully understand. These risks should be clearly disclosed to every investor to ensure that he or she is able to make an informed investment decision.

Past And Future Performance

when using any forecast on the economy, stock markets etc, state that such forecast is not necessary indicative of the future performance of the structure deposit;
when using past performance of the structure deposit, state that the past performance is not necessarily indicative of future performance.

Recommendations On Structured Deposits

Reasonable Basis For Recommendation

Warnings
Screening
Training And Competency

Fit And Proper Criteria

Segregation Of Activities
FA to ensure that the marketing and advisory process for structure deposit is distinct from the process through which a client's funds are accepted.

Requirements Under The Banking Act

A road show location where applications for structure deposits are received would be considered a new place of business, for which the bank would have to seek the prior approval of MAS.

GUIDELINES ON SWITCHING OF DESIGNATED INVESTMENT PRODUCTS [p.140]

To provide guidance on the controls, processes and procedures that the MAS expects licensed financial advisers and exempt financial advisers to implement in order to monitor switching and ensure that their representatives do not advise clients to switch products in a manner that would be detrimental to the clients.
For the purposes of these Guidelines, “switching” includes a situation where a client disposes of, or reduces his interest in, all or part of an investment product to acquire, or increase his interest in, all or part of another investment product, and “switch” shall be construed accordingly.

Disclosure Requirements
A financial adviser and its representatives should disclose to a client in writing and draw the attention of the client to any fee or charge the client would have to bear if the client were to switch from an original product to a replacement product.

Monitoring Of Switching Of Designated Investment Products

Front-End Monitoring Procedures: supervisor needs to review the switching recommendation, and indicated in writing, whether he agrees with the recommendation made and if not, the actions taken to rectify the situation;
Back-End Monitoring Procedures: FA should institute controls to monitor and track the switching of designated investment product.

Supervisor refers to a person who is responsible for the conduct of a representative and equipped to assess whether a switch is appropriate.

Remuneration Structure
Any remuneration structure based solely on the sales volume generated by representatives may encourage product pushing and undesirable switching. A financial adviser should structure the remuneration package of its representatives to uphold their responsibility to provide good quality professional advice.

CMFAS M5 Chapter 3: Written Directions

2009-03-06T07:02:00.003+08:00

personal loans
car loans, and
credit card balances

but exclude mortgage reducing term assurance plans; and

2. in circumstances where no recommendation is made or where only factual information is provided with respect to any investment product.

Recommendations On Investment Products

Section 27 of the FAA requires licensees to have a reasonable basis for any recommendation made with respect to any investment product to a person who may reasonably be expected to rely on the recommendation. In particular, the licensee should give due consideration to the person’s investment objectives, financial situation and particular needs.

A financial adviser who is involved in making recommendations on investment products to clients shall comply with the requirements set out in the “Notice On Recommendations On Investment Products” in relation to the following aspects:

know your client;
needs analysis; and
documentation and record keeping.

Know Your Client

The following information should be collected from the client:

financial objectives of the client;
risk tolerance of the client;
employment status of the client;
financial situation of the client, including assets, liabilities, cash flow and income;
current investment portfolio of the client, including any life policy; and
for any recommendation made in respect of life policies, the number of dependants of the client and the extent and duration of financial support required for each of the dependants.

A financial adviser should highlight the following in writing to its client:

the information provided by the client will be the basis on which the recommendation will be made; and
any inaccurate or incomplete information provided by the client may affect the suitability of the recommendation.

Needs Analysis

should explain to its client the basis for recommendation & the basis should be documented
Where the financial adviser is unable to identify a suitable product, it should inform the client accordingly
Where a client chooses not to receive any recommendation from a financial adviser, the financial adviser should ensure that there is proper documentation to demonstrate that this is so.

Documentation And Record Keeping

A financial adviser is required to furnish the following documents to a client when making a recommendation :

in the case of a collective investment scheme (CIS), a copy of the prospectus or profile statement (if applicable) issued and/or any other offer document as may be prescribed by the relevant laws
in the case of a life policy, a copy of the Product Summary and Benefit Illustration in respect of that policy.

A financial adviser should furnish to its client a document containing the following when making a recommendation in respect of a designated investment product to the client:

a summary of the information gathered by the financial adviser;
any recommendation made to the client by the financial adviser and the basis for the recommendation, and where applicable, a statement that the client does not want to:

provide any information requested by the financial adviser in accordance with Section 2.1.1 of this chapter;
accept the recommendation of the financial adviser and has chosen to purchase another designated investment product which is not recommended by the financial adviser; or
receive any recommendation from the financial adviser, before the client signs on the application form for the purchase of a designated investment product or gives his consent to dispose of a designated investment product.

Switching Of Designated Investment Products

A financial adviser should not make a recommendation to a client to switch from one designated investment product (referred to as “original product”) to another designated investment product (referred to as “replacement product”) in a manner that would be detrimental to the client.

In considering whether a switch is detrimental, MAS may have regard to a number of factors, including:

whether the client suffers any penalty for terminating the original product;
whether the client will incur any transaction cost without gaining any real benefit from such a switch;
whether the replacement product confers a lower level of benefit at a higher cost or same cost to the client, or the same level of benefit at a higher cost; and
whether the replacement product is less suitable for the client.

Information to Clients And Product Information Disclosure

The “Notice On Information to Clients And Product Information Disclosure” sets out the disclosure and information obligations of a financial adviser and its representatives to clients, including when they must provide the client with investment product information.

This Notice sets out the general principles that apply to all disclosure by a financial adviser to its client. It also sets out specific requirements as to the form and manner of disclosure that financial advisers have to comply with in relation to Sections 25 and 26 of the Act, as well as to the following matters:

general information about the financial adviser and status of a representative;
remuneration of the financial adviser;
conflict of interest;
designated investment products;
illustration of past and future performance of designated investment products; and
marketing materials.

In addition to the obligations under Section 25 of the FAA, a financial adviser shall ensure that any statement or representation made to its clients is not false or misleading. It shall also ensure that it does not omit to disclose any matter that is material to the statement or representation made.

The general standards which a financial adviser is expected to meet in all product information disclosures and information given to clients are as follows:

Clear
Adequate
Not False or Misleading

General Information About The Financial Adviser And Status Of A Representative

A financial adviser shall disclose the following, in writing, to a client:

its business name, business address and telephone number;
the type or types of financial advisory service that it is authorised to provide under the FAA;
the type or types of investment product in respect of which it is authorised to provide financial advisory service;
any other type of activity carried out by the financial adviser which is not regulated by the MAS, if any; and
the product providers whose products the financial adviser:

procures on behalf of its clients;
recommends or markets to its clients; or
markets to its clients on behalf of the product providers.

A licensed representative shall disclose the following, in writing, to the client:

his name;
the financial adviser(s) for which he acts;
the type or types of financial advisory service that he is authorised to provide under the FAA; and
the type or types of investment products in respect of which he is authorised to provide financial advisory service.

Remuneration Of The Financial Adviser

A financial adviser is required to disclose, in writing, to a client all remuneration, including any commission, fee and other benefit that it has received or will receive that is directly related to the making of any recommendation in respect of an investment product, or executing a purchase or sale contract relating to an investment product on the client’s behalf.
If a financial adviser charges a fee, it should disclose to the client details of the charges at the outset.
If a financial adviser receives commissions from a product provider on investment products sold on behalf of the product provider, it should disclose to the client the amount of commissions it receives on the investment products it recommends.
Where a financial adviser receives trailer commission, soft commission or such other benefit from a product provider, it should disclose to the client the amount of such commission and benefit.
Where the amount of remuneration, commission fee or benefit is not quantifiable, a financial adviser should furnish its client with a description of how it will be remunerated.
If the precise rate of remuneration or value of commission is not known in advance, the financial adviser should estimate the rate likely to apply in such description.
In the case of a life policy, a financial adviser should disclose to its client the “distribution cost” item in the Benefit Illustration (where a Benefit Illustration is available in respect of the life policy)

Conflict Of Interest

A financial adviser should disclose, in writing, to its clients any actual or potential conflict of interest arising from any connection to or association with any product provider, including any material information or facts that may compromise its objectivity or independence in its provision of financial advisory services.

Designated Investment Products
When making a recommendation on any designated investment product to a client, a financial adviser is required to disclose the following information to the client in a form and manner that is clear, adequate and not false or misleading:
Nature and Objective of the Product
Details of the Product Provider
Contractual Rights
Client Profile
Commitment Required From the Client
Benefits of the Product
Risks of the Product
Pricing of the Product
Fees and Charges to be Borne by the Client
Reports to the Client
Free-Look for Life Policies
Cancellation Period for Unit Trust
Withdrawal, Surrender or Claim
Warnings, Exclusions and Disclaimers

Illustration Of Past And Future Performance Of Designated Investment Products
A financial adviser shall comply with the following with respect to any illustration of past and future performance of any designated investment product:
the financial adviser shall not disclose (whether orally or in writing) any matter in respect of the future performance of a collective investment scheme, unless that matter is disclosed in the registered prospectus of the scheme;
when using any forecast on the economy, stock market, bond market and economic trends of the markets, it shall advise the client that such forecast is not necessarily indicative of the future or likely performance of the product;
when using past performance of the product to illustrate possible returns for that product, it should advise the client that past performance is not necessarily indicative of future performance. The source of data used in the illustration should be provided by the product provider or an independent agency, and be made known to the client;
iv. when advising on a life policy, it should make reference to the Benefit Illustration in respect of that life policy (where a Benefit Illustration is available in respect of that life policy); and
v. when advising on a collective investment scheme, it should not make any prediction, projection or forecast on the future or the likely performance of the collective investment scheme, except to the extent permitted under Clause 1 of Appendix 3B of the text.

When advising on a collective investment scheme, a financial adviser may disclose orally to a client any information on past or future performance contained in the registered prospectus of the scheme if and only if such disclosure is made at the same time as a copy of the prospectus is given to the client, and the financial adviser:
draws the attention of the client to all assumptions, warning statements and other information relating to the past or future performance that are contained in the prospectus; and
ii. where the last day of the period to which the past performance relates is more than three months prior to the date of disclosure, informs the client of this fact

Marketing Materials

A financial adviser shall ensure that all its marketing materials comply with the relevant guidelines issued by the MAS and/or industry association
A representative shall only use marketing materials approved by the financial adviser for which he acts
Where a financial adviser engages in the marketing of designated investment products using direct response advertising communications, it shall include, in all its marketing materials, prominent warning that:

the client may wish to seek advice from a financial adviser before making a commitment to purchase the product; and
in the event that the client chooses not to seek advice from a financial adviser, he should consider whether the product in question is suitable for him

The “Notice On Reporting Of Misconduct Of Representatives By Financial Advisers” sets out the responsibilities and reporting requirements of financial advisers for the misconduct of their representatives.

A financial adviser shall submit to the MAS, not later than 14 days after the end of each quarter, reports of any disciplinary action taken against its representatives for misconduct including formal warnings issued to the representatives during the preceding quarter:

Acts Involving Fraud, Dishonesty or Other Offences of a Similar Nature
Acts Involving Inappropriate Advice, Misrepresentation or Inadequate Disclosure of Information
Failure to Satisfy the Guidelines on Fit and Proper Criteria
Other Misconduct: any other type of misconduct resulting in

non-compliance with any regulatory requirement relating to the provision of any financial advisory service under the Act; or
a serious breach of the financial adviser’s internal policy or code of conduct which would render the representative liable to demotion, suspension or termination of the representative’s employment or arrangement with the financial adviser

The “Notice On Appointment And Use Of Introducers By Financial Advisers” shall apply to all licensed financial advisers and exempt financial advisers.

Introducing activities means [p.66]:

Introducing any client to an introducee in relation to the provision of financial advisory service; and
either or both of the following:

recording the particulars of any client and forwarding such particulars to any introducee with the client's consent;
providing factual information on investment product, including the name of the product, the product producer, the launched date, minimum subscription amount, and any fee or charge.

Requirement For Financial Advisers Appointing Introducers

Where a financial adviser appoints a person as an introducer, it should take reasonable steps not to appoint an introducer whose carrying out of introducing activities is its sole business activity or his full time occupation if the introducer is a corporation or an individual respectively.
A financial adviser should ensure that none of its employees or representatives enters into any arrangement with an introducer to carry out introducing activities other than on behalf of the financial adviser.
A financial adviser which engages the services of an introducer should institute adequate control systems and procedures.

In engaging an introducer to carry out introducing activities, the financial adviser is required to comply with the following requirements:

Written Agreement
Disclosure by Introducer
Provision of Script for Use by Introducers
Prohibition on Handling of Client’s Money or Property by Introducers
Maintenance of Register of Introducers

The “Notice On Minimum Entry And Examination Requirements For Representatives Of Licensed Financial Advisers And Exempt Financial Advisers” sets out the following:

minimum entry requirements;
application of the Capital Markets and Financial Advisory Services Examination (CMFAS Exam) requirements;
circumstances under which the CMFAS Exam requirements do not apply;
continuing education requirements for representatives.

MAS Notice 117 requires such representatives to obtain the requisite qualification in health insurance before they can provide any advice on or arrange such policies or both, unless the representatives fall within paragraph 6 or 7 of MAS Notice 117.

Minimum Entry Requirements
Application Of CMFAS Exam Requirements
Circumstances Under Which The CMFAS Exam Requirements Do Not Apply
Re-Taking Of Module 5
Continuing Education Requirements For Representatives

The “Notice On Prohibited Representations Made By Persons Exempted Under Regulation 27(1)(D) Of The Financial Advisers Regulations (Rg 2)” sets out certain prohibitions in respect of representations made by exempt persons and representatives of exempt persons regarding their exempt status.
Example:
An exempt person and its representatives shall not represent itself, nor cause to be represented, as being licensed, regulated, supervised or registered by the MAS, whether verbally or in writing.

The “Notice On Dual Currency Investments” applies to any licensed or exempt financial adviser or its representative, who advises on any dual currency investment.
Use Of The Term “Deposit” And “Structured Deposit”
Additional Product Information Disclosure
Warnings
Guidelines On Structured Deposits

CMFAS M5 Chapter 2: Financial Advisers Act and Financial Advisers Regulation

2009-03-06T07:00:00.002+08:00

Financial Advisers Act (FAA)

governs financial advisory activities in respect of investment products, and the distribution or marketing of life policies and collective investment schemes, such as unit trusts
consolidates various Acts into a single legislation
provides a consistent set of requirements and regulations for intermediaries engaging in similar activities across investment products
provides an integrated regulatory framework and ensures consistency in requirements and uniform standards across institutions providing financial advice

Financial Advisers Regulations (FAR)

is a subsidiary legislation to give effect to the provisions of the FAA and sets out the rules on the application of the FAA
provides for exemptions from the requirements relating to licensing, approval or registration requirements, the application of the provisions under the FAA

Financial Advisers (Amendment) Act

principally comprises minor policy changes and technical modifications to clarify the Authority’s administration of the FAA
improved the language of the FAA for the better administration of the FAA, and the consistency of requirements in the FAA with those in the SFA

4 key principles of FAA and FAR [p.13]

Customers’ Interest:
Consistency: financial advisers from different distribution channels would be subject to the same rules and standards.
Accountability
Independence

Changes Made by FAA:

a single licensing regime for persons engaging in financial advisory activities
raising the standards of financial advisers and representatives - impose business conduct requirements and minimum entry and examination requirements on them respectively
the use of the term “financial adviser” and “life insurance broker” are restricted to persons who hold a financial adviser’s licence or are exempt financial advisers
licences granted to financial advisers and their representatives are valid for a period of three years
obligation to disclose product information on investment products and to have a reasonable basis for any recommendation made with respect to any investment product

Financial Adviser vs Financial Planner:

MAS regulates all financial planning activities relating to securities, futures and insurance
Tax, retirement and estate planning activities do not come under MAS’ supervision

Types of “financial advisory service” regulated under FAA include:

advising others, either directly or through publications or writings, and whether in electronic, print or other form, concerning any investment product;
advising others by issuing or promulgating research analyses or research reports, whether in electronic, print or other form, concerning any investment product;
marketing of any collective investment scheme; and
arranging of any contract of insurance in respect of life policies, other than a contract of reinsurance.

Investment products mean:

any capital markets product as defined in Section 2(1) of the Securities and Futures Act;
any life policy; or
any other product as may be prescribed. Note: With effect from 2 December 2005, MAS has prescribed structured deposits as an investment product.

Exclusions

General Insurance policies
Life Reinsurance
Banks Deposits
Loans and Mortgages

Requirements for Granting Financial Adviser’s Licence
The financial adviser’s licence will be granted only to a corporation. Applicants for the licence will have to satisfy licensing criteria, relating to:

financial resources;
competence and expertise; and
must satisfy MAS that it would discharge its duties efficiently, honestly and fairly.

Exempt Financial Advisers:
Section 23 of the FAA provides that the following persons shall be exempted from holding a financial adviser’s licence:

banks licensed under Banking Act;
merchant banks approved as financial institution and approved to carry on a business of providing any financial advisory service under the Monetary Authority of Singapore Act;
companies/societies registered under the Insurance Act;
holders of a capital markets services licence under the Securities and Futures Act;
a finance company which has been granted an exemption from Section 25(2) of the Finance Companies Act to carry on a business of providing any financial advisory service;
a securities exchange, a futures exchange, a recognised market operator, or an approved holding company, in respect of the provision of any financial advisory service that is solely incidental to its operation of a securities market, a futures market, or to its performance as an approved holding company, as the case may be; and
such other persons or classes of persons as may be prescribed.

Representatives of Financial Advisers

A representative’s licence will only be granted to a natural person who satisfy the following requirements:

be at least 21 years old;
satisfy the minimum academic qualification of at least 4 GCE ‘O’ level credit passes;
satisfy the fit and proper criteria;
satisfy the prescribed minimum examination requirements; and
satisfy any other criteria stipulated by MAS.

Opportunity To Be Heard applies to the 3 situations:

Requirements For Grant Or Renewal Of Representative’s Licence
Lapsing, Revocation, Suspension And Expiry Of Licence
On Application For Approval To Be CEO Or Director

The Authority may refuse to grant or renew the representative’s licence on the following grounds WITHOUT giving the applicant an opportunity to be heard:

the applicant is an undischarged bankrupt, whether in Singapore or elsewhere;
a prohibition order under Section 59 has been made by the Authority, and remains in force against the applicant;
the applicant has been convicted, whether in Singapore or elsewhere, of an offence:

involving fraud or dishonesty or the conviction for which involved a finding that he had acted fraudulently or dishonestly;
punishable with imprisonment for a term of three months or more.

Return Of Licence Upon Cessation - Within 14 Days

Duration of Licence – 3 Years

One Representative One Principal Rule

No licensed representative shall at any one time, be a representative of more than one financial adviser. The objectives of this prohibition are two-fold:

secure clarity for investors ; and
ensure that the principal monitors and supervises their representatives at all times.

However, a licensed representative may be a representative of more than one financial adviser if the financial advisers are related corporations.

CEO and Directors of Licensed Financial Advisers

MAS’ approval is required prior to their appointment
MAS may direct the company to remove such an officer from his office if the MAS thinks it necessary in the public interest or for the protection of investors to do so

Receipt of Clients' Money or Property

“Client’s money or property” means money received or retained by, or property deposited with, a licensee for which he is liable to account to another person
Money received must be given to the right party
Money must be handed over not later than the next business day unless the licensee has client’s prior written consent to hand over after the specified date
Financial Adviser shall not receive client’s money or property in the form of cash or cheque made payable to any person (other than a person referred to in 15.2 (a), (b) or (c),) except where the cash or cheque is for services rendered by the financial adviser.

Insurance Broking Premium Accounts
Financial advisers which receive any insurance monies are required to establish and maintain a separate account with a bank licensed under the Banking Act for its life insurance broking premiums.

A financial adviser which receives any payment which is due to the insurer is required to pay the amount to the insurer within the credit period.
Interest earned during the credit period may be retained by the financial adviser for its own benefit with the insurer’s prior consent.
Interest earned after the credit period shall not be retained by the financial adviser for its own benefit and shall immediately be paid to the insurer to whom such payment is due.
Interest earned, which is due to an insurer under a contract of insurance (including a contract of insurance that has been cancelled) where cover commences before the appointed day, may be retained by the financial adviser for its own benefit.

Restriction on Granting Unsecured Loans. Section 24(3) provides that no financial adviser shall grant unsecured advance, unsecured loan or unsecured credit facility to:

a director of the licensed financial adviser, other than a director who is its employee; or
any other officer or an employee of the licensed financial adviser (including a director who is its employee) or any of its representatives which, in the aggregate and outstanding at any one time, exceeds $3,000 or such other amount as may be prescribed.

Obligation to Furnish Information to MAS:

A licensed financial adviser is required to prepare and lodge statements of accounts in accordance with the provisions of the Companies Act
Exempt financial advisers have to lodge returns such as a notice of commencement of business as a financial adviser or a notice of change of particulars

Placement of Risk with Unregistered Insurers

No licensed or exempt financial adviser shall negotiate any contract of insurance, whether directly or indirectly and placement of risk with unregistered insurers except where specifically permitted by MAS.
It does not apply to reinsurance, businesses relating to risk outside Singapore or such other risks as may be prescribed.
Individuals are not prohibited from purchasing life policies from unregistered overseas insurers. However, financial advisers are required to seek MAS’ approval should they wish to place their clients’ life insurance risks with unregistered overseas insurers.
This is to ensure that no financial adviser is being used by unregistered overseas insurers to assist them to write domestic Singapore risks, since unregistered overseas insurers are not allowed to write domestic Singapore risks.

Market Value, in relation to assets refers to securities listed on a securities exchange, means:

the last transacted price of the securities on the preceding business day
if there was no trading on the immediately preceding business day, the lower of the transacted price and last bid price of the securities; or
if there was no trading in the immediately preceding 30 days, the estimated value of those securities as approved by the MAS

Representations by Licensees:

FAA deals with representations by a financial adviser in relation to a proposed contract of insurance with the insurer.
It sets out the code of conduct that the financial adviser has to operate.
With respect to proposed contract/claim of insurance, the financial adviser cannot provide false or misleading information, or omit to disclose any matter that is material to the insurer.
A financial adviser shall not engage in any professional conduct involving fraud or dishonesty, trustworthiness or compromises its integrity.

Disclosure of Certain Interests in Securities

The financial adviser has a duty to disclose potential and actual conflict of interest to his clients or prospects. Prior to establishing a client relationship, a financial adviser should:

disclose all material information or facts that might compromise its objectivity or independence or impair its ability to make unbiased and objective recommendations; and
fully disclose to the clients its relationship with the financial institutions whose products it is providing advice on or recommending

Where such conflict of interest situations cannot be avoided, the financial adviser should ensure that its clients are treated fairly and equitably
Enter change in interest in securities within 7 days from date of change

Offences:

Any officer, auditor, employee or agent of a licensed financial adviser or an exempt financial adviser who wilfully omits, makes a false entry or alters document or statement of the business of the financial adviser shall be guilty of an offence and be liable on conviction to a fine not exceeding $100,000 or to imprisonment for a term not more than 2 years or to both.
Throughout the FAA, various provisions have stipulated the penalty to the body corporate.
In less serious offences, these offences may be compoundable under FAA.

Officer in relation to a body corporate means [p.37]:

director
member of the committee of management
chief executive
manager
secretary or other similar officer of the body, or
a person purporting to act in any such capacity

Officer in relation to an unincorporated association means [p37]:

president
secretary
members of the committee of the association
persons holding positions analogous to the above

CMFAS M5 Chapter 1: Regulatory Bodies and Associations

2009-03-06T06:57:00.001+08:00

Monetary Authority of Singapore (MAS)

Objectives of MAS

Conduct monetary policy; manage the official foreign reserves and the issuance of government securities
Supervise and develop the financial sector

Acts Administered by MAS:

Financial Advisers Act (Cap. 110)
Insurance Act (Cap. 142)
Banking Act (Cap. 19)
Exchange (Demutualisation and Mergers) Act (Cap. 99B)
The Currency Act (Cap.69)
Government Securities Act (Cap.121A)
Local Treasury Bills Act (Cap. 167)

Singapore Exchange Limited (SGX)

Regulatory Functions of SGX:

Issuer Regulation
Member Supervision
Market Surveillance
Enforcement
Risk Management

Investment Mgmt Association of Singapore (IMAS)

Objectives of IMAS. To:

promote professionalism in investment management;
provide a forum for members to discuss issues or matters relating to the investment management industry;
represent members’ interests and acts as voice for members;
promote the education of the investing public on investments generally and the investment management industry;
improve professionalism and standards of research and fund management expertise in Singapore; and
promote the investment and fund management industry.

IMAS members are governed by a Code of Ethics

Life Insurance Association of Singapore (LIA) is a trade association comprising direct insurers and reinsurers.

Mission of LIA - to promote the growth and development of the Singapore life insurance industry in consultation with the MAS and to protect the interests of life insurers and life insurance policy-owners.

Objectives Of LIA

development of the life insurance business in consultation with the supervisory authority, the Monetary Authority of Singapore;
development of industry practices; and
promotion of public awareness of life insurance.

S'pore IR will open end '09

2009-03-04T11:04:00.001+08:00

Home > Breaking News > Singapore > Story
March 4, 2009

LAS Vegas Sands, billionaire Sheldon Adelson's gaming company, said it's working 'aggressively' to meet its target to open a Singapore integrated resort by the end of the year, Bloomberg News reported.

Construction of the project's first hotel tower has reached its halfway mark and the three 55-story hotel towers may be 'topped out' in July, it said in a statement on Wednesday. The project also includes a convention centre.

'We are confident of delivering on all fronts,' Nigel Roberts, president of Marina Bay Sands, as the Singapore resort is called, said in a statement, Bloomberg reported.

'Everyone is working aggressively toward our target opening date,' he added.

Las Vegas Sands, which lost 94 per cent of its market value last year amid gambling declines in Las Vegas and Macau, raised US$2.14 billion (S$3.32 billion) in November, partly from Adelson and his family, to avoid tripping debt covenants.

The company also suspended all construction in Macau and work on its St. Regis condominium on the Las Vegas Strip to conserve cash and finish the Singapore resort and a Bethlehem, Pennsylvania casino.

Singapore is counting on the Sands resort and a competing project by Genting International to help achieve its goal of luring 17 million visitors and tripling annual tourism revenue to $30 billion by 2015.

The government has predicted visitor arrivals to fall as much as 10 per cent this year, the first annual decline since the 2003 outbreak of severe acute respiratory syndrome, or Sars, disrupted travel in the region.

China set to rebound as stimulus starts to work

2009-03-04T08:55:00.001+08:00

Home>Business>Macro-economy and policy
By Zhang Dingmin | 2009-3-4
http://www.shanghaidaily.com/sp/article/2009/200903/20090304/article_392997.htm

CHINA'S economy, being dragged down by its worst export slump in more than a decade, will rebound this year as the government's 4-trillion-yuan (US$585 billion) stimulus plan takes effect, officials said.

A recovery in the first half is "very likely," central bank Vice Governor Su Ning told reporters as the annual meeting of China's top advisory body started in Beijing yesterday. The government is "confident" of achieving its 8 percent growth target, Minister of Industry and Information Li Yizhong said.

The government may double the spending plan after economic growth cooled to the weakest pace in seven years and 20 million migrant workers lost their jobs, according to Standard Chartered Bank Plc.

Jia Qinglin, a member of the Communist Party of China's Politburo, urged a "vigorous employment policy" in his speech yesterday at the meeting of the Chinese People's Political Consultative Conference.

"There are more signs emerging that we are closer to the bottom," said Kevin Lai, an economist with the Daiwa Institute of Research in Hong Kong. "The worst is probably over."

Lai said positive signs included a surge in new loans to a record in January, falling commodity prices, which would aid Chinese manufacturers, and a restocking of companies' inventories.

The government is studying the possibility of issuing shopping vouchers nationwide to stimulate consumer spending, Commerce Minister Chen Deming told reporters at the meeting yesterday. His ministry is evaluating the effects of similar moves by city and provincial governments, he said.

The economic slowdown has prompted speculation that the government will increase the stimulus package, announced in November last year, which includes spending on houses, roads and power plants and runs through 2010, Bloomberg News said.

Spending likely will rise to 7 trillion to 8 trillion yuan, Sun Mingchun, an economist with Nomura Holdings Inc, said on February 25. Central bank deputy governor Liu Shiyu said that he hasn't heard of a plan for an 8-trillion-yuan package, the China Securities Journal reported on its Website yesterday.

Plummeting trade is adding urgency to the national efforts to revive the economy.

The nation's trade figures in February were worse than in January, when exports fell by the most in almost 13 years and imports plunged by a record, Chen said.

"The effects of the fiscal stimulus will start to be seen in the second half," said Wang Qing, Hong Kong-based chief China economist at Morgan Stanley. "The bulk of the money is yet to be dispersed or even approved."

Wang expects growth to slow to between 3 percent and 4 percent in the first half, picking up in the second, for a full- year expansion of 5.5 percent.

S&P downgrades Capland to BBB+

2009-03-04T07:26:00.000+08:00

STANDARD & Poor's Rating Services yesterday revised its outlook on the BBB+ long-term unsolicited corporate credit rating on property giant CapitaLand to negative from stable.

'At the same time, the rating on CapitaLand was affirmed before being withdrawn,' S&P said in a release.

S&P said that without full interaction of the company in the rating process, it is no longer able to provide an informed credit opinion based on publicly available information.

When contacted, a CapitaLand spokesman said: 'There is neither merit nor basis for us to comment. This kind of unsolicited rating is highly undesirable and misleading when it is done without the company's input.'

In its release, S&P said: 'Under the current volatile environment, a comprehensive understanding of the company's strategic and commercial response to the slowdown in the residential and commercial property business in its core markets is an important credit consideration.'

It added that its negative outlook reflects its opinion that 'CapitaLand's profitability will continue to face pressure as a result of lower revenues from residential development projects in its core markets, as well as the negative outlook in general for commercial properties in the region'.

S&P has also affirmed its BBB unsolicited rating on three series of convertible bonds issued by CapitaLand - the $430 million, 2.10 per cent bonds due 2016; $1.0 billion, 2.95 per cent bonds due 2022; and the $1.3 billion, 3.125 per cent bonds due 2018. 'Following the affirmation, the ratings on the convertible bonds have also been withdrawn,' S&P said.

Last month, CapitaLand said fourth-quarter net earnings fell 88.4 per cent to $77.96 million, while full-year 2008 net profit slipped 54.3 per cent to $1.26 billion. Return on equity fell from 31.9 per cent in 2007 to 12.2 per cent last year. Yesterday, the stock rose 5 cents to close at $1.85.

U.S. Stocks Retreat Following Bernanke’s Warning on Banks

2009-03-04T07:14:00.003+08:00

http://www.bloomberg.com/apps/news?pid=20601103&sid=ahACJvR2.VCs&refer=us

By Cristina Alesci and Jeff Kearns

March 3 (Bloomberg) -- U.S. stocks retreated for a fifth day as Federal Reserve Chairman Ben S. Bernanke said the banking system still hasn’t stabilized, offsetting gains in commodity shares on speculation China will boost demand for raw materials.

The early rally was erased after Bernanke, testifying before the Senate Budget Committee, spurred concern that the government won’t be able to shore up a financial system battered by $1.1 trillion in global credit losses.

Mining shares advanced as copper jumped the most in three weeks on speculation that China will buy more raw materials as the country’s 4 trillion yuan ($585 billion) stimulus plan takes effect. The Reuters/Jefferies CRB Index of 19 commodities added 1.7 percent. Freeport-McMoRan rallied $1.92 to $28.41 and Southern Copper Corp. added $1.01, or 7.9 percent, to $13.75.

China’s economy, being dragged down by its worst export slump in more than a decade, will rebound this year, officials said. The government is “confident” of achieving its 8 percent growth target, Minister of Industry and Information Li Yizhong said.

Fed program promises $1 trillion lending

2009-03-04T07:05:00.001+08:00

Central bank will accept assets backed by auto, credit card, student and small business loans, government says.
Last Updated: March 3, 2009: 11:45 AM ET

http://money.cnn.com/2009/03/03/news/economy/fed_lending.reut/index.htm?postversion=2009030311

WASHINGTON (Reuters) -- The U.S. Federal Reserve and Treasury on Tuesday extended a new securities loan program to include equipment and vehicle fleet leases and said a future expansion to $1 trillion may also include some of the riskier mortgage and debt securities now plaguing banks.

Launching the long-awaited $200 billion Term Asset-backed Securities Loan Facility, or TALF, the Fed and Treasury said the program will start offering loans on March 17.

Winning stocks in a losing decade

2009-03-04T07:03:00.002+08:00

Yes, the major market indexes are at their lowest levels in a dozen years. But many stocks have bucked the bearish trend.
By Paul R. La Monica, CNNMoney.com editor at large
Last Updated: March 3, 2009: 3:22 PM ET

http://money.cnn.com/2009/03/03/markets/thebuzz/index.htm?postversion=2009030315

Yes, if you had the misfortune of investing in an index fund, more than a decade's worth of investments have been wiped out. But the myopic focus on just how market indexes have done does some a disservice.

That's because even in a brutal bear market such as this, some investors have been able to make money by buying strong companies -- firms that have not made stupid mistakes and now expect a government handout to make them all go away.

In fact, shares of more than 200 companies in the S&P 500 are up during the past 10 years through Monday's close -- a time when the overall S&P 500 has plummeted more than 40%.

Gold Pullback Doesn't Inflict Meaningful Technical Damage

2009-03-04T06:35:00.000+08:00

Tue, Mar 3 2009, 05:23 GMT
by Mike Paulenoff

MPTrader.com

No, the gold and SPDR Gold Trust ETF (NYSE: GLD) markets have not provided much in any sort of hedge in the past week or so. However, looked at from a relative strength perspective, the enclosed chart pattern of the GLD clearly remains the inverse of the major equity market ETFs. Let's notice that the GLD has pulled back about 7% from its Feb 20th high, but has not inflicted any damage to the underlying chart structure. In fact, the GLD has pulled back to its mid-Feb upside break point, in the vicinity of 90.00-91.00, which thus far has contained the selling pressure. From a near-term perspective, the GLD will have to press and sustain beneath 87.50 to begin to inflict meaningful damage to the enclosed uptrend (channel) pattern. Although my near-term work leaves open a press into the 90.00 area from here, my intermediate-term pattern work indicates that thereafter the GLD should embark on another upleg that hurdles 98.99 on the way to new highs above 100.44.

http://www.fxstreet.com/technical/market-view/the-midday-minute/2009-03-03.html

Dow due for a rebound (UOB KayHian)

2009-03-03T14:42:00.001+08:00

For the past 3 weeks, we have been on record saying that the DJIA should head down towards 6900 in what we expected to be a wave 5 move. While the index has exceeded our stated target, it does not invalidate our view that this is the final wave 5 move. The RSI indicator is now at an extremely oversold positions and at levels, which historically preceded rallies. At the very least, we expect a rebound today or the next day, however there is a chance that this could be a small wave iv countertrend rally within the downward wave 5. Even so, we believe that the extreme bearish sentiment suggests that a major low is in the making. We have attached 3 charts here to underscore our view. The 10 day avg of declining stocks on NYSE is approaching a prior peak in October, which resulted in a significant rebound. This again highlights the prevailing extreme bearish sentiment, which could potentially reverse soon.

As we write, this both the FSSTI and HSI have rebounded off their lows. Expect both indices to at least close their recent gaps. For the FSSTI, this would mean 1584, for the HSI,12300 and then 12800.

Nikkei falls to 26-yr low

2009-03-03T12:08:00.000+08:00

Nikkei falls to 26-yr low
Home > Breaking News > Money > Story
March 3, 2009

TOKYO
Japanese stocks fell to a fresh 26-year low on Tuesday after the Dow Jones industrial average closed below 7,000 for the first time in more than 11 years on growing fears over the health of the US financial sector.

The benchmark Nikkei 225 stock average tumbled 104.82 points, or 1.44 per cent, to 7,175.33 in the morning trade, extending further losses after a 3.8 per cent drop Monday. That marked a fresh 26-year low for the Nikkei, which closed at 7,114.64 on Oct 7, 1982.

The broader Topix index also fell 1.67 per cent to 722.32.

'Investors are becoming nervous about the state of the U.S.

financial sector. They were worried about deteriorating assets in the U.S. financial sector,' said Kazuhiro Takahashi, equity strategist at Daiwa Securities SMBC Co Ltd.

Investors were jittery after insurer American International Group Inc. reported a staggering US$61.7 billion in quarterly losses, sparking fresh fears about the health of the U.S. financial system.

The worries pressured the Dow, which fell 299.64, or 4.24 percent, to 6,763.29. The Dow last closed below 7,000 on May 1, 1997.

The US credit crisis and recession have slashed more than half the average's value since it hit a record high over 14,000 in October 2007. And now many investors fear the market could take a long time to regain the lost 7,000.

Apart from AIG's massive losses, investors were spooked as HSBC PLC, Europe's largest bank by market value, said on Monday it needs to raise US$17.7 billion. The company reported a 70 per cent drop in 2008 earnings and said it would cut 6,100 jobs.

HONG KONG
Hong Kong share prices opened 2.8 per cent lower on Tuesday, tracking Wall Street's tumble overnight and following worse-than-expected annual results from banking giant HSBC, dealers said.

The benchmark Hang Seng Index opened down 350.39 points at 11,967.07.

HSBC opened 19.4 per cent down at HK$45.90 after trading in its shares was suspended on Monday for the announcement of earnings results.

The bank reported a 70 per cent plunge in last year's annual net profit and said it hoped to raise US$17.8 billion in a record British rights issue to weather the financial crisis.

SHANGHAI
Chinese share prices were down 1.93 per cent on Tuesday morning as sentiment remained fragile after the US stock market tumbled to a new 12-year low overnight, dealers said.

The benchmark Shanghai Composite Index, which covers A and B shares, was down 40.10 points at 2,053.35.

The Shanghai A-share index shed 42.41 points, or 1.93 per cent, to 2,155.26, while the Shenzhen A-share index fell 9.21 points, or 1.30 per cent, to 698.95.

KUALA LUMPUR
At 10.30am on Tuesday, there were 52 gainers, 215 losers and 103 counters traded unchanged on the Bursa Malaysia.

The KLCI was at 867.84 down 8.72 points, the FBM2BRD was at 3,938.54 down 12.33 points, and the FBMEmas was at 5,674.01 down 54.89 points.

Turnover was at 116.687 million shares valued at RM140.601 million.
-- AP, AFP, BERNAMA

STI at lowest close since August 2003

2009-03-03T07:04:00.001+08:00

Home > Money > Story
March 3, 2009
BULLS AND BEARS
STI at lowest close since August 2003
Bourse down almost 13% for the year, half what it was a year ago
By Alvin Foo, Markets Correspondent

FRESH investor worries over the health of financial institutions worldwide combined with growing regional gloom yesterday to drive Singapore stocks down to their lowest level since August 2003. A sea of red smothered the local bourse, seen most vividly in a heavy selldown of financial stocks and some other blue chips.

The benchmark Straits Times Index (STI) slumped 61.47 points, or 3.85 per cent, to close at 1,533.40 - its biggest one-day points drop since last November.

The STI has now sunk nearly 13 per cent for the year, and is about half the value it was a year ago.

'It's the worst mood I've seen so far this year,' said a dealer. 'Everybody was just waiting to get out, with some panic selling seen in the banking counters. It was a sombre session.'

Wall Street's 1.66 per cent fall last Friday set the scene for a weak opening here, and the STI's cause was not helped by the downbeat mood in the region.

Hong Kong stocks retreated 3.86 per cent, Japan's Nikkei 225 index dropped 3.81 per cent, while Australian shares declined 2.82 per cent.

The misery was compounded by a sluggish start for European shares and US stock futures trading sharply in the red, signalling a likely poor opening for Wall Street last night.

Dealers said short-selling - a technique of profiting from falling stock prices - of bank stocks and some other blue chips was also partly to blame for the gloom.

The spotlight fell on the three bank counters, which combined to shave nearly 30 points off the index.

United Overseas Bank sank to its lowest finish since 2003. It was the biggest loser among the STI's 30 component stocks, losing 74 cents, or 7.4 per cent, to $9.25. DBS Group Holdings shed 43 cents to $7.41, while OCBC Bank dropped 32 cents to $4.16 - both near six-year lows.

Citigroup noted: 'Singapore banks are also unlikely to see a sustained rally in our view if global banks do not stabilise, or if there are further major capital needs.'

Property stocks fared no better. CapitaLand was badly hit, slumping 18 cents to $1.80 as investors were worried by dilution from its recent rights issue. City Developments fell 20 cents to $4.60 with Keppel Land six cents behind at $1.24.

Other blue chips which took a tumble included Singapore Exchange, which dived 27 cents to $4.27, and Keppel Corp, 24 cents down to $4.13.

However, there were gains for index heavyweight SingTel, up two cents to $2.48, and palm oil giant Wilmar International, four cents in front at $2.92.

Overall, analysts say a technical rebound could be on the cards later this week after yesterday's sharp selldown.

Mr Najeeb Jarhom, senior vice-president of research at AMFraser Securities, said: 'We should see some technical recovery before Friday and a trading signal should come once 1,500 is broken and 1,474 is tested.'

Others warned of more volatility. CIMB-GK said the STI should 'at least test' the intra-day low of 1,473 seen last October in the near term, 'before a major bottom is reached'.

alfoo@sph.com.sg

Banks cut interest rates for deposits

2009-03-03T07:01:00.000+08:00

Home > Money > Story
Banks cut interest rates for deposits
Move follows Sibor's plunge and reflects flush conditions in money markets, analysts say
By Gabriel Chen

BANK depositors are again feeling the pinch as a key interest rate continues to plunge, further squeezing the meagre returns on their savings.

At least four banks - Maybank, Standard Chartered Bank (Stanchart), United Overseas Bank (UOB) and OCBC Bank - have trimmed their rates for deposits or are set to do so.

This follows further hefty falls in the rate banks pay one another to borrow cash, known as the Singapore Interbank Offered Rate (Sibor) - a key influence on the rate that banks pay depositors.

The Sibor is hovering at just 0.68 per cent, bringing it near the all-time low of 0.56 per cent reached in June 2003. It has plunged about 70 per cent from 2.22 per cent last September. Since early January, when it was about 0.97 per cent, the rate has nose-dived about 30 per cent.

This month, OCBC is slashing the interest rate paid on its FairPrice Plus Account from 1 per cent to 0.5 per cent for the first $50,000, but will still pay 1 per cent for amounts higher than that. It used to pay 1 per cent a year for this account, with no minimum balance requirement.

'In the light of declining Sibor rates, banks have started aligning the interest rates for savings accounts downwards,' said OCBC's head of customer segment and portfolio management, Ms Lee Ee Ling.

With margins under pressure, other banks have responded by also trimming rates for customers.

Last month, Maybank cut rates for iSAVvy, an online savings account, from 1.08 per cent to 0.5 per cent a year, provided there is a daily balance of $5,000 to below $50,000.

Stanchart's rate for its eSaver online savings product is 0.4 per cent a year, down from the 0.5 per cent it paid in early January for deposits under $50,000.

Come March 16, the rates paid on UOB's i-Account, Campus Account and FlexiDeposit Account will be cut. The new rates, made public last month, are available on the bank's website.

For example, its FlexiDeposit Account, a statement- based savings account, will fall from 0.35 per cent to 0.25 per cent for the first $15,000.

Barclays Capital economist Leong Wai Ho has predicted: 'Sibor will continue to set new lows this year.

'This is a reflection of extremely flush conditions in the money markets, as a safe hedge against the worsening global backdrop and dislocated credit markets.'

OCBC Bank economist Selena Ling said the US Federal Reserve has cut its Fed funds target rate to a range of 0 per cent to 0.25 per cent, and is now 'considering alternative quantitative easing measures'. The Sibor closely tracks this rate.

Bankers have not ruled out further falls in deposit rates, to as low as 0.l25 per cent, in the near future.

If that seems implausible, think again. In early 2003, POSB savings and passbook account-holders received 0.125 per cent for the first $50,000.

Today, Singdollar deposits yield at least 0.25 per cent.

'Most Singapore banks do not have a competitive reason to attract deposits,' said the head of a foreign bank.

'Due to capital constraints, not many are in an expansionary mode in terms of more lending or increasing their asset book, therefore, there are...fewer reasons to attract deposits for funding purpose.'

The falling Sibor should, in theory, benefit new home buyers taking up Sibor-linked housing loans, but in reality they may not be better off. This is because many banks are raising the spreads they charge above Sibor.

At DBS, for example, a home buyer taking out a loan of 80 per cent of his property's value last July would have paid the Sibor rate plus 1.25 percentage points. Now, a new buyer has to pay Sibor plus 1.75 percentage points.

'Banks are making huge margins now between deposit and lending rates. Banks feel they have to be compensated for taking the risk on loans,' a banker said.

DBS, OCBC and UOB all saw quarter- on-quarter improvement in net interest margins during their fourth-quarter results announced last month.

Net interest margins measure the difference between what banks pay for deposits and borrowings and what banks earn on loans and investments.

gabrielc@sph.com.sg

NO GREAT NEED TO RAISE FUNDS

'Most Singapore banks do not have a competitive reason to attract deposits. Due to capital constraints, not many are in an expansionary mode...therefore, there are...fewer reasons to attract deposits for funding purpose.'

Head of a foreign bank

Fool’s Gold

2009-03-03T05:28:00.002+08:00

http://247wallst.com/2009/03/02/fools-gold/

Posted: March 2, 2009 at 6:15 am
Gold has traditionally served as a safe haven for investors in times of economic turmoil or as a store of value during inflationary periods. The Economist recently argued that now is the time to invest in gold. The basic argument is that gold will perform well regardless of how well monetary policy achieves its goal of turning the economy around.

If slashing interest rates has the desired effect, the U.S. economy will likely enter into an inflationary period. This should spur a rally in gold as investors seek a hedge against the effects of inflation. If low interest rates fail to turn the economy around, gold should continue to benefit from the fear-driven buying that has driven it to its current level of around $950 an ounce.

The effect of economic deterioration on gold is evident in the way that it has traded since the first of the year. The average monthly trading volume for SPDR Gold Trust (GLD) is up over 200% since the beginning of the year. Its safe to say that if gloomy economic news continues to emerge gold prices will at least hold up.

However, the argument that increased inflation will be similarly bullish for gold is off the mark. A good deal of the upward pressure on gold prices has been speculative trading. If low interest rates are successful they will bring back more than inflation.

Barring a Carter-era anomaly, inflation will be a function of a recovering economy. When the economy reaches this point speculators will be looking for opportunities in assets that did not experience a run-up while the recession was still in progress. Economic recovery may pose the greatest risk to gold investors.

India: Auto sector posts record sales in February

2009-03-03T05:09:00.001+08:00

India: Auto sector posts record sales in February

Maruti-Suzuki achieves the highest-ever domestic sales
NEW DELHI: With all leading car manufacturers clocking good sales in February, the auto sector seems to be on the revival path. Almost all leading car manufacturers, including Maruti Suzuki, Hyundai Motor, Tata Motors and premium car-maker Honda, have reported impressive sales in February.

Maruti Suzuki India has achieved its highest-ever domestic and total sales in February, besides registering the highest-ever export sales. The company sold 70,625 units in the domestic market (up 19.1 per cent) in February. The previous highest monthly domestic sales were 67,005 units recorded in January. Led by A-star, Maruti Suzuki exported 8,565 units last month, surpassing its previous highest export sales of 8,282 units recorded in March 2004.

In all, the company sold 79,190 vehicles in February, up 24.1 per cent over the corresponding month last fiscal. The previous highest total sales were registered in January 2009 at 71,779 units.

HMIL’s good show
Similarly, Hyundai Motor India registered an impressive 45.3 per cent growth in the domestic market, while its cumulative sales increased by 31.9 per cent over February 2008 and exports increased by 18.3 per cent. Its total sales for February stood at 38,254 units.

The domestic market accounted for 21,215 units, while the export market totalled 17,039 units.

“While January 2009 sales growth for both the industry as well as HMIL had been negative, February sales saw a slight upturn with double digit growth for the industry but the overall market situation continues to be challenging,” said HMIL Senior Vice-President (Marketing and Sales) Arvind Saxena.

Tata Motors’ feat
Tata Motors also saw its sales going up in several months. Its domestic sales for February were 42,493 units (highest in the last four months), including domestic commercial vehicle sales at 23,454 units (highest since September 2008) and domestic passenger vehicle sales at 19,039 units (highest since May 2008). Its total sales (including exports) were 43,807 vehicles, also highest in the last four months.

Honda Siel Cars India (HSCI) also registered an impressive 47.83 per cent growth in February as its sales went up to 5,579 units from 3,774 units in February 2008, making it the highest-ever for the month. For Honda, the remarkable growth in sales was fuelled by the success of its new Honda City.

Mahindra & Mahindra (M&M) saw its sales for February grow by 21.6 per cent, mainly due to the launch of new multi-utility vehicle Xylo, which was launched in January. Its automotive sector’s total volumes (including joint ventures) for February stood at 19,594 units as against 18,379 units in February 2008.

However, the U.S.-based auto manufacturer, GM, despite the launch of a new version of its compact car Chevrolet Spark, saw its sales declining to 4,921 units in February compared to 5563 units sold in the corresponding period last year.

“The overall sales decline is triggered by the sluggish market conditions combined with tighter lending norms of banks and finance companies. We expect the sales to go up with the liquidity position improving and interest rates marginally coming down in the coming months,” said General Motor India Vice-President P. Balendran.

Prudential offers plan for those retrenched

2009-03-02T18:54:00.000+08:00

Home > Money > Story
Prudential offers plan for those retrenched
By Lorna Tan, Finance Correspondent

BRITISH insurer Prudential Assurance is offering policyholders the option of maintaining some insurance cover - at a lower premium - if they lose their job.
In response to the current economic gloom and job insecurity woes, Prudential recently introduced a Cover Assured scheme which offers a term life and critical illness cover to its existing customers.

This was mentioned at a recent press briefing to announce its performance for last year, which saw the insurer retain its No.1 ranking in new business life insurance sales for the fourth year.

The Covered Assured scheme is meant to protect policyholders who are unable to continue with their usual premiums. By paying a smaller premium, the policyholder can put his original policy on hold and still enjoy some life protection cover under the new scheme.

'At times like this, we want to make sure that our customers still have insurance protection in the event that they go through a temporary financial crisis like losing their jobs,' said Prudential Singapore chief executive Philip Seah.

He added that the worst thing that can happen in a crisis like this is not having protection. Once the affected policyholder finds a job and is able to continue paying the premiums of his original policy, he can drop the scheme and continue with his original plan.

For a sum assured of $100,000, the annual premium for a male, non-smoker, aged 35, is $66 for death cover, $11 for total and permanent disability and $68 for a critical illness cover.

Having the right products for customers is one of Prudential's strategies to counter the slowing economy.

Despite facing a challenging second half last year, Prudential maintained its market leader position in the life insurance market with new business premiums of $284.6 million. Its market share is about 16 per cent.

In the same period, its regular premium business grew a record 13 per cent. Prudential declined to give actual figures. It was ranked No.1 for new business sales for private hospitalisation Shield plans with more than 135,000 policies as at end last year.

Looking ahead, Mr Seah is aiming to outdo last year's growth by increasing its agency force. It now boasts the largest agency size of 3,500 agents and it wants to grow this to 4,500 by the end of this year.

Prudential products are also available via its banking partners - namely Standard Chartered and Maybank - and SingPost.

Buffet:: 'Beware of geeks bearing formulas'

2009-03-02T18:49:00.000+08:00

Home > Money > Story
'Beware of geeks bearing formulas'
Buffett blasts business world while chastising himself for dumb moves

NEW YORK: - Renowned investor Warren Buffett was uncharacteristically critical of himself and the business world at large in his annual letter to shareholders of his holding company over the weekend, as he sifted through the wreckage of his worst year in four decades.

Mr Buffett's company, Berkshire Hathaway, posted a 62 per cent drop in net income for 2008 and saw a decline in book value per share for only the second time since he took control in 1965.

Berkshire shares, which peaked in late 2007 at over US$148,000 (S$228,000) each, closed last Friday at US$78,600.

With characteristic candour, Mr Buffett, 78, took the blame for some of the falls, saying he 'did some dumb things', lamenting in particular an ill-timed bet on oil and the purchase of shares in two Irish banks, which have fared poorly.

But he also needled regulators and an assortment of unidentified chief executives as he predicted that fallout from the credit crisis would leave the stock market a shambles through 2009.

The letter, as ever, gave shareholders an overview of Berkshire's annual performance, but it also doubled as a folksy state-of-the-economy address from one of the most revered investors in the US.

In language by turns blunt and witty, he decried what he called 'a series of life-threatening problems within many of the world's great financial institutions'.

An inveterate optimist about the American economy, he forecast an eventual recovery, asserting that the US has faced even more severe travails in the past.

Despite its record losses, Berkshire still has about US$25 billion cash on hand and has been buying preferred shares of General Electric and Goldman Sachs.

Mr Buffett is shopping for bargains while the share prices of most companies are sliding - his own portfolio included.

In his letter, he blasted the decisions and habits that led to the credit crisis.

Reviewing the performance of Clayton Homes, a Berkshire unit that sells manufactured homes, he noted that its lending arm had managed to keep foreclosure rates to less than 4 per cent, even among sub-prime mortgage borrowers, or those with weak credit ratings.

He contrasted that relative success with the failures of just about everyone else in that business.

'The stupefying losses in mortgage-related securities came in large part because of flawed, history-based models used by salesmen, rating agencies and investors,' he wrote.

'These parties looked at loss experience over periods when home prices rose only moderately and speculation in houses was negligible,' he went on.

'They then made this experience a yardstick for evaluating future losses. They blissfully ignored the fact that house prices had recently skyrocketed, loan practices had deteriorated and many buyers had opted for houses they couldn't afford.'

Also blissfully ignored, he wrote, were the perils of relying on mathematical models devised without worst-case situations in mind. Too often, he wrote, Americans have been enamoured of 'a nerdy-sounding priesthood, using esoteric terms such as beta, gamma, sigma and the like'.

'Our advice: Beware of geeks bearing formulas.'

Mr Buffett was just as scathing on the subject of derivatives, which he had likened to weapons of mass destruction long before they started eviscerating the balance sheets of banks around the world.

He explained that the danger of derivatives was not merely the difficulty in assessing their value; rather, it was the 'web of mutual dependence' they create among financial institutions.

Derivatives contracts keep various parties entangled for years, which, as he vividly explained, can create real hazards once those assets start deteriorating.

'Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease.

'It's not just whom you sleep with, but also whom they are sleeping with.'

NEW YORK TIMES

Still Looking for Gold Bottom

2009-03-02T18:47:00.002+08:00

Posted by Ryno On March - 2 - 2009 10:02 pm

http://www.pick24.com/wp/?p=731

Yesterday, I posed the question of whether or not gold had hit a temporary bottom and was positioned to move back up. Well, it definitely wasn’t ready to move back up today. GLD is still in a free fall with fewer and few buyers coming to the table.

My GLD pullback target is now $87 - $88ish

Be cautious about new rights issues

2009-03-02T18:35:00.000+08:00

Home > Money > Story
March 2, 2009
CAI JIN
Be cautious about new rights issues
By Lee Su Shyan , ASSISTANT MONEY EDITOR

INVESTORS must be feeling a bit under siege these days with companies rushing to tap funds from rights issues. That basically means asking investors to buy new shares in the firm, usually at an attractive price. It allows the company to load up on cash without going cap in hand to banks, which are not keen on lending any way.

About 18 rights issues have been completed or announced in the last few months, raising a whopping $8 billion in total. The bulk of that can be accounted for by DBS Bank, CapitaLand and CapitaMall Trust. These calls on the retail investors' purses come just as most are reeling from massive falls in their portfolios - paper or realised - so they are not inclined to cough up more money. And that is assuming that they have the ready cash to invest more.

This is why the discounts on the share prices are so attractive. Even taking into account the depressed share prices before the rights issue was announced, DBS Bank offered a 44.97 per cent discount on the new rights shares. Smaller firms like Metax Engineering offered a 47.62 per cent discount while Global Voice dangled a 40 per cent discount.

But many investors hold a wide range of stocks, not just one or two counters.

The latest to open for subscription is CapitaLand. The property giant is widely held and has about 60,000 shareholders. It is raising $1.8 billion from a one-for-two rights issue at a 45 per cent discount. Shareholders will subscribe because of the dilution risks - their stake in the firm goes down proportionately once more shares are issued, so it is in their best interests to buy more shares. The discount is also very attractive, so few shareholders will want to pass up such an opportunity.

CapitaLand is raising money to give it greater capacity to pursue tactical and strategic growth opportunities. So the question should be: Will putting an extra few thousand dollars into CapitaLand's hands deliver a better return to investors than putting it somewhere else? The answer, possibly, is yes. Putting it in the bank yields something below 1 per cent; putting it with CapitaLand will most likely give it a much better dividend yield.

But, equally, there are many companies out there which may have made poor business decisions and need to boost their balance sheets with more capital. So investors have to exercise caution when deciding to put more money into a rights issue amid a plethora of choices.

Meanwhile, banks are very careful about lending and bank facilities are likely to remain tight for the next few months.

Even CapitaLand says that one of the reasons for the issue is to 'pre-emptively enhance the group's financial flexibility' - which probably means if funds dry up elsewhere, they will have funds at the ready. As a result, there is going to be a further rash of rights issues on the horizon with companies turning to shareholders with outstretched hands, asking for funds to tide them over.

Even if the need for cash is not that dire, companies will be seeking the first-mover advantage before markets run dry and investor fatigue sets in.

What may further increase the number of rights issues are the recent changes to rules by the Singapore Exchange (SGX). Indeed, it may be that the SGX has made it too easy for companies. It will now allow them to double their share capital, once they have got the general mandate given every year at shareholder meetings. There are some restrictions, but it is almost like blanket permission to issue shares and severely dilute existing shareholders.

Coupled with other measures, such as being able to offer shares at a larger discount more easily, investors can argue that the odds are weighted against them. Shareholders who have already been hit by the market crash have enough to worry about, but it is in their best interests to ensure that companies do not find it too easy to raise money.

sushyan@sph.com.sg

Cai Jin runs every Monday and covers financial matters and corporate governance issues that can affect investors. The two Chinese characters marry wealth with good fortune - the two crucial factors that any investor needs to prosper.

Even if the need for cash is not that dire, companies will be seeking the first-mover advantage before markets run dry and investor fatigue sets in.

Even 'Dr. Doom' Is Scared: Economy Much Worse Than Roubini Predicted

2009-03-02T17:04:00.001+08:00

Even 'Dr. Doom' Is Scared: Economy Much Worse Than Roubini Predicted
Posted Mar 02, 2009 01:35pm EST by Aaron Task in Newsmakers,

Fed Chairman Bernanke raised eyebrows (and, briefly, the market) last week when said there's a "reasonable prospect" the economy will bottom this year and be in recovery in 2010. But Berkshire Hathaway's Warren Buffett disagrees: The economy "will be in shambles throughout 2009 and...probably well beyond," the Oracle of Omaha declared this weekend.

In sum, Buffett and much of the rest of humanity are just now coming around to Nouriel Robuini's way of thinking, the economist known as "Dr. Doom" is upping the ante on his longstanding bearish views.

A year ago Roubini was forecasting an 18-month recession with a U-shaped recovery; now, he's now expecting the downturn to last at least 24 months and possibly 36-months. He also sees rising risks of a Japanese-style L-shaped stagnation, i.e. a prolonged period with little or no economic growth.

"I was one of most bearish people [but] the economy has surprised the bears on the downside," says Roubini of NYU's Stern School and RGE Monitor. "What's happening in the world now is scary."

Indeed, while the U.S. economy contracted 6.2% in the fourth-quarter, Roubini's main concern is economic activity in much of the rest of the world is in much worse shape. And while he is often critical of U.S. policymakers - including over the stimulus package, Fed policy and bank bailouts - Roubini says "the rest of the world is way behind the curve," in terms of doing the "right things" to confront the worst economic crisis since the 1930s.

FSSTI at a terminal stage of wedge formation; For DJIA, 6,900 beckons (UOB KayHian)

2009-03-02T14:47:00.001+08:00

In our previous report, we stated that the DJIA was at an advanced stage of a wave 5 decline and that we were expecting the index to head towards 6,900 within seven calendar days. The index had declined to a low of 7,033 on Friday. Price action suggests further downside in the coming days, but we do not expect the index to head significantly below 6,900. In fact, chances are that we could see a key reversal by Monday or Tuesday. A decline towards 6,900 and a subsequent rebound above 7,150 would suggest a terminal low had formed. All in all, we think it is too risky to be bearish or to be short on US indices at current levels.

Singapore’s FSSTI shows a similar set up. Last week, when we stated 1,570 as a support level, we were looking for a rebound off that level and a subsequent decline back to the same in a potential declining wedge formation. After declining to a low of 1,567, the index rebounded to a high of 1,630 and subsequently eased. We highlight the wave formation below and await a decline towards 1,550-1,570. If the index declines to the said range and rebounds above 1,600 or 50% of its decline from 1,630, this could lead to a potential reversal. A move back to 1,900-1,960 could be a likely possibility. Support level for key index stocks are as follows: DBS S$7.60, Sing Tel, S$2.40, ST Engineering, S$2.26, City Developments S$4.56, and SGX S$4.30-4.40.

Cosco Off 3.5%; More Projects May Be Delayed - KE

2009-03-02T12:16:00.000+08:00

DJ MARKET TALK: Cosco Off 3.5%; More Projects May Be Delayed - KE

0321 GMT [Dow Jones] Cosco (F83.SG) falls below S$0.70 for first time since November, off 3.5% at S$0.695, as news of customer seeking delay in taking delivery of 3 bulk carriers fuels concerns shipbuilder may face more of such requests in future amid tougher operating climate. "This latest delay is in line with our expectation that the challenging market environment will cause more order cancellations and/or customer requests for delivery delay," says Kim Eng Securities. Value of contracts not disclosed but Cosco says rescheduling won't impact FY09 earnings. Still, bottomline growth remains at risk if more customers follow suit, considering 10% fall in FY08 earnings partly due to several customers' requests to postpone delivery schedule due to credit crunch. Support eyed at November low of S$0.655. (FKH)

(END) Dow Jones Newswires
March 01, 2009 22:21 ET (03:21 GMT)

Jitters over cash position of S-chips

2009-03-02T12:02:00.000+08:00

March 2, 2009, The Straits Times
Jitters over cash position of S-chips
Probe at Fibrechem has analysts examining other China plays here
By Goh Eng Yeow

SHOW us the cash. That, in effect, is what analysts want when it comes to China firms listed here.

Unanswered questions over the financial accounts at Fibrechem Technologies have led to growing doubts over the high levels of cash reflected on the balance sheets of other China firms listed here. nvestors are spooked by one basic question: Is the cash really there at all?

The beleaguered fibre-maker last week said its auditors had difficulties in finalising the audit on its trade receivables and cash balances - despite its unaudited third-quarter results reflecting a cash hoard of HK$1.17 billion (S$233 million).

Founder and chief executive James Zhang, also executive chairman since 2003, has resigned from his posts and will help with a probe now under way by an independent investigator.

For now, Fibrechem's woes are confined to the issues raised by the auditor. No allegations have been made.

But for S-chips in general - the description of China plays listed here - the development is another blow to fast-fading investor confidence. Overall, the value of S-chips has plummeted 72 per cent in the past 12 months.

This is despite repeated 'buy' calls on such firms by analysts, at least before the Fibrechem disclosures, that they are trading at attractive valuations - well below their break-up cash value.

Fibrechem is the latest in a string of China firms under scrutiny since last September, when steel-coil maker Ferrochina suddenly collapsed after banks refused to roll-over its loans, despite a sterling set of second-quarter results.

At the heart of analysts' worries is a hair-raising possibility that some China firms might be suffering from the 'Satyam syndrome'. This refers to the recent Satyam Computer scandal, where founder Ramalinga Raju confessed to inflating earnings and inventing a US$1 billion (S$1.5 billion) cash pile to give the false impression of fast growth.

'When a company has a lot of cash but refuses to buy back any of its shares or give out a dividend, we start to wonder if the cash is there in the first place,' said Kim Eng analyst Pauline Lee.

It does not help to find that the accounts of many of these firms are not audited by one of the 'Big Four' audit firms - Deloitte, Ernst & Young, PricewaterhouseCoopers and KPMG.

Investment bank JPMorgan Chase, which flagged its concern over this issue last September, noted that under half of the S-chips are audited by a Big Four firm. By contrast, three-quarters of Hong Kong-listed China firms do so. The bank estimated firms which do not hire 'Big Four' auditors are 60 per cent more likely to fail than those who do.

JPMorgan flagged another concern - that while some S-chips hold high levels of cash, they are also highly indebted.

It described as inconceivable that any well- managed China firm should want to hoard cash long term when mainland banks pay only a paltry 1 per cent interest on deposits.

Another cause for concern: many S-chips are making cash calls even though they are already cash-rich.

'If a company's growth is self-sustaining, it does not have to raise equity. If it does so, this could indicate that management lacks capital discipline or that the growth is not sustainable,'' said JPMorgan. Some S-chips also have 'unreasonably high' capital expenditure, suggesting they may poorly manage their manufacturing capacity and their budget.

'It also reveals the possibility of misappropriation or financial fraud. An unreasonably high capex is often linked to other issues such as inflated profits.'

JPMorgan sieved S-chips based on the warning signs it raised. Not surprisingly, one was Fibrechem, which is now suspended from trading.

CMFAS M5 Study Notes

2009-02-28T06:59:00.003+08:00

Chapter 1: The Regulatory Bodies and Associations

Monetary Authority of Singapore (MAS)

Objectives of MAS

Conduct monetary policy; manage the official foreign reserves and the issuance of government securities
Supervise and develop the financial sector

Acts Administered by MAS:

Financial Advisers Act (Cap. 110)
Insurance Act (Cap. 142)
Banking Act (Cap. 19)
Exchange (Demutualisation and Mergers) Act (Cap. 99B)
The Currency Act (Cap.69)
Government Securities Act (Cap.121A)
Local Treasury Bills Act (Cap. 167)

Singapore Exchange Limited (SGX)

Regulatory Functions of SGX:

Issuer Regulation
Member Supervision
Market Surveillance
Enforcement
Risk Management

Investment Mgmt Association of Singapore (IMAS)

Objectives of IMAS. To:

promote professionalism in investment management;
provide a forum for members to discuss issues or matters relating to the investment management industry;
represent members’ interests and acts as voice for members;
promote the education of the investing public on investments generally and the investment management industry;
improve professionalism and standards of research and fund management expertise in Singapore; and
promote the investment and fund management industry.

development of the life insurance business in consultation with the supervisory authority, the Monetary Authority of Singapore;
development of industry practices; and
promotion of public awareness of life insurance.

Chapter 2: Financial Advisers Act and Financial Advisers Regulation

Financial Advisers Act (FAA)

governs financial advisory activities in respect of investment products, and the distribution or marketing of life policies and collective investment schemes, such as unit trusts
consolidates various Acts into a single legislation
provides a consistent set of requirements and regulations for intermediaries engaging in similar activities across investment products
provides an integrated regulatory framework and ensures consistency in requirements and uniform standards across institutions providing financial advice

Financial Advisers Regulations (FAR)

is a subsidiary legislation to give effect to the provisions of the FAA and sets out the rules on the application of the FAA
provides for exemptions from the requirements relating to licensing, approval or registration requirements, the application of the provisions under the FAA

Financial Advisers (Amendment) Act

principally comprises minor policy changes and technical modifications to clarify the Authority’s administration of the FAA
improved the language of the FAA for the better administration of the FAA, and the consistency of requirements in the FAA with those in the SFA

Key Principles of FAA and FAR

Customers’ Interest
Consistency
Accountability
Independence

Changes Made by FAA:

a single licensing regime for persons engaging in financial advisory activities
raising the standards of financial advisers and representatives - impose business conduct requirements and minimum entry and examination requirements on them respectively
the use of the term “financial adviser” and “life insurance broker” are restricted to persons who hold a financial adviser’s licence or are exempt financial advisers
licences granted to financial advisers and their representatives are valid for a period of three years
obligation to disclose product information on investment products and to have a reasonable basis for any recommendation made with respect to any investment product

Financial Adviser vs Financial Planner:

MAS regulates all financial planning activities relating to securities, futures and insurance
Tax, retirement and estate planning activities do not come under MAS’ supervision

Types of “financial advisory service” regulated under FAA include:

advising others, either directly or through publications or writings, and whether in electronic, print or other form, concerning any investment product;
advising others by issuing or promulgating research analyses or research reports, whether in electronic, print or other form, concerning any investment product;
marketing of any collective investment scheme; and
arranging of any contract of insurance in respect of life policies, other than a contract of reinsurance.

Investment products mean:

any capital markets product as defined in Section 2(1) of the Securities and Futures Act;
any life policy; or
any other product as may be prescribed. Note: With effect from 2 December 2005, MAS has prescribed structured deposits as an investment product.

Exclusions

General Insurance policies
Life Reinsurance
Banks Deposits
Loans and Mortgages

financial resources;
competence and expertise; and
must satisfy MAS that it would discharge its duties efficiently, honestly and fairly.

Exempt Financial Advisers:
Section 23 of the FAA provides that the following persons shall be exempted from holding a financial adviser’s licence:

banks licensed under Banking Act;
merchant banks approved as financial institution and approved to carry on a business of providing any financial advisory service under the Monetary Authority of Singapore Act;
companies/societies registered under the Insurance Act;
holders of a capital markets services licence under the Securities and Futures Act;
a finance company which has been granted an exemption from Section 25(2) of the Finance Companies Act to carry on a business of providing any financial advisory service;
a securities exchange, a futures exchange, a recognised market operator, or an approved holding company, in respect of the provision of any financial advisory service that is solely incidental to its operation of a securities market, a futures market, or to its performance as an approved holding company, as the case may be; and
such other persons or classes of persons as may be prescribed.

Representatives of Financial Advisers

A representative’s licence will only be granted to a natural person who satisfy the following requirements:

be at least 21 years old;
satisfy the minimum academic qualification of at least 4 GCE ‘O’ level credit passes;
satisfy the fit and proper criteria;
satisfy the prescribed minimum examination requirements; and
satisfy any other criteria stipulated by MAS.

Opportunity To Be Heard applies to the 3 situations:

Requirements For Grant Or Renewal Of Representative’s Licence
Lapsing, Revocation, Suspension And Expiry Of Licence
On Application For Approval To Be CEO Or Director

The Authority may refuse to grant or renew the representative’s licence on the following grounds WITHOUT giving the applicant an opportunity to be heard:

the applicant is an undischarged bankrupt, whether in Singapore or elsewhere;
a prohibition order under Section 59 has been made by the Authority, and remains in force against the applicant;
the applicant has been convicted, whether in Singapore or elsewhere, of an offence:

involving fraud or dishonesty or the conviction for which involved a finding that he had acted fraudulently or dishonestly;
punishable with imprisonment for a term of three months or more.

secure clarity for investors ; and
ensure that the principal monitors and supervises their representatives at all times.

However, a licensed representative may be a representative of more than one financial adviser if the financial advisers are related corporations.

CEO and Directors of Licensed Financial Advisers

MAS’ approval is required prior to their appointment
MAS may direct the company to remove such an officer from his office if the MAS thinks it necessary in the public interest or for the protection of investors to do so

Receipt of Clients' Money or Property

“Client’s money or property” means money received or retained by, or property deposited with, a licensee for which he is liable to account to another person
Money received must be given to the right party
Money must be handed over not later than the next business day unless the licensee has client’s prior written consent to hand over after the specified date
Financial Adviser shall not receive client’s money or property in the form of cash or cheque made payable to any person (other than a person referred to in 15.2 (a), (b) or (c),) except where the cash or cheque is for services rendered by the financial adviser.

A financial adviser which receives any payment which is due to the insurer is required to pay the amount to the insurer within the credit period.
Interest earned during the credit period may be retained by the financial adviser for its own benefit with the insurer’s prior consent.
Interest earned after the credit period shall not be retained by the financial adviser for its own benefit and shall immediately be paid to the insurer to whom such payment is due.
Interest earned, which is due to an insurer under a contract of insurance (including a contract of insurance that has been cancelled) where cover commences before the appointed day, may be retained by the financial adviser for its own benefit.

Restriction on Granting Unsecured Loans. Section 24(3) provides that no financial adviser shall grant unsecured advance, unsecured loan or unsecured credit facility to:

a director of the licensed financial adviser, other than a director who is its employee; or
any other officer or an employee of the licensed financial adviser (including a director who is its employee) or any of its representatives which, in the aggregate and outstanding at any one time, exceeds $3,000 or such other amount as may be prescribed.

Obligation to Furnish Information to MAS:

A licensed financial adviser is required to prepare and lodge statements of accounts in accordance with the provisions of the Companies Act
Exempt financial advisers have to lodge returns such as a notice of commencement of business as a financial adviser or a notice of change of particulars

Placement of Risk with Unregistered Insurers

No licensed or exempt financial adviser shall negotiate any contract of insurance, whether directly or indirectly and placement of risk with unregistered insurers except where specifically permitted by MAS.
It does not apply to reinsurance, businesses relating to risk outside Singapore or such other risks as may be prescribed.
Individuals are not prohibited from purchasing life policies from unregistered overseas insurers. However, financial advisers are required to seek MAS’ approval should they wish to place their clients’ life insurance risks with unregistered overseas insurers.
This is to ensure that no financial adviser is being used by unregistered overseas insurers to assist them to write domestic Singapore risks, since unregistered overseas insurers are not allowed to write domestic Singapore risks.

Representations by Licensees:

FAA deals with representations by a financial adviser in relation to a proposed contract of insurance with the insurer.
It sets out the code of conduct that the financial adviser has to operate.
With respect to proposed contract/claim of insurance, the financial adviser cannot provide false or misleading information, or omit to disclose any matter that is material to the insurer.
A financial adviser shall not engage in any professional conduct involving fraud or dishonesty, trustworthiness or compromises its integrity.

Disclosure of Certain Interests in Securities

The financial adviser has a duty to disclose potential and actual conflict of interest to his clients or prospects. Prior to establishing a client relationship, a financial adviser should:

disclose all material information or facts that might compromise its objectivity or independence or impair its ability to make unbiased and objective recommendations; and
fully disclose to the clients its relationship with the financial institutions whose products it is providing advice on or recommending

Where such conflict of interest situations cannot be avoided, the financial adviser should ensure that its clients are treated fairly and equitably
Enter change in interest in securities within 7 days from date of change

Offences:

Any officer, auditor, employee or agent of a licensed financial adviser or an exempt financial adviser who wilfully omits, makes a false entry or alters document or statement of the business of the financial adviser shall be guilty of an offence and be liable on conviction to a fine not exceeding $100,000 or to imprisonment for a term not more than two years or to both.
Throughout the FAA, various provisions have stipulated the penalty to the body corporate.
In less serious offences, these offences may be compoundable under FAA.

Chapter 3: Written Directions

The Financial Advisers Act (FAA) (Cap.110) sets out the general principles for the regulation of financial advisers and their representatives.
Regulations are considered subsidiary legislations. Sets out rules for the application of the FAA.
Notices (also known as written directions) are issued under Section 58 of the FAA and are legally enforceable.
The difference between Notices and Regulations is that Notices specify in more detail the standards expected of financial advisers in the conduct of their business.
A contravention of any requirement specified in the FAA, Regulations and Notices is an offence under the Act.
While representatives of exempt financial advisers are not required to hold a representative’s licence, the business conduct rules of the FAA apply to them. Section 58 empowers the MAS to issue written directions to representatives of exempt financial advisers.
The MAS may, if it thinks necessary or expedient in the public interest, issue written directions.

The MAS is empowered to issue written directions on the standards with respect to qualifications, experience and training of representatives, and the reporting of misconduct.

Guidelines are issued under Section 64 of the FAA. They are intended to provide general guidance and are meant to be good practice which would apply generally across the financial advisory industry. Because Guidelines set out general guidance and good practice, they do not create any legally enforceable obligations or duties.

Obligations to be Complied when Recommending an Investment Product

The principle underlying the following obligations as set out in the “Notice On Recommendation On Investment Products” is to ensure that the prospective client makes an informed choice before he makes a purchase.

The obligations set out below shall not apply:
to any recommendation made with respect to simple life policies sold as an ancillary product to loans with a simple payment basis for the insurance cover; and
in circumstances where no recommendation is made or where only factual information is provided with respect to any investment product

Recommendations On Investment Products
Section 27 of the FAA requires licensees to have a reasonable basis for any recommendation made with respect to any investment product to a person who may reasonably be expected to rely on the recommendation.
In particular, the licensee should give due consideration to the person’s investment objectives, financial situation and particular needs.

A financial adviser who is involved in making recommendations on investment products to clients shall comply with the requirements set out in the “Notice On Recommendations On Investment Products” in relation to the following aspects:
know your client;
needs analysis; and
documentation and record keeping.

Know Your Client
The following information should be collected from the client:
financial objectives of the client;
risk tolerance of the client;
employment status of the client;
financial situation of the client, including assets, liabilities, cash flow and income;
current investment portfolio of the client, including any life policy; and
for any recommendation made in respect of life policies, the number of dependants of the client and the extent and duration of financial support required for each of the dependants.

A financial adviser should highlight the following in writing to its client:
the information provided by the client will be the basis on which the recommendation will be made; and
any inaccurate or incomplete information provided by the client may affect the suitability of the recommendation.

Needs Analysis
should explain to its client the basis for recommendation & the basis should be documented
Where the financial adviser is unable to identify a suitable product, it should inform the client accordingly
Where a client chooses not to receive any recommendation from a financial adviser, the financial adviser should ensure that there is proper documentation to demonstrate that this is so.

Documentation And Record Keeping
A financial adviser is required to furnish the following documents to a client when making a recommendation :
in the case of a collective investment scheme, a copy of the prospectus or profile statement (if applicable) issued and/or any other offer document as may be prescribed by the relevant laws
in the case of a life policy, a copy of the Product Summary and Benefit Illustration in respect of that policy.

A financial adviser should furnish to its client a document containing the following when making a recommendation in respect of a designated investment product to the client:
a summary of the information gathered by the financial adviser;
any recommendation made to the client by the financial adviser and the basis for the recommendation, and where applicable, a statement that the client does not want to:
provide any information requested by the financial adviser in accordance with Section 2.1.1 of this chapter;
accept the recommendation of the financial adviser and has chosen to purchase another designated investment product which is not recommended by the financial adviser; or
receive any recommendation from the financial adviser, before the client signs on the application form for the purchase of a designated investment product or gives his consent to dispose of a designated investment product.

Switching Of Designated Investment Products
A financial adviser should not make a recommendation to a client to switch from one designated investment product (referred to as “original product”) to another designated investment product (referred to as “replacement product”) in a manner that would be detrimental to the client.

Information to Clients And Product Information Disclosure
The “Notice On Information to Clients And Product Information Disclosure” sets out the disclosure and information obligations of a financial adviser and its representatives to clients, including when they must provide the client with investment product information.

This Notice sets out the general principles that apply to all disclosure by a financial adviser to its client. It also sets out specific requirements as to the form and manner of disclosure that financial advisers have to comply with in relation to Sections 25 and 26 of the Act, as well as to the following matters:
a. general information about the financial adviser and status of a representative;
b. remuneration of the financial adviser;
c. conflict of interest;
d. designated investment products;
e. illustration of past and future performance of designated investment products; and
marketing materials.

In addition to the obligations under Section 25 of the FAA, a financial adviser shall ensure that any statement or representation made to its clients is not false or misleading. It shall also ensure that it does not omit to disclose any matter that is material to the statement or representation made.
The general standards which a financial adviser is expected to meet in all product information disclosures and information given to clients are as follows:
Clear
Adequate
Not False or Misleading

General Information About The Financial Adviser And Status Of A Representative
A financial adviser shall disclose the following, in writing, to a client:
i. its business name, business address and telephone number;
ii. the type or types of financial advisory service that it is authorised to provide under the FAA;
iii. the type or types of investment product in respect of which it is authorised to provide financial advisory service;
iv. any other type of activity carried out by the financial adviser which is not regulated by the MAS, if any; and
v. the product providers whose products the financial adviser:
procures on behalf of its clients;
recommends or markets to its clients; or
markets to its clients on behalf of the product providers.

A licensed representative shall disclose the following, in writing, to the client:
i. his name;
ii. the financial adviser(s) for which he acts;
the type or types of financial advisory service that he is authorised to provide under the FAA; and
the type or types of investment products in respect of which he is authorised to provide financial advisory service.

Remuneration Of The Financial Adviser
a. A financial adviser is required to disclose, in writing, to a client all remuneration, including any commission, fee and other benefit that it has received or will receive that is directly related to the making of any recommendation in respect of an investment product, or executing a purchase or sale contract relating to an investment product on the client’s behalf.
b. If a financial adviser charges a fee, it should disclose to the client details of the charges at the outset.
c. If a financial adviser receives commissions from a product provider on investment products sold on behalf of the product provider, it should disclose to the client the amount of commissions it receives on the investment products it recommends.
d. Where a financial adviser receives trailer commission, soft commission or such other benefit from a product provider, it should disclose to the client the amount of such commission and benefit.
e. Where the amount of remuneration, commission fee or benefit is not quantifiable, a financial adviser should furnish its client with a description of how it will be remunerated.
f. If the precise rate of remuneration or value of commission is not known in advance, the financial adviser should estimate the rate likely to apply in such description.
g. In the case of a life policy, a financial adviser should disclose to its client the “distribution cost” item in the Benefit Illustration (where a Benefit Illustration is available in respect of the life policy)

Conflict Of Interest
A financial adviser should disclose, in writing, to its clients any actual or potential conflict of interest arising from any connection to or association with any product provider, including any material information or facts that may compromise its objectivity or independence in its provision of financial advisory services.

Designated Investment Products
When making a recommendation on any designated investment product to a client, a financial adviser is required to disclose the following information to the client in a form and manner that is clear, adequate and not false or misleading:
Nature and Objective of the Product
Details of the Product Provider
Contractual Rights
Client Profile
Commitment Required From the Client
Benefits of the Product
Risks of the Product
Pricing of the Product
Fees and Charges to be Borne by the Client
Reports to the Client
Free-Look for Life Policies
Cancellation Period for Unit Trust
Withdrawal, Surrender or Claim
Warnings, Exclusions and Disclaimers

Illustration Of Past And Future Performance Of Designated Investment Products
A financial adviser shall comply with the following with respect to any illustration of past and future performance of any designated investment product:
the financial adviser shall not disclose (whether orally or in writing) any matter in respect of the future performance of a collective investment scheme, unless that matter is disclosed in the registered prospectus of the scheme;
when using any forecast on the economy, stock market, bond market and economic trends of the markets, it shall advise the client that such forecast is not necessarily indicative of the future or likely performance of the product;
when using past performance of the product to illustrate possible returns for that product, it should advise the client that past performance is not necessarily indicative of future performance. The source of data used in the illustration should be provided by the product provider or an independent agency, and be made known to the client;
iv. when advising on a life policy, it should make reference to the Benefit Illustration in respect of that life policy (where a Benefit Illustration is available in respect of that life policy); and
v. when advising on a collective investment scheme, it should not make any prediction, projection or forecast on the future or the likely performance of the collective investment scheme, except to the extent permitted under Clause 1 of Appendix 3B of the text.

When advising on a collective investment scheme, a financial adviser may disclose orally to a client any information on past or future performance contained in the registered prospectus of the scheme if and only if such disclosure is made at the same time as a copy of the prospectus is given to the client, and the financial adviser:
draws the attention of the client to all assumptions, warning statements and other information relating to the past or future performance that are contained in the prospectus; and
ii. where the last day of the period to which the past performance relates is more than three months prior to the date of disclosure, informs the client of this fact

Marketing Materials
A financial adviser shall ensure that all its marketing materials comply with the relevant guidelines issued by the MAS and/or industry association
A representative shall only use marketing materials approved by the financial adviser for which he acts
Where a financial adviser engages in the marketing of designated investment products using direct response advertising communications, it shall include, in all its marketing materials, prominent warning that:
a. the client may wish to seek advice from a financial adviser before making a commitment to purchase the product; and
b. in the event that the client chooses not to seek advice from a financial adviser, he should consider whether the product in question is suitable for him

The “Notice On Reporting Of Misconduct Of Representatives By Financial Advisers” sets out the responsibilities and reporting requirements of financial advisers for the misconduct of their representatives.

A financial adviser shall submit to the MAS, not later than 14 days after the end of each quarter, reports of any disciplinary action taken against its representatives for misconduct including formal warnings issued to the representatives during the preceding quarter:
Acts Involving Fraud, Dishonesty or Other Offences of a Similar Nature
Acts Involving Inappropriate Advice, Misrepresentation or Inadequate Disclosure of Information
Failure to Satisfy the Guidelines on Fit and Proper Criteria
Other Misconduct: any type of misconduct other than those set out in sub-paragraphs (a) to (c), resulting in
non-compliance with any regulatory requirement relating to the provision of any financial advisory service under the Act; or
a serious breach of the financial adviser’s internal policy or code of conduct which would render the representative liable to demotion, suspension or termination of the representative’s employment or arrangement with the financial adviser
in the form set out in this Notice

The “Notice On Appointment And Use Of Introducers By Financial Advisers” shall apply to all licensed financial advisers and persons who are exempt from holding a financial adviser’s licence under Section 23(1)(a) to (e) of the FAA.

Requirement For Financial Advisers Appointing Introducers
Where a financial adviser appoints a person as an introducer, it should take reasonable steps not to appoint an introducer whose carrying out of introducing activities is its sole business activity or his full time occupation if the introducer is a corporation or an individual respectively.
A financial adviser should ensure that none of its employees or representatives enters into any arrangement with an introducer to carry out introducing activities other than on behalf of the financial adviser.
A financial adviser which engages the services of an introducer should institute adequate control systems and procedures.

In engaging an introducer to carry out introducing activities, the financial adviser is required to comply with the following requirements:
Written Agreement
Disclosure by Introducer
Provision of Script for Use by Introducers
Prohibition on Handling of Client’s Money or Property by Introducers
Maintenance of Register of Introducers

The “Notice On Minimum Entry And Examination Requirements For Representatives Of Licensed Financial Advisers And Exempt Financial Advisers” sets out the following:
minimum entry requirements;
application of the Capital Markets and Financial Advisory Services Examination (CMFAS Exam) requirements;
c. circumstances under which the CMFAS Exam requirements do not apply;
d. continuing education requirements for representatives.

MAS Notice 117 requires such representatives to obtain the requisite qualification in health insurance before they can provide any advice on or arrange such policies or both, unless the representatives fall within paragraph 6 or 7 of MAS Notice 117.

Minimum Entry Requirements
Application Of CMFAS Exam Requirements
Circumstances Under Which The CMFAS Exam Requirements Do Not Apply
Re-Taking Of Module 5
Continuing Education Requirements For Representatives

The “Notice On Prohibited Representations Made By Persons Exempted Under Regulation 27(1)(D) Of The Financial Advisers Regulations (Rg 2)” sets out certain prohibitions in respect of representations made by exempt persons and representatives of exempt persons regarding their exempt status.
Example:
An exempt person and its representatives shall not represent itself, nor cause to be represented, as being licensed, regulated, supervised or registered by the MAS, whether verbally or in writing.

The “Notice On Dual Currency Investments” applies to any licensed or exempt financial adviser or its representative, who advises on any dual currency investment.
Use Of The Term “Deposit” And “Structured Deposit”
Additional Product Information Disclosure
Warnings
Guidelines On Structured Deposits

Gold Stock Pressure, With Or Without Gold Prices

2009-02-28T06:19:00.000+08:00

Gold Stock Pressure, With Or Without Gold Prices (EGO, RGLD, IAG, GSS, GLD, GDX, ABX)
Posted: February 27, 2009 at 9:03 am

http://247wallst.com/2009/02/27/gold-stock-pressure-with-or-without-gold-prices-ego-rgld-iag-gss-gld-gdx-abx/

We covered last weekend about how the $1,000.00 gold was at an inflection point and looking as though it was either poised to pop to $1,200.00 on the speculation of fear or that it was likely to fall back towards $800.00 as reality prevails as the world didn’t flatten and proceed to roll off the edge into the abyss. What is interesting is that even as gold was hitting highs, many of the miners, particularly the speculative miners, were well under highs and have seen even worse pressure this week on gold’s pullback.

When Eldorado Gold Corporation (AMEX:EGO) withdrew its planned offering of common stock on Tuesday, its shares and those of competitor miners fell sharply. Eldorado opened the day at $9.34 and closed it at $8.19, off more than 12%. Royal Gold Corporation (NASDAQ:RGLD) fell from $44.85 to $41.22, down about 8%; IAMGold dropped from $8.74 to close at $7.66, down more than 12%; and Gold Star Resources, Ltd. (NYSE:GSS) dropped from $1.40 to $1.16, off about 17%.

Two gold ETFs, SPDR Gold Shares (NYSE:GLD) and Market Vectors Gold Miners (NYSE:GDX) both fell sharply as well, but both have recovered some as of yesterday’s close. Gold Shares invests in bullion and Gold Miners invests in mining stocks. Gold Shares is down about 5% as of yesterday’s close, while Gold Miners is down about 9%.

Miners, especially the smaller ones like Eldorado and Royal Gold, will continue to struggle with liquidity as the economy remains sour. Mining ETFs like Market Vectors Gold Miners will follow along because the large gold miners like Barrick Gold Corporation (NYSE:ABX) included in the fund are also struggling to lower costs and increase production.

Gold bullion investors, like SPDR Gold Shares, will follow the economic news. Bullion fell sharply yesterday to close just above $940/ounce, down from about $945/ounce the previous day. European and Asian markets are lower today, so gold has recovered a bit to about $958/ounce. When inflation fears rise, bullion rises sharply, as it did last week, when it closed above $1,000/ounce.

Paul Ausick
February 27, 2009

Parkway: Kitchen sinking - HOLD (DBS)

2009-02-27T15:40:00.000+08:00

HOLD (maintained) $1.17 (STI: 1,1617.44)
Price Target: 12-month S$1.28
PE (X): 2008A - 31.9, 2009F - 14.5
Net Div Yield: 2008A - 2.1%, 2009F - 5.2%

FY08 headline profit fell by 88% to $34.8m on several one-off charges. Excluding those items, net profit at $89.8m was within expectations. We expect to see launch of sale of medical suites by mid’09. Restructuring and cost savings may provide upside to our forecasts. However, we believe uncertainty over take up of medical suites and high cost of investment may cap gains in near term. Maintain Hold, TP: S$1.28.

Excluding exceptional one-off items (see pg 2), Parkway’s net profit at $89.8m was within our expectations. Revenue grew 9% to S$945.4m on contribution from its Hospital and Healthcare divisions. Admissions for Singapore dipped 3.8%, offset by 10% in day cases. As a result, average occupancy dropped to 59.9% (FY08), from 64.6% (FY07). Revenue PAPD (Per Adjusted Patient Day) in Singapore grew 6% to S$1,853. Group operating margins dipped by 2.1% on higher rentals (paid to the REIT), partially offset by a lower increase in depreciation and staff costs.

As indicated previously, we do not see funding issues for its Novena hospital project. About $1bn of loan has been drawn down with additional $300m facility available. The Group has $542m in cash. Net D/E stands at 0.53x with an interest cover of c.9x. The Group is expected to launch first phase of 80 units of medical suites in mid’09, at ASP between $3,200 to $5,000 psf.

Valuations appear to be low relative to historical value. There could be upside in our forecasts arising from its restructuring and cost savings. However, we believe the uncertainty over the take-up rate and ASP of the medical suites at the new Novena Hospital would continue to weigh down this counter in the near term. As such, we maintain our Hold recommendation. Our TP of $1.28 is unchanged.

Parkway Holdings FY08 Review - SELL (DMG)

2009-02-27T15:29:00.000+08:00

SELL - Downgrade
Price: S$1.17
Target: S$0.92
Div Yield: FY07 - 33.9%, FY09F - 16.9%
P/E: FY08 - 33.9x, FY09F - 16.9x
P/B: FY08 - 1.0x, FY09F - 1.0x

Parkway recorded an 88% decline in FY08 net profit to S$35.8m, despite achieving a 9% increase in revenue. This was due to the exceptional items (provisions and losses) recorded for the year. Included in FY07 results was the gain on disposal of its hospitals to PREIT. Excluding these items, net profit would have risen 5% to S$89.8m. The bulk of the exceptional items were a provision for impairment loss on receivables (S$34.4m) and the impairment loss on the Group’s investment in Auric Pacific (S$16.2m). Management was unable to disclose additional information relating to the provision for impairment loss on receivables as it is in the process of taking legal action to recover the amount.

Parkway had intended to launch the sale of its Novena medical suites in 1H09. Management indicated that as the recession continues to unfold, it has yet to decide on a selling price for the suites, although it is looking at the range of S$3,200 to S$4,300 psf. It plans to launch the medical suites in phases, and may inject unsold units into PREIT. We have not factored in any sales of medical suites into our forecasts.

We cut our FY09 net profit forecast by 25% to S$78.0m, taking into consideration a decline in its Singapore hospital revenue and slower revenue growth in other segments. We cut our target price by 36% to S$0.92, based on 13x blended forward earnings (about 10% premium over peers). This is a 22% downside from current levels. Hence, we downgrade our recommendation to SELL.

Gold - Haring away

2009-02-26T17:34:00.001+08:00

Feb 26th 2009
From The Economist print edition
Burnished by bad news, gold looks like a good each-way bet
http://www.economist.com/finance/displaystory.cfm?story_id=13185396

IT IS 1979 and Harry “Rabbit” Angstrom, the hero of John Updike’s series of novels, is explaining to his wife why he has just spent more than $11,000 on 30 gold krugerrands. “The beauty of gold is, it loves bad news,” he says. Three decades later, gold is once again thriving on despair. Before Christmas, a troy ounce could be bought for around $800. By the third week in February, gold was trading at close to $1,000 an ounce.

A surge in demand for gold as an investment lies behind the jump in prices. Flows into exchange-traded funds, which buy and store gold for their shareholders, rose from 105 tonnes in January to 208 tonnes in the first three weeks of February, according to Suki Cooper at Barclays Capital. At that rate, inflows will soon surpass the total of 322 tonnes for the whole of 2008. Buying by investors has more than made up for a slump in gold-jewellery purchases in key markets, such as India and Turkey, where higher prices and wilting exchange rates have crushed demand.

How high might the gold price go? Gold bugs talk excitedly about it reaching $2,300, which would match the January 1980 peak in real terms (see chart). Already the gold price is above its average since 1972 when calculated in today’s money. There is a limited supply of gold and lots of potential buyers—ideal conditions for a bubble, says Stephen Jen at Morgan Stanley. If gold is burnished by grim news, it seems likely to become still more alluring.

815 BTO flats for sale

2009-02-26T14:42:00.000+08:00

Home > Breaking News > Singapore > Story
Feb 26, 2009
By Joyce Teo, Property Correspondent, The Straits Times

THE Housing Board on Thursday launched its first build-to-order flat sale this year, with 815 flats in Woodlands up for grabs.

Called Champions Court, the batch of flats will include 224 units of studio apartments - offered for the first time in Woodlands.

There are also 182 units of three-room flats, 224 units of four-room flats and 185 units of five-room flats.

Champions Court is near Woodlands Regional Centre.

In a statement on Thursday, HDB said the new flats in Champions Court are priced below their equivalent market prices to ensure that they are affordable to first-time buyers.

The three-room flats range from $118,000 to $142,000, four-room flats from $194,000 to $227,000 and five-room flats from $247,000 to $296,000.

In the resale market, comparable three-room flats go for $200,000 to $209,000, while the four-room units go for $255,000 to $278,000, according to data provided by HDB.

Comparable five-room flats cost $304,000 to $345,000, it said.

The studio apartments are priced from $57,000 to $80,000.

Applications can be submitted online from Feb 26 to March 11.

Macquarie Internetional Infrastructure Fund FY2008 Results

2009-02-25T18:58:00.001+08:00

Financial Highlights

MIIF achieved a net income on an adjusted basis of S$115.8 million for the year ended 31 December 2008, up from S$96.2 million in the prior corresponding period. The increase in MIIF’s net income was primarily due to: Distributions from MIIF’s new unlisted businesses: Hua Nan Expressway (HNE) and Taiwan Broadband Communications (TBC) which offset a reduction in distributions from MIIF’s listed investments sold during 2007 and 2008. In addition, net foreign exchange gains of S$6.8 million were recognised in 2008 primarily due to the realisation of MIIF’s distribution hedges.

MIIF’s total operating expenses of S$19.3 million were 45.3 per cent lower than the prior year, driven by lower management fees and reduced interest expenses as a result of lower company-level borrowings.

MIIF’s Net Asset Value (NAV) per share as at 31 December 2008 was S$0.97, compared with S$1.28 as at 31 December 2007 and S$1.12 as at 30 September 2008. The decrease reflects the impact of significant foreign exchange movements (particularly the devaluation in Pound Sterling), weaker asset-level revenue forecasts as a result of the global economic slowdown, lower inflation expectations, and tight credit markets.
Consequently, revaluation losses of S$287.7 million for the year ended 31 December 2008 (2007: gains of S$338.6 million) were reported in MIIF’s statutory accounts.

These unrealised losses do not impact MIIF’s cash flows and its ability to pay dividends in the current period.

All borrowings held by the underlying businesses are non-recourse to MIIF and have substantial remaining terms of between two and 14 years, with the earliest maturing in 2011. Long-term borrowings are well matched to the long-term cash flows generated by these businesses.

The Board declared a final dividend of 3.00 cps for the six months to 31 December 2008, which is in line with previous guidance.

ABOUT MIIF

Macquarie International Infrastructure Fund Limited (MIIF or the Company), a Bermuda-registered mutual fund company, is a leading Asia-listed private owner and operator of infrastructure businesses. MIIF has significant investments in toll roads, ports, communications and broadcast infrastructure, transport infrastructure, renewable energy, and aged-care infrastructure, among others.

MIIF was the first infrastructure fund to list on the main board of the Singapore Exchange Securities Trading Limited (SGX-ST). MIIF listed on the SGX-ST on 27 May 2005 and has over 7,700 investors, including retail investors and some of the world’s foremost institutional investors.

MIIF is an Asian-focused listed infrastructure fund managed by Macquarie Infrastructure Management (Asia) Pty Limited (MIMAL), part of Macquarie Capital Funds which, through special purpose management companies, has approximately A$52 billion (S$52.9 billion) of equity under management as at 31 December 2008.

DIVIDEND POLICY

MIIF's dividend policy is based on the anticipated cash flows from its investments. MIIF intends to pay out as ordinary dividends to shareholders the majority of normal distributions received from MIIF’s investment and not to retain significant cash balances in excess of prudent reserves. Prudent reserves are required to ensure that MIIF remains solvent and that, amongst other things, operating costs such as finance costs, audit fees, registry fees and hedging costs are adequately provided for. Should MIIF receive additional cash receipts from its business which are of a non-recurring nature, as a result of capital management initiatives such as refinancing or asset sales, these proceeds would be distributed by way of a special distribution. MIIF declares and pays regular semi-annual cash dividends on all outstanding shares.

As a Bermudian incorporated company, MIIF is governed by the Bermuda Companies Act 1981. The Bermuda Companies Act 1981 allows companies that are governed by it to declare and pay dividends to shareholders in excess of accounting profits and reserves. Consequently, it is possible that the dividends that MIIF’s Board of Directors (The Board) intends to declare and pay for the period exceeds the total of MIIF’s retained earnings and accounting profits generated for the period. Such situations may arise as a result of unrealised losses that MIIF is required to recognise due to movements in its foreign exchange rates, changes in the value of MIIF’s unlisted securities and other business specific and general economic factors. These unrealised losses do not impact MIIF’s cash flow and its ability to pay dividends in the current period.

TAXATION

As MIIF is incorporated in Bermuda and is not a resident in Singapore for tax purposes, dividends paid by MIIF will be regarded as foreign-source income. The foreign dividend is subject to Singapore corporate income tax when received in Singapore by corporate shareholders. Foreign dividends received by foreign investors with no permanent establishment in Singapore are generally not subject to Singapore income tax. Foreign dividends received by individuals in Singapore (whether resident or otherwise) are exempt from Singapore income tax.

Description of investment income

MIIF has progressively disposed of its entire interest in the listed investments DUET Group (DUET), Macquarie Airports (MAp), Macquarie Communications Infrastructure Group (MCG) and Macquarie Infrastructure Company (MIC) since the second-half of 2007. These divestments were consistent with MIIF’s focus on direct investments and on-going efforts to rebalance its portfolio towards the Asian region. As a result of these disposals, MIIF’s income in 2008 was solely derived from its unlisted investments.

Borrowings

Stand-alone company borrowings decreased from $178.2 million as at 31 December 2007 to $20.0 million as at 31 December 2008. This reduction was primarily due to the repayment of MIIF’s outstanding borrowings from proceeds received from the sale of MAp.

Group short term borrowings includes Miaoli Wind’s consolidated short term borrowings of $5.5 million.

Group long term borrowings have increased to $86.5 million as at 31 December 2008 due to the consolidation of Miaoli Wind’s long term borrowings which are non-recourse to MIIF. Equipment, building, cash and shares of Miaoli Wind were pledged with the lender as collateral for the borrowings of $92.0 million.

NET ASSET VALUE

MIIF uses the discounted cash flow (DCF) approach to value its investments. These valuations reflect the fair value for which infrastructure assets could be exchanged between knowledgeable, willing parties in an orderly arm’s length transaction.

MIIF calculates the fair value of each of its assets at the end of each calendar quarter and adjusts the carrying value of each investment to its fair value. This process generates revaluation gains and losses, which are reported in the Group Income Statement as Net gains/losses on financial assets at fair value through profit or loss.

To ensure that the DCF analysis continues to provide a fair value estimate that can be considered reliable, the valuation model is periodically benchmarked to other sources such as recent market transactions to ensure that the discounted cash flow valuation is providing a reliable measure.

Source: SGX Quarterly Report for the quarter and year ended 31 December 2008

SingTel: Optus rebound not in the price - BUY (Macquarie)

2009-02-25T15:55:00.000+08:00

In this note, we discuss some of the key issues and drivers of the medium-term outlook for the core Singapore/Optus business.

We view the Vodafone-Hutch merger as a positive catalyst for Optus because it should boost long-term margins. It is perhaps worth noting that Optus’s mobile margins have plummeted from around 40% in 2005 to around 27% today due to increased competition from Vodafone (subsidiary VOD LN, £1.26, Underperform, TP: £1.25) and Hutch (HTA AU, A$0.10, OP, TP: A$0.17). Rationalization of market structure is a “game changer,” and we expect the outlook to improve from here on.
Recessionary conditions, the effect of the government’s broadband project (NBN) and potential pay-TV price competition are key issues for the Singapore market. We think the NBN project is likely to be a non-event and argue that threats from new entrants (like MobileOne M1 SP, S$1.57, OP, TP: S$1.75) remain low. We arrive at this conclusion based on our assumption that NBN retail pricing is likely to be around S$70/user, which is significantly higher than most of the prevailing broadband price plans. The market may not be big enough for new entrants due to the limited market size – we estimate that only a small part of the broadband user base (~13%) currently subscribes to broadband plans with speeds >10Mbps.

Singapore National Broadband Network – likely to be a non-event with SingTel’s win
In our recent meetings, we found that some investors were concerned about the effect of the national broadband network on SingTel’s businesses. In particular, some view NBN as a positive catalyst for No. 3 player MobileOne and a negative for incumbents SingTel/StarHub because it gives them the opportunity to bundle services.

Control of the NBN project is far-more important for SingTel than for StarHub, because it needs to mitigate risks to its corporate revenues and also secure its technology roadmap beyond the current theoretical limits of its ADSL 2+ network (25Mbps).

The project is divided into two phases and a SingTel consortium has already won the first phase, called NetCo. The results for tenders of the second phase will be known in 1Q09, and we expect SingTel to win the project with wholesale pricing of around S$15/residential sub.

Is the cash really there?

2009-02-23T23:00:00.000+08:00

AsiaOne.com
Mon, Feb 23, 2009
The Business Times
Is the cash really there?
By TEH HOOI LING
SENIOR CORRESPONDENT

BASED on its latest available financial statements, that would be for the quarter ended Sept 30, 2008, C&G Industrial had a cash balance net of debts of about 408 million yuan. That worked out to cash per share of 0.87 yuan, or about 19.4 cents. As of yesterday, the manufacturer and distributor of PET chips and yarn products for the textile industry in China last changed hands at 8 cents a share.

Meanwhile, China's largest nylon manufacturer Li Heng's cash net of debts per share worked out to 23.6 cents. The shares last traded at 20.5 cents.

China Paper, which manufactures and distributes mixed-pulp based paper products to over 320 publishing houses, printing companies and other paper distributors throughout China, had 18.5 cents cash and no debts on its balance sheet as at end September 2008. Its share price, as of last Friday, was 16.5 cents.

At least in the former two companies, business prospects have taken a turn for the worse. Both have issued profit warnings. But for China Paper, its business seems to be still holding up well, based on its last financial reports.

Is the market being irrational? Well, maybe, maybe not!

As a head of research from a local broking firm quipped when asked to comment on the seemingly bottomless pit that China stocks are sinking into: 'All didn't do well in the results so far. Some are sitting on such embarrassing amount of cash, but there's still no sight of dividends for some. This raises the question: 'Is the cash really really there?' The Satyam Syndrome can be deadly if not treated early!'

Well even if the cash is there, if shareholders can only see and not touch, and worse still if investors can only watch while management fritter away the cash in unwise investments, then there are ample reasons for investors to place a discount on the cash.

Take the case of AEI Corporation. The manufacturer and trader of aluminium extrusion sections, metal materials and other related products, which was listed on the main board of Singapore Exchange in 2004, has been in a cash flow positive business. As at June 30, 2008, it had cash of $26.8 million, and no debts. That's down slightly from $28.5 million cash in the beginning of the year. The cash worked out to be about 10 cents per share.

Seeing such a clean balance sheet, and a business that, albeit small, was generating positive cash flow, some value investors no doubt would have been tempted to buy the stock. And to be fair, the company did pay out dividend of about one cent a share every year since it was listed in 2004. One cent, on its initial public offering price of 28 cents, worked out to a dividend yield of 3.6 per cent a year.

With over 200 million shares outstanding and a dividend payout of one cent a share, the total payout amounted to over $2 million a year. According to the group's cash flow statements, it generated cash of $10 million from its operations in 2007 and $3.5 million in 2006.

But the unfortunate part is how the management had decided to do with the cash that it had opted to retain.

In June 20, 2007, AEI granted Hoi Po Metal Manufacturing a convertible loan sum of HK$20.49 million ($4 million). Hoi Po owns Dongguan Gaobao Aluminium Mfy. Co and Dongguan Gaobao Aluminium Melting & Casting Mfy. Co. The former is engaged in the design, manufacture and sale of aluminium products and the latter in the melting and casting of aluminium products.

The proceeds of the convertible loan are for Hoi Po to acquire plant and machinery and its other working capital purposes.

The aim of granting the convertible loan is so that AEI, at its option, can acquire an equity stake in Hoi Po. That investment, according to AEI, would allow it to access Hoi Po's product design, mould making and extrusion technology. This would provide it a lower cost platform to expand its own production capacity. The rationale made sense.

Nine months after the convertible loan agreement, AEI announced that instead of converting the loan into shares in the capital of Hoi Po, it had on March 26, 2008, entered into a non-binding memorandum of understanding with Hoi Po to set up a joint venture company to manufacture and sell aluminium products in China. The joint venture company, however, would buy over the assets of Hoi Po's two subsidiaries. The assets, however, were mostly mortgaged to various financial institutions in Hong Kong and in China.

Two weeks ago, AEI announced that the global financial crisis had affected the proposed joint venture's business prospects. And because its offer to purchase the assets for the joint venture from the Hong Kong and China financiers at a discounted rate were unsuccessful, it has decided not to proceed with the joint venture.

It is now rigorously pursuing its claims against Hoi Po to repay the convertible loan of about $4.04 million. Until the amount is recovered, AEI said it has provided for impairment of the total outstanding convertible amount in the year ended Dec 31, 2008.

Ok, as mentioned, the initial rationale for making the convertible loan made sense. The current financial crisis was not anticipated. So it is indeed excusable that the deal didn't work out as planned. And the benefit of the doubt is given to the management for having done the proper due diligence before making that $4 million convertible loan.

But the second investment done by AEI is more perplexing. In July 2008, AEI said it had entered into another convertible loan agreement, this time with M2B World Asia Pacific.

The loan amount was US$2.5 million, from July 8, 2008 until July 7, 2010. And M2B is an Internet TV operator whose business model was unproven and which had yet to make any sustainably decent profits.

What's an aluminium extrusion company investing in an Internet TV operator? And worse still, M2B was actually to be injected into Auston in a reverse takeover deal. After evaluating the deal, the Singapore Exchange rejected the proposal of the reverse takeover in January 2008, presumably because SGX didn't think the M2B business model was viable.

So what's AEI doing extending a convertible loan to M2B after it was denied entry into the Singapore bourse by SGX?

AEI said the convertible loan, should it decide to convert, would 'allow it to diversify its investment portfolio and give it an opportunity to participate in the growing new media broadband industry'. Furthermore, the convertible loan would provide it an enhanced yield of 5 per cent per year, it added.

As of today, it is not known how M2B World Asia Pacific is doing. But in an environment where even the most established of businesses are struggling, it in inconceivable that one with an unproven business model can do well.

So given the management's rather questionable decisions, it is no wonder that AEI is trading at 6 cents compared with its cash per share of 10 cents a share.

But even for big companies with a large cash pile that we know with a great degree of certainty is there, there is no guarantee that the management will not try to be too clever with the management of their cash pile.

A case in point is Venture Corp. This week, the contract manufacturer reported an applaudable set of results. Adjusted for one-off items, net profit for the whole year registered a decline of 10 per cent to $280 million, not a bad performance at all when compared to the dismal results of its peers.

The drag - its fourth quarter net profit declined 94 per cent to $5 million - was due to an additional provision of $58 million for impairment in collaterised debt obligations (CDOs) that it bought in 2004.

Venture had bought CDOs in 2004 to improve returns on its cash pile. The CDOs held by Venture were worth about $209 million in late August last year. The current value, as at end December, was $18.8 million.

What business does an electronics manufacturer have investing in derivatives? The consolation is Venture has been managing its core business well, and has been pretty generous in distributing its cash as dividends as well. It declared a 50 cents dividend, or 12 per cent yield compared to its recently traded share price. And it's been doing that for the past four years. Which is why investors were cheering it yesterday, sending the stock 7.3 per cent higher despite a totally depressing day in the stock market. We're sure Venture has learnt its lesson.

The writer is a CFA charterholder.

This article was first published in The Business Times.

DJIA in advanced stage of wave 5 move

2009-02-23T14:51:00.000+08:00

US indices have been in a downtrend for a month amid concerns over banking stocks, in particular Citigroup and Bank of America, with persistent rumours over their nationalisation by the US Government. Both stock gapped down on Friday but closed off their lows well below opening levels. Both stocks have fallen by more than 50% since February, suggesting the market is heavily betting on nationalisation.

For the Dow Jones Industrial Average (DJIA), we were on record as saying that a wave 5 move would eventually unfold and that the index should decline towards 6,900. This view remains valid. There is a strong likelihood this level would head to that level over the next seven days. We highlight two possible scenarios in this report. One is that the index is tracing out in a normal impulsive wave 5 decline towards 6,900 and the other, that the index traces out in a descending triangle formation or what is known as diagonal fifth in Elliott wave terminology. In both cases, we expect the index to test the 6,900 level. The positive divergence on momentum indicators suggests this is a terminal move and once complete, would give way to a significant rebound.

For Singapore, the minimum downside was the gap at 1,678. The index had declined below that level and the next important support is the November low at 1,570.

MCL Land FY08 Results - HOLD (Kim Eng)

2009-02-22T23:58:00.001+08:00

Previous Day Closing price: $0.66
Recommendation: HOLD (maintained)
Target price: $0.74 (reduced from $0.89)
Yield: 2008 - 15.2%, 2009F - 9.1%

MCL Land took a hefty US$180.2m write down of development properties for sale to post an FY08 net loss of US$107.3m, compared to a net profit of US$61.9m last year. Omitting the write down, core profits were actually in line with expectations, improving 23% yoy, following the completion of The Grange, Mera Springs and The Esta in FY08.

MCL has become the first developer under our coverage to make a write down of its landbank, and the scale of the write down is much larger than the US$28m we had expected. We estimate that the management is forecasting property values to decline by about 20% on the average, prompting the prudent write down.

The Group expects The Fernhill, Tierra Vue and Hillcrest Villa to be completed this year, Waterfall Gardens and D’Pavillion to be completed in 2010 and the Peak@Balmeg in 2011. The progress of the sales of new units at the Peak@Balmeg and D’Pavillion has been slow, with 25% and 28% of the units being committed for sale respectively, but cash flows will continue to come in from the other projects under construction.

We expect MCL to continue to market the remaining units at the Peak@Balmeg and D’Pavillion in phases. New launches are likely to be phased out further into the future. Having already been written down based on current weak market conditions, these future projects could still turn profitable when they are subsequently launched at a time when the market has recovered.

MCL’s balance sheet remains strong with a net gearing of about 0.5x, which we expect to be pared down as projects become completed this year and next. However, it has a high exposure to the mid-end residential segment, which may continue to see weak demand as the recession persists. Maintaining our HOLD recommendation with a target price of $0.74, pegged to a 70% discount to RNAV.

Cosco Corp: Results Preview - HOLD (Kim Eng)

2009-02-22T23:55:00.000+08:00

Previous Day Closing price: $0.785
Recommendation: Hold (maintained)
Target price: $1.35 (maintained)

Cosco Corp will be releasing its FY08 results this evening (23rd February 2009). We are expecting FY08 earnings to come in at around S$320m, versus consensus at S$330m. Our forecast is consistent with Cosco’s profit guidance made at the end of last year, stating that FY08 earnings will be lower than FY07. In context, Cosco recorded net profit of S$336.6m for FY07. With Cosco already having posted net earnings of S$326.5m for the first 9M08, the implied lowered loss in 4Q08 will mainly be due to provisions for doubtful debts.

Looking beyond FY08 results, we expect Cosco to earn S$408.2m in FY09, but once again, this may be hampered by further contract delays and cost overruns. While Cosco has consistently paid a healthy dividend of between 40-45% of its earnings in the past 3 years, we believe that this may be reduced due to 1) a much more challenging environment 2) decelerating earnings and 3) a more conservative stance adopted by the company under the new President.

Our SOTP fair value stands at S$1.35. Despite the potential upside, we are maintaining our recommendation at Hold, as we are still unable to determine the full level of provisioning at this point, raising the risk of further earnings downgrades. Cosco’s Price to Book stands at 1.5x, on Book Value of S$0.52.

Property Sector: Playing the absolute numbers game (DBS)

2009-02-21T22:13:00.000+08:00

By:Adrian Chua

The media reported today that a number of units at Alexis have appeared on the subsale market. Some mass market projects are also looking to be relaunched - with a discount - to woo pent-up demand, as developers take the opportunity to move some unsold stock. However, pent-up demand on the high-end market is still lacking, and it is this segment which reflects confidence more succinctly compared to the mass market, which tends to be dominated by owner-occupiers. Pent-up demand in select segments and discounting by developers do not signal a recovery. Maintain Cautious, and avoid high-end plays like SC Global (Fully Valued, TP S$0.42), Ho Bee (Fully Valued, S$0.34) and Wing Tai (Fully Valued, S$0.5Cool. Our buy calls are City Dev (Buy, S$6.74) and Wheelock Properties (Buy, S$1.1)

Alexis Units on Offer in Subsale Market. There were media reports today that a number of units at Alexis, which was sold out this weekend, have appeared on the subsale market.Units are reportedly going for a 10% premium to sale price. At the highest reported ASP of c.S$1,100 psf sold by the developer, this would translate to an offer price on the subsale market that is close to the peak S$1,250 psf achieved by nearby The Anchorage back in 1Q08 (notwithstanding the fact that said Anchorage unit is 144sqm with a price tag close to S$2mil). This reiterates what we had indicated in our earlier note on the Alexis - that the small quantum (absolute number) is what is driving sales for the project.

Price-Cutting By Developers, Sensing Momentum. This does not change the fact that there are some notable developers that have made the move to discount prices for some of their unsold-but-launched units, despite the fact that these developments were already largely below the S$800K "comfort zone" in the first place. In other words, developers are taking the opportunity of the appearance of pent-up demand in the mass market to move some unsold stock, albeit at a discount - which is different from developers suddenly realising that S$800K is a "comfort level". There is a fine line between finding an excuse and finding a reason. As reported, City Dev has relaunched a small number of units (30-50 units) at Livia at a c.5% discount to its previous launch price of around S$650 psf. We also understand that F&N will be relaunching some less-choice units at Waterfront Waves (Bedok Reservoir) at around S$650 psf, about 15-20% below its launch price of c.S$800 psf. GuocoLand will also try to move its remaining 182 unsold units at The Quartz (Buangkok) at around S$595 psf, which is just above our breakeven estimate and about 10% below its launch price of c.S$650 psf. It has good reason to do this - the project obtains TOP middle of this year, and the pressure to sell the remaining units will start to mount.

Maintain Cautious, Avoid High-End Plays. Many of the development looking to be relaunched (as highlighted above) have a substantial number of unsold units. Given that these developments have seen slow sales over the past few months, we believe the developers of these projects are now taking the opportunity to move more stock upon the sign of pent-up demand, and trading ASPs for sales, which has long been factored in and expected by the market. Pent-up demand on the high-end market, however, is still sorely lacking. Any developer looking to price above S$1,000 psf would have to take a leaf out of Alexis' book - play the absolute numbers game and go for smaller units. Unfortunately, confidence in the overall physical market is derived less from mass market offerings (which cater more to owner-occupation). Evidence of pent-up demand and developers discounting their unsold mass market properties to move stock do not signal a recovery, in our opinion. We remain Cautious on the developers and would avoid the high-end names - which are seeing no signs of pent-up demand as yet. We have Fully Valued calls on SC Global (Fully Valued, TP S$0.42); Ho Bee (Fully Valued, S$0.34) and Wing Tai (Fully Valued, S$0.5). Our buy calls are City Dev (Buy, S$6.74) and Wheelock Properties (Buy,S$1.1).

$800 or $1,200 Gold, Panic Vs. Inflation

2009-02-21T06:21:00.001+08:00

$800 or $1,200 Gold, Panic Vs. Inflation, ETF’s (GLD, UGL, DZZ, DGP, DGZ, GDX)
Posted: February 21, 2009 at 8:43 am

http://247wallst.com/2009/02/21/800-or-1200-gold-panic-vs-inflation-etfs-gld-ugl-dzz-dgp-dgz-gdx/

We have probably covered more gold stocks over the last couple of months than we care to recall, but we have been getting more and more inquiries on the ETF’s and on how to play the shiny yellow stuff directly. When we see the media covering any topic with this frenzy and traders getting more and more interested, history and calm dictate that an inflection point has been reached. Following this inflection point is almost certainly what will be a sharp move in either direction. Gold breached the $1,000.00 threshold Friday as panic set further and further in, so in theory we could either be at $1,200.00 or $800.00 with a near-equal probability in just a few months.

For starters, let’s go ahead and get the “why do you think $1,200.00 or $800.00 is imminent?” question addressed. Every time you see major inflections like this, there is either the panic buying or the crescendo selling. Oil is the best and most recent example of this. When oil was trading north of $90.00 for the first time and everyone was scared of $100.00 oil, it became a chasing game and a game based upon speculation rather than a game based upon reality. We had many traders calling for $120.00 and we had many oil companies saying that anything north of $75.00 did not make sense to them. So use the $100.00.00 level as the key pivot. It turned out that both the traders and the oil companies were right. It also turned out that they were both wrong. Oil went to twice what many of those oil companies thought was a peak intrinsic value. And in just six months or so it was back to half of that same “intrinsic value” of $75.00.

Gold may be a perfect hedge against inflation. But what you are witnessing today is that gold is also a pure hedge against fear. There is fear of nationalizing some of the major banks. There is a fear that the DJIA could go to 6,000 and the S&P 500 could go to under 700.00. There is a fear that unemployment will hit double-digit levels. And there is a fear that our massive and nasty recession is going to be the modern day version of the 1930’s. These are currently all real fears, and this has not yet happened. A year ago the DJIA was north of 12,000 and the S&P 500 was north of 1,300.00. The closing levels yesterday were 7,365.67 on the DJIA and the S&P 500 closed at 770.05.

Yesteryear’s $1,000.00 gold was inflation related trading. Today’s $1,000.00 gold is the hedge of fear. Again, we are merely saying that this $1,000.00 mark is an inflection point. The cases for $800.00 or $1,200.00 are equally as easy to make. OK, so you got the history lesson and you have the most basic explanation for why gold is where it is.

But there is another issue affecting the price of gold today. Exchange traded funds and exchange traded notes. Investors and traders are buying the hell out of these. These ETF’s and ETN’s have to in turn go into the spot market and futures markets and buy the shiny yellow stuff. We have seen some figures showing that there could be as much as $100.00 or $200.00 extra in the price of gold because of the ETF’s and ETN’s buying it up. That number is probably impossible to give with any certainty, and you have to always use the notion that things are worth what the market is willing to pay for them. So whether gold is overvalued or undervalued, the value IS almost $1,000.00 today. This is also happening at a time when the banks and hedge funds that would have been buying can only do it with minimal leverage rather than the massive leverage used just a year ago.

SPDR Gold Shares (NYSE: GLD) is the mother load of all gold ETF’s. It tracks the performance of the price of gold bullion, less the trust expenses of course. It holds gold and is expected to issue baskets in exchange for deposits of gold. For fair measure, you can usually take the ratio at one-tenth to see where the price of spot gold happens to be. There are then the trust fees and the discrepancy of time and whichever direction the wind blows that factor in on its actual pricing. This closed at $97.80 Friday vs. $993.20 in spot gold. Again, not a perfect 1:10 ratio, but close enough. There are also large discrepancies in the actual market cap: Yahoo Finance shows $24.93 billion as this ETF market cap, and Google Finance shows $27.47 billion. The SPDR site itself shows a market cap of $24.891 billion. This one is massive regardless. To show how much of a bogey it is, it trades over 16 million shares on an average day, but it traded over 43 million shares Friday and on February 11 it traded some 55 million shares. On two different days in September its volume was north of 60 million shares.

Then there is the schizophrenic gold ETF that is supposed to employ TWO-TIMES leverage on gold. The Ultra Gold ProShares (NYSE: UGL) seeks to replicate, net of expenses, twice the performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. The difference here between this is that it has to use “financial instruments”… swap agreements, forward contracts, and futures and options contracts. So besides the fact that it aims for twice the performance, it has an extra measure of added volatility in its trading. ProShares lists its net asset value premium and discount as having been roughly -2.0% to as high as +6.0%. It noted Friday’s level was a premium of $0.44. It trades over 200,000 shares per day, but it traded over 664,000 yesterday and it saw some 882,600 shares trade hands on FEB 17. As gold is on highs, this one is too.

There are also two ETN’s which essentially offset each other. PowerShares employs more DOUBLE-LEVERAGE ETN’s. The PowerShares DB Gold Double Short ETN (NYSE: DZZ) and the PowerShares DB Gold Double Long ETN (NYSE: DGP) are the leveraged instruments. The PowerShares DB Gold Short ETN (NYSE: DGZ) is just the inverse, just… The average volume on these can be lower as well. “DZZ” traded over 1.6 million shares Friday, more than double its normal volume. “DGP” traded over 4.2 million shares Friday, almost twice its normal volume. DGZ traded over 38,000 shares Friday, about 150% of normal volume.

One gold ETF that is not keeping up with the shiny yellow stuff is the Market Vectors Gold Miners ETF (NYSE: GDX). While it closed up almost 4% at $37.03 Friday, its 52-week trading range is $15.83 to $56.87. This one tracks the Gold Miners Index in proportion to the company weighting in the index, so it invests in the common stocks of global gold miners which are not all US-based companies. Our most recent data shows that Barrick Gold, Goldcorp, and Newmont account for almost 35% of the entire ETF. Its 25 top holdings also account for about 97.8% of the entire ETF. It trades an average of over 8.5 million shares, and it saw over 19.5 million shares trade hands Friday.

We are not going to give trade set-ups here for how you can bet on $1,200.00 or $800.00 gold. That will either be done tomorrow or in our newsletters. And early this week we’ll show you how and why many of the more speculative gold stocks have not been tracking the price of the shiny yellow stuff.

JON C. OGG
February 21, 2009

Oil ETF: USL vs USO

2009-02-19T08:25:00.006+08:00

Dont-Buy-USO-Buy-USL-indexuniverse-14295114.html

OCBC offers scrip dividend (ST)

2009-02-18T23:23:00.000+08:00

OCBC's fourth quarter results are broadly in line with the lower earnings reported by DBS Group last Friday.

Its core earnings for October to December fell a staggering 41 per cent to $250 million even though it managed to grow the income it got from its core banking business by 28 per cent to $783 million.

This is due mainly to a sharp 44 per cent drop in non-interest income to $259 million and a big jump in provisions for bad loans to $243 million from a mere $13 million in the same period last year.

Rather than do a rights issue, it plans to reactivate its scrip dividend scheme and give shareholders the option to receive the final payout of 14 cents a share in the form of shares. It is sweetening the move by setting the issue price for the new shares at a 10 per cent discount to the average closing price of OCBC between the ex-dividend date and the book closure date.

If all investors take up the dividend in the form of scrips, the bank can retain $437 million in capital - a tidy sum not to be sniffed at. Given the current depressed level of its share price - it now trades at a six-year low - some investors may well take up the offer.

SGX - Trading idea (AmFraser)

2009-02-18T22:31:00.001+08:00

As the STI is likely to rebound significantly in the event of test of 1600-1610 strong support, SGX which has been holding up well above $5 since Jan 28, should be rebounding around current levels.

In fact it could be a rare chance to pick up the stock whose 7-day RSI is below the 30 buy signal line, which only took place at the time of October and November respective lows of $4.15 and $4.31.

In addition SGX has also dipped briefly below the last Bollinger band today which had also taken place for 3 days each in Oct/Nov.

The cautious trader may want to wait for another couple of days for it to stay below the lower band. As yesterday marked the first day of sharp fall after range trading between $5.02 and $5.28 for the last 3 weeks, the trading chance may be gone if traders wait for the stock to fall below today’s $4.77 low.

On the other hand, with break of strong 1640-1670 STI support and the Dow just a whisker away from last year’s intra-day low of 7449, SGX may be vulnerable to selling pressure.

But last year’s 1600 closing low is unlikely to give way at the first test and the market should rebound back to 1660-80 in the next few days and SGX too should be back to above $5. Resistance at $5.22

Venture Corp: FY08 Results Preview - HOLD (Kim Eng)

2009-02-18T21:50:00.001+08:00

Previous Day Closing price: $4.03
Recommendation: HOLD (maintained)
Target price: $4.64 (reduced from $5.22)
Yield: 2007 - 14.5%, 2008F - 13.7%

We expect 4Q08 revenue to have fallen 5% yoy to $913m, bringing full year revenue to $3.79b, down 2%. If Venture decides to write off its remaining CDO exposure of $90.7m once and for all, full year net profit is forecast to be $112.5m (implying a 4Q loss of $51m). Excluding any mark-to-market, our full year forecast will be $199m implying 4Q profit of $36.7m, down 51% yoy. Its equity stake in DMX (investment cost $82.5m) could also be impaired but has not been assumed in our forecast.

Based on our pre-MTM FY08 forecast of $199m, Venture currently trades at 5.6x, below the sector average of 7.0x. However, we do not think the stock is undervalued. We note that our forecast is lower than consensus of $231m, which seems rather high given that 9M08 profit was only $162m, implying a tall order profit of $72m in 4Q08. As such, we reckon the stock is already fairly priced. Maintain Hold.

Indo Agri: BUY (Kim Eng)

2009-02-18T21:47:00.001+08:00

Previous Day Closing price: $0.555
Recommendation: BUY (maintained)
Target price: $1.65 (maintained)

Indo Agri has announced a “noncash” writedown of Rp663 billion, or around S$85.6m, arising from the changes in fair values of biological assets for 4Q08 and FY08. To recap, the reporting of gain or loss arising from the changes in fair values of biological assets is in accordance with SFRS 41 of the Singapore tax code. We emphasize that the write-down is non-cash and nonoperational in nature. IndoAgri expects to remain profitable in FY08.

ST Engineering FY08 Results - BUY (Kim Eng)

2009-02-18T21:42:00.001+08:00

Previous Day Closing price: $2.06
Recommendation: BUY (maintained)
Target price: $3.60 (maintained)

STE recorded a FY08 net profit of S$473.6m from FY07’s S$503.5m, which included an impairment charge for investments of S$25.9m. Stripping this out, net profit was in line with our forecasts, and flat YoY. STE has also proposed a final dividend of 12.8cts per share, and coupled with the interim dividend of 3ct per share, STE has continued its policy of paying out 100% of reported earnings (including its impairment charge) as dividends, with a dividend yield at 7.7%. Return on equity was maintained at an impressive 30%.

Suntec REIT: Moody's Outlook Negative

2009-02-18T12:06:00.000+08:00

DJ MARKET TALK: Suntec REIT May Slip; Moody's Outlook Negative

0059 GMT [Dow Jones] Suntec REIT (T82U.SG) may slip after Moody's rating agency changed outlook to negative from stable. Moody's says, "the negative outlook change reflects Moody's view that Suntec is faced with considerable medium-term uncertainties due to the expected continued weakening of the Singapore economy and office property market." Adds reduced tenant demand, moderating rents, declining asset values also a factor. Rating agency also concerned that REIT's liquidity profile depends on successful refinancing of sizable debts maturing Dec. 2009, says refinancing likely more challenging in light of weak financial markets, risk aversion among lenders. Pre-open order book quotes show selling interest down to S$0.575, buying interest heaviest at S$0.58; shares closed flat at S$0.595 yesterday. (KIG)

Midas Holdings: Initiation Report - BUY (Kim Eng)

2009-02-17T22:06:00.000+08:00

Previous day closing price: $0.525
Recommendation: Buy
Target price: $0.69
Yield: 2007 - 3.8%, 2008F - 2.9%

Midas established a strong presence in the highly specialised aluminium alloy train profiles market in the PRC within a short span. Despite being a late entrant, it has secured an impressive 80%-market share for components that are used in high-speed train/metro bodies. It is also the only PRC supplier certified by all top three global train manufacturers: Alstom, Siemens and Bombardier.

Due to its prudent stance and effective capital management, Midas has been in a net cash position since its listing despite paying attractive and regular dividends. This will allow the group to fund its expansion plans for the next growth phase, including capex plans of S$85m.

With FY09 being a year of consolidation for Midas as its 3rd production line and downstream fabrication activities come onboard, we have used FY10 estimated profits in our SOTP approach. We value Midas at 12X its net core earnings and 15X NPRT net profits. Our target price of S$0.69 will provide a 31.4% upside.

Singapore Airlines: Company Update - BUY (Kim Eng)

2009-02-17T22:01:00.000+08:00

Previous Day Closing price: $10.44
Recommendation: BUY (maintained)
Target price: $13.20 (reduced from S$14.40)
Yield: 2008 - 9.6%, 2009F - 6.2%

We forecast passenger loads to decline by 6% in FY10, following no growth for FY09, while we peg cargo’s decline at 7%, following FY09’s 10% decline. For yields, we have reduced our FY10 and FY11 assumption of passenger yields to 10.5cts/pkm, and cargo at 35cts/ltk. Given that the outlook for air travel remains weak, we anticipate that jet fuel prices will correspondingly stay low. Coupled with cost reductions, the net effect is that we are reducing our FY10 forecast by 35% to S$1,082.5m.

The market has been anticipating a slowdown for SIA – however, we still see value, as it is trading below its trough Price to Book of 0.85x, at 0.8x currently. However, in line with our earnings reduction, we have reduced our price target to S$13.20 from S$14.40, or 1x FY09 Price to Book.

CitySpring Infrastructure Trust 3QFY09 Results - BUY (Kim Eng)

2009-02-17T21:55:00.000+08:00

Previous Day Closing price: $0.52
Recommendation: BUY (maintained)
Target price: $0.84
Yield: 2008 - 13.6%; 2009F - 13.5%

3Q09 cash earnings increased significantly to S$20.3m compared to the S$1.1m in 2Q09. Cash earnings for 9M09 amounted to S$39.1m, representing 78% of our full year forecast. The Group will pay a DPU of 1.75 cts for 3Q09, representing a 42% payout from cash earnings for the quarter, and expects to meet its DPU commitment of 7 cts for FY09.

The underlying businesses continued to be cash generative. City Gas contributed the bulk of the increase in cash earnings due to the lower fuel costs this quarter and a 7.7% yoy increase in the volume of gas sold. The gas tariffs have been adjusted from 1 Feb 2009 to reflect the lower fuel costs. 75% of cash earnings for the quarter were attributable to City Gas.

The Group turned in a net loss after tax of S$21.2m due mainly due to a fair value loss on the hedging agreement (FIRD) linked to Basslink. In view of falling interest rates in Australia, the management is managing its exposure to interest rate movements below the benchmark rate by purchasing an interest rate floor for an over-hedged portion of the FIRD.

Group NAV/unit was $0.11 compared to $0.52 as at Sep-08, dragged down by negative hedging reserves of $210m mainly related to the interest rate hedging agreement with Hydro Tasmania on a notional debt level of A$625m. The 3-month bank bill rate, which declined about 40% between Mar and Dec-08, resulted in the huge movement in the fair value of the hedge. The depreciation of the A$ against the S$ between the two periods has also caused the reduction in NAV. Excluding the reserves, NAV is $0.60.

The DPU commitment of 1.75 cts for 4Q09 remains intact. The board has not committed to any DPU guidance beyond FY09. However, surplus cash accumulated so far is sufficient to cover DPU of 1.75 cts for the next four quarters. The downtrend in the A$ interest rate may widen the hedging reserves and result in a negative equity, but our valuation remains supported by stable cash flow from the businesses. With a forward yield of 13.5%, we maintain our Buy recommendation.

UBS cuts DPU forecasts for retail Reits by 30%

2009-02-17T12:09:00.000+08:00

Business Times - 17 Feb 2009
UBS cuts DPU forecasts for retail Reits by 30%
It sees retail sales here sliding 4-5%; rents falling due to space oversupply
By UMA SHANKARI

(SINGAPORE) Retail sales here could slide 4-5 per cent this year, says UBS Investment Research, which has also cut its distribution forecasts for Singapore's retail trusts by up to 30 per cent.

After several downgrades, UBS economists now expect Singapore's GDP to shrink 3 per cent and inflation to fall to 0-1.5 per cent this year, saying that this will hit retail spending and rents.

In the past, retail sales correlated with GDP growth, UBS says. In the 2001 recession, they weakened 2.2 per cent, in line with a GDP contraction of 2.3 per cent. And rents in the central area fell 19 and 14 per cent in the 1998 and 2001 recessions respectively.

'As a recession of minus-3 to minus-4 per cent is expected for 2009, we expect retail sales to fall around 4-5 per cent before recovering to 3 per cent a year in 2010-2012,' UBS says in a report issued on Friday last week.

Previously, when retail sales declined during recessions, the supply of new retail space was limited, providing support for rents, UBS says. But, as well as the current weak economic climate, there is an unprecedented supply of new retail space coming up, especially in the Orchard Road area.

UBS reckons overall retail space supply could rise 11 per cent in 2009-2011, with Orchard Road supply up by 37 per cent.

'As a result, we now expect retail signing rents to fall 8 per cent in 2009-2010 in the suburban areas, and around 23 per cent in 2009-2010 in the Orchard Road area,' it says.

So far, Singapore-listed real estate investment trusts (S-Reits) have not seen a substantial drop in retail sales at their malls, UBS notes.

But discretionary sales could deteriorate, it says. 'We expect the impact to be limited for the suburban portfolios but materially negative for central area malls, mainly due to high supply.' Based on the current trade mix, UBS reckons suburban malls will be less affected by weakening retail sales.

With this in mind, it has cut its distribution per unit (DPU) forecasts for Singapore retail Reits by up to 30 per cent this year and 40 per cent in 2012.

UBS has 'buy' calls on four retail S-Reits - CapitaMall Trust, Suntec Reit, Starhill Global Reit and Frasers Centrepoint Trust.

F&N: Balance-sheet risks mounting - UNDERFORM (CIMB)

2009-02-17T07:25:00.001+08:00

1Q09 core net profit of S$71.4m forms 17% of our full-year forecast as lower property bookings and weaker dairy income due to the melamine scare proved to be drags. We believe results were below consensus as well.

Net gearing at 1Q09 was 0.66x, within the upper bound of its big-cap property peers. Potential write-downs of F&N’s UK and Australia properties could lift this ratio. While we take comfort in guidance that refinancing for over S$1bn of the S$1.7bn worth of maturing debt has been secured, risks of off-balance sheet commitments to re-capitalise FCOT remain, with the latter needing to retire over S$620m of maturing debt in 2009. A short-term loan of S$70m has already been given to the REIT. It remains to be seen if FCOT can successfully monetise its Japanese and Australian assets to pare down debt.

We lower our FY09-11 core EPS estimates by 0-19% to factor in slower inventory turnover and F&B income. We also reduce our end-CY09 RNAV by 13% to S$3.80 to account for: 1) potential capital drains to recapitalise FCOT; 2) lower valuations for its stakes in listed entities; and 3) lower ASPs. We continue to peg our target price at a 30% discount to RNAV to reflect its holding company structure and rising risks of asset write-downs. Accordingly, our target price drops to S$2.66 from S$3.09.

Suntec REIT: Target cut to S$0.73 - BUY (DB)

2009-02-16T22:38:00.000+08:00

DJ MARKET TALK: DB Cuts Suntec REIT Target To S$0.73; Keeps Buy

0105 GMT [Dow Jones] STOCK CALL: Deutsche Bank cuts Suntec REIT target price to S$0.73 from S$1.00; maintains Buy rating. Broker says new target price reflects "dilution scenario" based on assumption REIT will issue new equity to help refinance debt maturing this year. But thinks refinancing risks already priced in; "we believe that dilution for an equity raising to refinance S$825 million of debt expiring this year is priced in, and a successful refinancing could lift this overhang." Adds weakening retail sales, declining office rents will affect REIT's portfolio, but this is also already reflected in low valuation with REIT offering 15.7% FY09 yield, deep 69% discount to book net asset value. Shares down 0.8% at S$0.605. (KIG)

(END) Dow Jones Newswires
February 16, 2009 20:05 ET (01:05 GMT)

DBS: 4Q08 results update - Hold (Kim Eng)

2009-02-16T22:13:00.000+08:00

Previous Day Closing price: $8.39
Recommendation: Hold (maintained)
Target price: $10.10 (reduced from $10.60)
Yield: 2008 - 9.5%, 2009F - 4.2%

DBS posted a bottom line of $295m (-22% q-o-q; -40% y-o-y) including one-time charges from staff restructuring and impairment costs. Excluding one-time items, net profit was $383m in 4Q08, slightly below our expectations of $391m. The variance was mainly due to weaker than expected fee-based income. The board proposed a fourth-quarter dividend of 14 cents per share over the enlarged share base.

We have reduced our FY09 and FY10 earnings estimates by 15-20% to reflect higher provisions. Our target price is lowered to $10.10 based on FY09 BVPS (book value per share). The weak economic outlook and earnings uncertainties ahead will likely continue to depress share price. Maintain Hold.

Fraser & Neave 1Q09 Results - BUY (Kim Eng)

2009-02-16T22:09:00.000+08:00

Previous day closing price: $2.90
Recommendation: Buy (maintained)
Target price: $3.36 (reduced from $3.95)
Yield: 2008 - 4.3%, 2009F - 3.5%

1Q09 profit plunged 50% yoy to $52m, mainly due to fair value revaluations of its property business. Negative revaluation of overseas projects carved out almost $39m in profit, although this was offset by $37m in revaluation and exceptional gains. Operationally, earnings fell only 6% yoy to $86m. The F&B business, except Dairy, stayed resilient, with exceptional growth from Breweries.

F&B PBIT rose 9% yoy to 50% of group profits, led by soft drinks (+19%) and breweries (+13%). Margins improved on higher volumes, price increases and in certain countries such as Papua New Guinea and China, currency appreciation as well. However, dairies were hit by lower export sales and lower domestic sales in Thailand, due to the melamine scare and weaker economic conditions.

We have cut FY09 forecast by 26% and RNAV to $3.36. However, we reckon F&N’s pursuit of a business mix rebalancing to even out property volatility could yield some catalysts. Further, we reckon at the current share price, further fair value revaluations have been accounted for. Maintain BUY.

ComfortDelgro: Positioning for the long term - BUY (DBS)

2009-02-13T22:53:00.000+08:00

4Q/FY08 net profit were within expectations. But, a lower dividend payout at 52% versus past 4 years was a surprise. It seems like management is conserving cash for acquisitions, which should be beneficial over the long term, given its track record. Maintain Buy, TP: S$1.57.

The Group declared a final dividend of 2.4cents, equating to a 52% payout, which was below our expectations of 70% and the range in the last 4 years (75% - 85%). We think management is conserving cash for overseas acquisition opportunities, particularly in Australia and China.

The recent Budget measures will yield S$35m for the Group and will be passed on as rebates and the widely anticipated fare reductions later this year. We do not expect the fare reduction to have a significant impact on the Group’s bottomline.

Whilst the market may be disappointed by a lower dividend payout versus its historical average, we think this may be beneficial for the Group in the long-term if they are able to deliver on accretive acquisitions to reinforce its overseas growth. We maintain our Buy recommendation with a TP: S$1.57 based on 15x FY09F earnings.

COMFORTDELGRO - BUY (DMG)

2009-02-13T22:40:00.000+08:00

BUY: Maintain
Price: S$1.32
Target: S$1.78
Yield: 2007 - 7.7%, 2008 - 3.8%

ComfortDelgro reported 2008 net profit of S$200.1m, down 10.3% YoY. This is in line with our S$198.3m expectation and consensus’ S$195m.

WTI price was fallen from 2008 average of US$100/bbl to the current US$36/bbl. Although ComfortDelgro has hedged 43% of its 2009 diesel requirements (at higher-than-current WTI prices), there will be cost savings from the balance 57% that is unhedged. We are assuming effective 2009 WTI price of US$63/bbl for ComfortDelgro, which will lower its 2009 energy costs by 30% from 2008 levels. We expect 2010 earnings to rise further on our assumption of 2010 WTI price of US$45/bbl.

ComfortDelgro declared a final dividend of 2.4S¢/share, giving a FY08 payout ratio of 52%. This is sharply lower than FY07’s 85% (which includes special dividend). The market is likely to be disappointed with this. Looking ahead, management said that they will payout more than 50% of its earnings.

Comfortdelgro - OUTPERFORM (CIMB)

2009-02-13T22:30:00.000+08:00

Previous day closing price: $1.32
Recommendation: OUTPERFORM (maintained)
Target price: $1.84 (reduced from $1.97)

4Q08 net profit of S$44.8m (-6.3% yoy) was marginally above our estimate but ahead of consensus. FY08 net profit of S$200m was 2.3% and 6.4% higher than our forecast and consensus respectively. This was mainly due to lower-than-expected operating expenses in 4Q08. FY08 pretax margins slipped to 9.7% from 11.2% in FY07, but were steady yoy at 9.6% in 4Q08. Revenue fell 1.7% yoy to S$760m, led by forex translation of A$ and ₤. Overseas operations contributed 43% of revenue in FY08. A final tax-exempt dividend of S$0.024 was declared.

Bus revenue dipped 0.3% yoy to S$1,533m in FY08, due to the translation impact of a weak A$ and ₤ against S$. However, strong growth came from rail (+22.1% yoy), diesel sales (+31.9% yoy), automotive engineering (+40.3%) and vehicle inspection (+16.5%). Excluding the negative forex translation impact of S$140m, revenue would have risen S$244m (+8.2% yoy). A positive translation of S$133m from operating expenses mitigated this. The net forex translation impact for the group was a manageable loss of S$7.1m.

We adjust our FY09-10 forecasts by +4.2% to -5.5% to reflect retreating energy prices, higher ridership and forex translation. We also introduce FY11 forecasts. Due to our earnings changes, our DCF-derived target price falls to S$1.84 from S$1.97 on an unchanged WACC of 11%. Management guided for a minimum 50% dividend payout and no special dividends for FY09, translating to a prospective CY09 dividend yield of 4.4%. Maintain Outperform on the back of its defensive earnings.

Singapore Land FY2008 Results - BUY (Kim Eng)

2009-02-13T17:21:00.002+08:00

Previous Day Closing price: $3.22
Recommendation: BUY (maintained)
Target price: $4.44 (reduced from $4.57)

SingLand recorded a loss of $117.4m in FY08, compared to a staggering net profit of $1.36 bn the previous year. However, the bottomline volatility is largely caused by fair value revaluations of its investment properties. On a core earnings basis, net profit actually rose by 15% yoy to $158.5m due to higher rental and hotel income.

Operationally, SingLand enjoyed a 24% yoy increment in its gross rental income. Gross revenue from Pan Pacific Hotel also improved by 47% to $117.4m. We expect SingLand to continue to benefit from positive rental reversions from its office properties, but the negative impact of the economic downturn is likely to hit its hotel earnings.

SingLand’s portfolio of investment properties experienced a 6.3% overall decline in fair value as compared to June 08. Flagship SingLand Tower suffered a 10% decline in its valuation, but Marina Bayfront suffered a steep 25% drop in value, possibly due to Merrill Lynch shifting some of its operations to its new building at Harbourfront. Capital values are likely to decline further, and we expect more fair value losses going forward.

UOL has made a conditional cash offer for UIC, which owns 72.4% of SingLand. Should the offer be unconditional when UOL receives a 50% acceptance for UIC shares, UOL will then make a mandatory conditional cash offer of $3.57 per SingLand share, by virtue of the chain principle. The offer price is at a steep 60% discount to our FY09 RNAV.

We believe that the shareprice has already over-compensated for further fair value losses on its investment properties. We also believe that UOL’s bid for UIC is in part motivated by the value they see in SingLand, which forms a substantial part of UIC’s NAV. We maintain our BUY recommendation, with a target price of $4.44 at a 50% discount to RNAV.

Fraser Commercial Trust: FY08 Results

2009-02-12T19:04:00.001+08:00

Previous day closing price: $0.205
Recommendation: SELL (downgraded from HOLD)
Target price: $0.14 (reduced from $0.21)

Full year results were disappointing, although not unexpected. Revenue was up 42.1%, net property income up 31.8%, but DPU fell 5.1%. Revenue increased on the back of full year contributions from acquisitions and the fall in DPU is mainly attributed to higher borrowing cost.

Portfolio size dropped 13%, mainly due to translation losses of the Australian properties and also downward valuation of AWPF wholesale fund, Keypoint building and Cosmo Plaza. NAV thus fell from $1.42 in FY07 to $0.97 in FY08.

FCOT has $620 million to refinance this year, $70 million of which comes due in May 2009 and the rest in Dec 2009. In Nov 2008, F&N demonstrated its show of support by extending a loan of $70 million to FCOT at an interest rate of 3.73%. With its sponsor support, short term financing is not a problem for FCOT. The real test is towards the end of the year where the refinancing quantum is much higher.

We do not think DPU is going to get any respite in the near term. We factor in lower contributions from Australia and also make an allowance for higher tenant vacancies. Another dilution to DPU is the issuance of management fees in units. Approximately 29 million units were issue in lieu of management fee for FY08 versus 8.3 million units in FY07. If share price continues to remain depressed, we project a further 45 million units will be payable for FY09 and DPU will thus be further diluted. We do not rule out an equity fund raising either as gearing is currently at a high of 57%.

Shares: 736.047 mil
Market Cap: S$147.21 mil
Trailing PER: N.A
Forward FY09 PER: 6.06
P/BV: 0.21
52-weeks Price Range: S$0.195 – S$0.87
52-weeks PER Range: 1.47-21.6
Major Shareholder: F&N (20.6%), Capital Group (9.86%)
Dividend Yield: FY07 - 32.8%, FY08 - 30.8%, FY09F - 21.8%

Source: PhillipCapital, 12 Feb 2009

MacarthurCook Industrial REIT 3QFY09 Results

2009-02-12T18:51:00.000+08:00

MIREIT’s credit rating was downgraded by Moody’s to B1. The main reason for the downgrade is the impending refinancing need of MIREIT for its debt of $220.8 million due in April 2009. This is also our main concern regarding MIREIT. Although we understand the REIT manager has been in talks with various parties, nothing has been announced thus far.

Financial results are in line with expectations. Revenue for 3QFY09 is up 54.0%, net property income increases 49.1% and DPU increases 22.4%. MIREIT has maintained a quarterly DPU of 2.35 cents for FY09. Quarterly payout ratio was 92.7%, 87.7% and 98.5%. We believe the REIT manager has anticipated higher operating cost and therefore has maintained a fixed quantum of quarterly DPU so that there is buffer to withstand any volatility. With the retained cash on hand, MIREIT should be able to maintain at least the same amount of DPU for 4QFY09.

Shares: 261.716m
Market Cap: S$69.35m
Trailing PE: 1.65
Forward PE: 3.73
P/BV: 0.27
52-week Price Range: $0.225 - $1.20
52-week PE Range: 0.77 – 7.25
Major Shareholder: MCK Ltd – 15.21%; UBS AG – 5.75%
Dividend yield: 2008 - 28.3%; 2009F - 36.3%; 2010F - 32.4%

Source: Phillip Securities, 12 Feb 2009

OCBC 4Q08 earnings preview - HOLD (Kim Eng)

2009-02-12T14:52:00.000+08:00

Previous Day Closing price: $5.08
Recommendation: Hold (maintained)
Target price: $5.10 (maintained)
Yield: 5.0% (2008F)

OCBC will be releasing its 4Q08 results on 18 Feb. We are expecting the group to post a net profit of $382m in 4Q08 which is moderately below Bloomberg consensus estimates of $389m. Assuming that its dividend payout policy stays at 45%, a final DPS of 9 cents could be expected.

Insurance income is likely to stay subdued (we are expecting a 24% y-o-y decline) as more than 50% of GEH’s revenue is derived from investment profits that are hard to replicate in the current environment. The surge in life assurance profits led by mark-to-market gains seen in 3Q08 is highly unsustainable.

OCBC’s Tier-1 CAR of 14.4% is currently the highest among the Singapore banks after it raised 2 preference share issues of up to $2.5bn last year. The preference shares carry a fixed dividend rate of 5.1% per annum, payable semiannually. Its strong Tier-1 CAR that way exceeded MAS’s requirement of 6%, provides a good safety net to cushion against the downturn.

We believe OCBC’s current premium valuations to the sector average of 0.9x PBV reflect its superior capital strength. We are keeping our Hold rating on the stock and prefer an entry level of $3.60 on 0.8x book value as at Sep 08.

ASL Marine: 2Q09 Results - BUY (Kim Eng)

2009-02-12T14:44:00.000+08:00

Previous day closing price: $0.45
Recommendation: Buy (maintained)
Target price: $ (maintained)

ASL Marine posted a 2Q net profit of $16.3m, up a steady 10.6% over 2Q08, and against revenue growth of 7.7%. The margin improvement came from the shipchartering business, where management has indicated that rates have stayed firm.

Segmentally, shipbuilding and charter turnover were maintained at a steady level sequentially, as shipbuilding continues to convert on its orderbook of S$663m, and utilisation of charter vessels remains high. Shipbuilding margins were maintained at 9.8%, while shipchartering saw gross margins improve to 35.6% due to a firming up of charter rates. However, shiprepair saw a sequential decline in turnover due to recognition timing, but margins remained very healthy at 32.1%.

For shipbuilding, ASL will be recognising approximately S$172m worth of revenue in 2H09. However, it has not received any new orders recently, which is in line with the cautious outlook for shipowners in the current economic climate. However, ASL so far has had no issues with the usual worries currently plaguing the industry: it has not seen any order cancellations nor has any of its customers approached it for re-negotiation or delayed delivery. The overwhelming majority of its orderbook has already secured financing as well.

ASL has advised that its shiprepair business remains healthy, with a high level of enquiries. However, ASL is bracing for potential slowdowns through lower contracts and/or lower scopes of work, which it believes is inevitable. For now, the repair of specialised offshore vessels in particular remains in demand, and ASL will continue to capitalise on this. Its Batam yard expansion is also proceeding on track.

Our FY09 net profit of $72.2m is maintained, as is core net profit at S$60.2m, which excludes an S$11.3m one-off gain in 1Q09. Our target price of S$1.62 still stands, based on 8x core FY09 earnings. This implies significant upside for an undervalued stock, trading at just 2.3x core PER and a Price to Book of just 0.5x.

Metro 3QFY09 Results by Kim Eng

2009-02-12T06:31:00.002+08:00

Previous Day Closing price: $0.28
Recommendation: Hold (reduced from Buy)
Target price: $0.27 (reduced from $0.69)

Metro reported a 97% slide in 3Q09 net profit to $0.6m due mainly to the following. First, a $6m unrealised fall in investments, mainly holdings in REITs. Second, retail profit was affected by lower sales following a store closure in Singapore last year and poor economic conditions, as well as new store start-up costs in Indonesia. Third, a exceptional gain of $24.5m in 3Q08 from the sale of Gurney Plaza did not recur this year.

We estimate core net profit before the investment mark-to-market loss was $6.6m, bringing 9M09 net profit to $20m, or 81% of our original full year forecast. 9M09 profits are also higher by 22% from an estimated profit of $11.5m in 9M09, which is adjusted for MTM losses and measured on a continuing operation basis (i.e. excluded Gurney Plaza rental and closing down profits from Metro Tampines).

In the past two years, Metro had declared a 1 cent interim dividend and a 3 cent special dividend. This year, it did not declare an interim dividend and a special dividend is also in doubt. While cashflow is unimpeded, it may reserve cash to repay debt and to fund its new China projects. Without a special dividend, yield becomes merely ordinary at 7%.

We have cut our RNAV for Metro to 28 cents. As the last valuation of its investment properties (which account for 85% of RNAV) was done a year ago, the China slowdown could lead to severe loss of capital value. As such, we have deepened our discount assumption from 50% to 80%. Downgrade to Hold.

Source: Kim Eng, 11 Feb 2009

Ascott Residence Trust: Initiating Coverage by Kim Eng

2009-02-12T06:24:00.003+08:00

Previous Day Closing price: $0.455
Recommendation: BUY
Target price: $0.77

We initiate coverage on ART with a BUY recommendation at a target price of $0.77. Its projected yield of 16.1% and 13.7%, and 0.31x P/NAV represent a chance to buy the premium Ascott brand at a bargain. ART owns and operates 38 well-located serviced residences in gateway cities of both emerging and stable markets.

Sponsor, The Ascott Group, is the serviced residence arm of Capitaland Ltd. It owns and operates 18,000 serviced residences outside of the US, with another 6000 units under development in Asia Pacific. These represent a strong pipeline of units that could be included in ART’s portfolio in the future.

ART’s gearing of 38.3% is well within the regulatory gearing limit. The bulk of its S$111m in bank loans maturing in 2009 is due only in Dec-09. We expect management to be able to refinance or secure fresh loans. ART faces no major refinancing need until 2011. Its low borrowing costs, averaging 3.5%, was achieved by good interest rate management.

Our target price is derived based on the dividend discount model (DDM) at a 9.7% cost of equity and 1% terminal growth rate. The key risk is a greater-than-expected decline in REVPAU in major operating markets. We are estimating a gentler decline in its FY09F DPU due to rental support from the long-stay segment. ART’s discount compared to its closest peer CDLHT is unjustified. We initiate coverage on ART with a BUY.

Source: Kim Eng, 11 Feb 2009

SIA 3QFY09 Results - BUY (Kim Eng)

2009-02-12T06:20:00.002+08:00

Previous day closing price: $10.44
Recommendation: Buy (maintained)
Target price: $14.40 (maintained)

SIA produced a solid set of results, under current circumstances. 3Q09 Net profit declined by 43% to S$337.2m, but was ahead of our and consensus expectation of around S$300m. Our variance came from higher than expected aircraft/spare parts sale.

We are maintaining our full year forecast of S$1,413.1m for FY09, (versus consensus of S$1.1bn) having assumed weaker load factors and yields, with SIA having already earned S$1,081.7m year to date. Our FY10 forecasts are also maintained at S$1,661.9m, up 18% vs FY09. This improvement will come mainly on the back of lower fuel prices, while still maintaining a muted outlook for yields and load factors. Our target price is maintained at S$14.40, based on 1.1x forward book value. Currently, SIA is trading at a 0.8x historical book value of S$12.26.

Source: Kim Eng, 11 Feb 2009

NOL: Capacity cuts play catch-up with falling demand

2009-02-12T06:10:00.002+08:00

FY08 core net profit was 24% below our forecast and 32% below consensus, with higher taxes, depreciation and exchange losses accounting for the variance. EBITDA was in line with our projection. NOL declared a tax-exempt final DPS of 4 Scts, taking full-year payout to 8 Scts, which is in line with the minimum dividend policy. However, going forward, the dividend policy will be changed to 20% of net earnings, suggesting that in loss-making years, no dividend will be paid.

NOL booked a 4Q08 net loss of S$148.5m, including a S$72m restructuring charge for the termination of 1,000 employees, against a S$195.7m profit a year ago. This was NOL’s first liner division loss since the 2001/02 downturn, driven by quarterly falls in volume and underlying rates despite higher unit costs.

Maintain UNDERPERFORM; earnings downgrade and lower target price of S$1 (from S$1.30). Our target price is based on an unchanged trough valuation of 0.5x P/BV (peak at 2.5x). We have cut forecasts from net profits of S$67m and S$170m for FY09 and FY10, to net losses of S$331m and S$100m respectively.

Source: CIMB, 11 Feb 2009

SIA: Hedging losses prevented better results

2009-02-12T06:05:00.001+08:00

3Q09 core net profit was 25% below our expectation and 6.5% below consensus. The key variance was the average incurred price of US$124/barrel for jet fuel, against our expectation of US$102. However, as spot fuel costs continue to decline in 4Q and with passenger yields holding up better than expected, full-year earnings may still come within our forecast, which we are leaving unchanged for now. No dividend was declared, as expected.

For 4Q, SIA has hedged 44% of its jet requirements (3.7m barrels) at US$131/barrel, suggesting it will not be able to take full advantage of low spot prices. However, as these hedges expire, its average fuel cost should move closer to spot costs.

Source: CIMB, 11 Feb 2009

CapitaLand rises, CMT falls after rights issues (BT)

2009-02-11T18:42:00.000+08:00

CAPITALAND and its listed retail trust CapitaMall Trust (CMT) announced massive rights issues on Monday.

But while CapitaLand's $1.84 billion one-for-two rights issue has been well-received by analysts and the market, CMT's $1.23 billion nine-for-10 rights offer has not fared as well.

Analysts rushed to issue 'buy' calls on CapitaLand after the developer said it was raising money to boost its war chest to $6 billion as it searches for acquisitions. CMT, on the other hand, was criticised for an 'unwarranted dilution'.

The market seemed to agree yesterday. CapitaLand shares gained 11.4 per cent or 27 cents, to close at $2.63. But CMT lost 6.2 per cent or nine cents to close at a one-year low of $1.36.

Merrill Lynch upgraded CapitaLand to 'buy' from 'underperform', while OCBC Investment Research upgraded it to 'buy' from 'hold'. CLSA, Kim Eng, UBS Investment Research and UOB-Kay Hian all reiterated 'buy' calls too.

'We believe the cash raised provides CapitaLand with the financial flexibility to ride through challenging property markets, enhance market positioning and, more significantly, the ability to take advantage of opportunistic acquisitions,' Merrill said.

A few firms were less bullish. Citigroup, CIMB and Nomura maintained their respective 'sell', 'underperform' and 'reduce' recommendations. Citigroup said the rights issue will be a drag on CapitaLand's return on equity.

Goldman Sachs, which has a 'neutral' call on the company, said the rights issue is sufficient to address investor concerns over book value erosion from land bank provisions and associated asset value declines (from listed trusts), which Goldman estimates could be around $1.9 billion spread over the next two or three years.

'With the sizable rights offering, we see no further need for capital raising in the next two years into the downturn, as the company has said it plans to revisit project commitments,' said Goldman analysts Paul Lian and Natasha Parchani.

A successful rights issue would refocus attention on CapitaLand's capacity to benefit from the current market environment as it is more likely than its peers to generate net asset value growth in the next two or three years, the analysts said.

Reviews for CMT's $1.23 billion rights issue were more mixed. The trust intends to use the bulk of the proceeds to pay off $956.2 million of debt due this year.

CLSA downgraded CMT from 'outperform' to 'underperform'. In contrast, OCBC upgraded the stock from 'hold' to 'buy'.

'While the proceeds will help the company repay debt and lower gearing to 29.1 per cent (from 43 per cent currently), we see the rights issue to be rather value dilutive,' said CLSA analyst Yew Kiang Wong. The cost of retired debt, at 3.4 per cent, is much lower than the cost of equity, CLSA noted.

But OCBC analyst Foo Sze Ming said the rights issue is not driven by refinancing issues and is instead for the 'long-term sustainable growth of CMT's portfolio'.

'By paring its gearing level now, CMT will have better financial flexibility to take on opportunities for asset enhancement initiatives and acquisitions in future,' Mr Foo said.

Financial Advisers FAQ

2009-02-11T12:09:00.003+08:00

Q: What types of activities are regulated and require licensing under the Financial Advisers Act (FAA)?

The types of financial advisory services regulated under the FAA are as follows:

a) advising others concerning any investment product;
b) issuing or promulgating analyses or reports concerning any investment product;
c) marketing of any collective investment scheme including unit trusts; and
d) arranging of any contract of insurance in respect of life policies.

Q: Are activities involving life reinsurance regulated under the FAA or the Insurance Act?

Advising on life reinsurance policies and arranging of contracts of life reinsurance are regulated under the Insurance Act.

Q: Who is permitted to conduct financial advisory services regulated under the FAA?

Only licensed financial advisers and exempt financial advisers who are exempt under section 23(1) or (2) of the FAA are allowed to conduct financial advisory services under the FAA. Individuals providing financial advisory services on behalf of licensed financial advisers are required to be licensed as representatives. Individuals acting on behalf of exempt financial advisers are exempt from the need to hold a representative’s licence under the FAA.

Q: Who is exempt from holding a financial adviser's licence?

Banks, merchant banks, finance companies, insurance companies, insurance brokers registered under the Insurance Act, and holders of a capital markets services licence under the Securities and Futures Act (Cap 289) are exempt from holding a financial adviser's licence to act as a financial adviser in Singapore in respect of any financial advisory services. Individuals who provide financial advisory services on behalf of such institutions are exempt from holding a representative’s licence. However, exempt financial advisers and their representatives are required to comply with the business conduct requirements stipulated in the FAA.

Q: Under section 2 of the FAA, “financial adviser” means a person who carries on a business of providing any financial advisory service. If a person provides advice on securities which is incidental to his securities dealing activities, will he be deemed as carrying on a business of providing financial advisory services?

The term “carrying on a business” is not defined in the FAA. MAS would regard any activity which is conducted with system, repetition and continuity as carrying on of a business. Accordingly, a person would be considered by MAS to be carrying on a business of providing financial advisory services if advice is given or recommendations are made systematically, regularly and in a continuous manner, whether or not the person receives any remuneration for
providing the financial advisory service. In respect of giving of advice or making recommendations on a one-off basis, MAS’ view is that such activities are less likely to amount to carrying on of a business.

Q: Would financial advisory services provided by a person outside Singapore using the Internet medium be caught under the FAA?

A person outside Singapore who engages in any activity through the Internet which is intended to or likely to induce the public (or any section of the public) in Singapore to use any financial advisory service provided by him will be deemed to be acting as a financial adviser in Singapore. Such a person would contravene section 6(1) of the FAA unless he holds a financial adviser's
licence.

Q: Would individuals intending to provide financial advisory services be required to pass any proficiency examinations?

Individuals employed by licensed financial advisers and exempt financial advisers to provide financial advisory services are required to pass the relevant modules of the Capital Markets and Financial Advisory Services Examination, which comprises modules on rules and regulations for financial advisory services and product knowledge and analyses. Details of the new examination requirements are spelt out in the Notice on Minimum Entry and Examination Requirements for Representatives of Licensed Financial Advisers and Exempt Financial Advisers [Notice No. FAA-N07]. Both the Notice and FAQs on the Notice are available on the MAS website.

Q: Can a representative act for more than one financial adviser?

A representative can only act for one financial adviser. The only exception is if a representative acts for two or more financial advisers which are related corporations.

The objectives of the one-representative-one-financial adviser rule are two-fold:
(a) to secure clarity for investors about the status of representatives, the financial advisers they represent, and more importantly, where responsibility rests for complaints and redress; and
(b) to ensure that the financial advisers closely monitor and supervise their representatives at all times.

The one-representative-one-financial adviser rule does not restrict the product range that a financial adviser can market or give advice on. Financial advisers such as banks, fund managers, securities firms and insurance companies that distribute life insurance products and unit trusts are free to enter into contracts to sell one another's products and, hence, expand the range of products they can market or give advice on.

Q: Life insurance companies would be able to sell one another's products when the FAA comes into effect. Is the insurance industry ready for this new development? Does this go against the one-representative-one-financial adviser provision under section 12 of the FAA? Would this development benefit consumers?

Life insurance companies, especially the smaller ones, may see value in cross selling one another's products. Since not all life insurers offer all types of life insurance products, allowing them to cross sell one another's products will broaden their product offering, thus giving consumers a wider range of products to choose from.

The one-representative-one-financial adviser requirement will not be compromised as an insurance agent can only have one financial adviser (which is the life insurer with whom he has an agency agreement), and can only distribute those products authorised by that life insurer. As an exempt financial adviser, a life insurance company must closely monitor and supervise its agents, and be responsible for the conduct of its agents in respect of their provision of advice and distribution of investment products offered by other financial institutions.

Q: What are the rules governing the use of the term "Independent" by financial advisers?

The use of the term “independent” is restricted under regulation 21 of the FAR. Regulation 21 states that no licensed financial adviser or exempt financial adviser is permitted to use the word "independent" or any similar term in its name, description or title, or to promote or advertise its services, or in respect of any of its advice or recommendation, unless it:
(a) does not receive any commission or other benefit from a product provider which may create product bias and does not pay any commission to or confer other benefit upon its representatives which may create product bias;
(b) operates free from any direct or indirect restriction relating to any investment product which is recommended; and
(c) operates without any conflict of interest created by any connection to or association with any product provider.

A financial adviser must inform all of its representatives, in writing, as to whether it may or may not use the word “independent”. No representative is allowed to use the word “independent” in acting as a representative of the financial adviser if the financial adviser has informed him that it may not do so.

Q: What is the objective of prohibition orders made under section 59 of the FAA?

The objective of a prohibition order is to keep unfit persons from engaging in any or all of the financial advisory services regulated under the FAA. The ability of MAS to issue a prohibition order would be especially useful in cases where there is a need to prevent a representative of an exempt financial adviser from conducting financial advisory activities. As these representatives are not licensed by MAS, revocation of licence is not an action MAS may take. This helps to ensure that only fit and proper persons are permitted to participate in the financial services industry. An order will only be issued in cases where very serious offences have been committed.

Q: What does the exemption under regulation 27(1)(d) of the FAR cover?

Under regulation 27(1)(d) of the FAR, a person resident in Singapore who acts, whether directly or indirectly, as a financial adviser in giving advice, or in issuing or promulgating analyses or reports, concerning any investment product (other than life policies), to not more than 30 accredited investors on any occasion is exempt from holding a financial adviser’s licence under section 23(1)(f) of the FAA.

Q: Under what circumstances will section 27 of the FAA on recommendations made by licensees not apply?

Section 27 of the FAA will not apply to licensees, exempt financial advisers and their representatives when they make a recommendation in respect of:
(a) any investment product by way of a research report intended for general circulation, where the report is not made with regard to (and it is so stated in the report) the specific investment objectives, financial situation and the particular needs of any person who may receive the report;
(b) any capital markets product to an accredited investor or a person whose business involves the acquisition or disposal of or the holding of capital markets products (whether as principal or as agent);
(c) any life policy to an accredited investor; or
(d) any Government securities.

Q: Why is MAS allowing the use of introducers by financial advisers? Who may be appointed as an introducer?

Prospecting for clients is an essential part of a financial adviser’s business. The use of introducers by financial advisers to generate business leads would allow financial advisers to spend less time prospecting for clients. This will enable financial advisers to focus their resources on providing higher valueadded financial advisory services to clients. The use of introducers or mere
referral arrangement by financial advisory service providers is also allowed in other jurisdictions.

An introducer may be a corporation, an individual, a licensed financial adviser or an exempt financial adviser. Representatives of a corporation, a licensed financial adviser or an exempt financial adviser are also allowed to conduct introducing activities if such activities are carried out on behalf of their principals.

Q: What is the rationale for discouraging financial advisers from appointing introducers who carrying out introducing activities as their sole business activity or full-time occupation?

MAS expects financial advisers engaging introducers to exercise proper control over introducers they have appointed. Any improper conduct on the part of introducers could potentially give rise to market conduct problems and cause public nuisance. This may tarnish the image of the financial adviser and affect public confidence in the financial advisory industry.

MAS believes that one of the main reasons for financial advisers to appoint introducers is to tap the clientele base of the primary business activity of the introducers. Introducers who are not conducting introducing activities as their sole business activity or full-time occupation are less likely to engage in aggressive business tactics when soliciting prospects for financial advisers, as it is in their interest to protect their reputation and build good relationships with their clients. MAS will monitor developments in the market and review our policy where necessary.