TheFinance.sg » Lau

Financial May-hem

Lau — Mon, 14 May 2012 23:32:00 +0000

May is the month for mother’s day so first and foremost, Happy Mom’s Day!

On the financial front, May 2012 seems to be an eventful month for the Euro zone. A new French leader has been elected in power who threatens to ratify the financial treaty due to growing dissent from the population because of the austerity measures. This was followed by Greece difficulty in forming a coalition. Even Bank of England is keeping interest rates to their near zero range.

One thing financial markets dislike is uncertainty. Rule of thumb is that uncertainty carries risk and with increased risk, a higher premium is required to take on more of it. With the road ahead unclear, and the summer holidays approaching, believe most would look towards taking their bets off the table.

This reminds me of a recent term that has attracted a lot of hype, “known unknowns”. These known …

5.2% Inflation In March 2012

Lau — Sun, 29 Apr 2012 04:43:00 +0000

Singapore’s inflation rate rose to 5.2 per cent on-year in March 2012, from 4.6 per cent the previous month. MAS has also projected that inflation will likely remain elevated over the next few months, before easing gradually in the second half of this year.

In a Labor Day message, someone mentioned that wages should be kept ahead of inflation and must rise faster.

While it is a simple logic for the immediate solution, the equation is not uni directional and problem solved. It is a vicious loop with a exponential feedback effect.

Bus drivers have recently announced a 16% wage hike to “cope with inflation”. Nurses and doctors are going to be paid more. Basically, most sectors will be seeing a wage increase if they are capable of giving it.
Property prices have also been on a steep climb, resulting in rising rentals. This will have a significant …

Moving With The Times

Lau — Sat, 14 Apr 2012 04:33:00 +0000

Looks like the pager is going the way of the dodo, extinction. This comes as no surprise as the technology now is to have mobile phones rather than pagers. Reflecting back, a few items have also been phased out of our lives. Walkman and cassette tapes, Laser Discs or Video Compact Discs and the players, Kodak and film photography is also making way for digital, even childhood toys are evolving from video game sets like Micro Genius/SEGA to iPads.

MAS FAIR has also announced its committee members and looks set to revolutionize the financial advisory processes. However, they have already been heavily criticized by industry practitioners even before implementing anything. Resistance can always be felt when there is change.

Change is constant. Even now, the way wealth is made is changing. Previously, it relied on brick and mortar businesses and were usually handed down from generation to generation. However, the …

$900k For HDB

Lau — Thu, 12 Apr 2012 13:01:00 +0000

Looks like 3 HDB units just got sold at the $900k mark and the psychological barrier of $1m is inching closer. Many analyst give their 2 cents to say it is an exception and unique circumstances, rather than the norm, ya da ya da..

Regardless, it looks set that $1m is probably going to be hit in the next 1-2 years. Wonder if it is fair to become millionaires from government subsidized public housing.

Anyhow, who is going to be the 3 famous people?
- Huh, what are you talking about?

Basically, every single news agency and blogger out there is going to want to write about the buyer, the seller and the agent who closed that first $1m dollar deal!

So, I was thinking, why don’t we work together, I sell my house at market rate, say $800k, you buy from me at that agreed price. But we declare …

$500m Offer of Genting Perpetual Securities

Lau — Thu, 12 Apr 2012 06:26:00 +0000

Integrated resort/casino operator Genting will offer a second issue of perpetual securities worth S$500 million. Its first issue was a S$1.8 billion offering in March.

Half of the offering is set aside for retail investors, S$50 million to be offered to directors and employees, and the balance S$200 million to institutional and other investors. There is also an option to issue another S$200 million in the event of over subscription.

The bonds pay 5.125% annually. A quick calculation shows that Genting will need to foot at least almost S$118 million in interest payment per annum for all the perpetual securities.

Despite this, Fitch Ratings is maintaining a Triple BBB rating for this tranche.

Genting has indicated that the proceeds raised could be used to expand into Japan and South Korea. Some are even speculating Australia.

Comparing with its own shares, the payout seems more attractive as the company …

Financial Advisory Industry Shake Up

Lau — Thu, 29 Mar 2012 12:39:00 +0000

It seems that the recent speech by the Managing Director of MAS has triggered a strong response from the industry. I guess it is because he mentioned points that will have a significant impact to the industry like raising the entry criteria from the current 4 ‘O’ levels to keep up with current education trends and removing commission based sales to fee based structure.

Some opinions I heard include:
- “Oh no, it is going to mean more exams and paperwork.”
- “It simply will not work! Customers will not pay a fee. They have been so used to receiving free advice.”

In my opinion, raising the entry criteria is only keeping up with the current education standards. Most of the population is at least a diploma holder. At least, it will make the industry seem a little more professional as this point is often poked fun at …

Boon Or Bane Of Longevity

Lau — Tue, 20 Mar 2012 01:45:00 +0000

I recently came across an article titled “Top 10 Hotspots For Human Longevity” and realized that our sunny island of Singapore is in that top 10 list. I followed up with a google on “Singapore life expectancy”, google amazingly showed the statistics of 81.3 years according to the World bank source in 2009.

As I am at less than the half way mark of the average, I kind of had mixed feelings towards this result. On one hand, many would celebrate this, especially the Chinese, as it is the culture to emphasize a lot on longevity. However, on the other hand, we have to face the practical and realistic issues.

Looking at the progress of the local economy and society, high inflation seems to be the new normal. 20 years from now when I start considering retirement, it is not difficult to imagine a plate of chicken rice at …

Simpler CPF Life

Lau — Sat, 10 Mar 2012 04:08:00 +0000

I am often asked about this new scheme by those who are affected by this implementation when doing financial planning for them. It took me quite a while to navigate my way through all the terms and understand the 4 choices.

However, after all the effort, eventually I realized that many still did not fully comprehend and more importantly did not bother to make an effort to understand.

With this change to only 2 choices and a default option. It is a very much welcome move that should have been done in the first place. I always believe things should be made simple, KISS, as it is often known as.

The default is the standard plan. Higher monthly payout and lower bequest. Probably now, 80% would just leave it and the majority will be here. The alternative is the basic plan. Lower monthly payout and higher bequest. Only the few …

1k Income For House

Lau — Tue, 06 Mar 2012 02:39:00 +0000

After the mention of this fact at parliament by our DPM, it has caused quite the uproar from Singaporean netizens. Some interesting comments I came across include:

- “If so, I should be owning 5 properties already. How come I have difficulty having even one!”
- “I have a friend who earns $1,200 and his housing loan is not approved.”

In general, most are in disbelief over this statement. However, this reflects how poorly informed people are of the various housing schemes and loan approval criterias.

My personal opinion is that the statement is not false but people’s perception that is the issue here. And their view is not entirely wrong as well.

First let us put the truth to rest. The housing minister has also produced evidence that it is indeed a fact. It is indisputable, a $1k income can purchase a hdb flat. However, and it …

Best Interest Rate Deal

Lau — Sat, 03 Mar 2012 00:00:00 +0000

By now, many would have seen the advertisement of standard chartered bank BonusSaver splashed across the newspapers and internet.

They are giving 1.88%p.a. interest, when $500 is spent through mastercard each month.

Well, doing some calculation on my own and comparison, it wasn’t a deal that was very attractive to me as I could achieve the about the same returns through other banks, without the $500 spending criteria.

Anyway, what attracted me was not this. It was the finer print of giving $100 for placing an initial $50,000. This intrigued me and I went to ask the terms and conditions for this.

I was told there was no other terms and conditions! All I have to do was place $50,000, wait to be credited the $100 and I can withdraw everything. Though I realized that the account cannot be closed within 6 months and has a minimum maintenance …

Singapore Budget 2012

Lau — Tue, 21 Feb 2012 04:30:00 +0000

Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam announced the following initiatives relating to financial planning during the FY2012 Budget Statement in Parliament on 17 February 2012:

- Increase in CPF Contribution Rates for Older Workers

Lower CPF contribution rates for older workers were introduced to help improve the employability of older workers. Now, the same CPF contribution rates will be maintained for all workers up till age 55, rather than age 50. This move will encourage more workers to work longer, but at the same time, it may discourage employers to employ older workers.

In my opinion, it is definitely a good move as CPF is also used for housing loans and a decrease in contribution after 50 can have a significant impact, especially when loans nowadays stretch till most are 60s.

- Enhancement to SEC

It is good, more help for the lower wage earners. However, still …

HDB Jargon

Lau — Thu, 16 Feb 2012 14:17:00 +0000

As I am now house hunting for my own residence, I dived into the housing market and discovered that it had a lingo all of its own. There were so many abbreviations thrown around that I feel HDB should compile a dictionary to help first time home seekers understand what is going own.

After hours of research, I decided to post my work for my future reference and perhaps hope it helps other apprehensive first timers as well.

First and foremost, HDB flat types:

2 bedroom flat
Consists of 1 bedroom, kitchen, living room with 2 versions
2 ‘I’ (Improved) & 2 ‘S’ (Standard)

3 bedroom flat
Consists of 2 bedrooms, kitchen, living room with more than half a dozen versions
- 3 ‘A’ (Modified)
- 3 ‘NG’ (Modified)
- 3 ‘A’
- 3 ‘NG’ (New Generation)
- 3 ‘I’ (Modified)
- 3 ‘S’ (Simplified)
- 3 ‘I’ (Improved)
- …

When To Start Saving For Retirement?

Lau — Tue, 31 Jan 2012 07:42:00 +0000

Retirement carries a different meaning at different ages.

For the young adult starting to work in their 20s, retirement is something that probably does not carry much meaning. Something their parents are transiting into and has nothing to do with them. First and foremost on their minds will be landing that dream career, falling in love, getting married, purchasing all the “wants” with their first year paycheck, etc.

Next stage is the 30s, life has moved on for most from singlehood to setting up a family unit. Focus will be to stop job hopping, stablize a career to support the mortgages and plan for the first child. Even those single usually start taking care of their parents who have started making retirement plans.

Moving on to the age 40s, those with children start fussing over primary school entry or the dreaded PSLE. Some planning for the child’s future tertiary education …

Roar Of The Dragon Babies!

Lau — Fri, 27 Jan 2012 09:05:00 +0000

The Chinese zodiac dragon year is here once every 12 years. The birth rate this year has a significant impact to the whole country in the years to come. For example, primary school intake has to be expended to accommodate the larger intake, right up to secondary school, National Service and post secondary education. The competition among the children born this year will be most intense.

Well, for financial planners, the opportunities are going to be amazing. With parents nowadays so focus on their children, many even take the proactive approach to get at least an education plan for them the day after the child is born. Foresee that the insurance industry will carry on to boom with this market segment.

For property segment, the supply of new homes, seller stamp duties and the buyer stamp duties is going to halt the rate of price increase. Do note that it …

CapitaMalls Asia Bonds On Offer

Lau — Wed, 04 Jan 2012 01:50:00 +0000

CapitaMalls Asia is offering up to S$400 million of 10-year callable step-up bonds. DBS is the sole bookrunner and lead manager.

The issue has an initial offering of S$100 million for retail investors and S$100 million under a placement for institutional investors. Another S$200 million may be issued in event of excess demand.

The bonds are callable at par by the issuer after 5 years, i.e. 2017 through 2021 yearly on Jan 12.

They will bear a 3.8 per cent coupon for the first five years of their tenor and 4.5 per cent thereafter.

It looks like this is going to be another hot issue. 3.8 per cent is nothing to shout for, but it is better than zero point zero, something per cent. After 5 years if the interest rate environment is still low, they will call the bonds, however, if rates have increased, they …

Happy New Year

Lau — Thu, 29 Dec 2011 14:29:00 +0000

It is nearing the end of the year. December has always been my most favorite month of the year. It is the month people seem to be a lot happier, kinder, more generous and overall nicer. Even the taxi fare hikes, MRT train breakdowns and recurrence of flooding, are finding it hard to dampen the mood.

Reflecting back on 2011, I was wondering what I have done right and what I could have done better. I think this will serve as an important feedback on how to make 2012 an even better year.

In particular, in reference to this blog:

Most read articles for 2011
to pay or not to pay
why your salary is not enough
being penny wise pound foolish

Least read articles for 2011
interest rates
learning through reflecting
pre-paid packages

In conclusion, it seems articles related to property finance attract more attention than random updates like …

Retirement Woes

Lau — Wed, 21 Dec 2011 08:08:00 +0000

According to a recent survey by Aviva, the Consumer Attitudes to Savings (CAS) study, it showed an increasing concern over prospects for retirement.

About half felt that they will not have enough money when they retire to provide for an adequate standard of living and will have to work beyond the normal retirement age to fund their retirement.

I believe this is mainly due to an awareness of the importance of planning for retirement.

Previously, many would think that retirement is taken care of by having children and their CPF. However, now, the cost of living has been increasing exponentially with inflation stubbornly high. They are starting to fear that in addition to trying to provide for themselves, they may even need to provide for their children to give them some head start in life. This has been termed, the sandwich generation. They are worried and rightly so. To make …

This Is Home, Singapore

Lau — Fri, 09 Dec 2011 05:52:00 +0000

Back to Singapore after a 2 week break and it seems that a lot has changed in such a short time!

Increase in Comfort taxi fares
Comment: Not that I am blaming the fare increase, inflation is so high, I think it is only fair. However, the way it is implemented those not make sense. Extending the peak period to throughout (6pm to midnight) gives no incentive to space out the peak situation. Instead of usually delaying the trip to avoid the surcharge, there is no point now and it will cause frustration for the true peak period. As everyone now rushes for the same timing.

Singapore ranking as most costly city jumped up
Comment: Guess our kiasu culture as influenced even trying to be the number one most expensive place to live! If it is due to the strong SGD dollar, it is not exactly working. Although the effect …