TheFinance.sg » Sgbluechip

Market Updates For Feb 2012 and Portfolio Adjustments

Sgbluechip — Tue, 07 Feb 2012 22:54:00 +0000

1)Local market STI increased approximately 11% year to date, 17% from Oct 2011 lows. There were similar returns across regional markets. US markets increase at a lower rate, roughly about 7% YTD.

2)The reasons contributing to the buoyant stock markets have little to do with market fundamentals. It is the consequent of central banks printing money as European Central Bank pledged to lend out 489B EUROS to ease potential credit crunch in Dec 2011. This is as good as providing cheap credit to banks which enable them to lend out more cheaply for investments. This money are flowing to Asia and emerging market regions. Just last week, funds investing in regional equities drew a net inflow of US$430M. This is the 4th straight month of inflows to Asian regions, which explains the 5th straight week of regional equities market appreciation.

3)Aussie dollars appreciated as stock markets rallied. …

Why I worry about retirement

Sgbluechip — Sun, 23 Oct 2011 14:07:00 +0000

Many close friends who read my blog often label me as a salty man. This has a negative connotation because in Hokkien context, it is “kiam” or scrooge in western terms. However, when I explained my rationale to them, suddenly they realize they either be prepared to work past 55 or be better off being more salty.

In today’s competitive workplace, there are not many people who are willing to work past 55 years old, even if they are ABLE to. Perhaps it is due to the increased pace of life and work pressure, many people just find it too stressful to cope mentally and physically beyond 55 years old.

The problem is exacerbated when the same group has ailing parents, growing kids and mortgages to repay monthly.

Life becomes much more stressful, simply because they need to work or they die (from debts and poverty).

In a nutshell, most …

Update on Historical Volatility of SPH and STI ETF

Sgbluechip — Sat, 17 Sep 2011 17:31:00 +0000

With regards to my earlier post on volatility, yes the calculation was a bit off but it has no material impact on my comparision. But anyhow, for folks interested in the volatility of SPH and STI, I have taken monthly returns from 2008 Jan to 2011 Sept. Calculation was based on excel. The results are quite similar, SPH and STI has a correlation of 86.5%; Annualized volatility of SPH was 22.28%, STI (ETF) was 25.15%.

Unfortunately, volatility does not tell you whether it is upside volatility or downside volatility. It also assumes the same weightage of volatility throughout every month, which is not accurate. It also does not factor in dividends that affects price movement much more on certain days.

Compared to Schroders Singapore Trust, the average 3 year volatility was 23.7%, which is higher than benchmark. As for the returns, it returned 18% over 3 …

A little comparison with a single stock and unit trust

Sgbluechip — Sun, 26 Jun 2011 01:55:00 +0000

Most of my friends who bought Unit Trust didn’t really make money. I personally considered that a weird phenomenon as most of them held their holdings for more than 3 years and are still in the red. Compared to me, most of my holdings are held in single undiversified companies that gave me decent returns. Today I make a comparison with 2 random funds and my largest single stock holdings, SPH. < ?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />

I will compare the risk and return during the past 4 years.

I am using 2 funds which most of my friends invested during the height of the crisis. They are First State (FS) Asian Growth and First State (FS) Regional China.

During the peak of their price in end Oct 2007, FS Asian Growth peaked at 1.93, FS Regional China peaked at 2.35.

Today I checked their prices; they are at 1.73 and 2.0021 …

Hyflux Preference Shares

Sgbluechip — Sun, 17 Apr 2011 01:59:00 +0000

This post is slightly overdue as interested parties would most likely subscribed to it. Currently I see a lot of interest in it with books closed for subscription closed that very morning when it was launched in my workplace.

In fact I did carry around the Hyflux advertisements and ask some of my aunties in my office to subscribe to it. The 6% cummulative dividends and 8% step up (2018 if not recalled) is a compelling reason to subscribe.

However, do take note that the preference shares are not rated and most probably only Singaporeans are familiar with Hyflux. It is unlikely to have fund houses buying large quantities as it has no credit rating and fund managers cannot overide the mandate of having non investment grade preference shares/bonds in their portfolios.

This may result in poor liquidity.

It is extremely rare for non financial companies to issue preference shares …

Patriotic to own a Beemer

Sgbluechip — Sun, 27 Mar 2011 16:47:00 +0000

One of my classmates bought a BMW recently. I know she earns about $10,000 a month and technically speaking, she is buying a car that cost roughly twice her annual salary. There is nothing wrong to enjoy the finer things in life though it means she is also patriotic as well.

Why patriotic? < ?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />

In Singapore to own a car, you will be paying a huge load of tax to the government. Take my classmate’s BMW, she has paid the following to the government:

Open Market Value (OMV)= $58,000

Thus Additional Registration Fee (ARF) will cost 100% of OMV =$ 58,000

Excise Duty: 20% OMV= $11,600

Registration Fee: $140

Certificate of Entitlement= $45,000 (few months ago)

GST: OMV x 7% (approximate) = $ 4,000

Total tax payable to government coffers: $118,740

The total cost of her car was about $210,000 then, which means the gross profit margin for the car dealer …

What is the stock market to you?

Sgbluechip — Sun, 20 Mar 2011 09:33:00 +0000

My colleague thinks it is just an electronic platform to buy and sell shares. < ?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Some believe it is a gambling table. Perhaps that’s why Genting is often the most traded stocks.

Another might think it is a place to park retirement funds in blue chips for steady return.

Yet another might think it is a place where the big crocodiles eat up the small fishes and avoid it at all costs.

I believe it is the best place to generate excess return amongst all asset classes.

My grandmother doesn’t know the existence of it.

It is subjective to define what a stock market is because different people have different experience and thus perceive it differently. Just like how the blind men describe an elephant:

The First approached the Elephant,

And happening to fall

Against his broad and sturdy side,

At once began to bawl:

“God bless me! but the Elephant

…

BUY CALL FROM SBC

Sgbluechip — Tue, 15 Mar 2011 04:23:00 +0000

Be greedy when others are fearful, be fearful when others are greedy. I sense fear now. What are you waiting for?
Honestly, the last time I see such a scenario was during the Lehman Crisis in 2008. The selldown back then was even more earth shattering than this.

The last time STI went below 3000 points was roughly in August last year. This means that for STI has given up its 8 months gains due to the earthquake.

That said, 2800 points seems to be a safer entry point for long term investors. At that level, most banking stocks are giving at least 4% dividend yield on your investment.

Honestly, I have not much luck timing market cycles. Hence I try to always buy and rarely sell to build up my passive portfolio income.

If you are reading my blog and not invested, congrats. Buy now and hold as long …

Property thoughts

Sgbluechip — Sat, 15 Jan 2011 11:45:00 +0000

I must admit I caught the property fever for the past year. I have been actively looking, together with property agents for a completed property for rental income. Why not? My current portfolio yields about $2,500 monthly without any spectacular leveraging.

I was considering to liquidate a portion of it, take advantage of the current low interest rates to put a down payment of 20% for a $1M home. Taking a 30 years loan and a monthly installment of $2,650 seems affordable. I can pay off at least $650 from my CPF OA and use rental income to cover the remaining $2000. Seems perfect right? Well of course the low interest rates environment is not going to remain as it is, according to the data I got from MAS and plotted the graph below.

The rates we are seeing now are at record lows. Should private homes interest rates hover …

Why I wil not hold US stocks in the near term

Sgbluechip — Sun, 26 Dec 2010 04:09:00 +0000

Current S&P 500 PE Ratio: 22.95 < ?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />

Mean: 16.38
Median: 15.76
Min: 4.78 (Dec 1920)
Max: 44.20 (Dec 1999)

Looks expensive to me now. If stocks were to revert to mean, either earnings go up 40% or stocks go down 40%. Let’s just take the middle path to be neutral. That’s at least a 10% downside to go.

Current S&P 500 Dividend Yield: 1.78%

Mean: 4.35%
Median: 4.29%
Min: 1.11% (Aug 2000)
Max: 13.84% (Jun 1932)

Low dividend yield states that investors are betting on capital appreciation instead of dividend returns. Doesn’t bode well. The last time it went that low was in year 2000.

Current Treasury Bond Rate: 3.41%

December 23, 2010

Mean: 4.69%
Median: 3.84%
Min: 1.95% (Jan 1941)
Max: 15.32% (Sep 1981)

The 10 year treasury bond rate is higher than dividend yield. …

Investing in Singapore listed ETFs

Sgbluechip — Sat, 25 Dec 2010 09:22:00 +0000

ETFs is the acronym for exchange traded funds, which are basket of stocks traded over the exchange. Having invested nearly 0.5M in stocks I must agree that ETFs are not exciting products for people looking at supernormal returns. However, holding ETFs means sleeping better at night since I will probably not be losing my entire capital even during market crash. < ?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />

Take the STI ETF for example. If I lose my entire capital invested, this would literally translate to DBS, UOB, OCBC, SIA, Singtel trading at zero dollars. For that to happen, I think putting money anywhere will mean total loss anyway.

Besides, STI ETF pays regular dividends as well. Historically, the dividends are about 4-6 cents per unit, which translates to miserable yield of 2%. Well, don’t expect Singpost or SPH dividends payout if you are buying STI ETFs. People mainly buy it for capital appreciation.

The sales charge …

Why HDB prices will go up after new measures

Sgbluechip — Sat, 11 Sep 2010 02:00:25 +0000

Photo by 私奔到月球

As I sit at my rocking chair (old man already), I look at the measures and decide that I can never ever afford my HDB flat.

The current measures make owning HDB more difficult: HDB buyers with pte property and are willing to cash out (sell) their pte property can afford a high COV and thus are willing to pay a high price for HDB resale. Hence high COV is here to stay.

HDB owners are unwilling to sell the property now to buy private property as they are unable to buy back HDB later. Hence, supply for resale HDB will go down as people are more cautious upgrade their housing. Alternatively, they demand a higher price to give up this prerogative and pay for their pte homes.

We know after the measures, HDB is harder to own. In general, more people will want to buy HDB FIRST before buying private property now. Hence, more would be more incline to buy HDB. This increases current demand. However for current HDB owners, they are unable to buy a new HDB without incurring a resale levy (can be as high as $50k for executive flat). No HDB owners will want to buy new flats now as the levy will cancel off their COV and profits. It makes no sense for them to buy a cheaper house but to fork out more cash. Hence, more people will be staying put in their HDB to wait out for a higher price.

Eventually, HDB resale price will continue to climb upwards. If you think HDB will surpass private property prices, you are not alone. Judging from the COV and resale transactions, I think it is cheaper to buy private property in time to come. Read more…

Measures to curb property speculation finally revealed

Sgbluechip — Tue, 31 Aug 2010 10:26:27 +0000

Photo by pshutterbug

Today’s papers reported that measures are rolled out with immediate effect to curb property speculation. In layman terms, they are:

(1) Sellers to pay stamp duty again if they resell the property within 3 years of purchase. (A $1m property attracts $24,600 of stamp duty.)

(2) For buyers who have outstanding loans with banks or HDB they

(a) need to pay at least 10% in cash for downpayment, instead of 5%.

(b) can only loan up to 70% of property valuation limits.

Looks like the government is intervening as the property market astronomical rise is going out of hand and they can only continue to roll out measures in a such manners to react accordingly.

I feel that more can be done to curb the property craze. It is a good thing that government is trying to balance speculative interest from real home seekers. However from my observation, most speculators are already sitting on high paper/real profits; the people who are trying to buy now are real home seekers. Read more…

Additional Property Cooling Measures

Analysis of Macquarie International Infrastructure Fund (MIIF)

Sgbluechip — Mon, 15 Mar 2010 09:00:18 +0000

Photo by Hythe Eye

Macquarie International Infrastructure Fund Ltd (MIIF) is a mutual fund company that has been formed to own, operate and invest in a diversified group of infrastructure businesses around the world.

It offers investors an opportunity to invest in the Macquarie Bank Group’s first listed infrastructure fund in the Asian region and to participate in the public ownership of infrastructure assets.

MIIF’s investments include direct investments in airport infrastructure in Belgium and communications infrastructure and renewable energy assets in the United Kingdom. In addition, it will own interests in one unlisted and four listed infrastructure investment funds that have ownership interests in, amongst other things, airports, communications infrastructure, utility and energy assets, water and gas distribution assets and transport infrastructure assets located across the globe.

MIIF was listed on May 2005 at $1 per share. Its first day IPO price was $1.14. It currently trades at $0.525 (14/03/10). No rights shares were issued from its IPO till date.

Below figure A is a screen shot from MIIF 2H 2009 interim report. It shows the portfolio of MIIF: Read more…

Analysis of SP Ausnet Part 1

Sgbluechip — Thu, 04 Feb 2010 01:00:21 +0000

Photo by lepiaf.geo

Background of SP Ausnet (Source: http://www.sp-ausnet.com.au and http://www.singaporepower.com.sg/

SP Ausnet is a subsidiary of Singapore Power (with a 51% controlling stake) and its operations are managed by staff of Singapore Power in Australia. Singapore Power is a leading energy utility company in the Asia Pacific.

With assets of S$26.3 billion at end March 2009, it is one of the largest corporations in Singapore. It owns and operates electricity and gas transmission and distribution businesses.

SP Ausnet owns and operates electricity transmission and distribution networks and gas distribution assets in Victoria, Australia. It delivers a full range of energy related products and services to more than a million industrial and domestic customers. It was listed on SGX at $1.75 per share in Dec 2005. It current trades at $1.14 a share (03/02/10).

Electricity transmission network – carrying electricity from power stations to electricity distributors across all of Victoria via 12,800 high voltage towers and approximately 6,500 kilometres of transmission lines.

Electricity distribution network – carrying electricity from the high voltage transmission grid to over 600,000 customers across eastern Victoria. This network spans approximately 46,000 kilometres across an area of 80,000 square kilometres. Read more…

Portfolio Updates

Sgbluechip — Tue, 26 Jan 2010 11:00:35 +0000

My portfolio of invested amount went up slightly to breach the $400k mark last week when I took the opportunity to invest as STI fell. If you have read my post here, you would have realised that I need to invest $66k annually from 2010 and acheive return of 7.1% compounded yield before I can reach $1M in 2015.

This means that I need to invest another $10k more to reach my target this year.

Is that possible? I am not sure. Markets are volatile and the economic cycle seems shorter and shorter. My masters programme seems painfully slow to complete and I am literally struggling with my 14 hour job daily (including weekends).

I have switched to a new role (downgraded actually) in my company which means I have to be monitored closely. I hate that kind of feeling of being watched and assessed by goondos. This means that I am likely to tender my resignation and go into full time studies at the end of this year.

Where can I get $66k to invest if I have to be out of job for 6 months? Classmates will shun me too!! haha.. especially the girls!! Read more…

Is GDP a good measurement of life quality?

Sgbluechip — Tue, 01 Dec 2009 01:00:31 +0000

Photo by Håvar og Solveig

Consider the following (excerpted) statement by Robert Kennedy in 1968

…And if the Gross National Product includes all this, there is much that it does not comprehend. It does not allow for the health of our families, the quality of their education, or the joy of their play. It is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry, or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials… the Gross National Product measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile….

In Singapore, the government’s competency is assessed based on its ability to grow GDP year on year, quarter on quarter. Every civil servant’s bonus and salary increment depends largely on it. Does high GDP reflects high quality of living?

Consider that GDP is calculated using the following formula: Investment + Consumption + Government Expenditure + Net Exports

GDP measures the total income and total expenditure (since total income will equals total expenditure). It is also the total market value of all final goods and services provided within a country in a given period of time.

Intuitively if we compare countries with high GDP per capita over lower ones, we can see and feel the difference. If you have been to Japan, you will definitely find the quality of life there to be higher than Singapore. The reverse is true for Malaysia or China.

So how does GDP which is quantifiable able to measure quality of life which is not easily quantified? Read more…

Choosing quality over quantity

Earn one million dollars (in 6 years time)

Sgbluechip — Wed, 28 Oct 2009 01:00:47 +0000

Photo by Refracted Moments™

A reader pointed out that it is nearly impossible to turn my $350k portfolio into $1M in 6 years time as I would need an annual compounded return of 19.1% to reach that amount.

Am I being unrealistic?

To be honest, I could possibly set an impossible target judging from current circumstances, as most people think. However, to put things in perspective, perhaps there is a way (at least theoretically) to meet the target.
As a portion of my portfolio consists of CPF stocks as well, the following calculations will be based on CPF investment returns and reinvestments.

Considering I earn $80k per annum now. I spent approximately $24K a year, or $2000 monthly. I have a remaining $56k for investment.

My dividend income amounts roughly $20k a year. Thus, I have about $76k for investment. To be conservative, I put the figure to be $66k. Hence I have $10k for CPF contributions to Medisave and Special account and other off budget spending, that cannot be invested.

Assume it is year 0 on Dec 2009.

Hence from year 1 to year 6, I have $66k for investment into my $350k portfolio every year, till 2015.

Question 1: What is the annual compounded rate of return do I need for my portfolio to hit my target of $1M by 2015? ($66k invested in year 1, compounded annually (7.1%) for 6 years will have a value of $99.6k in year 6) Read more…