Getting started in stock investing and trading.

I have met people who told me that they find it hard to learn fundamental analysis (FA) or technical analysis (TA) by reading books. Some would get bored very quickly and lose interest. Some just find it harder to understand and absorb information presented in writing. For sure, not everybody enjoys reading.

Many of these people who are interested enough in the subject of investing and trading in the stock market could end up signing up for courses which could cost $X,XXX per course. I am not saying that these courses are not good as, indeed, like what a friend told me, some learn better in a classroom environment.

A case of different strokes for different folks? Maybe.

However, if I were to tell these people that there is possibly a book out there which they could find enjoyable to read and, in the process, save them lots of money, would they not give the book a chance? Is there such a book? Yes, I found one recently.

The book is an amazingly fun and engaging read. Each chapter is preceded by illustrations in the form of comic strips!

Example:

The chapters are well organised and bring the reader through fundamental analysis (FA) and technical analysis (TA). Yes, the author marries both schools. As this is something which I have always suggested as the most holistic approach to investing, I highly recommend this book.

See:

The book is obviously written with the beginner in mind. However, any seasoned stock market participant who is in the FA or TA camp would find this book a worthwhile read if he is willing to keep an open mind.

The book is now available for order from BetterWorldBooks. With every book ordered, a book will be given to the poor.

Follow the banner below to order a copy of  "Getting Started in Stock Investing & Trading: An Illustrated Guide":



Search for books by "Michael C. Thomsett" and you will find the book. Purchase a copy and you will be doing good in more ways than one.

Related posts:
1. 5 Rules for Successful Stock Investing.
2. Recommended books for FA and TA.

Iron Man 3.

I enjoyed "Iron Man" the movie. I also enjoyed "The Avengers". I am definitely going to watch "Iron Man 3" as well.

In "Iron Man 3", Tony Stark finds his personal world destroyed at his enemy's hands, he embarks on a harrowing quest to find those responsible.

With his back against the wall, Stark is left to survive by his own devices, relying on his ingenuity and instincts to protect those closest to him.

As he fights his way back, Stark discovers the answer to the question that has secretly haunted him: does the man make the suit or does the suit make the man?

I like movies which pack a punch, provide food for thought and inspire the audience.

When we are down and out, we are only really down and out if we believe we are down and out.

Unless we are seriously disadvantaged in some way, it is never too hard to improve our lots in life.

If you like what I like, watch "Iron Man 3":
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Singapore National Reserves.

A reader, Boon Sun, kindly contributed a piece of academic writing after reading my blog post on CPF and SGS recently.

He said 

"I have written an article on Singapore Reserves to raise awareness of the economic importance of this asset of Singapore's. This topic was also raised in one of the MOE/MOF budget seminar. If you think this is useful and easy to understand, you can share with your readers."




Here is his essay in full:

Singapore National Reserves are a critical resource for Singapore’s future. Our financial reserves are managed by the administrative branch of Government such as the Monetary Authority of Singapore (MAS), Temasek Holdings and Government Investment Corporation (GIC) and they serve as a strategic asset for these two key purposes:

1) They provide a key defence for Singapore in times of crisis. Our reserves are a strategic asset should a major crisis occur, allowing us to mount a decisive and effective response. In 2009, faced with the threat of our worst recession, Singapore government tapped into our reserves for a withdrawal of S$4.9 billion as part of the Resilient Package in our 2009 budget. This cushioned the economy from a severe economic downturn as the Government increased their expenditure to reduce job losses and keep viable companies afloat.

2) The investment of our reserves also provides a valuable stream of income for the Government Budget, which can be spent or invested for the benefit of the current, as well as future, generations. The Net Investment Returns Contribution (NIRC) from our financial investments by MAS, GIC and Temasek Holdings has allowed Singapore to maintain our investment in social and economic developments. NIRC almost quadrupled from S$2.1 billion in 2006 to S$7.9 billion in 2011. The Net Investment Returns Contribution (NIRC) comprises up to 50% of the Net Investment Returns on the net assets managed by GIC and MAS, and up to 50% of the investment income from the remaining assets (which includes Temasek). The NIRC has allowed Singapore to remain economically competitive by allowing Singapore to maintain low personal and corporate taxes while maintaining our government expenditure.

When the Government achieves an overall budget surplus over a term, the surplus will be kept in our National Reserves as Past Reserves. A term of government usually lasts 4-5 years. To prevent reckless fiscal policies by the current Government, which would result in a depletion of our reserves and hurt Singapore’s economic and social stability, our Constitution protects the Past Reserves of the Government and Fifth Schedule entities. Hence, the Government had to ask the President for permission to draw from the reserves in 2009.

Assets and Liabilities

Singapore’s National Reserves refer to the total assets minus liabilities of the Government and other entities specified in the Fifth Schedule under the Constitution.

Our assets include physical assets, such as land and buildings, and financial assets, such as cash, securities and bonds. As it is difficult to get market valuation for our physical assets, we usually refer to our financial reserves which are made up of our financial assets as our Nation’s Reserves. MAS manages Singapore’s official foreign reserves and government deposits, Temasek Holdings acts primarily as a commercial investment company, and GIC is the Singapore Government’s fund manager. As of 2012 March, MAS holds S$304 billion of foreign reserves and S$150 billion of government deposits, Temasek Holdings has a portfolio worth S$198 billion and GIC manages well over US$100 billion. Temasek and GIC are often termed as Sovereign Wealth Funds, which means they are stated-owned investment funds.

Our liabilities mainly comprise of Singapore Government Securities (SGS) and Special Singapore Government Securities (SSGS). The 10-year yield for SGS is decided by market conditions and ranged from 1.3-1.4% per annum between 15^th and 18^th Jan 2013. The SSGS issued to CPF pays a coupon rate of 2.5% to 4% per annum. To put these figures into perspective, the United States 10-year treasury yield is about 1.84%, Germany about 1.56%, Hong Kong at 1.04%, the Netherlands at 1.70%. Hence, we can see that Singapore enjoys a low cost of borrowing due to its credit-worthiness. Our bonds are ranked as one of the safest by major credit rating agencies. Singapore may have one of the world’s largest public debts (public debt can be measured as a ratio of Debt to GDP) but most of our debts are in local currencies and held by government agencies. Thus, our debt is relatively much more stable and safe as compared to the national debt of other economies.

The System

The diagram below can be used to briefly explain the system in which our Government gets the funds to invest for higher returns and increase our national reserves. Before we can get started, we need to be aware of the differences between different divisions of a government.

In the diagram, we separate the Government into two different sections. One of them is the Government (Executive) which refers to the ruling party of Singapore. Government (Executive) is formed by political party/parties which is/are elected into the Government by the people. Our current Government (Executive) is formed by the People Actions Party, led by our PM Lee Hsien Loong. The other section is the administrative section which is our Public Service division. It is made up of different ministries such as Ministry of Finance and Ministry of Manpower and they are independent of any political parties, and not affected by any political changes in Singapore. Monetary Authority of Singapore is part of Ministry of Finance and both GIC and Temasek Holdings are investment firms owned by Singapore government. Hence, we would group these three entities in one group which manages our financial reserves. These three entities are independent of political influence or the Government (Executive).

Over a term of 5 years, the Government runs either a balanced overall term budget where the deficits and surpluses cancelled out each other, an overall term budget surplus where the net surplus will be added to the Singapore reserves. Due to Singapore Constitution, it is almost impossible for a government to have a term deficit unless the President allows the Government to withdraw from our National Reserves. The borrowed sum of money from our reserves needs to be repaid back to the reserves once the Government runs a budget surplus. As mentioned earlier, up to 50% of the net investment return of our investments is used for our annual budget.

When the economy grows, the employment market also improves. The improvement in employment market increases the CPF contribution from employees, and as long as the increase in CPF contributions outweighs the withdrawal of CPF funds by retirees, the employment situation will lead to a higher net CPF contribution, ceteris paribus. Hence, it is important that for the Singapore labour market to keep growing, so that we have a positive net CPF contribution for Singapore to grow its reserves. However, this inflow of money is threatened by the aging population, as there will be more withdrawal by the retirees and less contributions from economically active residents. CPF liability refers to the total amount of money owed to the workers of Singapore when they retire.

The Government will issue the SSGS bonds to CPF to borrow the cash for various purposes, such as investment by the different organisations. This completes the basic cycle in which how the Government gets the money to invest for higher returns and grow our national reserves.




Monetary Authority of Singapore (MAS)

According to the IMF, Singapore has the 12^th largest foreign reserves of US$250 billion in 2012. Our GDP was US$240 billion in 2011, and Singapore had the world’s highest foreign reserves per capita in the world, at US$50,128.

            Singapore is able to accumulate large amount of reserves due to our high national savings rate, healthy BOP, and fiscal surpluses accumulated over the past decades. These foreign reserves allow the Singapore government to intervene in the foreign exchange market, usually to stabilise the exchange rate fluctuation during economic crisis. In 2011, MAS recorded a net profit of S$2.77 billion.

            Having large foreign reserves is very important for Singapore, which has a small and open economy reliant on exports. A highly volatile exchange rate deters long term foreign investment such as FDIs and would hurt Singapore’s economic growth. It would also disrupt the long term business plans of local companies. Therefore, it is important that MAS intervenes to reduce our short term currency fluctuations.

            As financial markets have been experiencing high volatility over the past few years due to numerous macroeconomic shocks such as the world financial crisis, the EU debt crisis and now the US debt crisis, it is imperative that MAS has a steady flow of foreign reserves for us to tide over the tough economic conditions.

Temasek Holdings

            Temasek’s aim is to maximise shareholder value over the long term. A significant portion of Temasek’s portfolio is invested in Singapore. However since 2002, Temasek has taken active steps to diversify its portfolio into Asia and other markets. Currently, as of 31 March 2012, 72% of the portfolio is invested in Asian markets, with Singapore accounting for 30% of the overall portfolio, 25% of the portfolio is in Australia, New Zealand, North America and Europe while 3% of the portfolio is invested in Latin America, Africa, Middle East and Central Asia.

            Some of the major investments of Temasek Holdings include Standard Chartered PLC, DBS Group Holdings, Singapore Telecommunications Limited, Keppel Corporation Limited, Singapore Airlines Limited, Singapore Power Limited, SMRT Corporation Limited, Capitaland Limited and Olam International Limited. In 2012, the net accounting profit was S$11billion.

Government Investment Corporation (GIC)

            GIC’s mandate is to achieve good long-term returns, to preserve and enhance the international purchasing power of Government reserves. As a rule, GIC’s investments are outside Singapore and not in Singapore companies or instruments. Due to national security issues, the Government does not disclose the size of our financial assets in GIC to prevent speculative attacks on our financial system which would threaten our economic stability.

            We can see that due to the rule set by the Singapore Government, the geographical locations of GIC investments differ from Temasek Holdings, and this complements the different portfolios between these two entities.

Performance of Our Financial Investment

            Due to the long term investment view taken by Temasek Holdings and GIC, we have achieved a real positive return on our investment. GIC has achieved a real investment return of 3.9% after taking into account of the global inflation. Temasek Holdings has achieved a nominal annual return of 16% over the past 20 years. These figures compare favourably against other mixes of portfolio investment in the financial world of investment.

            During the financial crisis in 2008, GIC and Temasek Holdings made the headlines together with other SWFs as they invested heavily into banks by purchasing equities. Due to the timing of the investment, both GIC and Temasek Holdings incurred huge losses through their purchase of equities in distressed banks such as UBS, Barclays, Bank of America and UBS. Since then, the value of GIC and Temasek portfolio has recovered and surpassed the pre-crisis level.

            According to the Sovereign Wealth Fund Institute, as of Jan 2013, both Temasek Holdings and GIC are listed among the Top 10 SWFs in terms of the value of their assets. The top 3 SWFs are the Government Pension Fund (Norway), with assets of US$660 billion, Abu Dhabi Investment Authority (UAE) with assets of US$627 billion, and SAFE Investment Corporation (China) with assets of US$560 billion. In 2012, Temasek Holdings recorded a net profit of S$11 billion whereas China Investment Corporation, another SWF of China, recorded a loss of 4.3% on its overseas holding. Thus, our SWFs have performed admirably over the past decades to grow our reserves.

Conclusion

            Our National Reserves form a critical part of our national security in ensuring economic stability. In times of crisis, they act as a powerful tool for government to resolve economic problems. Over the past decades, the three agencies, MAS, GIC and Temasek Holdings, have managed to grow our national reserves despite a resource-scarce economy.

            As the issue of aging population become more acute, the net CPF contribution may fall, reducing the inflows of funds into GIC and Temasek Holdings. Political demands by Singaporeans to establish a wider social safety net would result in an increase in Government’s expenditure. As a result, The Government may require a higher contribution from Net Investment Returns Contribution to fund the increase in government’s expenditure. These two issues pose challenges to the growth of our national reserves.

The 1998 Asian Financial Crisis, the Argentina debt crisis in 2000, the EU debt crisis and the on-going US debt issue show us the need to be prudent in our use of national reserves and to avoid populist policies which many hamper our economic growth in the long run.

A depletion of national reserves could create an economic crisis in Singapore. Thus, we should not be complacent in our management of National Reserves. As the world economy has become more volatile the past few years and in times of economic distress, our National Reserves would serve as a key national asset for us to fall back on.

My blog as a business?

I am quite the idiot when it comes to IT stuff.

Friends have given up asking me to use Excel and Powerpoint. At one point, I thought Excel meant to do well at work and Powerpoint was some special power which magic users had in Dungeons and Dragons.

Talk to me about Cloud and I will tell you it is all about dew point and ADLR which stands for adiabatic lapse rate. Hey, I could sound Greek too, you know, but just from a different corner of the island.

Actually, I have been reprimanded by a fellow blogger before for not becoming IT savvy. I am sure he means well and I do see why he thought I was not doing enough. 

Hey, I even gave up Facebooking after a few months but I only started a Facebook account because a friend told me my blog should have one. I didn't do it voluntarily.

To me, isn't having a blog good enough to reach out to people? Apparently, it isn't! 

Oh my goodness, it is just too much for my Jurassic Age brain to process. Woe is me.

A meeting over the weekend with someone whom I later found out to be an internet marketing guru set me thinking about my blog. 

I was impressed when I found out how he harnessed the power of the internet and made very good money. 

Passive income, I thought. No, he said, not passive. It is still a business that has to be maintained.

Oh dear. That sounds like work to indolent me.

I did some reading on internet marketing over the weekend and I am still quite lost. I mean I have ads in my blog and I also recommend some value for money deals in my blog. So, I guess these are considered internet marketing too, right? 

Then, why don't I make big money from blogging?

Of course, anyone who has followed my blog for a while would know that, for me, blogging was something that happened not by design. 

I started this blog out of boredom and curiosity. 

Any internet marketer would look at my blog's URL and shake his head. Too long. Too hard to remember.

Over the years, I just kept blogging and sharing my ideas. If I made some pocket money from blogging, I was happy but it was, obviously, not a major consideration despite what some people might think and say.

Now that I have been offered a peek into what I might be able to do with my blog, one question is, of course, how do I go about doing it? 

Another question is whether I want to do it?

Truthfully, I am more interested in learning about how to do it than to be actually doing it. After all, it could be something I might be able to do in future. 

A retirement pursuit? Maybe.

In a way, being really passionate about blogging without any overarching need for monetary rewards could have been a good thing because over the last few years, just doing what I enjoy doing, without any plan for branding, I found that I have established a brand. 

What do I mean?

If we were to Google "ASSI" or "AK" or "ASSI AK", my blog would appear at the top of the search results! 

It is true! Go ahead and try it.

I have known this for some time but the significance of it did not hit home until very recently. It is both exciting and scary. 

I am an anonymous public figure! 

I am an oxymoron! 

How is that for wow factor?

Anonymous public figure.

Any marketing person would tell us that a strong brand is an incredible asset. So, could I be sitting on an asset? 

If I could think of how to make this asset work for me, I could quit my day job and become a full time blogger like XiaXue and Mr. Brown, couldn't I?

Ahhhh... (picture Homer Simpson in a daze).

Ooooh... (nope, this is not a paid advertorial for Pizza Hut). 

Sigh... (allow me to look phased out for a while).

OK, back to reality. Hard landing. Ouch.

Anyway, I am just thinking out loud here, as always. I hope I have not offended anyone.

Blogging power!

I think I should be a fashion blogger!

I could start a trend. No?

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Ends 30 April 2013.

Marco Polo Marine: Is this a good time to buy more?

Yesterday, I met up briefly with some friends. It was a very invigorating experience as we talked about value investing. When asked if there was a stock which I thought would pass any fundamental analysis on both quantitative and qualitative aspects, without hesitation, I said "Marco Polo Marine".

Massive shortage has resulted in a 15% to 20% AHTS charter rate premium in Indonesia .

I have blogged extensively about Marco Polo Marine's business and why its stock was undervalued and how, even now, it is inexpensive. However, Mr. Market is a sentimental being and how he feels is more important than how he thinks. So, can we tell how Mr. Market feels about the stock?

I have mentioned about the glaring negative divergence in the chart a few times before and how anyone who should buy in then should be cautious enough not to throw in everything including the kitchen sink.

Since touching a high of 45c a share, the stock price has been drifting sideways with immediate support at 41c. Although volume is necessary to push price higher most of the time, it is not necessary to have volume to see price weakening over time, and volume has been very thin in the last month or so.

So, is this a good time to buy more of Marco Polo Marine's stock?

Although valuations are still very undemanding, I get the feeling that Mr. Market is waiting for a positive catalyst which could give the stock price a sugar rush.

In the meantime, we could expect some long holders to sell out their positions. Are they wrong to do so? Well, they could have found better places for their money or they could see with more clarity than I could that stock price is going to suffer a significant decline. Or they could have simply lost patience. There are so many possible reasons.

I like to think that a sideway movement in an uptrend is more bullish than bearish. When there is sideway movement, I like to look at the Stochastics which, in this case, seems to be turning up in oversold territory. Also, as the stock price formed lower highs, CMF has formed higher highs which suggests to me that smart money is still flowing into the stock even as its price seems to be stuck in the doldrums.

I told my friends that we should be brave and be invested. However, we should have a war chest ready. We could see share price lowering to test supports at 41c, 40c or even 39.5c where the rising 100d MA is approximating. 

Having said this, there is no guarantee that supports would be tested. So, if we are still waiting by the side, this is a possibility that we have to accept.

Even though I have strong conviction, I remain pragmatic and if things should go awry, I have the resources to ride through the rough patches. Stay invested but stay prudent.

Related posts:
1. Stock picking: Spotlight on Marco Polo Marine.
2. Marco Polo Marine: Insider buying continues.

Saizen REIT: A brief break through.

Saizen REIT had a high volume, white candle day. Could it be that Mr. Market is more than warming up to this once upon a time unloved REIT? It certainly looks that way.

Draw some Fibo lines and we see why 21c was a strong resistance today. With volume as high as today's, however, it would be natural for any chartist to wonder if there could be a follow through in the next session.

Of course, the very long upper wick on the candle suggests the presence of very strong selling pressure as unit price tried to push higher. Look at the CMF and we see a lower high and a lower low which suggest to me that money was flowing out of the counter as price pushed higher. This could limit upside in the short term.

Fundamentally, the NAV/unit of Saizen REIT as well as its DPU in S$ terms could reduce somewhat due to the weaker JPY. Against the S$, the JPY has weakened some 20% in the last one year. So, it would not be wrong to expect lower distribution yields, all else remaining equal.

However, Saizen REIT has been on an acquisition path and this would mitigate any reduction in NAV/unit as well as DPU in S$ terms. Indeed, unit holders would have been very pleased when a higher half yearly DPU of 0.66c was paid out recently. That was a bit higher than the DPU six months earlier.

On 31 December 2012, the REIT's NAV/unit was JPY 19.21.  Based on the exchange rate of S$13.30 to JPY 1,000 today, NAV/unit works out to be S$0.255. So, at 20c a unit, Saizen REIT is still trading at a discount to NAV. Almost 22%, actually.

If units of Saizen REIT should trade at S$0.25, with an annualised DPU of 1.32c, we are looking at a distribution yield of 5.28%. For a portfolio of freehold residential properties in Japan which has seen a consistent occupancy rate of above 90%, is this good enough for Mr. Market?

There are really no comparable REITs listed in Singapore and we have to look at J-REITs to get a clue as to why Saizen REIT could look very attractive even at today's price. J-REITs' average distribution yield is just slightly above 4% now. So, at 20c a unit and with an annualised DPU of 1.32c, the 6.6% distribution yield from Saizen REIT looks extremely attractive.

With an aggressive Bank of Japan bent on their own brand of quantitative easing (QE), we could see the Land of the Rising Sun experiencing rising prices again. So, we could see Saizen REIT's portfolio of properties being valued higher in JPY terms over time. This could bump up NAV/unit in S$ terms.

However, if we look at the experience of the USA, it could take years and more than one QE before we see positive results. So, any optimism in the short term should be tempered but the longer term picture is very promising.

If Mr. Market is ready to accept a lower distribution yield of 5.5% from the REIT and 5.5% is still much higher than comparable J-REITs' distribution yields, then, we could see unit price trading higher at 24c in time to come, everything else remaining equal.

So, is Saizen REIT still undervalued now? Yes, even now, I believe that it is.

Technically, however, selling pressure was very strong as unit price tried to push past 21c. CMF shows an increase in the outflow of money from the REIT as unit price moved higher today. So, if you took some gains off the table today, I think it was a great idea. Just make sure to get back in at supports if given a chance.

Related posts:
1. Saizen REIT: Still a buy?
2. Saizen REIT: DPU 0.66c.

MIIF: Asian Pay Television Trust (APTT).

MIIF is calling for a special general meeting on its plan to spin off its stake in Taiwan Broadband Communications (TBC) through the setting up of a new business trust, Asian Pay Television Trust (APTT).

The idea is that this will further unlock value for unit holders who could either accept new units in APTT or cash in payment. Overseas unit holders can only accept cash in payment. The minimum valuation of MIIF's stake in TBC puts it at S$469.5 million or S$0.408 per unit, net of costs.

This is probably the fund's most valuable asset. In terms of proportion to the fund's NAV, it is approximately 60%. In terms of earnings contribution, it accounts for about 76% of the fund's earnings. So, it is obvious that TBC is the star performer in the fund's portfolio.

Could unit holders profit from this spin off?

1. For a business that is worth at least S$469.5 million, it generates an income of about S$44 million. That gives us a raw yield of 9.37%. What would the final distribution yield be like, after costs? 8%? In a yield hungry world, we could possibly see distribution yield compressing to under 7% which means the market value of unit holders' investment in APTT could then see a gain of approximately 15%.

2. A sell off of MIIF units by Mr. Market could happen, post spin off. Since TBC accounts for some 76% of the fund's earnings, MIIF's unit price could decline proportionally. However, Mr. Market doesn't behave rationally all the time. We could take advantage of drastic mispricing to sell or buy units in MIIF then as there could be some confusion as to the valuation of MIIF, post spin off.

For now, we can only wait to see how things will turn out.

See MIIF's full 2012 results: here.

Related post:
MIIF: Realising value.

POSB HDB loan: Peace of mind (for 10 years).

A friend asked me if he should refinance his HDB housing loan with POSB. He currently has the HDB Concessionary Loan which attracts an interest payment of 2.6% per annum.

Pegged at 0.1% above the CPF-OA interest rate, the HDB Concessionary Loan's interest rate is unlikely to increase, ever.

Having a floating interest rate of 3 months SIBOR + 1.38%, the new POSB HDB loan gives the assurance that interest rate will not go higher than the CPF-OA interest rate for the first 10 years of the loan. CPF-OA interest rate is currently 2.5%.

What happens after the first 10 years? Well, interest rate will be revised to 3 months SIBOR + 1.48% and there will not be any upper limit to the interest rate anymore.

Intuitively, I feel that this is a good deal for anyone who wants to enjoy a lower interest rate on his HDB housing loan which, given the current very low interest rate environment, represents rather substantial savings.

Without the guarantee of an interest rate cap at the prevailing CPF-OA's rate for the first 10 years, however, it would not have been as attractive. So, you can imagine what I am going to say next.

The attractiveness of the offer ends in the 10th year as the interest rate could be higher than the HDB Concessionary Loan's rate by then. Of course, if the low interest rate we see today should still be around 10 years later, no matter how unlikely the case might be, then, this would still be a good deal.

From the 11th year, however, borrowers would be at the mercy of the 3 months SIBOR. They could try to re-finance their loans with other banks but they can never go back to the HDB Concessionary Loan.

Older readers might remember stories of how many HDB home owners switched to bank loans when the market was first liberalised many years ago. Initially, the interest rates on those housing loans offered by the banks were lower but they gradually increased. Those owners were badly affected.

Interest rates will not stay so low forever and anyone who signs up for this new POSB HDB loan should do so only with a contingency plan to pay off the entire loan at the end of the 10th year. It is a contingency plan and this means that the borrower should have the ability to do so but he doesn't have to if circumstances remain benign.

Take the loan, by all means, but put aside some money religiously every month to do partial capital repayments or enough for a full payment of the outstanding loan at the end of the 10th year.

This is what I would do.

Update (25 July 2014): It is 8 years now.
"Save up to S$20,000 in the first 8 years when you switch to the POSB HDB Loan! Plus, get a S$1,800 cash rebate, on top of capped interest rates and more. T&Cs apply."

Update (29 May 2016): It is 5 years now.
POSB HDB Loan is the first HDB Loan to offer interest rates capped at the prevailing CPF Ordinary Account rate* for the first 5 years. Not only will you be protected from interest rate surprises, you could enjoy guaranteed savings too! Guaranteed 0.1% p.a. lower than HDB Concessionary Loan rate for the first 5 years. Enjoy savings from lower interest rates compared to HDB Concessionary Loan rate. No prepayment fee.


PLEASE SEE LATEST UPDATE ON HOME LOANS:
http://singaporeanstocksinvestor.blogspot.sg/2016/08/fixed-rates-sibor-fhr18-or-hdb-housing.html

CPF or SGS?

When I revealed that I did a voluntary contribution to my CPF account earlier today, someone told me he is scared of the CPF and would only contribute what is required by law.

I said that the CPF gives us relatively attractive, risk free returns. He then asked why not consider the 30 years SGS (Singapore Government Securities) with a 2.6% return and have some upside to boot.

Well, the SGS are quite different from the CPF, aren't they?

When we do a voluntary contribution to our CPF account, the contribution is apportioned to the OA, SA and MA. The OA pays 2.5% while the SA and MA pay 4.0%.

CPF money is actually long term savings, a very long term fixed deposit of sorts. The principal sum does not change. We can't actually lose money, so to speak.

When we buy long term SGS, we are buying bonds. We might get 2.6% per annum with the possibility of some upside but the possibility of downside exists as well.

Actually, a quick check over at MAS' website will show that the 30 years SGS which is supposed to pay a 2.75% coupon has fallen in price. See: Daily SGS prices.

As I believe that the very low interest rates we currently see cannot persist for many more years, buying long term bonds is a risky proposition. Why?

For bond prices to rise, interest rates have to continue falling. How likely is this? It is more likely for bond prices to fall in the coming years as interest rates once again start to rise. It is not a matter of "if it happens" but "when it happens".

I have money stored in four war chests. My CPF-OA and CPF-SA are two.

Money in these accounts earn relatively attractive, risk free returns while waiting for possibly more compelling propositions to be offered by Mr. Market.

Money in bonds is like money in equities in that they are not money in a war chest waiting to be deployed. Or am I mistaken?

Related posts:
1. Be cautious even as we accept higher risks.
2. Build a bigger retirement fund with CPF-SA.
3. If we want peace, be prepared for war.

Investing in Singapore banks?

Just read an article in CNA and I am just thinking out loud if it is still a good idea to invest in Singapore banks?

Southeast Asia's biggest bank has said demand for home and car loans in Singapore has plunged this year following government measures to cool inflation.

DBS Group's chief executive, Piyush Gupta, told Channel NewsAsia new home loan demand fell by 50 to 60 per cent last month.

He said lending this year is unlikely to match 2012.

.... Mr Gupta said much of the bank's Singapore operations lose money and Indonesia is the focus for growth this year.

Read full article: here.

Related posts:
1. More cooling measures on the way?
2. Cooling measures for cars.

First REIT: DPU to increase!

First REIT is going to acquire two new hospitals in Indonesia for $190.4 m.

1. Siloam Hospitals Bali.
Purchase price: $97.3 m.
Annual base rent: $9.7m.
Financed by a drawdown of committed debt facility.

2. Siloam Hospitals TB Simatupang (South Jakarta).
Purchase price: $93.1 m.
Annual base rent: $9.3m.
Financed by a combination of a drawdown of committed debt facility and issuance of new units to the REIT's sponsor.

For anyone investing for income, an important question is how would these actions affect the DPU?

Well, even with the issuance of new units to the REIT's sponsor, unitholders will still enjoy a 5.47% increase in DPU on a per annum basis. The estimated full year DPU including these acquisitions is 6.94c.

Mr. Market certainly likes the news as the REIT's unit price rose 3.5c to close at $1.23 per unit. At this price, the projected distribution yield is 5.64%.

Yield has certainly compressed very much compared to those days when I bought at between 42c to 76c per unit.

So, is it still good to buy at current prices? It would depend on what is our definition of "good".

See announcement: here.

Related posts:
1. REITs: When to buy?
2. Do not love unless it is worth the loving.

A bad experience in a local bank.

One would think that after the Lehman Brothers Mini-bonds incident, things would have changed on the banking floors here. However, if my sister's experience yesterday at a reputable local bank was anything to go by, not much has changed on the ground.

I see dark clouds again.

She went to the bank to deposit my niece's savings in a fixed deposit but was approached by a male banker who tried to convince her to put the money in a "bond" which would supposedly give her a 5% return instead.

He told her that there was no lock in period and that the 5% return was better than the 1% which the one year fixed deposit would pay in interest...

Waiting for more information? You would be disappointed. Now, how many aunties and uncles would have taken up the offer right there and then?

Well, my sister asked questions! Good on her!

Bonds? Who am I lending money to?
Answer: XXX (name of the bank she was at) lah.

Is this some kind of unit trust?
Answer: No, no. You are lending money to XXX.

What is the catch?
Answer: The catch is you get 5% per annum lor.

There are no fees?
Answer: You can sell anytime. There are no fees when you sell.

What about fees when I buy?
Answer: There is a 3% fee.

So, before I make any money, I would have lost 3%?
Answer: But you will get 5% per annum.

XXXX offered me a product too. Capital is guaranteed. What about this?
Answer: This won't lose money one. See? I show you the chart. The value keeps going up.

So, nothing is guaranteed?
Answer: The projected returns is very good. See the chart?

HOCUS POCUS! POOF!

If I had been there, the "banker" would have been blasted by me big time! I would have asked to see his branch manager. I would have suggested that this person be sent for corrective training. Indeed, how are these "bankers" trained?

Misrepresentations aplenty!

I get very agitated when I hear of such incidents. Why do people resort to such trickery to close deals? Why can't they be honest?

Related posts:
1. Know what is good for us.
2. Inflation adjusted retirement income plan.

Want to make big money? Must drink this!

I have used the example of how we can save on super atas coffee and to drink less expensive coffee for the masses. Of course, I am assuming that all of us are of the masses.

I went one step further by suggesting not drinking coffee at kopitiams but to bring our own 3in1 coffee mix to work. Wah! Save even more!

Of course, if our workplace has a well-stocked pantry, we get free coffee! Win already lor!

However, with cost of doing business in Singapore rising, we could be seeing office pantries becoming less well stocked or having cheaper alternatives.

Today, I was rather amused that the familiar Nescafe coffee in our pantry has been replaced by:

A must drink for all investors and traders every morning!

Gong Hei Fatt Choi!

Huat ah!

Related post:
A common piece of advice on saving.

Letter from a Brigadier General.

Slightly more than a year ago, I received a letter that had the words "ON GOVERNMENT SERVICE" and our national crest on the envelope. I had palpitations.

Today, it happened again!

This time, I received a letter from BG Tung Yui Fai of the Singapore Armed Forces.

Enclosed with the letter are 8 pieces of $10.00 vouchers which can be used at more than 5,000 outlets in Singapore! They include petrol stations, supermarkets and F&B outlets!

Accepted at Old Chang Kee as well, I guess I will be having free curry puffs for a while. Yummy!

Related posts:
1. AK71 gets recognition from the government.
2. Old Chang Kee: Have my curry puff and eat it too.

Sound Global: Long position at 50c

Sound Global's share price is currently at an important support level. This approximates 49.5c.

I am once again a shareholder of the company with a long position at 50c. I bought some shares towards the end of the day when I saw how the support seemed to be holding up.

Make no mistake, Sound Global's stock is in a downtrend but share prices go down a river of hope and hardly in a straight line. Although no one can say that the stock has bottomed, it could be that it has found a floor.

I see a higher low in the CMF even as share price dipped lower. We see a positive divergence. The MFI does not spot a higher low but it has just dipped into oversold territory. We could be seeing some buying activity as the stock becomes oversold with volume increasing today.

A short white candle with a lower wick formed today. Although not strictly a hammer, after yesterday's black spinning top, this is a promising sign that the downtrend has weakened and possibly coming to a halt. This short white hammer is a reversal signal which would need confirmation tomorrow.

Fundamentally, I like the company's business. I am concerned about its higher financing cost but in spite of this, it is still a very profitable company with very good prospects. The selling down of its stock might have been overdone by Mr. Market.

In fact, EPS is likely to improve in 2013 because of a very strong order book. With China bent on improving water and sewage infrastructure, I expect Sound Global to be a logical beneficiary. Trading at a PE of less than 10x, Sound Global's stock is inexpensive.

With the stock currently in a downtrend, however, for anyone buying on dips, adopting a trading mentality could be more rewarding.

Related post:
Sound Global: Lost 17.2% in a day.

Yongnam: Partial divestment at 31c.

Last month, I commented that I was almost sure that Yongnam's stock would hit 31c per share and this has happened sooner than expected. Today, the stock hit an intra day high of 31.5c.

Technically, I have observed that the share price seems to move in bands of 1.5c. So, overcoming resistance at 31c, we could see share price rising to 32.5c and 34c over time.

Fundamentally, it is not so easy to forecast Yongnam's earnings as it depends on the number and value of projects they might capture in future. There really is no consistent recurring income base which can be used.

However, if we were to accept last year's performance as the worst case scenario and be more conservative, at 31c per share, Yongnam is trading at a PE of almost 9x. It is hardly expensive.

If we accept CIMB's forecast of 5.2c EPS in 2013, then, PE is much lower at almost 6x. Definitely inexpensive.

CIMB thinks 5.2c EPS is attainable because previously delayed projects would be ramped up in 1Q 2013. Various landmark projects are also expected to boost earnings in 2013. (See CIMB's report: here.)

Is share price going higher in the next few sessions? The formation of a long white candle on the back of extremely high volume is very bullish. Share price could indeed move higher but because my initial target price of 31c has been hit, I decided to do another partial divestment today.

After all, to sustain the upward movement in price from here, much higher volume is probably required. Is this likely? I don't know but locking in some gains as price action went parabolic seems like a good idea.

Keep an eye on the momentum oscillators. If lower highs form although share price has moved higher, we would see the formation of negative divergences. This would sound a warning bell although it does not mean that share price would decline right away.

Related post:
Yongnam: Investing in infrastructural developments.

Yongnam: Investing in infrastructural developments.

I like what I read in The Business Times today on how Yongnam is leveraging on its core competencies to diversify into investing in infrastructural developments which would generate recurring earnings in future.

This is an astute step in the right direction since Yongnam is already a leader in the provision of structural steelworks, specialist civil engineering and mechanical engineering services. So, they have an upperhand in undertaking infrastructural developments.

Yongnam has, together with JGC Corporation and Changi Airport Planner and Engineers Pte Ltd, looked into possibly submitting a tender for the construction and management of an international airport in Myanmar.

This new business direction and the burgeoning pipeline of infrastructure projects in Singapore to 2030 hint of more vibrant times ahead. Yongnam is, more likely than not, going to be a steady performer and could surprise with better results in time to come.

Dividend payout remained the same at 1c per share despite a decline in EPS. This suggests to me that Yongnam is commited to paying at least 1c per share in annual dividend in future.

I am rather contented to be paid to wait for Yongnam's results to improve meaningfully over time.

Related post:
Yongnam: Declared 1.0c dividend per share.

Article published in Yahoo! Finance Singapore (3).

An ASSI classic was republished in Yahoo! Finance Singapore on 6 March 2013.

The article has, naturally, attracted comments and some of them are eye openers.

I am a frog in a well and can only see a small patch of the sky.

In case anyone is interested in finding out more, here is the link:

Yahoo! Finance Singapore.

To read the comments, simply scroll down beyond the end of the article. Happy reading!

Related post:
Article published in Yahoo! Finance Singapore (2)