Saturday, October 31

UOB Xinhua China A50 ETF

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UOB has launched the UOB Xinhua China A50 ETF recently. This ETF will track FTSE Xinhua/China A50 index and this index is designed to track the top 50 China A-shares companies by their market capitalization. A-shares are stocks of China companies which are listed in the Shenzhen or Shanghai stock exchange and these shares are listed and denominated in Chinese Yuan. These A-shares can only be owned by Chinese Nationals or Qualifed Foreign Insituitional Investors (QFII) as approved by the China Securities Regulatory Commission (CSRC)

The prospectus of this ETF can be downloaded here. Personally, I have taken a look at the prospectus and I do think that UOB has done a good job in explaining how this ETF works although it is still quite complex. I have taken snapshots of the important information of this prospectus.




After reading through some parts of the prospectus, I feel that the model of this ETF is rather complex. For a start, one is not holding directly to the A-shares of the China companies in the index but is actually holding on to the participatory notes known as P-notes, which is a synthetic representation of the A-shares. These P-notes have some terms and conditions which I am not too comfortable with and these are listed further in the prospectus which you can read about. Besides, both tranches of P-notes are essentially issued by Rabobank and this brings up the issue of counterparty risk.

Sunday, October 25

HDB resale prices high

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HDB resale prices high
Up 3.6% in Q3, with 11,649 units sold; cash top-ups also soar
By Jessica Cheam
(Taken from the Straits Times on 24th October 2009)

Cash-over-valuation amounts for resale HDB flats have quadrupled, from a median of $3,000 in the previous quarter to $12,000 in the third quarter. --

PRICES of resale Housing Board homes have continued their relentless climb, rising another 3.6 per cent in the third quarter to hit a fresh record.

But despite the high prices, demand for resale flats remained hot. A total of 11,649 homes changed hands in the third quarter, reaching a level not seen in five years.

The latest figures, released by HDB on Friday, highlight another important trend. Almost 80 per cent of resale flats were sold above their bank valuations.

And this amount, known as the 'cash-over-valuation' (COV) - or the cash top-up payable by buyers - quadrupled from a median of $3,000 in the previous quarter to $12,000.

Together, the numbers show that resale HDB flats are not just becoming more expensive, but homeowners have to fork out more cash to buy them.

Analysts said on Friday that the feverish buying activity had been fuelled by recent positive economic sentiment, and also some panic buying.

jcheam@sph.com.sg

Friday, October 23

Is that investment safe ?

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To see whether an investment is likely to be credible or not, there are a few simple questions which we can ask ourselves.

Does the return corresponds with the risk being taken ?

As a general rule of thumb, the risk should correspond with the returns. If the risk is low, then the return should be low. But then again, how low is low exactly ? For risk-free investments such as government bonds or fixed deposits, the return should be a low single digit. We should be looking at around 2% plus or minus approximately. For investments which are of low risk, the return should be in the single digit range although this will be higher than that of the risk-free investments. Any investments that promise to return over 10% to 20% or even more and claim to be risk-free is likely to be fraudulent. If the investment that you are considering passes this test, then perhaps you may consider to find out more about it. However, do also remember that for the recent Minibonds saga, they were marketed as low-risk investment products and the returns were low indeed. But I'm sure all of us know that truth by now that these Minibonds were a high-risk and low return investment. So that brings me to my next point.

Do you understand in the product that you are investing in ?
This can be summed up in the next sentence. If you do not understand the investment that you are investing in, then do not invest in it. Pretty simple and straightforward.

To know whether you understand the product that you are investing in, you can ask the following questions.
  • Do you know how this investment works ?
  • What is the maximum loss if this investment fails ?
  • What will happen if this investment folds up ?
  • Is this investment sustainable in the long run ?
Now this is the tougher part as it probably involves some thinking and research. But this is also another important step which you should do too as a prudent investor. If you are able to answer these questions about the investment which you are about to take up, then it should probably be safe.
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Saturday, October 17

Asia markets regain losses

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The two articles below when combined together, can give us a pretty good insight at the current state of the market. When the market was at its maximum pessimism last year, it was the best time to buy as many stocks were trading below their value. Now the tide has turned and those who have already bought into the market earlier on will be waiting for the majority of the market to put their funds into the stock market to bring the indices even higher. This is seen by the new level of optimism in the survey for the 2nd article. Coupled with the recovery of the economy, this should be the beginning of a new market cycle.
Asia markets regain losses
By Alvin Foo, Markets Correspondent
(Taken from the Straits Times on the 16th October 2009)

REGIONAL markets extended their rally on Thursday and have now fought their way back to where they were before the financial crisis struck a year ago.

That is still a long way below the peaks of 2007, but the remarkable rally that began amid the depths of panic and desperation in March is dramatically underlining the region's economic potency.

'The investor pendulum has been swinging towards Asia,' said CIMB-GK regional economist Song Seng Wun. 'The region's recovery prospects look better than anywhere else, and the post-Lehman selldown was probably overdone.'

The Lehman Brothers crash in September last year was the tripwire that sent the global economy into a tailspin, but bourses in the Asia-Pacific region have found traction to stage a recovery.

Wall Street's effort on Wednesday to cross 10,000 points, a surge driven by buoyant US corporate earnings, gave regional markets the push they needed.

The Straits Times Index (STI) closed at a new 13-month high of 2,712.15 points on Thursday, while Hong Kong's Hang Seng Index finished at a 14-month peak of 21,999.08, after crossing 22,000 during the day.

Japan's Nikkei 225 gained 1.77 per cent to 10,238.65, crossing the 10,000 mark for the first time this year, while Australian stocks added 0.6 per cent, bringing the S&P/ASX 200 to a 13-month high of 4,859.90.

The Shanghai market is up 63.7 per cent this year, way above the Dow's 14.1 per cent gain for this year and Britain's FTSE 100 Index's rise of 18 per cent.

The Indian market has surged 78.2 per cent this year, and the Hang Seng is up 52.9 per cent. Back home, the STI has gained 54 per cent for the year, and the Nikkei has added 15.6 per cent.

Japan's Nikkei 225 gained 1.77 per cent to 10,238.65, crossing the 10,000 mark for the first time this year, while Australian stocks added 0.6 per cent, bringing the S&P/ASX 200 to a 13-month high of 4,859.90.

The Shanghai market is up 63.7 per cent this year, way above the Dow's 14.1 per cent gain for this year and Britain's FTSE 100 Index's rise of 18 per cent.

The Indian market has surged 78.2 per cent this year, and the Hang Seng is up 52.9 per cent. Back home, the STI has gained 54 per cent for the year, and the Nikkei has added 15.6 per cent.


S'pore investors most upbeat in Asia: Survey
By Fiona Chan
(Taken from the Straits Times on the 16th October 2009)

INVESTORS in Asia have grown more confident about the global economic recovery, and Singapore investors are enjoying the biggest boost in sentiment.

According to a survey by Dutch banking group ING, investors here have registered the biggest increase in confidence across Asia, with a 24 per cent jump in optimism between June and last month.

The buoyancy may stem from the sustained strong performance of the financial markets and Singapore property market, said ING in a press statement yesterday.

Investors in South Korea and the Philippines were the next most upbeat, with a 19 per cent and 16 per cent increase in sentiment respectively over the same period.

In general, Asian investors are experiencing strong optimism about their local economies improving and the global economy being on the road to recovery.

Export-oriented markets such as Singapore, Hong Kong, South Korea and Taiwan have particularly cheerful investors who anticipate that their economies and that of the United States will continue improving in the fourth quarter.

In Singapore, four out of five investors believe the economic situation will get better by the end of the year.

Almost all of them - 91 per cent - believe that the local stock market will remain constant or rise in the fourth quarter, and on average they expect stocks to rise by another 9.3 per cent in the period.

Many of them are currently invested in sectors poised to benefit when the global recovery picks up, such as financial services, telecommunications, technology and commodities.

Eight out of 10 Singapore investors also believe home prices will not fall for the rest of the year. The average expected rise: 2.6 per cent.

Mr Tim Condon, head of research and chief Asian economist for ING Wholesale Banking, said the Singapore economy has 'snapped back more quickly than expected, albeit from a low base' as the Government did a good job preparing for the recession.

He believes investor confidence has been boosted by the strong rebounds in the stock and property markets, optimism about the tourism industry with the upcoming integrated resorts, and expectations of exports picking up next year with the recovery of the global economy.

One concern that Singapore investors have, however, is inflation. Three-quarters of them expect prices to rise next year, and about two-thirds think interest rates will also go up next year.

The ING Investor Dashboard survey has been published every quarter for more than two years. It is conducted across 13 markets in the Asia-Pacific, including Japan, Australia and New Zealand.

Friday, October 16

OCBC buying ING Asia private bank

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OCBC buying ING Asia private bank
By Clare Jim and Saeed Azhar

HONG KONG/SINGAPORE (Reuters) - Singapore's third-biggest bank OCBC announced its arrival as a serious wealth player after clinching a surprise deal to buy Dutch ING's private banking unit in Asia for $1.5 billion.

Oversea-Chinese Banking Corp (OCBC.SI) beat HSBC (HSBA.L) to the deal, which will triple the assets the Singapore bank manages for the rich and position it for opportunities in the fastest-growing private banking region of the world.

"What this would do is put the private bank on a firmer footing," Trevor Kalcic, banking analyst at RBS in Singapore, said of OCBC. "They had a very small private banking operation."

ING's (ING.AS) sale of its Asian private bank with about $16 billion in assets is its third major disposal in less than a month and the second in the Asia-Pacific region, as it seeks to raise capital to pay back bailout money to the Dutch government.

OCBC said in a statement on Thursday the acquisition will take its private bank assets to $23 billion.

"We are committed to investing more in the business and look forward to capturing greater market share of the growing number of high net-worth individuals in Asia and other markets," said OCBC CEO David Conner.

The purchase price, excluding ING's surplus capital of $550 million, is about 5.8 percent of ING's private banking assets in Asia, and would free up 370 million euros of capital for ING, the banks said.

By comparison, Julius Baer agreed to pay about 2.3 percent of ING's Swiss banking assets in a deal on October 7 excluding the surplus capital.

The CEO of HSBC's private bank Chris Meares told Reuters earlier this month that private banking assets in growth markets such as Asia could command a price of 2-3 percent of assets.

OCBC said the deal would cut its tier-1 capital by 1.5 percentage points to 13.9 percent.

Citigroup analyst Robert Kong said that OCBC's tier-1 capital exceeded the 12.5 percent for its local peers, giving it ample ammunition to seek M&A opportunities.

ASSET PRICES QUESTIONED

OCBC's private bank, which lost a third of its bankers to foreign rivals in 2006, is run by French national Olivier Denis. OCBC also controls insurance firm Great Eastern (GELA.SI) and asset manager Lion Global Investors.

ING's private bank in Asia is run by Renato de Guzman, who has been instrumental in building the business in his home country Philippines and Indonesia. For a newsmaker on the banker click on

The sale of the Asian assets came after it struck a deal to sell its Swiss private banking unit to Julius Baer (BAER1.VX) for 344 million euros on Oct 7. For stories on Dutch financial sector turmoil, click on

ING is in the midst of raising 6 billion euros to 8 billion euros through asset sales under a restructuring program it announced in April. It plans to ultimately exit 10 of the 48 countries where it does business.

The restructuring follows 10 billion euros in state aid ING received in October 2008 and a 22 billion euro asset guarantee it received from the Dutch state in January 2009.

The asset-sale program is seen as one potential way to offset a capital hit, though analysts have been unhappy with the sales thus far. In particular, they have found fault with both the prices paid and the fact that ING is selling assets in a still-depressed market. (Additional reporting by Ben Berkowitz in Amsterdam; Editing by Neil Chatterjee and Muralikumar Anantharaman)

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