Probable softening of property prices ahead

With the continued use of the internet media in politics, it has drawn some of the thoughts of our policy makers into more ordinary minds and lives.

For those for are looking into Singapore property in the near term, this might be a useful website --->

http://mndsingapore.wordpress.com/

In my humble opinion, the prices of property in the SHORT term (< 1yr) are just affected simply by basic laws of economics of supply and demand. To put it half a step further, "anticpated" supply and demand. In investment terms some like to term it as GREED vs FEAR. If there is more fear, prices will drop. If there is more greed, prices will go up. Fundamentals do not play out so much as they are more long term factors.

Of cos, some might argue that blogs and facebook are not official statements and soon-to-be-implemented policy changes. Still I think it is a good sign, if releasing an unofficial statement, could help to balance an extreme situation, that would be the best.

In our lives, we need to balance so many things. Religion, family, career, health, friends etc etc

The key is simply to BALANCE and avoid both extremes. Balancing however is not apathy or having no opinion over things/issues. It simply means working on important things in your life, such as to maintain equilibrium.

In simple health terminology, during a blood test if u notice that your data (calcium, sugar, potassium) are not within an acceptable medical range, u would need active steps to rectify it. Being too high or too low is not good in the long run. For example if your potassium is too high, u would need to avoid certain foods like durians or bananas. If too low, then eat more :)

I always say that the house is most probably the biggest purchase of your life. So consider it wisely!

Enjoy Mr Khaw's blog and check out his facebook too :)

Baby Bonus account and 1% savings bank account from Standard Chartered

Standard Chartered Bank is offering 1% savings account (eSaver) for a CDAC baby bonus account opened with them. Offer ends by the end of 2011, but my guess is that it will go on and on.

Check it out on their website for more info  :)

http://www.standardchartered.com.sg/personal-banking/deposits/child-development-account/en/

I also like their free Personal Accident Insurance of $50K

Hyflux Preferance Shares - Long term and Low Risk Investments

Was pleasantly surprised that the Hyflux pref shares are currently going at $106.20 which translates to a yield of 6.2% if u choose to sell it tomorrow!

A quick recap on the emails in mid April that Hyflux was offering its preferance shares at 6% semi-annual payout (Apr and Oct). Hyflux will redeem back at $100 par value in 2018, if not it will "punish" itself by paying the shareholders 8% instead.

Now wait a minute, if I can sell it now in a matter of 1.5 mths and obtain a 6.2% yield, why should I wait for the full 6 to 12 mths to receive 3 to 6% dividend ?!  Is there a catch somewhere ?

The catch however is advantageous to the long term investor. This is what investors call it as "capital gains", where u gain $6.20 from a par value of $100. On top of this, there is an intrinsic guarantee of 6% dividend payout every year. Isn't a 6.2% + 6% = 12.2% a good return ? I would say so.

Should I sell my pref shares now? Well it depends. Part of the reason why there is a 6% capital gain is becos investors in general cannot find anything better to invest in ?

Equities or shares are generally the highest rate of return compared to bank interest, fixed deposits, bonds etc. But looking at the Singapore market, which had stayed largely sideways for the past 6 mths (plus the March 2011 earthquake where there was a steep correction from the horrifying event), the rate of return in equities is almost zero. Worse still with Europe debt issues, high inflation and QE2 ending, the equities market probably looks biased towards the down side in the short term.

With money lazing in the bank and earning 0.1% interest, some people are taking a portion of their funds out to buy up the pref shares. Hence all the bank pref shares went up by 1-2% too.

Does it sound silly if I missed the chance to buy at $100, and now at $106.2 ?  Well 5.6% (=6/106.2) is still a reasonable yield compared to bank interest nowadays. (Is 5.6% sillier or 0.1% ?)   Looking at the strong price move, it might go further to say $108 in a few mths time  :)

As always, investing is a personal choice, and a balance of risk vs reward.
I like this phrase from another blogger - To protect our wealth, we must take some risk  :)

Medium Risk Shares 1

I would consider Reits and Business trusts (eg. Hutchison Port Trust) as Low to Medium risk share investments, with medium term timeframes (>few months). For medium risk investments, it is a little bit more complicated as compared to long term investments like Bank pref shares. Just a leetle bit, not to worry :)

To start off with for medium risk shares, there is a need at least to understand the bull and the bear market cycle. In general, people consider bull market when the STI index is trending above the MA200 (moving average 200 days). Similarly, a bear market is trending below the MA200.

In general, for medium risk investments, it is a "buy for a bull market" and a "sell for a bear market". Bull and Bear markets on the average last 2-3 yrs. So it is a buy, wait and do nothing for few months to yrs, in a bull market. Then sell when a bear market comes or when the price have reached your target or when u are too bored in doing nothing and cannot tahan anymore. Simple right? :)   Do however take note that we are in the 3rd year of the bull market. Hence statistically, this should be the last year of the bull run

Savings Account

CIMB Malaysian Bank has been expanding agressively recently and is currently offering prob the most competitive savings rate as compared to other banks (Maybank, Stanchart, DBS etc)

The Starsaver savings account interest rate is at an attractive 0.8%, comparable even to some fixed deposit rates.

On top of the savings account, it also offers free unlimited cheque books, which are useful for day-to-day and if u need to transfer large amounts of money quickly to a local bank (DBS, OCBC, UOB) for a hot IPO share application

Have sinced transferred a major bulk of my cash savings to capitalise on the attractive interest rate. Don't think this will last for a long time as I guess it is to attract new customers for the bank. Probably by next year, unless interest rates in general also go up due to inflation and a strong economy, the rates should come down accordingly. Still 0.8% is 8x as compared to 0.1% in DBS. Have to make my money work harder :) and myself to work less hard  :P

For those who are risk averse (or kiasi type), u might want to take note that bank deposits are 100% guaranteed by the Deposit Insurance Act. So it is safe to transfer your monies into this Malaysian bank.

Still looking closely at the 0.8% rate, there is a slight element of fixed deposit component inside this predominant savings account. The minimum deposit is $5K, with a monthly inward transfer requirement of $500. Failing to meet the $500 transfer, would mean that the interest would drop till 0.5% (which I think is still attractive compared to other banks. In summary, my feel is that if u have about $11K+ to transfer over, this savings account would be suitable. ($5K for minimum, $6K for one yr of monthly transfers)

http://www.cimbbank.com.sg/index.php?ch=sg_per_st&pg=sg_per_st_cur&ac=12&tpt=cimb_sg

For those who have no use of the cheque book, I was at the bank twice, and the CIMB staff explained clearly to me, that the minimum deposit to start is $1K and monthly inward transfer is $100, to enjoy the 0.8% interest. There was no brochure and info in the web. I also opened this heehee, so i now have two CIMB accounts!  :P

It's nice to be surprised by money (CIMB logo). My Feb bank interest is now much higher than before :) There is an art to moving money around to maximise opportunities or reduce risk investments. Recently I have been looking at financial numbers from the % perspective instead of the real amount value. 1% of $10K and 1% of $100K are the same in terms of % but the amount values are 10x. Part of financial stewardship is not to belittle humble beginnings. As the amount grows, the multiplication effect will be substantial, together with compound interest. Monies earned honestly and with integrity, will be of much use. History has shown that people who win lotteries, became poorer many yrs later. They have not learnt money management skills properly  :)

Low risk shares 6

After talking about the pros in the previous 5 posts, it is only fair to also highlight the cons of pref shares. There are always both sides of the coin, and only by understanding both sides of risks vs rewards would we be able to clearly judge whether the investment is suitable for us.

The disadvantages are namely:

1. Pref shares are not capital protected investments and there are inherent risks involved. Hence it is possible even without a doomsdays scenario where the local banks fail, for u to lose part of the capital should u wish to cash out urgently.

During what some experts deem as a once-in-a-lifetime financial crisis 2 yrs ago, the pref shares did lose up to 20% of their offered price. For example OCC5.1% went till as low as $80 (Aug 08). It took almost a year to recover back to $100 in Sep 09, and has since moved upwards to the current price of $103. Hence pref shares should be for long term investments (>1yr). Baring any unforseen financial circumstances which are of the same magnitude of the Lehman Bros crash, there should be little chance of falling below $100 in the next upcoming yr.

2. Low volume or liquidity of the pref shares traded daily in the Singapore stock market. As these are very low risk investments, with almost certain dividend payouts at scheduled times of the year, investors usually park a certain amount of money and forget it for a few months or yrs. Hence people rarely buy or sell these pref shares, unless various individuals require to cash in / out for their personal reasons.

Still the daily volume is a respectable few lots plus and minus. My guess is that we only have enough money to invest in a few lots (few tens of thousands), vs the millions held by various funds. In urgent need of money, i guess just selling one to few lot per day ($10K = 1 lot) should be okay.

3. Bank Interest rates might increase or spike up suddenly. With inflation in the current horizon, banks in India and China have started hiking up their interest rate to cool their hot economy. Singapore could possibly also do so in the next yr, as inflation rises and hot money rushes into Singapore.

Though extremely unlikely, the current 0.1% interest rate might rise to say 6% in months, hence making it more attractive to put money in the bank earning the interest, than in pref shares.

Low risk shares 5

Added a 2 yr weekly chart of UOB505 pref share, to show the consistency of the share price. The long red downward bars every 6 months are the semi-annual payout of the dividends. The price has always recovered and gone higher over time

Family Planning

For those who are planning on having kids, it might be good to go for Thalassaemia screening prior, as 3% of the Singapore population are carriers. Basically Thalassaemia is a natural blood immunity against Malaria, but some preventive actions should be taken if one party is a carrier.
  

You can call up KK hospital to book an appointment for DNA tests. Just require few tens of dollars, simple blood test and few weeks of waiting
   

My gynae suggested this, especially if you see your blood test results MCV (mean cell volume) is on the normal range but on the low side.

Term Insurance vs Life Insurance

Hello all, this might be applicable to some of u  :)
Have been reading some articles on Term vs Life Insurance, and I admit being slowly skewed towards Term insurance.
   

http://www.bigfatpurse.com/2009/03/do-not-buy-whole-life-insurance/

Though not really a supportor of Suze, for other reasons but i guess its just part of show-biz.

I do agree that insurance should be for protection, and not for investment.

Mixing both up with get murky results at the end of 20 yrs.
  

Unfortunately, i have 2 whole life insurance :(   which is prob too late to back out now.

I am currently considering this, $12.80 per mth, for $100K of protection

http://www.aviva.com.sg/life-and-health/for-individuals/saf-insurance-for-nsmen.html

Still trying to find out more, just wanted to send this out, as some of u might be considering getting insurance

Hospital shield insurance 3

For those who have current medical problems, enrolling into a normal medical shield insurance plan, would most probably result in a medical exclusion in your medical plan. (Medical exclusion means if your current medical problem happens, the insurance plan would not cover the expanses). Example if u have exisiting high blood pressure, your insurance company might not want to cover u under stroke or heart diseases.

As such it would be worth considering the Aviva Moratorium underwriting, where there is no need to declare your current medical condition. Upon approval by Aviva, and when 5 yrs of pre-exisiting medical condition does not arise, it would be almost equivalent to a normal medical underwriting shield insurance plan

Check out more details in the Aviva website under Brochure and Forms
http://www.aviva.com.sg/life-and-health/for-individuals/health.html

Hospital shield insurance 2

For those who are planning on starting a family, u may also wish to consider getting medical shield insurance which includes pregnancy complications and congential abnormalities. For example the NTUC Enhanced Incomeshield, GE Supreme Healthshield Plan B+, Aviva Myshield etc.

Check out with your insurance agent/financial planner and MOH website for more details
http://www.moh.gov.sg/mohcorp/hcfinancing.aspx?id=11222

Of course, u are only eligible for these insurance coverages before your wife is pregnant :)
If she is currently pregnant, well there is always possibly a 2nd or 3rd child *heehee*

Hospital shield insurance 1

The hospital medical shield insurance is probably the most important portion in you and your family's insurance, in terms of wealth protection. Unfortunately it is also one of the least understood, as insurance agents and financial planners do not emphasize on it.

Part of the reason why agents have not been looking into this very important shield insurance, is becos their renumeration does not compensate it. A normal medical shield insurance would only cost S$100+ in a year. (payable through CPF Medisave account)  Assuming their renumeration is 30%, it would just translate to a miserly $30 commissions in a year. Hardly interesting for a high flying agent, if his/her desire is to make quick and big bucks.

Another reason is probably because the Singapore government has seen this great importance, as hospital medical bills have been steadily rising over the years, and have been trying to include most, if not all, into the national wide Medishield program.

Unfortunately after many years of Medishield implementation, there is still a small portion of the population, that falls outside of this important hospital shield insurance. They are namely some of our non-working mothers, and some of our younger siblings, before the Medishield was made compulsory.
http://www.moh.gov.sg/mohcorp/hcfinancing.aspx?id=306#

If u noticed that you or your loved ones are not covered under Medishield, pls pls enrol them at least into Medishield. The hospital bill unfortunately is probably the only debt in Singapore that will not end, even in the event of death. A hospital stay of cancer treatment will easily go up to 6 figures, enough to bankrupt most of us, without shield insurance.
When in doubt, if possible in an emergency, always go to A&E govt hospital of the lowest subsidised ward of B2 / C class (there is no penalty for upgrading later, but downgrading of ward class is not allowed). Enrolling in a subsidised ward, would also mean that the outpatient (when out of the hospital) and followup treatments, are also subsidised by the govt. In the event that the illness turns out to be chronic (long term), the subsidies will go a long way financially.

Low risk shares 4

Did a table to show the effective dividend % yield of the local bank preferance shares yield
Under the remarks column, ex-dividend (XD) means the semi-annual payout of the dividend
  

Pref Share Name	4 March 2011 Price	Dividend % yield	Remarks
DBS 4.7% NCPS 100	$103.76	4.5%	XD 22 May and Nov
OCBC 3.93% NCPS	$95.5	4.1%	XD 7 Mar and Sep
OCBC 5.1% NCPS	$105.16	4.9%	XD 3 Jun and Dec
OCBC Cap 5.1% NCPS	$103.66	4.9%	XD 2 Mar and Sep
UOB 5.05% NCPS	$104.96	4.8%	XD 1 Mar and Sep

I am currently vested in all 5 of these pref shares

Low risk shares 3

Some good links for more info on pref shares

http://www.ocbc.com/global/investorrelations/Gco_Inv_PrefShareBond.shtm
http://www.uobgroup.com/investor/stock/preference_shares_and_notes.html#132classepreferenceshares
http://www.dbs.com/investor/prefshares/default.aspx

Low risk shares 2

Some common questions on Preferance Shares

(1) The min investment amount for pref share is S$10,000 ?

Reply: Right

(2) If I want to sell the pref share anytime, can I sell the 100 pref shares or do I need to have at least 1000 pref shares in order to sell. Similar to stocks which needs at least 1 lot (1000 shares) to sell?

Reply: U can sell the pref share through any brokerage firm (eg. UOB KH, CIMB, KimEng etc), as your shares are all consolidated in the government central depository CDP. The lot size for pref share is 100, instead of the normal 1000 for other shares. Hence u can sell in 100 (or 1 lot for pref shares)
  

(3) At maturity date, the bank will buy back these pref share at the current price listed on SGX?

Reply: No, the local bank (offeror of pref shares) will only gurantee to buy back at the offer price of $100

(4) Are the banks required to buy back the pref share?

Reply: It depends on the terms of the pref share offering.

Of cos, if they dont buy back, they would need to pay u the dividend  :)

At maturity date, depending on terms of the pref share (example the OCC5.1%), the dividend might be reduced to bank swap rate + 2.5%

(5) Are the dividends cumulative?
Reply: No the dividends are non-cumulative, which actually means, if in the very unlikely event, when the semi-annual payout occurs, DBS bank is doing very very badly, say in May 2011, they can choose not to pay $235 for your $10K vested. Come Nov 2011, when the bank has recovered, they can pay u $235 for the next 6 mths. However they will not pay u for the May 2011 dividend that was missed.

This is what is meant by non-cumulative.

In the event of this, ordinary bank shares will also not be paid dividend, as pref shares have a higher priority over ordinary shares. This has never happened in all the local banks (DBS, UOB, OCBC) history, even during the LehmanBros market crash of 2008

(6) Can pref shares be converted into ordinary shares?

Reply: Nope pref shares are not eligible to be converted into ordinary shares. Hence the term "non-convertible pref shares"

(7) Will the local banks want to buy them back?

Reply: They can choose to buy back at maturity date, maturity + 6 mths, and maturity +12 mths etc

Low risk shares 1

For new investors who would like to start and learn how to invest in the Singapore stock market, the local banks (DBS, OCBC and UOB) preference shares offers a good entry point by being very low risk, long term investments (>1yr)

Basically Preference shares have been around almost 10 yrs and forms part of the Tier 1 capital of banks. Hence they are fundamentally safer than ordinary shares of the local banks. In the very unlikely event (never happened in Singapore history!) that the local banks are wound down, pref shareholders have a higher priority of payout compared to ordinary bank shareholders. This is really a doomsday scenario in Singapore, if any of the local banks fail, any company in Singapore is not safe, not even your bank deposits or cash or anything!

There are currently a number of pref shares out in the stock market like DBS4.7%, UOB5.05%, OCBC5.1, OCC5.1%, OCC3.93% etc

These pref shares payout semi-annual dividends to shareholders. A relatively good ~5% return as compared to the current bank deposits interest of 0.1%