Start of a bull run for gold?

Since the beginning of 2016, gold price had seen a meteoric rise of 21%. It rose from USD1061 to USD1292 per troy ounce at this point of writing, representing an incredible come-back by the yellow precious metal. Is this the start of a bull run for gold?

Traditionally seen as a safe asset class, the surge in gold price is due to the poor economic climate. The combination of oil crisis, China stock market crashes, negative interest rate policy by Bank of Japan and weak global growth currently make gold an attractive commodity for investors to hold. After all, it has been regarded as a safe haven for decades during economic downturns and sky-high inflation.

If you are one of those who think that the current market climate is doing “fairly okay”, then perhaps you have not been following the news or you must be an extremely optimistic person. The matter of fact is that many businesses are finding it challenging to operate under the current climate and the global market is basically waiting for a Black Swan event to implode. By then, it will be too late for you to liquidate your stocks and transfer the fund to gold because very often, the stock market moves very swiftly.

Like all investments, you must adopt a contrarian approach in order to make money. Gold has fallen from a high of USD1825 per troy ounce in August 2011 and it is likely to be at an inflection point of an upward curve. Thus, in my view, the best time to buy physical gold bullion is now because it is in an upward trending cycle. In fact, local finance blogger, Dave, predicted that gold will storm to USD2400 level this year. A very bold prediction I must say but then again, it …

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A better tomorrow for Singapore engineers

After a trip to California’s Silicon Valley, Singapore Prime Minister Lee Hsien Loong called for better recognition and prospects for Singapore engineers. It was as if the government has just awoke from a deep sleep and suddenly found that local born and bred engineers have been given the raw deal all this while. With a magic wand, PM Lee magically revitalized the outlook for engineers and give this profession a steroid injection, in terms of salaries and career progression.

To be honest, I have been an engineer for 11 years and my starting pay was $2,600. It took me 5 years of working experiences to crawl to the $4,000 level. Now, fresh graduate with no working experience can command $4,000 level. Effectively, given the new salaries regime, fresh graduates have 5 years of head-start than me. The quantum increase is quite a huge jump and I wonder whether SMEs can afford to pay such premium for fresh engineering graduates.

SG Wealth Builder

It may be the case that the government is struggling to find local computer engineers with cyber security skills. Or maybe there is a dearth of software engineers to support the growth of local fintech industry. Whatever the real reason it may be, the sudden government’s push to groom local engineers is long overdue.

For many years, Singapore companies prefer to employ cheaper foreign talents with engineering skills. But then again, many of these so-called foreign talents graduated from foreign universities of lower standard than our local universities. Furthermore, there have been reported cases of foreigners who obtained jobs with fake degrees. How can Singaporeans remain cool and be not angry?

Look, I am not implying that local engineering graduates are more competent due to our education system but there must be a level playing field. How do you feel when …

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Contra trading to be phased out?

On 22 April 2016, Singapore central bank and white-collar police raided 4 local brokerages for possible breaches of securities law. It was reported that one remisier each from OCBC Securities and DBS Vickers were taken for questioning by the authorities. When this news broke, it took the market by storm and left investors wondering which stock counters had been involved.

This latest episode reveals another dark chapter in Singapore stock market following the epic penny stock crashes of Asiasons, Blumont and Liongold in 2013. Back then, the authorities investigated the three companies for possible insider trading or market manipulations after $8 billion dollars were wiped out in two days of trading. The scandal in 2013 led SGX to implement a number of market reforms to safeguard investors’ interests.

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Among the new measures implemented were minimum trading price of $0.20, daily short-selling reporting and new reporting requirement of shares transactions by major shareholders. It was also proposed that by mid-2016, contra trading will be phased out. I personally feel that the removal of contra trading is too draconian because fundamentally, there is nothing wrong with contra trading. This activity, although speculative in nature, allows flexibility and market liquidity. Of course, like all things in life, there will always be black sheep who attempt to abuse the system. So I sincerely hope that this move will not materialize as I had made thousands of dollars from contra trading in the past.

At this point of time, it should be highlighted that OCBC Securities and DBS Vickers are not involved because only their remisiers, and not dealers, are under investigation. Unlike dealers, remisiers are self employees not drawing salaries from the brokerages and their incomes are based on commission.

Two very important lessons for all stock investors to be learned …

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Retrenchments in Singapore

According to the latest Ministry of Manpower (MOM)’s data on the employment landscape in Singapore, more workers were retrenched in 2015. A total number of 13,440 workers were laid off, the highest since 2008-09, which of course was the Great Financial Crisis period. The spike in retrenchments in Singapore reflected the gloomy economic outlook and challenging times ahead.

As a wealth builder, my mantra is to work hard for money and also ensure that my money works hard for me. Being gainfully employed and having a good income is important in order for me to lay down a strong financial foundation for the family. Henceforth, the data on retrenchment is useful because they provide useful information on the impact of economic downturn and allow Singaporeans to identify which industry sectors are ailing.

SG Wealth Builder

The latest data from MOM is indeed worrying and I am thankful that I have a job. Sometimes, in the midst of our busy schedules, we tend to take things for granted and expect every day is Sunday in office. What we don’t realize that Singapore is rapidly losing its competitive edge because of high business costs. Many MNCs realize that the so-called talents in Singapore are not so highly skilled or possess niche knowledge that cannot be found in cheaper locations.

As a result, many companies in certain industries are starting to shift their operations to overseas countries like Thailand, China and India where talents are abundant and staff costs much lower. This means that Singapore PMETs are facing structural risk in their job prospects if they don’t start to up-skill their competencies.

If you are mid-level professional, it is important to learn how to progress in your career because if you don’t, nobody will do it for you. Pick up skills that will aid you in …

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OCBC share price skyrocketed

On 7 April 2016, local bank OCBC announced the acquisition of Barclays Asia wealth management business in Singapore and Hong Kong through its private banking arm, Bank of Singapore for $430 million. The transaction is still subject to approval by Singapore’s High Court but is expected to be completed by end of this year. Nevertheless, investors have given their nod of approvals and pushed OCBC share price up by $0.60 within the past week.

Since last year, OCBC share price performance had not been doing well partly because of its loan exposure to the oil and gas industry. The non-performing loan (NPL) has increased to $1.97 billion in FY15 from $1.28 billion the previous year, due to the “classification of a few large corporate accounts associated with the oil and gas services sector”. As a result, the share price had tumbled from $10.89 in 2015 to a low of $7.46 in February 2016. So the recent share performance must have given OCBC investors something to cheer about.

Smart traders who bought OCBC shares at $7.46 this year would be sitting on massive paper gains by now. Personally, I knew a wealth builder who invested $70,000 at that price range. I guess he must be laughing all the way to the bank now, if he decided to cash in.

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To put things into perspective, there is nothing that OCBC can do about the current oil crisis. The only feasible mitigating measure is for the bank to limit its exposure to companies in the oil and gas sector and to exercise disciplined risk management on the loans disbursed to companies in this affected sector. However, in doing so, this will not grow the company. In the banking world, there is a need to scale in order to capture market …

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Will Singaporeans pay the banks to deposit their savings?

When the Bank of Japan (BoJ) announced the shock move to implement Negative Interest Rate Policy (NIRP) in January 2016, it took the market by storm. The aggressive step reflected the extent of Japan’s economy difficulties and the scary prospect of deflation. Just what is NIRP all about and why should Singaporeans take note of this development? Will Singaporeans pay the banks to deposit their savings?

NIRP is used by countries to devalue their currencies so that their exports can be cheaper and thus spurring economic growth. Previously, during the era of the Great Financial Crisis in 2008, major economies like USA, Europe, Japan and China all resorted to Quantitative Easing (QE) to encourage spending in the hope of achieving growth in the long-term. However, after a long period of sluggish global growth, policy makers started to panic because they have run out of idea to stimulate growth. In Europe, countries like Denmark, Sweden and Switzerland had already embarked on NIRP. Japan followed suit early this year.

Together, Europe and Japan produce 20% of the global GDP. Thus, they are major players in terms of global trade. By adopting NIRP, they are essentially triggering a global currency war and issuing a subtle challenge to United States. After all, the greenback is still the de-facto global reserve currency. So with negative interest rates in Europe and Japan, surely traders will flee Euro and Yen and flood the US Dollar. And a rising US Dollar will have serious implications not just for USA, but also developing countries.

Many people have speculated that USA will increase interest rates at least two times this year and have dismissed the prospect of the Federal Reserves implementing NIRP. However, it remains to be seen whether this is true because things may worsen to the point that …

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Buy gold to protect your wealth against negative interest rates

In the aftermath of Great Financial Crisis in 2008, policy makers had resorted to financial engineering to restore global economy. Some notable policies were Zero Interest Rates and Quantitative Easing (QE) which aimed to encouraging spending and lending. However, after so many years, these policies were deemed ineffective and so several European countries and Japan had devised the Negative Interest Rate Policy (NIRP) in a bid to revive their ailing economies. What does this mean to you as a wealth builder and how can you protect your wealth against negative interest rates?

gold

Very simply put, for those who live in countries with NIRP, the banks will charge depositors for putting their monies in the bank. Yes, that’s right. Instead of receiving money on your saving deposits, you have to pay the bank money. This may sound strange but the intent of this policy is to prevent wealth builders from hoarding money and also to encourage banks to lend money. The objective of central banks implementing this policy is basically to prevent deflation from eroding the demand side of the market.

It is still early days of NIRP and the long-term effects are unclear. Nevertheless, by resorting to negative interest rates, policy makers had inadvertently revealed that they have run out of ideas to salvage the affected economies. Thus, it is only a matter of time that the fiat currencies collapse. Look, we are talking about major economies like Japan, Sweden, and Switzerland which have all implemented NIRP. Will United States follow suit and reverse its course of monetary policy? There is a possibility because of “peer pressure”. After all, no countries like to lose the currency war.

Gold and Silver

According to World Gold Council (WGC), bond holders “can expect little return, or even negative return, from their sovereign bonds” due to the …

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Is ISOTeam an undervalued stock?

ISOTeam is a Catalist listed stock which I have been wanting to cover for a long time but had not done so because I was under the impression that the company is in small player in the building and construction industry. However, I found out recently that I was wrong.

Company background

The company is actually an established player in the building maintenance and estate upgrading industry in Singapore. ISOTeam has over 15 years of Repairs & Redecoration (R&R) and Addition & Alteration (A&A) experience, and has successfully undertaken more than 300 public and private sector R&R and A&A projects involving close to 3,000 buildings. ISOTeam is also the exclusive applicator of paint works for both SKK and Nippon Paint in the public housing sector in Singapore.

I like ISOTeam for its competitive strengths in its strong track record of project completions, early mover in eco-conscious solutions and diversified capabilities in servicing residential, commercial, industrial and institutional segments. All these strengths enabled ISOTeam to repeatedly winning tenders for public sector projects even when they are not the lowest in price.

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Share price performance

ISOTeam launched IPO in July 2013 with 32.2 million shares at 22 cents each. For the past three years, the share prices increased steadily from $0.22 to $0.30 based on the strength of increasing revenue and profits. I like this sort of company because its share price reflects the actual business performance.  Below are the key financial highlights:

Revenue

FY13: $48.2 million

FY14: $69.9 million

FY15: $81.7 million

Net attributable profits

FY13: $6 million

FY14: $6.1 million

FY15: $8.1 million

Return on Equity

FY13: 41%

FY14: 23.5%

FY15: 17.5%

On 17 February 2016, ISOTeam announced record levels of revenue, profit and order book as at halftime 2016. For the six months ended 31 December …

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Diversify Your Wealth with Investment Precious Metals

When it comes to precious metals like gold and silver, many Singaporean investors are still trying to figure out its status within the world of asset management.

As an emerging asset class, gold is often regarded as money and a form of long term safe-haven during times of financial crises. On the other hand, silver is deemed more as an investment instrument for investors to make money because of its short term price volatility. Whatever the case it may be, it is important for investors to diversify wealth across several asset classes, such as investment precious metals, so that during financial crises, the impact to wealth is mitigated.

In 2012, Singapore government announced that precious metals which qualify as Investment Precious Metals (IPM) will be exempt from GST. The change is to recognize gold and silver bullion as financial assets, and also to grow Singapore into a regional precious metal trading hub. Nonetheless, it is important to note that not all gold and silver bullion are granted the status of IPM. There are basically four criteria to meet:

Gold and Silver Bullion
Gold and Silver Bullion
  • It is gold of at least 99.5% purity, silver of at least 99.9% purity or platinum of at least 99% purity.
  • It is capable of being traded on the international bullion market.
  • It bears a mark or characteristic that is internationally accepted as guaranteeing its quality.
  • It trades at a price based on the spot price of the precious metal it contains.

Based on the above criteria, below is a list of coins recognized as IPM under the Fourth Schedule to the GST Act:

(a) List of qualifying gold coins

(i) America Buffalo

(ii) Australia Kangaroo Nugget

(iii) Australia Lunar

(iv) Austria Philharmoniker

(v) Canada Maple Leaf

(vi) China Panda

(vii) Malaysia Kijang Emas

(viii) Mexico Libertad

(ix) …

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OSIM increases buy-out offer price from $1.39 to $1.41

And so the saga continues. On 8 April 2016, OSIM increased the buy-out offer price from $1.39 to $1.41. The revised offer price is basically on a cum-dividend basis and will be the final offer price.

To be frank, the revised price is nothing to shout about and is unlikely to sway those dissent shareholders who refused to accept Ron Sim’s offers. Whether maverick entrepreneur Ron Sim can successfully de-list OSIM remains to be seen but it would be interesting to analyse what exactly prompted this shocking corporate move of the year.

Bad times ahead?

One possible reason for Ron Sim to de-list OSIM might be because of a possible global economic downturn. After all, China is slowing down now and OSIM had previously banked on rich Chinese’s spending power. A look at its global network of outlets revealed that the number of outlets in North Asia has been reduced from 365 to 360. Overall, the company is also reducing its GNC and TWG Tea outlets.

As OSIM’s core business is still in selling luxury massage armchair, a global economic crisis will definitely impact its share price negatively. Drawing from the Great Financial Crisis (GFC) in 2008, its share price tumbled to a record low of $0.04. Perhaps Ron do not want to go through this painful chapter again, thus prompting him to privatize OSIM. But then again, given his resilient style, such a reason may not hold water. After all, Ron Sim is the man responsible for building OSIM from scratch into a global brand. Against this backdrop, a cyclical downturn in the market would not possibly strike fear in this seasoned businessman.

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Big bold plans for OSIM?

The other possible reason is that Ron Sim wants to have the cake all for himself because he …

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5 Things That Investors Must Know About Contract for Differences (CFDs)

Contract for Differences (CFD), basically allows you to trade in leveraged products without forking out huge capitals upfront. This approach essentially manifests both your potential profits and losses, but with proper risk management, you can ensure asymmetric returns as a trader. To be an all-rounded wealth builder, it is important to have knowledge in different investment instruments and their associated risks. So let’s delve into the 5 most important things that investors must know about CFDs.

(1) What are CFDs? 

CFDs are derivatives because they derive their values from underlying assets like gold, shares or currency. This means that investors are not trading the assets. Instead they are actually trading the contracts with the service providers. This is important because investors are not owning or taking physical delivery of the underlying assets. Money is made or lost when the value of the asset moves either in your direction or against you. Thus, with CFDs, investors have the full option of going “long” or “short” the asset.

(2) The power of leveraging 

Another attractive feature of CFDs is that it allows you to put down a small investment capital for a much larger market exposure. As leveraged financial products, they are traded on margin. So instead of paying the full value of the underlying asset, you pay an initial margin to open the position. You may be required to maintain some minimum margin or top up margin, especially during volatile market conditions when the prices of these assets move against you.

Thus, there are ample opportunities to make big money with small investment. On the other hand, while CFDs can be very flexible, investors must also exercise risk management because the risk of losing more than your deposit is very real, especially when market forces turn against you.

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Why SGX Gold Kilobar Contract is a Major Flop

I was reading an article written by BullionStar on SGX Kilobar and could not help but agreed with all the points. The blogger has correctly pointed out the major flaws in the product offering from SGX and also compared it to BullionStar’s products.

From a Singapore Inc perspective, of course I hope SGX’s project will be a success as it could have played a major role in fulfilling Singapore’s desire to become a gold trading hub, thus boosting our economy and creating more high-value jobs for fellow Singaporeans. Unfortunately, SGX messed up royally and thus, I foresee that Singapore may miss the golden opportunity to become a trading hub if the situation is not addressed adequately.

Gold and Silver

Firstly, by setting a 25 x 1 kilo bar of gold contract, SGX has inadvertently made this product exclusive for the big players. Not many retail players can afford to fork out $1.35 million and there are not many gold buyers who are interested in buying 25 kilobars of gold, especially in a small market like Singapore. In this regard, I am quite convinced that SGX has not done much market study on the gold demand before launching this product. If SGX is working with government bodies like IE Singapore to enhance the liquidity of precious metals in Singapore, then the physical quantum for the gold contract should be lowered. Otherwise, the issue of bullion liquidity will not be addressed.

In the recent market statistics report, SGX revealed that the SGX Kilobar Gold contract recorded a shocking zero trading volume in February 2016, and only 1 contract in January 2016. Such performance is indeed dismal, given that in late 2015, there was a lot of hype on the launch of SGX Kilobar Gold. Perhaps the root cause is the complex process involved in …

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OSIM’s founder dangles more carrots to shareholders

The Chairman and Chief Executive of OSIM International Ltd (the “Company” or “OSIM”), Mr. Ron Sim Chye Hock, has revised the Offer Price for OSIM shares to S$1.39 per share. The Offer was made through Vision Three Pte. Ltd. (the “Offeror”), a private investment vehicle legally and beneficially owned by Mr. Ron Sim.

There will be no further revisions made to the Final Offer Price. Judging by the size of the increase ($0.07), it seems that Ron Sim is not hell-bent to privatize the company. Nevertheless, the final offer still represent a premium of 40% for three-month periods up to and including 29 February 2016. With this latest development, it remains to be seen what the actual outcome of this saga will be like.

To be fair to the minority shareholder, although the offer made by Ron Sim is reasonable, many of them would have suffered heavy losses if the takeover materialized, especially if they had bought the shares at a high of $2.90 in 2014. They probably would have invested in OSIM based on the strength of its 21 consecutive quarters of profits from 2012 to 2014. That was an amazing feat for a local lifestyle company and many investors were enticed by OSIM’s fascinating story.

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SG Wealth Builder

Fast forward to 2016, OSIM is still growing and is still making profits, albeit lesser profits due to the challenging market conditions. The company is still cash rich and the brand name of OSIM is strong as well. With two strong brand names in TWG Tea and GNC, OSIM’s brand will definitely continue to be dominant in the lifestyle community. Unfortunately, Ron Sim wants to have the cake for himself and if the takeover do materialize, investors would be unable to participate in one of the most exciting growth stories …

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Is it worth buying Tat Hong shares now?

Founded in the 1970s in Singapore, Tat Hong is a listed company that provides crane rental services in the construction and offshore marine industry. It now operates 1,500 cranes across the region. By tonnage, it is the seventh largest crane rental company worldwide. Is it worth buying Tat Hong shares now? In this article, I will share my insights on Tat Hong’s investment value.

On 15 March 2016, the company announced in the SGX website that “it has been approached in connection with a potential transaction which may or may not lead to an acquisition of the issued share capital of the Company. Discussions are preliminary and there is no certainty or assurance whatsoever that these discussions will result in any transaction”. The announcement on potential takeover offer led to a massive surge in Tat Hong’s share price the next day. The stock rocketed from 41.5 cents to 63.5 cents.

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SG Wealth Builder

Is this a value trap or value buy? Before jumping the gun, investors or traders must put things into perspective and evaluate whether Tat Hong’s shares are worth buying or trading. Since 2007, Tat Hong’s share price has tumbled from a high of $3.36 and is now languishing at a 6 year low of $0.58. Faithful investors who bought at the peak in 2007 will be staring at massive losses. Even those who bought Tat Hong’s shares during the 2008’s Great Financial Crisis (GFC) are not better off because prior to the recent potential takeover offer announcement, its share price was trading at similar level to the GFC times. This is a classic example vindicating my belief that sometimes being an investor is riskier than a trader. The longer you exposed your money in the stock market, the higher the risk of wealth destruction.

For Tat Hong’s …

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The Explosive Surge of The Hour Glass

The Hour Glass is a listed luxury watch retail group in Asia with headquarter in Singapore. Founded in 1979 by the husband and wife team, Dr. Henry Tay and Dato’ Jannie Tay, the company started operation in Lucky Plaza through a partnership with Metro Holdings. In recent years, the company’s share price has surged from $0.30 in 2009 to almost $2.00 in 2014. Post stock-split of a one-into-three exercise in 2014, the current share price is now trading at $0.74.

What sets apart The Hour Glass from other luxury watch competitors is that it also has a substantial property portfolio. According to its 3Q2016 financial report, the group is holding on to $64 million worth of investment properties. In 2015, it acquired two Australian properties, namely an 11,000 square feet heritage listed retail and commercial property in Sydney and an 8,000 square feet retail property in Brisbane’s prime luxury retail precinct for $6.3 million. Such property investments reflect the listed company’s strategy for growth in the future.

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Besides laying the groundwork for future growth, it is also making the effort to grow its core business. Amid the global economy uncertainties, The Hour Glass acquired the Watches of Switzerland in 2015 for $13.3 million. These investments caused its cash flow to go into negative territory, to the tune of -$16.1 million. However, cash and cash equivalents are still solid at $69 million and profits for 9 months is at a healthy level of $35.5 million. Short-term borrowing is at $46.2 million while long-term debt is $24.2 million. Thus, the company should have no liquidity issues in the short-term as its cash holdings can meet its short-term debts more than sufficiently.

The company’s Net Current Asset Value Per Share (NCAVPS) is $0.43 per share. However, given that it has some hidden …

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See How I Trade K1 Ventures

Last Friday, I have sold off all my K1 Ventures shares. Overall,  I made a profits of $150 after holding the shares for two months. The size of the yield is 0.7% and there is nothing to shout about. I wanted to hold the shares longer until the 3Q results are released in April. But I am consolidating all my funds to purchase an Executive Condominium, so I have decided to divest all my shares (thankfully with some profits).

For the uninitiated, K1 Ventures is the investment arm of Keppel Corporation and was formerly known as Keppel Marine Industries Limited. The investment firm pirimarily invests in education, energy, and transportation leasing companies in the United States. Compared to its parent company, Keppel Corporation, K1 Ventures is of course less well-known and is under the radar of most investors. However, under the guidance of their Chairman and CEO, Mr Steven Green, the company has been consistently giving out good dividends for the past decade. I have made a lot of profits from investing in K1 Ventures over the years. Therefore, I have a lot of confidence in the performance of the company because of the management’s track record in delivering for the past 10 years.

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I have exited K1 Ventures recently not because the business fundamentals have changed but investors need to know that currently, the company is in divestment mode. Following the failed management takeover in 2013, the company has been in divestment mode. The management is managing existing investments with a view of exiting within the next few years and returning excess cash to shareholders.

For the past week, the stock market has seen a mini rally. Could this be a window of opportunity for investors to take profits and seek safe haven like gold? …

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