May 2016

Record demand for silver in 2015

May 31, 2016May 31, 2016 sgwealthbuilder 57 Views 0 Comments

According to The Silver Institute, the silver market posted record demand in 2015, driven by new highs from demand of jewelry, coins and bars. Last year also saw the third consecutive annual silver market deficit of 129.8 million ounces, reflecting the continued strength in silver demand.

The data from The Silver Institute reveals a couple important trends that wealth builders should take note. Firstly, unlike gold, silver has very wide industrial applications. Thus, the majority of silver demand come from industrial fabrications for electronic devices, photography, solar and brazing alloys. In 2015, due to the weak global demand, the overall industrial demand declined from 611.2 million ounces in 2014 to 588.7 million ounces last year.

Interestingly, the data on investment demand for silver bars and coins reflected a contrasting picture in 2015. Silver coin and bar investment surged 24% to reach a feverish high of 292.3 million ounces as investors took the opportunity to buy silver on the cheap in the midst of market correction. This was the highest demand on record and overtook the previous high in 2013. The explosive demand from investors was a result of lower average annual silver price of USD15.68 per ounce. The low price of silver in 2015 was due to the slowdown of China and strengthening of US dollars.

Since the start of 2016, silver has bounced from a low of USD13.80 per ounce to the current USD16.00 per ounce. Based on the price trend, silver seems to be at an inflection point of moving up. Wealth builders should seize the opportunity and consider diversifying some funds into silver bullion. After all, to make money from investments, you should always adopt a contrarian approach and buy when prices are low. This is the same for precious metals too.

The …

Self improvement Trading

Falling from the peak

May 30, 2016May 30, 2016 sgwealthbuilder 61 Views 0 Comments

Borrowing a phrase from the Taiwanese, the late Mr Lee Kuan Yew described those Singaporeans born from the eighties onward as “The Strawberry Generation” because of the perceived lack of resilience. Indeed, compare to him, many Singaporeans don’t have the experience of living in the World War II period and thus do not understand what hardship really means. Due to this, we often lose the fighting spirit of our fore-fathers in overcoming life obstacles. This is especially so when we start falling from the peak of our lives.

Contrary to what most people thought, the difficult part of mountain climbing is not the ascending phase. It is actually the descending that is more treacherous because after reaching the top of the mountain, the climber would have expended all his energy and fatigue began to set in. He would not have put much thinking on the journey downward and because of this, he become complacent, which led to his downfall literally. In fact, statistics have shown that most climbers die on their way down the mountain, rather than on the way up.

Similar to our education system, you need years of training to build up your body stamina and fitness in order to scale the highest mountain. You would realize the lack of oxygen at high altitude and it’s all about mental endurance once you are up there. If you are not careful, you would fall. In Singapore, we spend at least 16 years to obtain tertiary qualifications and then enter our first jobs to start earning incomes. This is a very long period of gestation time but nevertheless, you need to ask yourself honestly whether the paper qualifications prepare you well for the challenges that you face in your daily life. If so, good for you! If not, then what …

Stocks

Falling knife for EZRA investors?

May 28, 2016October 29, 2017 sgwealthbuilder 42 Views 0 Comments

One of the victims of the global oil crisis, EZRA Holdings announced a set of terrible 2^nd quarter financial results on 14 April 2016. Losses after tax came in at USD282.6 million for 2^nd quarter and USD336.4 million for the first half of the financial year. This is a massive financial loss and there are not many companies in Singapore which can withstand this sort of impact. If EZRA investors are thinking of dollar-cost averaging and buying EZRA shares on the cheap, they need to be careful of catching a falling knife.

The company is actually biting the bullet for 2QFY2016 and realized the impairment losses from all front – loss-making joint ventures, losses on fixed assets and bad-debts. Given the depressing market conditions for the oil and gas industry, it is still unknown whether there is any more impairment to be made for EZRA Holdings further down the road.

Many investors thought that dollar-cost averaging is a good strategy to buy more shares at a lower price. But many of them don’t understand the difference between price and value. This technique, if applied wrongly, can cause massive wealth destruction to an investor’s portfolio, especially if the business fundamentals of the company are shaky. Investors of EZRA need to be honest with themselves and question whether this is the time to cut loss or pump more hard-earned monies into this stock. After all, EZRA’s share price fell from a mighty high of $3.90 per share in 2007 to the current $0.07 per share.

Another aspect to highlight is the falling revenue, which decreased 14% year-on-year for 2QFY2016. This reflects the challenging period for EZRA as the industry witnesses massive cuts in spending across all value chain. In light of the falling global demand, one way for EZRA …

Gold; currency

Record Negative Inflation for Singapore

May 26, 2016May 26, 2016 sgwealthbuilder 56 Views 0 Comments

On 23 May 2016, Singapore smashed the record for the longest streak of negative inflation, recording a stunning 18 consecutive months of declining Consumer Price Index CPI (all items). On a year-on-year basis, CPI (all items) for February 2016 was -0.8%. Is this a good development for Singapore and should wealth builders pop the champagne because things are going to be cheaper? This is certainly not the case because the data is disturbing and reveals dark sides of the economy that every Singaporean should take note.

The statistics on consumer price development track three data, namely CPI (all items), CPI-OOA which excludes rental from owner-occupied accommodation and MAS Core Inflation, which excludes the cost of accommodation and private transport costs. The top reasons for the negative CPI (all items) are due to declining housing prices, weaker Certificate of Entitlement (COE) premiums and slump in global oil prices. Together, these three factors drove CPI (all items) to 18 months of downward trend. The negative trend is expected to continue as Monetary Authority of Singapore (MAS) forecasted that CPI (all items) is projected to average -1.0 to 0.0% for the whole year.

On the other hand, MAS Core Inflation rose to 0.5% in February due to higher food inflation. Hence, due to this consumer price trend, Singaporeans are paying more for food while things like petrol prices, recreation products, rental, COE and housing become cheaper. Given that Singapore is a price-taker in terms of food imports, the inflation in food prices is inevitable because of poor climate conditions. In my view, being a small country with no resources, there is nothing much that Singapore can do to tackle this problem because this is a global phenomenon.

However, the continuing decline in CPI (all items) warrants much concern because it covers comprehensive prices …

Property investment; Singapore market;

The Terrace Executive Condominium

May 24, 2016November 8, 2019 sgwealthbuilder 34 Views 0 Comments

Prior to our purchase, one of the questions that my wife and I had been thinking over and over again is whether it is worth buying The Terrace Executive Condominium (EC). We are certainly not buying for investment purposes but then again, as a wealth builder, you would want a home with potential to appreciate in value significantly over the long run. In Punggol and Sengkang residential areas, we shortlisted three ECs for consideration and they are The Vales, Bellewaters and The Terrace EC, which is known famously as “Venice of Punggol”.

In terms of location, The Vales is considered the best among the three because it is located within walking distance to the SengKang MRT. However, as an upgrader, we need to pay the resale levy for The Vales, hence this project is not an option for us. Then again, we also noted that virtually most of the good-facing units have been sold. Those remaining unsold are either road-facing or facing the nearby SengKang Hospital. To make things worse, the recently launched EC, Treasure Crest is located just beside The Vales. Thus, the residents of The Vales will have to put up with the incessant noise and dust pollutions for at least 3 years after moving into their new homes.

In terms of interiors, Bellewaters is slightly better than The Terrace and there is no need to pay for the resale levy. We would have purchased this project if not for the fact that the Temporary Occupation Permit (TOP) is earlier than my Minimum Occupation Period (MOP). But beyond these points, wealth builders need to look at the big picture level, SengKang ECs lose out to Punggol ECs for the lack of major developmental projects that cater to lifestyle needs.

Eventually, we are glad to purchase The …

Stocks

SGX-listed stocks lack quality?

May 22, 2016October 29, 2017 sgwealthbuilder 99 Views 0 Comments

Almost a year ago, the Straits Times Index tanked from almost 3500 points to the current 2760 points. The fall in the Singapore stock market benchmark index reflects the challenging economic conditions and those who invested in SGX-listed stocks would have suffered from a certain level of wealth destruction. Incidentally, the market correction started since the previous SGX CEO, Magnus Bocker, was replaced by the current Loh Boon Chye. But the rot probably started during Bocker’s time and it would not be fair to blame the current CEO for this mess.

One thing for sure is that Bocker was highly unpopular during his helm as SGX’s chief because of his slew of projects that did not yield much improvements to Singapore market. The biggest flop definitely had to be the introduction of a new $250 million trading engine that promised to propel Singapore into Asia’s top trading centre. Instead, a massive technical fault in 2014 caused SGX to stop trading for at least 3 hours and left SGX red-faced. To make things worse, this embarrassing incident came after SGX tried to restore confidence following the penny stock crashes involving Blumont, LionGold and Asiasons.

The penny stock crashes in 2013 probably summed up the lack of quality in SGX-listed stocks. Many retail investors have lost their fortunes investing in these three counters seemingly unaware of the traps that are awaiting them. For example, alarm bell should have been rung when LionGold rose from $0.10 in 2009 to $1.70 in 2013. Such astonishing ascent in price was not normal and the relevant authorities should have intervened much earlier instead of letting them imploded on their own.

Besides these three companies, there are quite a number of “deadwood” listed companies in SGX as well. To improve transparency, SGX recently launched a half-yearly update …

Gold; portfolio management

Buy Gold, Now or Never?

May 21, 2016May 21, 2016 sgwealthbuilder 29 Views 0 Comments

When it comes to investing in gold, there is a need to understand the fundamentals and study the long term trend of the gold spot price movements. According to BullionStar, the global daily amount of gold mined is only 9 tonnes, yet the daily trading volume in London amounts to 5,500 tonnes. Why is this so and how does this affect the price of gold? Should wealth builders buy gold, now or never?

London is the heart of all the gold trading activities and is regarded as the world’s largest gold market. The market in London set the price for spot gold for the rest of the world to follow and London is also the home of London Bullion Market Association (LBMA), a renowned trade association known for setting the refining standards, trading documents and trading practices. Henceforth, the data concerning gold trading activities in London will provide insights on the value of gold moving forward.

Generally speaking, the supply and demand rule is not strictly applicable to physical gold. In fact, the total amount of gold mined will have limited effect on the price movements of gold because 95% of the gold traded in London is actually unallocated. This means that the trading instruments for gold in the London market are mostly not backed by physical gold. Investors are merely betting on the movement of the gold spot price to make money and it is important to note that there is no underlying real gold for many of these paper gold trading instruments.

The trend of the paper gold plays a dominant factor in how wealth builders should allocate gold in their portfolios. Like all asset classes, there are bull and bear cycles for gold. From 1977 to 1979, gold soared from USD150 per ounce to USD820 per …

Property investment; Singapore market;

Build wealth with property

May 18, 2016May 18, 2016 sgwealthbuilder 52 Views 0 Comments

There are a lot of online debates on how to build wealth with property. In my humble view, there is no absolute right or wrong answer for this topic because whether property is a wealth enhancer or value trap really depends on how you play the game. If you play your cards right, there is no doubt that property investment is one of your best tickets to financial freedom. However, if you don’t have a clear strategy on playing the property game, it can be your greatest financial nightmare.

One thing that readers must be clear is that property investment may not be suitable for everyone because every wealth builder’s financial needs, goals and profiles are different. As such, when it comes to building wealth from property, it is not possible for Singaporeans to adopt a blanket approach. The conventional wisdom is to wait for a financial crisis and expect housing prices to drop and then you go in for the kill as a bargain hunter. However, in today’s context, things are not so straightforward anymore.

To illustrate my point, I shall use my family’s real estate strategy and compare it with a working couple. Let’s assume that both my family and the working couple are presently living in a 3-room HDB flat and planning to purchase the next property. Let’s also assume that both families each have outstanding loan of approximately $100,000 housing loan. For my case, my family will be upgrading to an Executive Condominium (EC) while the working couple is planning to buy an additional property and has obtained approval from HDB to decouple the HDB flat. Which family is better off and why?

Many Singaporeans would have taken the approach of the working couple and purchase a private property while keeping their HDB flat. This is …

Property investment; Singapore market;

The Terrace Executive Condominium (EC)

May 16, 2016May 18, 2016 sgwealthbuilder 45 Views 1 Comment

In one of my previous posts, I updated that I have recently purchased an Executive Condominium (EC), which is actually The Terrace at Edgedale Plains, Punggol Drive. In this article, I will touch on the motivating factors for my family’s purchase and also share with readers the buyer referral scheme offered by the developer of The Terrace Executive Condominium (EC).

HDB Resale Levy

In 2013, HDB announced that second-timers must pay a resale levy for new ECs launched on or after 9 December 2013. However, for land sale before 9 December 2013, applicants need not pay the resale levy. There is a list of ECs that HDB upgraders need not pay resale levy and it is found here. One of the motivating factors of my purchase of The Terrace EC is that this project is exempted from resale levy, which in my case, amounted to $45,000. If you have previously bought a new Design, Build and Sell Scheme (DBSS) or received a CPF Housing Grant, then you need to pay a resale levy when you purchase your next home.

Due to the fact that my family’s first subsidised flat was a 5-room flat, so we need to pay $45,000 for projects that come with resale levy. My wife and I were reluctant to pay this amount of monies to the government. After all, we received only $40,000 housing grant, so why should we pay back $45,000? Henceforth, we were attracted to The Terrace EC because it is one of the last few projects which upgraders need not pay resale levy.

Good Location and amazing amenities

In terms of location, The Terrace is situated right next to the Kadaloor LRT Station. In fact, upon visiting the actual site, our unit is literally a stone throw away from the LRT …

Gold

Gold demand ignites price rally

May 13, 2016May 13, 2016 sgwealthbuilder 64 Views 0 Comments

According to World Gold Council, global demand for gold grew 21% to 1289.8 tonnes, the strongest Q1 on record. As gold demand ignites price rally, many investors are caught by surprise at the yellow metal best performance in 30 years.

The sudden change in the global economic and financial landscape has certainly caused investors to flee for security. Significant uncertainties stem from the sluggish economic growth and the Negative Interest Rate Policies (NIRP) implemented by Japan and European countries. Against this backdrop, many analysts anticipate that the pace of US interest rate increases is expected to slow down significantly. These factors combined to send gold price to rally by 17%, making gold one of the best performing assets in Q12016.

Among the key engine of growth is the astonishing come-back of gold-backed Exchange Traded Funds (ETFs), which saw an increase of 300% this quarter. This is indeed a revelation as it comes about after three years of straight outflow. While this type of scale is unlikely to be sustained for gold ETFs going forward, this trend reflects an improved outlook for gold.

Interestingly, the trend of gold bar and coins followed closely to that of the ETF market in Q1. Demand for bullion shot up by 55% year-on-year from 11.8 tonnes to 18.3 tonnes, representing 11% increase over 5 year average. Sales of the popular American Eagle coins rose by 68% year-on-year, to 7.6 tonnes while sales of 24k American Buffalo coins rose by 7% to 1.9 tonnes.

During this quarter, India government announced their first official gold coin which is minted by the Indian government mint. As India is one of the biggest importers of gold bullion in the world, the sale of the Indian gold coin will help to ease the pressure on the …

Money management; personal finance; relationship

Dying for retirement savings

May 12, 2016May 12, 2016 sgwealthbuilder 41 Views 0 Comments

In facing death, is retirement savings still important? During the recent Parliament sitting held on 9 May 2016, the Worker’s Party raised the possibility of increasing the $5000 cap on CPF Medical Grounds Scheme due to rising cost of living in Singapore. The Minister of Manpower Lim Swee Say rejected the proposal and claimed that he was “hesitant about introducing such a move”. I was truly disappointed with his response and felt that he totally missed the point.

Withdrawal of CPF based on Medical Grounds

You can apply to withdraw your CPF savings on medical grounds if you

are suffering from an illness which renders you permanently unfit from ever continuing in any employment; or
have a severely reduced lifespan; or
lack capacity within the meaning of Section 4 of the Mental Capacity Act (MCA) and the lack of capacity is likely to be permanent; or
are terminally ill.

You will be able to withdraw from your Ordinary, Special and Retirement Accounts, the higher of $5000 or savings after setting aside a reduced Retirement Sum in your Retirement Account. Minister Lim clarified in Parliament that the reduced retirement sum has been set at $40,300, which is half of the current basic retirement sum.

Basically, under this CPF rule, even if you have the legitimate medical reasons to withdraw your CPF monies, you still need to set aside a sum of monies for your retirement. Otherwise, you are entitled to withdraw at most $5000 only. Such CPF ruling, in my point of view, is at best illogical and at worst, come across as inhumane and lack of compassion for those suffering from terminal illness.

Just imagine yourself staring at the prospect of dying in the coming months or years. Logically, you will not be thinking of your retirement lifestyle, which you …

Property investment; Singapore market;

Right time to buy private properties now?

May 9, 2016May 9, 2016 sgwealthbuilder 56 Views 1 Comment

I just bought my first Executive Condominium (EC) last month. On looking back, it was truly an enlightening experience because I have learned a lot on the housing regulations and CPF-related ruling. Prior to this, my wife and I had visited many projects for the past 2 years and we were fairly clear on what we are getting. But what we didn’t expect was the whole slew of housing regulations that not many Singaporeans are aware of. In the next few articles, I will touch on regulatory matters relating to private properties. In this article, I will instead share my views on whether it is the right time to buy private property now.

According to data from URA, for the whole of 2015, prices for private residential properties fell by 3.7%, compared with 4.0% decline in 2014. Credit to the Singapore government, the Property Price Index witnessed a soft landing since 2013. Despite various cooling measures firmly entrenched, the property market did not crash but nonetheless, prices have declined from the stratospheric levels seen in the last few years.

Source: URA

One important trend to note for 2015 was the record vacancy rate of 8.0% since 2011. This trend is expected to continue given the huge supply glut of private residential properties for the next three years. To put things into perspective, 26,467 units (including ECs) will be completed this year alone, followed by 17,234 units in 2017 and 16,223 units in 2018. Considering the fact that the whole of 2015, developers sold 7,440 units, compared with 7,316 units in 2014, this pipeline supply is overwhelming. As there are only so many upgraders and property investors, and with so many projects to be completed this year, the market is really at a tipping point.

Source: URA

For the developers, …

Stocks

Sheng Siong’ share price is rock solid

May 7, 2016October 31, 2017 sgwealthbuilder 33 Views 0 Comments

Sheng Siong Group announced its 1Q2016 results on 27 April 2016. Revenue increased 5.1% year-on-year to $208.5 million while net profit increased 16.8% year-on year to $16.4 million. Given that many SGX stocks had been heavily sold down since the start of the year, Sheng Siong’ share price remains rock solid in the face of poor market sentiments.

Under the current challenging business climate and government’s restriction on foreign labor employment, Sheng Siong’s latest results are impressive as they reflect management’s ability to control cost and improve margins.

I continue to like Sheng Siong for its debt free status and strong cash position. The group currently has cash pile of $113.9 million and operating cash flow remains healthy at positive $5.23 million, which is significantly lower than previous year of $12.8 million. This is because of the acquisition of property, plant and machinery.

In terms of growth expansion, the group is opening 4 new stores in 2Q2016. In addition, Sheng Siong had exercised the option to purchase premises at Block 209 New Upper Changi Road, for consideration of $53 million. I am pretty excited about this project because the traffic at Bedok interchange is very high, thus this store is very likely to increase revenue substantially for Sheng Siong.

To expand its overseas outreach, Sheng Siong is using China as its first test bed. The subsidiary in Kunming has signed a lease for the first store to be opened in 4Q2016. This calibrated approach is not surprising given the conservative style of the management, which typically focuses on managing costs and nurturing growth of new stores in Singapore.

Sheng Siong’ share price is on an upward trend and is steadily marching on to the $1.00 level. This is definitely a growth stock with strong potential and solid fundamentals. Since it …

Stocks

Epic fall of LionGold shares from $1.70 to $0.003

May 6, 2016October 29, 2017 sgwealthbuilder 54 Views 0 Comments

If you are one of those retail investors who had bought LionGold shares at the dizzying height of $1.70 per share and still holding on to them, you might as well write off the investments. After all, the shares are worth nothing and is now trading at $0.003. The epic fall of LionGold shares from $1.70 to $0.003 represented one of the most dramatic penny stock crashes in Singapore stock market.

LionGold, together with Asiasons and Blumont, were penny stocks but rose spectacularly to new highs from 2012 to 2013. The trio of stocks then went into a free fall at the same time, causing many retail investors to lose huge amount of monies. The huge swings of these stocks had led to speculations of foul plays. SGX, which takes on the role of both regulator and operator, was also blasted for late intervention and lax enforcement.

LionGold is a gold mining company with primary concessions in Australia and Ghana. Investors need to understand that investing in gold mining stocks is different to buying physical gold because the risks involved are inherently very different. Investors who bought LionGold shares and subsequently lost a fortune must have learnt this lesson a painful way.

Firstly, investors need to understand that the major issue of gold mining company is the exploration risk. Out of 2000 projects with potential of gold to be mined, typical only six or seven would prove to be successful. And it takes several years to determine whether the extraction of gold would be profitable. Many gold buyers have no idea the painful process of mining raw gold and turning it into investment-grade gold!

Cost control is the second risk. Companies which are unable to exercise disciplined cost management would face huge cash-flow problem because gold mining is capital-intensive and …

personal finance

My dream for fellow Singaporeans

May 3, 2016May 12, 2016 sgwealthbuilder 38 Views 0 Comments

As SG Wealth Builder, my dream is for fellow Singaporeans to have an equal opportunity to build wealth. That is why I chose this name for my blog. Even though I don’t work in the financial sector, through my articles, I hope that readers can gain valuable insights and learn from my investment mistakes.

Building wealth is a journey and requires a person to have a correct mindset. There are finance bloggers out there who wrote that more money cannot buy you happiness. I certainly don’t dispute this wisdom but then again, being poor in Singapore will certainly make you unhappy and miserable. If you belonged to the lower income bracket, it is understandable that you feel stressed out and insecure just trying to make a reasonable standard of living here. I have being through that phase in life and can certainly relate to this sort of feeling.

One thing that I must qualify is that I have not achieved financial freedom, nor am I trying to preach to readers on how to live a life. In fact, I am still a struggling middle-class income earner. But I feel that if Singaporeans can step out and share our investment or financial mistakes, collectively, we can become a better wealth builders.

In recent years, Singapore blogging community has witnessed the emergence of many investment bloggers. I am not sure whether this is a good phenomenon because many of these bloggers solely write about their stock portfolios. So I don’t see how they can value-add to readers and improve their investment knowledge. Nevertheless, there are a few investment bloggers who constantly share their analysis on stock selections, such as Investment Moats and Big Fat Purse.

I don’t often meet up with clients who are interested to partner with me because I …

Stocks

Blockbuster dividend from K1 Ventures

May 1, 2016August 11, 2016 sgwealthbuilder 31 Views 0 Comments

While parent company Keppel Corp suffered from another week of attacks by short-sellers, its subsidiary K1 Ventures announced yet another blockbuster dividend of $0.09 per share to be paid out on 18 May 2016. In total, K1 Ventures has given out $0.30 per share dividends this year.

K1 Ventures is one of my favorite SGX stocks which I have been tracking for more than 10 years. It is the investment arm of Keppel Corp and its business objective is to invest in US companies with potential and hidden values. Over the years, it had made many notable exits like Helm Holding, MMR and China Auto Grand. From these divestment, K1 Ventures had rewarded shareholders with hundred of millions of dividend payouts. In fact, based on its dividend track records, K1 Ventures should be the best dividend stock in SGX.

I had made thousands of profits from investing in K1 Ventures but had recently sold off all my shares to purchase my new matrimonial home. Nonetheless, I hope readers can benefit from reading my blog and thus, is sharing my analysis on K1 Ventures (again).

Following an unsuccessful management buy-out in 2013, K1 Ventures has committed to managing its existing investments for eventual exits and returning the excess cash back to shareholders. This means that the company will not be making any new investments for the foreseeable future. Henceforth, investors should be cautious when dealing with this stock because it may not be wise to adopt a buy and hold strategy. In my point of view, K1 Ventures is more suited as one of those stocks which you apply momentum investing – that is, buy on ex-dividend and sell on good news.

The business fundamentals for K1 Ventures are still strong as usual. Cash flow remained positive in third quarter, registering …