Devastating effect of Brexit

As one of the very few reserve currencies in the world, Britain’s Sterling pound is considered to be one of the most popular reserve currencies held by many central banks. Historically, Sterling is the third most widely held currency, after US dollar and Euro. Thus, one cannot ignore the devastating effect of Brexit on Sterling pound when it recently plummeted to historic low. Currently, Sterling is trading at a 31-year low and this led to a lot of fear in the market.

Market turmoil

The current turmoil stems from the massive drop in the Sterling pound which wiped off billions from the markets. Governments which hold Sterling pound as foreign currency reserves suffer huge losses. Many investors fled for safety and bought into Japanese yen, causing the yen to rise substantially. The upward swing results in Japanese exports becoming expensive overnight and potentially worsen the deflation condition in Japan economy.

The havoc in the currency markets may prompt central banks to take drastic actions before the situation manifests into global crisis of confidence. Some of the possible measures may include further interest rate cuts, stimulus packages to encourage spending or even negative interest rates, which Japan and several European countries have recently implemented. Central banks may likely to also increase their gold holdings to mitigate the losses from the Sterling devaluation.

shutterstock_86860204

The intervention risks arising from monetary policies would have significant consequences for the man in the street because these actions often led to inflation or deflation. Inevitably, the value of their currencies will diminish and thus those who hold their wealth in fiat currencies would see their purchasing power drop. In the face of uncertainties arising from Brexit, investors do not have many alternative safe assets to preserve their wealth.

Gold as safe haven

Gold is seen as a …

Read more

OCBC Bank

If you are a high net worth individual, you would certainly not want to take chances with your wealth. Usually wealthy individuals would choose private banking because of their specialized financial needs and the desire for discretion. In Singapore, there are many banks that offer private banking services and one of them is OCBC Bank’s private banking subsidiary – Bank of Singapore (BOS).

In my previous article, I touched on OCBC’s acquisition of Barclays Asia Wealth Management and highlighted it as a strategic move that allows OCBC to enhance its investment moat in the arena of private banking. Indeed, the real money to be made is actually from the rich and wealthy clients, not the mom-and-pop depositors.

Amidst the global economic downturn, OCBC reported strong results for 1Q16 private banking income. Operating profit from Global Consumer/Private Banking grew from $218 million to $253 million, an increase of year-on-year 16% for 1Q2016. This was OCBC’s best performing segment for 1Q16 and given the growing affluence of Asians, there are a lot of opportunities for growth in this banking niche.

In 2015, BOS was one of only 5 private banks in Asia to record more than 5% growth in assets under management (AUM). In fact, this segment has been growing steadily and the AUM has grown by compounded annual growth rate of 40% since 2010.

The private bank is also proactive in collaborating with partners to offer wealthy clients investment solutions that cater to their needs. For example, in 2015, BOS partnered with Blackstone to avail the latter’s investment platforms to wealthy clients, raising more than US$170 million.

investments
Investments

To capture growth in the highly lucrative private banking segment, OCBC announced the hiring of several strategic talents in May 2016 to strengthen BOS’ product management capabilities. Among them is Mr Johan …

Read more

Brexit sparked explosive gold price surge

With the score-line at 0-0 nearing full-time, Brexit voters unleashed an unstoppable volley past the “Remain” goal-keeper and claimed an unexpected victory on 23 June 2016. UK has chartered into unfamiliar horizon. Government officials, analysts and economists were all dumbfounded by the results as most of them expected UK to remain part of European Union. In the midst of the chaotic situation, Brexit sparked an explosive gold price surge as expected.

Flight to Safety

At one point, when the Brexit was released, gold price stormed past USD1,300 per ounce as investors bolted to park their wealth in the safe haven amid carnage in the global currencies. Notably, Euro and sterling pound suffered record meltdown as investors flee for safety. Their concerns were not unfound as UK is the world fifth’s largest economy. Decoupling from European may have deep implications in terms of trade and military cooperation.

Whilst it is easy to argue that UK voters had let their emotions ruled their heads, it should be highlighted that the issue of immigration has always been sensitive in an open economy like UK. Many global leaders and analysts grossly underestimated that ground sentiments can swing the voting results, even though there are a lot at stake, in terms of political and economic stability. This is because when it comes to voting, personal interests always come before national interests.

shutterstock_396774535

Reason for “Leave” 

No doubt European Union (EU) is a massive bloc that allows UK to have access to a market of more than 300 million people and global investors had always regarded London as the gateway to trading with Europe. But such privilege also comes with conditions as UK is obliged to meet EU’s immigration and economic policies. Under the EU regime, UK residents are hapless against the massive influx of immigrants from …

Read more

You’ll Never Walk Alone with Central Provident Fund

For many football fans, the song “You’ll Never Walk Alone” is synonymous with English football club, Liverpool. The song is the anthem of Liverpool and has inspired many great comebacks for the football club. Although glory days are clearly over for Liverpool, many fans still adore the club because of its great tradition and core values.

Indeed, values define who we are and guide us through good times and bad times. The Central Provident Fund (CPF) was implemented in 1955 by the British authorities with the aim of abolishing the pension schemes in Singapore and introducing a national saving scheme. The scheme requires employers and employees to contribute a portion of the employee’s monthly salary into their CPF accounts.

The intent of the CPF scheme was to instill among Singaporeans the value of hard work and saving for retirement. Each of us is responsible for growing our wealth and save for rainy days.

Over the years, the CPF scheme had gone through significant changes, especially during the eighties, when the late Mr Lee Kuan Yew was at the peak of his power. These changes were needed to cater for the growing aspirations of Singaporeans. As a result, CPF was expanded to include healthcare, housing and investment purposes. Because of these changes, many Singaporeans tend to forget the main function of CPF, which is basically to provide for our retirement needs.

Perhaps a victim of its own success, the CPF scheme has become so entrenched and pervasive in our lives that many of us take it for granted. Some have even argued that because of CPF, many Singaporeans are not willing to take the entrepreneurship risks. If you think about it, this reasoning is not exactly flawed. After all, the monthly current employer’s contribution rate is 17% and employee’s contribution rate …

Read more

How safe is your money in Singapore banks?

No bank is too big to fail and one question that every depositor may ask is how safe is our money in Singapore banks. During the Great Financial Crisis, Citigroup was on the brink of collapse before being rescued by the U.S government, which had to guarantee losses on more than US$300 billion worth of assets and injected US$20 billion into the troubled company. At that point of time, Citigroup’s share price was trading less than US$1, which was the historical record low for the bank.

Money Crisis

Fast forward today, Citigroup recovered from the crisis but is no longer the world’s largest bank in terms of assets. However, its share price has surged to close to US$50. Investors who bought the shares back then and held it till today would have made a fortune. But the point that I want to reiterate is that Citigroup was very close to being made bankrupt in 2008 and savers who put all their hard-earned savings in banks may have lost their monies overnight if the renowned bank collapsed unexpectedly.

Singapore Banks

In the aftermath of the financial crisis, people start to realize that the prospects of bank failures are real even in Singapore. Hence, the Deposit Insurance Scheme and Policy Owners’ Protection Scheme (PPF Scheme) was amended to provide more protection for Singapore depositors. This insurance scheme is needed to protect small depositors’ savings in the event of bank failures.

shutterstock_86860204

Safeguard Your Wealth

Take note that the Deposit Insurance Scheme covers aggregated deposits in savings accounts, fixed deposit accounts, current accounts, CPFIS, CPF Minimum Sum and Supplementary Retirement Scheme up to S$50,000. This scheme does not cover securities, stocks, unit trusts or foreign currency deposits. Furthermore, not all banks in Singapore are covered. You may check the list of scheme members here.

Read more

SGX Hall of Shame

On 3 March 2016, Singapore bourse operator, SGX, included 41 listed companies into its infamous watch-list due to the implementation of the 20-cent Minimum Trading Price (MTP) rule. In all, there were 76 companies under the SGX watch-list, which was like the Hall of Shame.

To be part of this watch-list can be very embarrassing because it means that affected companies have to buck up and improve their financial performances. Otherwise, they may face the prospect of being delisted from the stock exchange.

The expansion of the watch-list to include companies failing to comply with the MTP rule had riled market players because this move essentially blurs the distinction between market quality and business fundamentals.

To be fair, even though a company’s share price is trading below 20 cents, it does not mean that the company has shaky business fundamentals. So to put those failing to meet the MTP with those companies with financial problems is deemed by many to be onerous.

shutterstock_309324755

To put things into perspective, the MTP rule was introduced in the aftermath of the penny stock crash in 2013. Many retail investors lost their pants after dabbling in Blumont, LionGold and Asiasons Capital. The three penny stocks surged to incredible levels within a short period of time and then dived spectacularly, prompting rumours of market manipulations by the Big Boys. To prevent this sort of incident from happening again, SGX introduced the MTP in a bid to raise the quality of shares in the SGX.

In my own opinion, I am not sure whether this MTP will actually serve its intent to improve the stock market and prevent market manipulations by the Big Boys. To meet this rule, many penny stock companies have to resort to share consolidation to avoid being in the watch-list.

Then again, meeting …

Read more

Record retrenchments in Singapore

On 13 June 2016, the Ministry of Manpower (MOM) announced a surge in the number of workers being made redundant. Overall, 4,710 workers were retrenched by their companies, representing a record level of retrenchments in Singapore for first quarter layoffs since 2009.

The MOM data is not surprising as it tallies with the ground situation for the employment landscape. In fact, there are many recent articles of Singaporeans struggling to find work after being given the retrenchment notices by their employers. Many of them are actually qualified professionals with many years of relevant working experiences in their industries. Hence, it is understandable that they feel bitter and resentful.

Being fired or retrenched from the workplace can be the worst thing that can happen to an employee, possibly even worse than been passed by for promotion. This is because losing your job is more than just losing your income, it can be extremely damaging to your self-worth and ego. Understandably, you may feel emotional and victimized. The “why me?” will definitely pop up in your head and you start to demonize your ex-bosses or colleagues. But as a wealth builder, you must pick yourself up quickly and move on from the self-pity stage. After all, you still have bills to pay and you simply cannot afford to waste time nursing bruised ego.

career

For those who got retrenched, the biggest challenge is moderating their expectations. Many Singaporean job seekers expect to find similar job titles and salaries in their job hunt but they failed to realize that they don’t have the bargaining chips. They need to wise up and understand that without a job, it is difficult to negotiate with prospective employers because they have the upper hand and so it will be a “take it or leave it” approach.

The …

Read more

Neptune Orient Lines: End of another Singapore icon

In a month in which SGX-listed Haw Par Corp announced the closing of the Underwater World Singapore, Temasek Holdings tendered all their shares and paved the way for French giant, CMA CGM to take Neptune Orient Lines (NOL) private. This marked the end of another Singapore icon and highlighted how fragile the economy is right now.

The take-over offer for NOL is $1.30 and it is unconditional. According to the listing rule, NOL can be delisted once it obtains more than 90% of the shares. The offer is deemed by many to be fair given that NOL has been bleeding for several years due to the collapse of the Baltic Dry Index (BDI). Temasek Holdings had been looking for a white knight for NOL for quite some time and CMA CGM came to the rescue.

The downturn in the shipping industry took many players by surprise. After all, the BDI stormed to 11,000 level in 2007 and subsequent crashed to near 700 level with the arrival of the Great Financial Crisis. Nevertheless, the downturn turned out to be much longer than expected and its seems that Temasek Holdings, which is the parent company of NOL, decided to throw in the towel.

stock market

To continue playing the game, Temasek Holdings must invest more capital to increase the scale of operations within NOL by buying more container ships. The economy of scale is needed to offset the devastating effects of the low BDI levels. Otherwise, NOL simply has no chance to compete against other global players in the midst of cut-throat freight rates. This was the rationale when NOL acquired APL for a cool $825 million back in 1997.

Temasek Holdings’ decision to sell NOL could be a turning point for the shipping industry. Given that NOL is our national carrier, its sale …

Read more

Stroke of Calamity

Since 2013, I have written articles paying tribute to my late father during Father’s Day. This year will be no exception. Dad passed away at home after 20 years of struggle with a major stroke that resulted in him being half-paralysed. It was really a stroke of calamity for our family and the last 20 years were like “lost decades” for us. Dad had played a major role in shaping my values, character and life’s perspectives. I cannot claim to remember everything that he said but most of his important teachings still live in my heart. I hope that by walking down this memory lane, my children will appreciate and learn from his legacy.

As a child, I had very little opportunities to spend time with Dad because he was always working. In fact, he even worked on weekends because in the late 80s, there was a huge construction boom in Singapore. Dad was a self-employed lorry driver and business was thriving back then. He was a typical baby-boomer – hardworking, thrifty and disciplined. Every morning at six, he would wake up and had quick shower and breakfast. Then he would do some quick calculations using the Chinese abacus and then promptly left for work.

personal finance

As the sole breadwinner, Dad had to work really hard to support a family of six. So when he was down with stroke, we were totally caught off-guarded by this family crisis and did not know how to handle the situation. We did not send him for treatment at hospital because in those days, awareness of stroke was really low. We thought that by letting him rest at home, he would recover in due course. We only send him to hospital after a few days when his condition did not improve. By then, the damage …

Read more

Buy and store bullion in Singapore

Below is an email from one of my readers. I feel obliged to reply him because it is the first time that I received queries that touched on precious metals, a topic that I have a lot of interest in and am still learning. Through this sharing, I hope that there is a better understanding of precious metals among Singaporean investors.

Dear SG Wealth Builder,

I came cross your blog and enjoyed reading the articles. I am considering to buy gold and silver bars from dealers and also like to rent their vault storage facilities in Singapore. As such, I will be very grateful if you could help me by answering my questions stated below.

1. Do you have the list of licensed bullion dealers in Singapore?

To the best of my knowledge, based on information gathered from IE Singapore, there is no licensing requirements for the import and export of precious metals in Singapore. IE Singapore is the lead agency tasked to grow Singapore into a precious metal trading hub. Thus, this policy of not regulating bullion dealers make sense because Singapore government’s objective is to ensure a free flow of precious metals through Singapore without any hassle.

Actually, until a few years ago, I also shared the same thoughts that bullion dealers are regulated by Monetary Authority of Singapore until BullionStar revealed to me that bullion dealers don’t actually need a license to trade in Singapore.

2. I understand from friends that there were instances of exit or closure of some bullion players in the Singapore market in the past. How are investors or customers who keep their bars in their vaults protected in the event of their closure/bankruptcy and exit from the local market? Is there any provision for recourse in the Securities and Futures Act on

Read more

Mayday for Noble Group!

In the world of aviation, one of the most dreadful radio distress signals is “Mayday!”. When the pilot-in-command made this signal, he would be facing some emergency situations that might be potentially life threatening. On 4 June 2016, it certainly was Mayday for Noble Group when the company’ share price tumbled to its lowest since 2003 after the announcements of a rights issue to raise $500 million and the shock resignation of founder, Richard Elman. This latest episode marks another embarrassing chapter for Noble Group after it was kicked out of the benchmark Straits Times Index in March 2016.

Today, Noble Group’s share price tanked further when the commodity trader announced that the proceeds for the rights issue will be used for working capital instead of paying down its massive debt. Obviously, investors are not happy with the management’s move given that only 20% of the proceeds from rights issue will be used to pay for the net debt of $3.7 billion. Furthermore, the price of the rights issue is at a huge discount of 63% to its price of $0.30 at the date of announcement. As a result, many traders punished the share price and sent it tumbling by 13%.

stock market

The rot for Noble Group started in 2015 when it engaged in an epic battle with US short-seller Muddy Waters and research firm Iceberg Research over Noble Group’s questionable accounting practices and allegations of misleading debt levels. Whether who was right or wrong was immaterial but the market had spoken when Noble Group started sliding from $0.90 in 2015 to the current price of $0.23. And in the history of SGX-listed companies, there were very few successful turnaround stories.

I am not vested in Noble Group and have never invested in its shares before. Nevertheless, through the years, …

Read more

The winning formula

Our ability to excel in life lies on whether we can constantly re-invent ourselves to continue playing the game. To achieve this, we need to keep learning new skills and knowledge in this new economy in order to position ourselves for success. Obviously to a certain extent, most of us yearn for career success but how many of us are willing to learn and earn? There is no secret winning formula as everyone has a different life path. But then again, successful wealth builders almost certainly share some common traits.

Receptive to new ideas

Even though you may be very experienced or have deep expertise in your job, you should always stay curious and be receptive to new ideas. In my job journey, I have come across many colleagues who are afraid of experimenting different approaches to resolve issues because they only believe in tried-and-tested methods. Because of their rigid mindsets, work productivity were often affected.

A few years ago when Singapore exempted Goods and Services Tax (GST) for investment-grade bullion, I asked a few fellow investment bloggers their main reasons for not buying gold and silver in Singapore. Most of them shared that they don’t believe in diversifying their wealth in gold and prefer to focus on Singapore shares. Their lack of understanding of precious metals could be the reason for the resistance to new ideas on wealth building. It is difficult to imagine that they would be successful in their wealth building journey down the road because it only takes a major stock market correction to wipe out their portfolios’ value.

gold

Know what you don’t know

One of the reasons why the rich always become richer is because they know what they don’t know. Thus, they either delegate it to professionals to focus on their strengths or improve …

Read more