Latest stock market news from Wall Street -

Saturday, April 30, 2011

10 Simple Ways To Speed Up Windows Vista

Windows Vista is a rather heavy operating system with many neat features, but unfortunately they all come at a price. Right out of the box it requires a pretty hefty system to run (arguably).

Before you run out and buy a new computer just so you can run your base operating system, check out these 10 Simple Ways To Speedup Windows Vista tips to lighten the load. This is just the first in the series, so many of them may be very apparent to those experienced in tweaking.

If you’re still using Windows XP, then check out 10 Simple Ways To Speedup Windows XP. Or, if you moved onto Windows 7 then this post.

1. Turn off UAC, or at least make it less annoying
Now, there’s a lot of talk about the new user account control policy in Vista, and all I can say is: as it is, it annoys the hell out of me and slows down my normal computer usage. Just why, oh why, does it have to flash my video card to a black screen, take 5 seconds and really just make itself a royal pain in the arse?

To turn it off, the easiest way is to go into the Control Panel and type in ‘UAC‘ into the search bar. It’ll bring up a search result of ‘Turn User Account Control (UAC) on or off’. Just follow the prompts from there.

To keep some of the security of the UAC, let’s just turn off the crazy annoying blacking out screen bit. To do this:

open group policy (start | run | gpedit.msc)
then navigate to Computer Configuration | Windows Settings | Security Settings | Local Policies | Security Options
Find the policy named ‘User Account Control: Switch to the secure desktop when prompting for elevation’. Set this to disabled.
Much better, eh? You might say ‘but what’s that got to do with speed?’ Well, as I mentioned, it prompts me a couple times an hour at least and then takes several seconds to figure itself out. My productivity goes up, so it’s a speed enhancer ;)

2. Disable Aero
I personally do not do this, as I am a fan of the graphical styles, but I realize it comes at a cost. It does tend to eat up both RAM and CPU usage (as well as video card usage). While it is turned off during gaming, you can still notice its effects during normal computer usage. When it is really cranking, it can use 15% of your CPU. Ouch. Vanity comes at a cost.

If you do like it, at least turn it down a couple notches. Some performance increases have nothing to do with strain on hardware, or amount of processing. Sometimes, things are designed to take longer than they should, though only maybe a fraction of a second, but the end result to the user is a faster machine. Minimizing and maximizing does an animation. Watch closely. Pretty quick eh? Still, it does slow you down, and, really, what does it add to your experience? I am all about vanity and aesthetics, but this feature has got to go.

Relish in the fact you will be increasing your productivity by 0.2 seconds per minimize/maximize. :)

Open your start menu, go to run, and type in ‘systempropertiesperformance’
From the Visual Effects tab, uncheck ‘Animate windows when minimizing and maximizing’
While you are here, might as well check out the other goodies you can disable.

3. ReadyBoost
ReadyBoost is one of the more innovative features of Vista. The idea behind it is to use solid state memory as a secondary memory cache (before hard drive caching). It does require a certain level of speed from your USB (or other) flash drive. Do a quick search on google for just the fastest USB flash drive you can get your hands on (don’t worry they are cheap) and buy one.

To enable ReadyBoost, just plug in a fast flash drive, and AutoPlay should come up with a dialog stating that you can use it for readyboost. If you have disabled it, you can just go to the properties for the drive and select it under the readyboost tab. Easy as cake. It is no substitution for RAM, but one can get a several GB flash drive for very little. Some sites have stated that the improvements are not as much as MS says they are, but even a minor improvement for such a low investment makes this worth your while. Do find the best drive you can for random reads/writes (the drive speed is usually rated for sequential reads which won’t help you much).

What speed drive do I need? 2.5MB/sec throughput for 4K random reads and 1.75MB/sec throughput for 512K random writes.
What size drive do I need? 256MB to 4GB, where as best performance is gotten at around a 1:1 to a 2:1 flash to ram ratio. So really, you should never try this with a flash drive smaller than 1GB-2GB.
Continue on, and see the rest. I’ll get more complex as I go.

4. Disable Search Indexing
I personally don’t mind the new search too much. It still hogs a lot of resources though. To turn it off completely:

Go to my computer, right click on C: drive, go to the General tab, and uncheck Index this drive for faster searching, select Include subfolders and files.
If you want, you can just remove any extra areas of search, so you can keep your fast searching for some areas.
I personally find the indexing of control panel options and start menu items to be a blessing, so I would leave those alone. Just find items in the tree that you really don’t wish to be indexed (like your documents).

5. While you are at it, fix the rest of your search options

It is often that I do searches for text in files, like a method use in a PHP file, or maybe something in a java file. Regardless of the situation, Windows Vista has a very limited number of file extensions flagged for full text searching, which causes you to get ‘no results’ when you know there are some.

Open Control panel and type in ‘indexing’ into the search box (or you can do this from your start menu, but many people turn it off).
Select ‘Indexing Options’
Select Advanced Button
Select ‘File Types’ Tab
In this list you will see a list of extensions. When you click on most of them, the bottom radio button will change from ‘index properties only’ or ‘index properties and file contents’
Honestly, index properties only is pretty useless for what most people will use search for (i.e. really only search by date).
Uncheck a box to have it removed from search. This can be done for a variety of extensions that honestly, you don’t want in search anyway. It will actually help your results.
Change the radio button to ‘index properties and file contents’ to have these file types included in your searches (should be set for word docs, etc and any other text-based files you search for)

6. Get rid of the sidebar

Pretty self explanatory. It’s a heavy and ugly. If you use it, great, if you don’t reclaim some desktop space. Install googles version. Or yahoos.

7. Defender has a use?
Yes, windows defender actually has a purpose!

Open it up
Click on tools
Click on Software Explorer
This will let you select groups of items, the default is Startup Programs. Now you can see that oh, Open Office quickstart is there, and I can just disable it there.
Items in this list are very likely to be programs that are running 100% of the time your computer is on, so if you can live without them, kill em.

Almost to the end of part 1. The final page is filled with some more advanced things you can do, but they can take a bit of time…

8. Tweak your services
Well, this one is arguable. Many sites preach service tweaking as the end all of tweaks, and Vista does have a lot of services (like 130). However, a good portion of them are set to manual or disabled by default. Manual will only start the service when the operating system thinks it needs to use that program. However, Vista does have a lot of services set to Automatic by default that are not needed for many people. Granted, they are usually sleeping, not using any CPU, and if they use memory, they usually get paged out to disk pretty fast. But, regardless, it is fairly quick to do, and will gain you some improvement.

First off, how to tell what you should really be worried about. One new feature in Vista is the ‘Go to Service’ feature in Task Manager (or at least I never noticed it before). Open Task Manager, Processes tab, right click on a particularly heavy process, and select ‘Go to Service (s)’. This will jump you over to the services tab, and select all the services that are running under that process (multiple ones are usually running under svchost.exe, many of the others only map to one service).

It also works in reverse (select service, right click and go to process) I have something like 75 services running at this very moment. Many of them I have exactly zero use for. I do not have a printer, but print spooler is running and using a whole whopping 1MB of my ram at the moment. There are heavier examples, but even if you can remove 20 of these, is it worth your time? Well, yes and no. Like I said, many of them are already paged out, so they really aren’t affecting your system’s memory. There is added overhead because the scheduler still needs to manage them, but I cannot for the life of me remember how it is done in Windows.

Overall maybe minimal, but if you are going for every ounce of tweak-ness, give it a shot. I’d recommend Speedyvista look for their cheatsheet or registry files pages so you can keep a copy of the default services around for when/if you mess it up and need to get back to default.

9. How to find out the next area for improvement ? Tweak your programs
Well, you’ve gotten the operating system down to a certain point, what’s next? Well, figure out where your bottlenecks still are! There’s probably some software on your computer that just kills performance (or 6-7 of them). Don’t blame MS quite yet. Anyway, luckily for you Windows Vista has a simple tool included that can help you identify the problem and remedy it quickly.

Open the task manager (many ways to get to it, easiest is ctrl+alt+delete then select Start Task Manager)
Navigate to the Performance tab
Click on Resource Monitor
Expand the disk section and sort by either reads or writes column.
Additionally, you can check out cpu, memory usage and network usage in the same way. Now you will probably notice that your virus scanner is using 20x the resources of Aero, as it insists on scanning your RAM all the time, and scanning every damn file you read from, write to, or execute. But, what can you do? Try to find a couple programs that are too greedy, or running when they have no reason to be running (Example: itunes has a couple services installed that run constantly. Why? I’ve no idea why it takes 2-3 services running and several threads to just be looking out for when you just might plug in your ipod, because that functionality is already built into windows). Office also has a preloader ‘quick start’ service (as does open office) to make sure that things run ‘better’ for you. Even though you do have super fetch which should do it automatically without the need for any extra memory usage.

10. Not really a tweak but…
Ok, #10 isn’t really a speed tweak, but it’s something I’ve always found annoying on many operating systems. Many of us have 2 LCDs, and oh wouldn’t it be nice to be able to set different backgrounds for both? There are programs out there that do it, but here’s a way to just do it inside windows.

Right click on the background and select Personalization.
Click on Desktop Background
Select a background image that is at least as wide as the combined resolution of both of your monitors (or scale the image up so it is big enough, else you will get tiling.. it takes some tweaking, so get out your photo editor of choice for this one.
Select the Tile picture positioning option as shown below. This is the only option that will display your background image across multiple monitors
Alright, tune in next time for more advanced Windows Vista tweaks. If you have any questions doing any of the above, let me know, or if you wish to debate their usefulness, etc. If you wish to give your own, even better!

Reit or business trust?

Business Times: Sat, Apr 30, 2011

WITH interest rates still scraping rock bottom, you are likely to be on the lookout for investments that offer yield. Within this segment, real estate investment trusts (Reits) and business trusts are promising investment options.

Both give you access to yield-bearing assets such as properties or infrastructure that as a retail investor, you are unlikely to be able to invest in directly. Most of a trust’s underlying assets require substantial amounts of capital to acquire as well as expertise to manage.

By now, Reits are a fairly mature market here, boasting a market capitalisation of roughly US$30 billion as at end-December. There are also a number of business trusts to consider, offering exposure to assets such as utilities, shipping and ports.

The concept of Reits and business trusts may seem broadly similar. An outstanding feature of such trusts is their ability to earn or generate a stable income or cash flow, which is distributed regularly to unitholders in the form of dividends.

Yet, there are key differences in their respective structures, with implications for ownership, management and governance.

A Reit is a collective investment scheme investing in real estate, which could span commercial, industrial, retail or hospitality. It is managed by a licensed manager who is paid an annual management fee.

The underlying assets of a Reit are held by a trustee on unitholders’ behalf. With Reits, there is a separation of roles between the trustee and the manager.

In contrast, a business trust is a hybrid structure combining elements of a company and a trust. It runs a business enterprise, investing in sectors and assets with a stable income profile such as utilities and infrastructure. But unlike a company, it is not a separate legal entity.

Instead, it is created by a trust deed under which the trustee has legal ownership of the trust assets, and manages the assets for unitholders’ benefit. It is managed by a single entity – the trustee-manager.

The accompanying graphic illustrates some key aspects of three structures – companies, business trusts and Reits.

Here are some issues relating to corporate governance that are worth noting.

Removal of manager or trustee-manager: The trustee-manager of a business trust can be removed only if 75 per cent of unitholders vote against him. A Reit requires a simple majority of votes to remove a manager.

Independence of directors: There are also rules in place to guard against conflict of interest. For business trusts, the majority of its board must be independent of management and business relationships with the trustee-manager. In addition, at least one-third must be independent of management and business relationships with the trustee-manager, and from every substantial shareholder of the trustee-manager.Wong Partnership deputy head (equity capital markets) Long Chee Shan says that the composition of the board of directors of a business trust is subject to stricter rules relating to the independence of its directors.

‘For business trusts, the law requires the majority of its board members to be independent. This is unlike managers of Reits, or the boards of listed companies, where the Code of Corporate Governance requires that only one-third of the directors be independent.’

He also notes the higher threshold for removal of a trustee-manager compared to that for a Reit manager. ‘. . . unlike a Reit which is a passive investment holding vehicle that is externally managed, the trustee-manager of a business trust manages its business and operations. If the threshold is set too low, it may be difficult for the trustee-manager to plan and manage the business of the trust in the interests of unitholders.’
Audit committees: Reits and business trusts are required to have an audit committee, which oversees financial reporting and disclosures.

In both structures, sale and purchase transactions with interested parties are subject to safeguards: Any transaction representing 5 per cent or more of an entity’s net asset value must be approved by independent unitholders.Reits are also required under the Code of Collective Investment Schemes to get two independent valuations. Assets cannot be acquired from the interested party at a price above the higher of the two valuations, nor be sold at a price below the lower of the two valuations.

There are, of course, risks attached to investments in Reits and business trusts, as with any other investment. Here are some to consider:
Market risk: As listed vehicles, Reits and business trusts are subject to factors that may now and again cause the stock market to rise or fall. These include fund flows, investor sentiment and risk appetite. While the trusts are generally stable vehicles, there is volatility in their prices.

Liquidity risk: The 2008 crisis eloquently showed that even stable vehicles such as Reits could suddenly become illiquid along with the general market. Compared to unit trusts, Reits and business trusts are subject to greater liquidity risk. Unit trust investors can buy and sell units through banks, and fund managers are bound to redeem units except in certain extreme conditions. For Reits and business trusts, the ease of buying and selling units will depend on the demand/supply situation on the exchange.

Leverage: Business trusts and Reits are allowed to take on borrowings to buy assets. Reits are subject to a gearing limit of 35 per cent. This can be raised to 60 per cent if the Reit obtains, discloses and maintains a credit rating from rating agencies. There is no explicit cap on borrowings for business trusts but the trusts themselves may set their own limits.Wong Partnership’s Mr Long says that the absence of a similar cap on gearing for business trusts is not necessarily a negative. ‘The absence of similar restrictions . . . allows (business trusts) more flexibility in the borrowing of funds to grow its business in a low interest rate environment. In such an environment, a business trust may take advantage of opportunities to purchase higher yielding assets by gearing up more readily.’ The presence of leverage gives rise to related risks – that of refinancing the borrowings as they come due, in addition to the spectre of breaching loan covenants due to negative equity. The refinancing risk was stark during the 2008 financial crisis when credit dried up as banks turned risk averse. The dearth of financing drove a number of Reits to seek funding by rights issues. This can create a strain on unitholders who may not be able to cough up the cash to take up the issue.

On loan covenants, shipping trust Rickmers Maritime had to negotiate value-to-loan coverage requirements and a loan maturity extension to relieve pressure on its balance sheet. Such agreements come at a higher cost of debt and may also entail a cap on distributions per unit.

Between 2008 and 2009, Moody’s assigned a negative outlook to Singapore Reits due to concerns over refinancing, asset devaluation and a weak operating environment. This has since been upgraded to a stable outlook. Earlier this year, Moody’s said that it expected continued growth in Singapore Reits in an environment of low interest rates, supportive capital markets and improved economic sentiment.
Business risks: Each Reit or business trust will be exposed to specific sectors that may be subject to their own business cycles. While infrastructure and utilities are typically seen as resilient and defensive assets, the same may not be true for industrial properties, for instance. You will need to be cognisant of business and economic conditions which have a bearing on lease renewals and occupancy rates.There are also unpredictable risks that arise from calamities. The recent Japan earthquake is a case in point. Japanese Reit Saizen was heavily exposed to the worst hit Sendai area, and this dragged down its unit price.
Income risk: Distributions by listed trusts are typically not guaranteed, even though a newly listed trust may undertake to make distributions for a certain period. When business is poor, a trust may reduce or not pay a dividend at all. Saizen Reit, for example, had suspended dividend payments in 2009. It had also proposed that it issue scrip instead of cash as dividends, but this was subsequently abandoned.

Investment/financial risk: Risk could arise from a trust’s use of financial derivatives. Under the Code on Collective Investment Schemes, Reits may use derivatives to hedge existing portfolio positions or for efficient portfolio management. Derivatives cannot be used to gear up the portfolio.Business trusts are not subject to such a restriction. But the trusts use derivatives typically for hedging, and the hedging policy is reviewed and approved by the board of the trustee-manager.

Tuesday, April 26, 2011

Want to invest in currency pairs?

Dual Currency Investments are picking up in popularity here. -myp

Tue, Apr 26, 2011
my paper

By Reico Wong

DUAL Currency Investments (DCIs) are again picking up in popularity here as investors' appetite for structured products shows signs of returning, in stark contrast to the time when they were avoided like the plague after the failure of Lehman Brothers in 2008.

Experts say the volatility in the world's major economies and their currencies following the financial crisis has, over time, drawn investors back to the asset class, particularly as they search for higher yields as numerous central banks cut rates aggressively to stimulate their economies.

Indeed, as a subset of the structured- notes class, DCIs allow investors to capitalise on narrow currency movements and are said to be attractive as they are liquid and transparent. More importantly, they have the potential to earn investors substantially higher interest rates than vanilla deposits.

Interest rates paid out under DCIs could be as much as 10 per cent per annum or even higher, compared to the less than 0.5 per cent currently offered for traditional time deposits.

But like all investment products, they come with their own set of complexities and risks - and because a larger investment principal is required and the volatility of the asset class here is higher than average, DCIs are typically offered by financial institutions only to high-net-worth individuals with a larger risk appetite.

DCIs, essentially, are non-principal protected structured products, on which the return on investment is subject to the fluctuation of foreign-exchange rates. Investors may suffer substantially or even lose their principal completely due to the depreciation of the alternative currency.

They thus should not be deemed as a substitute for a regular term deposit, experts caution.

How exactly do DCIs work?

Investors basically have to pick a currency pair - a base currency in which their principal sum is in, and an alternative currency which they are comfortable holding.

The US dollar, Australian dollar and New Zealand dollar are usually the more popular currencies among Singapore DCI investors.

A tenor for the investment must also be selected, and this could range from as short as one week to a year.

Lastly, investors must select a strike price, also known as the target conversion rate. They must also accept the interest rate stipulated by the financial institution.

On maturity of the investment, investors will receive the principal plus interest earned in either the base or alternative currency, at the pre-agreed strike price.

Note that early redemption of any portion of the DCI is typically not permitted within the duration of the tenor but, where it is allowed, it is subject to unwinding cost.

Let's take, as an example, that I have US$100,000 and I choose the NZ dollar as my alternative currency for a one-month tenor. I then fix my strike price at 0.812 at an interest rate of 12 per cent per annum.

There are two scenarios upon maturity. Firstly, if the NZ dollar appreciates to above 0.812 against the US dollar at the end of the month, I'll receive my principal together with interest back in US dollars. This will be a total of US$101,000.

However, if the NZ dollar is still less than 0.812 against the US dollar at the end of the month, I'll receive my principal together with interest back in NZ dollars. This will be NZ$124,384.23 [US$101,000/0.812].

Note that the financial institution has the right to repay you in the alternative currency you picked initially, regardless of whether you wish to be repaid in this currency at that time.

Assuming that the current NZD-USD rate on the date of my investment maturity is 0.801, converting NZ$124,384.23 back to USD would result in me getting only US$99,631.77 (less than my initial US$100,000).

Investors thus have to remember that the return on DCIs is strongly affected by politics, economics and other current-affairs situations in the global arena.

"For investors looking to invest in currencies or DCIs, there is no substitute for learning as much about the product as they can," said Mr Wyson Lim, head of wealth management in Singapore at OCBC.

"Sophisticated customers with knowledge of foreign exchange may be best suited for these products."

Mr Greg Zeeman, head of personal financial services at HSBC bank, added that DCI investors need to be aware of the probability of their base currency being converted to their linked currency.

"They must ensure that they have the stomach for the foreign-exchange risk, and have a view on the foreign-exchange movements that they would like to capitalise on," he said.

"To minimise potential risk and loss, investors should invest in a linked currency that they have a natural need for, such as the currency of a country that their children are going to study in or if they conduct business transactions in the alternative currency."

Investors ultimately need to be comfortable holding both currencies for the longer term and they should not be overly concerned whether they receive their capital and interest in either currency.

In general, analysts expect the broad-based US-dollar weakness to continue, especially against its stronger Asian counterparts, including the Singapore dollar. The Sing dollar is widely expected to appreciate to at least about 1.22 against the greenback by year-end.

HSBC said that regular demand for commodities with robust growth in the Asia-Pacific region will be a long-term positive factor for the Australian dollar.

"However, at current levels, the AUD looks slightly overvalued and retracement is likely in the coming months.

The currency may be hard-pushed to give up its gains if the current 'risk on' market environment continues," said Mr Zeeman. "Our year-end forecast for AUD-USD is 0.85."

Meanwhile, the NZ dollar has rebounded strongly after the earthquake as the "risk on" market environment and positive domestic data helped to push the currency higher.

The currency is predicted to pull back from its recent levels and hit 0.72 NZD-USD by the year-end, said HSBC.

Sunday, April 24, 2011

Go with the fund flows

Source: The Sunday Times
Author: Goh Eng Yeow 24/4/2011

For many investors, one way to strike it rich is to hunt for undervalued stocks and buy into them in the hope that their attractiveness will eventually be recognised by others.

But the way in which stocks everywhere seemed to be moving in lockstep with one another during the global financial crisis three years ago has cast great doubt on whether such conventional wisdom in share investing is still valid.

Instead, investors have done considerably better in their investments when they find themselves guided by the flow of funds moving in and out of markets.

Take last month, when the widely watched Nikkei 225 Index in Tokyo plunged by almost 20 per cent in two days, following a devastating earthquake and tsunami in Japan.

For most of us, it was a sign of the gloom and doom stalking the Japanese stock market as it grappled with a potential environmental disaster triggered by the damage caused by the earthquake to a nuclear plant near Tokyo.

But what most of us missed at that crucial moment was the huge amount of fresh money - almost US$1 billion (S$1.26 billion) to be precise - that was pumped into a large New York-listed fund, known as the iShares MSCI Japan fund, which specialised in investing in Japanese blue chips.

Flush with new funds, the iShares MSCI Japan fund then swung into action, buying into depressed stocks in Tokyo in a big way, helping to set off a spectacular V-shaped rebound in the Nikkei 225 which enabled it to regain half of its losses in the next few days.

In hindsight, Japan's central bank was believed to be the driver behind the huge inflow of money to the fund, as it raced to calm the tremors on the financial market and prevent indiscriminate dumping of Tokyo stocks by jittery investors.

Traders who kept their nerves during those trying few days and followed in the footsteps of the iShares MSCI Japan fund in snapping up Tokyo blue chips would have profited handsomely.

For market watchers like us, it is the latest demonstration of how tracking fund flows can be a profitable exercise for investors.

Indeed, big investment banks like Citigroup and Morgan Stanley now regularly issue reports which analyse trends in fund flows, measuring the amount of money entering and leaving different markets.

Based on such information, investors can sometimes work out whether a market is overheating or unloved.

Some retail investors have, however, complained that the reports issued by these research houses are available only to their rich clients, who then enjoy an unfair advantage in switching in and out of markets profitably, based on the fund flow data to which they have access.

I disagree. As a market writer, I watch fund flows very closely. They usually confirm for me the trend which I am already seeing in the market.

And when turmoil hits the market, like it regularly did during the recent global financial crisis, fund flows become an important gauge of investor sentiment.

Let me give you an example: In late 2006, there was a flood of new money into funds investing in Asian stocks propelling regional bourses to stage their own bull runs. In December of that year alone, a staggering US$3.2 billion of inflow was recorded.

Singapore was a particularly big beneficiary of the fresh flow of funds as it was perceived by foreign investors as the gateway to Asia, and this propelled the benchmark Straits Times Index past the 3,000-point level for the first time.

It turned out that the deluge of foreign money into the region was so huge that in the subsequent 10 months, the STI rose by a further 28 per cent to a record 3,850.

What the fund flow data at that time showed was a regular inflow of fresh funds into funds specialising in regional equities - and any investors would have made a handsome profit just by riding on the trend during that super-bull run.

And while fund managers and sophisticated investors might have access to the fund flow data first, retail investors certainly had plenty of time to climb onto the gravy train as well, even though they only got the fund flow reports from the newspaper a few days later.

But by December 2007, the fund flow data showed that institutional investors were busily locking in their profits and jumping ship, selling billions of dollars' worth of Asian shares each week, as the mortgage crisis in the United States threatened to pull the rest of the world down with it.

Just before US investment bank Bear Stearns imploded in March the following year, the data showed that foreign fund managers had pulled a record US$10.7 billion from Asian markets in the previous 10 weeks. It amounted to a screaming sell call on equities, one might say.

And those who had heeded the warning signal would have been spared the agony of seeing their investment portfolios suffer a meltdown as the STI plummeted by a staggering 50 per cent when another US financial giant, Lehman Brothers, collapsed six months later.

The fund flow data also offered investors an inkling of when to re-enter the market when sentiment was at its most gloomy, following Lehman's demise.

In a black fortnight between the end of February and early March in 2009, the global banking system teetered on the edge of collapse as the US banking giant Citigroup broke US$1 in share price, while HSBC Holdings tumbled 24 per cent in one day.

But those who followed fund flow data would have noticed that investors had started streaming back into the region, pouring US$583 million into China stocks alone in just one week that February.

It turned out to be a master stroke, with financial markets experiencing a V-shaped recovery, as they responded to the measures made by then newly inaugurated US President Barack Obama to calm the global banking panic.

So how can an investor take advantage of the trend provided by the fund flow data?

To make it easy for investors to put their money into markets rather than individual stocks, investment banks have created a new type of investment known as the exchange traded fund.

These are funds listed on the Singapore Exchange which are traded like shares, but which track the performances of actual stock market indexes like the Straits Times Index and the Hang Seng Index.

In recent years, they have become highly popular because of the low management costs - about 0.3 per cent of the total asset value of the fund.

So, given the vast changes in the global financial landscape, rather than stock-picking, it may be time to consider market-picking as part of your investment strategy. Happy investing!

Wednesday, April 20, 2011

Don't Follow the Herd

Start by being intellectually honest and transparent.

20/04/2011 BT

I RECENTLY had dinner with three portfolio manager friends whom I have known since I started my career. Collectively with over 100 years of investment experience in Asia, what had we learnt? We debated the following ideas: first, growth is over-priced because most investors look for growth; second, easy money encourages undisciplined investment; and third, when markets turn bearish, investors look for safety and make defensive stocks over-priced. In essence, what we have learnt is centuries-old wisdom - be contrarian and don't follow the herd.

Buy sheep, sell deer: Buying cheap and selling dear is easier said than done - in a deep crisis, investors always expect the low to get lower

As Barton Biggs, founder of Morgan Stanley Investment Management, puts it: 'buy sheep, sell deer' (buy cheap, sell dear), but it's easier said than done. Experience tells us that in a deep crisis, we always expect the low to get lower. In the dark days of February 2009, we noted that the price to book value for Asian corporates was at an all-time low, but everyone made compelling arguments that markets would go even lower.

Was that greed or fear? I argued to get invested because risk had become asymmetric - in other words, the upside potential was much larger than the downside risk given market psychology (drawing on my experience during the unprecedented sell-off in Hong Kong during the Asian Financial Crisis). After you overcome the psychological barrier to buy, beware that you may end up with a portfolio of fully priced safe stocks that will lead to under-performance. Such is the complex behavioural biases that investors have to deal with everyday.

2008 was the fifth major crisis I had experienced close-up in my career: the others being June 4, 1989; the 1994 Tequila Crisis; the Asian Financial Crisis; and 2000's Tech Bubble.

My first lesson in contrarian investing happened in June of 1989. Our chairman, a Wall Street legend, told us to 'buy Hong Kong'. Then I had the audacity to say, 'I don't think this is a good idea.' Fortunately for clients, I was not the one who mattered (the Hang Seng has appreciated 934 per cent from June 30, 1989 to March 31, 2011). In the process, I learnt a Chinese proverb - newborn babies have no fear of tigers. (In a secular bull market, hire young managers and let them loose!) My reaction to crises also matured over time, but it took a lot of discipline and painful reflection.

But how do you define a contrarian position? Technology has enabled instantaneous information flow and market reaction, making it extremely difficult to tell how the market is actually positioned. Financial innovations also made possible faster and deeper reaction to events. Price signals may be inadequate.

The Pavlovian response that worked well 25 years ago may be a ticket to trouble. Having a longer investment horizon is also contrarian today as the market has transformed from one dominated by long-term investors to one where hedge funds, proprietary trading and high frequency trading dominates.

Over time, I have come to realise that modifying mean reversion with a philosophical understanding of the Taoist saying that 'all things taken to the extreme, change form' allows one to handle the dynamic and uncertain nature of developing markets and economies better.

We started turning positive on the Indonesian market in early 2007 and carried the position over a multi-year period. A simplistic use of mean reversion would have led us to exit too early as the market started to move above its long-term averages driven by structural changes. The volatility we sat through was massive.

To cope, we mentally prepared ourselves by developing a thesis for the structural change which we constantly reviewed, tested and updated, while maintaining the flexibility to discard it if we found a flaw. One has to be prepared to spend time developing deep knowledge and careful analysis to manage risk. It is not only about what you can win, but also understanding what you can afford to lose.

In this game of managing human behaviour, the one replicable skill set is discipline. We can start by being intellectually honest and transparent with our decisions. The explosion in the availability and speed of information and limitless computing power has created a delusion of control and a dangerous sense of complacency.

The ego is our biggest enemy. However, a true ego is one that learns from mistakes; understands that they don't have all the answers; always feels the need to constantly regenerate themselves; and understands the need to be constantly at risk in the marketplace. I rely on the 'neural network', a team of portfolio managers who work to ensure intellectual honesty through rigorous debates. However, one has to ensure diversity to avoid groupthink and understand that investing is a lonely pursuit.

How is all this relevant to the market today? A senior UK politician recently remarked: 'There is no recognition in the US and Europe of the sheer change in Asia and the sheer scale of competitiveness emerging.' The semantic debate on decoupling misses the point. The world is getting more 'global' with non-G-7 countries now constituting a meaningful portion of global gross domestic product (GDP) and at the margin, the main driver of global growth.

Going global

Thirty years ago, global really referred to the G-7 and the rest was irrelevant. The composition of the 'global average' has fundamentally changed, something not obvious if we just focus on the 'mean'. That is why in the past when the US/EU sneezed, we caught a cold; but today, they can catch pneumonia and we will still only go down with a cold.

Today, Asia-Pacific ex-Japan market capitalisation is larger than Europe, compared to 35 per cent of Europe's market capitalisation in 2000. What makes this so hard to believe is the lack of theories in understanding why a world that for the past 200 years has less than 20 per cent of its population controlling more than 80 per cent of global GDP is now changing for good.

Part of the reason lies in Lin Yifu's theory of the advantage of backwardness, with information technology enabling rapid dissemination of knowledge and unprecedented economies of scale. In 1800, the midst of the Industrial Revolution, the UK had a population of 10 million and the US five million. Today, China is industrialising with 1,300 million people. Unprecedented economy of scale is a thesis that we are developing to understand the changes taking place.

How else can you explain the rapid price drop in goods such as mobile telephony as China entered the space? Many choose to believe the demographic explanation to everything - that China grew because it had a large population. If this is true, China with more than 300 million people in 1800 would have been the largest economy in the world for the past 200 years. The irony is that the best performing economies for the past 200 years are actually European countries with small population bases.

This powerful secular shift is underpinned by a shift in the global balance of science, with research powerhouses now emerging in the developing world. Today, South Korea has the highest per dollar capita R&D spend globally. For the first time since World War II, developing economies are also producing capital equipment previously dominated by Western companies and at a much lower price. Chinese mobile telecom equipment suppliers such as Huawei and ZTE are supplying equipment at US$50 per subscriber capital expenditure and sub-US$50 handsets, empowering five billion emerging market consumers. This secular shift in favour of developing economies will continue for the foreseeable future.

Are you prepared to bet that this powerful trend will continue and how do you overcome all the noise that will try to convince you that historically, this is not possible?

The writer is managing director and senior portfolio manager, Morgan Stanley Investment Management (MSIM)

Tuesday, April 19, 2011

Fugitive lawyer’s life on the run

By Kai Fong | Singapore Scene
Tue, Apr 19, 2011

A lawyer, who had been on the run for six years until his arrest in 2009, was jailed in Singapore for nine years on Monday for criminal breach of trust and cheating involving a total of S $4.8 million.

A former star debater at the National University of Singapore (NUS) law faculty, Tan Cheng Yew, 43, was convicted of misappropriating S$1.5 million and S$1.9 million from five members of a Tan family — to whom he is not related — in 2001, The Straits Times reported.

He was also found guilty of two charges of deceiving Tommy Tan Kwee Khoon, a member of the same family, of S$480,000 and S$900,000 in 2002.

The Malaysian and Singapore permanent resident was practising as a partner of Tan Cheng Yew & Partners and Tan Jin Hwee, Eunice & Lim Choo Eng.

During the 16-day trial, Tan repeatedly said that he had acted as a trustee to the Tan family's money in his personal capacity and not his professional role as a lawyer.

District Judge Hamidah Ibrahim did not accept the defence's arguments.

In February 2003, Tan, then 34, fled to Perth, Western Australia, where he stayed in his family's house and hotels. He did not contact his family regularly initially as they "didn't take what I had done… too well", he said in court earlier this year.

Tan testified that he had adopted an "ostrich-like mentality". When he called his parents for the first time, they said that "what's past is past", and they should not dwell on it. Tan felt that it had been his parents' way of consoling him, as there were times when he had been distraught.

Later in 2003, he travelled to the United States on a forged passport under an assumed name. He worked as legal counsel in multinational companies and flew regularly to Munich and Germany for work. While in the U.S., he contacted his parents weekly.

One of the reasons Tan gave for staying away for so long was that he was trying to earn enough money to repay the Tan family.

Tan told the court he had picked up gambling from a client in the late 1990s and began gambling heavily at casinos in Australia and on cruise ships in 1998, where he chalked up debts. He said he also owed relatives and friends about S$700,000.

Tan was arrested at Munich airport on June 2, 2009 and held in remand until his extradition in October that year.

He comes from a family of lawyers and his older brother is Professor Tan Cheng Han, dean of the law faculty at NUS and a senior counsel. His father, Tan Hock Him, 85, who was in court yesterday, is a retired lawyer.

Saturday, April 16, 2011

Avoiding buy-high, sell-low syndrome

In its new study, Dalbar shows how investors can manage their psyche to capture 'alpha' or excess returns.

Mon, Apr 18, 2011
The Business Times

By Genevieve Cua

BY NOW, you would be familiar with the defeating pattern of investors buying high and selling low. It crops up almost invariably at moments of stress in markets.

In its latest Quantitative Analysis of Investor Behavior, US-based Dalbar comes up with suggestions on how to overcome the behaviours that tend to rob investors of 'alpha' or excess returns.

'It continued to be a struggle to help investors protect and grow portfolios by taking advantage of the behaviour of investments and using the available time horizons . . .

'When investor behaviour is anticipated and investment plans are developed and maintained, investors will capitalise on the alpha created by the strategies and tactics of financial advisers and portfolio managers. Investors must be guided to rely more on the probabilities of history than the possibilities of emotion - this seems possible but is complex.'

Dalbar has been studying US investor behaviour through mutual fund flows, using data from the Investment Company Institute, S&P and Barclays Capital Index Products. The latest study spans 1991 to end-2010. It uses mutual fund sales, redemptions and exchanges to surmise investor behaviour.

The study shows that across almost all periods, investors did markedly worse than the respective benchmark indices. One exception is the one-year period in 2010 where the average equity investor saw a return of 13.6 per cent against the S&P 500's 15 per cent return.

Against inflation, there are some long periods where the equity investor did beat inflation. Over 20 years, for instance, the investor earned an annualised 3.83 per cent, against inflation of 2.57 per cent. Dalbar says this is due more to unusually low inflation rates, rather than improved investor returns.

The fixed-income investor appeared to fare relatively much worse, ironically in a long period hailed by fund managers as the best for the asset class. Over a 20-year period, the bond investor saw annualised returns of just 1.01 per cent, against the Barclays Aggregate Bond Index's return of 6.89 per cent and inflation of 2.57 per cent. Ten-year returns were relatively worse; the investor earned 0.77 per cent against the index's 5.84 per cent and inflation of 2.48 per cent.

Average holding periods based on 20 years of data have improved somewhat but remain relatively short at about 3.27 years for equity investors, 3.17 years for fixed-income investors, and 4.29 years for asset allocation investors.

This relatively short horizon is part of the reason for the gross underperformance. 'One of the most startling and ongoing facts is that at no point in time have average investors remained invested for sufficiently long enough periods to derive the benefits of a long-term investment strategy.'

Dalbar says its charts show that 'recommendations by many mutual fund companies to remain invested have had little effect on what investors actually do'. 'The result is that the alpha created by portfolio management is lost to the average investor, who generally abandons investments at inopportune times, often in response to bad news.'

Still, a year-by-year analysis shows that the underperformance gap has actually narrowed. In 2000, the investor underperformed the S&P 500 by 10.97 per cent. By 2010, this had narrowed to 5.31 per cent. Dalbar says this could be due to the fact that investors who had been in the market in the 1990s would have experienced multiple market corrections and recoveries and might have learnt from the experiences.

Some investors and advisers, however, have been able to avoid 'alpha robbing behaviour'. This was achieved through better understanding and management of the psychological factors, and a better understanding of the investments as well.

'While a buy-and-hold strategy prevents a loss of alpha . . . effective management of psychological factors, and an understanding of the 'behaviour' of investments being used, combine to produce positive alpha.'

Alpha is the excess return of a fund over its benchmark index. It is the value that a manager is able to add to a fund's return. Dalbar defines 'investor's alpha' as the value a retail investor adds or subtracts from the value delivered by the fund manager.

It says the key to curbing undesirable behaviour - such as the urge to sell when markets tank - is to simply pause and assess the facts.

In this pause, investors should assess whether they are falling prey to any of nine psychological factors. These include loss aversion, where one expects to find high returns with low risk; and narrow framing, where investors make decisions without considering all implications.

Other flaws are mental accounting, where the investor takes undue risk in one area and avoids rational risk in others; and anchoring, where investors relate their current situation to familiar experiences, even if they are inappropriate. One example is to anchor a stock price to a previous high, even if that high was excessive. This could lead investors to hang on to loss-making investments.

The second part of the solution is to understand and choose appropriate asset classes and their allocations in a portfolio.

There are some broad categories of investments depending on who is expected to seek out alpha. One are investments that alone seek alpha - that is, portfolio managers are able to enter and exit markets to outperform their benchmarks. A second category is that of 'zero alpha' - or investments that have 'styles' that remain consistent regardless of market conditions. Here, the expectation is that investors will make changes to their allocations to achieve alpha.

This article was first published in The Business Times.

Thursday, April 14, 2011

Time to raise the bar on CPFIS stocks

Published April 14, 2011


IT'S disturbing to note that of the 10 China stocks or S-chips suspended from trading on the Singapore Exchange (SGX), four - Falmac, Oriental Century, New Lakeside and China Gaoxian - are investments included under the Central Provident Fund Investment Scheme (CPFIS).

Scanning through the list of shares whose names contain the word 'China' reveals that at least 20 more are permitted CPFIS investments. So it has to be just as disquieting to learn that in order to qualify as a CPFIS stock, only four criteria are employed: the company has to be incorporated in Singapore; it has to be listed on the mainboard (Catalist companies qualify if they were already listed on Sesdaq, Catalist's predecessor); it has to be traded in Sing dollars; and it has to allow CPF investors to attend its meetings.

Finally, it can be of no comfort to local investors who have used their CPF savings to invest in S-chips to read that US regulators earlier this week have set up a task force to investigate fraud in the listing of China companies in the US via reverse takeovers or 'backdoor registrations'.

US Securities & Exchange Commission (SEC) commissioner Luis Aguilar was quoted in news reports as saying there have been over 150 backdoor registrations of Chinese companies since January 2007, and that a number of these companies have been 'vessels of outright fraud', attributing this to the lack of due diligence in reverse mergers, deficiencies in cross-border auditing rules and procedures, as well as the inability to enforce US securities laws in China.

Since investigations into the suspended S-chips here are still ongoing, it would be premature to conclude that the Singapore experience is identical to the US one; however, it would be fair to say there are some disconcerting similarities because the sector here is currently labouring under a shroud of suspicion born of a series of accounting failures and corporate governance lapses over the past two years.

Does all this mean it's time the authorities stop allowing the use of CPF money for S-chip investment? Not quite. It would not be reasonable to conclude that just because a handful of China stocks appear shady, all China stocks are suspect; there are many high-quality investments to be found within the S-chip segment, many of which pay decent dividends and some of which have even been included in the Straits Times Index (STI).

However, the scandals associated with China companies listed outside China have drawn attention to a need to review and tighten the rules for all CPF stocks.

The use of CPF savings for stocks started in 1993 when Singapore Telecom was listed, and a time when the 'Asian Tigers' appeared to be a compelling, long-term manufacturing growth theme that captured the imagination of investors everywhere. Whether or not the scheme has been a success is not known but according to CPF's website, as at September 2007, a not-inconsiderable sum of $4.5 billion was invested in CPFIS stocks. So it appears the use of CPF money for the stock market has proven popular with retail investors.

However, of the four criteria currently used for inclusion in the CPFIS, only one relates to quality, and even that tenuously at best - namely that the stock be listed on the mainboard.

Granted, this is a 'caveat emptor' world we live and invest in, but by now many observers would agree that meeting SGX's listing requirements is hardly an endorsement of quality sufficiently high for investing one's retirement savings.

The authorities should therefore consider raising the CPF bar by taking a case-by-case approach, employing criteria such as quality and reputation of the company's board, its adherence to the Code of Corporate Governance, whether it has a proven and consistent track record of profits and/or dividends, and whether its disclosure record over the years has been acceptable.

Other criteria worth considering are whether the company is widely covered by brokers, the availability of analyst research, liquidity of its shares, and whether it is frequently queried by SGX on odd share price movements.

Whatever the eventual criteria, a tightening of the present rules should be undertaken to ensure maximum safeguarding of people's CPF savings.

Wednesday, April 13, 2011

95 HDB owners found subletting flats illegally

95 HDB owners found subletting flats illegally

my paper
Wed, Apr 13, 2011

STEPPED-UP enforcement efforts by the Housing Board have paid off, with a total of 95 flat owners taken to task last year for unauthorised subletting.

Of those caught, HDB took compulsory- acquisition action against 39 flat owners who had infringed subletting rules blatantly.

In one such instance, a flat at the Pinnacle@
Duxton was acquired by HDB after inspections conducted in May and June last year found that the owners had sublet the entire flat without approval. The owners' bedroom was locked and only the sub-tenants' shoes, clothing and belongings were found in the flat.

Investigations revealed that the owners had no intention of living in the flat and had bought it purely for monetary gain.

HDB carried out 7,000 flat inspections last year, up from 3,000 inspections in 2009.
Feedback from members of the public led to 1,800 of last year's inspections being conducted, almost double the number of feedback received in 2009.

In a statement yesterday, HDB said it takes a "very serious view" of any unauthorised subletting.

A spokesman said: "We will take stern action against owners, including compulsory acquisition, even if it is the owners' first infringement.

"This is especially for cases where flat owners had bought the flat purely for monetary gains, with no intention of occupying it."

In cases where flat owners try to circumvent the rules by locking up one room and subletting the rest of the flat without physically living in it, the spokesman said: "Such cases will be treated as unauthorised subletting of the entire flat."
HDB reminds all owners that their flats are meant primarily to be occupied by owners. Flat owners who wish to sublet their entire flats must meet the Minimum Occupation Period and obtain HDB's prior approval.

Members of the public can call HDB's dedicated hotline on 1800-555-6370 to report suspected cases of unathorised subletting. All feedback will be kept strictly confidential

Tuesday, April 12, 2011

The Secret to beating Wall Street

Acker Beats 94% of Equity Peers Shunning Manhattan

By Matt Walcoff - Apr 12, 2011

Brian Acker, the Toronto-based manager of a fund that buys large U.S. companies and beat 94 percent of peers in the past year, says he’s found the secret to beating Wall Street: staying away.

Acker, whose Acker Finley Select U.S. Value 50 Fund has returned 31 percent since the end of 2009, says being about 560 kilometers (350 miles) from the New York Stock Exchange keeps him away from the buzz of corporate news that could throw off his quantitative strategy, which relies on statistical analysis to pick shares.

“Everyone wants to get on the hottest stock, the hottest news, and I think returns from that are marginal at best,” Acker, 51, said. His company manages about C$560 million ($586 million). “The market is wired in such a way, all the advantages are gone from the floor being close,” he said. “The farther away, the better.”

Among 205 funds that purchase the biggest American companies from outside the U.S., only three have gained more since April 2010 than the Select U.S. Value 50 Fund. Among 85 large-cap funds based in Canada, only the Montrusco Bolton Quantitative Canadian Equity Fund (MONTBQCE) had a higher return in 2010.

Acker, the chief executive officer of Acker Finley Inc., achieved the returns even though the fund had more invested in technology and health-care companies than in other industries. Those groups lagged behind the rest of the U.S. stock market over the past year.

Value Stocks
The C$47 million fund focuses on value stocks, or companies with low share prices in relation to earnings. U.S. large-cap value stocks have lagged behind growth stocks -- or companies with the fastest profit increases -- over the past year, according to Russell Investments indexes.

Acker bought stocks such as Woonsocket, Rhode Island-based CVS Caremark Corp. (CVS), the largest U.S. provider of prescription drugs, as well as Redmond, Washington-based Microsoft Corp. (MSFT) and Walgreen Co. (WAG) of Deerfield, Illinois, the biggest U.S. drugstore chain. He invested in the companies following declines and sold before they declined again.

He bought Microsoft, the world’s largest software maker, for $24.65 a share in October and sold it at $27.81 on Jan. 4. Microsoft has fallen 6.9 percent to $25.98 in 2011.

Acker uses a formula when choosing stocks, calculating a “model price” for each Standard & Poor’s 500 Index company based on three factors: “intrinsic business value” or what its balance sheet says about its ability to generate profit; how likely the balance sheet is to be affected by changes to the share price; and projected earnings growth.

Ranking Companies
He then ranks the largest 100 companies and the other 400 companies in the S&P 500 by how much they would have to gain to match their model price. The 10 or so highest-ranked companies from the first group and 40 highest-ranked companies from the second group are added to or kept in the fund.

His biggest holdings include Houston-based Marathon Oil Corp. (MRO), an oil producer, New York-based MetLife Inc. (MET), the largest U.S. insurer, and Whitehouse Station, New Jersey-based drugmaker Merck & Co. The fund has a minimum investment of C$150,000 for non-accredited investors.

Acker said he doesn’t stray from companies that are in the S&P 500 and has ruled out adding large-cap companies such as Transocean Ltd. (RIG), the offshore driller, and Kinder Morgan Energy Partners LP (KMP), a pipeline company, that are ineligible for the index.

‘Holier Than Thou’
“What I see constantly that drives me crazy is people say they beat the S&P 500, but they don’t have S&P 500 companies in the portfolio,” he said. “I don’t want to sound holier-than- thou, but I have a perverse feeling of satisfaction that I can actually beat the S&P 500 with S&P 500 names.”

The fund added Freeport-McMoRan Copper & Gold Inc. (FCX), the world’s largest publicly traded copper producer, in early March, when it was trading at about $52 a share. Acker’s model came up with a valuation of $79.27 for the Phoenix-based company. Acker said other investors have probably driven down the shares amid speculation Chinese economic growth will slow, curbing demand for metals.
“We don’t make any macro guesses,” Acker said. “We invest the way we invest all the time.”

Acker said he plans to reinvest in Microsoft over the next month because his model price is 47 percent above the software company’s current share price. The stock has fallen 10 percent since Jan. 27, when the company reported second-quarter unearned revenue, a measure of multiyear contracts, below the average analyst estimate.

Intrinsic Value
Microsoft’s balance sheet indicates the shares have an intrinsic value far higher than the current market value, he said. Microsoft has 19.95 cents in debt for each dollar of equity, 21 percent less than the S&P 500 Information Technology Index as a whole. The company had $4.02 billion in cash on Dec. 31.

Acker said he’s not the only investor who recognizes that Microsoft shares are undervalued.

“People aren’t really missing it, it’s just that no one really cares,” he said. “Everyone’s turned into a momentum guy. Unless the stock hits a three-month high or a six-month high, no one’s ever going to look at it again.”

The strategy hasn’t always worked. During the 2007-09 bear market that was the worst worldwide slump since the 1930s, the fund declined 73 percent, compared with a 55 percent drop for the S&P 500. Acker blamed the underperformance of value stocks during the period. Before the S&P 500 reached its peak in October 2007, the fund had outperformed the equity benchmark 10 out of 14 quarters.

Away From New York
While Acker may benefit from his location, other fund managers aren’t taking advantage of their distance from New York.

Among 4,363 actively managed mutual funds with at least $150 million in assets and specializing in U.S. stocks, those with managers based in New York averaged an 18 percent return over the past year. Funds run by managers elsewhere in the U.S. averaged a return of 17 percent, while funds with managers based outside of the U.S. returned 12 percent, on average, according to Bloomberg data.

Acker, who co-founded his company with the late Joe Finley in 1992, said he can’t say why other managers outside of Manhattan have not matched his success.
“I’m sure there are times it’s beneficial to be outside New York, and I’m sure there’s times there’s benefit to be inside,” said Acker, who was an accountant at Clarkson, Gordon & Co. and later a broker at Canadian Imperial Bank of Commerce’s Wood Gundy unit before starting Acker Finley. “We pride ourselves on not talking to the Street and knowing what other people do.”

After having run the U.S. fund for more than seven years, Acker said he has it down to a science and does little tinkering. That leaves him free time.
“I do a lot of golf,” he said. “A lot of our day-to-day work is client relationships, and we let the system do its work.”

Monday, April 11, 2011

In Reits we trust?

 A report card on the performance of various types of trusts listed in Singapore shows that Reits remain the best bets. 

 Mon, Apr 11, 2011
 The Business Times 
By Teh Hooi Ling

A FEW weeks back, I was having dinner with some colleagues, one of whom is from The Straits Times when a colleague from Lianhe Zaobao walked past. We started chatting, and the topic naturally veered towards the stock market, given that we are all business writers.

The Straits Times colleague asked the Zaobao colleague what she thought of Hutchison Port Holdings (HPH), whose initial public offering was about to close then. Instead of directly answering the question, the Zaobao colleague said: 'CitySpring is now trading at half its IPO price!'

The Straits Times colleague interpreted the comment as negative for HPH. 'She's saying don't buy, that the new IPO may suffer a similar fate as that of CitySpring,' he said. Then, our marketing colleague sheepishly admitted that he has CitySpring in his portfolio. I didn't own up at the time, but I too had CitySpring languishing somewhere in my portfolio.

The conversation set me thinking. Has CitySpring done that badly if we take into consideration all the dividends paid out since its IPO?

How about the other investment trusts? We've had a number of property investment trusts, shipping trusts and business trusts listed on the Singapore Exchange. In general, how have they done since IPO, in absolute terms, and relative to the broad market movement?

So I decided to find out. Basically, I obtained from Bloomberg the total return for each of the trust relative to their IPO price. Bloomberg assumes that all dividends received are reinvested back into the security.

Also, the Bloomberg program can only calculate total return up to a certain number of days. So, for Reits that were listed before 2005, I had to switch to the weekly return numbers. Hence, the returns for Reits such as Ascendas, CapitaMall, CapitaCommercial, Suntec and Fortune are calculated based on the closing price on the first Friday after they started trading, and not the IPO price.

Here's what I found. Of all the various types of trusts, the real estate investment trust (Reit) has been the most successful. The performance of shipping trusts and other forms of business trusts have generally been rather dismal.

And among the Reits, those with Singapore-based properties have on the whole performed better than those with overseas properties.

So which has been the most successful Reit to date? Excluding those with trading records of less than one year, CDL Hospitality Trust appears to be the star. Since July 18, 2006, it has returned 225 per cent to its unitholders. That's an equivalent of 28.5 per cent a year, and it outperformed the FTSE Straits Times All Shares Index by a whopping 198 percentage points during that period.

First Reit, which owns hospitals and hotels in Indonesia and Singapore, is the second-best performer with a return of 20 per cent a year. Both were listed in 2006.

The first batch of Reits to hit the market also fared well. Ascendas Reit rewarded investors with return in excess of 17 per cent a year since 2002 - that's a near 10-year record. CapitaMall Trust, meanwhile, returned 16 per cent a year, outpacing the general market by more than 170 percentage points.

Earning the dubious honour as the worst Reit to have listed on the Singapore Exchange is Saizen, which owns residential properties in Japan. It is now 78 per cent below its IPO price, and after taking into consideration its distribution, investors have seen their capital getting shaved by 33 per cent a year since November 2007. It underperformed the general market by 66 percentage points.

AIMS AMP Capital Industrial Reit, formerly known as MacarthurCook Industrial Reit, is the second-worst Reit. It has lost 72 per cent of its share price, or the equivalent of 17 per cent a year after dividend since 2007. It trailed the general market by 37 percentage points.

The median return of all the Reits listed on SGX since their IPOs up till end-March 2011 is 8.9 per cent a year. That's a return not to be sniffed at. Reits which bombed tended to have high gearing, so that's a good metric to start one's screening process.

As at this week, the average yield for all the Reits listed in Singapore is 7 per cent. There's a website - - which provides a comprehensive and updated listing of all the reits and business trusts in Singapore.

Meanwhile, the performance of the other two types of trusts - shipping and business or infrastructure trusts - leaves very much to be desired. On average, the three shipping trusts - Pacific Shipping Trust, FSL Trust and Rickmers - have seen their unit price slumped by 56 per cent since their IPO. Only the distributions from Pacific Shipping Trust has more than made up for the capital loss.

Investors who bought into Pacific Shipping Trust are still better off than leaving their money in the bank, or buying into the general Singapore market. The trust returned 7.43 per cent a year since May 2006. It outperformed the FTSE All Shares Index by 17.5 percentage points.

No such luck for holders of FSL and Rickmers. Investors in the two suffered a loss of 14 per cent and 20 per cent a year respectively since 2007 when they were listed.

As for the other business trusts, the performance in general has also been lacklustre. The average annual return is -18.9 per cent a year. The average is dragged down by Indiabulls Properties Investment Trust which has seen its unit price slump 70 per cent since its listing in July 2008.

The best performer in this category is Ascendas India Trust - with an annual return of 2.3 per cent a year since 2007.

What about CitySpring? Well, what do you know - after taking in all its distributions, investors are actually up by 1.4 per cent a year. That's an outperformance of 14.5 per cent over the FTSE All Shares Index between February 2007 and end-March 2011.

From the report card above, on the whole, it appears that of the various types of trusts, Reits remain the best bets. There seems to be a lot more uncertainties associated with the other forms of trusts.

-The writer is a CFA charterholder

Wednesday, April 6, 2011

Before you start investing

You should know your investment objectives, net worth and risk profile.

Wed, Apr 06, 2011
The Business Times

By Teh Shi Ning

IT is a truth widely acknowledged that a single man in possession of a good fortune must be in want of a good investment to marry that fortune to.

These days that single man, or woman, is likely to be younger, and typically hoping his investments will make his fortune good.

One reflection of rising investor interest among the young has been the Singapore Exchange lowering the minimum age to open a trading account to 18 two years ago, but the number of savvy young investors and success stories of their ilk appear to be on the rise too.

Interestingly, people often embark on financial planning and investing later than they think is ideal.

While based on the rather dated National Financial Literacy Survey of 2005, 54 per cent of those surveyed thought they should start planning their finances once they start work, but only 32 per cent actually did. This does still seem to be the case.

Most would appreciate the importance of investing, over and above saving, especially in this current low-interest rate environment. But many are also daunted by the sheer array of investment products and opportunities out there.

To warm up for the plunge into these asset classes next week, here are a few points to think through before you start investing, or for those already dabbling in investments, to take stock of where you are headed.

What are your investment objectives? What is your investment horizon?

Investment objectives are set by balancing your current and future financial needs.

Youth is on the investor's side. Each person's investment objectives are shaped by the stage of the life-cycle he or she is at, says Ang Ser-Keng, senior lecturer of finance at the Singapore Management University's Lee Kong Chian School of Business.

'The investment objective is important because it affects the time horizon,' says Mr Ang. So, a young person who has by default a longer expected life span, can afford to view his investments over a longer time horizon and thus take on riskier investments in exchange for potentially higher returns.

But people in their 20s would range from those still in tertiary education, to fresh entrants to the workforce, to others who may need to factor in support for ageing parents. So, age is not the sole determinant - lifestyles and personal financial commitments shape investment goals too.

Other points to consider include whether big-ticket expenses such as a wedding, a car or a house are on the cards, and whether you intend to save for and finance your children's university education.

Will upkeep of a certain lifestyle retirement suffice, or do you aim to attain spectacular investment success Warren Buffett-style (and give most of it away)? Why you intend to amass wealth will help determine where you decide to put your money into and how.

What is your financial situation/ net worth?

It's also worth having a clear idea of how monthly income and expenses affect how much you can invest.

Mr Ang says a simple gauge of how much you are able to put to work in the markets is to figure out your (Keynesian) money demand in transactionary, precautionary and speculative terms.

In other words, cash for day-to-day needs, cash for the rainy day and cash available to invest and grow.

Invest only with money you can comfortably spare both now and in the foreseeable future, he says.

'It also does not hold you hostage to having to sell assets at very low prices under adverse market conditions, very frequent these days, so that you can sleep well at night.'

What is your risk profile?

Most people can instinctively say if they have a good appetite for risk, or a tendency to shy away from risks. But that is only a subjective type of risk profiling.

'It is a common myth that a risk profile is just about how much risk an investor is willing to take - risk taking versus risk aversion,' Mr Ang says.

If a risk profile is to be used in asset allocation, it needs to be supplemented with an objective risk profiling. In other words, not just how much risk you think you can take, but how much you can actually afford to take.

'The litmus test of an investor's capacity to take risk is whether he would suffer a significant loss in quality of life if a complete loss of the investment occurs,' Mr Ang says. If so, he should then view himself as owning a lower risk profile, even if behaviourally, he is a risk taker.

How much do you know about investing?

'An investment in knowledge always pays the best interest,' Benjamin Franklin once said, a phrase just as well applied to investing for financial gain.

While money management is a lot of common sense, investing entails products and strategies that are not always easy to understand.

On top of researching thoroughly any investment product or strategy, the basic rule which bears repeating, going by the fallout post-Lehman's collapse, is to ask till you understand, and if you still don't, avoid.

Some oft-mentioned strategies include:

Diversification and asset allocation

Spreading the wealth you wish to invest across a variety of investments helps reduce the risk that the failure of any single investment wipes out the value of your entire portfolio.

Different products react differently to the shocks which rock world markets more frequently these days, and diversification can be undertaken by asset classes but also by sectors and geographies.

Think about the composition of your portfolio methodically. The mix of assets in your portfolio ought to help reduce your overall risk, while the exact allocation depends on your investment horizon and risk tolerance.

Dollar-cost averaging

Some advocate invest set amounts on a regular basis over a certain time horizon, whichever way the market heads, as a useful way to invest amid volatility. The idea behind this is that since investors are unlikely to be able to 'buy low and sell high' or 'time the market' all the time, it is preferable to buy a smaller amount each time but do so regularly.

While no shield against market fluctuations, dollar-cost averaging is supposed to lower the average cost of investments over time compared to that of a one-off investment. This is because, in theory, regular investing will mean buying more shares when prices are low and fewer shares when prices are high.

Monday, April 4, 2011

How to behave in the markets during a crisis

by Lim Say Boon
04:46 AM Apr 04, 2011

The recent triple disaster in Japan - as tragic as it has been in human lives and suffering - provides a useful example to investors on how not to behave in the markets during a crisis.

One can easily sympathise with the horror of the moment for Japanese investors as they watched the north-east of the country's main island devastated by earthquake, tsunami and, subsequently, a nuclear power station malfunction. You can understand why they would dump their stock holdings. You can understand the powerful emotions driving their selling.

But thousands of kilometres away in Singapore, investors were also joining the herd, dumping not only Japanese equities but also Asia ex-Japan stocks.

Warren Buffet famously urged investors to - and I paraphrase -be fearful when others are greedy and be greedy when others are fearful.

And there was real fear in the markets in the days following March 11. But what I urged our clients to do by late Wednesday, March 16, was to start to buy on the fear - yes, even Japanese equities.

There had been massive "gap down" plunges on volumes that even exceeded that recorded at the peak of market fear in March 2009.

The market had oversold Japanese equities. You do not need complex "quant models" to work this one out. Here are the back-of-the-envelope calculations.

By March 16, the Nikkei had lost nearly a quarter of its value from its year high in February. Most of that - 22.8 per cent - was lost as a reaction to the March 11 disaster and its aftermath. How did that measure against other disasters?

Let's start with the Chernobyl disaster of April 26, 1986. The German market index, the DAX, lost 17 per cent over the next three months. That was the big one. The Three Mile Island nuclear accident in Pennsylvania, United States, in 1979 knocked only 5 per cent off the S&P500.

Then there was the Great Hanshin earthquake of Jan 17, 1995, which saw some 26 per cent wiped off the Nikkei. But that was over a period of nearly half a year.

And it was set against the backdrop of massive overvaluation of equities, with price to earnings multiples of over 50 times compared to the low teens today. There was also the collapse of Barings at the time, which could have compounded the pressures on the Nikkei.

And as we pointed out on March 14, it was important to keep an international perspective on this.

As terrible as the Hanshin earthquake was, it barely registered on international markets. Asia ex-Japan markets dipped slightly and then continued upwards until the Asian Financial Crisis of 1997.

What typically happens during a crisis is that investors usually take a day or so to absorb the horror of the situation before they panic. In this instance, it would have taken them to Tuesday, March 15. That was indeed when the selling was at its most intense - with huge losses and extraordinarily high volumes.

The market bounced back the very next day and has been gradually recovering since. There was a very similar pattern of investor behaviour on the Asia ex-Japan markets.

Fearful investors, encouraged by the talking heads on TV, were understandably concerned: "But what if the Fukushima nuclear reactors go into full meltdown as in Chernobyl? What if this damages international supply chains? What if ... what if ... "

Truth be known, nobody had the answers. And even now, nobody really has all the answers.

But history tells us again and again that points of maximum pain are often opportunities for maximum gain.

In 2001, when I was actively trading my own stock account, I found myself in a similar predicament, after Sept 11. Stocks gapped down everywhere. I gave in to fear and threw whatever I could out the proverbial window.

If I had held on another eight weeks, I would have broken even on the Dow Jones index. If I had waited four months, I would have made a profit. If I had just ignored all the noise and just held on - through the war in Iraq, through the collapse of Lehman Brothers, through the recent disasters - I would still be 22 per cent up on my Dow Jones index position. That is the power of time.

And never forget that markets are anticipatory.

Clients are usually startled when I point out to them the lowest point for the Dow Jones Industrial Average during the Second World War. That was late April 1942 - less than five months after the bombing of Pearl Harbour and two months after the fall of Singapore.

The writer is chief investment officer for DBS Bank's wealth management business.