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Tuesday, May 31, 2011

Interview with Sylvia Lim

Victorious Sylvia, after crossing the Rubicon

Business Times - 31 May 2011


'IT is hard to describe the feeling when one works towards a day for years, and finally is standing on the banks of the Rubicon.

Our people have been tireless, rooted in a sense that our efforts will bring about some good for Singapore.

It is hard to predict the course of the campaign and its outcome. But we wish Singapore well in every sense.

I know that as I proceed tomorrow with comrades to our respective nomination centres, we are living an enormous moment. Wish us luck!'

Sylvia Lim was pensive - in fact, 'quite emotional', she says - when she updated her blog the night before Nomination Day in April. A hectic, heady four weeks later, it's a decidedly different Ms Lim who is discussing the polls. The Workers' Party (WP) chairman and newly elected Member of Parliament, clad in colours outside the WP's sky-blue shade, is relaxed amid banter about the lighter side of the electoral battle, including the numerous satirical jibes out there in the run-up to Polling Day - she's Princess Leia in a series of mock movie posters featuring Opposition candidates - laughing heartily at the hilarity of it all.

She and her Aljunied GRC teammates lived their 'enormous moment' in the wee hours of May 8, but are mindful of the enormity of their job ahead. After five years as a non-constituency MP (NCMP), she's now in charge of the Serangoon division of the Group Representation Constituency (GRC) - an area that she's 'quite familiar' with, the 46-year-old says, having grown up in Seletar Hills and gone to school in the vicinity.

Barely a week after the election, she resigned from her job as lecturer and manager at Temasek Polytechnic to better focus on being an elected MP. But she did make her mark even as an NCMP. A video clip of her speech in Parliament during the April 2007 debate on ministers' salaries, when she argued against pegging the pay to top private sector earners', went viral early this year, much to her surprise.

'I was quite taken aback by the breadth of the transmission,' she says. 'My students were telling me, 'Ms Lim, my uncle sent it to me', and even people from overseas (told me). It just shows you the power of the social media. I was really surprised that it (the speech) went through a revival.'

She's surprised, too, by the decision to review political salaries.

'I am glad the PM (Prime Minister Lee Hsien Loong) finally decided to do this. It was necessary, as the benchmark of 2/3M48 became more and more unsustainable due to the widening income gap between the top earners and the median,' she says, referring to the yardstick : two-thirds of the median incomes of the top eight earners in six professions.

'The outcome I hope to see is political salaries brought down to a modest level, so as to foster a culture which upholds the intrinsic value of public service.'

A sense of public service, or at least of wanting to contribute and be 'helpful to society', probably took root in her even as a teenager, when she became a student councillor at National Junior College, and in her original career choice: she wanted to be a doctor. But she failed to get into medical school despite good grades, and ended up studying law instead at the National University of Singapore.

'So I went to law school and I had a lot of issues after that because I was trying to see how being a lawyer would help make people's lives better. It was quite a big issue with me. So I was thinking very hard about how I could find a career which could marry legal knowledge and public service - and the police came to mind, because I'm also very interested in crime and criminal justice. And one day I was driving along the PIE and it was raining, and I saw this policeman in a yellow raincoat directing traffic. Then I thought: 'Yes! This is what I must do!' Because, you see how helpful he was to people in the rain?'

Her father didn't like the idea and thought that packing her off to London to do her Master of Laws might change her mind about joining the police force, 'but it didn't', and she became a police inspector for three years in the early 1990s. She then did litigation at a local law firm for four years, handling both criminal and civil cases, before joining Temasek Polytechnic in 1998.

She hasn't yet decided on her career options next, she says.

'Right now I'm still holding on to one or two writing contracts which I have to finish anyway. I'm working with a colleague on a volume of Halsbury's Laws of Singapore, which is a lawyer's reference, on criminal procedures. We did the first two editions, so this will be like an updated version. That is something I consider flexible.

'I foresee that in the next few months, because of the start-up of the town council, quite a lot of my time will be spent on those things, so I can't really take on anything heavy at this point.' She has been approached for law practice work, 'but I'm a little hesitant because I can't go the full way - like I don't see myself doing trials or anything like that during this period. So maybe if I do some ad hoc work, on a part-time basis - that might be one possibility.'

Ms Lim joined the WP in November 2001 - a decision that was 'a cathartic moment' - after the 'one-sidedness' of a snap general election (GE) that year that saw only 29 out of 84 seats contested, and became party chairman in 2003.

For all the focus on Aljunied, going into the 2011 GE, for her it was 'a lighter burden' this time compared to her first contest in 2006 when she was leader of the WP's Aljunied team. 'My job this time was to stand next to (leader) Mr Low (Thia Khiang) and look credible,' she quips.

There was also a certain peace of mind, she says. 'Partly, it was a sense that we had done all we could already, because we had been doing our ground visits to the homes in Aljunied GRC since 2002.' There was a bit of a scramble, after the new electoral boundaries were announced in February, to cover the newly drawn-in Kaki Bukit. The WP team also found that certain precincts in the old Hougang and Aljunied areas where they had been working the ground, covering some 29,000 voters, had been carved out.

And with the risk of boundary changes 'always there', it 'makes sense for us to concentrate our groundwork, off-election, in contiguous areas - so that no matter how they cut, at least we have covered some of the areas. So we'll try to concentrate right now on the neighbouring areas - the East, North-East, and we're also interested in Tampines; we have always been.'

The party is against the NCMP scheme but 'you have to think . . . is it right for us to totally throw away the chance to at least contribute something?' she says. 'We have to calculate the costs of spending five years outside Parliament, when you could be speaking up for Singaporeans, albeit through this route.'

Her NCMP stint has been useful for the opportunity 'to engage in some sort of debate, especially with the ministers, over certain issues' but what she has found particularly rewarding has been to see certain inputs taken up, in the drafting of bills.

But this happens at the earlier public consultation stage, rather than when the bill is already before the House for a second reading. 'I had actually quite a good experience of this - for example, during the Criminal Procedure Review. I have some knowledge of this area, so when they first put up the bill, not to Parliament but for consultation, I studied the bill in great detail because I have great interest in this area, and I wrote a submission to the Ministry of Law. To their credit, they were very objective in looking at it and adopted some of my suggestions.'

She is 'quite looking forward to the next few years', she says. 'It's a milestone for us. And the eight of us (Opposition MPs) in Parliament - it's actually quite an interesting mix of people, in terms of age, background, life experiences. I think a wider range of issues will be canvassed.'

Meanwhile, she hopes to return by June to her wing chun class, which has been a side interest apart from running, music and wine - 'not necessarily in that order'.

She has missed the Chinese martial art lessons, which she started in 2009, since the new electoral boundaries were announced, she says.

'I was inspired by the film Ip Man, but that would not have clinched it for me, if not for the fact that I discovered during a lunch with an old friend that he was a wing chun sifu! Wing chun is suitable for women, as it emphasises self-defence through technique rather than strength. It is also fun sparring with people of all ages and sizes - though at times embarrassing when teenagers pulp you.'

Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.

Another financial crisis brewing: Mark Mobius

31 May, 2011, 12.25AM IST,Bloomberg

TOKYO: Mark Mobius , executive chairman of Templeton Asset Management's emerging markets group, said another financial crisis is inevitable because the causes of the previous one haven't been resolved. "There is definitely going to be another financial crisis around the corner because we haven't solved any of the things that caused the previous crisis," Mobius said at the Foreign Correspondents' Club of Japan in Tokyo on Monday in response to a question about price swings.

"Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes." The total value of derivatives in the world exceeds total global gross domestic product by a factor of 10, said Mark Mobius, who oversees more than $50 billion.

With that volume of bets in different directions, volatility and equity market crises will occur, he said. The global financial crisis three years ago was caused in part by the proliferation of derivative products tied to US home loans that ceased performing, triggering hundreds of billions of dollars in writedowns and leading to the collapse of Lehman Brothers Holdings in September 2008. The MSCI AC World Index of developed and emerging market stocks tumbled 46% between Lehman's downfall and the market bottom on March 9, 2009.

"With every crisis comes great opportunity," said Mobius. When markets are crashing, "that's when we're going to be able to invest and do a good job," he said. The freezing of global credit markets caused governments from Washington to Beijing to London to pump more than $3 trillion into the financial system to shore up the global economy .

The MSCI AC World gauge surged 99% from its March 2009 low through May 27. The largest US banks have grown larger since the financial crisis, and the number of "too-big-tofail" banks will increase by 40% over the next 15 years.

Separately, higher capital requirements and greater supervision should be imposed on institutions deemed "too important to fail" to reduce the chances of large-scale failures, staff at the International Monetary Fund warned in a report on May 27.

"Are the banks bigger than they were before? They're bigger," Mobius said. "Too big to fail." The money manager had earlier said at the same event that Africa has an "incredible" investment potential and that he has stakes in Nigerian banks. "These banks are doing very well and are much better regulated than they were in the past," Mobius said, without disclosing which lenders he holds.

Friday, May 27, 2011

Roubini Sees Stock-Correction ‘Tipping Point’ as Economic Growth Slows

By Zoltan Simon - May 27, 2011

Nouriel Roubini, the economist who predicted the global financial crisis, said stock markets are at the “tipping point” of a correction as economic growth may begin to slow.

Companies had ridden a worldwide recovery to boost sales and profits, supporting equity price increases, Roubini, co- founder and chairman of Roubini Global Economics, told a conference in Budapest today. Now, signs of a global economic slowdown may drag down stock prices, he said.

“Until two weeks ago I’d say markets were shrugging off all these concerns, saying they don’t matter because they were believing the global economic recovery was on track,” Roubini said. “But I think right now we’re on the tipping point of a market correction. Data from the U.S., from Europe, from Japan, from China are suggesting an economic slowdown.”

The world economy is losing strength halfway through the year as high oil prices and fallout from Japan’s natural disaster and Europe’s debt woes take their toll.

Goldman Sachs Group Inc. now forecasts global economic growth of 4.3 percent in 2011, down from its 4.8 percent estimate in mid-April. UBS AG has trimmed its forecast to 3.6 percent from 3.9 percent. Downside risks also include a shift to tighter monetary policy in emerging markets.

Meltdown Prediction
Roubini, 53, a professor at New York University’s Stern School of Business, predicted in July 2006 a “catastrophic” global financial meltdown that central bankers would be unable to prevent. In October 2008, Roubini said he still saw “significant downside risks to equity markets,” failing to predict the stock market rebound that sent shares soaring around the globe last year. The Standard & Poor’s 500 Index has almost doubled from its low in March 2009.

Stocks rose today, preventing the fourth straight weekly loss for the MSCI All-Country World Index, and commodities gained after the Group of Eight leaders said the global economy is strengthening. The MSCI index added 0.8 percent at 10:32 a.m. in New York, putting the gauge 0.1 percent higher since May 20. The Standard & Poor’s 500 Index climbed 0.4 percent.

Data this week showed Chinese manufacturing expanding at the slowest pace in 10 months, orders for U.S. durable goods dropping the most since October and confidence among European executive and consumers sliding for the third straight month. The MSCI World Index of stocks in advanced economies dropped 4.2 percent this month.

“Until now, equity prices were supported by better-than- expected earnings, sales and profit margins,” Roubini said. “But all three are under squeeze. With slow global economic growth, they’re going to surprise on the downside. We’re going to see the beginning of a correction that’s going to increase volatility and that’s going to increase risk aversion.”

Thursday, May 26, 2011

The Audacity of Chinese Frauds

May 26, 2011


To pull off a fraud that humiliates the cream of the global financial elite, you need to have some friends. And where better to have them than at the local bank?

The fraud at Longtop Financial Technologies, a Chinese financial software company, was exposed this week in an amazing letter from its auditors, Deloitte Touche Tohmatsu. It appears to be a tale of corrupt bankers and their threats to auditors who had learned of the lies.

Deloitte, which had given clean audit opinions to Longtop for six consecutive years, apparently was well on its way to providing a seventh, for the fiscal year that ended March 31. But for some reason — Deloitte did not say why —the auditor went back to Longtop’s banks last week to again seek confirmation of cash balances.

It appears Deloitte sought confirmations from bank headquarters, rather than the local branches that had previously verified that Longtop’s cash really was on deposit. And that set off panic at the software firm.

“Within hours” of beginning the new round of confirmations on May 17, the confirmation process was stopped, Deloitte stated in its letter of resignation, the result of “intervention by the company’s officials including the chief operating officer, the confirmation process was stopped.”

The company told banks that Deloitte was not really the auditor. It seized documents, Deloitte wrote, and made “threats to stop our staff leaving the company premises unless they allowed the company to retain our audit files.”

Despite the company’s efforts, Deloitte learned Longtop did not have the cash it claimed and that there were “significant bank borrowings” not reflected in the company’s books.

A few days later, Deloitte said, Longtop’s chairman, Jia Xiao Gong, told a Deloitte partner that there was “fake cash recorded on the books” because there had been “fake revenue in the past.”

The stock has not traded since that confrontation. The final trade on the New York Stock Exchange was for $18.93, a price that valued the company at $1.1 billion. At its peak in November, it had a market capitalization of $2.4 billion.

It now seems likely that the stock is worthless. It is a real company, but its revenue and profits probably were a small fraction of the amounts reported. The existence of the “significant” debt means that whatever assets are left are likely to be owned by the banks, not the investors.

Deloitte may have decided to check the numbers again because it knew a growing group of bears on the stock had been challenging the Longtop story as too good to be true, questioning both its financial statements and the claims it made for its software. A month earlier, Deloitte resigned as the auditor of another Chinese company, China MediaExpress, in part because of questions about bank confirmations.

It is never good for an auditor to have certified a fraud, but Deloitte seems to have acted properly. It got bank confirmations, and it got them directly from the banks rather than relying on the company to provide them, as PricewaterhouseCoopers had done when it failed to notice a huge fraud at Satyam, an Indian technology company.

But the confirmations were lies.

“This means the Chinese banks were in on the fraud, at least at branch level,” says John Hempton, the chief investment officer of Bronte Capital, an Australian hedge fund. He was one of the bears who questioned Longtop’s claims and now stands to profit from the stock’s collapse.

“This is no longer a story about Longtop, and it is not a story about Deloitte,” he added. “Given the centrality of Chinese banks to the global economy, it’s a story much bigger than Deloitte or Longtop.”

The Securities and Exchange Commission has started an investigation, and no doubt more details will emerge, including the names of the banks involved. Just what, if anything, Chinese officials choose to do could provide an indication about whether defrauding foreign investors is deemed to be a serious crime in China.

Fraud in Chinese stocks is not new. But it had seemed that the worst problems were in small companies without Wall Street pedigrees. Many of the fraudulent companies went public in the United States by the reverse-merger shell route, a course long favored by shady stock promoters. That route allowed companies to start trading without going though a formal underwriting process or having its prospectus reviewed by the S.E.C. And many used tiny audit firms based in the United States that seemingly did little if any work.

What is stunning about Longtop and some other recent disasters is the list of smart people who were fooled.

Longtop did not go public through a reverse merger. Its initial public offering, in 2007, was underwritten by Goldman Sachs and Deutsche Bank. Morgan Stanley was a lead manager in a 2009 offering of more shares. Major owners of the stock included hedge funds run by people known as “tiger cubs” because they got their start at Julian Robertson’s Tiger Fund.

On May 4, only a couple of weeks before the fateful struggle at Longtop offices, an analyst for Morgan Stanley, Carol Wang, wrote:

“Longtop’s stock price has been very volatile in recent days amid fraud allegations that management has denied. Our analysis of margins and cash flow gives us confidence in its accounting methods. We believe market misconceptions provide a good entry point for long-term investors.”

By then, Longtop officials had begun to scramble. According to its last audited balance sheet, cash accounted for more than half of Longtop’s $606 million in assets. Bears were asking why the company needed all that cash and were questioning whether it existed.

In mid-March, just after the fraud at China MediaExpress was exposed, Longtop announced plans to put some of the cash to use by spending up to $50 million to repurchase its own shares. On April 28, the company tried to assure analysts that the fraud claims were bogus. Derek Palaschuk, a Canadian accountant who served as the company’s chief financial officer, wrapped himself in Deloitte’s prestige, saying that those who questioned Longtop were “criticizing the integrity of one of the top accounting firms in the world.”

“For me,” he said, “the most important relations I have other than with my family, my C.E.O., and then the next on the list is Deloitte as our auditor, because their trust and support is extremely important.”

Mr. Palaschuk had an explanation for why the company had not repurchased any shares. It had some very good news that it had not yet released, and “we were advised by our securities counsel that we should not be in the market purchasing our own shares in the event that this would be considered insider trading.”

Longtop is not the only Chinese fraud that caught prominent Americans. Starr International, an investment company run by Hank Greenberg, the former chairman of American International Group, invested $43.5 million in China MediaExpress and had a representative on the company’s board. Starr has filed suit in Delaware against the company and Deloitte.

Goldman Sachs was not the underwriter of ShengdaTech, a Chinese chemical company traded on Nasdaq, but its investment arm, Goldman Sachs Investment Management, had accumulated a 7.6 percent stake in the company before its auditor, KPMG, refused to sign off on the company’s 2010 annual report and then resigned in late April. KPMG cited “serious discrepancies” regarding bank balances and “discrepancies between KPMG’s direct calls to customers and confirmations returned by mail.” Just as at Longtop, it appeared that auditors had been given false confirmation letters.

In each of those three cases — Longtop, China MediaExpress and ShengdaTech — the auditors discovered discrepancies, but only after signing off on financial statements. That was not the case in this year’s other — and perhaps most embarrassing — resignation by a Big Four auditing firm.

In December, KPMG was retained by China Integrated Energy, which claimed to be a leader in the production of biodiesel. Just hiring a Big Four auditor enabled it to raise $24 million from institutional investors in the United States. Three months later, KPMG certified the financials.

Six weeks after that, KPMG repudiated the report and resigned. By then, China Integrated Energy executives had refused to cooperate with a board investigation into claims that the company was a complete fraud.

The Chinese audit firms, while they are affiliated with major international audit networks, have never been inspected by the Public Company Accounting Oversight Board in the United States. The Sarbanes-Oxley Act requires those inspections for accounting firms that audit companies whose securities trade in the United States, but China has refused to allow inspections.

In a speech at a Baruch College conference earlier this month, James R. Doty, chairman of the accounting oversight board, called on the major firms to “improve preventative global quality controls,” but said that actual inspections were needed.

Two weeks ago, Chinese and American officials meeting in Washington said they would try to reach agreement “on the oversight of accounting firms providing audit services for public companies in the two countries, so as to enhance mutual trust.”

Frauds and audit failures can, and do, happen in many countries, including in the United States. But the audacity of these frauds, as well as the efforts to intimidate auditors, stand out. If investors such as Goldman Sachs and Hank Greenberg cannot fend for themselves, something more needs to be done if Chinese companies are to continue to trade in American markets. - NYT

Wednesday, May 25, 2011

Beware risks of private placements

Published May 25, 2011

The lure of huge returns from these products is strong but invest in them only if you can afford to lose the money, reports PAUL SULLIVAN

INVESTOR interest in private equity and debt offerings continues to increase a mere three years after these illiquid investments caused a lot of anxiety, if not substantial financial losses. The problem is there is little sign that investors are any more aware now of the risks involved in these deals than they were then.

In an investment maze: There is little sign that investors are any more aware now of the risks involved in private equity and debt offerings than they were before
At the beginning of the year, wealthy investors were abuzz over a private placement investment in Facebook, the social networking site. But deals that large are not the norm. Most private offerings, or placements, are smaller - with minimum investments of US$25,000 as opposed to the reported US$2 million in the Facebook offering - but carry the same high risks and high fees.

'We're starting to see more of it because more and more of our clientele are having the ability to invest in these sorts of things,' said Drew Kanaly, chairman and chief executive of Kanaly Trust, which manages US$1.8 billion. 'This is where they're going to see better returns going forward, but the pros and cons are tough.'

Jeffery and Linda Knippa, who now live in Point Venture, Texas, found this out the hard way. After coming into a modest inheritance and selling their home in Houston, they made two investments in private placements, in 2005 and 2007, that totalled US$80,000. They say they did so on the recommendation of their broker, Don L Devens, a registered representative of the broker-dealer Capital Financial Services. Their goal was to keep their money safe, they said, until they returned from Colombia, where Jeffery Knippa was sent to work as an oil field engineer.

Instead, they lost their US$80,000. The Knippas filed an arbitration claim against Capital Financial Services in November 2009 and are waiting for a hearing. 'We knew him through the Lutheran church, so we put our trust in him,' Linda Knippa said.

Mr Devens declined to comment. John Carlson, chief executive of Capital Financial Services, said he could not comment while the case was pending.

Regardless of the size of these deals, investors need to weigh many factors before getting in, including their willingness to lose the money they put in. Here is a look at the considerations:

Likelihood of loss

The reality is the Knippas should never have gotten into such a high-risk investment. They did not have the net worth to be what the US Securities and Exchange Commission calls 'accredited investors' - those with at least US$1 million in net worth or a US$300,000 annual salary for a couple. Nor did they understand the potential downsides.

'We had no financial experience,' Linda Knippa said. 'That was the reason we sought out Don.' She said her husband was now working at an oil field in Baku, Azerbaijan, to rebuild their nest egg.

While private placements represent a tiny share of all investments, the number of arbitration cases involving limited partnerships, which is how some private placements are structured, has nevertheless increased in the last few years, to 80 in 2010 from 19 in 2007, according to Financial Industry Regulatory Authority.

Andrew Abramowitz, a lawyer in New York who has worked with both buyers and sellers of private placements, said every investor should approach a private placement sceptically.

'As long as the expectations are, 'I can lose this and I may not be able to sell it,' then nothing goes wrong,' he said. 'That may not come to pass. People who are savvy about this do a bunch of them and hope one will pop.' For those who do not understand this, the experience can be life-altering. 'We miss that US$80,000 every day,' Linda Knippa said. She said the remainder of their money was now in low-yielding certificates of deposit.

Membership in the club

There are many reasons the SEC tries to limit private placements to accredited investors, but one of them is surely that they can afford to lose money.

Yet Andrew Stoltmann, a securities lawyer in Chicago who is representing the Knippas, noted that there was not necessarily a link between wealth and financial sophistication, which would give you a fighting chance to assess one of these offerings.

'I know a lot of people who have US$1 million or US$2 million in net worth, but they don't know anything about investing,' Mr Stoltmann said. 'Think about a football player who signs a US$30 million NFL contract: He's an accredited investor, but he's not sophisticated with finance.' These placements, then, are best reserved for a small group of people.

Karl Wellner, president and chief executive of Papamarkou Wellner Asset Management, said one of the things his firm did for clients was arrange 'clubby deals from time to time'. These are private placements in their original form: led by people who have already made significant money in the area where they are investing and see an opportunity that requires them to raise money quickly.

Right now, his firm, which manages several billion dollars for 150 families, is helping to arrange a private placement that will invest US$150 million in farmland in the US. The attraction is the promise of steady returns in an asset class that has historically done well in both uncertain and inflationary times.

He arranged something similar after the construction markets collapsed in 2008. The firm put together a deal to buy and store various noble alloys used to make steel stronger. Their prices had fallen by 60 to 80 per cent when construction dried up. But the family leading the deal had made its money in metals and believed the price would rebound.

Within two years, the 15 to 20 families who had contributed a total of US$65 million had received a 40 per cent return. 'There is a very real attraction to unique, boutique, clubby transactions that we often have access to,' said Thorne Perkin, managing director at Papamarkou Wellner. 'But we're in the stay-rich business, not the get-rich business.' Mr Perkin has a point: If his clients lose millions in an investment, they still have plenty of money left. When a couple like the Knippas loses US$80,000, their lifestyle changes.

What to look for

Of course, investors will be attracted to promises of high returns just as surely as moths fly to a flame. When should they take a chance and when should they walk away? Every adviser will say researching the deal and examining the track record of the managers are essential. This is easier said than done when limited information is available.

Mr Kanaly said potential investors should make sure that the general partners had their own money at stake - from one to 5 per cent of the deal - and also understand how they will be paid out. 'You want to see a preferred rate of return for you until they meet their objectives,' he said.

Mr Abramowitz said investors should not have any illusions that they will have a say in how their money is managed. One warning sign is if the company is widely promoting its private placement. Such marketing violates SEC rules.

Still, the lure of huge returns is strong. 'You can tell them it's illiquid, but making them understand that the money is locked up and gone is difficult,' Mr Kanaly said. 'Even if the return is higher, that lag to the first drink of water can be years. You have to be pretty wealthy to wait that long.' - NYT

Zhongmin Baihui - real or false demand?

Published May 25, 2011


CHINA stocks listed here, or S-chips as they are popularly known, have had a rough ride over the past year, what with a well-publicised string of accounting and corporate governance failures that have hit many in the segment. As a result, most S-chips have suffered and their shares wallow deep in penny territory, trading well below 50 cents, and in many cases, below 20 cents.

Yet there is one S-chip which stands out, not just because of its jaw-dropping performance this year - which makes it by far the local stock market's best performer - but also because its stock price appreciation defies logical explanation.

We're referring here to Zhongmin Baihui Retail group, a Fujian-based department store operator which listed on Catalist in January, offering 30 million shares which were all placed out at 30 cents each.

For the year ended Dec 31, 2010, Zhongmin's losses widened from 6 million yuan in 2009 to 9 million yuan, yet incredibly, the company's shares have rocketed more than 500 per cent since listing, yesterday adding a stunning 25 cents or 15 per cent to close at $1.97.

This gravity-defying feat has come without the company making any significant announcements other than lease agreements for department stores and routine matters relating to the company's annual general meeting.

The stock's massive outperformance hasn't gone unnoticed by regulators. After the company's results were released on Feb 28, its shares, which had climbed to 40 cents at that date, continued to soar. This prompted an April 26 query by the Singapore Exchange (SGX), by which time Zhongmin's shares had hit $1, more than triple their offer price.

The company's reply to SGX was that it had no knowledge of any reason for the interest in its shares. Since then, in little under a month, Zhongmin's shares have almost doubled.

So what's going on? According to Bloomberg's financial service there are no analysts that cover Zhongmin, so it's unlikely that the shares have benefited from a sudden burst of interest from the research community.

And it's not as if the market as a whole has performed well since the start of the year - since Zhongmin was listed on Jan 19, the FT ST China index has dropped 10 per cent while the Catalist Index has lost some 11 per cent.

Of course, it is possible that there exists a logical reason for Zhongmin's spectacular outperformance. The company could be a takeover target, for instance. Or parties which have as yet not been identified could be accumulating the stock in advance of a big announcement - although in view of the company's April 26 reply, this latter possibility is admittedly remote.

There is, of course, the less-than-palatable explanation that something funny is going on, especially since the IPO involved a relatively small number of shares that were all placed out. Readers with memories that extend back to 1998 will recall the case of Mid-Continent, whose shares were placed out to only a handful of parties, resulting in its price going ballistic soon after listing. Needless to say, this came to a painful end soon after the authorities intervened.

Then there was the case of the loss-making property and construction counter Leong Hin, whose shares quadrupled after listing some 10 years ago despite the company reporting widening losses. That stock was later found to have been cornered and manipulated and the parties subsequently dealt with.

Let's hope that history isn't repeating itself.

Monday, May 23, 2011

Vital to make retail broking more appealing

Business Times - 23 May 2011


WITH commissions constantly under pressure, dealers and remisiers are probably not overstating things when they say theirs is a sunset profession, one whose attraction wanes with each turn of the regulatory screw.

Earlier this year, they had to deal with news that trading in the local stock market would soon be full-day, that is, no more 90-minute lunch break. Then came the release of new, significantly heftier fines for dealers who fail to observe proper procedures in administrative tasks such as keeping proper records.

If frontline dealing becomes increasingly unappetising, more remisiers are likely to throw in the towel, while fewer join. And, herein lies the problem: Retail investors, many of whom rely on their remisiers for advice and expertise, will over time surely suffer from poorer service.

If so, how is the Singapore Exchange (SGX) to lure retail players back into the market, given anecdotal evidence that many are already disillusioned with the local market and the investments it offers?

Some observers might not see this as being significant, since it is institutions via their high-speed programmes that are thought best positioned to generate the vast amounts of liquidity that exchanges crave. Certainly, SGX appears to be focusing most of its efforts in this direction with its recent $250 million investment in the world's fastest-trading engine to cater to the needs of high-speed traders.

However, the experience of the local equity market is that the contribution of retail investors should not be underestimated. Attempts over the past 20 years to launch an options market, single-stock futures and extended settlement contracts all fell victim to gradually disappearing liquidity and, in some cases, eventual complete failure because retail investors were not properly engaged.

The lesson is that small investors, by virtue of their considerable collective financial muscle, form a significant presence in the local market, and steps should be taken to ensure their participation is as active as possible.

And the best way to do this would be to take a serious look at the issues confronting remisiers and dealers, since these are the people who, for many retail investors, are the face of the local stock market.

Firstly and most importantly, there is an urgent need to address the perception that being a remisier is a thankless job with plenty of downside and little upside. The main reason for this has been highlighted before in this column, namely the lopsided risk-reward structure that remisiers have to work with, which places all the risk on their shoulders in return for only a portion of the reward.

As it stands today, dealing representatives have to act as credit officers on behalf of the management of the firms at which they work; yet many - possibly all - are not equipped to monitor the creditworthiness of their customers, having no access to or knowledge of the latter's income, debts and spending habits.

Worse, a remisier at one firm is completely ignorant of the number of accounts a customer may have with other firms, as well as the number of positions that a customer may have open at any one time. It is difficult to see how dealing representatives can properly discharge their role as fiduciaries when they have to labour under such an inequitable system.

As for the thorny issue of a lunch break, the middle ground proposed some months ago in this column is still worth considering if SGX is prepared to accept a 60-minute extension to trading hours instead of 90. This can be achieved if the market was to open at 8.30am instead of 9am (that is, 30 minutes earlier) and the current lunch break changed to 1-2pm instead of the present 12.30-2pm. Surely, a more conciliatory stance on SGX's part would be welcome, instead of unilateral action that has upset those affected.

What is needed is for all interested parties, namely the Society of Remisiers, SGX, broking firm managements and even the Monetary Authority of Singapore, to sit down and work out ways of addressing the issues confronting the profession. If not, there is a very real danger that the appeal of retail broking will continue to decline - and take with it the participation of the retail investor.

Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.

Sunday, May 22, 2011

S-chip scandals just the latest to plague markets

By Goh Eng Yeow, Senior Correspondent
22 May 2011

Recently, a short wire story out of Tokyo caught my eye.

It reported that brash young Internet tycoon Takafumi Horie would be going to jail after losing his final appeal against a conviction for an accounting fraud committed more than five years ago.

For me, the news brought back a flood of memories of similar frauds that had rocked the local stock market at around the same time Horie was arrested.

Even the broad outlines of the accounting scandal involving him and the then big corporate scandals that had erupted here - waste recycler Citiraya Industries and phone repairer Accord Customer Care Solutions (ACCS) - were similar.

All three scams involved young businessmen who had been feted like rock stars. But they were also hounded by sky-high expectations in terms of business and profit, which turned out to be out of touch with reality. Inevitably, the house of cards collapsed, leaving investors to lick their wounds in the fallout.

Just a few words to jolt the memory: ACCS was run by Victor Tan, who was made out to be Singapore's corporate poster boy after taking his company public at the age of 31. Citiraya's young boss Ng Teck Lee was celebrated by the Wall Street Journal Asia as a rags-to-riches story for building a recycling business from scratch after dropping out of secondary school.

On the day ACCS was going to make its year-end results announcement five years ago, the Commercial Affairs Department raided its office.

At Citiraya, Ng was overseas on a business trip when the scam was uncovered. He never came back, and his bungalow in Paya Lebar showed signs of a hasty departure. Half-burnt joss sticks and Chinese New Year decorations adorning the house were not taken down for months after that.

The script for the two scandals roughly had the same ending as well. Justice was meted out to Tan, and while Ng was never caught, his accomplices were given long jail sentences. It provided some closure for the aggrieved investors who lost money to the scams.

However, there was no similar closure for the other spate of accounting scandals that rocked the local stock market in recent years. They involved China-based companies - or S-chips as they are known here - which had made their way in large numbers to Singapore in recent years.

Again, the scripts were broadly similar in outline. In most cases, the auditors experienced difficulties locating part of the huge cash hoard, which the companies claimed to have, when they went to inspect the books in China.

Analysts even coined a term for it - the Satyam Syndrome - after the accounting scandal that involved Indian software company Satyam Computer Services whose founder had confessed that he inflated its earnings and invented a huge cash pile in order to give the impression of fast growth.

But keeping track of the latest accounting scams involving S-chips has not been as easy.

Getting information on Citiraya and ACCS had been relatively simple because they were located here and most of their business was conducted out of Singapore. Reporters could get information from many sources like suppliers, customers and business rivals.

For S-chips, however, we have to rely on the companies' disclosures for the bulk of our information, as well as the occasional reports issued by research analysts who had visited them in China.

Often, the flow of information dries up completely when irregularities are uncovered and trading of the company's shares is suspended subsequently. It is also very difficult to verify the authenticity of the information furnished by the affected S-chips.

Even after huge sums have been spent hiring special auditors to get to the bottom of the matter, investors are often left no wiser as to what really happened.

Take China Sun Bio-chem. Back in 2009, the company called in accounting company KPMG to do a review of its accounts, after its then auditors PricewaterhouseCoopers raised concerns over its cash balance.

However, before the KPMG team could get down to work, it was told that the truck transporting the company's accounting records had been stolen while the driver was having dinner.

More recently, investors at Sino Techfibre were caught in a similar bind. Just as they were supposed to be getting their annual report last month, they were suddenly told that the company could not finalise its accounts because discrepancies had been uncovered in its sales invoices.

To rub salt into fresh wounds, Sino Techfibre then issued a statement a few days later to say that a fire had broken out at its factory's premises in Shandong province, destroying the company's books and financial records.

So far, there is very little an investor can do to get redress. As the scams occurred in China, we have to rely on the law enforcement agencies there to take action against the wrongdoers.

Stock market regulators outside China are powerless to do anything, even though the scam may involve a Chinese company that is listed on the stock exchange they oversee.

Even the powerful Securities and Exchange Commission (SEC) in the US reportedly said that it was facing problems.

One of its commissioners, Mr Luis Aguilar, was recently quoted by wire agency Bloomberg as saying that the SEC is limited in its ability to enforce securities laws on fraud committed at China-based companies listed in the United States.

He made the statement following a probe conducted by the SEC last year that arose from concerns that some China-based companies listed on US stock exchanges were doctoring their financial accounts.

But I am hopeful that this sorry state of affairs will not continue.

As China advances to economic superpower status, it will not want any corporate misbehaviour by its overseas-listed Chinese companies to besmirch its good name internationally.

It will also be in China's interests to make sure that the corporate governance concerns dogging these companies are being tackled vigorously.

Thursday, May 19, 2011

Seeking a silver lining? Bubble bursts on 'safe' assets

By Goh Eng Yeow

HAVING too much of an apparently good thing can be bad for your financial health.
The recent epic rout in the silver market may have been of no more than passing interest to the average investor here.

However, it offers a stark lesson on how the hunt for a safe asset with a higher potential return can result in unnecessary risks which undermine investments.
Investors have been left licking their wounds as the price of silver crashed by a spectacular 30 per cent in the past fortnight, after surging close to its historic highs last seen 40 years ago.

Still, some sympathy is in order for these investors over the exuberance which led to their folly. The world is awash with cash as the United States central bank prints more than US$2 trillion (S$2.5 trillion) in fresh money to try to stave off an American recession.

With the US Fed's printing press in over-drive, investors have been justifiably worried about the erosion of the value of paper money and this has led them to search for safe haven assets which can offer them a potentially higher return.
So it is hardly surprising that precious metals such as gold, platinum and others are in great demand among investors.

As the search for safety gathered pace, investors also extended their bets to other metals such as silver and copper.

But while the ordinary investor buys precious metals in a small way to try to hedge his risks against escalating prices, big-time traders such as hedge fund managers carry out the same exercise on a far bigger scale.

For them, there is an added advantage: The US Federal Reserve has slashed interest rates to almost zero in its efforts to help businesses there get back on their feet.
But its action also enables hedge fund managers to borrow huge sums at almost zero costs to make huge bets on any asset which can offer them a potentially higher return.

This means that markets in commodities such as silver can quickly become over-heated, as all sorts of participants fall over one another to get a slice of the action by bidding prices higher.

This leads to the build-up of what is known as a 'bubble', where prices reach unrealistic levels due to the huge surge of liquidity into the market.
In such cases, the bubble usually bursts when the liquidity is removed. For the silver market, that came with the decision of the Chicago Mercantile Exchange - the world's largest commodities exchange - to clamp down on the cheap loans made available for betting on the silver futures market.

It did this by raising the margin, or the amount of cash down payment, which a trader has to put up in order to finance his purchase of a silver futures contract. This action caused silver prices to tumble, as weaker players were forced to cut their positions after failing to raise the additional cash.

One consolation is that the rout in the silver market failed to produce a financial storm on the scale of the one experienced in 2008, which nearly caused the global banking system to collapse.

It is an instructive lesson on how a search for safety ended up encouraging risky investment behaviour.

But if you believe that the silver market is an isolated instance of irrational exuberance, you may be mistaken.

Take China's red-hot residential property market, for example, where Shanghai's new home average prices surged 15.3 per cent in a week, according to a Chinese property consultant, Shanghai UWin Real Estate Information Services.

What is disconcerting is that the rise in prices is not the result of a housing shortage but rather an attempt by mainlanders to buy multiple homes - which they then leave mostly vacant - as part of their efforts to guard against inflation.
What happens to those empty houses if there is a sudden shrinkage of liquidity in China's economy, leaving their owners unable to service their mortgages?

The parallels with the calamity which has overtaken the silver market may be too compelling to ignore.

Wednesday, May 18, 2011

SGX needs more blue-chip counters, not high-tech upgrades

I AM surprised by the Singapore Exchange's (SGX) $250 million investment to create the world's fastest trading engine, and wonder if this is what our stock market needs.

I have been involved in stockbroking for the past 17 years and have not seen the Singapore stock market trading volumes languishing so badly.

One does not hear many phones ringing in the dealing rooms, even at times when the markets look buoyant. Most of the trading volumes are perceived to be created by programme trading.

With so many third-rate companies from China being brought in, many retail and institutional investors have lost quite a bit of money. Some Chinese companies may be good investments, but it is difficult for investors to distinguish the good ones from the bad, largely because of unreliable financial data.

What the market needs is to have more good-quality blue-chip companies and world-class firms listed here. We can start by looking at home-grown organisations such as PSA and PUB, as well as companies in the Temasek stable.

One factor behind SGX's recent failed ASX deal could be the perception that it was a takeover rather than a merger.

The deal could have gone through if it was strongly emphasised that it was a merger between two equals, thereby minimising nationalistic sentiments.

The industry was looking forward to the merger as it would have provided the necessary depth to the Singapore market.

SGX has introduced new products such as extended settlement contracts and American Depository Receipts. So far, the market response to these have been lukewarm.

As for doing away with the lunch break, it would have been wiser to follow the Hong Kong Stock Exchange's policy of a gradual withdrawal rather than removing it at one go.

S. Nallakaruppan
May 18 2011 - ST Forum

5 Easy Steps to Becoming a Millionaire

Erin Joyce
Wednesday, May 18, 2011

Who wouldn't want to be worth a million dollars? Many of us dream of achieving this goal, more often than not for the sake of the freedom financial stability would bring. So how can we get there? The answers are actually much easier than you might expect. Here are several easy steps to get you into the millionaires' club. (With a little discipline and the help of some powerful savings vehicles, anyone can hit this mark.)

1. Only Marry Once
According to "The Millionaire Next Door" by Thomas J. Stanley, Ph.D and William D. Danko, Ph.D, the average millionaire is married with three children. The wives of these millionaires are good budgeters and most often described as even more frugal than their husbands. Interestingly, according to Stanley and Danko's survey, half of these wives do no work outside the home and of those who do, they are most likely teachers.

One upside of only marrying once is avoiding the costs of divorce and of subsequent weddings. The cost of a divorce depends on many factors including income, attorney fees, court fees, and the assets a couple has and how they are divided. The average wedding cost in the United States in 2010, according to The Wedding, was $24,070.

2. Live Off One Income
One of the advantages of having a life partner is the potential to pull in two incomes. If you are able, consider structuring your set expenses based on only one income, and save what comes in from the other income. Doing so strengthens your financial position in two ways: In case of an emergency or if one partner loses their job, you will not only have less set expenses to cover, but you will also have built up your net worth as a safety measure.

3. Choose the Right Career
According to The Millionaire Next Door, "self-employed people make up less than 20% of the workers in America but account for two-thirds of the millionaires." The book goes on to list an average of 45 to 55 hours spent working per week, so by no means is this the self-employed fantasy of playing golf while your business grows.

The idea of the "right" career can encompass a myriad of factors. Ideally, this would be a career you enjoy, otherwise you likely won't be putting in the dedication required to be successful. The right career would also coincide with overall working trends, or at least not work directly against them. For example, starting a career in typewriter manufacturing may be something you are passionate about, but it would likely suffer due to the current technological trends.

4. Put Your Money in Appreciating Assets
According to Stanley and Danko, the millionaires in their survey invested nearly 20% of their realized household income each year. Nearly 20% of the household's wealth is held in "transaction securities such as publicly traded stocks and mutual funds" and the millionaires tended to rarely sell their equities. Only a very small number of the millionaires surveyed had ever leased a car; few even drove the current year model. Half of those surveyed had lived in their homes for more than 20 years, which, as the authors point out, means they have likely enjoyed "significant increases in the value of their homes."

The end result? These people put a financial priority on assets that will make them money, from their homes to their businesses.

5. Don't Live the Millionaire Lifestyle
Warren Buffett's frugal lifestyle (especially relative to his net worth) is the go-to example for this point. The average value of the surveyed millionaires' homes was $320,000. The bottom line is, those who spend their money on non-appreciating assets cannot put that same money in an asset that will net them a return and increase their wealth. If it is important to you to build your financial worth, stop spending it on new cars, toys and clothes. (The Oracle of Omaha has a net worth in the billions, but his lifestyle is not as rich as you may think.)

The Bottom Line
Becoming a millionaire is easier than ever. While this is a dream that will take work and discipline to achieve, it isn't as far out of reach as you might think. Be smart with your money and before you know it, you'll be able to count yourself among the world's wealthier citizens.

This article is part of a series related to being Financially Fit

Saturday, May 14, 2011

Voting for opposition doesn't signal a mature electorate

OF THE comments on the General Election, none is as wrong as that which proclaims that an increase in the opposition vote shows an electorate coming of age or maturing.

A mature electorate would not dismiss five candidates who served their constituency and Singapore, in some cases, with great distinction. Mature voters would not have voted in a team which has made no real contributions to the country.

What had the incumbents of Aljunied done or not done to lose the election?

A mature electorate would compare the individual candidates and their party manifestos and would study the programmes for their constituencies. How many did?

A mature electorate would not go ga-ga over a pretty face in the advertising industry with good speaking skills but with an unknown grassroots record, and would not viciously flame a candidate who has seven solid years of service to the community.

A mature electorate would not circulate untruths on the Internet that the Government spends only 1.4 per cent of the gross domestic product on health.

This is not to say that all who voted for the opposition did so without thinking diligently. I am certain many did. But to equate voting for the opposition with political maturity is just silly.

Thankfully, over 60 per cent voted for a party with a brilliant record and a solid slate.

So, perhaps, we do have a mature electorate after all.

Tan Ying San
14/5/2011 ST forum


14 May 2011
Lui Su Kian

Most people understand the importance of savings and are used to maintaining their money in a bank's deposit account.

However, over the years, the simple deposit account has proliferated into many versions with varying features. These include savings, current, fixed deposit and structured deposit accounts. So how does one determine the type of deposit accounts he or she should go for?

Deposit accounts can be broadly classified into four categories - transactional, regular savings, lump sum saving, and save and invest.


Everyone should have a deposit account for day-to-day transactional purposes. A savings or current account will ensure convenient access to your money and allow you to better track your expenditure, rather than keeping large amounts of cash with you.

Some of the considerations when opening such an account are whether the bank offers a wide network of branches and ATMs, and has round-the-clock access via Internet or telephone.

With more merchants and organisations accepting cashless payments, the account should also allow you to make payment easily, such as through GIRO, fund transfers, and online bill payments.


The deposit account is also a tool to help you start saving. It is ideal to save at least 10 per cent of your monthly income or allowance. Most banks offer special savings accounts which reward you with better interest for the commitment to save monthly. Some of these accounts help to establish discipline in savings by automatically transferring a specified amount from your salary credit account to this special account monthly.

Treat this as a way to pay yourself first. Choose a date shortly after your pay day to have the funds transferred to this special account. Set the sum you can comfortably afford as some of these special accounts will impose a penalty if you fail to fulfill the commitment to save monthly.


While choosing to leave your savings in your deposit account provides you with immediate access to your funds, you should be aware that the value of your savings can be gradually eroded by inflation over time against a low interest rate environment.

To reduce the impact of inflation, you can choose to move part of your funds into a fixed deposit account to enjoy slightly higher interest by locking in the funds for a few months to a year or two. A fixed deposit is relatively low risk as you will receive your principal amount and interest as promised on maturity.

Do note that, in an extremely low interest rate environment, the interest differential between fixed deposit and savings account can be almost negligible. Thus, do your math before deciding if it is worth your effort moving the funds between a savings account and a fixed deposit.

If you are looking for better returns, are prepared to lock-in the funds for several years but do not wish to risk your principal sum, you can consider a structured deposit. However, make sure that you fully understand how your returns will be determined as not all returns are guaranteed. Know what are the underlying investments, and the terms you must accept, such as restrictions on withdrawal. Look beyond attractive returns as higher returns generally translate to higher risk and make sure you understand the terms you will be subjected to.


Some people have a combination of various deposit products. Some even use several accounts for the same purpose.

Before opening a new account, you should consider if it is necessary to divide your savings among a number of accounts as it could mean account fees if you are unable to maintain the minimum balance required.

You may also be able to take advantage of a higher interest rate if you maintain a higher balance for certain deposit accounts.

You should also ensure that you select the deposit product that suits your needs instead of the one that gives you the best returns. For example, you should not use your fixed deposit account for day-to-day transactions as that can result in a loss of returns.

Most of the above deposit products are available in Singapore dollars or foreign currency. While deposits in foreign currency can offer you potential foreign exchange appreciation or better interest, fluctuating exchange rates may also result into losses when you convert back to Singapore dollars.

Lastly, know that your Singapore dollar deposits, except for structured deposits, are covered by the Deposit Insurance Scheme. Your eligible accounts will be aggregated and insured up to S$50,000, net of your liabilities with the bank, should the bank fail.

Lui Su Kian is managing director and head of deposits and secured lending at DBS Bank.

Friday, May 13, 2011

The global corporate crime wave

13 May 2011
Jeffrey D Sachs

The world is drowning in corporate fraud, and the problems are probably greatest in rich countries - those with supposedly "good governance".

Poor-country governments probably accept more bribes and commit more offenses, but it is the rich countries that host the global companies that carry out the largest offenses. Money talks, and it is corrupting politics and markets all over the world.

Hardly a day passes without a new story of malfeasance. Every Wall Street firm has paid significant fines during the past decade for phony accounting, insider trading, securities fraud, Ponzi schemes, or outright embezzlement by CEOs. A massive insider-trading ring is currently on trial in New York, and has implicated some leading financial-industry figures. And it follows a series of fines paid by America's biggest investment banks to settle charges of various securities violations.

There is, however, scant accountability. Two years after the biggest financial crisis in history, which was fuelled by unscrupulous behaviour by the biggest banks on Wall Street, not a single financial leader has faced jail. When companies are fined for malfeasance, their shareholders, not their CEOs and managers, pay the price. The fines are always a tiny fraction of the ill-gotten gains, implying to Wall Street that corrupt practices have a solid rate of return. Even today, the banking lobby runs roughshod over regulators and politicians.

Corruption pays in American politics as well. The current governor of Florida, Rick Scott, was CEO of a major healthcare company known as Columbia/HCA. The company was charged with defrauding the United States government by overbilling for reimbursement, and eventually pled guilty to 14 felonies, paying a fine of US$1.7 billion.

The FBI's investigation forced Scott out of his job. But, a decade after the company's guilty pleas, Scott is back, this time as a "free-market" Republican politician.

When Barack Obama wanted somebody to help with the bailout of the US automobile industry, he turned to a Wall Street "fixer", Steven Rattner, even though Obama knew that Rattner was under investigation for giving kickbacks to government officials. After Rattner finished his work at the White House, he settled the case with a fine of a few million dollars.

But why stop at governors or presidential advisers? Former Vice President Dick Cheney came to the White House after serving as CEO of Halliburton. During his tenure at Halliburton, the firm engaged in illegal bribery of Nigerian officials to enable the company to win access to that country's oil fields - access worth billions of dollars.

When Nigeria's government charged Halliburton with bribery, the company settled the case out of court, paying a fine of US$35 million. Of course, there were no consequences whatsoever for Cheney. The news barely made a ripple in the US media.

Impunity is widespread - indeed, most corporate crimes go unnoticed. The few that are noticed typically end with a slap on the wrist, with the company - meaning its shareholders - picking up a modest fine. The real culprits at the top of these companies rarely need to worry. Even when firms pay mega-fines, their CEOs remain. The shareholders are so dispersed and powerless that they exercise little control over the management.


The explosion of corruption - in the US, Europe, China, India, Africa, Brazil, and beyond - raises a host of challenging questions about its causes, and about how to control it now that it has reached epidemic proportions.

Corporate corruption is out of control for two main reasons. First, big companies are now multinational, while governments remain national. Big companies are so financially powerful that governments are afraid to take them on.

Second, companies are the major funders of political campaigns in places like the US, while politicians themselves are often part owners, or at least the silent beneficiaries of corporate profits. Roughly one-half of US Congressmen are millionaires, and many have close ties to companies even before they arrive in Congress.

As a result, politicians often look the other way when corporate behaviour crosses the line. Even if governments try to enforce the law, companies have armies of lawyers to run circles around them. The result is a culture of impunity, based on the well-proven expectation that corporate crime pays.

Given the close connections of wealth and power with the law, reining in corporate crime will be an enormous struggle. Fortunately, the rapid and pervasive flow of information nowadays could act as a kind of deterrent or disinfectant. Corruption thrives in the dark, yet more information than ever comes to light via email and blogs, as well as Facebook, Twitter, and other social networks.

We will also need a new kind of politician leading a new kind of political campaign, one based on free online media rather than paid media. When politicians can emancipate themselves from corporate donations, they will regain the ability to control corporate abuses.

Moreover, we will need to light the dark corners of international finance, especially tax havens like the Cayman Islands and secretive Swiss banks. Tax evasion, kickbacks, illegal payments, bribes, and other illegal transactions flow through these accounts.

The wealth, power, and illegality enabled by this hidden system are now so vast as to threaten the global economy's legitimacy, especially at a time of unprecedented income inequality and large budget deficits, owing to governments' inability politically - and sometimes even operationally - to impose taxes on the wealthy.

So the next time you hear about a corruption scandal in Africa or other poor region, ask where it started and who is doing the corrupting. Neither the US nor any other "advanced" country should be pointing the finger at poor countries, for it is often the most powerful global companies that have created the problem. PROJECT SYNDICATE

Jeffrey D Sachs is Professor of Economics and Director of the Earth Institute at Columbia University. He is also Special Adviser to United Nations Secretary-General on the Millennium Development Goals.

4 retirement tips for twentysomethings

By Yesha Shah

In today's dismal job market, it's no wonder college grads are focused on finding a job instead of socking away money for the future.

Unfortunately, young people aren't the only ones befuddled by their post-career plan.

But saving early is the key to building up a nest egg.

A panel of experts brought together by Merrill Lynch Wealth Management last month offers twentysomethings this advice for getting started on reaching their retirement goals.

Get out of debt

It's common for students to graduate with thousands of dollars in student loan debt, and thousands more in high-interest credit card bills.

"Don't forget that paying down debt is … the financial equivalent of saving. So if you have some debt, be focused on paying that down," says Andrew Sieg, head of retirement services at Bank of American Merrill Lynch.

Be flexible

Don't count on working at the same place for your entire life.

Traditional jobs - where you work one place for your entire career - are gone; pensions, gone, says ABC host and panel moderator Charles Gibson.

And flexibility will pay off in the event of an unexpected job loss or changes in income, says Anya Kamenetz, author of Generation Debt and staff writer at Fast Company.

"Real financial freedom and security doesn't come from having a certain number in the bank… It comes from knowing that I have the ability to live within my means," she says. "If I have a fluctuating income, I can live at the low end of that, and that's what really makes me feel comfortable."

Take advantage of workplace savings program

Get educated and learn about your benefits, says John Pelletier, director of the newly created Center for Financial Literacy at Champlain College.

Build up your skill set

Investing in yourself will pay off, says Kamenetz.

Young people "understand the importance of investing in education and having skills that translate from decade to decade, career to career," she says.

Developing transferable skills and acquiring various experiences are key to diversifying your life portfolio and will better prepare you for peaks and valleys in the workforce.

Wednesday, May 11, 2011

Chinese stock scams are the latest U.S. import

By Ryan Vlastelica and Daniel Bases

NEW YORK | Wed May 11, 2011 7:52pm EDT

(Reuters) - It seemed like the perfect China play, a way for investors to
cash in on the world's fastest growing economy.

China MediaExpress Holdings Inc, which provides advertising on buses that
clog the smog-choked streets of the country's largest cities, was on a tear
on the Nasdaq stock exchange. After rising 45 percent in 2009, the stock
gained another 49 percent in 2010.

That came to a halt in late January. In a research report, Andrew Left, an
investor who runs Citron Research from his Los Angeles home, termed the
company a "phantom" that was literally "too good to be true." The stock
plummeted 14.4 percent after Left's comment, to $17.84 from $20.86 in one

Citron's report was followed by similarly damning charges from Carson Block
of Muddy Waters Research, who called the stock a "'pump and dump' scheme."
Soon after, Roddy Boyd, the editor of in
Wilmington, North Carolina, visited the company's offices and posted videos
that he said made it "exceptionally clear" the place was bogus.

China MediaExpress' stock hasn't recovered. Shares lost 47 percent in four
days, and were trading at $11.88 on March 11 when the stock was halted on
the Nasdaq stock exchange. It hasn't traded since.

In March, the company delayed its year-end filings and its finance chief
resigned. The Hong Kong-based company said on March 11 its auditor,
Deloitte Touche Tohmatsu Hong Kong, a member firm of the "Big Four"
accounting company's global network, severed ties to the company.

The story of China MediaExpress has become an increasingly common one as
U.S. investors chase the next hot Chinese stock -- only to find themselves
victims of scams.

Many of the questionable Chinese companies gain access to U.S. capital
markets through a back door. In what's known as a reverse merger, a private
company buys enough shares of a public firm to essentially become publicly
traded. That allows the company to pay a much lower fee to be listed than
it would with an initial public offering - not to mention sidestep the more
rigorous filing demands of an IPO.

Of the more than 600 companies that obtained entry to U.S. exchanges this
way between January 2007 and March 2010, a total of 159 were from the China
region, according to the Public Company Accounting Oversight Board (PCAOB).
While many are legitimate, some turn out to be outright pump-and-dump
schemes and other scams.

A study by financial web publication TheStreet indicated such schemes
involving small-cap Chinese firms may have cost investors at least $34
billion over the past five years.

This has taken U.S. exchanges by surprise. NYSE and Nasdaq have delisted
several companies and have a veritable "skid row" of more than a dozen
firms that have been halted for weeks or months pending requests for
information about accounting problems and late regulatory filings. (For an
up-to-date list, see: here)

What are regulators doing about it? Although their stocks are traded on
U.S. exchanges, the companies are based in China. That makes it unclear
whose jurisdiction they fall under -- creating a regulatory void that
companies can easily exploit.

On top of that, Beijing has barred America's PCAOB, established under
Sarbanes-Oxley, from reviewing China-based accounting firms - even if they
are registered auditors with the accounting agency.

That loophole enables Chinese companies to hire big name and no-name firms
locally; as a result, they face no redress from U.S. authorities for bad

"There may be honest firms in China, but you can't monitor or control
them," said Hamid Kabani, president of Kabani & Co in Los Angeles, a firm
that has audited reverse merger stocks. "I can't see how a U.S. firm can
satisfy whether the (Chinese) firm is (is legitimate)."


In the absence of stricter regulation on companies and auditors, it is left
to independent investors like Andrew Left or Carson Block to ferret out
suspicious activity.

They, too, are not without controversy. Left, Block and their peers are
short-sellers who profit when a stock collapses - and critics point out
that they can in theory benefit even if their research proves faulty.

But it's also true that they face extraordinary business challenges.

"It's no secret we're interfering with scams that could net these chairmen
tens of millions of dollars," said Block, who is 35. "Criminals deprived of
such amounts will not take a kind stance toward people like me."

On November 10, 2010, his fledgling firm published a strongly critical
report on RINO International Corp, charging that many of the company's
customers were nonexistent and that its accounting "has serious flaws that
are clear signs of cooked books."

Shortly after, Block received threatening letters warning him to retract
his allegations and explaining that "severe consequences may result if you
do not act appropriately." An email received two days later mentioned his
wife, Kathy: "Are you, Kathy and your dad ready for a bullet? Get ready. It
could happen at any time now."

Less than a week later, RINO's auditors found accounting flaws. One month
after the Muddy Waters report, the clean-tech company was delisted by
Nasdaq. Its shares had fallen 96 percent from a 52-week high reached in

Block is based in Asia, though he would not say exactly where. He didn't
contact the authorities, saying he was "more worried about the people whose
threats I haven't received," but he did take additional security measures.

After his report on China MediaExpress, Block said he received more
threatening e-mails. One of them was from an Auckland, New Zealand-based
investor named Rick Page. He wrote in one email seen by Reuters that Block
may meet "somebody's 'contract worker'. Who knows who, when or...where."

Reached by Reuters, Page acknowledged "acrimonious contact" with Block via
e-mail but denied that he threatened Block. He says he regrets "having put
money into this company and this space" and questions why regulators were
not on top of the problem.


Lately, the U.S. Securities and Exchange Commission has stepped up its
interest in reverse-merger stocks. The SEC has an active probe into foreign
companies listed on American exchanges, Commissioner Luis Aguilar noted in
an April 4 speech.

U.S. exchanges, too, are belatedly tightening rules on reverse mergers.

Nasdaq, for one, is now considering adopting stricter listing requirements
for reverse mergers. The proposal would require such companies to be traded
for at least six months on the over-the-counter market or another national
exchange, as well as maintaining a minimum bid price of $4 per share on at
least 30 of the last 60 trading days immediately preceding the filing for
the initial listing.

A source at Nasdaq, who could not be quoted on the record about rules under
consideration, said the recommendation was expected to be enacted. When
asked if it was undertaken due to the scandals, the source added that
"we've had some feedback."

Then there is Beijing, whose policies play a crucial, albeit indirect, role
in all this.

Paul Gillis, a professor of accounting who focuses on U.S.-listed Chinese
companies at Peking University in Beijing, said China needed to make it
easier for its firms to list on Chinese exchanges.

"It makes no sense for Chinese companies to have to go halfway around the
world to get capital," he said, adding that China was in a better place to
regulate them than the SEC or the Public Company Accounting Oversight

A PCAOB report on reverse mergers published in March noted there were 56
initial public offerings from China, representing 13 percent of all IPO's
in the United States in the three years from January 2007 to March 2010.
IPO's require a greater degree of scrutiny and expense for companies to
meet listing and filing requirements. They are an important source of
income for such exchanges as NYSE Group and Nasdaq OMX.

As of the report date, the 159 China-region companies that gained access
via reverse mergers had a combined market capitalization of $12.8 billion,
less than half the $27.2 billion market capitalization of the China related

By the end of the research period, 59 percent of Chinese reverse merger
companies reported less than $50 million in revenues or assets as of their
most recent fiscal year.

Analysts hastened to say that there was nothing inherently suspicious in a
reverse merger, but Gillis said such operations "avoid much of the scrutiny
that takes place in a normal IPO. That makes them the preferred route for

Once here, these companies attract retail investors who screen for stocks
with high growth rates and low prices, and often run into companies such as
this, seemingly diamonds in the rough overlooked by others.

"You see these Chinese companies that have these great numbers, they never
miss a quarter of earnings. They are always right on. Their expenses are
low. Their growth is tremendous, regardless of the economy. So you go,
'Hmm, this doesn't make sense'," said Left.

James Chanos, founder of the New York-based hedge fund Kynikos Associates
LP, says the Chinese scams follow a classic pattern.

"The modus operandi by these stock promoters is to find what the hot area
for retail investors is, so 15 years ago it would have been the dot-coms, a
bunch of years ago oil and gas and now it is China. You sell the big
story," he said.


Dave Gentry, president and chief executive officer of investor relations at
research firm RedChip Companies, points out that 70 percent of China's
double-digit economic growth is created by companies with less than 2,000

While some companies may be overstating their results to entice American
investors, Gentry says in their homebase, Chinese firms more frequently
under-report revenues to tax authorities - a problem he said was

"It comes down to the character of the CEO and the management team in these
companies and there is fraud. We cannot be in denial about this," he said
in a telephone interview while meeting clients in China.

Investor relations firms play a big role in helping companies navigate
through the listing process, either through a reverse merger or an IPO.

Crocker Coulson is the president of CCG Investor Relations and Strategic
Communications, a company which handles investor relations for some 35
companies, many of them Chinese.

One Chinese client, Puda Coal Inc., which provides coking coal for steel
production, saw its stock plunge and halt on the NYSE Amex stock exchange
less than a month ago after another investor, Alfred Little, took aim at
the company.

His April 8 report alleges the chairman of the company "transferred the
ownership of PUDA's sole Chinese operating entity, Shanxi Puda Coal Group
Co., Ltd ("Shanxi Coal"), to himself in 2009 without shareholder approval
according to official government filings."

Asked how he felt about companies he works for that have had their shares
halted, Coulson paused, shifted his feet uncomfortably, and said: "I'm
going to say no comment."

As for his client Puda, on April 11 the company said it would investigate
the allegations. The chairman, Ming Zhao, agreed to cooperate in the
investigation. That's not stopping law firms from sharpening their pencils
as a handful have filed for class action status on behalf of investors.

By April 29, with the investigation still underway, the company issued a
press release saying the board received a preliminary non-binding proposal
from Zhao to buy 100 percent of the company's outstanding shares in a
"going private transaction at up to $12 a share." Puda's shares were
trading near $13 a week before Little's report but plunged to $6 on April
8. The stock was halted before trading started on April 11. In December
2010 the shares hit a closing high of $16.47.

Another company fighting allegations from Little is Deer Consumer Products.
It has accused Little of being a "fictitious character," and said in a
press release there is evidence of illegal short-selling on the part of
hedge funds distributing false information through web sites, including the
popular Seeking Alpha, where Little has published articles.

At the Shenzen headquarters of Deer, located in a six-story building in an
industrial part of town, officials would not answer questions.

A security guard repeatedly asked a Reuters reporter to leave before
eventually finding a representative, who would not provide a business card
but gave his name as Jevin He. He said he was "not in a position to answer"
questions, and calls to headquarters have not been answered.


Some of the worst breaches may be at the auditing and accounting level.

"It is no secret that we have not been able to inspect all of the non-U.S.
firms we are required to," PCAOB chairman James Doty told the Council of
Institutional Investors on April 4.

At the same meeting, SEC Governor Aguilar raised the issue of how companies
are raising capital, a situation he said he finds himself "increasingly
concerned about."

"PCAOB-registered accounting firms based in the United States audited 74
percent of the Chinese reverse merger companies, while China-based
registered firms audited 24 percent," the agency said in March.

Top officials from both the United States and China concluded their
once-a-year Strategic and Economic Dialogue meeting in Washington on
Tuesday, saying they would work toward enhancing "mutual trust and strive
to reach agreement on cross-border oversight cooperation."

Efforts to inspect Chinese auditing firms have met resistance from Chinese
authorities, but Doty told Reuters this week he expected progress this
year, in part because the various problems with Chinese firms had shown
authorities in Beijing the importance of credible auditing. "We will make
progress in getting access to those audits," he said.

Drew Bernstein, the co-managing partner of Marcum Bernstein & Pinchuk, a
New York-based audit and accounting firm, said he sometimes has to go to
extremes to get Chinese company officials to understand the ramifications
of shoddy auditing and accounting.

Instead of bowing to the intransigent company chairmen or boards, he
explains that if they don't cooperate and own up to problems, he will be
forced to tell the local authorities of alleged fraud, therefore making it
a Chinese problem.

Switching the jurisdiction changes the calculus. Executives have been
executed in China for fraud and corruption.

"A lot of the answers, you know, get down to dealing with the Chinese in a
Chinese way," he said.

Fears for personal safety are not limited to short-sellers like Carson

George Qin, head of the Chinese audit practice at Houston-based
MaloneBailey, says he has to think twice now about future travel within

According to documents filed with the SEC, MaloneBailey resigned its
auditing duties from four companies that have subsequently been halted for
trade on the NYSE Amex and Nasdaq stock exchanges.

The companies are: China Century Dragon Media, China Electric Motor, China
Intelligent Lighting, and NIVS IntelliMedia Technology Group.

"I'm afraid for my personal safety in some areas of China," Qin said.

He told Reuters that some companies colluded with employees at major
Chinese state-owned multinational banks to provide false bank statements,
though he would not specify which ones.

In interviews with various actors in the field, there was a lot of
finger-pointing about competitors, to which Qin said: "Are they
(competitors) all fraud free? We found the fraud by ourselves. If there
were more serious firms there would be more fraud discovered. Where there's
one roach, there are many roaches."


Short sellers like Left will say he and others on this side of the markets
are just following up on information and data to help explain things that
"just don't make sense."

"Me? I'm out to make money. I don't consider myself a short seller. I
consider myself a market opportunist. Would you be asking me this if I was
writing about stocks that I take a long position in? People are so ready to
hate short sellers," Left told Reuters.

Many agree the presence of short sellers and the research they provide are
useful. As soon as they attest to that, though, they point fingers at
unidentified "dishonest" short sellers operating at the behest of hedge
funds looking for an edge.

Winston Yen, CFO of Orient Paper, which is based in the city of Baoding in
China's Hebei province, said his company and investors "feel totally
victimized" by the negative research published by Block in 2010, which
caused a sharp decline in that company's stock.

Shares in the company closed at $8.33 before Block's first report published
on June 28, 2010. They fell precipitously in the next session and have
never fully recovered, currently trading at around $4 a share.

Orient's audit firm, Davis Accounting Group, also known as Etania Audit
Group P.C., was not correctly licensed, forcing the paper maker to hire new

Bernstein, the accountant with Marcum Bernstein & Pinchuk, is chairman of
Orient Paper's audit committee. He said Orient was by now perhaps the most
vetted company in China.

Speaking on the sidelines of a China investment conference in New York, he
said he saw the battle between Block and Orient as "a war of credibility."

Bernstein said the Muddy Waters report was full of "enormous allegations"
that were untrue and that he is now "highly confident that the financials
of the company materially represent what they say." He added that a lawsuit
against the research firm is probably justified.

"I don't think they were right on anything, to be honest with you,"
Bernstein said, explaining that Orient Paper hired 15 to 20 professional
services firms to investigate.

Because investors don't have the ability to conduct similar due diligence,
they "tend to panic" when negative research appears, Yen said.

"It has not been difficult for the shorts to make wild allegations of fraud
and profit handsomely from their pre-established short positions," he said.

Orient Paper defended itself, saying an internal investigation found no
evidence of problems.

"When you put a company under an enormous amount of scrutiny, as we did,
you find imperfections. We did find areas that we can improve upon, but
none that misrepresented the financial statements," Bernstein said.

However on March 23 the company said it would have to re-audit results from
2008 though it maintained that doing so would not impact financial
statements for fiscal years 2009 and 2010. The re-audit results are
expected at the start of the third quarter of 2011.

Block isn't buying the company's view.

"It is not surprising that a probe conducted by the company on itself,
under the umbrella of the attorney-client privilege conferred by having the
inquiry managed by one of the most prolific issuer's counsel of Chinese RTO
(reverse takeover) companies, enabled the company to issue a press release
stating that it determined it wasn't defrauding investors," Block said.

Claiming security concerns, Muddy Waters removed the firm's phone number
from its website, along with a phony mailing address that had created
controversy about the location of the firm's headquarters. "I felt that the
sort of attention I was getting wasn't the kind we wanted," Block said.'s Boyd, who does not short shares he is
writing about, has some reservations himself about shorts.

The reports "were brilliantly reported and laid out, but you can never get
past the fact that they're doing this for money," he said. "If something
doesn't work out - and I'm not just talking about (Muddy Waters) - these
guys could have a situation where they went after a company and made money
but couldn't substantiate their claims."

Until the auditing problems are cleaned up and greater responsibilities are
shared by U.S. and Chinese regulators, however, folks such as Block and
Left will have ample opportunity in their chosen business.

"Just because it is China doesn't mean it is a path to riches," Left said.

Monday, May 9, 2011

Women wise up to money needs

Mon, May 09, 2011
The Sunday Times
by Lorna Tan

International Women's Day is celebrated tomorrow so it's pleasing to report that women here not only feel more optimistic about the future after the economic woes of last year, but are also more proactive about setting themselves up for retirement.
These findings - from recent surveys - show that women have made some progress in terms of personal finances.

The Tsao Foundation-TNS an-nual Ageing Preparedness Survey polled about 300 respondents in the second half of last year, on how prepared they are for their retirement. Half of the 300 were female. It found that compared with the 2008 survey, more women believe that retirement planning is important, are saving actively and are realising they may have to work beyond 60.

This is evidence of a trend in the right direction and shows that the importance of preparing for retirement is getting through to people, says the Tsao Foundation.
Not surprisingly, the survey also notes that income security is the topmost concern for a happy retirement.

'It is heartening to know that preparing for one's retirement is increasingly becoming an important part of a woman's life,' says Tsao Foundation chief executive Tan Bee Wan.

This is because women very often have to make sacrifices for their families and end up neglecting to care for themselves.

'Awareness is the first important step. Next comes action and that is to get themselves equipped with the necessary skills to prepare for retirement,' adds Dr Tan.

Positive news comes from a second survey as well. The MasterCard Worldwide Index of Women's Advancement found that more women are taking charge in the household.

Throughout the region, an estimated 66.5 per cent of women are taking on the role of decision-makers, up from 45.6 per cent last year. Conducted early this year, the biannual survey measured consumer confidence in 21 markets.

Here are some things to consider for a woman reviewing her financial needs.
Broadly, these differ from those of men because of a woman's physical makeup and her family circumstances.

For instance, women live longer than men, earn about 20 per cent less on average and retire younger. They are more likely to work part-time and take time out to be caregivers. Women also tend to suffer from more debilitating diseases in old age.
1. Cover against critical and women-related illnesses

Financial experts highlight that women are more susceptible to critical illnesses. Besides, certain illnesses are more prevalent among females such as systemic lupus erythematosus (SLE), osteoporosis, arthritis and of course breast cancer.

So while health insurance is important to everyone, women should ensure they have sufficient coverage against certain illnesses while they are still healthy.

Mr Patrick Lim, associate director at financial advisory firm PromiseLand Independent, notes that Manulife's critical illness plan lists SLE as one of 30 illnesses in its coverage. 'Another plus from taking up Manulife's 30 critical illnesses cover is the additional free coverage of up to two children per policy for the sum assured of $10,000 for serious illness of a child.'

Besides critical illness plans which can be bought by men and women, the market offers plans targeted at women who wish to insure against female-related conditions. This is especially suitable for women who have a family history of female-related cancers, says Ms Cynthia Toh, senior executive life planner at Great Eastern (GE).

To sweeten such plans, insurers may bundle extra benefits such as no claims discounts, additional critical illnesses coverage and other female wellness privileges such as biannual health checks.

An example is GE's PinkLife health plan, which charges an annual premium of $970 for a 30-year-old female who opts for a sum assured of $50,000. Prudential Assurance offers a similar plan called PruSmart Lady II.

Ms Toh says the main benefits of such plans are that they pay a lump sum upon the diagnosis of the specific female illnesses, provide for surgical procedures and even cover certain reconstructive surgery such as breast reconstruction.

This is typically excluded in all hospitalisation plans as it is not deemed a medically necessary procedure to treat breast cancer.

The downside is that these plans typically provide cover until age 65 and the sum assured is commonly capped at between $50,000 and $100,000, which may not be enough for the long-term treatment of advanced female malignant cancers.

This is particularly so when prohibitively expensive drugs like Herceptin for breast cancer and Avastin for ovarian cancers are prescribed for treatment.

2. Cover for pre- and post-natal treatment and childbirth
PinkLife and PruSmart Lady II plans offer an option to insure mothers against maternity risks like pregnancy complications and birth defects of a newborn.
By insuring against such risks before childbirth, parents have a safety net with cover for pregnancy-related conditions like stillbirth and miscarriage due to an accident. It also covers congenital conditions of a newborn and infant mortality.
Prudential highlights that such birth defects are usually not covered when parents buy an insurance plan for the child after birth as the child has to undergo health declaration. The optional maternity risk cover also includes hospital care for the infant if incubation or intensive care is required.

3. Disability income cover
Both Mr Lim and Ms Toh stress that there are two types of disability plans. The first is an occupational disability income policy that covers an individual's income.
Ms Toh strongly recommends women with good income to consider buying an occupational disability income cover. 'This is to ensure that you will continue to receive a certain proportion of your monthly income stream should you fail to perform the duties of your job or related jobs on a prolonged basis, resulting from a health condition or disability.'

With more women working and contributing substantially to the household income, such policies will certainly provide peace of mind, she adds.

Such covers are offered by insurers such as Aviva, GE and Manulife. GE's Paysecure charges an annual premium of $1,192.50 for a 30-year-old female in an office job. This is based on a monthly benefit of $5,000.

In the case of Manulife, the disability income cover is an optional rider. Mr Lim says the annual premium for a Manulife term plan with such a rider, for a sum assured of $1 million, is $2,024. This is based on a 30-year-old woman who opts for the cover to cease at age 55. The other is a severe disability plan for people over 40, and it aims to provide a rehabilitative income to cover the expenses on contracting severe old age disabilities.

Besides offering the severe disability plan ElderShield, GE has a Long Term GoldenCare Policy where the cover is based on fewer restrictive health conditions.
It charges a female who turns 55 at her next birthday $5,733.50 a year, for a monthly benefit of $5,000 for life. Other insurers that offer similar long-term care policies are Aviva and NTUC Income.

4. Adequate insurance protection
If you are a housewife, it is only prudent to make sure that your husband has put aside sufficient insurance coverage for your family's financial needs if he dies prematurely or suffers from a disability.

An economical way is to buy term insurance on your husband's life as it covers huge sums for a small annual premium compared with other plans like whole life and endowment.

Another area often overlooked is mortgage insurance. If your house is not fully paid up, it is important to ensure the mortgage is adequately covered.

5. Managing investments proactively
Whether single or married, women should adopt a proactive attitude towards upgrading their financial know-how and managing their investments.

Surveys show that women tend to be good savers and are more conservative in their approach to money.

Mr Albert Lam, investment director of IPP Financial Advisers, cautions women investors that if they hold largely investments that are less risky in nature, it will not help them in the long run if the investments are unable to grow to the amount required for their retirement.

'Let's assume you leave $100,000 in a bank deposit now at an annual interest rate of 0.5 per cent. If inflation is 2 per cent, the sum will dwindle to $86,000 after 10 years. So safety need not always be the best thing. Inflation would have eaten away your principal,' says Mr Lam.

He suggests that all investors look towards the mega trends of the future and invest in a portfolio of instruments that will ride on these trends.

'Some of these will include Asian and emerging markets growth, commodities as a long-term hedge against inflation, and an allocation to physical gold. Investing in gold coins may be something that appeals to women investors... After all, she can leave them as a legacy to her children.'

More savvy female investors can do their own homework and select individual stocks, blue chips or real estate investment trusts that pay out regular dividends as viable investment alternatives.

6. Updating wills and nominations of beneficiaries
Know the contents of your husband's will and make sure that he makes adequate provision, particularly if you are a housewife.

Mr Lam advises married women to update their Central Provident Fund nominations as those done before marriage would have become void.

And if you become a widow, remember to update your will on your husband's death so that your share of his estate will be distributed according to your wishes, says Ms Toh.

7. Professional help
If you have inherited wealth from your husband's estate, it is vital that you appoint an independent corporate trustee rather than an indivi-dual.
Use a lasting power of attorney arrangement to direct the financial affairs and properties should you fall into dementia or suffer from other mental incapacities, says Ms Toh.

This can also be done by setting up a living trust arrangement and designating professionals to handle the management of those assets in the event of disability or critical illnesses.

'Such an arrangement will ensure a continuity of a comfortable lifestyle even after your husband is gone and you are too sick to take care of yourself during your retirement years,' she adds.