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Sunday, September 29, 2013

Learning - the Finnish way

No exams, no tuition, no streaming, minimal homework and lots of play. Yet Finland consistently produces top students in mathematics, science and literacy. How does the country do it?

Published on Sep 29, 2013

By Sandra Davie Senior Education Correspondent

Like Singapore, Finland, which has a population of 5.4 million, is an education superstar.

Its students consistently do as well as top-performing Singapore pupils in international maths and science tests.

But a recent study trip by The Sunday Times sponsored by Lien Foundation found that Finnish students take a completely different route to academic excellence.

Before going to Primary 1 at age seven, all that Finnish children in pre-schools seem to do is play.

And once in school, they do not undergo formal assessments or examinations until they are 18, when they sit for a matriculation examination to enter university.

There is also little homework for primary and lower secondary students, and no nationwide standardised testing.

And tuition? That is a concept foreign to most Finnish parents.

Teachers say the equivalent of Singapore's gifted education scheme or Normal or Express streams would be illegal in Finland because its education policy calls for all children to be given the same opportunities.

The only "streaming" allowed occurs at age 16, when students, after being graded by teachers, get to choose whether to take the vocational or academic route.

And yet, the Finns have consistently performed in the top tier since the first Programme for International Student Assessment (Pisa) survey was conducted in 2000.

This study compares 15-year- olds in different countries in reading, mathematics and science.

So how does Finland do it without the intense pressure and competition that are so much a part of Singapore's system?

Finnish educators list a combination of factors, from the strong reading culture - Finnish people borrow more books from libraries than anyone else in the world - to highly educated and well-trained teachers.

Many also attribute the success of the Finnish education system to the strong foundation in learning laid in pre-school, where the focus is on cultivating intellectual curiosity and a love of learning in the young.

The emphasis is on learning through collaboration, not competition.

"All children are given equal opportunities. We put equity ahead of producing top students," says Dr Pasi Sahlberg, who wrote the much-talked-about book, Finnish Lessons, which details how the country improved its mediocre academic results and produced top-performing students.

The 53-year-old director-general of CIMO (National Centre for International Mobility and Cooperation) at the Finnish Ministry of Education explains how Finns aim to have good schools for all students, echoing the Singapore Education Ministry's (MOE) recent slogan that "every school is a good school".

Dr Sahlberg says Finnish parents really do believe that all Finnish schools are equal. That would explain the puzzled looks given by Finnish parents when The Sunday Times asked how they select a school for their children. The answer: They pick the one closest to home.

Dr Sahlberg points out that the Pisa results show that the gap between high and low achievers in Finland is the smallest in the world.

The main aim of its policymakers since the 1980s has been to ensure that every child should be given the same opportunity to learn, regardless of family background or income.

In Finland, education is free from pre-school to university level. Government spending on education makes up 6.8 per cent of gross domestic product (GDP).

All Finnish schools offer free meals, free health care, free psychological counselling and free individualised student guidance.

The country's education system did not start out this way. Back in the 1960s, less than 10 per cent of students continued their education until the age of 18. There was nationwide standardised testing for children at age 11. Children who scored in the top 25 per cent went to private schools that charged high fees.

But starting in the mid-1970s, education reforms were introduced. Private schools were scrapped and all schools became publicly funded. Pre-school teachers attended a three-year degree course, while those heading to teach in primary and secondary schools studied for five years up to master's level.

Streaming of students to put them on either the vocational or academic tracks was pushed to a later stage, at age 16.

Class sizes were kept to an average of 25 students. Teachers were allowed to design their own lessons. Instead of examinations, teachers assessed students using tests they designed themselves. Grades in report cards were based not just on test scores, but also on projects and class participation.

Periodically, the Education Ministry would track a few sample groups of children across a range of schools to make sure the system was working.

There was opposition to the reforms at first, with some groups calling for a return to examinations and streaming.

But the results of the first Pisa studies in 2000 and the second in 2003 changed people's minds. Finnish children were among the top performers in mathematics, science and literacy.

Soon, educators from around the world were flocking to Finland, hoping to learn the secret to its success.

"Once, people used to come to Finland to learn about Nokia. Now, they come here to learn about our school system," says Dr Sahlberg, who receives numerous invitations from around the world to give talks and attend education conferences.

Dr Sahlberg, who has been appointed visiting professor by Harvard University, says: "When the first Pisa study came out, most Finns didn't believe it. But we came out tops again in the second survey. The best thing that Pisa did was that it silenced those who wanted to go back to having private schools and national examinations."

But he is quick to correct any misconceptions among visiting educators that the system, from pre-school to university, is laid-back. He notes that although examinations and streaming do not exist in the lower levels, students have to sit examinations at age 18.

At 16, more than 90 per cent of students choose to further their education through either "general" or "vocational" upper secondary schools.

Vocational students usually head to polytechnics or enter the job market. Those in the academic general stream have to sit a national examination to get a place in university.

Universities also set their own entrance tests to select students for specific courses.

However, there are those who believe the Finnish system is not suitable for all countries, including Singapore.

While Finland's population is similar in size to Singapore's, it is largely homogeneous, with people speaking the same language, Finnish.

Also, Finland has a generous social welfare system where education and health care are free. But Finnish taxes are among the highest in the world at 44 per cent of GDP, reported Reuters. The income tax rate ranges from 6.5 per cent to 31.75 per cent. On top of that, Finns pay municipal tax ranging from 16.25 per cent to 22 per cent.

Dr Sahlberg says Singapore is admired for the way it teaches mathematics and science, and for its recruitment and training of teachers.

But one thing that Singapore should consider doing away with is the Primary School Leaving Examination, he says, echoing the views expressed by Stanford University professor Linda Darling-Hammond in a recent interview with The Sunday Times.

"Singapore is one of the few countries in the world to have a high-stakes examination for 12-year-olds," says Dr Sahlberg. "So I wonder why Singaporeans are arguing over scores or bands. Shouldn't the debate be about whether the exams are appropriate for children at such a young age?"

He is aware of the anxiety felt by Singapore educators over the widening gap in school performance between children from disadvantaged homes and those from privileged backgrounds.

Stressing that many elements of the Finnish school system are interwoven with the country's social welfare policies, he says: "As the OECD (Pisa) report stated, the highest-performing education systems are those that are able to combine quality with equity.

"And if there is something that Finland can show others, it is what equity and equal opportunity in education look like. And it is possible to achieve excellence along with equity."
Background story

PSLE revisited

"Singapore is one of the few countries in the world to have a high-stakes examination for 12-year-olds.

So I wonder why Singaporeans are arguing over scores or bands. Shouldn't the debate be about whether the exams are appropriate for children at such a young age?"

Dr Pasi Sahlberg, director-general of the National Centre for International Mobility and Cooperation at the Finnish Ministry of Education.

Lessons from fallen financial idols

Their words still offer valuable insights about investments

Published on Sep 29, 2013
By Goh Eng Yeow Senior Correspondent

As a financial writer who tries to help readers to understand the intricacies of the stock market, I have often turned to the folksy quotes of investment guru Warren Buffett to make my point.

But let's face it, most of us are not likely to have the patience to buy a stock and then hold it for decades like Mr Buffett. The likelihood is that if we make a decent profit on our investment, we will take the windfall and use the money to reinvest somewhere else.

So what other financial leading figures might we learn from?

This may sound rather perverse, but a few of them whose words are worth heeding are fallen idols in the financial world.

And it is precisely because they have fallen foul of the law in their relentless pursuit of material wealth that they make such captivating subjects to study.

For me, one compelling fallen angel is the late Marc Rich, the "king of commodities" credited with pioneering global spot oil trading markets in the late 1960s.

What I find abhorrent about him was his lack of ethics and failure to differentiate between right and wrong. But I sometimes wonder if these were the very traits which made him a successful trader.

I first came across his name when he was given a controversial pardon in 2001 by then US President Bill Clinton nearly two decades after he fled the United States on charges of fraud, racketeering and tax evasion. It was a decision Mr Clinton later regretted, calling it "terrible politics".

When Rich was once asked by a young trader for advice on trading, he purportedly picked up a knife, ran a finger across its edge and said: "As a trader, you often walk on the blade. Be careful and don't step off."

It offers a valuable insight on what makes a good trader - living the high life, but perpetually trying to balance risk with reward, fearful of falling off the cliff if he is not careful.

Few walked the so-called knife more skilfully than Rich. His life story read like a spy thriller, as he scanned the globe for looming crises to make money, skirting around political and moral obstacles, such as by selling Soviet oil to then apartheid South Africa despite a United Nations embargo.

But even he fell off the knife blade, as he ended up in 1983 on the Federal Bureau of Investigation's list of 10 most wanted people on charges that included exploiting a then US embargo against Iran - while it was holding US hostages - to make huge profits on illicit Iranian oil sales.

Then there is the disgraced Wall Street financier Bernie Madoff, mastermind of the biggest Ponzi scheme in history, which cost investors at least US$18 billion (S$22.6 billion) in losses when the law finally caught up with him.

For the financially uninitiated, a Ponzi scheme is a fraudulent investment operation that pays its investors a return from their own money, rather than from profit made by the business.

I recently came across an interview which Madoff gave to a US financial portal, Marketwatch, five years after he was put behind bars for his crimes.

Some advice he offered to investors on how to avoid getting scammed boils down to common sense.

Madoff said: "Wall Street is not that complicated. If you ask an average hedge fund or investment firm how they make their money, they won't tell you. If you don't understand something, then don't invest in it."

Still, the ease with which he could get people to part with their money was amazing. He used credibility won by hobnobbing with the likes of former US Treasury secretary Bob Rubin and former Securities and Exchange Commission chairman Arthur Levitt.

He said: "My investors were sophisticated people, smart enough to know what was going on, and how money was made - but they still invested with me without any explanation."

And he noted that if an investment sounds too good to be true, it is. He had offered his clients a consistent 11 per cent to 12 per cent return year after year which made no sense, yet nobody questioned him about it and he was able to continue with his scam for a long time.

But if you believe that frauds perpetuated by the likes of Madoff are few and far between, you would be mistaken.

Just look at the recent gold scams in our own backyard which look like variations of the Ponzi scheme spawned by Madoff.

In one instance, a trading firm lured investors into buying gold at a premium and then offered them an attractive monthly payout for keeping the precious metal with the firm. Its owner, who capitalised on a spot of good publicity to perpetuate his scam, went missing after that.

For me, the best advice Madoff has to offer is to just keep your cash safe, even though you run the risk of its value getting eroded by inflation.

He said: "If you are not sure, you should put your money in a savings account. At least it is better than losing the money to fraud."

Don't try to time the markets, says expert

Have a well-diversified equity portfolio and don't focus on picking the next shiny sector

 Published on Sep 29, 2013

By Alvin Foo Economics Correspondent

Trying to time financial markets in these volatile times would be foolhardy, according to a leading fund manager in the region.

Retail investors should, instead, adopt a dollar-cost averaging method of regular investing, with a balanced and diversified approach, said Mr Jed Laskowitz, the chief executive of JP Morgan Asset Management (JPMAM) Asia-Pacific.

He told The Sunday Times: "Timing the markets doesn't work... individual investors tend to become too euphoric in the good times and too negative in the bad times."

That leads them to sell at the bottom and buy at the top, Hong Kong-based Mr Laskowitz added.

He advocates having a well-diversified equity portfolio while not being too focused on picking the next market or sector which will shine.

"What you tend to see is investors buying past performance," he noted.

"Investors need to stay away from chasing last year's best-performing asset class, and build a long-term investment plan that's well diversified across stocks and bonds and geographies and stay true to that plan."

JPMAM manages US$1.47 trillion (S$1.84 trillion) worth of funds globally as of June 30, with US$126 billion being Asia-Pacific client assets.

Mr Laskowitz noted that stocks are still not that popular with investors: "The great rotation out of bonds to equities hasn't quite happened... most clients don't own enough equity in their portfolios."

That is because many investors still feel the sting of the global financial crisis, thus they prefer to keep significant amounts of their wealth in cash.

This behaviour is particularly true in Asia.

"Investors are still concerned with volatility. The markets in the last five years have traded more on macro events than fundamentals," he said.

Mr Laskowitz also weighed in on the surprise decision by the United States Federal Reserve to maintain its massive money-printing measures.

He said upcoming events such as the appointment of the next Fed chairman, the US debt ceiling debate and US budget may have been considerations for the Fed's delay.

"The decision to wait is a sound one... as there are potential challenges those items could create," noted Mr Laskowitz, who added that the market consensus is that the Fed will start winding stimulus back in December. "But as we've seen this time, it's not so easy to predict".

He also unveiled plans to expand his firm's Singapore headcount.

The firm has 54 staff here, of whom 17 are investment professionals. It hopes to grow this to 65 employees with 21 investment professionals by the end of next year.

The funds management industry here recorded gross fund flows of US$12 billion in the first half of this year, with net fund inflows of US$4 billion.

JPMAM's market share is 17 per cent of the total net industry flows.

Its client assets under management here grew 32 per cent between December 2011 and July this year, said Mr Laskowitz.

"More of our clients are growing here and are making more of their investment decisions out of Singapore," he added.

Background story

Stick to the plan

"Investors need to stay away from chasing last year's best-performing asset class, and build a long-term investment plan that's well diversified across stocks and bonds and geographies and stay true to that plan."

MR JED LASKOWITZ, chief executive of JP Morgan Asset Management Asia-Pacific

Friday, September 27, 2013

Six Genneva personnel slapped with over 900 money laundering charges

Published: Friday September 27, 2013
By M.MAGESWARI and Maizatul Nazlina

KUALA LUMPUR: Six personnel from gold investment company Genneva Malaysia Sdn Bhd and another company have been slapped with 926 charges of money laundering, making false statements and illegal deposit-taking involving RM5.5bil.

Genneva received the RM5.5bil from 35,000 depositors.

Its directors Datuk Philip Lim Jit Meng and Datuk Tan Liang Keat faced 246 and 226 counts of money laundering respectively; business advisers Datuk Ng Poh Weng (155), Datuk Marcus Yee Yuean Seng (17), Datuk Chin Wai Leong (23), and general manager Lim Kah Heng (16).

All six claimed trial to the charges.

The company itself, Genneva Malaysia Sdn Bhd, faced 222 counts of money laundering and Success Attitude Sdn Bhd, eight counts.

Four of them, Philip Lim, Tan, Hah Heng and Ng, were also charged under the Banking and Financial institutions Act 1989 with two counts each of accepting deposits without a valid licence via a scheme involving gold transactions.

Earlier, Philip Lim and Tan pleaded not guilty at another Sessions Court to making a false statement in an advertisement on the company's website, saying its gold trading was in accordance with Islamic law.

Genneva Malaysia Sdn Bhd also faced a similar charge.

The case has been set for mention on Oct 28 and the two were granted bail of RM20,000 each.

Sunday, September 22, 2013

The Caregivers - The day he lost his soulmate to dementia

Published on Sep 22, 2013


They come from all walks of life – parents, spouses, children, even strangers – but the trials they face are similar. Long hours often on top of a full-time job, emotional and physical strain, and all too often, financial stress as well. Yet they toil on, day after gruelling day, driven by love and family bonds.

Madam Ng Mui Chuan, 61, has wandered into the kitchen in the middle of the night to turn on the gas for no reason.

She has strewn rice and oats all over the kitchen, played with her faeces and spent hours on the floor in a foetal position weeping. For no reason at all.

As her dementia advanced, so did her fits of anger and paranoia, says her husband and sole caregiver, Mr Lim Fah Kiong, 68.

When out in public, she would point at strangers and make "scolding noises". Fearful of taking her out or leaving her alone indoors, Mr Lim eventually became a prisoner in his own home.

For the past four years, he has helped his wife eat, dress, shower and go to the toilet. He also cooked, cleaned and did all the other household chores.

He could afford a maid, but chose not to have one. "I was afraid Mui Chuan might hit her. I just can't live with that fear," he says.

When her condition deteriorated late last year, his wife would keep waking him up at night. "I could sleep only one or two hours at a stretch, week after week."

Robbed of sleep for days, there were times he felt he was losing his sanity. He would often break down in tears, he says, but never in front of her.

He knew she had to be in hospital the day she assaulted him with a clothes hanger and tried to smash a fish tank.

He is on the lookout for a subsidised nursing home, but with long waiting lists for dementia patients, the former SingPost executive is bracing himself for round two of his caregiving ordeal.

The couple are childless.

It was not always this way. Mr Lim and Madam Ng retired when they were in their 50s in 2005, eager to spend their golden years with love and laughter - without the stresses of work.

They had married late in life, after meeting at a training course. They planned "makan trips" around the island and to Malaysia.

"We hoped to grow old together as friends and soulmates," said Mr Lim. "Just like when we were young."

But that was not meant to be.

Sitting alone in the study of his spacious and neat five-room flat, decorated with photographs and Valentine's Day cards from his wife, Mr Lim lets on that her problems began innocuously enough.
She would be forgetful and get angry for no reason. She began washing her hands obsessively, every time she saw a tap.

Once a genial, gentle woman, she grew suspicious of even her closest friends. "They hammer me when you're not around," she would tell him.

He took her to a psychiatrist in 2010 after she tried to jump from their eighth-floor flat. She was diagnosed with obsessive compulsive disorder.

He installed window grilles. He soon had no time to tend to his beloved plants and the ornamental fish he kept in a giant double- decker fish tank in his living room.

"My bougainvillea are dead and most of my big fish," he said sadly, as a lone golden dragon fish swam in one of the tanks.

It was only after she was referred to the National Neuroscience Institute in 2011 that she was also diagnosed with Alzheimer's disease - by then already in its moderate stage.

"With so much hype on dementia being an old person's disease, few realise that you can get it even before you hit 50," said Mr Lim.

Despite medicines, the disease continued its inexorable march. By early this year, Madam Ng could not recognise most of her friends and family. He is bracing himself for the time when she forgets him too.

She failed to recognise everyday objects too. When the phone rang, she would put the television remote control to her ear. She left wet slippers on the bed. And once, trying to dress herself, she wore a panty like a shirt.

She went to a day-care centre for dementia patients for one year till early this year, but her frequent "crying, praying and chanting" frightened the other patients.

"I was told I must withdraw her till she gets better," he said. "But she never did."

These days, Mr Lim follows a familiar routine. Every morning, he takes a bus from his Bishan home to the Institute of Mental Health, where his wife is warded, only to return late in the evening.

September has always been a special month for the couple. His birthday is on Sept7 and their wedding anniversary, five days later. They have been married 25 years now.

His wife did not remember either occasion. He spent both days sitting next to her in hospital.
"There is nothing left to celebrate any more," he said.

Radha Basu

Monday, September 16, 2013

An unwavering dedication to Singapore

By Heng Swee Keat
16 Sep 2013

The first time I met Mr Lee Kuan Yew in person was in March 1997, when he interviewed me for the job of Principal Private Secretary (PPS). His questions were fast and sharp. Every reply drew even more probing questions.
At the end of it, he said: “Brush up your Mandarin and report in three months. We have an important project with China.”

I realised later that, among other things, it was perhaps when I replied “I don’t know” to one or two questions that I made an impression. With Mr Lee, it is all right if you do not know something. But you do not pretend and lie if you do not know. Integrity is everything.

I had the privilege of working as Mr Lee’s PPS from mid 1997 to early 2000. This was the period of the Asian Financial Crisis, and Mr Lee was writing his memoirs.

Mr Lee’s world views are comprehensive and consistent. Three stand out for me.


The first is about Singapore’s place in the world. His view is that a small city state can best survive in a benign world environment, where there is a balance of powers, where no single state dominates, and where the rule of law prevails in international affairs.
A small city state has to stay open and connect with all nations and economic powerhouses. To prosper, Singapore has to be relevant to the world. We must be exceptional.

Second: His views about human nature, culture and society. Human beings have two sides to our nature — one that is selfish, that seeks to compete and to maximise benefits for ourselves, our families, our clans; the other that is altruistic, that seeks to cooperate, to help others, and to contribute to the common good.

A society loses its vigour if it eschews excellence and competition; equally, a society loses its cohesion if it fails to take care of those who are left behind or disadvantaged. Mr Lee believes that this tension between competition and cooperation, between yin and yang, is one that has to be constantly recalibrated. Within a society, those who are successful must contribute to it and help others find success. We must share the fruits of our collective efforts.

Third: His views about governance and leadership. As a lawyer, Mr Lee believes deeply in the rule of law and the importance of institutions in creating a good society. But institutions are only as good as the people who run them. Good governance needs leaders with the right values, sense of service and abilities. It is important to have leaders who can forge with the people a vision for the future and to forge the way forward.

Above all, leaders are stewards. They should develop future leaders and, when their time comes, they should relinquish their positions, so that the next generation of leaders can take us to greater heights.


While Mr Lee’s world views are wide-ranging and widely sought, when I worked with him, I had the privilege of learning how his views are so coherent, rigorous and fresh, and how he put his agile mind in the service of the Singapore cause.

Mr Lee’s favourite question is “So?” If you update him on something, he will invariably reply with, “So?” You reply and think you have answered him but, again, he asks, “So?” This forces you to get to the core of the issue and draw out the implications of each fact.

His instinct is to cut through the clutter, drill to the core of the issue, and identify the vital points. And he does this with an economy of effort.

I learned this the hard way. Once, in response to a question, I wrote him three paragraphs. I thought I was comprehensive. Instead, he said: “I only need a one sentence answer, why did you give me three paragraphs?” I reflected long and hard on this, and realised that that was how he cut through clutter. When he was Prime Minister, it was critical to distinguish between the strategic and the peripheral issues.


On my first overseas trip with Mr Lee, Mrs Lee, ever so kind, must have sensed my nervousness. She said to me: “My husband has strong views, but don’t let that intimidate you!”

Indeed, Mr Lee has strong views because these are rigorously derived, but he is also very open to robust exchange. He makes it a point to hear from those with expertise and experience. He is persuasive, but he can be persuaded.

A few months into my job, Mr Lee decided on a particular course of action on the Suzhou Industrial Park, after deep discussion with our senior officials. That evening, I realised that amid the flurry of information, we had not discussed a point. I gingerly wrote him a note, proposing some changes. To my surprise, he agreed.


Mr Lee’s rich insights on issues come from a capacious and disciplined mind. He listens and reads widely, but he does so like a detective, looking for and linking vital clues while discarding the irrelevant.

Once, he asked if I recalled an old newspaper article on United States-China relations. I could not — this was several months back and I had put it out of my mind — but a fresh news article had triggered him to link the two developments.
I realised that he has a mental map of the world where he knows its contours well. Like a radar, he is constantly scanning for changes and matching these against the map. What might appear as random and disparate facts to many of us are placed within this map and, hence, his mental map is constantly refreshed.

A senior US leader described this well — Mr Lee is like a one-man intelligence agency.


The most remarkable feature of the map in Mr Lee’s head is the fact that the focal point is always Singapore. I mentioned his favourite word, “So?” Invariably, the “So?” question ends with, “So, what does this mean for Singapore?” What are the implications? What should we be doing differently? Nothing is too big or too small.

I accompanied Mr Lee on many overseas trips. The 1998 trip to the US is particularly memorable. Each day brought new ideas and, throughout the trip, I sent back many observations for our departments to study. It might be the type of industry that we might develop or the type of trees that might add colour to our garden city.
This remains his style today. His every waking moment is devoted to Singapore, and Mr Lee wants Singapore to be successful beyond his term as Prime Minister.
From the early 1960s, he already spoke about finding his successor. During my term with him, as Senior Minister, he devoted much effort to helping then-Prime Minister Goh Chok Tong succeed.
He refrained from visiting Indonesia and Malaysia as he wanted Mr Goh to establish himself as our leader. Instead, he fanned out to China, the US and Europe to convince leaders and investors that Mr Goh’s leadership would take Singapore to new levels of success.

As Senior Minister, he worked out with Mr Goh areas where he could contribute, and I will share three key projects that not only illustrate his contribution but, more importantly, how he develops insights and achieves results.


The Suzhou Industrial Park project was one of the areas in which Mr Goh asked Mr Lee to stay actively involved. Two years into the project, we ran into teething problems: Local Chinese officials promoted their own rival park.
Some felt that such startup problems and cultural differences were expected and would be resolved over time. But Mr Lee drilled deep into the issues and held many meetings with our officials. He worked with an intensity that I did not expect of someone who was then 75 years old.

He concluded that the problem was much more fundamental. China had (and still has) a very complex system of government, with many layers and many interest groups, some formal, some invisible. The interests of the various groups at the local levels were not aligned with the objectives that the central government in Beijing and Singapore had agreed upon. Unless this was put right, the project would not go far.

Instead of hoping that time would resolve this, Mr Lee raised issues at the highest levels and made the disagreements public. He was unfazed that going public could diminish his personal standing.
He proposed to the Chinese, among others, two radical changes: To swap the shareholding structure so that the Chinese had majority control, and to appoint the CEO of the rival park to head the Suzhou Industrial Park. Mr Lee was proven right — the changes created the necessary realignment and put the project back on track.

Next year, we will be witnessing the 20th anniversary of the Suzhou Industrial Park. From all accounts, it has been a success story, not just in its development, but also in how it has enabled a new generation of leaders from both sides to develop a deeper understanding of each other, and in paving the way for further collaboration.

I learned a valuable lesson. If things go wrong, do not sweep them aside. Confront the problems, get to the root of the difficulties, and wrestle with these resolutely. Go for long-term success, and do not be deterred by criticisms.


My second example, on the revamping of the financial sector, shows how Mr Lee is constantly looking out for how Singapore should change, and how he turns adversity into opportunity.

The 1997/98 Asian Financial Crisis hit the region hard. Many analysts attributed it to cronyism, corruption and nepotism. Mr Lee read up on all the technical analyses and met with our economists. I was amazed at how, at the age of 75, he would delve deeply into the issues.

He concluded that the reason was more basic — investors’ euphoria and the weak banking and regulatory systems in the affected countries had allowed a huge influx of short-term capital. These weaknesses had their origins in the political system. Cronyism exacerbated the problems, but was not the cause. Years later, many bankers would tell me that Mr Lee’s analysis was the best they had heard.
Mr Lee was convinced that though Asia’s economic growth would be set back temporarily, dynamism would return. In the short term, we had to navigate the crisis carefully but, for the longer term, we should turn this adversity into opportunities. While investors fled, we should use the crisis to lay the foundation for a stronger Singapore in a rising Asia.

Mr Lee took the opportunity to review the long-term positioning of Singapore’s financial sector. With the permission of then-Prime Minister Goh, he met experts from different backgrounds as well as the Chairmen of local banks.


For years, Mr Lee had believed in strict regulation and in protecting our local banks. While this protected the banks from the crisis, it had its cost. Our stringent rules, while appropriate in the past, were now stifling growth, and the banks were falling behind.
Mr Lee was persuaded that our regulatory stance had to change.
I was struck by his systematic and calibrated approach. His reputation is that he is impatient for results, and drives a fast pace. This is true, but he is also wise in distinguishing between things that change slowly and things that ought to change swiftly. Instead of one big bang, he was in favour of a series of steps which added up to a significant shift of direction.
Mr Lee discussed with and sought Mr Goh’s approval on a broad plan to revamp the financial sector. Mr Goh agreed with the plan, and later appointed then-Deputy Prime Minister Lee Hsien Loong as Chairman of the Monetary Authority of Singapore (MAS) in January 1998. Mr Lee Hsien Loong did a review of major policies and reorientated the MAS’ organisational culture. Remarkably, within a few years, the MAS was transformed. By 2006, when I became Managing Director of the MAS, I inherited an organisation with a new set of regulatory doctrines and a deeper pool of talent.

The global financial crisis of 2007/08 tested our system severely. We not only withstood the shock, but also emerged stronger after the crisis. Singaporeans’ savings were well protected and businesses recovered rapidly.

If Mr Lee had not initiated the changes in the late 1990s and sought to turn adversity into opportunities, we would not have become a stronger financial centre today. To prepare to open up our financial system in the midst of one of the worst financial crises is, to me, an act of great foresight and boldness.


My third example relates to how Mr Lee expanded our external space by being a principled advocate of collaboration, based on long-term interests. Today, we are remarkably well-connected, but this did not come by accident. Over the years, Mr Lee has worked hard at this.

His strategic world view has projected Singapore onto the global stage and created opportunities for Singaporeans. In all his years as the face of Singapore, Mr Lee also made fast friendships with senior world leaders who appreciate his view of things and respect Singapore’s principled stance on international issues.

This was driven home to me at two meetings. In 1999, relations between the US and China were very tense. China’s negotiations with the US on its entry to the World Trade Organisation (WTO) had failed, there were tensions between the two countries over US bombs that had hit the Chinese embassy in Belgrade, and President Lee Teng Hui in Taiwan had pronounced his “two states” concept.

In July 1999, US Secretary of State Madeleine Albright and Chinese Foreign Minister Tang Jiaxuan were in Singapore for the ASEAN Regional Forum. It was quite tense, and many of our officials believed there could be a flare-up at the forum. Both figures met Mr Lee separately.

Mr Lee gave each side his reading of their long-term strategic interests. His advice to the US was that it was not in their interest to be adversarial towards China or regard her as a potential enemy. To China, he suggested that it should tap into the market, technology and capital of the US to develop its economy. They should look forward, and search for areas of cooperation, such as China’s entry into the WTO.

Sitting in these meetings, I was struck by how Mr Lee approached this delicate situation. He did not say one thing to one and sing a different tune to another. If they had compared notes later, they would have found his underlying position inconsistent.
What made him persuasive was how he addressed the concerns and interests of each side. I could see from the way both reacted that his arguments struck a chord, and one of the guests asked a note-taker to write the notes verbatim for deeper study later on. In 2000, a few months after this meeting, I was very pleased to witness China’s entry into the WTO at the Doha meeting.


What is Mr Lee like as a person? The public persona of Mr Lee is a stern, strict, no-nonsense leader. But deep down, he is energised by a deep sense of care for Singaporeans, especially for the disadvantaged.

He does not express this in soft, sentimental terms — his policies speak louder, and he is content to let them speak for themselves. He distributed the fruits of Singapore’s progress in a very significant way, by enabling Singaporeans to own their flats. Apart from the investment in education, he donated generously to the Education Fund to provide awards, especially to outstanding students from poor families.

He is a firm advocate of a fair and just society. But he demands that everyone, including those who are helped, put in their fair share of effort.
Many regard Mr Lee as a pragmatist who does not hesitate to speak the hard truths. I think he is also an idealist, with a deep sense of purpose. He believes one has to see the world as it is, not as one wishes it to be. Fate deals us a certain hand of cards, but it is up to us to make a winning hand out of it. Through sheer will, conviction and imagination, there is always hope of progress.

Man is not perfect, but we can be better — Mr Lee embraces Confucianism because of its belief in the perfectibility of man. No society is perfect either, but a society with a sense of togetherness can draw out the best of our human spirit and create a better future for our people.

He is, to me, a pragmatic idealist.


During my term as PPS, the Prime Minister of a Pacific Island nation asked to call on Mr Lee. Given his very tight schedule, I thought Mr Lee would not be able to meet him. To my surprise, he said he would make the time.

He explained that this young Prime Minister’s father had been a comrade-in-arms, fighting the British for independence, and he owed it to his father, who had passed on, to offer whatever advice might be useful.

Mr Lee and his family are closely knit, and he was particularly close to Mrs Lee. On overseas trips, I had the opportunity to have many private meals with Mr and Mrs Lee. It was heartwarming to see their bantering. Mr Lee has a sweet tooth, and Mrs Lee would, with good humour, keep score on the week’s “ration”.

But when it came to official work, they drew very clear lines. Mrs Lee travelled with him whenever she could. Once, in Davos, she came into the tiny room where Mr Lee was giving a media interview. She found a stool in a corner and sat there, listening unobtrusively. Twice, I offered her my more comfortable seat near Mr Lee. She said to me: “You have work to do. I am just a busybody — don’t let me disturb you!”

Mrs Lee was supportive without intruding — she was certainly not “just a busybody”, and anyone who had the chance to observe them together would know just how close a couple they were, and how much strength her presence gave to her husband.


We live today in a different world that demands of us new ideas and approaches. But there is one quality of Mr Lee’s that we can, and need to, aspire towards: His unwavering and total dedication to Singapore, to keeping Singapore successful so that Singaporeans may determine our own destiny, and lead meaningful, fulfilling lives.

Singapore’s survival and success are Mr Lee’s life’s work and his lifelong preoccupation. History gave him a most daunting challenge — building a nation out of a tiny city state with no resources and composed of disparate migrants. He cast aside his doubts, mustered all his being and has given it his all.

His most significant achievement is to show the way forward in building a nation. There were, and still are, no textbook answers for achieving this. Mr Lee and his team analysed the issues from first principles and had the courage and conviction to do what was right and what would work for the country.
Mr Lee is an activist. He and his team would try, adapt and experiment, to get on with the job of making Singapore a better home for all. In the same way that he asks himself, we need to always be asking ourselves, “So?” So, what does this mean for Singapore? So, what should we do about it? And act on it.

Of the many qualities I have observed in him, this is the one that leaves the deepest impression on me — the one I hope we can learn to have. We take inspiration from the courage and determination of Mr Lee and his colleagues. The task of creating a better life for all Singaporeans — through expanding opportunities and through building a fair and just society — never ends.


Education Minister Heng Swee Keat spoke yesterday at the conference “The Big Ideas of Mr Lee Kuan Yew”, organised by the Lee Kuan Yew School of Public Policy in celebration of Mr Lee’s 90th birthday. This article is abridged from that speech.

Time to look for good-value buys?

The Straits Times
Goh Eng Yeow

FED up with the US Fed? For investors burnt by recent declines in stock prices, the United States central bank looks like a convenient scapegoat to blame for their woes.

The Federal Reserve's vast stimulus programme has helped to fuel a year-long rally in global equity markets.

But Fed chief Ben Bernanke pricked that bubble in May when he flagged the likely scaling back of this stimulus.

Some believe that if Mr Bernanke had said nothing, the recent precipitous sell-off may have been avoided - at least for now.

But closer scrutiny suggests that the Fed's role may have been overstated.

The real villain may not be the Fed but a host of other issues, which have been dogging the worst-hit markets for some time.

One big factor is a lack of good corporate governance practices which investors tend to overlook, doing so at their own peril.

Too often, investors take too narrow a view of governance, failing to appreciate that it extends beyond the corporate arena to include the rule of law, political freedom and the robustness of a nation's institutional framework.

But when the tide of cheap money recedes and investors turn their back on emerging markets, the flaws become all too obvious - India's political sclerosis, Brazil's credit worries and Indonesia's excessive deficit.

Still, as the dust settles on the indiscriminate sell-off which initially battered emerging markets everywhere, some markets, such as Taiwan and South Korea, have been luring investors back into their fold.

Both are export-oriented economies with healthy trade surpluses, which should help shield them from the withdrawal of the Fed stimulus - whenever that comes.

And the strong institutional framework they have built up since the Asian financial crisis 15 years ago offers another layer of comfort to investors.

Then there is the fixation over China.

Now that the days of China's double-digit economic growth are over, the worry is that the super-commodity cycle triggered by the mainland's insatiable demand for raw material has come to an end.

That has taken a toll on commodities-heavy markets such as Brazil, Indonesia and Australia.

Mr Jeff Shen, the head of emerging markets at US fund manager Blackrock, said in a recent note that the fixation over short-term performance was what led investors to adopt a commodity-based strategy that rests on China's demand for raw materials.

So every time China's manufacturing data flags a slowdown in factory activity, it inevitably triggers a big debate as to whether the mainland is handed for a hard landing - and an almost inevitable sell-off in shares on regional bourses.

But Mr Shen has this advice to offer: "In reality, it is more important to look at how successful China is at changing its economic model and to match your investment horizon to the long-term horizon it is taking."

For investors, it is more important to focus on issues such as sustainable growth and corporate cash flow, rather than try to time the market swings, he said.

Of course, that is not to say the end of the Fed easing does not matter.

Emerging market assets have been boosted to recent high levels by investment flows that were artificially strong, as traders and hedge funds took advantage of the cheap greenback to put money where it could earn a higher return.

But even as the US Fed turns off its liquidity tap in the months ahead, the risk of another financial disaster, similar to the one that hit South-east Asia in 1997, is remote.

Asian countries sit on huge war chests of reserves and a lot of their debts are now denominated in local currencies. That means it may be possible for most of them to survive the withdrawal of the Fed stimulus without triggering a painful recession.

But just as countries' fortunes will diverge once the US Fed brings its vast money-printing programme to an end, so will individual companies'.

As this new phase unfolds, issues such as company fundamentals, stock valuations and corporate governance will start to matter again to investors, to a much greater extent.

For value investors who have the patience to hold for the long term, it may be worthwhile looking for stocks to pick up again, rather than trying to time the market.

The heady days of buying an index fund to ride on the broad emerging market rally may be over, but there are many corporate gems going at pretty attractive prices waiting to be unearthed. Maybe it is time for investors to start digging hard.

Sunday, September 15, 2013

240% late interest fee

The Sunday Times
Joyce Lim

When a licensed moneylender tried to get a borrower to pay up a huge debt on an unsecured loan, the judge said no.

District Judge Leslie Chew found the interest rate of 72 per cent per annum charged by Unilink Credit to be excessive and ordered it slashed to 24 per cent. He also cut the 240 per cent per annum late interest fee to 24 per cent, saying it was not only excessive but also made the transaction "unconscionable".

He said the late interest was "entirely out of proportion to the actual loss that the plaintiff may prove arising from the borrower's default in payment of the instalments, and is therefore a penalty and unenforceable".

The case between Unilink Credit and borrower Chong Kuek Leong came before the judge after Unilink appealed against the Deputy Registrar's decision to cut both the interest rate and late fee interest rate to 18 per cent per month.

Mr Chong had borrowed $8,000 on 72 per cent interest per annum. It was to be repaid over 10 months with a late interest of 240 per cent per annum. When he defaulted on his payment, Unilink Credit went to the courts.

Lawyer Chia Boon Teck told The Sunday Times: "This judgment should send a chilling signal to lenders that their 'agreements' charging excessive interest rates may not be allowed to stand against a defaulting borrower if the borrower challenges the agreement in court."

Joyce Lim

So hard to clear debt

The Sunday Times
Rachael Boon

Credit Counselling Singapore (CCS), which helps people stuck in the red, said that about 70 per cent of people with debts to clear are aged between 30 and 50.

And the average amount owed by those whom the non-profit agency helps is about $83,000. Given their average monthly income of $3,100, these people can be stuck in debt for more than two years while they try to get their heads above water.

These are among the most vulnerable individuals who stand to benefit from new Monetary Authority of Singapore curbs on unsecured loans.

DBS Bank's head of cards and unsecured loans, Mr Anthony Seow, said that those who do not repay their credit card bills or loans on time tend to be younger.

"They don't make that much so just one other big expense might affect the repayment for that month," he said.

He noted that many who fall into debt with credit cards and personal credit lines are not really reckless spenders.

Bankers say those who resort to unsecured loans - the main type of lending targeted by the new rules - do so for emergency medical expenses, travel and home furnishing.

Industry players estimate that credit card holders have an average of five or six cards in their wallet.

A 46-year-old man who works in IT finally paid off his $65,000 debt last month.

He said: "Ask yourself, is it worth it to take the risk?

"I don't have the desire to spend or gamble off a few hundred dollars in one shot. If you win, never mind, but what if you don't?"

So easy to borrow money

The Sunday Times
Joyce Lim

When it comes to getting easy money, desperate borrowers can get what they need almost instantly from licensed moneylenders.

The Monetary Authority of Singapore's (MAS) new curbs on unsecured loans do not affect licensed moneylenders as they come under the purview of the Ministry of Law, not the central bank.

Even though unsecured loans granted by moneylenders made up less than 3 per cent of overall debt here, the Law Ministry said last week it is looking to align its rules with those of the MAS.

Last week, The Sunday Times called 20 licensed moneylenders and all were prepared to offer this reporter instant cash of up to three months' salary. They did warn that the easy loans would come with high interest rates of 150 to 420 per cent per annum.

Three were willing to offer a loan of four times the borrower's monthly income if the borrower earned between $30,000 and $120,000 per annum.

All asked basic questions about the borrower's monthly income, length of employment and type of property owned.

An employee of one moneylender explained that if the borrower defaulted on repaying, a $20,000 loan could incur an interest of $20,000 with a interest rate of 25 per cent per month charged and paid over four months.

That aside, the loan could be approved right away. "I just need you to show me your identity card and use your SingPass to retrieve your income statements online," he said.

One man who came to financial grief after borrowing from a licensed moneylender told The Sunday Times that his $8,000 loan snowballed to a $60,000 debt over a period of 10 months last year.

John (not his real name), a 29-year-old sales manager, said: "I was charged 30 per cent interest for the $8,000 loan. When I defaulted on my instalment, I was charged a late fee of 240 per cent of the instalment amount."

He said he borrowed from loan sharks to repay the moneylender.

High-risk borrowers like John are not uncommon, as moneylenders have been seeing more bad debt in recent years, said Mr David Poh, president of the Moneylenders' Association of Singapore.

"Moneylenders need to charge high interest rates to cover their losses with such borrowers. But if there are more rules to protect them, the interest rates may be reduced," he said.

Statistics from the Subordinate Courts showed that civil cases relating to moneylending more than doubled last year, with 260 cases compared to just 96 cases in 2011. In the first half of this year, there were 102 such civil cases.

These cases include those involving licensed moneylenders as well as banks and other institutions.

Monday, September 9, 2013

Introduction to bond investing

The Business Times
Cai Haoxiang

ONE month ago, as Singapore celebrated its National Day, Japan celebrated a dubious national milestone.

On Aug 9, 2013, the Japanese finance ministry announced that total Japanese government debt as at end-June was over 1,000 trillion yen, or 1,000,000,000,000,000 yen.

One quadrillion yen translates to $12.8 trillion in Singapore dollar terms, or $12,800 billion. The size of Singapore's economy was just $350 billion last year. Japan's government thus owes money to the tune of 37 Singapores. This astronomical sum was more than twice the size of Japan's own economy, which was already the third largest in the world.

Add in total corporate and private debt, and total Japanese debt is 500 per cent of its gross domestic product (GDP), or more than 2,000 trillion yen.

By contrast, the total market capitalisation of the Tokyo Stock Exchange was just 400 trillion yen at end-August.

Debt is obviously a big deal, and this is also reflected in global financial markets.

The news might tend to be dominated by stock market movements, but the movements in the bond markets have a potentially weightier impact.

According to a 2011 report by consultancy McKinsey, the world's stock of equity and debt amounted to US$212 trillion in 2010. Stock market capitalisation amounted to just a little over a quarter, or US$54 trillion. The remainder consisted of debt: bonds issued by corporations, financial institutions, governments; asset-backed securities; and bank loans held on balance sheets. Government debt amounted to 69 per cent of world GDP.

Since the global financial crisis, money has flowed into debt markets as governments borrowed to fund stimulus programmes or to boost confidence in the economy, and investors fled to the relative safety of high-quality debt securities.

Among the very rich, a popular way to mint money in a low interest rate environment was to borrow from banks at a lower rate, say 3 per cent, and buy bonds yielding a higher rate, say 6 per cent. Assuming the bonds did not go into default, which would seldom happen if they bought investment-grade bonds, and assuming the lengths of both the bank loans and bonds were matched, the trades were extremely profitable at a very low risk.

But what exactly are bonds? And how do you go about bond investing?

This article gives the briefest glimpse of the world of bonds, otherwise known as debt or fixed income securities. I will focus on the simplest type of bonds, and leave the discussion of perpetuals, callable or putable bonds, convertible bonds, preference shares, mortgage-backed securities and asset-backed securities for another day.

The gist is this: Bonds are a way for companies and governments to borrow money from investors for a fixed period of time over the long term.

From the investor's point of view, bonds are generally regarded as less risky. However, they usually have to settle for lower returns. And in an environment of potentially rising interest rates as the US Federal Reserve gradually stops pumping so much liquidity into the financial system, bonds are not a recommended investment for investors who intend to sell their bonds before they are due.

How to buy bonds

I will tackle the investing question first before going into detail on the nature of bonds.

There are two ways of investing in bonds: buying the individual bond, and buying units in a bond fund.

Buying individual bonds is typically not done by the retail investor due to the large commitment required per bond, which can be $250,000 a lot. But there are a couple of options.

Singapore government bonds, for example, can be bought through an ATM machine or Internet banking platform. The minimum investment is $1,000, and people buy in multiples of $1,000.

Some bonds are also traded on the Singapore Exchange. These are known as retail bonds. There are 10 retail bonds out on the market, issued by companies such as Singapore Airlines (SIA), Olam, Genting, CapitaMalls Asia, United Engineers, and Tiger Airways.

The minimum investment required for retail bonds is typically relatively low. In 2010, SIA was the first listed company to set aside a portion of its corporate bonds for retail investors, with a minimum subscription of $10,000.

The largest amount of debt sold to investors here happened last year, when casino operator Genting made a $1.8 billion perpetual bond issue, with another $500 million of perpetuals targeted at retail investors with a minimum subscription of $5,000.

But the main portion of the bond market is traded by institutions and high net worth individuals in the over-the-counter (OTC) market, that is, not publicly in any formal exchange. To buy them, investors go through banks or through a broker. Bond professionals, however, recommend that retail investors invest in bond funds instead. These funds invest money in a variety of bonds. This is to spread out the risk, in case the company you lent money to goes belly-up. Bond funds are typically more liquid. This means they are traded more frequently, so it is easier to buy and sell at a fairer price.

There are numerous bond funds catering to bonds across different countries, geographical regions, and companies. They can be bought through the Central Provident Fund (CPF) Investment Scheme, through fund providers such as Fidelity, Vanguard and BlackRock, and offered indirectly or directly in products by insurance companies and banks.

There are a few bond funds tradeable on SGX. The ABF Singapore Bond Index Fund is one such investment. It is an exchange-traded fund (ETF) run by Nikko Asset Management, and gives investors exposure to Singapore government bonds. Its last traded price was $1.1320 a unit, and the lot size is 1,000 units a lot. The fund distributes dividends once a year. Its last distribution was announced at end-September 2012, of $0.0128 per unit, giving a yield of 1.1 per cent.

What are bonds?

Bonds are essentially a contract between a borrower and a lender.

The lender agrees to lend a sum of money to the borrower for a fixed period of time for a year or more.

In return, the borrower typically promises to pay the lender interest payments every six months, to compensate the lender for parting with the money. These payments are known as coupons.

Coupons are called thus because bonds used to be issued to investors in the form of engraved certificates. The bonds would come with multiple coupons that represented the interest payments. When they become due, say on June 30 or Dec 31, the owner would clip the relevant coupon and bring it to a bank to exchange for money. At the end of the borrowing period, the borrower will give the entire sum borrowed back to the lender, together with the final coupon payment.

This process is automated now, but the old name stuck.

If the borrower cannot pay interest payments or pay back the original sum it borrowed, it will be in default. This is a technical term that means the borrower has not met its legal obligations according to its debt contract.

The lower the credit rating of the borrower, known as the bond issuer, the higher the chance of default.

Credit rating agencies such as Moody's, S&P and Fitch are companies that help investors assess the likelihood of failure. They classify bonds into various grades, akin to the grades you get in school.

The top four grades, AAA, AA, A, and BBB (Baa for Moody's), are known as investment grade bonds. Typically, these are bonds that banks and financial institutions invest in, because these borrowers are judged to have a low enough risk.

Issuers with strong balance sheets and mature businesses tend to get rated higher. By having a higher rating, they do not need to pay investors as much interest. The yield of investment grade bonds tend to be low, say 2-3 per cent a year.

Bonds below investment grade, such as BB, B, or C-rated bonds, are considered speculative grade. These bonds are also known as junk bonds, or high-yield bonds. These companies are assessed to be riskier to invest in and lend money to, and often have to pay investors a higher interest rate, say 7 per cent or more. There is an advantage to buying the bonds of a risky company compared to buying its stock, however.

In the event of default, bondholders get paid first as a company's assets get liquidated. Stockholders are often left with nothing after that.

The bond investor also seldom loses everything even if the company defaults. A study by Moody's on 1,100 defaulting North American bond issuers from 1983 to 2003 found the average recovery rate to be 39.5 per cent, and the median, 36.6 per cent.

Bond jargon

The bond world, unfortunately, is rife with jargon. This can make it difficult for the layman investor to understand how bonds work.

The exact mechanics of bond pricing will be explained in a future piece.

But the most important thing investors should be careful of is the percentages bandied around by bond professionals.

A bond typically pays a fixed coupon rate on its face value, the amount that the issuer has to pay back upon the end of the borrowing period.

For example, an issuer might borrow $1,000 from investors with a coupon rate of 5 per cent, for a period of 10 years. This means coupon payments are $50 a year, or $25 every half-year.

There will be a total of 20 half-year payments of $25, before the investor gets back $1,000 at the end of 10 years.

But the price of the bond, or the cost to investors who buy when the bond is first issued, might not be $1,000.

It will only be $1,000 when market interest rates equal the coupon rate. If interest rates are at 5 per cent and the bond offers a coupon of 5 per cent, the market is indifferent to investing $1,000 to get $25 a half-year either in the bond, or elsewhere. Thus it is willing to pay $1,000 for this 5 per cent coupon, 10 year bond.

But if one year later, general interest rates rise to, say, 6 per cent, the market can now get more money by investing in another instrument. Demand for this bond will fall.

The price of this bond will also fall to $931.23 - even though it will continue to pay out $25 every half-year for the next nine years, and will pay $1,000 when it matures.

If investors need to sell the bond instead of holding it till maturity, they will suffer a loss.

The coupon yield, current yield and yield to maturity of a bond can all be different. Investors need to pay the greatest attention to the bond's yield to maturity, which is the bond's total return at the moment when the investor is looking at it.

Yield to maturity is the common understanding of what a bond's yield is.

Saturday, September 7, 2013

Blumont's meteoric rise raises concerns

Published on Sep 07, 2013

Mining counter's huge gains don't square with the firm's Q2 results

By Goh Eng Yeow Senior Correspondent

THE jitters among the blue chips have not soured traders' appetite for some of the sexy mining counters now in play.

One of the most appealing has been Blumont Group, which gained an astounding 38.7 per cent in the same four weeks that saw the benchmark Straits Times Index tumble 5.7 per cent.

Even the discomfort flagged by some brokerages such as UOB Kay Hian, which requires clients to have upfront payments if they want to buy Blumont above a certain cash limit, has failed to quell the exuberance.

The counter simply shrugged off the worries and carried on with its rocket-like ascent.

It also outperformed the rest of the mining plays, which chalked an average gain of 6 per cent last month, according to the Singapore Exchange's My Gateway website.

It left some traders with burning questions over the sustainability of the share's gains.

Financial consultant Mano Sabnani said: "Blumont's rise is amazing and defies logic. It has jumped from two cents in June 2011 to about $2 now."

It ended two cents down to $1.99 yesterday on a volume of 12.05 million shares, valuing the company at $3.4 billion.

That makes Blumont more valuable than well-established firms such as container shipper Neptune Orient Lines, which is worth $2.87 billion, or transport operator SMRT, valued at $1.96 billion.

Mr Sabnani's concerns are understandable. In its second-quarter results, Blumont reported revenue of $714,000 and a hefty bottom line loss of $24.1 million. They are not exactly the type of financials in keeping with a company worth $3.4 billion.

It recently proposed to raise $43.05 million in a one-for-two rights issue by issuing 861 million new shares at five cents apiece.

My Gateway also has this note of caution on mining plays: "Investors should be aware that MOG (mineral, oil and gas) companies may undergo long periods of time without making economic realisation, and may return to the market for several rounds of fund-raising for further project development."

One key sector risk is that a company may not be able to progress to the next stage of development, or to a stage where it is able to generate revenues, it added.

For now, however, investors may be more enamoured with the string of investments Blumont has made.

The company, which is seeking approval to change its name to Blumont Phoenix Corp to reflect the change of its business to mineral and energy resources, summed up the various ventures it had taken up since late last year in a recent statement to the SGX. It included investments in an iron ore company in Indonesia, stakes in coal mining companies and in firms with exposure to gold, uranium and base metal mining.

Let Medisave cover premiums fully

Published on Sep 07, 2013

Most retirees will still need to fork out cash that some can ill afford

By Salma Khalik Senior Health Correspondent

THE $200 increase for Medisave withdrawal caps seems like a good, proactive move to help the elderly pay the premiums for integrated MediShield plans.

But it does not go far enough - because almost everyone aged 66 and older who is on an integrated plan will still need to top up their premiums with cash that some can ill afford.

The Health Ministry (MOH), in announcing the increase yesterday, said this "will enable Singaporeans to use more Medisave in paying for premiums for the private Integrated Shield plans".

Everyone above 65 will have their Medisave withdrawal limits raised by $200, making it a cap of $1,000 for those aged 66 to 75, $1,200 for ages 76 to 80 and $1,400 if you are 81 and above.

The previous caps were already enough to cover premiums for the basic MediShield plan.

With the new caps, the Government hopes to ease the burden for those on integrated plans, which are offered by private insurers and give higher payouts.

Two in three people on MediShield, the national health insurance scheme, are on integrated plans. But premiums keep increasing with age.

To be of real help, Medisave needs to at least cover the premiums for the lowest of the three integrated plan categories, which pegs payouts to B1 rates at public hospitals. But even with the new caps, these premiums are not fully covered.

By the age of 66, most people would have retired and be living on their savings. The worry raised during Our Singapore Conversation and at many health dialogues over the years is that this group of retirees would have trouble paying the cash portion of their medical insurance premium.

They would either have to downgrade to the basic MediShield, losing their years of higher premium contributions, or scrimp and save to top up what they cannot pay with Medisave.

The $200 increase will be enough only for people aged 66 to 70 years on four of the seven lowest category integrated plans, where premiums range from $888 to $1,238 a year.

The higher cap is not enough to cover any of the integrated plans for people aged 71 years and older.
Between the ages of 71 and 73, annual premiums range between $1,089 and $1,677.

This rises to between $1,249 and $1,948 at 75, then $1,601 and $2,733 for 80-year-olds.

In contrast, the highest premium for those 60 and younger is $562, well within the $800 cap.

The reason to choose an integrated plan is that basic MediShield limits - capped at $70,000 a year and $300,000 a lifetime - may not be enough if one is hit with a huge hospital bill.

But the B1 integrated plans have annual claim limits of $110,000 to $250,000. Lifetime limits range from $800,000 to unlimited.

Given the way health-care costs have been rising, it makes sense to opt for integrated plans.

What the MOH should do is to allow Medisave to be used to pay for the premiums fully, at least for the lowest category of integrated plans.

Premiums for these plans have been going up steadily, some much faster than others. This means that there will be seniors who started on a plan which was cheaper in the past, but has become more expensive than others.

It is extremely difficult for someone in his 60s or older, who has been with one insurer for decades, to switch to a cheaper one, since most would by then have some pre-existing illness.

As the saying goes, it is easier to ride a tiger than to get off.

This is where government intervention would be appreciated.

It could cap the premiums that insurers can charge for the lowest integrated plan category.

Let insurers work within these caps to offer the best deal possible for their policy holders.