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Monday, February 24, 2014

A Word of Warning on Gold: Investor Fear May Be Fading

Monday, 24 February 2014
By E.S. Browning

Gold is the stuff myths are made of.

Among the myths: It is a store of value, a hedge against inflation or a hard alternative currency.

Its behavior over recent decades suggests that it has been inconsistent in those roles. It has done better as something simpler: a bet on fear.

Gold rose on basic economic fears in the 2000s but fell starting in 2011 as those fears abated. Now fears are spreading again about waning Federal Reserve stimulus and about global growth. Gold has rebounded 11% since mid-December.

Experienced gold analysts are warning clients to be careful: If the fears subside, the price of gold could do the same.

"Gold goes up as an insurance policy and then it is sold at a loss when people no longer want insurance," said Rhona O'Connell, head of metals research and forecasts at Thomson Reuters GFMS, a research firm known for its work on gold.

Gold could move higher temporarily, but Ms. O'Connell says its price is likely to have trouble making significant gains before 2016 because economic confidence has improved.

Sameer Samana, senior international strategist at brokerage firm Wells Fargo Advisors, suggests clients use gold's rebound to sell anything they have left.

"What we have found in our work is that a broad basket of commodities is a better hedge against inflation, a greater diversification and a better hedge against the dollar," Mr. Samana said.

Gold does well "when you are very nervous about the world," he said.

He prefers copper, aluminum and zinc in a time of recovery.

Gold differs from other investments in an important way: It isn't very useful. Some is used for rings, watches, dental implants and electronic connectors.
But the vast majority is hoarded as bars, coins or, in developing countries, heavy jewelry that serves more as a protection against disaster than an adornment.

Unlike stock, gold doesn't offer a stake in a business's results. It doesn't pay dividends or interest. It doesn't grow crops like farmland or provide shelter like a building. It is useful when people are fearful and flee to it.

Gold soared in the 1970s amid oil crises, runaway inflation and a volatile stock market. When the economy recovered gold collapsed.

Gold rebounded in the troubled 2000s but peaked in 2011, the year Standard & Poor's downgraded U.S. sovereign debt and stocks fell nearly 20%. Economic stability since then has put a lid on gold.

Particularly disappointing, gold has never come close to returning to its 1980 record once inflation is taken into account.

Gold futures hit a record $825.50 in New York on Jan. 21, 1980, which in today's dollars is $2,481.98. Gold's 2011 high was $1,950.15 in today's dollars, 27% short of a record. On Friday, gold futures closed at $1,323.90.

Stocks have hit inflation-adjusted records repeatedly since 1980, most recently in December and January. Gold hasn't. It is barely halfway back to its 1980 record, taking inflation into account.

Gold in that time has worked better as a speculative bet on fear than a store of value. Because Western economies tend to experience more stability than fear, gold is typically a risky holding there.

The Permanent Portfolio, a San Francisco mutual fund that invests in bonds, gold, stocks and foreign investments, ballooned to $17 billion a year ago from $57 million in 2000. Now it is back to $9 billion.

Michael Cuggino, its president, says gold wasn't the only reason for redemptions; investors have fled bonds and other conservative investments.

 Some money has returned to his fund since gold began recovering in December.

Still, "when people got concerned about gold in the second quarter of last year, there were more redemptions than previously," he said. He is optimistic about gold but sees the mentality shifting. Investors, he said, are more concerned about returns than protection.

One reason for gold's recent rebound is demand in China and India, where economic worries have risen. Swiss refineries have worked overtime to recast big bars favored by Western banks into smaller ones preferred in Asia.

Tips on evaluating a Reit

The Business Times
Cai Haoxiang

JUST as people are judged by what they wear and how they look, real estate investment trusts (Reits) are usually judged by their yields and net asset values (NAVs). This is an overly simplistic approach that can catch investors off-guard when a Reit turns out to be riskier than they thought, or when professional valuations of properties implied by the NAV change drastically when economic conditions and market sentiments turn.

Yield, or more precisely historical yields here, refer to the distributions per unit a Reit paid investors in the past year divided by its current share price. NAV refers to the most recent valuations of the Reit's assets minus its liabilities like debt. Investors tend to look at whether a Reit's share price is trading at a premium or discount to its NAV per unit to see if there is scope for price appreciation.

High yields do not mean a Reit is an attractive buy, however. Yields are related to risk and growth potential, as investor Bobby Jayaraman pointed out in his 2012 book on Reit investing, Building Wealth Through Reits. The safer the Reit and the higher its growth potential, the lower its yields will be. This is because high demand from investors for these assets pushes up their price, thus lowering yields.

At a price of around $1.90 per unit and 10.27 cents per unit paid out in 2013, CapitaMall Trust (CMT) is trading at a yield of just 5.4 per cent, meaning investors get paid $5.40 out of every $100 invested every year, assuming distributions stay constant.

This seems low now compared to other Reits. But it was even lower. Last May, before the Reit market took fright at the withdrawal of monetary stimulus by the US, CMT was trading at a historical yield of just over 4 per cent. The market was happy to pay 4 per cent not only because CMT is seen as stable but also because CMT had shown a repeated ability to increase distributions year after year. CMT's 10-year return is about 10 per cent a year if dividends are reinvested, according to Bloomberg.

Think of a Reit's yield as the inverse of the price to earnings (PE) multiple that investors are willing to pay for companies: investors are happy to pay 50, 70, even 100 times historical earnings for a fast-growing company if its profits can double each year for the next few years.

More growth potential

Similarly, with low interest rates and risk-free 10-year Singapore bonds trading at yields of 2.5 per cent, investors are happy to get what extra yield they can by buying a steadily growing Reit at yields of 5, 4.5 or even 4 per cent.

Thus, low yields can reflect a Reit with more growth potential than its peers. A Reit can also trade at low yields also because it is seen as less risky, and thus less vulnerable to price fluctuations. Since tapering fears began last May, CMT prices have fallen about 20 per cent from their pre-taper fear highs. By contrast, Lippo Malls Indonesia Retail Trust, another Reit with shopping malls but based in Indonesia, had seen its price fall over 30 per cent. Its 2013 distributions were 3.25 cents, giving a yield of over 8 per cent now.

Why is the market now willing to pay 5-plus per cent for one Reit and 8 per cent for another? Both have shopping mall assets, which are theoretically more resilient to economic downturns than hotels or commercial properties.

But Lippo Malls is perceived to be riskier than CMT as Indonesia has faced capital outflows in the past year, and its currency had depreciated by some 20 per cent against the Singapore dollar. This translates into lower income for Singapore investors. Currency risk is hedged, but this incurs additional costs. Lippo Malls' debt is also denominated in Singapore dollars, and it has to hedge its income flows to ensure its Indonesian income can be converted back to the more expensive Singapore dollar.

Lippo Malls also borrows at a higher cost compared to CMT. It is borrowing at interest rates of 4-6 per cent. Last November, it placed out close to 250 million new units to investors, raising $100 million to strengthen its balance sheet and refinance debts. Raising equity is costly and dilutes the stake of existing shareholders. By contrast, CMT recently borrowed $350 million from investors at a cost of just over 3 per cent.

Annual fluctuations

Higher yields thus do not necessarily make Lippo a more attractive buy, just as lower yields do not make CMT a bad buy.

Lippo is also trading at a discount to its NAV, while CMT is trading at a premium. The argument for buying a Reit that is trading at a discount to its NAV is that over the long run, Reits generally trade at the value of their assets. This makes intuitive sense, because in a situation of stable economic growth, a Reit should be able to sell its properties at just about what they are valued at.

But keep in mind that NAVs fluctuate every year as Reit properties are revalued. Since Reits do not buy and sell properties every other day, Reits with particular characteristics can also trade at a permanent premium or discount to their NAVs, just as consumer and healthcare stocks generally trade at higher PEs than, for example, manufacturing stocks.

On what basis are properties valued? Let us take a look at the notes to the 2013 financial statements of AIMS AMP Capital Industrial Reit. "The valuations of the investment properties were based on capitalisation approach, discounted cash flow (DCF) analysis and direct comparison methods," it said. In both the capitalisation approach and the DCF approach, income is divided by the cap rate or the discount rate to come up with a value. But the final value is very sensitive to what rates are used. The rates used depend on what kind of growth and risks valuers ascribe to the properties.

As for direct comparison methods, when property is compared to recent equivalent transactions, value tends to be overstated during good times.

Valuation is not an exact science. Looking at yields and NAVs is a start. But what makes a good Reit investment goes beyond these two superficial measures. It takes time to know a person well enough to make an assessment of his or her character. Investors should thus also observe the actions taken by a Reit over a period of time before deciding whether it is a good investment at its current yield and NAV.

Understanding Reit structures

The Business Times
Cai Haoxiang

LAST week, we covered the basics of why investors buy property. To sum up, property investments offer capital appreciation, rental income streams and diversification. Investors also derive pleasure from owning a piece of space.

Buying residential property in Singapore for investment purposes requires a large sum of capital. Properties are generally illiquid and difficult to sell quickly. The multiple measures put in place by the government to cool the market in the last few years also impose costs and limitations on investors. Rental yields, after deducting costs of debt and maintenance, might just amount to a few percentage points a year.

Real estate investment trusts (Reits), on the other hand, offer investors a yield of 5-8 per cent currently. They are easily traded on the stock market. Investors just starting out might find Reits a more attractive proposition than buying their own physical property to rent out.

Before jumping in, investors have to understand the nature of Reit company structures and how they differ from other commonly traded structures such as bonds and stocks.

In Singapore, Reits are divided into shopping mall Reits, office Reits, industrial Reits and others such as hotel, hospital and residential property Reits. The price and yield of each type of Reit are affected by different factors.

Today's article will focus on the Reit structure itself and why Reits have become popular with both buyers and sellers alike.

Why do Reits exist?

While stocks and bonds have been around for hundreds of years and wealthy families have owned land and property for generations, Reits were only first introduced in the US in the 1960s and Australia in the 1970s.

This financial innovation helps investors by breaking up large pieces of property into smaller, easily bought and traded chunks. Reits were introduced in Singapore in 2002, with the listing of CapitaMall Trust. Since then, the number of Reits here have grown. Currently, there are 26 Reits on the market.

Reits allow companies to park their income-generating real estate assets within a financial structure that gives them tax advantages on the rental income received. Individual investors will also not be taxed on the dividend income that they get from Reits. To qualify for these tax advantages, Reits have to distribute at least 90 per cent of their income to their investors.

Essentially, most of the money that a Reit generates from renting out its properties will end up in the pockets of its investors. This is why Reits generally have higher yields than stocks of companies, which generally retain profits for growth purposes. Reits should thus not be looked upon as growth stocks, and investors should not expect them to double in value every year. But they can expect steady dividends.

Companies like to sell their income-generating property assets to Reits. By doing so, they "unlock" or monetise the value of their property, getting a tidy sum from Reit investors to reinvest for their own growth. Companies tend to own a portion of the Reit that they sell their properties to, so they can still enjoy a stable source of income even after they sell their properties.

The relationship between the company that sells the property to the Reit and the Reit itself is important to understand, as conflicts of interest may arise.

One of the hallmarks of a good Reit is having a strong "sponsor" company that can continue to feed the Reit with a pipeline of cashflow-generating properties in years to come. It is a win-win situation for company and Reit: a property developer, for example, can monetise its mature assets while ploughing money back into more development projects; the Reit has a stable growth outlook as investors know which properties might potentially be brought in; if the sponsor is financially strong, the Reit is also more financially stable and can borrow at a lower cost.

What remains to be seen are the terms of the deal, that is, whether a company sells properties to its Reit at a fair price, or whether it is just taking the chance to sell its lower-quality buildings to unknowing Reit investors while holding on to its best properties.

Reit investors look out for "yield-accretive" acquisitions. This means that the costs of debt or equity incurred to pay for the new property will be outweighed by the rental income received, such that the Reit unitholder will see an increase in his or her distributions per unit.

Some Reits in Singapore have sponsors that are developers. Property development giant CapitaLand, for example, is backing the various Reits that bear the CapitaLand name: CapitaMall Trust, CapitaRetail China Trust and CapitaCommercial Trust. Two malls of Frasers Centrepoint Limited could potentially be injected into the Reit it is sponsoring, Frasers Centrepoint Trust, at some point. They are Changi City Point and Centrepoint.

Mapletree Investments, a property group wholly owned by Temasek Holdings that has a property development arm, is sponsoring four Reits: Mapletree Logistics Trust, Mapletree Industrial Trust, Mapletree Commercial Trust and Mapletree Greater China Commercial Trust.

Business park developer Ascendas, formed from a merger of two JTC subsidiaries in 2001, has one Reit, Ascendas Reit, a stapled security Ascendas Hospitality Trust, and a business trust, Ascendas India Trust.

Other Reits have sponsors that are more like landlords instead of developers. The sponsors buy and sell property assets from third-party sellers. Real estate fund manager ARA Asset Management, itself an affiliate of Hong Kong's Cheung Kong Group headed by billionaire Li Ka-shing, partnered logistics firm CWT Limited to list Cache Logistics Trust, a Reit that owns warehouse properties. The Cheung Kong Group also sponsors Fortune Reit here, a Reit that holds retail properties in Hong Kong.

ARA Asset Management, meanwhile, manages Fortune Reit, Cache Logistics Trust and Suntec Reit.

Who runs the Reits?

Reits in Singapore are typically managed by a subsidiary of the sponsor. For example, Keppel Reit is managed by Keppel Reit Management Limited, a wholly owned subsidiary of developer Keppel Land Limited.

The CEO of the Reit manager is responsible for setting the overall direction of the Reit. There is no Reit CEO. This is a point that can confuse people looking at the financial statements and press releases of Reits for the first time, as mentions are always made of the CEO of the Reit management company, instead of the CEO of the Reit.

Responsibilities of the Reit manager, otherwise known as the trust or asset manager, include optimising the Reit's capital structure and identifying assets that can be acquired or sold, as well as planning initiatives that would enhance the value of the properties.

The property manager, meanwhile, is separate from the Reit manager but is also often a subsidiary of the sponsor. SPH Reit, for example, is managed by SPH Reit Management Pte Ltd. But its properties Paragon and Clementi Mall are managed by SPH Retail Property Management Services Pte Ltd.

The property manager provides "on the ground" services such as collecting rental payments from tenants, implementing marketing and promotional programmes, ensuring that floors are swept clean and leaking pipes fixed, and so on.

Fees are charged by the trust manager as well as the property manager. Together with finance costs, utilities costs and property taxes, these charges account for a major part of a Reit's operating expenses.

To get an idea of how much managers charge, let us take a look at the fees charged by the recently launched SPH Reit, which are typical of the industry. The trust manager will get 0.25 per cent a year of the value of deposited property as a base fee, and 5 per cent a year of SPH Reit's net property income in the relevant financial year. In addition, the manager will be paid an acquisition fee of 0.75-1 per cent of the price of properties that it acquires and a divestment fee of 0.5 per cent of properties sold.

The property manager, meanwhile, will get 2 per cent a year of gross revenue of the relevant property, 2 per cent of net property income, and another 0.5 per cent of net property income in lieu of leasing commissions.

Fees can generally be paid in either cash or units.

Aligning incentives

Fees can be a sticking point for unitholders, who argue that incentives of managers are not aligned with them. This is because the more properties are acquired, the higher the revenue and net property income will be and the more fees will rise.

There is no guarantee that additional properties acquired will be yield-accretive and generate a better return for unitholders. In good times and bad, the performance fee will still be paid out as a percentage of net property income.

However, it can also be argued that if a Reit is not managed well, the value of their properties will fall, which will also affect fees.

OUE Commercial Reit (OUE C-Reit) has an interesting way to address the issue that another Reit, Mapletree Greater China Commercial Trust, offered last year. OUE C-Reit's trust manager charges a base fee of 0.3 per cent of the value of gross assets. Then, instead of charging a percentage of net property income for its performance fee, OUE C-Reit charges performance fees based on whether its distributions per unit (DPU) will increase. The performance fee payable is 25 per cent a year of the difference between the DPU of a financial year with the previous year, multiplied by the weighted average number of units in issue for the year. The fee is payable if the DPU of the current year is more than the DPU of the immediate preceding year.

For example, if DPUs increase by one cent, and there are one billion units issued, managers get a $2.5 million performance bonus.

In other words, the Reit manager is only rewarded if the Reit benefits investors with higher DPUs. If distributable income increases but equity is diluted, Reit managers will not be rewarded.

However, this structure might also reward managers handsomely if DPUs plunge one year and recover sharply in the next. They might not get a performance fee for the year that DPUs plunge, but they will get paid for performance in the following year, even if DPUs only recover back to what they were the year before.

To sum up, investors should think about Reits as property assets, not companies. They are not fast-growing companies, but Reits can still grow by increasing their rental incomes every year through various means and by acquiring properties at good prices. Well-run, financially strong Reits will provide steady streams of income for many years to come. They have a place in every portfolio.

Monday, February 17, 2014

A smart way to property investment

The Business Times
Cai Haoxiang

PROPERTY investing has always been popular in Asia and especially in land-scarce Singapore. The common conception of how one can invest in property is often limited to buying a Housing Board (HDB) resale flat or a private condominium.

For the beginner investor with limited capital, a condo unit might not be the best type of investment to start out with. The downpayment for a suburban condo is likely to be at least $150,000. One takes on substantial debt of up to 80 per cent of the value of the property. The private property market, too, is showing signs of a market top. Rental yields have fallen while prices have risen.

The government's cooling measures also mean that most young people will only own one investment property for some time. This makes diversification difficult, but putting all of your eggs in one basket is risky.

By contrast, the publicly traded equity market offers more options. Property development companies, which buy land, build units and sell them off, are one way to get exposed.

A relatively recent innovation in Singapore is the real estate investment trust (Reit). Investors can buy small ownership chunks of portfolios of shopping malls, office buildings or industrial factories and warehouses. For example, one lot of CapitaMall Trust (CMT), the oldest Reit and biggest in Singapore, goes for about $1,800.

The publicly traded Reit market has suffered considerably since last May. Prices for Singapore Reits have corrected by around 20 per cent since fears of rising interest rates left financial markets shaken. Reit prices may very well correct further, depending on how high interest rates go.

This article will touch on why people buy property and outline the characteristics of the investment class. It will also discuss how buying a residential unit differs from buying a Reit. A future piece will elaborate on Reits specifically, and how to value them.

Why buy property?

The reasons why people buy property in general also apply to Reits. There are four main reasons to buy any sort of property: diversification, capital appreciation, rental income and as a hedge against inflation.

Property prices do not move up and down together with other asset classes such as stocks or bonds. This means that if you hold property together with stocks, for example, the overall fluctuations of your portfolio are reduced. You can sleep soundly at night knowing that your net worth is unlikely to change much on a daily basis, compared to the return you can get.

Capital appreciation comes about because Singapore is a relatively land-scarce country. If demand for land outstrips supply, prices are likely to rise. In the last 10 years, average property prices have doubled. This works out to an average yield of more than 7 per cent a year.

Retirees also like to hold property because of the rental income they provide. HDB flats and condos can be leased out to tenants on a long-term basis of six months or more. The Urban Redevelopment Authority's (URA) guidelines also state that the maximum number of occupants in a residential unit is eight, no matter how big the unit is, and each occupant should have at least 10 square metres of space.

Finally, property is regarded as a way to protect against inflation, or rising prices. When prices in an economy go up, rents and property values might also go up.

Residential properties versus Reits

Similarly, the value of a Reit's properties has the potential to appreciate. The Reit can then choose to sell the property and buy another one with a greater potential for growth.

The rental income a Reit collects and distributes to unitholders can also increase over time. Here, a key statistic to look out for is a Reit's occupancy rate. If you have a condo with three bedrooms, you want to make sure that all three rooms are rented out. Similarly, because Reits own large properties such as shopping malls or office buildings, they have to maximise their rental income.

Because of the potential for both capital appreciation and a steady stream of rental income, properties and Reits in particular are said to take on the characteristics of both stocks and bonds. Reits have high liquidity as they are divided into many tiny units which are traded like stocks. They also have bond-like characteristics because of rental payments from tenants. Just as a bond promises its holder a fixed sum of income twice a year for say five to 10 years, tenants pay rentals every month, and sign long-term leases to do so. One way to value a Reit is therefore to calculate, in today's terms, a stream of projected rental payments going into the future.

The risk of a Reit is also somewhere between that of a stock and a bond. Bonds are thought of as low-risk, low-return investments, while stocks offer higher risk for higher returns. Because they take on the characteristics of both, Reit prices should theoretically not fluctuate as much as stocks and offer investors a decent yield. This might make them good diversifiers to a portfolio.

Both Reits and residential property have similar features which potential investors would do well to take note of.

One characteristic relates to the use of debt. Property buyers generally take out loans to finance their purchases. If they can borrow at a lower interest rate than the yield they generate on their property, they will make money. Interest rate increases eat into their profits if they have to refinance their loans at higher rates.

The higher one's borrowings and the more one pays in monthly mortgages relative to one's income, the riskier the investment is. If you cannot service the property mortgage payments for whatever reason, the bank that lent you the money will have the right to claim the property and sell it off, because the property was used as collateral for the mortgage. This legal process is known as foreclosure.

Property prices are affected by the general economy. If an economy slows down or goes into recession, leading to retrenchments, some people will not be able to service their monthly mortgage payments. They might then be forced to sell their properties at a discount to repay a portion of their loan to the bank. This is known as a distressed sale. If there are many distressed sellers in the market, property prices are likely to fall. Even those holding on to properties which they have already paid off will see the values of their homes plunge.

Credit rating

Similarly, Reits borrow from banks or private investors to finance their purchases. They can also go to equity holders, but the cost of doing so is typically higher. Reits can borrow up to 35 per cent of the value of their property, and go up to 60 per cent if they obtain and disclose a credit rating from Fitch, Moody's or Standard and Poor's.

Reits typically borrow through short-term loans of a few years, and roll over their debt after the loan period is up by getting a similar loan at the prevalent market rate. In the 2008-2009 global financial crisis, financial markets feared that an economic downturn would cause tenants to go out of business and default on their rental payments. If that happened, Reits would face lower income streams and would not be able to refinance their debts. Many Reits were thus trading at extremely low valuations as investors wondered if they would go bankrupt.

An investor should therefore scrutinise the debt levels of a Reit and ask if they are sustainable. Some Reits are better placed to weather market downturns than others. In a sustained economic downturn, people might still need to shop for necessities, so shopping mall Reits might still perform well. But an office Reit might not if enough businesses decide to close shop or move somewhere cheaper.

Illiquid property

Another major characteristic of property is that it tends to be illiquid. This means that property cannot be easily disposed of. This illiquidity is due to the complexity of most property transactions, as well as the large values involved. To sell a unit without making a loss, one has to find a buyer who can pay more than what one bought it for. This is a process that can take weeks or months. In a weak market, like now, it might be difficult for an average property to fetch a good price. Even if you lower the selling price of your condo, for example, it takes time for the buyer to evaluate whether the price is worth paying, relative to other options he or she has.

By comparison, Reits and stocks of large corporations can easily be sold on the public market at any point of the economic cycle, with brokers and traders standing ready to take a position. If one desperately needs the cash, one would find it easier to liquidate a Reit investment than a property. The underlying property might still be illiquid, but the Reit itself is not.

A final characteristic of property investments is the management and maintenance costs which are required. If you own a condo for investment, you have to spend time and money advertising or sourcing for tenants, negotiating rental contracts, collecting rental payments and fixing property defects. If the property you own is old, you might need to spend money to renovate it so it will be more attractive to tenants.

On the other hand, a Reit employs an agent to help it manage the property. This is advantageous in a way. You do not have to worry about ceiling leaks or ageing facilities at a mall or office property when you buy units in a Reit. A professional manager will do it for you. Of course, the fees they charge have to be reasonable and free of conflicts of interest. Fee structures are disclosed in the Reits's annual report. We will discuss this in a future article.

The best managers will be able to add value to their properties through asset enhancement initiatives, or AEI for short. They can, for example, improve the layout of a mall to increase shopper flow. They can change the tenant mix, taking out unprofitable shops. Profitable tenants mean that Reits have the leeway to increase rentals, for example. Mall managers can also subdivide their space more efficiently to maximise rentals - witness how common spaces in malls are being used for promotional events now.

In short, property investments are usually classified as alternative investments, as opposed to the traditional classes of stocks and bonds. They can take on the characteristics of a growth stock during certain times, and offer the steady income streams of a bond in others. Those who cannot afford a condo but still want an instrument that gives a stream of income can think about getting a Reit first.

Location, location, location

The Business Times
Cai Haoxiang

WHEN we buy property, we are told that location is all that matters. But defining a good location is easier said than done. Does it mean buying something in a central and accessible area? Central to what? Accessible to whom?

There are wheels within wheels, and locations within locations.

To understand this, look no further than Orchard Road, and two malls side by side there: Somerset 313, which sits atop Somerset MRT, and Orchard Central beside it.

Theoretically, an Orchard Road property sounds good. Let's say I offer you two commercial buildings, both within walking distance of Somerset MRT, both located along Orchard Road, Singapore's premier shopping belt. Who doesn't want to own either?

Yet Orchard Central sometimes feels like a ghost town. While there are good restaurants in there, it does not see much human traffic. You can blame the layout, the tenant mix, or the way floors are connected to each other. For some reason, people do not visit it, despite its central location.

Somerset 313, in contrast, is bustling. Emerge from the exit from Somerset MRT, and you see crowds of people milling about its first floor as they browse the latest gadgets at EpiCentre or shop for dresses at Forever 21.

But as you go higher up the floors, the crowd, too, diminishes to a trickle. Food Republic on Level Five offers a wide variety of cuisines at affordable prices, but the tables there are not as packed as other food courts.

Investing in property is more complicated than you might think. Like stocks, everything looks rosy in a bull market, when people snap up every unit in a launch and sell it to people who sell it to people. But just wait till the tide goes out, to paraphrase Warren Buffett, and you'll see who's swimming naked.

In a thin market where buyer interest is scarce and there is plenty of supply, closing a sale will be tough. Suddenly, the fourth-floor unit with a blocked view and an inauspicious doorplate will go for much less. The shoebox unit in a remote part of Punggol or Sengkang with 40 years left on its lease? Good luck with that, too. A three-bedroom unit within one km of an elite primary school and a national hospital will probably do just fine, though.

One good thing about real estate investment trusts (Reits), especially shopping mall Reits, is that investment research is much easier to do.

You can visit the actual location to size the place up for yourself - whether there are good connections to the MRT, whether there are better malls nearby that people flock to, whether the mall is ageing and uninviting to hang out at.

You can talk to store owners to find out whether they are happy with mall management and making money. You can ask your friends and family who frequent the malls whether they will come back. You can see, at one glance, whether the mall is likely to make money - or whether it is going to face competition.

Bedok Point opened in 2011 and was acquired by Fraser Centrepoint Trust (FCT). At that time, it was already known that CapitaLand was building the now-opened Bedok Mall right beside it. Analysts doubted whether FCT made a wise purchase.

True enough, in its latest financial results after the Bedok Mall opening, occupancy at Bedok Point slipped to 80.2 per cent from 96.7 per cent in the previous quarter, and rental contracts were renewed at a rate that was 16 per cent lower - a less than ideal situation known as "negative rental reversion". Occupancy is expected to go back to 90 per cent when Harvey Norman moves in, but there's no getting around the fact that the mall is not doing that well.

Seeing crowds of people at malls does not automatically mean the shops there will make money either. At any one time, high-end shops seem disconcertingly empty - you need only walk around the upper floors of ION Orchard or visit the high-fashion labels at Paragon.

But some might only need to close a few sales a day to cover their rent and make a decent margin, while a mass-market retailer has to depend on volume and discounts to get by. In a mall, shops on lower floors tend to get more shopper traffic. Hence you see mass-market fast food choices there such as BreadTalk and McDonald's.

Those located on higher floors will tend to draw crowds if their offerings are really, really desired, and if people go there for a specific purpose, such as to see a movie at a cinema or to send their children to a tuition centre.

A property with a good location is, generally speaking, easily accessible. But a place that is easily accessible might not have a good location. A nearby MRT station matters a lot where a mass-market residential or retail property is concerned. But it is just a start.

Sunday, February 16, 2014

In investing, stick to the best companies

Published on Feb 16, 2014

... and those whose businesses you already know something about

By Goh Eng Yeow Senior Correspondent

Betting on a new management to turn around a struggling business rarely works in practice.
So every time someone comes to me with a sexy story of how a company boss plans to rescue an ailing listed firm, I greet it with considerable scepticism.

In my long career as a financial writer, I have rarely come across a case where it makes sense to throw good money after bad, and hope that the glory of a failing company can simply be restored with a change of ownership.

To me, it would make better sense for an investor to stick to throwing good money at already well-run companies if he wants to get a decent return on his investment. That is because good businesses tend to stay good, even if they sometimes find themselves run by managers who fail to live up to expectations.

It led to a wry observation by legendary investment guru Warren Buffett that "when a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact".

So, in any successful investment strategy, the key rules are: buy into only the best companies, stick to business sectors which enjoy predictable earnings and higher-than-average growth, and pay a fair price for the investment.

The principles may sound simple but sticking to them is easier said than done.

That brings me to another point about successful investments: How do you identify the best companies to invest in? For a start, you should stick to companies involved in businesses you already know something about.

Looking back at the milestones in his life recently, CNBC business commentator Jim Cramer noted that when he started out in his career, he was enthralled with a Florida orange grower which he knew next to nothing about.

He said: "It seemed to be compelling so I bought 10 shares. A week later, a frost hit, wiped out the crop and my investment was cut in half. I was devastated."

Undaunted, he cut his losses and used the remaining capital to buy into a clothing firm that he had read about, only to see his money halving again when the company reported a bad set of earnings.

He then reflected on what went wrong and realised that he had invested in companies whose businesses he had not understood. He said: "What did I know about growing oranges? Very little. What did I know about women's fashion? Less than what I knew about oranges."

Mr Cramer's observation seems so obvious that you would think most investors would have worked it out for themselves. But they seem intent upon immediate gains as they go about chasing after the next sexy stock in sight.

Part of the problem, I believe, is the obsessive focus on the short-term such as the next set of earnings numbers which, in turn, triggers a flood of calls by analysts advising investors what they should do with their stocks. It certainly helps the broker to churn up his commission income while doing nothing to grow an investor's nest egg.

Yet, what will really determine a company's fortune is the quality of its earnings growth over the long term, and not the quarterly profit figures which send analysts into a tizzy.

But if you expect the research reports you get from your broker to offer you such insights, you will be sorely disappointed.

Fortunately, it is not too difficult to spot investment gems. As I noted in an earlier column, some of my best investment ideas come from observing the habits of consumers, including my own.

It led me to buying stocks such as Cerebos Pacific (which has since been delisted) and British American Tobacco (Malaysia) whose businesses outperform incrementally year after year - but reward their shareholders with a solid dividend payout while doing so.

Investment opportunities abound all the time. The key is to stay alert when they knock on your door.
During the recent stock market wobble, my broker sent me a list of the names of the blue chips which had sunk to their lowest price levels in a year.

There were a few familiar household names which caught my attention. They included OCBC Bank and the Singapore Exchange in the financial sector, and defensive plays such as the Hong Kong-based Dairy Farm, which owns the Cold Storage supermarket chain here.

Now, some of these names enjoy commanding positions in their respective businesses which have been tried and tested over the decades as the stock market was rocked by one financial crisis after another.

For prudent investors, the best time to get blue chips on the cheap is when the market suffers from financial turmoil. It may thus be worth your while to stay alert, as wild price swings become the norm again on the stock market.
Goh Eng Yeow is the author of Small Change: Investment Made Simple

Tuesday, February 11, 2014

Why the humble cauliflower packs powerfully nutritious punch

Tuesday, 11 February, 2014, 11:01am

Jeanette Wang

The vegetable is gluten-free and diabetic-friendly, with a low glycaemic index. So why don't we eat more of it, asks Jeanette Wang

Imagine eating bangers without mash or curry without rice: palatable, but tough. As popular and effective low-carb diets are, the truth is a meal without a starchy carb - rice, noodles or potatoes - often doesn't satisfy.

Serene Loong, who describes herself as "in my late 30s with middle-aged metabolism", knows the feeling well. Tired of not fitting into her clothes, in 2010 she embarked on a low-carb diet and lost 10kg in three months. But once she reintroduced carbs to her plate, "the weight came back with a vengeance" and the scale returned to 58kg.

Cauliflower is very versatile and can be treated like a piece of protein

Matt abergel, owner of yardbird

"To restrict certain foods like mashed potatoes or rice serves to make us want it more," says Loong. "So I thought, why not make mash or rice from the stuff you're supposed to eat more of anyway, such as vegetables?"

Scouring the internet for recipes, she eventually found an alternative: cauliflower. Chopped, cooked and blended with a bit of cream cheese or butter, the cruciferous vegetable resembles and tastes like mashed potatoes - but with fewer calories and fat, and about a third less carbs.

The only trouble was preparing and cooking the cauliflower mash took at least 20 minutes. Taking inspiration from instant mashed potatoes, Loong decided to develop a similar product using cauliflower.

Cauliflower Mash by Zero Cuisine. [1]After a year of research and development with a food technician in Singapore, Zero Cuisine was born. Loong says each serving of her instant cauliflower mash - just add water - is made from 300 grams of fresh cauliflower and contains 60 calories, 15 grams of carbs, one gram of fat and five grams of fibre.

That's 63 per cent fewer calories, 38 per cent fewer carbs, 92 per cent less fat and 150 per cent more fibre than traditional mashed potatoes made with cream and butter.

Zero Cuisine is scheduled to hit grocery stores next month. In the meantime, Loong is selling samples via international crowdfunding site Indiegogo ( [2]) in a bid to raise US$10,000 to keep her business going.

It's certainly a good time to be dealing with cauliflower. Food trend experts have named it a hot commodity for 2014: the Canadian Press last month crowned it "the new kale" (last year's veggie superstar) and Baum+Whiteman, a US-based food and restaurant consultancy, identified cauliflower as one of 30 buzzwords in food this year.

"Cauliflower is extremely versatile and, in many ways, can be treated like a piece of protein," says chef Matt Abergel, owner of Yardbird, a bustling yakitori outlet in SoHo that serves up sweet and spicy Korean fried cauliflower. "It's not difficult to find good quality cauliflower and it's relatively inexpensive."

Gluten-free and diabetic-friendly with a low glycaemic index, the vegetable is a good substitute in dishes that call for traditional carbs or protein. At Washington's downtown Cedar Restaurant, cauliflower is grated into rice-sized pieces and cooked in a similar way to risotto. In California's Superba Snack Bar, a thick slab of grilled cauliflower is served - and said to be as satisfying - as a T-bone steak.

Still other chefs have used cauliflower to make pizza crust, hash browns and popcorn, giving the pale, pungent and unpopular vegetable a new lease on life.

"I grew up with a lot of vegetables and cauliflower was one of them, so I have no prejudice on its flavour profile or its smell," says Richard Ekkebus, culinary director of the The Landmark Mandarin Oriental hotel in Hong Kong, whose signature dish is sea urchin in lobster jello with cauliflower, caviar and crispy seaweed waffle.

"In a lot of food cultures, smelly ingredients such as cheese or stinky tofu are seen as absolute delicacies.

"What I like about cauliflower is its versatility in utilisation: raw, finely chopped and then just blanched for a couscous-like texture, caramelised in a skillet and roasted till fondant, or cooked thoroughly as a purée. They're all worthy preparations."

In spite of its recent rise in the culinary world, cauliflower has always ranked highly in health and nutrition.

It's a good source of vitamin C, folate, potassium and fibre. According to the USDA National Nutrient Database, 100 grams of raw cauliflower - about one cup of chopped pieces - contains just 25 calories, two grams of protein, 0.3 grams of fat, five grams of carbohydrate, two grams of dietary fibre and two grams of sugars.

Cauliflower is part of a family of cruciferous vegetables - including broccoli, brussels sprouts, cabbage and kale - that are rich in organic compounds called indoles, which have a positive impact on cellular health.

Diindolylmethane (DIM) is one such compound that has shown to support the immune system and help keep hormones, especially oestrogen, in balance.

Breast, prostate and other areas of hormone-related cellular health rely on this balance. DIM has been proven to increase the good kind of hormone metabolites and decrease the kind that can derail health.

DIM may also protect normal tissues in cancer patients during radiation therapy and may prevent or mitigate sickness caused by radiation exposure in healthy people, according to a study on mice by Georgetown University published in October in the Proceedings of the National Academy of Sciences.

Cruciferous vegetables are also rich in another compound, sulforaphane, which has shown in tests on rodents to inhibit some cancers either induced by carcinogens or arising from genetic make-up.

Johns Hopkins researchers have also found that the compound helps prevent the severe blistering and skin breakage brought on by the rare and potentially fatal genetic disease epidermolysis bullosa simplex.

Many people shy away from cauliflower, however, because of its smell. Playing around with cooking methods can help you enjoy the vegetable.

"Cauliflower is very dense and has a low water content, so cooking it over high heat with a good amount of fat is best," says Abergel. "Cauliflower also takes well to strong flavours, like spice and vinegar. Personally, I like to deep fry or caramelise cauliflower."

Try seasoning cauliflower with the curry spice turmeric: the combination has shown potential for the treatment and prevention of prostate cancer, say researchers at Rutgers University.

Google "cauliflower recipes" and you won't be short on ideas. The 10 best cauliflower recipes named by The Guardian in an article last year include cauliflower and pear bake, cauliflower omelette, a French cauliflower gratin, and roasted cauliflower tart with oat-walnut crust and lemon herb filling.

The worst way to cook cauliflower is boiling, say University of Warwick scientists. In their 2007 study, boiling appeared to have a serious impact on the retention of cancer-protective substances called glucosinolates found in cruciferous vegetables.

After boiling for 30 minutes, cauliflower lost 75 per cent of the phytochemical. Steaming for up to 20 minutes, microwaving for up to three minutes and stir-frying for up to five minutes showed no significant loss of the compound.

The bottom line to reap the health benefits of cauliflower and its cruciferous cousins: eat the real thing. A 2011 study by Oregon State University found that an enzyme called myrosinase, which helps with the absorption of glucosinolates, is missing from most of the supplement forms of the compound.

Tuesday, February 4, 2014

Instrumental Returns Of The STI Over The Past 10 Years

 04/02/14 3:00 pm
Last week State Street Global Advisers updated the ten year performance chart of the SPDR® Straits Times Index (STI) ETF as of the end of 2013. ETF stands for Exchange
 Traded Funds, which is basically an investment fund that can be bought and sold like a stock on the Singapore Exchange (SGX). There are two ETFs listed on SGX that track the performance of the STI – the SPDR® STI ETF and the Nikko AM STI ETF. The SPDR® STI ETF was introduced in April 2002, while the Nikko AM STI ETF was later introduced in February 2009.

Another feature of the ETF is that in order to provide returns that track the STI, the ETF invests in the stocks that make up the index, which are then appropriately weighted in order to resemble the performance of the index. These stocks become the primary assets of the fund. The fund will also be made up of multiple units, each of which has a Net Asset Value (NAV). When one refers to an ETF being “open ended”, it means there are no limits on the amount of units in the ETF unlike stocks, where there is a fixed number when issued. Hence in this case, the value of the fund depends on its net assets, ability to track the STI, and the performance of the STI itself. Some of the largest stocks of the STI were discussed inlast week’s highlight. Essentially, you can “invest” the in STI using an ETF.

The performance chart of the SPDR® STI ETF is detailed with or without dividends. With dividends, the NAV of the SPDR® STI ETF gained 140.4 percent in the ten years ending December 2013. Without dividends, the NAV gained 78.7 percent. On an annualised basis, the NAV of the ETF averaged a 9.2 percent annual gain with dividends and a six percent annual gain without dividends.

Hence the composition of the annualised returns over the past ten years were as follows:

As noted above, the ability of the ETF to track the STI will have an effect on the performance of the ETF. Over the same period of time the index gained 79.5 percent without dividends, which also generated an average annualised return of six percent over the ten years. NAV will also take into account the costs associated with the ETF which are usually bundled together to form the total expense ratio. The current annual total expense ratios for the SPDR® STI ETF and Nikko AM STI ETF are respectively 0.3 percent and 0.39 percent of the NAV. This is lower than traditional funds that might charge between one percent and two percent per annum.

The Nikko AM STI ETF has a smaller unit size than the SPDR® STI ETF. At a price of $3.00, the minimum investment in the Nikko AM STI ETF is $300 and the minimum investment in the SPDR® STI ETF is S$3,000. Despite the underlying STI ending the 2013 year with its price unchanged, growing participation in the Nikko AM STI ETF meant that turnover increased by 18 percent. The two ETFs distribute dividends on a semi-annual basis.

These two ETFs were also amongst the most liquid of SGX listed ETFs in 2013 and both ETFs are classified as Excluded Investment Products (EIP), which do not require retail investors to be pre-qualified by their brokers before trading.

Cancer 'tidal wave' on horizon, warns WHO

4 February 2014 Last updated at 06:33

Large numbers of people do not know there is a lot they can do to reduce their exposure to risk
The globe is facing a "tidal wave" of cancer, and restrictions on alcohol and sugar need to be considered, say World Health Organization scientists.

It predicts the number of cancer cases will reach 24 million a year by 2035, but half could be prevented.

The WHO said there was now a "real need" to focus on cancer prevention by tackling smoking, obesity and drinking.

The World Cancer Research Fund said there was an "alarming" level of naivety about diet's role in cancer.

Fourteen million people a year are diagnosed with cancer, but that is predicted to increase to 19 million by 2025, 22 million by 2030 and 24 million by 2035.

The developing world will bear the brunt of the extra cases.

Chris Wild, the director of the WHO's International Agency for Research on Cancer, told the BBC: "The global cancer burden is increasing and quite markedly, due predominately to the ageing of the populations and population growth.

"If we look at the cost of treatment of cancers, it is spiralling out of control, even for the high-income countries. Prevention is absolutely critical and it's been somewhat neglected."

The WHO's World Cancer Report 2014 said the major sources of preventable cancer included:
Obesity and inactivity
Radiation, both from the sun and medical scans
Air pollution and other environmental factors
Delayed parenthood, having fewer children and not breastfeeding

For most countries, breast cancer is the most common cancer in women. However, cervical cancer dominates in large parts of Africa.

AdvertisementDr Chris Wild, WHO: "We're not going to be able to address this problem by simply improving treatment"

The human papillomavirus (HPV) is a major cause. It is thought wider use of the HPV and other vaccines could prevent hundreds of thousands of cancers.

One of the report's editors, Dr Bernard Stewart from the University of New South Wales in Australia, said prevention had a "crucial role in combating the tidal wave of cancer which we see coming across the world".

Dr Stewart said human behaviour was behind many cancers such as the sunbathe "until you're cooked evenly on both sides" approach in his native Australia.

He said it was not the role of the International Agency for Research on Cancer to dictate what should be done.

But he added: "In relation to alcohol, for example, we're all aware of the acute effects, whether it's car accidents or assaults, but there's a burden of disease that's not talked about because it's simply not recognised, specifically involving cancer.

"The extent to which we modify the availability of alcohol, the labelling of alcohol, the promotion of alcohol and the price of alcohol - those things should be on the agenda."

He said there was a similar argument to be had with sugar fuelling obesity, which in turn affected cancer risk.

Meanwhile, a survey of 2,046 people in the UK by the World Cancer Research Fund (WCRF) suggested 49% do not know that diet increases the risk of developing cancer.
A third of people said cancer was mainly due to family history, but the charity said no more than 10% of cancers were down to inherited genes.

Amanda McLean, general manager for the WCRF, said: "It's very alarming to see that such a large number of people don't know that there's a lot they can do to significantly reduce their risk of getting cancer.

 For most countries, breast cancer is the most common cancer in women.
"In the UK, about a third of the most common cancers could be prevented through being a healthy weight, eating a healthy diet and being regularly physically active.

"These results show that many people still seem to mistakenly accept their chances of getting cancer as a throw of the dice, but by making lifestyle changes today, we can help prevent cancer tomorrow."
It advises a diet packed with vegetables, fruit, and wholegrains; cutting down on alcohol and red meat; and junking processed meat completely.

Dr Jean King, Cancer Research UK's director of tobacco control, said: "The most shocking thing about this report's prediction that 14 million cancer cases a year will rise to 22 million globally in the next 20 years is that up to half of all cases could be prevented.

"People can cut their risk of cancer by making healthy lifestyle choices, but it's important to remember that the government and society are also responsible for creating an environment that supports healthy lifestyles.

"It's clear that if we don't act now to curb the number of people getting cancer, we will be at the heart of a global crisis in cancer care within the next two decades."

Emerging markets face fragile future

By  Nouriel Roubini
Published: 04 February, 4:02 AM

The financial turmoil that hit emerging-market economies last year, following the United States Federal Reserve’s “taper tantrum” over its quantitative-easing (QE) policy, has returned with a vengeance.

This time, the trigger was a confluence of several events: A currency crisis in Argentina, where the authorities stopped intervening in the forex markets to prevent the loss of foreign reserves; weaker economic data from China; and persistent political uncertainty and unrest in Turkey, Ukraine and Thailand.

This mini perfect storm in emerging markets was soon transmitted, via international investors’ risk aversion, to advanced economies’ stock markets. But the immediate trigger for these pressures should not be confused with their deeper causes: Many emerging markets are in real trouble.


The list includes India, Indonesia, Brazil, Turkey, and South Africa — dubbed the “Fragile Five”, because they all have twin fiscal and current-account deficits, falling growth rates, above-target inflation and political uncertainty from upcoming legislative and/or presidential elections this year.
But five other significant countries — Argentina, Venezuela, Ukraine, Hungary and Thailand — are also vulnerable. Political and/or electoral risk can be found in all of them, loose fiscal policy in many of them and rising external imbalances and sovereign risk in some of them.

Then, there are the over-hyped BRICS countries, now falling back to reality. Three of them (Brazil, Russia and South Africa) will grow more slowly than the US this year, with real (inflation-adjusted) gross domestic product rising at less than 2.5 per cent, while the economies of the other two (China and India) are slowing sharply.

Indeed, Brazil, India and South Africa are members of the Fragile Five, and demographic decline in China and Russia will undermine both countries’ potential growth.

The largest of the BRICS, China, faces additional risk stemming from a credit-fuelled investment boom, with excessive borrowing by local governments, state-owned enterprises and real-estate companies severely weakening the asset portfolios of banks and shadow banks.

Most credit bubbles this large have ended up causing a hard economic landing and China’s economy is unlikely to escape unscathed, particularly as reforms to rebalance growth from high savings and fixed investment to private consumption are likely to be implemented too slowly, given the powerful interests aligned against them.


Moreover, the deep causes of last year’s turmoil in emerging markets have not disappeared. For starters, the risk of a hard landing in China poses a serious threat to emerging Asia, commodity exporters around the world, and even advanced economies.

At the same time, the Fed’s tapering off of its long-term asset purchases has begun in earnest, with interest rates set to rise. As a result, the capital that flowed to emerging markets in the years of high liquidity and low yields in advanced economies is now fleeing many countries where easy money caused fiscal, monetary and credit policies to become too lax.

Another deep cause of current volatility is that the commodity super-cycle is over. This is not only because China is slowing; years of high prices have led to investment in new capacity and an increase in the supply of many commodities.

Meanwhile, emerging-market commodity exporters failed to take advantage of the windfall and implement market-oriented structural reforms in the decade; on the contrary, many of them embraced state capitalism, giving too large a role to state-owned enterprises and banks.

These risks will not wane any time soon. Chinese growth is unlikely to accelerate and lift commodity prices; the Fed has increased the pace of its QE tapering; structural reforms are not likely until after elections; and incumbent governments have been similarly wary of the growth-depressing effects of tightening fiscal, monetary and credit policies.

Indeed, the failure of many emerging-market governments to tighten macroeconomic policy sufficiently has led to another round of currency depreciation, which risks feeding into higher inflation and jeopardising these countries’ ability to finance twin fiscal and external deficits.


Nonetheless, the threat of a full-fledged currency, sovereign-debt and banking crisis remains low, even in the Fragile Five, for several reasons.

All have flexible exchange rates, a large war chest of reserves to shield against a run on their currencies and banks, and fewer currency mismatches (for example, heavy foreign-currency borrowing to finance investment in local-currency assets). Many also have sounder banking systems, while their public and private debt ratios, though rising, are still low, with little risk of insolvency.

Over time, optimism about emerging markets is probably correct. Many have sound macroeconomic, financial, and policy fundamentals.

Moreover, some of the medium-term fundamentals for most emerging markets, including the fragile ones, remain strong: Urbanisation, industrialisation, catch-up growth from low per capita income, a demographic dividend, the emergence of a more stable middle class, the rise of a consumer society and the opportunities for faster output gains once structural reforms are implemented. So it is not fair to lump all emerging markets into one basket; differentiation is needed.

But the short-run policy trade-offs that many of these countries face — damned if they tighten monetary and fiscal policy fast enough, and damned if they do not — remain ugly.

The external risks and internal macroeconomic and structural vulnerabilities that they face will continue to cloud their immediate outlook. The next year or two will be a bumpy ride for many emerging markets, before more stable and market-oriented governments implement sounder policies. PROJECT SYNDICATE


Nouriel Roubini is Chairman of Roubini Global Economics and Professor of Economics at the Stern School of Business, NYU.

Monday, February 3, 2014

Cancer cases on the rise in Singapore

Published on Feb 03, 2014

Worrying trend of more lifestyle cancers like prostate, breast tumours

By Linette Lai

CANCER is on the rise in Singapore - especially those linked to bad habits associated with the modern lifestyle, including smoking and eating too much.

According to the latest available figures from two years ago, 12,123 people were diagnosed with cancer, up from 10,576 in 2008. This marks an increase of nearly 15 per cent.

One reason for these numbers, said National Cancer Centre Singapore (NCCS) director Soo Khee Chee, is an ageing population. The NCCS is Singapore's leading cancer treatment and research centre.

"In developed countries like ours, people are living longer. Previously, people would die before they got cancer," he said.

But what is more worrying is how "lifestyle cancers" such as prostate, breast and colo-rectum cancers are contributing to the rise as well.

Prostate cancer cases went up by 52 per cent from 2003 to 2012, when cases of breast cancer also rose by 25 per cent.

These cancers are, respectively, among the top three most common in men and women. They are also known as "developed world cancers" because they are associated with the lifestyle in these countries.

One factor that increases the chance of cancer is smoking, said Professor Soo.

"Overall, the rate of smoking is moving downwards, but there is a trend of more younger people here taking it up," he said.

Health Promotion Board figures from 2010 showed that 16 per cent of young people aged 18 to 29 smoked regularly, up from 12 per cent in 2004.

Other factors contributing to the rise of cancer here are poor diet and lack of exercise, because we are "overfed and eating the wrong food", Prof Soo said.

Having fewer children and having them later also increase a woman's chances of getting cancer, he added.

Cancer remains the No.1 killer in Singapore, with 30 per cent of deaths in 2011 caused by the disease. This is five times more than deaths caused by accidents, violence and poisoning together.
But the outlook is not all bleak.

The chances of getting cancer can be lowered dramatically by modifying one's lifestyle. Stopping young people from smoking, for instance, "will almost decrease cancer deaths by a third if we succeed", Prof Soo said.

Some of the most common cancers are also those which have the highest survival rates.

Breast cancer - which is the most common cancer in women - has a five-year overall survival rate of 89 per cent. This means that 89 of every 100 people diagnosed with breast cancer were still alive after five years. The corresponding figure for lymphoma was 70 per cent, while that for colon cancer was 60 per cent.

"Cancer is not a death sentence," said Prof Soo. "It would be a pity if cancer patients go into despair or give up because they think that way."

Saturday, February 1, 2014

The ethics of end-life sedation and hydration

Saturday, Feb 01, 2014
The Straits Times
By Andy Ho

The National University of Singapore medical school just launched an online casebook about ethical dilemmas that doctors face, including end-of-life issues, which have been on my mind a lot lately.

My mother passed away at 81 less than two weeks ago from end-stage adenocarcinoma of the lung.
Diagnosed 14 months earlier, she was virtually symptom-free for the first 13 months. So she did quite well considering also that the median survival time for such cases is about 8 months.

Locally, lung cancer is the third most common malignancy in women. And the adenocarcinoma variety is the most common form of lung cancer in women, often non-smokers like my mother.
Because the adenocarcinoma often begins in the outer parts of the lungs, symptoms like cough, shortness of breath and blood in the sputum are not common: my mother never had them.

She stayed active and independent until the final month of her life when the cancer started producing the antidiuretic hormone (ADH). In health, it is the pituitary gland in the brain that produces ADH, which normally maintains the delicate balance of water and salt in the body.

When a cancer itself starts producing ADH - this is called the syndrome of inappropriate antidiuretic hormone (SIADH) production - it upsets the body's delicate balance of water and salt. In SIADH, the kidneys stop producing urine, so the body retains too much water and does not have enough salt. At this point, the patient becomes weak, confused, delirious and may fall into a coma.

Because the body retains water excessively in SIADH, the patient is not allowed liquids. At this point, I asked if my very delirious and distressed mother could be sedated continuously until death.
This is called continuous deep sedation (CDS), during which fluids are concurrently discontinued. even if there is no SIADH.

My mother had, on several previous occasions, expressed her wish to many of us separately that she wanted to suffer as little as possible. Hence my request for CDS, to render her unconscious until she died.

But CDS is controversial the world over. A 2013 University of Chicago survey found that 10 per cent of US doctors have carried out the procedure before.

The idea is to make the dying patient - with intractable suffering that cannot be alleviated despite optimal treatment - go into deep sleep. However, in sedating the patient to unconsciousness, the doctor must avoid using so much of the sedative that the patient stops breathing, which might be construed as active euthanasia.

The balancing act is required because the drugs that induce and maintain deep sleep can also suppress the brain centre that controls our automatic breathing. That is, CDS may hasten death unintentionally. But it is still permissible under the doctrine of double effect.

Originally developed in Roman Catholic theology, this doctrine states that an action is morally permissible even though it may also lead to serious harm, such as the death of a human being, because it does much good.

Thus, some consider CDS to be ethically permissible, since sedation for the delirious is par for the course anyway and, used for the dying, can offer much comfort.

However, CDS may also be accompanied by the withholding of hydration, which would make it look like euthanasia by stealth.

The reason given for withholding fluids in CDS is always that it is common practice in palliative care not to rehydrate dying patients. Also, withholding fluids causes them no symptoms of suffering that can be discerned, save for a dry mouth, it is said. It is also claimed that, under the circumstances, fluid withdrawal does not quicken death anyway.

But most family members would beg to differ: water is needed for life, so how could withholding fluids benefit the dying? It certainly can't make the patient more comfortable, one feels.

Some argue, though, that as the body's systems begin shutting down with death approaching in the very ill, the kidneys can no longer excrete the additional fluid that an intravenous (IV) drip delivers. That fluid could pool in the lungs, causing the patient difficulty in breathing, it is argued.

While there is a medical consensus that appropriate sedation does not shorten life per se, there is vigorous disagreement over whether fluids should be concurrently withheld in CDS.

It seems more prudent not to assume that a dangerously ill patient who does not receive hydration should feel no thirst.

In fact, one should assume that she experiences thirst - unless disease has destroyed the centre for thirst (in the part of the brain called the hypothalamus).

Retrospective studies of hydration and thirst in the dying have produced data that is hard to interpret, especially in patients dying of lung cancer with SIADH, like my late mother.

But it would be unethical to do prospective studies on the issue, which would require the random assignment of some dying patients to fluid withdrawal and others to artificial hydration by IV drip, when it is their comfort that should be uppermost.

Therefore, many doctors would set up drips for such hospitalised patients if they can no longer drink (unless there is SIADH).

Clearly, scientists don't yet have a firm grasp of the benefits and harms of dehydration or rehydration in this situation, so clinicians will continue to manage terminal hydration in ways that they are personally comfortable with.

Experience in palliative care - in hospice rather than hospital settings usually - supports the view that most patients with death imminent do die in comfort without drips. But it is hard to believe that they are not also thirsty. Perhaps, being semi-conscious or unconscious on CDS, they just can't communicate their thirst.

Mercifully, my mother passed away in her sleep before a decision on CDS was made for her.
But it still remains for the profession to discuss the issue and come to a consensus on CDS for the terminally ill and also whether it should be accompanied by dehydration or rehydration.