Singapore bum investment decisions

Here's a not-so-flattering take by the ft on the investment decisions undertaken by some of the Singapore companies.
Ouch...

The competition gets even more intense

With the credit crunch in full swing, many US and UK based finance professionals are heading to Singapore's shores.
This mass exodus of 'talented' foreigners into sunny Singapore to escape or as a result of the mass culling in New York and London looks set to continue at least for the next few months.
With this exponential arrival of skilled migrants, there will be new opportunites to be uncovered but yet stiffer competition to be faced.
Local Singaporeans will once again, as usual, have to prove their worth in this rising tide of skilled foreign talents. Hopefully, the quality of our people will be enhanced through even tougher competition.

Capitalism and Greed

It is immensely exciting to witness the near capitulation of Fannie and Freddie for it bears the following implication:

a. The US brand of capitalism is not insulated from disaster - the US will no longer be able to stand on a economic ethos high ground and preach the 'goodness' of their brand of capitalism

b. Much of the failings can be attributed to greed and human nature. The US financial systems have their internal checks and balances, but human greed cannot be easily checked nor balanced. How can we prevent financial institutions from leveraging to the tills, when everyone is doing the same?

The current de-leveraging process will take years to unwind, and the excesses built up over the last decade will take as much, if not more time to work off.

Expect the worst and hope for the best.

Did Temasek make a mistake?

It is interesting to note that in the latest cash call by Barclays, Temasek only contributed a measly 200 million pounds. I think This has more to do with a diluation issue than having a real interest in buying the share at a 9% discount to the stock price as of Tuesday.
So, if we apply Buffet's definition of a good stock (of buying more when the price drops), then indeed Temasek's action may have the following implications:
a. That they may have paid too much last summer
b. That there may be more write-downs for Barclays and a further cash call

Ouch!

Conversations with a Taxi Driver Part 1

On my many overseas trips, the journey from the airport to the city/hotel usually provides a fertile opportunity to strike up a conversation with the taxi driver.
These conversations provide a great insight into the people and the country - it is amazing just how people open up when 'boxed' up in a vehicle.

Description of Journey: From OR Tambo International to Jo'berg CBD (South Africa)
Journey Time: 40mins
Cost of journey: 350 Rand (approx 65 SGD)
Date: Sometime in mid May when the xenophobia violence broke out in Johannesburg townships
Taxi driver: 'Prince' - we called him the 'Fresh Prince of Joberg'
Background: Prince is a native South African and speaks English pretty well albeit with a strong Africana accent. Taxis in Johannesburg are usually unmarked and run privately, so it is important to find a driver whom one can trust, especially if it is the first trip there. Due to this reason, people like Prince are doing a roaring trade chauffeuring foreigners around.
Prince owns four Mercedes Benz, including a Mercedes 4x4 and a 300 series. Probed further, he revealed that Mercedes evokes the imagery of a dependable, reliable and classy ride. Beemers are a 'no-no', since they are usually targets for carjackers.
There is no available public transport to bring travellers from the airport to the city - the only option is via the taxis or minibuses. The airport is currently undergoing massive renovations in preparation for the World Cup 2010.
Interesting observations: En-route to the city, we came across several Nike ads which depicts athletes in various pledges of using their bodies as a 'weapon' to 'fight' the odds. This was how Nike South Africa defined their campaign: Every day is a struggle in South Africa, albeit a struggle for respect and dignity, or a fight for food or against crime, Nike feels it has a powerful message to share – that through sport, anyone can overcome anything."
Goes to show how violence is so ingrained in the South Afican psyhic/culture.
Conversations: Inquired about the xenophobic violence in the townships. Prince was particularly against foreigners from other parts of Africa who are taking away their jobs. Sounds familiar to what's happening back home in Singapore, I added. Folks back home in Singer are complaining about highly-skilled jobs taken over by foreign talents. Adding to the pain, even lower-skilled jobs are becoming scarce, due to influx of cheaper labour from parts of Asia.
Here, immigrants from Zimbabwe, Somalia having attracted by South Africa's brighter lights and better opportunites have poured into the country since the past decade. The outbreak of violence was the culmination of anger and frustration at the loss of jobs to immigrants, fuelled by the rising cost of living which have escalated at least threefold since the beginning of the year.
Funny Incident: Not just our designated driver, Prince has many other clients to attend to. So, on one occasion, he was not available and sent a 'stand-in' driver to pick us up. Our stand-in driver turned out to be a scholar and have little or no experience driving in Jo'berg. The car stalled twice as he tried to start the car in 2nd gear and we ended up 'cruising' in Jo'berg at a lesiurely 40km/h.

Loss of jobs to foreigners seems to be the common grouse these days, but this seems inevitable as the world gets progessively flatter. Especially for a open and small nation like Singapore without any natural resources, the effect will be even more pronounced for native Singaporeans when our government strive to attract the best into our city.

London Votes!

It's funny how wife and I never had the opportunity to vote in Singapore but are now presented with a chance to do so tomorrow.
The face-off is between Ken Livingstone, the Labour incumbent versus the Conservative Party (read opposition) candidate Boris Johnson. We had polling cards, a leaflet explaining the policies which each candidate is proposing and what each of them stands for, sent to our flat.
The incumbent is riding on his past credentials and the fact that he had presided through the 'golden years' of the revival of London as a global financial center, a consequence of the policies his party has implemented. However, there is always a tradeoff for achieving such goals. Public transport is expensive, population growth has seen an exponential spike due to the attractiveness of working in London and the rising cost of living.
The voting will take place on the 1st May, which is not a public holiday unlike the rest of the world.
I can't help recalling my younger days in Singapore where my parents were voting ...

Olympic's Shame

Wife and I were at Leicester Square, London on the 6th April to witness the Olympics touch relay.
The day started with a huge snowfall, pretty unexpected as this was 'supposed' to be Spring. The decision to go to Leicester Square was made due to the desire for a 'warm bowl of noodle soup' rather than for the Olympics touch. We were unaware of the huge fiasco surrounding the touch relay beforehand. It was only after lunch did we realised that protesters were trying all kinds of ways to extinguish and put out the Olympics flame.
The atmosphere at Leicester was supportive and we could hear shouts of 'Long live Beijing', 'Long live Olympics'. For a while, I felt proud to be a Chinese and felt no different from the Chinese supporters beside us from HongKong or China.


The Olympics flame, when it arrived, was heavily guarded with at least three rings of guards surrounding the touch bearer. It was hard to see the torch bearer or the flame - on hindsight, it was not difficult to see why there was so much security.



In retrospect, the protestors do have the freedom to voice their displeasure about their views on China's policy on Tibet and human rights but I question the method through which they raise their protests. It was heart-wrenching to see protestors trying to snatch or extinguish the Olympics flame - I am not sure what they are trying to achieve in carrying out those acts. Perhaps a more meaning action such as running alongside the relay team with their flags would bring across a stronger message which will gather more supporters to their cause.



This is a huge PR lesson for China indeed, it is not lost on me that translation between the Chinese language to English may not be perfect and subtle meanings may not have been conveyed by the English media. In addition, China's hardline approach towards the protestors is likely to fuel more anger and anguish. Perhaps a more reconcilatory tone from China may be the better way forward.

The cost of the appreciating SGD

The SG dollar has strengthen against every other reserve currency since the start of 2004.

There was a report by the New York Federal Reserve in 2004 which quantified that for every 10 percent appreciation of the Singapore dollar against the U.S. dollar and other reserve currencies would result in a domestic currency capital loss of more than 10 percent of GDP.

Looking at the charts above, since the start of 2004, the SGD has appreciated more than 15% against the USD, more than 10% against JPY and GBP and remained unchanged against the EUR.

Given Singapore's GDP of about 140 bn SGD in 2006, these currency fluctuations would mean a loss of about 14bn SGD ... wow ... which may explain GIC's and Temasek's interest in the US banks - better to hold their stocks than to hold the USD.

The Importance of being fiscally prudent

Looking at the crumbling asset prices in the US and around most parts of the world, it inevitably reinforces the virtue of being financially prudent, rather than financially savvy.
The past 5 years have seen unprecedented creation of credit and the world economy was awash with 'cheap' money. As a consequence, property prices have also risen to unprecedented levels and there was a time when investors were 'educated' on the benefits of investing in properties - the huge potential financial gains that could be made simply by placing a 5% downpayment on any property developments. Every 1% upside in the property valuation would result in a gain which is 20 times multiplication of the investor's initial outlay. Such is the lure of leverage.
However, the reverse of the situation is also true. A 1% decline would also imply a loss 20 times the initial outlay.

The sticklyness of property prices - marked by sellers' reluctance to sell in a weak market and aided by cheap refinancing options means that the current downturn would take more than just a couple of months to clear. In the meantime, there will be many false dawns but until the speculative element in housing prices is replaced by realistic pricing, it is still wiser to remain at the sidelines and hang on to pure cold hard cash.

Prepare for more pain ahead

It is estimated here that total losses from the credit crisis will reach 400bn USD. The tally so far is about 160bn, so there is still more pain to come.

Recent reports were debating about the seemingly wide mismatch between the gloom in the credit markets and the sunny outlook in the equities universe. There is a bit of a spillover delay effect at work there and I guess today, with the Dow falling almost 200points, the markets are gradually converging.

There is definitely a slow down heading our way - tighten your seat belts and enjoy the ride!!

They don't seem to like our Money very much

After spending almost 30bn USD to bail out financial institutions in the US, the Singapore sovereign funds still do not have much support from the US public.
In the survey done by Public Strategies Inc, the American public favours the Australias and the Norwegian sovereign funds but have strong negative sentiments for the funds from Asia and the Middle East.
Transparency and timely disclosure of the funds allocation may most likely be a reason for the Americans perception. I guess having good public relations with the international media help as well.

The star of a bank's back office

In almost all operations and back office teams in financial institutions, these departments are considered primarily as cost centers and play a supporting role to the front office traders, the rock stars or money makers for the banks.

Having spent six years in the company supporting clients in the back office domain of processing and financial control, I have seen my share of gross wage and hours worked disparity between the rock stars and the backroom operators. This was the rule of the jungle - the traders rake in the big bucks with an army of support staff at their disposal, to ensure that the trades have been confirmed, the payments settled, their P&L verified.

In a dramatic turn of events, Jerome Kerviel decided that he had enough of the jungle rules and wanted to prove that he was also able to rack in huge profits despite his humble beginnings in the back office. He busted a 3.6bn pd hole in SocGen's balance sheet with his 50bn pd positions on European equity futures.

How he managed to deceive his managers and the risk departments will be thoroughly analysed, I can bet that his fraud will be pored over with just the same intensity as his banks' famous quants poring over their 5-factor pricing models.

In many ways, the back office is the last bastion of control for any banks. Any mismatched confirmations, unfixed trades or unsettled payments should have raised alarm bells. But as the rule of the jungle goes, the back office operators are too insignificant in the whole food chain - traders usually have the right of way and can easily brush off any mismatches with scant excuses or simply just by throwing a fit. It is perhaps the time now that the balance of power starts shifting more towards the back office.