Monday, February 22, 2010

Interest rates / Oil / Property

Recently there have been a few major events in the market.

1. Fed raises the emergency lending rate from 0.25% to 0.75% last Thursday, marking the first change to interest rates since Dec 2008 though the all important overnight interbanking borrowing rate is unchanged at almost near 0%.

In my opinion, the Feds are just 'testing water' to see how the market react to such news (i.e. increasing only the EMERGENCY interest rates), because they did not increase the so called 'more important' overnight interbanking borrowing rates, which most people are looking out for. So if all goes well, and the market sentiments still remains good, they will then execute the plan to increase the interbank rate.

This is because, at the moment, the FEDs are keeping extremely low interest rates, which will inevitably erode the USD value. This will in turn cause the huge foreign reserves of countries like Japan and China who have large quantities of USD to start reducing their holdings of USD. (Reason being : They do not want their reserves, which are dominated in USD, to drop in value.) *Dumping of USD is not good, this is because, if the USD devalues too much, the USA will not have much spending power in the future!

On a side note, China have been selling quite some bit of its US treasury bonds, and has fallen behind Japan. Thus Japan is now the country with the larges holding of US treasury bonds of around US$768.8 billion as of Dec 2009, while China holds about US$755.4 billion.

2. Oil Industry

Presently, Singapore is the third largest oil trading hub, behind just New York and London. BUt there is still much intention to increasing the oil activities here.

For example Macquarie is going to start to conduct Asian oil trading in Singapore soon. It will be lead by industry veteran Steven Taylor, with a team of 6 men.

Also, the government is trying to increase Singapore's capability to be a strong force in the oil and gas industry.

The following was taken from The Straits Times:

SINGAPORE'S technical capability and skilled manpower have made it a strong player in the oil and gas industry despite lacking natural resources, but there is no room for complacency.

Mr S. Iswaran, Senior Minister of State, Ministry of Trade and Industry, and Ministry of Education, told an industry event last week that it was imperative the workforce here continues to meet the requirements of the industry.

He also pointed out that the era of finding 'easy oil' in areas close to the shore is over.

Exploration companies now venture into deeper waters offshore for oil and gas, creating rising demand for drill ships, floating production, storage and offloading (FPSO) vessels, as well as subsea equipment capable of withstanding the harsh underwater environment.

'Singapore is hence well-placed to benefit from this trend due to our global leadership in rig building and FPSO conversion, as well as in oil and gas equipment manufacturing and engineering,' said Mr Iswaran.

The minister was speaking at a joint symposium by the National Subsea Research Institute (NSRI) and the Centre for Offshore Research and Engineering (Core) last Friday.

3. Singapore property is on the rise again. And the government is trying to curb speculation by implementing stamp duty on sale of homes within a year of purchase, and decreasing the maximum loan amount to 80% of the house value from 90%.

Some interesting statistics of the Singapore housing market are as follow:
  • Jan 2010 has 3 times as many houses sold as compared to Dec 2009
  • Of this, 76% of the units were sold at more than $1,000 per square feet!
  • In 2009, 76% of all home deals are transacted by Singaporeans (no link to the above though)
  • In 2009, of all those homes transacted by PRs and foreigners, 27% are by Malaysians.
  • Price of mass market homes have increased to $610 per sq ft in Q4 2009, which is almost back to the peak price level in Q4 2007 ( so you can see that the recovery in the property is extremely fast! even faster than the stock market!)

Thursday, February 11, 2010

Is the correction over?

Frankly I do not know, but I have decided to stay side lined, at least till the technical indicators get better.

However here are 2 reasons why it might not be over.

1. I was reading a trader's magazine in borders yesterday, and it says that usual technical supports will be broken before the uptrend occurs. In fact, seldom is it ever a very 'clean' support. In short, support and resistance lines are within a region and not at an exact value.

2. Here is a report I received from the Edge magazine.

Since peaking at 2,933 on Jan 11, the STI has lost 6.8% to close at 2,734 today. The big question is: Have the markets bottomed? Is the selling over? Credit Suisse analysts Sakthi Siva and Kin Nang Chik attempted to answer these questions by comparing net foreign selling in the past two weeks with what happened in previous corrections.

The duo estimated that net foreign selling in “emerging Asia” was about US$6.9 billion ($9.8 billion) in the period from Jan 19 to Feb 8. Historically, Credit Suisse says the selling associated with four prior corrections were: US$2.4 billion in April 2004, US$4.5 billion in April 2005, US$4.4 billion in October 2005 and US$14.5 billion in May 2006.

But what’s telling is the length of time of the sell-off, says Credit Suisse. In the corrections of April 2004, April 2005, October 2005 and May 2006, Credit Suisse says the “net foreign selling” usually lasts a full month but so far we’ve only had 11 days. Therefore, it appears that the selling isn’t over from past data.

So I guess it's not really time to buy in yet. This is because about 2 years plus ago, I did an analysis on past market bear length, and found out that it takes around 1.5 years to reach the bootom. And it actually applies to our market!

Tuesday, February 2, 2010

Bank of Singapore

There is a full page in the Straits Times today stating that ING Asia Private Bank is now called the Bank of Singapore !

This is after ING Asia private bank was taken over by OCBC bank and being converted to a wholly owned subsidiary.

Details from the newspapers are as follows
  • Only dedicated private bank headquartered in Singapore ( But I guess it is because its a Singapore bank?)
  • Aa1 credit rating from Moody's (But then again all the Singapore banks have VERY good ratings)
  • 15% Tier one capital and is ranked amongst world's 50 safest banks, by Global finance
Personally, unless they do much aggressive marketing like what CIMB bank have been doing recently, coupled with great customer service, they will not be able to gain much market share. This is based on what I have observed about the local bank's private bankers. They do not treat their clients as well as those from foreign banks, especially DBS. DBS have relatively bad customer service.

In addition, having keep track of much bank products that are being offered, I have never really found DBS or OCBC offering good products. So let's hope that the Bank of Singapore, being a subsidiary , be able to pull away from the 'norm' of Singapore banks and be a world class private banking center.