Gold price driven by ‘fears of inflation’

Straits Times Singapore, December 21, 2009, Monday

By Dickson Li

 

GOLD could fall back to US$1,070 (S$1,500) an ounce by the year end, but it is still a good buy, according to a local expert.

The price of the precious metal lifted off four-week lows to end last week at US$1,112.50 an ounce, following news last Monday that Dubai had received US$10 billion in emergency funds from Abu Dhabi.

CMC Markets’ chief market strategist Ashraf Laidi believes gold could soar to US$1,300 or US$1,400 by the middle of next year. Gold prices hit a record high of more than US$1,227 on Dec 3.

However, investors face a nervous period in the meantime, given that short-term volatility looks poised to weigh it down, he said at a media briefing last week. ‘If something like the Dubai fallout revisits the markets… gold is going to come down,’ he said.

Mr Laidi expects uncertainty in Greece, Ireland, Spain and Dubai to fuel safe haven inflows into the US dollar. This will weigh heavily on gold in the short term. The US dollar and the gold price tend to move inversely against each other.

In a subsequent statement, Mr Laidi said that he expects the US dollar to a ’sustain a short-term retreat’ amid the Abu Dhabi intervention in Dubai.

Gold may have enjoyed a bullish run in US dollar terms, the main denomination in which the metal is quoted. However, it has not been doing so well against the Japanese yen. Its only recent record high in yen terms was mainly due to a depreciation of the currency, Mr Laidi said.

This seems to hint at the possibility of a consolidation of the price of gold against the greenback: ‘If gold is going to retreat against the yen, then it is going to retreat against the dollar and all the other currencies,’ he said.

Mr Laidi warned that ‘everybody is looking at gold against the dollar’, when they should also be looking at it in terms of the yen, the euro and the Australian dollar. The price of gold is being driven by ‘fears of inflation’ and not because of inflation itself.

Confusion in Johor over fuel sales cap

 

Sunday Times Singapore, December 19, 2009, Sundday

By Khushwant Singh

 Some petrol stations are diligently enforcing the 20-litre fuel limit on sales to foreign cars, but confusion remains over whether Singapore-registered cars are exempt as some station owners have not been officially informed of the cap. — PHOTOS: SHAHRIYA YAHAYA

 

Petrol station operators in Johor are confused but are taking the safe way out by implementing the 20-litre fuel limit for foreign vehicles despite news that Singapore-registered cars are exempt.

The 20-litre cap took effect on Wednesday, but The Star newspaper reported the next day that state officials had confirmed Singapore vehicles were exempt.

A check on 10 petrol stations by The Sunday Times last Friday also revealed that two stations had not received any word from their petrol companies about the fuel cap on foreign vehicles.

One of the owners said: ‘I heard about the fuel limit for foreign vehicles from the media, but there was no official notification from the government or my petrol company.

‘Now there’s this newspaper report that it does not apply to Singapore cars.’

Introducing himself only as Mr Ong, he said he will not limit the amount of fuel he sells to foreign vehicles until he is officially informed of the new rules.

An Esso station is also not implementing the limit for the same reason.

Its boss said: ‘It’s all very confusing right now, with some petrol companies saying one thing and the newspapers saying something else and the national government not clarifying matters.’

He did not want to be named as he felt the subject was sensitive.

A kilometre away along Jalan Tebrau, another Esso station was diligently enforcing the fuel limit.

Its cashier, Mr M. Milon, 22, said his employer received a letter about the fuel cap from the petrol company on Thursday.

‘To stay out of trouble, we do what we are told,’ he added.

The new rules stipulate that foreign vehicles should not take in more than 20 litres of fuel at petrol stations within a 50km radius of the border.

This is to curb smuggling of petrol and diesel in border areas.

Malaysia’s fuel prices are much lower than those in neighbouring Singapore and Thailand because of a RM40 billion (S$16.3 billion) annual subsidy.

On Friday, many Singaporeans appeared unaware of the new fuel limit.

Computer engineer Alvin Yeo, 32, who was driving to Kuala Lumpur with his wife and daughter, stopped at a Shell station along Jalan Tebrau some 10km from the border.

He was warned by a pump attendant to keep within the 20-litre limit, but it was a full tank after only 17 litres.

All Singapore cars heading into Malaysia must abide by a three-quarter tank rule and for most cars, this is equivalent to about 35 to 40 litres of fuel.

Another 20 litres after the drive across would bust most tanks’ capacity.

It is also for this reason than Singapore-registered vehicles are exempt from border checks on their fuel status when returning from Johor.

‘Even without pumping any petrol here, my car will have more than 20 litres in it, so how can they check if I had kept within the limit?’ said Mr A. Remy.

The 42-year-old MRT station manager drives to Johor once a month to shop for groceries – and to fill his tank with some cheap petrol.

Where to put your money next year

Sunday Times Singapore, December 19, 2009, Sunday

The world economy has got off the deathbed but its recovery in the year ahead will be sluggish. Gabriel Chen gets tips from financial experts for 2010 and finds out where the traps might be.

You could term 2009 the year the world did not end.

Flash back 12 months and it looked like a financial Armageddon was about to descend on us all.

Most experts were of like mind: Financial markets would continue to bleed, banks would keep failing, millions of jobs would be lost, profits would evaporate. Think of the worst-case scenario and double it and you have an idea of the mood back then.

‘Till March, negative sentiment was at the fore with concerns that capitalism was at an end,’ recalled Mr Daryl Liew, chief investment strategist of independent wealth management firm Providend.

But the world did not end; 2009 surprised us all.

Financial markets have been on a roll since March as investors’ risk appetite returned amid signs of recovery in the banking sector and global economies.

The MSCI index of stocks in the Asia-Pacific region outside Japan is up more than 60 per cent from a five-year low on March 9.

Dubai’s debt crisis, which unfolded last month and rattled global financial markets, turned out to be a blip on the radar screen.

Most markets have stopped panicking and have recouped their losses.

After a head-spinning year like this, it is no wonder many in

the prediction industry are scratching their heads when it comes to 2010.

Some finance practitioners caution that a big risk to the improving economic climate is the emergence of asset bubbles, fuelled by investors borrowing cheaply in US dollars to stock up on emerging market equities and commodities.

This risky strategy of using the weakening greenback to finance bets in higher-yielding assets

is known as the US dollar carry trade.

It can turn nasty fast. If the US dollar rises in value relative to the currency the investor is using to fund the purchase, then huge losses can result.

‘Everybody’s playing the same game and this game is becoming dangerous,’ warned New York University professor Nouriel Roubini, one of those who accurately predicted the magnitude of the global financial crisis.

‘This asset bubble is totally inconsistent with a weaker recovery of economic and financial fundamentals.’

Not everyone agrees with his assessment – further proof that even experts do not always see eye to eye.

‘What bubble? It’s clear Mr Roubini hasn’t done his homework, yet again,’ veteran investor Jim Rogers told Bloomberg.

Bubble territory or not, experts say that investors should be mindful of risks and be prepared for volatility next year.

‘With talk of higher interest rates, the easy gains behind us, and greater reliance on earnings going forward, it is likely that markets will see greater swings over the next year than has been the case since March,’ said Dr Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors.

Mr Wyson Lim, OCBC Bank’s head of wealth management, advised those looking to invest to buy gradually over the coming months to ride out the uncertainty and volatility in markets.

Hot themes next year:

Frontier markets  

For investors with a higher tolerance for risk, frontier markets are diamonds in the rough.

They are the next emerging markets and include Kazakhstan, Romania, Nigeria and Sri Lanka. They are generally more undervalued than the emerging markets of Brazil, Russia, India and China, a grouping known as Bric.

‘I do not believe the level of risk is necessarily higher as compared with emerging markets,’ said Dr Mark Mobius, executive chairman of Templeton Asset Management.

‘Frontier markets generally share the same political and economic issues as emerging markets, but their valuations may be more attractive as a result of this perception.’

The Templeton Frontier Markets Fund is one way retail investors can access such investments.

The fund’s top holdings include Ecobank Transnational, a pan-African banking group with a presence in many African countries, and MTN Group, a South African- based mobile telecommunications company.

Currencies – Australian, Canadian, Norwegian  

Currency exposure can add diversification and gains to your portfo-lios, but there are also risks.

For a start, exchange rate movements are notoriously difficult to forecast over the near term and even professional foreign exchange traders get their bets wrong.

Still, many in the business believe that the Australian dollar, Canadian dollar and Norwegian krone – all of which have appreciated this year – will continue to do well next year on the back of stronger commodity prices and likely interest rate hikes.

These currencies belong to countries where commodities form a substantial portion of their exports.

Mr Manpreet Gill, Asia strategist at Barclays Wealth, expects the trio’s interest rates to rise faster and higher relative to others.

‘Norway and Australia were never hit hard by unemployment, and Canada is already adding jobs. Most macroeconomic indicators in these countries are looking more positive, and together argue for tighter monetary policy,’ he said.

Central banks can ‘make money tight’ by raising interest rates, which increases the cost of borrowing and effectively reduces its attractiveness.

A rise in a country’s interest rates relative to those in other countries will tend to lead to an appreciation of its exchange rate against other currencies.

Investors can get foreign exchange exposure through various means. Buying shares of ANZ Banking Group, for instance, gets you Australian dollar exposure.

Then there are foreign currency time deposits, which offer interest on your deposit, as well as capital gains if exchange rates move in your favour.

Indonesian equities and Chinese yuan-related assets  

The second term of Indonesia’s President Susilo Bambang Yudhoyono should lead to further structural reforms that will underpin the country’s sound demographic fundamentals, according to Mr Thomas Kaegi, head of macroeconomic research, Asia Pacific, at UBS Wealth Management.

He explained that Indonesia exports commodities to China and India so it should benefit from their robust growth.

‘Not only are Indonesian equities set to benefit but also other Indonesian assets like corporate and sovereign bonds, money market, currency, in general,’ said Mr Kaegi.

Then there is the Chinese yuan appreciation theme.

Mr Kaegi expects the People’s Bank of China to allow the yuan to rise against the US dollar next year.

This should fuel demand for Chinese yuan-denominated assets or instruments benefiting from the expectation of Chinese yuan appreciation.

One of the more straightforward ways to ride on this theme is to invest in Chinese-yuan denominated stocks on the Shanghai and Shenzhen stock exchanges, but this mode is not available to everyone.

Access to the so-called ‘A-shares’ market in China is limited to Chinese nationals and Qualified Foreign Institutional Investors approved by the Chinese regulator.

Mr Kaegi recommended that keen investors explore Chinese yuan assets listed outside China, including Hong Kong’s China Enterprises Index, Chinese equity funds and Chinese stocks listed overseas.

Defensive sectors  

The cyclicals did better than the defensives this year.

Cyclical sectors such as financials, technology and property rallied ahead of defensive sectors like utilities, telecommunications and health care.

Experts tip the defensive sector – so-called because it comprises companies whose business performance and sales are not highly correlated with the larger economic cycle – to do much better next year.

‘In a nutshell, we recommend taking profits on cyclical equities and reinvesting proceeds on defensive stocks,’ said SG Private Banking’s chief executive for Singapore and South Asia, Mr Pierre Baer.

Ms Mah Ching Cheng, manager for research and analysis at First State Investments (Singapore), favours telecommunications companies due to their ‘defensive earnings, strong cash flows, stable dividends paid and attractive valuations’.

‘Telecoms companies in India and the Philippines look attractive for us at this juncture,’ she said.

gabrielc@sph.com.sg

 

Tips from experts

Dr Mark Mobius, executive chairman of Templeton Asset Management:

‘We believe commodities will continue to do well, and that includes gold. Commodity stocks look good because we expect the global demand for commodities to continue its long-term growth. To keep pace with domestic consumption, commodity prices will remain positive and though they will fluctuate from time to time, the overall trend globally is upwards.’

---

 

Mr Pierre Baer, SG Private Banking’s chief executive for Singapore and South Asia:

‘Among sectors, we prefer telecommunications and health care, which appear undervalued. The energy sector is expected to benefit from the recovery and a steady rise in energy prices. Emerging markets are also favoured with a preference for Latin America and Asia with notably India, Taiwan and South Korea at the forefront.’

---

 

Mr Thomas Kaegi, head of macroeconomic research, Asia Pacific at UBS Wealth Management:

‘We advise clients to stay away from developed-market government bonds. Low interest rates make them an unattractive yield play and the removal of monetary policy support and rising inflation fears may hurt the sentiment towards governments.’

---

 

Mr Wyson Lim, OCBC Bank’s head of wealth management in Singapore:

‘Within the equities space, we remain most positive on the Asia ex-Japan region, which is expected to enjoy superior economic and earnings growth compared to developed markets. While bourses in the region have run up significantly in recent months and are fairly valued based on this year’s earnings, they are still attractively valued if investors are prepared to look out over the next two to three years.’

 

 

Many showflats still open for viewing

 

Sunday Times Singapore, December 19, 2009, Sunday

Some are open to visitors every day, even on Christmas Day and New Year’s Day

By Joyce Teo

 Would-be buyers eyeing Far East Organization’s Adria condominium in Derbyshire Road, near United Square Shopping Mall, can visit its showflat at River Valley Road. — PHOTO: ONG WEE JIN 

The market for new homes is quiet as most developers and potential buyers have taken time off for the year-end holidays.

‘If you are going to sell one or two units now, you might as well close shop and wait till next year,’ said Cushman & Wakefield managing director Donald Han.

‘Salespeople and consultants have worked very hard this year. So, to be fair, they need a break.’

But for those potential buyers itching to check out new projects, a fair number of showflats are still open. These are mostly projects launched in recent months.

A list compiled by property consultancy Knight Frank shows there are at least 35 showflats staying open this month.

Those keen on mass-market projects can check out Waterfront Key in Bedok Reservoir, Livia in Pasir Ris, Double Bay Residences in Simei and Trevista in Toa Payoh.

For high-end homes, the list includes Ferrell Residences and Cyan in Bukit Timah Road and Reflections at Keppel Bay. The showflat of the luxury St Regis Residences is open this month, but viewing is by appointment only, said developer City Developments.

Those keen on mid-tier to upper mid-tier homes can check out Ascentia Sky in the Alexandra Road area, Parvis in Holland Hill, The Tier in Pegu Road and Sophia Residences in Sophia Road.

Diehard showflat visitors will be happy to know that they can go to some showflats even on Christmas Day and New Year’s Day.

Far East Organization said its showflats are open every day of the year, except for the first day of Chinese New Year – which falls on Valentine’s Day next year.

And there are a fair number of choices. More than a third of the 35 or so showflats showcase projects developed by Far East Organization, such as Alba in Cairnhill Rise and Adria in Derbyshire Road, near United Square Shopping Mall.

Far East is also keeping its showflats open for some of the projects it released earlier for sale, such as Silversea in Marine Parade Road.

Another developer, Hong Leong Holdings, is also keeping its showflat for The Gale in Flora Road open throughout Christmas and New Year’s Day.

Most other showflats are likely to close on Christmas and New Year’s Day.

Some projects still have units available for sale, but the showflats are already closed for the year, either for the year-end holiday season or renovation work, Knight Frank said.

These include the showflats for The Trizon in Ridgewood Close, Lush on Holland Hill, The Orange Grove and Oasis @ Elias. However, the showflats for these projects can still be viewed by appointment.

The showflats for Dakota Residences and Meier Suites have closed for the year and will not be available for viewing, even by appointment.

Potential buyers or visitors keen on new projects or showflats will have to wait until next year. Experts expect launches to resume mostly after the start of Chinese New Year.

Don’t shun flats in newer estates

 

Sunday Times Singapore, December 19, 2009, Sunday

Aspiring home owners should not be too picky; living in the suburbs has its perks

By Dennis Chan, Deputy Money Editor

 

A young couple pushed past me the other day at the HDB Hub in Toa Payoh, chattering excitedly and pointing at some documents in their hands.

Looking at their beaming faces, the mild annoyance I had felt at being shoved by them evaporated. Clearly, they were so engrossed in selecting their dream home that deliberately giving offence to anyone was the furthest thing on their minds.

Seeing their enthusiasm in the crowded Housing Board sales office was gratifying, as it reinforced my view that many Singaporeans – a solid but silent majority – go about their business of acquiring a home with little fuss.

If you read the newspapers regularly, you could have an entirely different impression.

Based on the volume of public griping in newspaper stories and letters to the editor over the availability and affordability of homes, it is easy to lose sight of the fact that the HDB has been satisfying – and will continue to satisfy – the housing demand of a large number of Singaporean households.

Much of the griping, I feel, is generated by a small but vocal minority, and their views carry a disproportionate weight in the great housing debate.

Minister for National Development Mah Bow Tan has said the HDB expects to offer 10,000 to 12,000 new flats a year for the next five years to accommodate rising demand for public housing. The bulk of these flats will be located in new estates such as Punggol and Sengkang.

This building programme should take care of the majority of home buyers.

But satisfying the demand of those who insist on a new flat in a mature estate near the city is harder. Last week’s launch of 1,718 flats in Dawson Estate will go some way towards meeting the aspirations of first-time buyers of new flats in a mature estate.

Although a significant number, the 1,718 flats will be gobbled up in no time. On the first day of the launch, flat applications exceeded supply.

Home buyers are a savvy lot. They know that new flats in mature estates are limited, particularly when these are a mere 10-minute drive from Orchard Road.

Dawson is located in Queenstown, where some of the most expensive HDB resale flats are found. Under the circumstances, it was a foregone conclusion that the Dawson flats would be heavily oversubscribed, and balloting would be required once again. This means the chances of securing a flat at Dawson are slim.

Still, I suppose there is no harm trying your luck. I would do the same if I were still eligible for a flat.

Just don’t raise your hopes too high, lest disappointment follows.

If you succeed in getting a flat at Dawson, congratulations, you have hit the jackpot. If you fail, don’t be disheartened. Go for other flats in newer estates where the success rates of first-time buyers being offered a flat are eight in 10, or, if they failed in their first attempt, 9.6 in 10 on their second try.

I understand why some buyers hold out for a new flat in a mature estate.

Having been a city dweller for most of my life, I too was leery at the thought of living in the suburbs.

When my wife and I were hunting for our first home in 1995, Singapore was in the throes of a housing boom, not unlike the property frenzy in 2007 and, more recently, between May and September this year.

Five-room HDB flats in popular estates near the city were changing hands at half a million dollars or more. By 1996, rooftop executive maisonettes in Bishan were going for $800,000.

There was no way we could afford those prices. Buying a flat directly from the HDB was our best bet.

Back then, new flats were sold either through a queue system (for flats in non-mature estates) or via balloting (for flats in popular estates).

After a wait of about two years, we had reached the head of the queue and consequently received an invitation from the HDB to book a flat in Woodlands. Around the same time, an opportunity came up for us to ballot for a flat in Holland Village, where we really wanted to be as it was also where my wife’s parents live.

There were a few hundred flats up for grabs, but the number of applicants was at least thrice that.

We were in a bind.

If we rejected HDB’s invitation for a flat in Woodlands and opted to ballot for a flat in Holland Village instead and were unsuccessful, we would be relegated to the back of the queue. This could lead to a wait of another two to three years before getting another bite.

On the other hand, accepting HDB’s offer meant that we had no chance at all of getting a home in a dream location.

After agonising over it for days, we chose certainty over desirability, but with much regret.

First-timers today are also facing a struggle.

If they are willing to settle for a new flat in Punggol or Sengkang, they are likely to get one fairly quickly. But that will mean blowing their chance of getting a new flat in a mature estate in future.

Theoretically, a second-time buyer is eligible to buy a new, bigger flat directly from the HDB. In reality, their chances are small as first-time buyers are allotted the lion’s share of new flats.

Taking everything into account, my advice to aspiring home owners is: Don’t be too choosy in terms of location. Get out of your comfort zone and go for a flat in a new estate.

Having lived in Woodlands for 12 years, I can vouch that living in the suburbs is not bad at all.

My family loved the surrounding parks, like Sembawang Park and Admiralty Park. Other rustic attractions like the Singapore Zoo, Sungei Buloh Wetland Reserve, Hay Dairies goat farm and numerous hydroponic farms in Lim Chu Kang are a mere 15-minute drive away.

Getting to the city is also not a hassle, as an MRT ride to Orchard Road takes just half an hour.

I moved to Toa Payoh two years ago to cut down on commuting. But I miss my old home in Woodlands as well as the friendly neighbours with whom our ties remain strong.

Leaving to live in centrally located Toa Payoh, I think, was perhaps a wrong choice.

Now that’s quite an admission from someone who dislikes living anywhere outside a 15-minute commute.

dennis@sph.com.sg

Er, what is sovereign debt rating?

 

Sunday Times Singapore, December 19, 2009, Sunday

FINANCIAL QUOTIENT

Where do you see this?

In reports from credit rating agencies and in financial news articles.

What does it mean?

This is an assessment by an international credit rating agency – such as Standard & Poor’s, Moody’s or Fitch – of the likelihood that a specific country will default on its loans.

These private agencies generally grade a country’s creditworthiness using ratings that range from excellent to poor, with an AAA rating being the best and a D the worst.

Why is it important?

A country’s sovereign credit rating indicates its ability to meet financial commitments. The rating helps investors to gauge the risk level of the country’s investing environment.

In assigning the ratings, the agencies consider a wide range of factors such as economic growth, political stability, financial reserves, inflation and exchange rate policies. Thus the ratings offer investors, financial institutions and businesses a valuable relative gauge of a country’s credit standing over time, and can aid them in their decision-making.

Recently, the agencies have singled out Greece and Spain as countries that might have trouble paying back their debts. They have downgraded their outlooks for Greece’s government bonds and Spain’s government finances.

So you want to use the term. Just say…

‘Standard & Poor’s has affirmed Singapore’s creditworthiness by retaining its AAA sovereign debt rating.’

Alvin Foo

Cheap greenback ‘will delay correction’

 

Straits Times Singapore, December 19, 2009, Saturday

 Dr Roubini expects the US dollar to remain weak for six to 12 months. 

NEW YORK: Global markets have rallied ‘too much, too soon, too fast’ but a correction will not happen immediately, leading economist Nouriel Roubini says.

The New York University professor, one of the few economists who accurately predicted the magnitude of the financial crisis, said on Thursday that a cheap US dollar will keep encouraging investors to seek higher-yielding assets for several months.

He says the US dollar will eventually recover some of its losses, but only in ’six to 12 months from now, not any time soon’.

As a result, carry-trade operations – in which investors borrow at low short-term rates, in this case in the US dollar, to buy high-yielding longer securities in other markets – will continue to support prices for a little longer.

‘A correction might occur, but the risk of a correction is more in the medium term than in the short term,’ Dr Roubini said at an event organised by the Council of the Americas.

The economist repeated his view that the United States economic recovery will be anaemic and U-shaped, which should translate into worse-than-expected corporate earnings and macro economic indicators, eventually forcing asset prices down.

Such a correction will be delayed, however, by a prolonged period of low interest rates and fiscal stimulus.

‘I see this kind of tension due to the fact that I think the real economy will surprise on the downside, especially when the stimulus fizzles out, but on the other side you have these effects of policies, especially monetary and liquidity, that keep asset prices levitating,’ he said.

Loose monetary policies worldwide will result in continuous dollar inflows into developing economies, which are expected to grow faster than developed countries for several years, Dr Roubini said.

The challenge for emerging market countries such as Brazil, he added, will be to implement effective policies to curb the excessive capital inflows that have led to ‘overvalued’ currencies.

‘The solution is probably along the lines of capital controls,’ he said, noting that the measures adopted by the Brazilian government so far were not ‘tight enough’ to curb short-term dollar inflows.

Dr Roubini added that he remains positive about the Brazilian economy, although there is too much ‘froth and euphoria’ in the country’s domestic markets.

He also said Brazil’s currency is overvalued and that the economy can grow more than 6 per cent a year if the government makes the structural changes to education and infrastructure which President Luiz Inacio Lula da Silva has failed to push through so far.

REUTERS, BLOOMBERG

Hong Leong Finance lowers HDB loan rates

Straits Times Singapore, December 19, 2009, Saturday

By Dickson Li

 

HONG Leong Finance has unveiled a new HDB loan package with one of the lowest rates in town.

The finance company’s latest offering is aimed at one of the hottest segments of the market, with intense interest in projects such as the new flats to be built at Dawson estate in Queenstown.

Last week, it unveiled a loan package for the other end of the spectrum – the good class bungalow market.

For HDB buyers, it is now offering variable rates for loans of $100,000 and above, with up to 80 per cent financing, at 1.33 per cent, 2.03 per cent, and 2.63 per cent a year for the first, second and third year respectively.

This is another step down in rates from the company’s offer last month, when rates for an equivalent loan were 2.13 per cent and 2.83 per cent for the second and third year respectively.

A borrower looking for a two-year fixed rate loan from Hong Leong will now enjoy a rate of 2.13 per cent in the second year, down from 2.63 per cent.

By comparison, DBS Bank offers a two-year fixed rate of 2.9 per cent for a loan with up to 60 per cent financing, its website says. This is for owner-occupied homes which have been completed.

Hong Leong said the increased activity in the HDB market had led to more inquiries for HDB home loans.

‘We anticipate continued growth of our HDB home loans portfolio in 2010, which will be boosted in part by HDB’s plans to launch at least one build-to-order project per month to meet the housing demand here,’ said president Ian Macdonald.

The company is also offering customers an added sweetener of a $20 Millennium and Copthorne hotels gift voucher for every $100,000 loan.

Customers taking out small loans have not been left out. Those borrowing less than $100,000 with financing of up to 80 per cent will now be offered first-year variable rate of 1.93 per cent, and two-year fixed rates from 2.33 per cent.

Hong Leong’s earlier promotion rewarded its customers with KrisFlyer air miles and spa vouchers.

Unit trust fees slashed to woo investors

Straits Times Singapore, December 19, 2009, Saturday

DBS, Fundsupermart among those which now charge just 1%

By Sylvia Paik

 

A PRICE war seems to have broken out in the unit trust industry in Singapore, with at least three fund distributors now slashing their sales charges to just 1 per cent.

DBS Bank started the ball rolling in early October when it cut its sales charge on all unit trusts to 1 per cent – a move the bank says has already resulted in a two-fold increase in unit trust sales.

Last Tuesday, online fund distributor Fundsupermart.com reduced its sales charge for its 11 best performing funds over a period of three years to 1 per cent.

And The Straits Times has learnt that even though it has not advertised this, Standard Chartered Bank (Stanchart) is also offering a 1 per cent sales charge to selected customers quietly.

Unit trusts are typically sold by banks, insurers, stockbrokers and other independent financial advisers.

These distributors levy an upfront sales charge, which is deducted straightaway from the principal amount an investor puts into a unit trust.

The traditional sales charge in a face-to-face transaction with a customer is usually 5 per cent, but this has been bettered in recent years by a host of cheaper online distributors.

Most online distributors charge between 1.5 per cent and 2.5 per cent, with some going as low as 1 per cent if the customer invests a large amount of money.

At a flat 1 per cent for any investment amount, the three distributors are undercutting the competition significantly.

Mr Jeremy Soo, DBS’ managing director and head of consumer banking in Singapore, said the bank slashed the upfront sales to ‘give customers greater value for their investments’.

‘As part of our continuous efforts to demonstrate product transparency and suitability, and to give customers greater peace of mind when investing, DBS also began offering customers 14 days to review their unit trust investment decisions – seven days more than the industry standard,’ he said.

Both initiatives have been well-received by customers, Mr Soo said.

At Fundsupermart, unit trust sales are up 34 per cent since the 1 per cent sales charge was introduced. Its general manager, Mr Wong Sui Jau, said its latest promotion was not a response to DBS’ price cuts.

‘We have always had ad hoc promotions on and off on a regular basis, and we usually base our promotions on certain themes which are often related to our research outlook,’ he said.

Stanchart, a top fund distributor here, continues to charge a sales fee of ‘up to 5 per cent’, said its spokesman. But The Straits Times understands that the sales charge has been reduced to 1 per cent for some customers.

In response to queries, Ms Janice Poon, who is head of the bank’s advisory and segment strategy in Singapore and Malaysia, would only say that the bank reviews its fees and charges periodically.

‘Currently, there is no change to our unit trust sales charges. We continue to see a healthy demand for our unit trust products,’ she said.

OCBC Bank’s head of wealth management in Singapore, Mr Lim Wyson, also said the bank maintains its unit trust sales charges at ‘competitive levels’. It charges up to 5 per cent at its branches, but fees are lower – about 2 per cent to 3 per cent – on its online portal finatiq.com.

But cost is not the only factor in selling these investments, Mr Lim cautioned.

‘We believe that customers look at factors beyond price, such as their investment strategies, past performance of the fund, track record of the fund manager, among others.’

Some seasoned unit trust investors told The Straits Times the reduced rates do make a big difference.

Mr K. Yong, who has had more than $300,000 invested in unit trusts, said: ‘Basically, the unit trust distributors will all give financial advice, but we will look for the cheapest sales charge for the same unit trust.

‘I am also considering other options like exchange traded funds, which are more cost-efficient as I do not need to incur any sales charges.’

But others maintained that they are willing to pay higher sales charges if their financial planners provide sound advice.

‘Basically, I buy whatever my financial planner recommends, and the sales charge doesn’t really bother me,’ said Mr S. Cheng, who buys unit trusts for retirement planning.

Expect 3.2% pay rise, says Mercer

Straits Times Singapore, December 18, 2009, Friday

SALARY PROSPECTS FOR 2010

Human resource consultancy’s forecast is the rosiest so far

By Rachel Chang

 

WITH the recession over, the question among workers now is how well companies will pay them next year.

Yesterday, human resource consultancy Mercer Singapore threw its hat in the ring with a forecast of a 3.2 per cent rise in salaries.

It is the rosiest projection among at least four companies that have recently given their forecasts for next year.

Mercer based its projection on its survey, done in October, of 262 companies in 11 industries.

Expected to give top dollars are pharmaceuticals, which plan to hand out 4.1 per cent more, and high-tech companies, at 3.3 per cent more.

The banking and finance industry plans to give a 3.1 per cent pay rise, a quick rebound over this year’s average increment of less than 1.5 per cent.

Only 15 per cent of the companies intend to freeze salaries next year, compared with 35 per cent that did so this year.

As these pay-freeze companies are included in the overall calculations, the 3.2 per cent average pay rise is a conservative figure.

The inclusion follows a controversy that erupted in December last year when these companies were excluded from the calculations.

As a result, Mercer predicted that salaries this year would increase by an average of 4.2 per cent.

The high number was criticised by unionists and employers. Minister of Manpower Gan Kim Yong called the forecast ‘treacherous’, saying the focus in the midst of recession should be on how to save jobs.

Singapore was then deep in the throes of a slump caused by the global economic crisis.

Now, Mercer reports that salaries actually rose by 1.9 per cent this year.

Its latest forecast for next year is higher than the projections of ECA International (3 per cent), Hay Group (3 per cent) and Hewitt Associates (2.6 per cent).

Economists interviewed say Mercer’s figure is on the high side.

One reason, suggested Barclays Capital economist Leong Wai Ho, is its focus on multinationals, which are recovering more quickly from the crisis than small- and medium-sized enterprises.

Multinationals make up 71 per cent of the companies Mercer surveyed.

Action Economics’ David Cohen argues that although it is relatively high, it is not unreasonable given that the economy is recovering.

Agreeing, DBS economist Irvin Seah said with the economy rebounding rapidly, ‘the labour market may also improve faster than initially expected’.

Workers, however, are expecting far more next year, according to a new survey by human resource consultancy Robert Half.

Most employees expect a pay rise of 10 per cent to 15 per cent.

In its report, Mercer also said that hiring is set to increase.

Four out of 10 employers plan to boost their manpower next year, while fewer than 5 per cent intend to cut staff numbers.

rchang@sph.com.sg

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Projected figures

Pharmaceutical: 4.1 per cent

High-tech: 3.3 per cent

Aerospace: 3.2 per cent

Consumer goods: 3.1 per cent

Banking and finance: 3.1 per cent

Chemical: 2.9 per cent

Property: 2.6 per cent

Source: Mercer Singapore