'The market might have gotten overly panicked and the rebound might last for a few days, but I don't think this is it,' said Kenneth Ng, an analyst at CIMB.

'We have to live with reality, and that reality will come when earnings start falling.'
The Straits Times Index ended 130.71 points or 7.8 per cent higher at 1,801.91, after rising as much as 9.9 per cent earlier in the day.

A senior private banker here said that it was not yet time for investors to plunge back into stocks. 'If you look at the level of volatility in the market, that's a classic sign of a bear market.'

CIMB's Mr Ng said that banks and property firms here especially still have 'a lot of headwinds to fight'.

For the banks, 'you're likely to see big writedowns' on investment securities, he said.
'This Q3 earnings will be the most unpredictable earnings season ever.'

Continue to read more...

Source: Businesstimes.com
Published October 30, 2008

We need to show them how financial bubbles of all kinds - in commodities, stocks, currencies and derivatives - can grow over a period of time, but burst almost overnight. And why, if you are late coming to the party, you will often be left with the smallest crumbs and the largest losses.

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Will I sell my house at 49% discount to market price?

Absolutely NO.

Unless I am so desperate for cash to meet the immediate commitment and I have no better choice.

And the deal is concluded after 20 expressions of interest from various parties.

Yes, I am referring to the acquisition of Macquarie Prime Reit by YTL Corp yesterday.
YTL was paying 82 cents a unit for Macquarie Prime Reit. The price is a 49 per cent discount to Macquarie Prime Reit's net asset value, and a 52 per cent premium over its last traded price on Friday of 54 cents.

This episode is meaningful because it reminds us again that what is the true meaning of ‘value’. We may have long argument to determine the value of an asset. However, it is safe to say that it can not be easily identified by NAV. P/B or the balance sheet. But, the simple principle of SUPPLY AND DEMAND prevail.

Be mindful in doing bottom fishing on the pretext of 'value'.

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SINGAPORE Airlines, the world's most valuable airline, saw its stock drop the most in 21 years yesterday, leading Asian carriers lower on concerns that a global recession will cut business and leisure travel demand.

SIA's share price dropped 10.4 per cent to S$10.52 in trading yesterday.

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Cash is King in every crisis!

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Source : MarketWatch
http://www.marketwatch.com/news/story/valuations-low-only-if-you/story.aspx?guid=6071ABC4-8568-4529-8A87-E182268CE13E&dist=SecMostRead

The guest before me on a television talk show expressed astonishment that price/earnings ratios were so low currently. In fact, he pointed out incredulously, some stocks' P/Es had dropped so low that they were now even in the unheard of single digits.

To me, this just showed how little stock market history that this guest really knew. In fact, according to data collected by Yale University Prof. Robert Shiller, the stock market's P/E ratio has been below 10 in 17% of the months since 1871.

That's about one-sixth of the time.

Of course, most of those months came more than two decades ago. That's why those with short memories can get away with thinking that current P/E ratios are particularly low. The last time the market's P/E was below 10, for example, according to Shiller's data, was in 1984, some 24 years ago. Anyone younger than 45 or 46 was probably still in college at that time.

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The idea is belong to my friend. NOT MINE. But you can make it yours.

This is a little bit ‘immoral’ but totally legal approach to exploit the system, or the lack of it.

There are plenty of risky but potentially high return investment products offered in market now. Of course, the risk of losing entire investment sum is huge and real. The strategic is: there is a parachute escape plan as last recourse if something screwed up.

Since the financial institutions are ready to compensate full sum for lost investment for those above 62 years old and with primary education only, the strategic is to purchase the product with the parents’ name if they fall into these category.

If the product makes money, profit earned.

If the product loss money, principle guaranteed.

Can this work?

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A single analyst report has caused Cosco Corp to plunge 16.7% in one day.

An analyst report which does not exist can boost Hyflux by more than 10% in a falling market yesterday.

Who is the most powerful analyst house in Singapore today? Credit Suisse.

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Cosco used to be a market darling!

It is the top performing stock in last 5 years(of course, exclude this year), outperformed all blue chip, S-chip or even penny stocks in old day of euphoria.









It used to have the most warrant issued in the market, and, all call warrant only, no put warrant! Everyone is expecting Cosco to conquer one resistance after another, therefore everyone will punt for the call warrant only.





Today, Cosco still have 28 warrants issued under their name as underlying share. The market offered call and put warrants too. However, the volume is dry as Sahara Dessert.

The world is changing, the investing world landscape is changing even faster.

Just be prepared to adapt.

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Darling in the beginning of the years but a pariah of market now.

As recession fears fueled a sell-off in commodity-related companies, including Exxon Mobil Corp last night, SPC will be in deep trouble today with their 99% plunge of profit announced last night.

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SINGAPORE - Singapore Petroleum Co on Tuesday reported a 99 per cent fall in quarterly net profit and said it expected to continue being affected by the global financial crisis and oil price volatility.


The oil refining and marketing firm said it earned S$619,000 (US$$418,000) in the three months to the end of September, compared with S$98.1 million a year earlier.

According to Reuters calculations, refining margins in Singapore for complex units cracking benchmark Dubai crude made an average of US$5.80 a barrel in the third quarter, historically decent but below the US$7.18 average of the past year.

Margins rose in September as benchmark US crude oil prices plunged from a record near-US$150 a barrel in July to around US$100 by the end of the quarter.

Shares in SPC fell 29 per cent in the quarter, versus a 20 per cent fall in the benchmark Singapore index in the same period.

Keppel Corp, the world's number-one offshore oil drilling rigs builder, owns 45 per cent of SPC, which equally shares ownership of a 285,000 barrels a day refinery in Singapore with US oil major Chevron.

Keppel Corp will announce its group results on Thursday. -- REUTERS

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There have been six major bear markets over the past 80 years. The average decline in the Dow Jones Industrial Average of the previous five disasters - from peak to trough -was 43%. We're a lot closer to the bottom than the top.

With the Dow Jones up more then 400 points overnight, a lot of people are now confident they can pick the bottom. They run afraid of sitting in cash, collecting a pittance, when the market starts to rally again in earnest.

If you hate to hold cash instead of stock, you may consider most boring cash rich index stocks with generous and sustainable dividend distribution. And, always, set you cut lost level before hitting the buy button.

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At least there a some good news for reading.

Shanghai. October 16. INTERFAX-CHINA - Singapore-listed FerroChina Ltd. has suspended steel mill operations in Jiangsu Province's Changshu City as it is unable to repay bank loans, and the city government is moving to take over operations, a government official told Interfax on Oct. 15.

Source: http://www.interfax.cn/news/6148/


The most high-profile failure has been steelmaker FerroChina. According to media reports, the government of Changshu, where FerroChina is based, is in talks with banks about a deferral of payments or loans obtained by the company. Reports also say the government is proposing a debt-for-equity swap to relieve financial pressure on the company and may provide a US$200 million guarantee to revive the company.

Source: The Edge 20 October 2008

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Source: Businesstimes.com

INVESTORS will be presented with a barometer for assessing the impact of the financial crisis on the property sector with five Reits turning in their quarterly report cards this week.

K-Reit Asia - Today, 20 October 2008
CapitaMall Trust - Tomorrow, 21 October 2008
Ascott Residence Trust - Wednesday, 22 October 2008
Mapletree Logistics Trust - Wednesday, 22 October 2008
CapitaCommercial Trust - Thursday, 23 October 2008

Against growing economic uncertainty, analysts say that Reits have an advantage over property developers as they are still expected to derive stable, visible and recurring income.

However, falling rentals, will take some shine off the sector. Meanwhile, debt refinancing remains a key issue with nearly $4 billion worth of Singapore Reit debt expiring next year.

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Reit take wrong turn

Reit hv fallen more or less in line with the STI. Reit refinancing needs in the next year, which for the 20 lsited reits amount to some 4.3 billion coupled with possible write-downs in their asset values have spooked investors.

Ascendas India – Still falling
Capitamall – set to break support
Ascendas reit – Not an ascending reit
Macquarie Prime – Down the kitchen sink
Fraser Centrepoint – Breaking minor support
Parkway Life – No sign of life

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Investors are following America's most famous investor. But those same investors should be careful.

It's not that Buffett isn't smart, he is. But at this stage of the game, Warren Buffett doesn't buy stocks on the open market by calling his broker, he buys them in bulk and in his TERM.

Buffett made the point that he's using his personal account to buy stocks.

That may be true and his heart may be in the right place, but it's also true that Buffett's fame, success and fortune ride with his investment company Berkshire, not his personal account.

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Published October 18, 2008
Businesstimes.com
By R SIVANITHY
SENIOR CORRESPONDENT

A PROMINENT businessman recently said of the US$700 billion US Treasury bailout plan that it didn't mark the beginning of the end, but rather the end of the beginning.

He meant, of course, that the US government's plan to buy toxic bank assets announced a fortnight ago marked only the end of the first phase of the bear market and that there was plenty more pain to come. Judging by the way trading went this week, he was probably right.

The Straits Times Index started the week with a two-day, 180-point burst following news of coordinated interest rate cuts, liquidity injections, bank nationalisation programmes and deposit guarantees by European governments/central banks that gave fresh hope that the credit crunch might soon be eased.

The reversal started on Wednesday, possibly because conditions in credit markets have not improved dramatically but also because investors have apparently cottoned on to the fact that a painful recession looms, the full effects of which may not have been priced in yet.

As stated in this column last week, a big reason for this is that Wall Street has probably lagged the rest of the world on the downside all throughout this year, and is only now starting to play catch-up.

Until it does, conditions are likely to stay as volatile as they've been over the past few months, with 3-5 per cent daily moves becoming increasingly frequent.

As a result, the STI promptly lost all of that 180 points gain, its 72.69 points plunge yesterday taking it to 1,878.51 or a nett loss of 70 points or 3.6 per cent for the week.

Among the worst hit of the index stocks was SingTel, whose price has tanked along with the Australian dollar.

Over the course of the week, SingTel lost 27 cents or 10 per cent to finish at $2.50.

China shipyard Cosco Corp was another STI member to bear the brunt of selling pressure because of several concerns, among them the strength of its order book.

However, two houses, JP Morgan and Kim Eng Research, stuck their necks out on Thursday with strong 'buys'.

Cosco yesterday fell six cents to 75.5 cents, bringing its loss to 34.5 cents or 31 per cent for the week.

Bank stocks held up reasonably well yesterday after news that the government will guarantee all deposits.

However, they were heavily sold off in the final hour - DBS lost 84 cents at $13, UOB 24 cents at $14.76 and OCBC 22 cents at $6.10.

Citi Investment Research said earlier in the week that it is time to sell the banks because Singapore's bear market is likely to continue until the point of maximum GDP contraction, projected to be in mid-2009. 'We see 20-25 per cent downside to consensus 2009/10 estimates,' said Citi.

Elsewhere within the finance sector is the Singapore Exchange, which reported a 35 per cent first quarter profit drop mid-week that, predictably, led to 'sell' reports being issued. The stock yesterday lost 23 cents to $5.31.

On the state of the US economy, BCA Research said that 'the worsening economic outlook is sustaining a high level of risk aversion on the part of lenders and investors'.

'Of course, this creates a self-fulfilling outcome as frozen credit markets and falling equity prices directly undermine the economy. The authorities fully understand that they must break this vicious circle. For its part, the Fed has begun to rapidly expand its balance sheet, and it is under pressure to cut interest rates again soon.' it said.

Continue to read more...

Published October 15, 2008
Source: Businesstimes.com

Anthony Soh denounced, OCBC rapped over Jade saga

Anthony Soh and OCBC Bank were yesterday censured by the Securities Industry Council (SIC) for their role in the botched takeover of Catalist-listed Jade Technologies. Law firm Allen & Gledhill, which advised Dr Soh, also did not escape blame.


The stunning fallout of the SIC's findings is that, without admitting liability in law, OCBC and Allen & Gledhill lawyer Steven Loh have voluntarily decided to abstain from takeover work for six months, starting Sept 1.

Dr Soh, meanwhile, has been barred from making any takeover offers in Singapore or sitting on the board of any Singapore-listed company for five years.

Yesterday, the SIC released its 86-page findings, shedding some light on one of the most convoluted takeover sagas in recent history. The SIC administers and enforces the non-statutory Singapore Code on takeovers and mergers.

On April 4, Dr Soh was forced to withdraw his 22.5 cent a share offer, worth $116 million in all, shocking other investors who saw their holdings soon plunge in value. The stock is now trading at 4.5 cents.

OCBC was the financial adviser to Dr Soh in the affair, but abruptly quit on April 2. Investors wondered then how it was allowed to discharge itself and said that the offer was trusted only because OCBC had signed off on it.

The bank later reported the matter to the police, alleging it had received false representations.
Yesterday, the SIC's five-man hearing committee said Dr Soh was found to have 'committed multiple and serious breaches of the code'. It said he was 'far too casual' in approaching his obligations as an offeror.

As punishment, the SIC said that it was prohibiting him from making a takeover offer in Singapore for five years from yesterday.

Dr Soh is also denied the facilities to buy and sell shares through Singapore Exchange Securities Trading Limited without the SIC's consent for the next three years. The SIC added that it 'considers Dr Soh unsuited to be a director of any company listed in Singapore for a period of 5 years' from yesterday.

OCBC too was censured for 'serious lapses' which led to 'multiple breaches of the code'. OCBC said yesterday that 'without admission as to liability in law' it will be voluntarily abstaining from financial advisory work on takeovers for six months from Sept 1.

It will also donate up to $1 million to 'sponsor education programmes in fraud awareness and detection', the bank said in a press statement.

In its statement, OCBC sought to draw attention to the forgery of a funds confirmation document used by Dr Soh to demonstrate that he had the funds for the offer. OCBC said a complaint on the matter was lodged with the Commercial Affairs Department, the white-collar crime unit, and claimed in its submission to the SIC that it was 'a victim of fraud perpetrated by the primary wrongdoer, Dr Soh'.

Allen & Gledhill, the legal advisers to Dr Soh on the takeover, were also found to have breached certain parts of the code, in particular that they failed to verify a securities lending agreement that saw Dr Soh pledging a large block of his shares to Opes Prime, an Australian brokerage.

When Opes failed late in March, Merrill Lynch, as a creditor, seized most of the Jade shares. Dr Soh has initiated action in Australia for the return of the seized shares.

However, Allen & Gledhill lawyer Steven Lo, the partner in charge of advising Dr Soh on the offer, was blamed for less than thorough work in ascertaining that ownership of the shares remained with Dr Soh.

Mr Lo has volunteered to abstain from any takeover work for the six months from September, and had on his own accord not accepted such work since April 11. Like OCBC, he did not admit any legal liability.

Merrill Lynch, which failed to declare its holdings in Jade after it had seized them, and also failed to declare the sale of almost 100 million Jade shares on April 1, before the rest of the market was aware the takeover may collapse, was found to have breached the takeover code, but no other action was taken.

This is not the first time that OCBC's corporate finance team has landed on the wrong side of the authorities. In 1998, the bank sacked two senior executives for their part in the Mid-Continent scandal.

The company was delisted from Sesdaq after it was discovered that 96.5 per cent of its initial public listing shares were placed in the hands of just five investors.

OCBC was rapped then by the Stock Exchange of Singapore for not exercising greater care in carrying out its duties.

Dr Soh flew to Melbourne yesterday to attend a meeting of Opes creditors. He could not be contacted for comment.

Continue to read more...

Out of sudden the recession is over, the financial turmoil is forgotten, the credit start to flow, men on the street keeping their jobs, the bargain is emerging and nobody want to be left behind to catch the swift recovery!

Wait a minute, I thought I just read and read again the same line sound like this:

“Sell into strength at every opportunity because there won't be many of them”

Opssss, yup. Relief rally or bear rally, your choice?

Bear trap ahead!

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Today Business Times has an article to remind us on Jade take-over story 6 months ago.

Other then Jade, I do remember how Uni-Asia share price climb up almost everyday and suddenly dropped to bottom. Today, Uni-Asia is just another penny stock among full basket of SGX penny stocks. Some has promised to investigate but I can’t recall reading any result until today.

Uni-Asia case happen much earlier then Jade, do you know the outcome?

Continue to read more...

Published October 14, 2008
Businesstimes.com

MORE earnings downgrades on S-shares or Singapore-listed Chinese companies can be expected once analysts start pricing in the dampening impact from the worsening economic environment next year.

But this is unlikely to hurt S-share ratings, as valuations are already at such extreme low levels that it will trigger a 'buy' call under most valuation models.

'What people should concentrate on doing now is to adjust their expectations on 2009, regardless of which sector or businesses they are in and take management ideas with a pinch of salt,' DMG & Partners Securities analyst Heng Tong Jin told BT.

In view of uncertainties in the economy and Chinese government policies, PrimePartners research manager Lim Keng Soon said he expects overall earnings growth among S-shares to ease to 20 per cent, down from an earlier estimate of 30 per cent growth for 2008.

'But some S-chips are now trading at three times earnings forecast for FY08. Even if we assume a pessimistic scenario where margins are further pressured and corporate earnings decline by another 30 per cent, a price-earnings ratio of about four times for fiscal 2008 would still be undemanding,' Mr Lim added.

S-shares have taken a beating as investors worldwide dumped stocks and fled to safe haven assets. There was also the spillover poor sentiment from the sell-down in Chinese mainland markets and credibility issues arising from recent corporate scandals among S-share companies and China's tainted milk saga.

Chinese stock analysts believe that the Chinese government may use huge infrastructure spending to bolster the domestic economy, with its huge foreign reserves of some US$1.7 trillion to draw down on.

Last week, China cut its interest rates by 27 basis points and reduced reserve requirement ratios of banks by 50 basis points to bring down borrowing costs for banks and other businesses.

'While we believe that exports will slow down GDP growth in China next year, consumption, government spending and investment should still hold well to make sure that growth will hover around 9 per cent in 2009,' Mr Lim said. 'As such, we remain reasonably sanguine.'

China had earlier undergone 'supernormal' double-digit rates of expansion at a time when the G3 economies were experiencing a slowdown. Mr Heng, however, believes that one should no longer assume that China is operating on a different gear from the rest of the world given the current economic uncertainties.

'Investors probably have to weather another six to 12 months of downside but for those with a two years and above horizon, these are fantastic levels to enter,' he said.

The high-value chemical fibre space is worth looking at, Mr Heng added, pointing to stocks like Sino Techfibre and Li Heng.

Analysts also favour the agricultural sector as food security remains a concern. Stocks like China Farm Equipment, China Milk and China XLX Fertiliser could benefit, a recent DMG & Partners Securities report said.

Mr Lim of PrimePartners noted that Chinese shipbuilders with clear earnings visibility from large orderbooks such as Cosco and Yangzijiang, have also fallen to attractive levels, while input cost pressures have eased.

Beyond sectoral and financial factors, investors should also look out for companies with a credible management, good expansion plans and a viable business model, Mr Heng added.

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Hot Stocks – Marine plays sink

Keppel Corp – Strongest among the weak

SembCorp Marine – Down in the depths

Cosco – Set to break support

Last Friday’s break below $1.35 indicates yet another downside target, this time at 65 cents. Back in 2002, when Cosco lacked a sense of direction and had a hodgepodge of business, it traded at 40 cents. Now, as an established shipbuilding company and breaking into engineering and offshore, with a strong balance sheet and a net cash position, it’s hard to grasp its fall into the abyss. Quarterly momentum is hugely oversold, and RSI has even stopped falling. But a recovery probably won’t materialize till investor panic has run its course.

Yangzijiang- Penny stock status

ASL Marine – That sinking feeling

Jaya Holdings – Set for a breakdown

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It is not right to say that the Edge predicted that STI will fall to 875. What they did was to apply the statistic from Wall Street Crash in 1929 to project the potential level now, all under the pretext: IF.

Meanwhile, good to note that there is no bottom is visible from a chart pattern point of view for STI.

For Hang Seng, no resistance has been mentioned as that may be too remote to hit. The support is an old resistance turned support in 2003 at 13,750. However, the real support cited at 11,950.

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Don't sell out, hold on in there
By Christopher Tan
CEO, Providend
The writer can be contacted at chris_tan@providend.com
http://www.providend.com

The lesson is this: even in the worst crises, markets still recover with a respectable return. But if you want to shorten the time of your recovery, don't sell out. Keep investing but invest in the right things. If you sell, you are out of the game with no hope of recovery at all.

My trip to the past has taught me that all crises stem from the same cause - greed. Today's crisis is not new. It's just that we have forgotten our lessons. Don't try to time the markets. Michael J Mauboussin, chief investment strategist at Legg Mason Capital Management, found out that if you are able to accurately avoid the worst 50 days of the market, your returns jump to 18.2 per cent per annum. But if you miss the best 50 days, your returns dropped to a mere 1 per cent per annum.

Investors, be strong and courageous. You may be fearful. I am too. But history is behind us and for us. If you stop investing, you will perish. The crisis will surely pass. Don't ever give up.

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What’s a technical recession? – From The Straits Times

A Technical Recession is defined as two consecutive quarters in which the economy has shrunk compared to the previous quarter.

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CEO, deputy CEO not contactable; parent company faces bankruptcy
By LYNETTE KHOO
Businesstimes.com

CHINA Printing & Dyeing Holdings has requested a voluntary trading suspension of its shares on Monday, amid the uncertainties surrounding the group after its parent company reportedly went broke.

It is also seeking protection from relevant authorities in Shaoxing County for its assets held under wholly owned subsidiary Zhejiang Jianglong Textiles Printing & Dyeing Co Ltd.

In a filing with the Singapore Exchange (SGX) yesterday, the group's board of directors said that they are unable to comment on market rumours and media speculation.

According to recent media reports, China Printing's parent company Jianglong Holdings faces bankruptcy due to mounting debts, which includes some 200 million yuan (S$43 million) owed to 300 small suppliers, while its chairman and CEO have gone missing.

Jianglong chairman Tao Shou Long is also CEO of China Printing, and his wife Yan Qi, who is CEO of Jianglong, is deputy CEO of China Printing. They are based at the premises of Zhejiang Jianglong at Shaoxing County.

China Printing's independent directors (IDs) said yesterday that the husband and wife, who are also executive directors of the company, have not been contactable since Tuesday, despite repeated attempts to reach them.

'The chief financial officer visited Zhejiang Jianglong's factory in Shaoxing County on Oct 8 and 9 and has verbally informed the independent directors of his preliminary observations,' the IDs said in the SGX filing, without elaborating on what the preliminary observations were.

The IDs said that they 'hope to have better clarity on the state of affairs and financial condition of Zhejiang Jianglong in the near future'.

But according to a source close to China Printing, operations at China Printing and its parent company in China have ceased. The status of these companies needs to be sorted out at this point, the source said.

China Printing secretary Elle Zhang, the only employee located at its office here, told BT that she has not heard anything from the company yet and continues to report for work.

Phone calls made by BT to Zhejiang Jianglong Textile Printing & Dyeing Co Ltd in Shaoxing County suggested that the line was no longer in service and e-mail messages to the company have bounced back.

Mr Tao, his wife, the deputy CEO as well as Ted Wong - the company's consultant who was said to be 'close to the management' - could not be reached. Their mobile phones were turned off.

Temasek Holdings is one of the two limited partners in a Cayman Islands-incorporated private equity fund, New Horizon, that has an 8 per cent stake in China Printing. The other limited partner in this fund is SBI Holdings Inc.

A Temasek spokesman declined to comment, saying that they are a passive investor in the fund.

China Printing had asked the SGX on Wednesday to halt trading of its shares that afternoon after the news broke out in China.

Jianglong Holdings brought China Printing to list in Singapore in September 2006. Its shares were last traded at 2.5 cents, almost a tenth of the value on their listing debut at 27 cents. Although there was no word from the company, the trading volume of its shares spiked on Tuesday and Wednesday morning.

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Unwinding proceeds not enough to cover original collateral
By SIOW LI SEN
Source: Businesstimes.com

(SINGAPORE) Investors of the Merrill Lynch Jubilee Series 3 LinkEarner Notes are said to be walking around shell-shocked after receiving letters telling them that their investments are worth zero.

The current financial crisis meant that the proceeds from the unwinding process were not enough to cover the original collateral value of the notes which were complex products involving credit default swaps and derivatives.

The Jubilee Series 3 notes are the first structured products linked to the bankrupt Lehman Brothers to be unwound here.

A total of S$26.29 million and US$1.4 million had been sold by six broking houses at minimum amounts of S$20,000 or US$10,000.

Beside the Jubilee Series 3 notes, DBS High Notes 5 and Lehman Minibonds have gone belly up. Over half a billion dollars worth of these products were sold over the last two years to thousands of people.

According to the letter dated Oct 6 sent to noteholders from Merrill Lynch, it said that 'as the credit event redemption for both the SGD notes and the USD notes is zero, no amounts are due and payable to noteholders on the credit event redemption date.'

The credit redemption date is Oct 17, 2008.

Merrill said bids were asked from five dealers for the debt obligations of Lehman Brothers and securities which were notes whose performance is credit-linked to a pool of 120 underlying securities.

'Because Lehman Brothers Holdings Inc has filed for bankruptcy, these ...debt obligations are trading significantly below their face value... are currently valued below 20 per cent of their value value,' it said.

'The current US financial crisis has led to unfavourable market conditions in the broad credit markets which has led to significant decline in the value of the securities,' it said.

Although the proceeds came to several millions of dollars, they were less than the market value adjustment of S$20.9 million, so consequently the credit event redemption amount was determined to be zero.

Martin Lee, a financial adviser, said many investors have difficulty understanding that they will get nothing from the proceeds.

'It shows how complex the product is,' said Mr Lee.

Tomorrow, many investors of the failed structured products will gather at Hong Lim Park to listen to former NTUC Income chief executive Tan Kin Lian, who has handed a petition to the government on the matter.

The Monetary Authority of Singapore last night said it has received the petition from Mr Tan and said that it understands the anxiety of investors and is committed to ensuring a quick and fair resolution of their complaints.

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Ferrochina in Newspaper

After read through two English daily today: The Straits Times and The Business Times, I am surprise that the former manage to report news with depth, far outperformed the latter.

The Business Times has merely repeated the statement from Ferrochina and end the article by quoting the response from SGX saying that the exchange is 'closely monitoring the situation'.

Some interesting lines from The Straits Times:

Ferrochina staring at a black hole of 5.2 billion yuan, while its 3,800 or so shareholders will be left with stock that may be potentially worthless.

The last Ferrochina announcement is when the company said it had installed a new production line that would allow it to sell additional products. It also said it had identified a potential investor who was already carrying out a due diligence.

According to sources close to Ferrochina, “there is no evidence of anything untoward at the company”

It is understood that as some loans came due, the banks did not want to roll-over the outstanding amounts and demanded repayment. This left Ferrochina with no choice but to throw in the towel, albeit for a time.

Source say shuttering the factories is a precautionary move.

Chairman: She Chun Tai
Independent Director: Eric Low, Loo Choon Chiaw, Low Seow Juan (from Singapore)

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Billionaire investor Warren Buffett's instant paper profits on Goldman Sachs Group and General Electric have been wiped out amid the stock market's worst yearly slump since 1937.


Goldman, the most profitable Wall Street firm, fell 7.3 per cent on Tuesday in New York trading to US$115, the price at which Mr Buffett can buy US$5 billion of shares at any point in the next five years. When the deal was announced last month, Goldman closed at US$125.05, meaning Mr Buffett was US$437 million ahead.

Goldman and GE also sold Mr Buffett a combined US$8 billion in preferred shares that pay a 10 per cent dividend, allowing his Berkshire Hathaway to earn US$800 million a year without the warrants unless the companies collapse.

In exchange, the firms got Berkshire's cash and the endorsement of the 'Oracle of Omaha' at a time when stock prices are falling on concern that a tightening credit market may hobble even the largest companies.

Mr Buffett 'doesn't have a two-week time horizon', said Frank Betz, a partner at Warren, New Jersey- based Carret Zane Capital Management, which holds Berkshire and GE shares.

'Just because these prices drop below the strike price, it doesn't suggest that either of them are not exceptionally good investments.'

GE, the world's biggest maker of jet engines, agreed on Oct 1 to give Berkshire warrants to purchase US$3 billion in shares at US$22.25 apiece. The stock, which closed at US$24.50 that day, dropped to US$20.30 on Tuesday.

'You've got to pick them and hold them,' said Gerald Martin, a finance professor at American University's Kogod School of Business in Washington. 'He admits that he can't time markets, and he takes a very long time horizon.'

Mr Buffett, heralded as the world's best stock picker, agreed to the investments while some rivals find themselves with a cash shortage.

The worst housing slump since the Great Depression has resulted in record mortgage defaults in the US and a yearlong contraction in global credit markets, driving down stock prices and sending firms like Goldman and GE in search of funds.

Goldman has fallen 47 per cent this year through Tuesday in New York Stock Exchange composite trading. GE has declined 45 per cent. -- Bloomberg

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THE credit crisis is likely to worsen and Europe will have a harder time than the United States, tycoon Oei Hong Leong said yesterday.

Speaking at an event to honour his $7 million donation to the Lee Kuan Yew School of Public Policy, Mr Oei reiterated his earlier assessment of current financial turmoil as 'just the end of the beginning'.

While the $7 million was the handsome payoff on his gamble last month on one million American International Group (AIG) shares, Mr Oei said of the present situation: 'If there's any rally in the market at all, just get out. It's better to cut losses. I think things can get much worse.'

He bought AIG stock at US$1.80 apiece in the belief the company was too big to be allowed to fail. The US government intervened with an US$85 billion bailout on Sept 17 - and he sold the stock on Sept 22 for about US$5 a share.

'You've got $5 trillion in assets that are going to be deleveraged. $700 billion is far from enough,' he said yesterday, referring to the US government's bailout plan, which he reckons is insufficient to restore confidence in financial markets.

Mr Oei thinks the US government has the capacity to bail out its banks but reckons Europe is in 'big, big trouble', with banks too big to be saved.

'Deutsche Bank's exposure is about 80 per cent of Germany's GDP,' he said. 'The combined exposure of Credit Suisse and UBS is six times that of the Swiss GDP. I think the situation is getting worse.'

European governments this week pledged to defend the European banking system's stability, but no specific rescue plan has emerged yet.

Mr Oei's donation will go into an endowment fund awarding scholarships to students from China. The government will match his gift one-for-one. Of the 283 students currently enrolled at the LKY School of Public Policy, 42 are from China.

Mr Oei said: 'In China, they have learnt Western capitalism very quickly. But a lot of what has been learnt is bad capitalism - the greed and getting rich at all cost. What needs to be learnt are the good things about capitalism - proper governance, fairness, contribution to the community.'

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All the fixed assets like machinery and buildings come for free when companies trade at below net current assets
By TEH HOOI LING
Businesstimes.com

WITH the stock market sinking day after day into what seems like an abyss, few dare touch shares with a 10-foot pole. But have we entered the realm of irrational fear?

One way to know is to examine how cheap prices have become. Well, here's how cheap: Based on a rough screening, about 100 Singapore-listed companies are trading below their net current assets. That's their current assets after deducting all liabilities - be they short- or long-term - as well as minority interests.

In other words, at today's prices investors are getting a discount on current assets like cash, receivables and inventories net of all the company's obligations. Fixed assets like buildings and machinery come free.

Of the 100-over companies, I went through about 50 and found the discounts of some to be as deep as 70 per cent or more (see accompanying table).

The first component of value investing employed by Benjamin Graham was what his famous disciple Warren Buffett described as 'cigar butt investing'. Basically, Graham liked stocks that were akin to cigar butts found on the street - still smouldering, and from which it was possible to snatch one or two last puffs.

Graham's favourite valuation signal was a stock selling at a price below its net current assets - that is, a stock selling for less than its net working capital after deducting all of its prior obligations.

In his words: 'The type of bargain issue that can be most readily identified is a common stock that sells for less than the company's net working assets alone, after deducting all prior obligations. This would mean that the buyer would pay nothing at all for the fixed assets - buildings, machinery, etc - or any goodwill items that might exist.

'Very few companies turn out to have an ultimate value less than the working capital alone, although scattered instances may be found. The surprising thing, rather, is that there have been so many enterprises obtainable which have been valued in the market on this bargain basis.

'It is clear that these issues were selling at a price well below the value of the enterprise as a private business. No proprietor or majority holder would think of selling what he owned at so ridiculously low a figure. In various ways, practically all these bargain issues turned out to be profitable and the average annual return proved much more remunerative than most other investments.'

And to give himself more safety of margin, Graham advocated buying companies trading at less than two-thirds of their net current asset value. Let's call these stocks 'net-nets'.

In his book Intelligent Investor, he provided a table showing the results of the net-nets approach. The return from buying one share of each of 85 net-net companies on Dec 31, 1957, and then holding for two years, was 75 per cent. This compared with a 50 per cent gain from the S&P's 425 industrials. None of the issues showed a significant loss. Seven were almost unchanged and 78 showed appreciable gains.

Others have tested his approach. In 1986, Henry Oppenheimer examined the returns of buying net-nets between 1970 and 1983. The holding period was one year. Over its life, the portfolio contained a minimum of 18 stocks and a maximum of 89 stocks. Its mean return was 29 per cent per annum, against a market return of 11.5 per cent per annum.

Just this week, James Montier, a Societe Generale strategist who has won a global following through his articles on happiness and the sins of fund management, issued a report on his net-nets strategy on global stocks.

He used a sample of developed markets. Between 1985 and now, he found that an equally weighted basket of net-nets generated an average return above 35 per cent per annum versus a market return of 17 per cent per annum.

Regionally, the strategy outpaced the market by 18 per cent in the US, 15 per cent in Japan and 6 per cent in Europe. Montier noted that one wouldn't expect to find lots of stocks trading at less than two-thirds of net current assets. Of the developed markets he looked at, he ended up with a median number of 65 stocks and a mean of 134 stocks in the portfolio every year. In 2003, there were more than 600 net-nets in the markets he studied. That, he pointed out, was a signal of value in the market. Right now, despite the sharp falls in the market year-to-date, Montier found only 176 companies trading as net-nets. Well, obviously, he didn't look at Singapore.

It is to be expected that net nets are typically small caps. This is true of the list I generated. The median market cap of Singapore net-nets I happened to go through is $33 million. The average is $56 million.

In the big developed markets, the current crop of net-nets that Montier found had a median market cap of US$21 million and an average of US$124 million.

And guess where he is finding most of the net-nets now? About half the developed world's net-nets are in Japan, according to him. Sometimes there is a reason why these stocks are trading at such deep discounts. Montier found 5 per cent of his net-nets selection suffered more than a 90 per cent loss in value in a single year. However, on a portfolio basis, as mentioned, it fared much better than the general market. Also, he found that the net-nets strategy generated losses in only three years in the entire sample he back-tested; in contrast, the overall market witnessed six years of negative returns.

As Graham himself noted: 'Our experience with this type of investment selection - on a diversified basis - was uniformly good. It can be affirmed without hesitation that it constitutes a safe and profitable method for determining and taking advantage of undervalued situations.'

I'm not too sure if the back-testing done by Montier and the others took into consideration transaction costs. If not, the returns from the net-nets strategy may have been overstated. Imagine buying one lot each of the 100 net-nets in Singapore. In some cases, the transaction cost would amount to more than the cost of the stock itself, given that some are trading at just one or two cents.

Also, one should be discerning about what constitutes current assets if one were to consider investing in these stocks. For example, a few of the companies that appear on my list have 'developmental properties' itemised as one of their current assets. Of course, we know property prices are coming down. So there is a high likelihood that the value of these assets will be written down. Similarly, there could be write-offs on the accounts receivable or things like dues from subsidiaries. Also, a number of the deeply discounted stocks are China- based companies, where corporate governance has been an issue in the past.

Still, if the discounts are deep enough, it would probably have made up for the risks of write-downs and so forth. Indeed, some companies themselves see so much value in their stocks that they have been scooping up their own shares in the open market.

One example is HTL. The company's current market cap is only 64 per cent of its net current assets. The group managed to eke out a net profit of $3.6 million in the second quarter, and it thinks H2 will be better. No wonder its directors have been busy buying its shares from the open market.

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China Kunda is a manufacturer of precision moulds and plastic injection parts. They have launched the IPO after postponed its initial plan.

It is interesting to see how the underwriter manage to market this IPO when nobody seems to have appetite for IPO. First trading day is on 9 October 2008.

Don't bother to read the prospectus. Avoid it at all cost!!

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The only purpose for someone to risk the capital for investment is to generate profit. How about investing in 'boring stocks' to ride out the credit crunch? I personally find that the reason given in The Edge is laughable because it said: "partly because they fall less".

Boring Stocks are Best
Fraser & Neave – That Sinking Feeling
Singapore Press Holding – Surprising strength
Singapore Telecoms – Set for a bounce
SMRT – Greater relative strength
ST Engineering – Is this a base formation
Singapore Airline – Testing Support

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