May 2008

Date: April 30, 2008

MARKET REVIEW & GUIDANCE
(1st May 2008)

SIAS Investor Education Programme

By
Charlie Lau Suan Liat
A SIAS Investor Education Trainer

THOUGHT FOR MAY:

“The current economic downturn is due to:
1. Too much cheap money for too long.
2. The rampant use of exotic financial instruments to disperse risk among people who didn’t understand it.
3. Rating agencies failed to catch a great deal of highly rated debts.”

By: Ram Charan, Investment Guru, Fortune 500.

Market Review for April:
April Fool’s day saw Dow Jones up 391 points to 12’263 points amidst release of negative US economic data – manufacturing index down, housing sales down, more hedge funds closing down, further job cuts, etc, etc, etc.
Bear Stearns’ US$30b bailout by US Federal Reserve Board via JP Morgan is history. Lehman Brothers’ & UBS’ woes in requiring fresh capital are not.
April saw Dow ding-dong within a 500-point range (4%), on the upward bias.

Back home in Singapore, Olam raised S$307m via placement of 155.6m new shares @ $1.97, 2nd week of April.
Unifiber intends to raise US$227m through bond issue. Terms unknown.
In the midst of a credit crunch, no PLC wants to borrow from banks because banks are not keen to lend — for whatever the reasons.
So the message is clear. Market lacks money.
No money, no play; — or to be exact, no sustained support in speculative counters.

April Fool’s day also saw Jade Technology’s share price plunged from 22c to 6c after a one-week halt for investors to stomach the abortion of takeover by Jade’s president, Dr Anthony Soh.

Price increase in food staples seemed to be more severe with the world in April than the US sub-prime mortgage malpractices.

Singapore is more fortunate in that the SIN$ strengthened in record high against the USD.
It is even more fortunate that the Singapore Government acted not only to stabilize the price of food staples, she has also set up a $4m fund to assist those who were still not able to manage the increased cost of food staples.
This cannot be said of oil companies in Singapore that made record profits on the strength of the SIN$ and on greed, despite hardship caused to Singaporeans and the Singapore economy.

April saw hungry people from some third world countries throwing paper & stones at government officials over unbearable increase in cost of food staples & getting beaten up by enforcement agents with batons & bayonets.
Singapore is not too bad. People only grumble about increased cost of everything.

“Global investment funds & the weak USD are mainly to blame for high world food prices” — Jose Graziano, UN.

Take away futures trading of food staples and the world won’t go hungry, albeit some brokers & bourses would be leaner.

Some countries have already designated oil, steel and cement as strategic commodities. — That is, no futures trading, no hoarding, all under government control on such products. Citizens could be better off if such control could be extended to food staples.

Conclusion:

Since 1996 when US, by chance under Alan Greenspan, at the helm of the Federal Reserve Board, discovered how easy it was to “improve” the US economy by “cooking” its interest rates and “monetizing” subsidies, expenditures and wars, so started a decade of “easy money” on a monstrous scale.
Some US corporate heads, particularly the bankers, were quick to learn this new financial wizardry, so started the US sub-primed mortgage bonds that got the whole world conned, including some of their own, who were not so savvy but very greedy.
US’ staunched European allies in the likes of UBS, Credit Suisse & Societe Generale were also helped onto banana skins – US sub-primed mortgage bonds.
With so much money to play around, OPM, — Other Peoples’ Money – Bankers, brokers & dealers had no qualms about playing into risks they did not understand, — sub-primed mortgage bonds, futures, derivatives, involving billions of dollars or euros, as in the cases of Swiss bank, UBS losing US$37b and of French Bank, Societe Generale allowing a junior dealer to be involved with a 4.9b euros loss.
As mentioned earlier, US own bank, venerable Bear Stearns was already two feet on the banana skin and is now history.

“What goes up, must come down.”

Stocks that went up unrealistically Hi without fundamentals, but with “easy money” dropped back to realistic levels now when the “easy money” is no more.

But alamat! Investors now dare not buy although there are bombed-out stocks with very sensible dividend yields and earnings.

Singapore’s own Investment Guru, Dr Tony Tan, Deputy Chairman & ED of Government Investment Corp [GIC] bought into CitiGroup, UBS and others with wings all over the world.
As a tribute to Dr Tony Tan, he not only steered GIC clear of the US sub-primed mortgage bonds because he could foresee that most US home borrowers had no means of re-payment, he also “liquidated a portion of our equity holdings [GIC’s] in the third quarter of 2007”.
GIC was therefore well prepared for the present financial crisis to take advantage of any fire-sale.

In investment, timing is very important, and always look at three things – Fundamentals, Fundamentals & Fundamentals.

*If you wish to contact our writer, please email at sllau@uobkayhian.com

MARKET REVIEW & GUIDANCE
(1st May 2008)

SIAS Investor Education Programme

By
Charlie Lau Suan Liat
A SIAS Investor Education Trainer

THOUGHT FOR MAY:

“The current economic downturn is due to:
1. Too much cheap money for too long.
2. The rampant use of exotic financial instruments to disperse risk among people who didn’t understand it.
3. Rating agencies failed to catch a great deal of highly rated debts.”

By: Ram Charan, Investment Guru, Fortune 500.

Market Review for April:
April Fool’s day saw Dow Jones up 391 points to 12’263 points amidst release of negative US economic data – manufacturing index down, housing sales down, more hedge funds closing down, further job cuts, etc, etc, etc.
Bear Stearns’ US$30b bailout by US Federal Reserve Board via JP Morgan is history. Lehman Brothers’ & UBS’ woes in requiring fresh capital are not.
April saw Dow ding-dong within a 500-point range (4%), on the upward bias.

Back home in Singapore, Olam raised S$307m via placement of 155.6m new shares @ $1.97, 2nd week of April.
Unifiber intends to raise US$227m through bond issue. Terms unknown.
In the midst of a credit crunch, no PLC wants to borrow from banks because banks are not keen to lend — for whatever the reasons.
So the message is clear. Market lacks money.
No money, no play; — or to be exact, no sustained support in speculative counters.

April Fool’s day also saw Jade Technology’s share price plunged from 22c to 6c after a one-week halt for investors to stomach the abortion of takeover by Jade’s president, Dr Anthony Soh.

Price increase in food staples seemed to be more severe with the world in April than the US sub-prime mortgage malpractices.

Singapore is more fortunate in that the SIN$ strengthened in record high against the USD.
It is even more fortunate that the Singapore Government acted not only to stabilize the price of food staples, she has also set up a $4m fund to assist those who were still not able to manage the increased cost of food staples.
This cannot be said of oil companies in Singapore that made record profits on the strength of the SIN$ and on greed, despite hardship caused to Singaporeans and the Singapore economy.

April saw hungry people from some third world countries throwing paper & stones at government officials over unbearable increase in cost of food staples & getting beaten up by enforcement agents with batons & bayonets.
Singapore is not too bad. People only grumble about increased cost of everything.

“Global investment funds & the weak USD are mainly to blame for high world food prices” — Jose Graziano, UN.

Take away futures trading of food staples and the world won’t go hungry, albeit some brokers & bourses would be leaner.

Some countries have already designated oil, steel and cement as strategic commodities. — That is, no futures trading, no hoarding, all under government control on such products. Citizens could be better off if such control could be extended to food staples.

Conclusion:

Since 1996 when US, by chance under Alan Greenspan, at the helm of the Federal Reserve Board, discovered how easy it was to “improve” the US economy by “cooking” its interest rates and “monetizing” subsidies, expenditures and wars, so started a decade of “easy money” on a monstrous scale.
Some US corporate heads, particularly the bankers, were quick to learn this new financial wizardry, so started the US sub-primed mortgage bonds that got the whole world conned, including some of their own, who were not so savvy but very greedy.
US’ staunched European allies in the likes of UBS, Credit Suisse & Societe Generale were also helped onto banana skins – US sub-primed mortgage bonds.
With so much money to play around, OPM, — Other Peoples’ Money – Bankers, brokers & dealers had no qualms about playing into risks they did not understand, — sub-primed mortgage bonds, futures, derivatives, involving billions of dollars or euros, as in the cases of Swiss bank, UBS losing US$37b and of French Bank, Societe Generale allowing a junior dealer to be involved with a 4.9b euros loss.
As mentioned earlier, US own bank, venerable Bear Stearns was already two feet on the banana skin and is now history.

“What goes up, must come down.”

Stocks that went up unrealistically Hi without fundamentals, but with “easy money” dropped back to realistic levels now when the “easy money” is no more.

But alamat! Investors now dare not buy although there are bombed-out stocks with very sensible dividend yields and earnings.

Singapore’s own Investment Guru, Dr Tony Tan, Deputy Chairman & ED of Government Investment Corp [GIC] bought into CitiGroup, UBS and others with wings all over the world.
As a tribute to Dr Tony Tan, he not only steered GIC clear of the US sub-primed mortgage bonds because he could foresee that most US home borrowers had no means of re-payment, he also “liquidated a portion of our equity holdings [GIC’s] in the third quarter of 2007”.
GIC was therefore well prepared for the present financial crisis to take advantage of any fire-sale.

In investment, timing is very important, and always look at three things – Fundamentals, Fundamentals & Fundamentals.

*If you wish to contact our writer, please email at sllau@uobkayhian.com