Bubbles bubbles bubbles of Bond markets

Photo : http://hdwpics.com/images/046451906A53/Bubbles-High-Resolution.jpg

One of the articles from ChannelNewsAsia, have caught my attention. It on one of the Singapore corporate bonds by PT Trikomsel Oke(Sing-dollar) that could faces default. If it really happen, it will be the first in Singapore Corporate Bonds overpast 6 years.

Standard & Poor’s Asia Pacific Director of Corporate Ratings Xavier Jean, said : “Between 2010 and today, companies across the region, whether it’s Malaysia, Indonesia, or even Singapore, have taken the opportunity to raise so much debt, because it was so cheap. When things slow down, as a result, they have to service bigger debt amounts.”

Besides that, Credit Suisse AG announced that they will stop being a market maker for government bonds across Europe since last week, due to a higher cost of wholesaling debt resulting from a tighter regulations.

“This could be the beginning of a wider trend,” said Gianluca Minieri, head of trading at Pioneer in Dublin, which oversees $242 billion. “Banks stay in a business only if it’s profitable, but the regulations expected in coming years are not envisaged to loosen capital requirements for banks. It could be the opposite.”

In my view, there is way too much easy money out in the Bond Market due to various governments carry out QE, First from USA, follow by Japan, China(China have a different approach with their QE), and with EU joining the “Fun Party” in March of this Year. Government issue bond and in return buy up bond with the printed money that they injected. There is no real demand for bond. And what all these easy money really meant is that a certain level of bubble are building up in Bond Market. Open out both your eye and ear for tell tale sign!

Photo : http://www.bbc.com/news/business-30933515

 

Links :
http://www.channelnewsasia.com/news/business/singapore/sing-dollar-corporate/2228564.html

http://www.businesstimes.com.sg/banking-finance/credit-suisse-exiting-dealer-role-rings-alarm-in-debt-market

http://www.bbc.com/news/business-30933515

China $550 Billion Stock Wipeout Reminds Traders of 2007 Catastrophe

SSEHotTemperatureWith the ever increasing temperature of the China Stock Market, are you aware of the pitfall or the potential bargain?

Read on the following article for more detail. Just take note, never ever place all in one shot, instead timed and break it up into 3 entry which applied for both taking up position and profit taking.

 

http://www.bloomberg.com/news/articles/2015-05-31/china-stock-rout-grips-market-with-deja-vu-of-5-30-catastrophe

The rout wiped out about $350 billion of market value in a week on the Shanghai and Shenzhen exchanges. It so traumatized traders that eight years later they still refer to the decline by the date it began: the 5/30 catastrophe.The milestone for the modern Chinese stock market, which began in 1990, started on midnight, May 30, 2007, with Hu Jintao’s government unexpectedly announcing it would triple a tax on stock trading. The plunge sparked by the pronouncement had followed a breathless rally, making it eerily similar to last week’s events.

On Thursday, stocks erased almost $550 billion in value after surging 143 percent on the Shanghai Composite Index over the past year. Traders could be forgiven for a wave of deja vu mixed with a dollop of dread: In 2007, stocks recovered from their May losses only to drop more than 70 percent over the next 12 months from an October peak.

The Shanghai Composite gained 1.9 percent at 10:30 a.m. local time Monday.

Here’s a look at the similarities and differences between China’s markets then and now.

What’s similar:

* Timing of declines: Both selloffs followed rallies that sent the benchmark index up more than 100 percent in just months.

Thursday’s tumble in Chinese stocks came after brokerages tightened lending restrictions and the central bank drained cash from the financial system. The Shanghai Composite shed 6.5 percent and fell another 0.2 percent in volatile trading on Friday.

On May 30, 2007, the Shanghai gauge also tumbled 6.5 percent after the government raised the stamp tax to 0.3 percent from 0.1 percent. The measure aimed to cool the stock market after it doubled in about six months and almost quadrupled from the end of 2005.

By June 4, the benchmark had lost 15 percent. The market then started to stabilize and rose another 66 percent to an all-time high in October 2007 before tanking again as the global financial crisis raged.

* Rookie traders: The two stock rallies were fueled by record amounts of new investors, increasing fluctuations.

About 29 million new stock accounts have opened this year through May 22, almost as many as in the previous four years combined, according to the China Securities Depository & Clearing Corp. Margin debt on the Shanghai exchange has soared more than 10-fold in the past two years to a record 1.35 trillion yuan ($220 billion) on Thursday.

In the first five months of 2007, more than 20 million stock accounts opened, four times the amount in all of 2006. Margin trading, or investing with funds borrowed from brokerages, wasn’t allowed then.

* Initial public offerings: In both instances, a flood of new companies came to the market to take advantage of rising share prices. More than 120 newly listed companies have started trading so far this year, almost matching the total for all of 2014.

In 2007, PetroChina Co.’s 67 billion yuan ($11 billion) IPO was “one of the catalysts” pricking the “bubble,” Hao Hong, the chief China strategist at Bocom International Holdings Co. in Hong Kong, wrote in a note on May 28.

What’s different:

* Monetary policy: China’s economy was booming in 2007, prompting the central bank to extend a policy of raising interest rates for a third year. Higher borrowing costs eventually helped cool the market.

This time, policy makers are cutting interest rates as the economy slows, bolstering stocks. The People’s Bank of China lowered its benchmark for the third time in six months to 5.1 percent on May 11. The central bank will further cut it to 4.85 percent by December, according to economists surveyed by Bloomberg.

* Valuation: While stocks have become more expensive, price-to-earnings ratios are still lower than in 2007. Trading at around 18 times forward profit, the Shanghai benchmark is about 60 percent cheaper than at its at peak of 2007, data compiled by Bloomberg show.

* Liquidity: Unlike in 2007 when the Chinese market was largely off-limits to foreign investors, authorities have recently accelerated the accessibility of stock trading, luring more overseas funds.

A link between the Shanghai and Hong Kong exchanges established in November allowed international investors greater access to the local market. A similar program between Shenzhen and Hong Kong is due to start this year. Global funds investing in China added more than $4 billion in the week through May 27, more than double the previous record set in 2008, according to data provider EPFR Global.

* Government support: Policy makers repeatedly warned investors of risks in the stock market in 2007. This time, they’ve voiced their support. As the government tries to lower corporate debt levels, the equity market has become a more important venue for companies to raise funds, according to Andrew Sullivan, head of sales trading at Haitong International Securities Group in Hong Kong.

By moving money away from the “shadow banking” system, it makes investments “more controllable,” Sullivan said on Bloomberg Television.

“That’s where they want to keep it,” he said.

Differences between Reit and Business Trust

dividend-stockEvery now and then, i got question regarding to dividend stock after my post on dividend stock to be in your porfolio. With most dividend stocks fall under Reit or the Business trust model, but as an investor, do you know what is the differences between both? I got this nice article from http://www.fool.sg/2015/01/05/3-important-differences-between-a-reit-and-a-business-trust-that-investors-have-to-know/ that have a good comparison between both.

For the full list of REIT listed in Singapore, do click here, and if you interested in Business Trust listed in Singapore, please click here instead. :)

3 Important Differences Between A REIT and A Business Trust That Investors Have To Know (From fool.sg)

The Singapore stock market is home to quite a wide selection of real estate investment trusts (REITs) and business trusts. In fact, Singapore’s stock exchange is also one of the few exchanges in the world which allows the listing of business trusts.

Within Singapore’s market benchmark the Straits Times Index (SGX: ^STI), there are already three trusts amongst its 30 constituents. The trusts include Ascendas Real Estate Investment Trust (SGX: A17U), a REIT, and Hutchison Port Holdings Trust (SGX: NS8U), a business trust.

It might be easy to lump a REIT and business trust together and view them similarly. But, there are actually important differences between the two types of securities that investors have to know before they invest in them.

1. Legal structure

Unlike a normal corporation, both business trusts and REITs are managed through a trust deed with the trustee having full legal ownership of the trust’s assets instead of the trust’s unitholders.

The trustee of a business trust is considered the trustee-manager and so it’s the same entity which owns and manages the assets on behalf of the unitholders of the business trust. Meanwhile, a REIT requires a trustee to hold the assets and a separate manager to manage the assets for unitholders. The trustee for a REIT must be a licensed entity approved by the authorities.

Unitholders can also choose to remove the manager of a REIT if there’s a vote on the matter and more than 50% of the votes say “yes” on the move. As for a trustee-manager of a business trust, it can only be removed if 75% of votes from unitholders are in favour of such a move.

2. Differences in leverage

According to the “Code on Collective Investment Schemes,” a REIT is only allowed a limit of 35% for its gearing ratio. A REIT can boost its gearing ratio to 60% if it obtains a credit rating from rating agencies (these credit restrictions might be altered in the future).

Business trusts on the other hand, are not required to subject themselves to any borrowing limit. It is thus important for unitholders to keep an eye on the gearing ratio of a business trust as the level of leverage employed might get out of hand. There have been instances of business trusts overstretching themselves, with the experience of First Ship Lease Trust (SGX: D8DU) being a good example.

In this sense, business trusts might be seen to be riskier entities than a REIT since there’re no hard limits on how much the former group can borrow.

3.  The level of distributions

Another key difference between a business trust and a REIT is that the former is is not obligated to distribute any of its income while a REIT must pay out 90% of its “distributable income” under the Income Tax Act. So for investors looking for stable yields, a REIT might be considered a “safer” investment in this sense since a REIT has to pay a distribution.

Foolish Summary

A collection of real estate might be bundled up as a business trust instead of a REIT – there are no restrictions on the matter. But, an investor has to realise that, there are fundamental differences between the two structures even if they do own the same type of asset. Investors should take note about these key issues before investing in any of the two.

How to benefit from Singapore Budget2015?

budget2015_logo

About SGBudget2015

In SGBudget2015, there are a lot of measures that benefit most of the Singaporeans in the Middle and Low Income Tier, in area like Personal Income Tax rebate, Childcare and Exam fee rebate. It also come with scheme that help to lighten financial load of Singaporean that taking care of their parent. The list go on, and you can find ton of information online like https://twitter.com/MOFsg or http://www.straitstimes.com/news/singapore/more-singapore-stories/story/singapore-budget-2015-15-things-cheer-about-20150223.

What will be more important is to analyst the influence of Budget2015 over Singapore Stock Market. We need such information to empower us and assist us on the path of wealth creation. So let’s get started!

Key Influences of SGBudget2015

  • Govt expenditure will continue to increase over the medium to long term, driven by healthcare, public transport & T5.
  • A new Changi Airport Development Fund will be set up, with an initial injection of $3B
  • Temasek to be included in Net Investment Returns framework; add. resources to fund govt expenditures
  • Petrol duty rates for premium and intermediate grade petrol raised by $0.20/litre and $0.15/litre respectively
  • Credit – S’porean aged >= 25 to get initial credit of $500 from 2016 for education & training

As the initial fund for public transportation being locked in, the transport companies SMRT and SBS Transit will be back in spotlight with Lui Tuck Yew announce on the bus asset purchase plans pretty soon. Comfort should also get to be part of the spotlight gang as it not impacted from the come-into-effect increased petrol duty rates, as it uses diesel for its fleet.

As plans for Terminal 5 Airport materializes with an initial injection of $3B new Changi Airport Development Fund, certain construction company and logistic company like Yongnam, CWT and Singpost may have big rally story cocking up and bang up soon.

Scheme Skillsfuture will soon put $500 into education & training account for most of the working Singaporean adults. With this Skillsfuture Fund spill over, Education operators like Raffles Education should enjoy the soak up too.

Previously, Singapore government tap on returns generated on its net assets managed by the Monetary Authority of Singapore (MAS) and GIC, and now Temasek is being listed to served Singapore. Temasek may need to generate safer return, and forcing it to make better investment decision. We can started to consider those companies that Temasek invested in after this NIR framework update.
Update
Do not chase any stock especially when it has rally, instead look for sign of weak supply or higher low, before enter any long position!

 

Disclaimer:
Articles in this blog contained the personal views and opinions of the author and are based solely on his perspectives and/or experiences, except for articles that originated from other sites, shall bear their own disclaimer. They do not represent any form of statements made by any organizations.

The articles are for information only and readers must not misconstrued them as financial advice. The author does not work in the financial industry nor is he a licensed financial adviser authorized to provide financial advisory. And purpose of articles been written in mind for main purpose of knowledge sharing & discussion, never to induce or promote any insider trading or manipulation activities.

Any form of investments carry risk, so readers should engage a licensed financial adviser to assess if they are suitable to invest in such products. The author of this blog will not be liable for any form of damages that may arise from the use of information, products and services directly or indirectly featured or implied in this blog.

Introduction to Supply and Demand

What is Supply and Demand?

Every day stock prices change due to the result of market forces in respect to supply and demand. When more people want to buy a stock (demand) than sell it (supply), then the price moves up (Refer to the green box in the diagram below).

On the other hand, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall(Refer to the red box in the diagram below).

sti-1yearAnd when you have supply and demand been acted out on bigger time frame, you will be presented the overall trend direction. Is it trending up, down or sideway? Below is the chart for STI since 1980 till now. Within the chart, there were a lot of supply and demand (waves) going on. From the chart, it is easy to say that it’s a trending up chart. Reason been the various higher low. We can say that there more buyers than sellers, or the buying strength is more superior than the selling strength. And you as a trader, it important for you to keep a lookout and analyses the strength of each wave. One simple method will be to lookout for a higher low for up trend or lower low for down trend.

Example, look at the black box as below, you can clearly identified a series of higher low and higher high and it looks like it’s a compressed spring waiting to unleash the stored energy within it. Although the probability for a up trend is higher, but it be safer to get in any long position when there is dip and be sure to lookout for a serious supply wave that bleach the previous low.

sti-longerViewDisclaimer:
This article contained the personal views and opinions of the author and are based solely on his perspectives and/or experiences, except for articles that originated from other sites, shall bear their own disclaimer. They do not represent any form of statements made by any organizations.

This article is for information only and readers must not misconstrued them as financial advice. The author does not work in the financial industry nor is he a licensed financial adviser authorized to provide financial advisory. And purpose of article been written in mind for main purpose of knowledge sharing & discussion, never to induce or promote any insider trading or manipulation activities.

Any form of investments carry risk, so readers should engage a licensed financial adviser to assess if they are suitable to invest in such products. The author of this blog will not be liable for any form of damages that may arise from the use of information, products and services directly or indirectly featured or implied in this blog.

How you interact with Stock Market? You React And Response?

Came across this meaningful article online and i will like to share with the readers out there. The same concept describe below also applied to the way how you handle your emotion in stock market when it turn on you.

React And Response

At a restaurant, a cockroach suddenly flew from somewhere and sat on a lady. She started screaming out of fear. With a panic stricken face and trembling voice, she started jumping, with both her hands desperately trying to get rid of the cockroach – Her reaction was contagious, as everyone in her group also got panicky.

The lady finally managed to push the cockroach away but …it landed on another lady in the group. Now, it was the turn of the other lady in the group to continue the drama. The waiter rushed forward to their rescue.

In the relay of throwing, the cockroach next fell upon the waiter. The waiter stood firm, composed himself and observed the behavior of the cockroach on his shirt. When he was confident enough, he grabbed it with his fingers and threw it out of the restaurant.

Sipping my coffee and watching the amusement, the antenna of my mind picked up a few thoughts and started wondering,

Was the cockroach responsible for their histrionic behavior? If so, then why was the waiter not disturbed? He handled it near to perfection, without any chaos.

It is not the cockroach, but the inability of the ladies to handle the disturbance caused by the cockroach that disturbed the ladies.

I realized that, it is not the shouting of my father or my boss or my wife that disturbs me,
but its my inability to handle the disturbances caused by their shouting that disturbs me.
Its not the traffic jams on the road that disturbs me, but my inability to handle the disturbance caused by the traffic jam that disturbs me. More than the problem, its my reaction to the problem that creates chaos in my life.

Lessons learnt from the story :

I understood, I should not react in life, I should always respond. The women reacted, whereas the waiter responded. Reactions are always instinctive whereas responses are always well thought of, just and right to save a situation from going out of hands, to avoid cracks in relationship, to avoid taking decisions in anger, anxiety, stress or hurry.

Casualties From Swiss Shock Spread From New York to New Zealand

EuroVsSwissFrancHow it started

Pending announcement from European Central Bank (ECB) to launch a full-scale quantitative easing program (QE) on 22 Jan 2015, has lead to Swiss National Bank (SNB) to abandon the capping of franc at 1.20 to the euro, introduced since September 2011.

Besides they also have their key interest rate cut from -0.25% to -0.75%, raising the amount investors pay to hold Swiss deposits.

And such action have caused massive impact by trigger massive automatic and painful cut loss due to leverage call (If you look at the chart on the left). Watch out if you have fund in oversea trading house.

 

Article : Casualties From Swiss Shock Spread From New York to New Zealand

Losses mounted from the Swiss currency shock as the largest U.S. retail foreign-exchange brokerage said client debts threatened its compliance with capital rules and a New Zealand-based dealer went out of business.

FXCM Inc., which handled a record $1.4 trillion of trades by individuals last quarter, said clients owe $225 million on their accounts after the Swiss National Bank’s decision to abandon the franc’s cap against the euro roiled markets worldwide. Global Brokers NZ Ltd. said losses from the franc’s surge are forcing it to shut down. IG Group Holdings Plc estimated an impact of as much as 30 million British pounds ($45.5 million) and Swissquote Group Holdings SA set aside 25 million francs ($28.4 million).

“I would be astonished if we did not see more casualties,” Nick Parsons, the London-based head of research for the U.K. and Europe at National Australia Bank Ltd., said by phone from Sydney. “This was a 180-degree about turn by the SNB. People feel hurt and betrayed.”

The franc surged as much as 41 percent versus the euro on Thursday, the biggest gain on record, and climbed more than 15 percent against all of the more than 150 currencies tracked by Bloomberg. Dealers in London at banks including Deutsche Bank AG, UBS Group AG and Goldman Sachs Group Inc. battled to process orders yesterday when the SNB surprised markets with its announcement in Zurich.

Unprecedented Volatility

Market turmoil from the move extended into a second day as Asian shares dropped with U.S. index futures, while Japanese and Australian government bond yields plunged to records as investors sought haven assets.

“Clients experienced significant losses” after the franc’s surge, FXCM said in a statement dated Jan. 15. That “generated negative equity balances owed to FXCM of approximately $225 million.”

The brokerage dropped 15 percent in New York trading yesterday to an almost two-year low of $12.63, leaving the company valued at about $596 million. The shares were cut to sell from neutral by Citigroup Inc., which lowered its price target to $5 from $17.

Spokeswoman Jaclyn Klein didn’t immediately respond to calls to her mobile and office phones.

The U.S. Commodity Futures Trading Commission allows investors to put down as little as 2 percent of the value of their foreign-exchange bets. Brokers may get stuck with the balance of losses suffered by clients who used leverage, borrowed on credit cards, or did both to bet against the franc.

Leveraged Trades

Drew Niv, FXCM’s chief executive officer, said that individual currency traders are enticed by the chance to control large positions with little money down, in remarks that were published in Bloomberg Markets magazine’s December issue.

“Currencies don’t move that much,” he said. “So if you had no leverage, nobody would trade.”

The company warned investors in a regulatory filing last March that its risk controls were imperfect. FXCM had 230,579 retail customers on Dec. 31. They traded $439 billion of currency in December, with an average of 595,126 trades a day.

“Some of our methods for managing risk are discretionary by nature and are based on internally developed controls and observed historical market behavior,” the company said in the regulatory filing. “These methods may not adequately prevent losses, particularly as they relate to extreme market movements.”

Swiss Surprise

Most of FXCM’s retail clients lost money in 2014, according to the company’s disclosures mandated by the CFTC. The percentage of losing accounts climbed from 67 percent in the first and second quarters to 68 percent in the third quarter and 70 percent in the fourth quarter.

The SNB ended its three-year policy of capping the franc at 1.20 per euro a week before the European Central Bank meets to discuss government bond purchases to boost the euro-area economy. Such a policy, known as quantitative easing, could spur pressure on the franc to appreciate against the euro. The SNB spent billions defending the currency cap after introducing it in September 2011.

“Many clients were following the confirmed longstanding strategy from the SNB and were anticipating a weakening of the Swiss franc against the euro,” Swissquote said in its statement. The drop “left the clients with a negative balance and has prompted the bank to activate a provision of 25 million francs.”

Deutsche Bank was among dealers to suffer disruptions to electronic trading, with its Autobahn platform temporarily ceasing to provide quotes, according to a dealer from outside the bank. Auckland-based Global Brokers NZ said the market for francs was disrupted for hours.

HSBC Customers

“The majority of clients in a franc position were on the losing side and sustained losses amounting to far greater than their account equity,” Global Brokers NZ director David Johnson said in a statement dated Jan. 15 and posted on the website of affiliated company Excel Markets. All of the firm’s client funds are in segregated accounts and “100 percent of positive client equity or balance is safe and withdrawable immediately,” Johnson said.

HSBC Holdings Plc is investigating reports that customers in Hong Kong bought the Swiss franc below market rates when an online banking system failed to keep up with the currency’s gains after the removal of the cap.

Apple Daily and the Hong Kong Economic Journal cited unidentified bank customers as saying that they took advantage of the mistake yesterday evening. HSBC spokeswoman Maggie Cheung said in an e-mail that the lender was looking into the reports.

Fund Pain

IG Group shares fell 4.4 percent yesterday. The U.K. spread-betting firm said the financial impact from the surge in the Swiss franc was partially dependent on its ability to recover client debts.

The market turmoil turned the $1.9 billion John Hancock Absolute Return Currency Fund into the biggest loser among U.S. peers. It tumbled 8.7 percent yesterday, the steepest drop on record and the most among more than 2,000 U.S.-domiciled funds tracked by Bloomberg with at least $1 billion under management. The fund had its second-biggest short position in the franc at the end of November, according to the latest fact sheet on John Hancock’s website.

“When they pulled the rug under the market, the Swiss franc rallied against everything,” said Chris Weston, chief market strategist at IG Markets Ltd. in Melbourne. Many funds “would have been in a lot of pain last night,” Weston said.

 

Article from http://www.bloomberg.com/news/2015-01-15/new-zealand-currency-broker-closes-on-losses-after-swiss-shock.html

 

Important to have a good stock broker!

Important to have a good stock broker!

whatstockstobuy Often when you opening your first trading account, you’re most likely to be assigned to a general pool of brokers of the brokerage firm. I not meaning that their services are that great, but to them, you are just another ordinary investor out there. Unless you trade in million and let them earn a big fat commission or a close friend/client, you less likely to get good service or to hear from them. So it will worth your time to look around for a good broker, ask your friends for referral will be a good way to start the hunt!

Finding the suitable stock broker.

Finding a good personal broker, aside from the general pool, is a lot like getting a good life partner! First of all, your stock broker should be the one that you trusted and of course they should of a good character like trustworthy. A lot of what makes the team-up works will be the chemistry, and only you can decide whether it works or not.

Unfortunately, after the Lehman Brothers incident in 2008, stock brokers are “tied” with ton of read tape and it hinder their work in order to service you better.  They are bounded not to give advise of stock that you should invest in. So don’t blame them if they never advise you of good stock to trade. Unless, you have a good personal relationship with them, and they may drop some hint here and there, after they trusted you of not to spill the bean.

 

Stock broker as your personal pair of eyes and ears to Stock Market.

A good stock broker will be your personal pair of eyes and ears to monitor the stock market, giving your insight of some of the potential events to be take place for your group of invested interests or potential investments.They definable prefer you as their client to have a good profit, as that in return increase their payslip. Nevertheless, please do your due diligent to research on the investment before you parked your money in and don’t blame your broker if thing go wrong. They are not god!

Fortunately for me, i have a few good brokers in my inner circle of friends, which i appreciate their help and service in times to times. And make use of this chances to say “thanks bros!” and continue to give me good hints! :)

Note : For those interested to get started to have good broker, do feel free to email to me fredrick@bigfatpillar.com as for my trusted brokers list. By the way, i not getting any commission from them, i just helping them out for the good services they rendered!

Disclaimer:
Articles in this blog contained the personal views and opinions of the author and are based solely on his perspectives and/or experiences, except for articles that originated from other sites, shall bear their own disclaimer. They do not represent any form of statements made by any organizations.

The articles are for information only and readers must not misconstrued them as financial advice. The author does not work in the financial industry nor is he a licensed financial adviser authorized to provide financial advisory. And purpose of articles been written in mind for main purpose of knowledge sharing & discussion, never to induce or promote any insider trading or manipulation activities.

Any form of investments carry risk, so readers should engage a licensed financial adviser to assess if they are suitable to invest in such products. The author of this blog will not be liable for any form of damages that may arise from the use of information, products and services directly or indirectly featured or implied in this blog.