` Moneytalk
| 16 comments ]

The last time I actually wrote something on this site was a couple of months ago. The reason why I have stopped writing for such a long time is that there is really nothing interesting out there in the market for me to write about as there is nothing which I can capitalize on.


Bonds in particular, the Singapore Government Bonds and Treasury Bills are still near their historical yield level which makes any purchase unattractive.

Stocks are neither here or there. It is at a price level which is not undervalued enough (at least for me) to purchase them. But it is also not ridiculously overpriced such that some upside is still possible. I'm an risk averse investor so I only seek to buy at a price significantly below their worth.

Properties should be pretty obvious to everyone. It has been in the headlines for a long time with mostly bullish news. Price are still bursting through the peak. Flip through the newspapers and properties advertisement and sale launches are still everywhere. Similar to stocks, I reckon it is not a good idea to buy near the peak.

I am actually bidding my time to capitalize on events which I think it may happen in the near future.

The stock market has been trending sideways for the past year or so. There are a few issues which may have a potential for stocks to be on the downside. These issues now are the Greek debt crisis and the sluggishness of the US economy being weighed down by huge amount of the debt. I would say that the latter is contributing more to the sideway trending that we are seeing now. Despite of this, I do not think that the market is going to fall heavily. I am waiting for the opportunity to snap up quality stocks but meanwhile, it will be waiting and waiting for the market to fall and monitoring the companies on my watchlist.

The property market locally is a bubble waiting to be burst. For me, it is not a matter of if but when. There has been a few articles out there warning about this. The main factors are as the following.

  • Tightening of foreign labour policies
  • Oversupply of land and properties
  • Rise in interest rates
The tightening of foreign labour policies will see a drop in demand and the oversupply of land coupled with properties with developments coming in the pipeline in the next few years will be a double whammy. Besides, interest rates will not remain low forever and when it rise, it will affect the mortgage payments of properties owners and the serviceability of their loans. Still remember the property crash back in 1998 ? When this happens, it will be easy to snap up properties counters at firesale prices.

| 3 comments ]

Home prices slip but the 'centre' still holds
Central region resists overall dip for now, but luxury market also expected to stay flat

By KALPANA RASHIWALA from the Business Times, 29th March 2011

Prices of completed private apartments and condos have slipped slightly, overall, as the government's cooling measures made themselves felt. But those in the most posh part of town are still holding their own.


Latest flash estimates for February from the National University of Singapore show a weaker month-on-month performance in price indices compared to January.

'The Jan 13 cooling measures are certainly working,' said Knight Frank chairman Tan Tiong Cheng. 'The lower loan-to- value limit has affected investors with outstanding housing loans even if they have some financial capacity to purchase another residential property.'

NUS's overall Singapore Residential Price Index (SRPI) dipped 0.4 per cent month on month in February, a reversal of a gain of 2.9 per cent posted in January.

The sub-index for the Central region - home to Singapore's choicest residential districts (1-4 and 9-11) - rose one per cent month on month in February, a slower rise than the 3.1 per cent gain recorded in January.

The sub-index for the Non-Central region (where suburban mass-market condos are located) declined 1.5 per cent in February over the preceding month, in contrast with a 2.8 per cent appreciation in January.

Mr Tan predicts that private home prices in Singapore are likely to drift at current levels - 'unless the government opens the immigration tap again and removes some of these very severe cooling measures such as the seller's stamp duty rates and 60 per cent LTV for those with existing housing loans'.

Meanwhile, prices in the Central region have risen at a faster clip in the first two months of this year since end-2010 than in the Non-Central region. This marks a reversal of last year's pattern.

As a result, the SRPI for the Central region has finally surpassed its pre-global financial crisis peak of November 2007, albeit by just 0.1 per cent.

NUS's indices are produced by the university's Institute of Real Estate Studies and cover only completed non-landed private homes. The February 2011 flash estimate for the Central region index is up 4.1 per cent from the end of last year. This is a bigger gain than the 1.3 per cent year-to-date appreciation in the index for the Non-Central region.

The February Non-Central region index is up 18.8 per cent from its pre-crisis peak in January 2008.

The overall SRPI has appreciated 2.5 per cent year to date and is 11.5 per cent higher than its November 2007 peak.

February flash estimates reflect year-on-year increases of 10.3 per cent for the Central region, 13.1 per cent for the Non-Central region and 11.9 per cent for the overall index.

International Property Advisor (IPA) chief executive Ku Swee Yong said that prices of projects such as St Thomas Suites and Trillium in the prime districts, which were completed towards the end of last year, have posted price gains as buyers viewing the finished projects have found their quality better than expected.

'Clients whom we have brought for viewing for other projects like 8 Napier and Parkview Eclat have also been impressed by the quality of finishings,' he added.

Despite the NUS SRPI for the Central region outperforming that for the Non-Central region in February, Mr Ku is doubtful that this trend will prevail for the whole of this year.

'Unfortunately, wealth does not trickle from the bottom to the top,' he said. He does not expect the luxury condo market to outshine the suburban market in 2011 unless 'we see an influx of more high net worth individuals into Singapore both as tenants and buyers, and bankers receive their one and two-year bonuses again', he added.

The luxury market is likely to remain flat this year in terms of both prices and transactions, Mr Ku predicts.

Last year, out of the 16,292 private homes developers sold, only about 100 were above $3,000 per square foot.

'Foreigners are still scouting for buys but are not coming back to the high-end market the way they were in 2007,' he added.

Agreeing, Knight Frank's Mr Tan said: 'The foreign contingent is not back in full force. And there's still a good selection of units in prime district projects available from developers, which will put pressure on prices. For these reasons, I don't see a need for further cooling measures.

| 19 comments ]

I was trying to search for the historical price to earnings ratio or in short, the P/E ratio for the S&P 500, a major US index. My search was not exactly that fruitless and I managed to get a Excel spreadsheet of the data from the official website of Standard and Poors here although the data is only up to 2008. However, the data goes back to a long time starting from 1936. Using the data, I managed to plot the P/E ratio against time and the chart is shown below.



From the chart, the P/E ratio has not drop below 10 since 1984. Following which, the P/E ratio has consistently remained above 10. This chart is a good gauge of when it is a good time to accumulate the S&P 500 given that one can buy an ETF that tracks the S&P 500 on the SGX. This ETF is the iShares S&P 500 trading under the symbol IS S&P500 10US$.

| 3 comments ]

Amidst all the frenzy and noise with regards to the bullish and feverish economic and property news, the following are two articles which in my opinion, are rather interesting as it offers something that is of the contrary. Capital inflows into Singapore and a low interest rate are inflating assets and such circumstances will come to a stop soon, especially the latter. And when that happens, it is not hard to think of what will the outcome be.

Personal debt bomb
THE real star behind the recent Monetary Authority of Singapore statistics is consumer loans and not business loans ('Business loans surge in sign of upswing'; last Thursday)
Jan 5, 2011. Taken from the Straits Times.

Business loans actually contracted from July 2009 until March last year, and showed anaemic growth until the second half of last year.

By contrast, total consumer loans have never declined and have grown steadily with usually double-digit growth year on year. Even in the depths of the financial crisis, total consumer loans were growing at a high single-digit pace from October 2008 to September 2009, before spurting into double-digit territory a year ago.

The growth of total consumer loans has quickened from 10 per cent a year ago to more than 18 per cent for the past three months to reach $150 billion. Business loans managed only a double-digit growth from October to November last year.

The performance of business loans therefore pales in comparison with the growth of consumer loans.

The fast growth can be explained by housing loans. January 2008 housing loan figures were already 16 per cent higher than the corresponding figure in 2007. This double-digit performance lasted until October 2008, when growth figures slipped into the high single-digit figures before going back into double-digit growth in July 2009. Total housing loans are now $111 billion.

Since May last year, housing loans have been growing at more than 20 per cent year on year, a growth rate that must be the highest ever seen in Singapore.

Two other milestones which merit mention are that the total number of main credit cards crossed six million in October last year; and second - which is of greater concern - that rollover balances breached the $4 billion mark in November. This is the amount that is not paid by cardholders and on which interest is charged at usually 24 per cent per annum. Rollover balances have been growing at an average annual rate of 11.5 per cent for the past two years.

Personal indebtedness in Singapore is, therefore, growing unabated and the pace has quickened this year. The recent big surge in housing loans and the growth of rollover balances raise the question of whether Singaporeans, already facing one of the highest debt-to-income ratios in the world, have placed themselves in a very precarious situation.

If the economy stumbles and real estate prices decline, many individuals will be unable to pay off their debts.

Kuo How Nam
President
Credit Counselling Singapore
ADB: 51% S'pore banking loans to property is 'Worrying'
Dec 08, 2010

SINGAPORE - The Asian Development Bank (ADB) said yesterday that Singapore's fast-rising home prices are "worrying", as real-estate lending accounts for more than half of total loans in the banking system.

According to the latest issue of the ADB's Asia Economic Monitor, the share of property-related loans in total loans is as low as 9 per cent in South Korea, 15 per cent or less in Indonesia and the Philippines, and below 20 per cent in Hong Kong, Thailand and China.

At 51 per cent of advances, Singapore's banking sector's exposure to property is the highest among the nine major economies of East Asia, followed by 42 per cent in Taiwan and 38 per cent in Malaysia, ADB data showed.

The ADB report comes less than two weeks after the Monetary Authority of Singapore said in its annual Financial Stability Review that household debt has been growing at a faster rate in recent quarters - driven largely by housing loans which account for the bulk of household borrowing.

The study pointed out that Singapore had already taken steps to cool the property market, in line with measures adopted by other economies in the region.

As a result, the increase in home prices had started slowing in the third quarter in eight out of the nine East Asian economies, with Thailand as the only exception.

The ADB also called for greater cooperation among East Asian authorities on exchange rates, so as to reduce the volatility of currency fluctuations within the region and benefit the production network that spans East Asia. For Asean nations and China, Japan and South Korea, cooperation on exchange rates could also help "manage surging capital inflows to the region and better rebalance the sources of growth", the study said.

A single currency is not on the menu because "the recent debt crisis in the euro zone shows that stronger institutions than previously thought are required for monetary unions to function properly", the ADB said. Nor does it recommend that regional countries peg their currencies to one another's or benchmark their exchange rates to the "Asian Monetary Unit", the artificial basket of regional currencies first mooted by Japanese scholars.

East Asian countries could instead pick a reference currency from outside the region - either the US dollar, or a combination of the dollar and the euro - and then seek to maintain stability of their home currency's exchange rate against the reference unit.

| 2 comments ]

Amidst all the frenzy and noise with regards to the bullish and feverish economic and property news, the following are two articles which in my opinion, are rather interesting as it offers something that is of the contrary. Capital inflows into Singapore and a low interest rate are inflating assets and such circumstances will come to a stop soon, especially the latter. And when that happens, it is not hard to think of what will the outcome be.

Personal debt bomb
THE real star behind the recent Monetary Authority of Singapore statistics is consumer loans and not business loans ('Business loans surge in sign of upswing'; last Thursday)
Jan 5, 2011. Taken from the Straits Times.

Business loans actually contracted from July 2009 until March last year, and showed anaemic growth until the second half of last year.

By contrast, total consumer loans have never declined and have grown steadily with usually double-digit growth year on year. Even in the depths of the financial crisis, total consumer loans were growing at a high single-digit pace from October 2008 to September 2009, before spurting into double-digit territory a year ago.

The growth of total consumer loans has quickened from 10 per cent a year ago to more than 18 per cent for the past three months to reach $150 billion. Business loans managed only a double-digit growth from October to November last year.

The performance of business loans therefore pales in comparison with the growth of consumer loans.

The fast growth can be explained by housing loans. January 2008 housing loan figures were already 16 per cent higher than the corresponding figure in 2007. This double-digit performance lasted until October 2008, when growth figures slipped into the high single-digit figures before going back into double-digit growth in July 2009. Total housing loans are now $111 billion.

Since May last year, housing loans have been growing at more than 20 per cent year on year, a growth rate that must be the highest ever seen in Singapore.

Two other milestones which merit mention are that the total number of main credit cards crossed six million in October last year; and second - which is of greater concern - that rollover balances breached the $4 billion mark in November. This is the amount that is not paid by cardholders and on which interest is charged at usually 24 per cent per annum. Rollover balances have been growing at an average annual rate of 11.5 per cent for the past two years.

Personal indebtedness in Singapore is, therefore, growing unabated and the pace has quickened this year. The recent big surge in housing loans and the growth of rollover balances raise the question of whether Singaporeans, already facing one of the highest debt-to-income ratios in the world, have placed themselves in a very precarious situation.

If the economy stumbles and real estate prices decline, many individuals will be unable to pay off their debts.

Kuo How Nam
President
Credit Counselling Singapore
ADB: 51% S'pore banking loans to property is 'Worrying'
Dec 08, 2010

SINGAPORE - The Asian Development Bank (ADB) said yesterday that Singapore's fast-rising home prices are "worrying", as real-estate lending accounts for more than half of total loans in the banking system.

According to the latest issue of the ADB's Asia Economic Monitor, the share of property-related loans in total loans is as low as 9 per cent in South Korea, 15 per cent or less in Indonesia and the Philippines, and below 20 per cent in Hong Kong, Thailand and China.

At 51 per cent of advances, Singapore's banking sector's exposure to property is the highest among the nine major economies of East Asia, followed by 42 per cent in Taiwan and 38 per cent in Malaysia, ADB data showed.

The ADB report comes less than two weeks after the Monetary Authority of Singapore said in its annual Financial Stability Review that household debt has been growing at a faster rate in recent quarters - driven largely by housing loans which account for the bulk of household borrowing.

The study pointed out that Singapore had already taken steps to cool the property market, in line with measures adopted by other economies in the region.

As a result, the increase in home prices had started slowing in the third quarter in eight out of the nine East Asian economies, with Thailand as the only exception.

The ADB also called for greater cooperation among East Asian authorities on exchange rates, so as to reduce the volatility of currency fluctuations within the region and benefit the production network that spans East Asia. For Asean nations and China, Japan and South Korea, cooperation on exchange rates could also help "manage surging capital inflows to the region and better rebalance the sources of growth", the study said.

A single currency is not on the menu because "the recent debt crisis in the euro zone shows that stronger institutions than previously thought are required for monetary unions to function properly", the ADB said. Nor does it recommend that regional countries peg their currencies to one another's or benchmark their exchange rates to the "Asian Monetary Unit", the artificial basket of regional currencies first mooted by Japanese scholars.

East Asian countries could instead pick a reference currency from outside the region - either the US dollar, or a combination of the dollar and the euro - and then seek to maintain stability of their home currency's exchange rate against the reference unit.