Genneva Gold

There is a pretty interesting post with a few hundred comments on lioninvestor’s site. The post was about a company called Genneva Gold, which exists in Malaysia and Singapore. The links to the company’s website can be found here. In this post, there were a lot of comments that debate on whether this investment is true or not and there were a lot of heated arguments and debates.

In my opinion, Genneva Gold is likely to be a fradulent company. Firstly, the returns does not corresponds with the risk. It seems to be a high return and low risk investment and that is not possible at all. Secondly, the business model of Genneva Gold seems to be unsustainable. Not much is said about how is the profits of the company being generated. Without being profitable, Genneva Gold will not be able to last long.

There were a lot of interesting insights and detailed analysis made by various parties that explains on why Genneva Gold seems to be a scam. The strange thing is that many still choose to believe that Genneva Gold is workable and not a scam. This is where I think that the greed has blinded them and they choose only to look at the good side of things instead stepping back and take a serious look at this investment. Unfortunately, this is also the very same reason why I think that the majority of people are not likely to do well when it comes to the stock market.

Case study of Capitaland Rights Issue

Capitaland conducted a rights exercise not long ago to raise capital so I thought it will be good to use it as a case study using pictures to illustrate the process. I realize that rights issue can be very confusing thus I hope this post will help.

The important dates for a rights issue are given in a schedule and this can be found in the Offer Information Statement or the OIS.

Once a rights issue is declared, the counter will go on ‘cum-rights‘ and there will be a ‘CR‘ beside the name of the counter.

Subsequently, the counter will go on ‘ex-rights‘ and there will be a ‘XR‘ beside the name of the counter. If you wish to receive the rights, you will have to buy the counter before it goes on ‘XR‘.


Next, the rights will be traded on the market after it is issued to the shareholders who bought before ‘XR‘. This can be seen in the ‘Capitaland R’ and ‘Capitaland R 500‘ counters.

After this, the trading of the rights will be stopped. When the payment of rights is done, the rights will be converted to rights shares and that will be the end of a rights issue exercise.

In this case, Capitaland has a rights issue at a ratio of 2:1. This would mean that shareholders who are holding an odd number of lots for example, 1 lot will receive 500 shares if they subscribe to the rights issue. To facilitate the trading of these 500 shares, a counter labelled ‘Capitaland 500′ with a lot size of 500 shares will be listed temporarily on SGX.

They pay money to learn to make money

They pay money to learn to make money

Financial training courses in demand despite volatile markets; experts warn against get-rich-quick mindset

By Joanna Seow

(Taken from the Straits Times on the 23rd March 2009)

THEY claim to teach you how to become a millionaire, retire rich or even make ‘lots of money’ during a recession.

Whatever the claims, eager participants are lining up for financial training courses, not in the least put off by the economic slump or plunging share markets.
These courses are not cheap – fees range from around $2,000 to more than $7,000 for anywhere from two to eight days of coaching – but the lure of trading riches overrides the cost. Companies say the recession has not dampened demand, with 40 people turning up on average – whether retirees, self-employed, students or managers – all looking for an edge.

Courses usually specialise in a particular market, such as stocks, foreign exchange (forex) or options.

‘Each option contract controls 100 shares, so option trading is low risk, yet gets high returns,’ said one organiser.

‘The forex market has tremendous volume and is open 24 hours a day,’ enthused another.

Or, ‘the US stock market has over 14,000 listed companies for you to choose from, and it’s tax-free’.

While the hooks differ, most courses have one thing in common: selling strategies to help people get the most they can out of financial markets – and at a time when every extra dollar counts.

The training goes further than simply teaching from a textbook, and coaches focus on money management, psychological aspects of trading and software usage.

Sceptics, of course, will cite the old adage: ‘Those who can, do; those who can’t, teach’.

Mr Chris Firth, the chief executive of wealth management firm dollarDEX, is one. He is ‘very dubious about these courses’ and feels that if traders are really so brilliant, they will be spending more time trading rather than training other people.

Yet customers still roll up. At the three free course previews attended by The Straits Times, there were people with trading experience and those without. Most were keen to find ways to boost their income or even switch to full-time trading.

Administrator Diana Woo, 34, said: ‘Now that the economy is so bad, I want to see how I can get more money to supplement my income.’ She has done some share trading in the past, and was at a preview for a forex course.

As course organisers are quick to point out, getting some coaching should not be seen as a get-rich-quick scheme.

Mr Ee Chee Koon, the chief trainer and chief operating officer of Asia Charts, said people desperate for instant cash should not turn to trading, as the wrong mindset could be dangerous.

‘A man came to me in desperation in 2007 after losing 50 per cent of his retirement fund in bad trades,’ he said. ‘He had followed poor advice from someone else. I told him to cool down before starting to trade again, because his psychology would be very weak.’

Investing in a share trading course in January proved worthwhile for area information technology manager Jason Kwok, 38, who recouped the $2,900 he spent on the Asia Charts course within a month and recommended the course to four friends.

Full-time trader Eric Lye, 36, also thinks he got enough bang for his buck. He used to earn a five-figure monthly income at a bank, but after attending a T3B Holdings forex trading course last year, he was able to earn the same or more from trading.

Ms Karen Loh, a marketing manager with a multinational corporation, was also highly impressed with the T3B course she attended last September, which set her back by about $2,500.

The 36-year-old said: ‘The training was thorough and comprehensive, and constant support is provided even after the course through teaching gatherings on Saturdays and an online forum.’

She had attended another forex course, which was a disappointment.

‘Many people think they can just go for a course, then start trading on their own without any support, but it’s actually very tough,’ she said.

People should also be wary of trainers who misrepresent their qualifications, like Mr Clemen Chiang of Freely Business School. He claimed to have a doctorate in option trading but was exposed as getting the degree from an unaccredited university. This month, the Small Claims Tribunal awarded participants of his trading seminars partial refunds of course fees.

Most people told The Straits Times that courses should teach how to invest wisely, including in volatile times like now. They also want continuous after-course support, such as daily coaching, weekly discussion sessions or online trading forums and newsletters.

But skill and nerve come into it as well. Mr Clarence Chee, a forex trader and a coach with T3B, said many people who trade are losing money or are too scared of the risks involved.

‘People need to understand that with the right strategies, the risk is manageable,’ he said.

Frankly, I am skeptical of such trading courses. The line of reasoning is very simple. If the trading strategies and systems that they are employing are indeed that profitable, why would they offer to teach others ? Surely, trading will be much more lucrative than conducting courses.

If they wish to help the public in improving their finances through trading, I think charging a few thousand per head for each course is more than enough to cover the cost of the courses over a few times round. It would be far more cheaper to read some technical analysis and trading books and subsequently, paper trade for a while to see trading is workable for you. If not, it won’t be too late anyway to go for such courses.

I am not doubting the abilities of these traders and since I have not use any of their trading systems or strategies before, I’m not in any position to judge actually. Among the people who attended such courses, there will definitely be people who will become successful traders but I believe they are the minority.

Now this reminds me of investing. If you realize, there are trading courses being advertised online. A flip to the money section of the Straits Times and you can probably see that quite a lot of advertisements in that section are promoting trading courses. So far, I hardly come across any investing courses yet. Perhaps investing is not as appealing as trading ? Anyone wonders how did Warren Buffett ends up as the 2nd richest person on this planet currently

What is contra ?

Contra is the buying or selling of stocks without having to pay for the cost of the stocks. Once you buy the stocks on contra, you will have to sell the stocks after a period of time. At the end of that period, you will have to pay for the difference between your initial buying price and selling price.

Currently, the period of time offered by the local brokerages to settle your payment and pay for the difference between the initial buying and selling price is 3 days although the period of time can be extended depending on your relationship with your broker, credit record and the frequencies of trades that you carried on with the brokerage.

For example, you bought 2 lots of SGX at a price of $5.00 on Monday which is also known as T+0. 3 days later which is on Thursday, also known at T+3, you will have to sell those 2 lots of SGX which you bought on Monday. Assuming you sold those 2 lots of SGX at a price of $5.20 on T+3, your profit before brokerage fees would be ($5.20 – $5.00) * 2 lots * 1000 shares =$400 since 1 lot is equal to 1000 shares and you will not have to pay for the cost of buying the 2 lots of SGX which before brokerage fees is $5.00 * 2 lots * 1000 shares = $10,000.

However, if you sold those 2 lots of SGX at a price of $4.80, you will have to pay for the losses since your selling price is lower than your purchase price. Thus your loss before brokerage fees in this case is ($5.00-$4.80) * 2 lots * 1000 shares = -$400.

Contra can be dangerous when there is a sudden unexpected market movement and you do not have enough funds to pay for it. Let us consider the following case with reference to the previous examples. For example, on T+3, the price of SGX suddenly plunge to $3.50 and you have no choice but to sell it at this price. Thus your loss before brokerage fees in this case is ($5.00-$3.50) * 2 lots * 1000 shares = -$3000 and that will be disastrous if you do not have the funds to pay for it.

Capitaland Rights Issue

Capitaland is doing a rights issue and will offering its shareholders one right share for every two shares that they are holding at an issue price of $1.30. It is at a discount of around 40 percent from the closing price last Friday. Someone on the Channelnewsasia forum has summarize the important things that you should take note.

From now until 18 Feb
Shares trade cum-rights (CR). It’s just an indication that a rights issue exercise is ongoing. Whoever is still holding Capitaland shares as of end trading day 18 Feb will be entitled to apply for the rights shares at a ratio of 1 rights share per 2 existing mother shares. For example, if you are holding 2 lots (2000 shares), you will be entitled to apply for 1 lot (1000 shares). If you have 1 lot, then your entitlement is 500 shares.

19 Feb
Shares trade ex-rights (XR). The price will be adjusted to reflect the inclusion of your rights shares. For example, if it closed at $2.36 on 18 Feb, the fair price when trading starts today will be $2.01 (rounded).

23 Feb
If you were holding any mother shares before 19 Feb, the ownership will be registered in CDP by this date. Based on this record, you will receive your nil-paid rights (also called renounceable rights). These will be deposited into your CDP account before 26 Feb. Nil-paid rights give the owner the choice to accept the rights shares at the issue price of $1.30. You do not have to pay for your nil-paid rights, and they are yours to trade (sell) starting from 26 Feb.

26 Feb to 6 Mar
Trading of nil-paid rights begin. Because it’s a 1 for 2 exercise, the smallest lot size will be 500 shares. So on top of a Capitaland_R, a Capitaland_R500 counter will be set up for trading. For shareholders who do not wish to pay more money to convert his/her rights shares to mother shares, this time window allows you to sell away your nil-paid rights. For shareholders who wish to round up odd lots, they may also choose to do so through nil-paid rights purchases here. For investors who were not holding any mother shares previously but now wish to participate in the rights issue exercise, they can buy these nil-paid rights. Theoretically, nil-paid rights will cost the amount of (mother share price – rights issue price). For example, if the mother share now trades at $2, the nil-paid rights should be trading at $2 – $1.3 = $0.70.

12 Mar
Those holding nil-paid rights have to pay up by this date ($1.30 per share) to apply for the rights. If you do not wish to subscribe, make sure you sell away your nil-paid rights between 26 Feb and 6 Mar. If you still have them as of this date, for whatever reason, pay up and apply for the rights issue. Don’t be an *censored* and hold on to your nil-paid rights and not apply for the rights! You may pay up either via post (using bank drafts or money order, no cheques accepted) or ATM (CDP account should be linked, but note down your CDP account number for keying in manually just in case)

This is also the date by which excess rights applications must be submitted. If you are holding odd lots, my advice is to apply for the excess rights. Priority in excess rights allocation is always given to holders with odd lots.

23 Mar
You may begin trading your rights shares today. You will see them in your CDP account as normal Capitaland shares (code C31). To know the allocation results in advance, check your CDP account on 22 Mar, they should already be in by then.

Philips Share Builders Plan


SBP which stands for Share Builders Plan, is a Dollar Cost Averaging or DCA in short, plan offered by Philips Securities. The whole idea behind the SBP is that you will contribute a fixed amount of funds every month and they will use that amount of funds that you have contributed to purchase shares on your behalf. Any remaining funds not used in the purchase of the shares will be carried over to the next month. Currently, there are 19 counters which are available for purchase under this SBP and the STI ETF is included in it too along with the other blue chips.

The brochure is rather easy to understand thus I would like to point out some other issues which you should take note if you are interested in the SBP.

1. Odd lot shares

Stocks in SGX are usually traded in board lot size. The board lot size is 1000 shares i.e. 1 lot = 1000 shares except for a few exceptions. For these exceptions, there will usually be a number in the name of the counter. For example, the size of 1 lot of SBS Transit 500 is 500 shares and the size of 1 lot of SIA 200 is 200 shares. There are two markets in SGX and they are the common market and the unit share market. If you wish to buy whole number of lots i.e. 1 lot, 2 lots, 3 lots, 4 lots etc, you can buy it on the common market and that is the market which most people will go to purchase stocks. However, if you wish to buy anything other than whole number of lots such as 200 shares of 800 shares which are also known as odd lots, you will have to buy it on the unit share market. Do take note that the unit share market is a totally different market from the common market. One potential problem that can arise is the lack of liquidity. A lack of liquidity will make it harder for you to buy and sell shares since there can be a lack of buyers and sellers for the shares. Furthermore, the difference in the buy price and the sell price can be rather significant and that can result in the purchase and sale of shares at an unfavourable price.

2. Custody of shares

Take note that the shares bought under the SBP is under the custody of Philips Securities and not CDP. If you check your CDP account, the shares which you have bought will not be reflected in there. When you wish to sell your shares, you will have to inform your trading representative before you can sell your shares. Do take note that if you inform your trading representative to sell your shares, you will be subjected to a minimum brokerage charges of $40 currently. If you wish to transfer your shares to CDP, you will have to pay $10.70 to CDP and $10.70 to Philips Securities for each counter that you wish to transfer.

3. Charges

The handling fee can be quite expensive if the amount of funds that you wish to use each month to buy shares is rather small. For example, $500 is set aside every month to purchase 2 counters. The handling fee for the purchase of 2 counters is $6.42 thus the handling fee in terms of percentage will be $6.42 / $500 * 100% = 1.28% and this is rather high. The percentage will be even higher if the amount of funds being set aside every month to buy shares is smaller than $500.

There are also other charges under the SBP. Even though the charges are quite small, they are still rather significant if added together. There are some charges you can avoid such as the Hard Copy Statement charge by opting for an Electronic Statement instead and Insuffcient Funds charge by ensuring sufficient funds in the designated bank account. Some charges are unavoidable such as the Dividend charge and Cash Offer, Rights Issue & Other Corporate Action charge.

4. Buying price of the shares

It is stated in the information sheet that the shares will be purchased on the 18th of every month on a non-discriminatory and non-preferential basis. If the 18th of every month falls on a trading day, the shares will be purchased on the next available trading day. In my opinion, there is a loophole with this. How can one determine whether the shares are purchased on a non-discriminatory and non-preferential basis ? There is always a possibility that they can purchase the shares at a lower price than what is being reflected to you and thus they can profit from the difference between the prices.

Despite of all the issues that I have mentioned regarding the SBP, it is still a rather useful plan. SBP enables the investor to develop some form of discipline by investing in a fixed amount of money every month. Furthermore, it also helps an investor by eliminating the problem of timing the market. Some of the blue chips such as DBS and Keppel Corp are very expensive to purchase since buying just one lot of these counters can cost a lot thus the SBP is a rather feasible plan that enables investors to own these counters by accumulating the odd lot shares over a period of of time.

I hope this post can prove to be useful for those who are interested in the SBP. Do think about it seriously as with any investments if you wish to take part in the SBP. If I have miss out on anything, feel free to leave comments and I will try my best to get back to you.

How to buy the STI ETF

This post is part of a series of posts that discuss about the STI ETF in detail. To access the other posts in this series, click here.

STI ETF is a fund that tracks the Straits Times Index but can be traded like a stock on the stock exchange thus if you wish to purchase or sell it, you will have to buy it on the local stock market. So how does one get started with buying it on the local stock market ?

 

In order to purchase or sell the STI ETF, you will need to open a brokerage account and CDP account. A brokerage account will enable you to buy or sell the STI ETF with the brokerage that you have chosen. CDP stands for Central Depository and the CDP account is an account where stocks will be stored or deposited at after you have bought the STI ETF. For a list of brokerages and their brokerage fees, you can take a look at a separate post which I have blogged here while the link to the CDP website is here.

 

To open a brokerage account and CDP account, all you have to do is to walk into any brokerage and tell the staff that you wish to open a account to buy stocks. They will probably help you to fill in and submit some forms to open the brokerage account and CDP account. The process should take a few days to complete and after which, you will be given the user name and password to login to the brokerage and CDP account. Do take note that you may have to put up a sum of money which is in the region of a few thousand dollars, depending on the brokerage as a form of security deposit. After the accounts are opened, you can take out this sum of money or use it to purchase the STI ETF.

Basically there are two ways in which you can ask your brokerage to do the purchase for you. The first would be to use an online trading account whereas the other option is to call your trading representative or broker to do the purchase for you. I would prefer the 1st method since the brokerage fees will be cheaper as compared to the other method.

If you are using an online trading account to do your purchase, you will be given a user name and a password to log in to your account. I will be showing an example on how to purchase the STI ETF using POEMS by Philips Securities below as I am currently using POEMS to do my purchase although I have other brokerage accounts. Generally, the online trading accounts being offered by all the brokerages are roughly the same.

1. Go to http://www.poems.com.sg/ and login with your user name and password

2. After you have log in sucessfully, click on ‘stocks’ as highlighted by the red circle and click on ‘S’ as highlighted by the green circle subsequently.

3. Find ‘STI ETF’ and click on it


4. Enter the price that you wish to purchase at, whether you wish to buy or sell, number of shares and whether you wish to buy using CPF. Do take note that the quantity is in number of shares and 1 lot is equal to 1000 shares. Thus for example, if you wish to buy 3 lots, enter 3000 shares.

The buy price is the price that those who wish to buy the STI ETF are willing to pay and the sell price is the price that those who wish to sell the STI ETF are willing to pay while the last done is the price which the last transcation was carried out at. You can key in the last done price to buy the STI ETF if you do not wish to wait that long for your order to be fulfilled. Otherwise, you can key in the price you are willing to buy and wait for your order to be fulfilled once the price of the STI ETF hits your buying price.

Please make sure that you do not accidentally click on sell if you wish to buy as you may accidentally short the stock. Shorting means that you are selling a stock which you do not own and currently, there are penalties imposed by SGX on shorting.

5. After you have submitted your order by clicking ‘ok’, go to the ‘order status’ as highlighted by the blue order to check whether your order has been fulfilled. If your order has been fulfilled, it will appear in the ‘Order Processed (today)’ page under SGX. Otherwise, it will appear in the ‘Working Orders’ page under SGX.

After your order has been processed, do remember to pay for the STI ETF that you have purchased. within 3 days. In other words, the day that you bought the stocks is known as T and you will need to pay for your stocks by T+3. Currently there are 3 ways of paying and they are listed below.EPS – EPS stands for Electronic Payment for Shares and you can pay for your shares through your designated online banking account by logging in to it. You can opt for this option when you opened your brokerage and CDP account. Do inform the staff at the brokerage about this option when you open your account and you will have to give them your bank account number. Payment will have to be made by T+3 on 9pm.

GIRO – Payment will be automatically deducted 2 market days after due the date i.e. D + 2. Do ensure that there is sufficient funds in your account by D + 1.

Cheques/Cash – Payment is to be received latest T + 3 by 5 p.m.

Once you have paid for the STI ETF that you have bought, you can login to your CDP account here to make sure that the STI ETF is at the CDP. That should be all. If you have any doubts or queries, feel free to leave comments and I will get back to you.