My questions on Supplementary Retirement Scheme (SRS)

time to spend money? donate

If I have not opened an SRS account, should I?

My simple is YES (and quickly). I opened the account on the basis that I wish to lock in on the current mandatory retirement age before I can make my first withdrawal. There are signals from the government that the official retirement age could be raised. While we won't see the kind of riots and unrests in France replicated here in Singapore, personally we need to take that in consideration.

The much touted immediate benefits of tax savings from deposits into SRS would depend on your tax bracket and availability of taxable income / free cash.

The usefulness of an SRS account would also depend on the age group. During the early part of our working life, we are living in a stage of intense spendings with little of  savings ie. repaying study loans, travelling, dating, getting married, babies, home renovation, parents etc etc Thus should we need to call upon some monies for emergency reasons, your savings in SRS is an option but an expensive one (penalty of 5% and immediate taxability of amount withdrawn).

Thus you would have noticed that my recommendation to open the account is different from recommending regular amount to be deposited.

I would think twice before using the SRS account to house my investments. Please check on the service charges that the bank may levy. Given my experience with the CDP account ie. $10.70 per transaction (I think) regardless of the nature of transaction (I think), it is very expensive indeed when I am just receiving dividend.

Lorna Tan cited the example of yearly contribution of $11,475 to an SRS account for 20 years, this would translate to $2960 monthly withdrawal for 10 years ASSUMING you are able to manage your nest age to generate a return of 4% per year. Governments of the world, fund managers and insurance companies are all trying very hard to do the same, if not better.

Buyers beware, always.

Reference - Lorna Tan, "Saving a little today will go a long way", Sunday Times, Nov14, 2010.

REITable?

 it was vacant many years ago

In my Saturday's Business Times, 4 REITs' results were reported. May I summarise the results for quarter ended June 30, 2010 as follows:-

1. CapitaRetail China Trust (CRCT)
Gross revenue - $29.6m (-2.8% compared to Q2 last year)
Net property income - $19.8m
Distribution per unit (DPU) - 2.07cents
Share price - $1.26 (as of Friday's closing)

2. Ascott REIT
Gross revenue - $44.4m (+3% compared to Q2 last year)
Net property income - $11.6m ($11 in Q2 last year)
Distribution per unit (DPU) - 1.87cents (1.79cents in Q2 2009)
Share price - $1.23 (as of Friday's closing)

3. Frasers Centrepoint Trust (FCT)
Gross revenue - $30.7m (+45%)
Net property income - $16.3m (+35% compared to similar quarter last year)
Distribution per unit (DPU) - 2.07cents (1.97cents in similar quarter last year)
Share price - $1.39 (as of Friday's closing)

4. Ascendas India Trust (a-iTrust)
Gross revenue - $30.9m (+4% on year on year basis)
Net property income - $18.9m (+3% on year on year basis)
Distribution per unit (DPU) - 1.66cents (-19% compared to similar quarter last year)
Share price - $0.995 (as of July 22's closing)

P/S - Usual disclaimer apply.

An interesting remark on HK property

Andy Xie, an independent economist said on CNBC today, "HK property is actually more risky than China."

Bernard Lo of CNBC was taken aback and he queried why it is so.

Andy said property owners in Hong Kong, who are hanging on to their property, are hoping for some stupid and wealthy mainlanders to come and pay them millions of dollars for their CONCRETE BOXes.

I am wondering whether the same phenomenon is also happening in Singapore.

General Magnetics - a lesson yet to be learned?

jakarta traffic from my taxi window

General Magnetics (GM) conducted its first AGM as an unlisted firm last week. Joyce Hooi of Business Times observed that for an unlisted firm's AGM, it was really well attended but with so much outpouring of outrage by its shareholders.

GM was listed 20 years ago as a cassette tape maker, "survived the death of the Walkman age, struggled through the Discman decade as a recordable CD and DVD maker and finally succumbed to the iPod era".

It made losses by the millions since the turn of century and was put on the watchlist in 2008 before being delisted in April this year.

Why are there so much outpouring of outrage by shareholders at this stage? Some shareholders have held on to their shares years after years for the last 10 years despite the annual warning bells of losses being announced. Why lament the delisting?

In fact, they were not outraged by the delisting but rather by the fact the minority shareholders could not force the majority/management to liquidate all remaining assets and distribute the net proceeds to all shareholders. Why would a shareholder buys shares in company and hope the company goes into liquidation?

Towards the end of listed status, the shares had traded so far below net tangible asset value. For those who may have bought at those prices, they are clamouring for the company to be liquidated.

Learning point - Are you holding on to shares of companies, that in recent years, have been making significant losses year after year (eg. Creative)? If so, are you doing anything about it?

Prudential buying AIG?

Prudential's market capitalisation - about GBP12.3billion (about USD18.5billion)

Purchase price - USD35.50billion

The biggest reason for Prudential to buy - rapid increase in access to a rapidly growing Asia market.

How to pay?
USD$25billions in cash and the rest in Prudential shares

Where to find USD$25billion cash?
- rights issue of USD$21billion ie. issue more shares to existing shareholders
- borrow USD$5billion

Impacts and consequences?
Marcus Barnard said - 3 times increase in the number of shares with only 60-70% increase in contribution from AIG (for now) (thus massive dilution expected for now)
Is Prudential buying at too high a price given the current weak European currencies against USD?

Gold still glitters?

Global demand for gold dropped 11 per cent last year, but the the gold price gained 35 per cent - the biggest annual rise in three decades . Why?

• Just like oil priced in USD and its weakening outlook, the sellers of these commodities have to asked for higher prices in USD to compensate for its weakness.
• It is an alternative perennial store of value against expectations of long-term inflation as the world economy emerges from recession. (Is this still valid?)
• Just pure madness when there are millions of tonnes of gold sitting idle with central banks of the world.

What do you think?

Singapore, SGX and our neighbours

For year 2010 in Hong Kong / Shanghai / Shenzen
South China Morning Post reported a few days ago that Hong Kong may raise more than HK$300 billion (about SGD60bio) this year through initial public offerings albeit Shanghai and Shenzhen will do better, according to estimates by PWC. PWC forecasts there will be 60 listings this year in Hong Kong. HK$300 billion would represent a 23 per cent increase from last year.

For year 2009 in Hong Kong / Shanghai / Shenzen
- 73 IPOs in Hong Kong last year raised HK$243.7 billion (far exceeding PwC's predictions at the beginning of the year of HK$100 billion).
- Shanghai and Shenzhen bourses raised 185.6 billion yuan (HK$210.9 billion) combined.

For year 2009 in Singapore
- $2.84 billion were raised by the 23 IPOs (about 20 times LESS than Hong Kong)
- $8.29 billion from 17 listed firms delisted, called it a day and went private (due mainly to Chartered Semicon, SPC and CK Tang) (Source - BT Jan 4, 2010)
- Turnover in structured warrants hits 4-year low. Average daily volume last year plunged to $43m from $84m in 2008. (Source - BT Jan 8, 2010)

Countermeasures in motion:-
- new CEO for new ideas?
- Jan 7, 2010 - SGX proposes Special Purpose Acquisitions Company scheme and changing its listing criteria.

We will be watching as the new CEO of SGX gets to work.