Sunday, 4 June 2023

Rise of Trust Bank as No 1 Digital Bank- Bad News for Grab and Sea

Recently Trust Bank announced it has attracted $1 billion in deposits. It has one of the largest number of depositors and is now the fourth largest behind by the 3 local banks

How Good is Trust Bank?

They are really good in the combination of offerings.

Bank Account- 1) No minmum (fall below fee), 2) No Monthly Account Fee and (iii) a 1.5% fuss free interest for your first $75,000 which does not have hoops to join (that is even better than DBS).

Credit Card- 1) No fees, 2) No FX Transaction, 3) Downside no credit card rewards

As someone who is not really into miles, Trust credit card is now my second go to card for overseas transactions after the Amaze card. While other cards offer 4 miles per dollar for overseas transaction, they carry in it a 3.5% fee. So effectively people are buying miles with the fees.

The Trust credit card, on the other hand, has no foreign transaction fee for overseas purchase. However, they do not give any benefits. The other downside is that Trust does not have a wallet function to store FX or has a 1% point rebate like Amaze instarem card. Otherwise, overall it is a great product. When compared to specifically Grabpay card which charges a FX fee and gives a meagre reward, the Trust Card is way ahead of Grab.

Rewards- When Trust consumers spend they get NTUC linkpoint, furthermore Trust occassionaly dishes out vouchers or promotions to reward its card users. These rewards are much better than that offered by Grab or Sea

Nightmare to Investors of Grab and Sea Group

The domaniance of Trust Bank in Singapore is scary. Given how good Trust is, it is likely Grab GXS and Sea Group will be fighting for the number 2 spot as the latter two are uncompetitive in terms of bank account and card offerings.

For Grab and Sea, I am quite confident to say their Fintech segment dreams are dashed by Trust Bank. Without the hold of a legion of bank depositors, they are going to struggle to gain traction. Unless these two can innovate to outperform Trust Bank or paratake in cash burn intiatives, I abscribe only a $100 million valuation of each of their Fintech Segment. 

To Grab, this means its company is close to worthless and I would not pay anything above its net cash value of US$5 billion, which is dwindling. Similarly, Sea will only be worth its e commerce segment which has turned itself around and is probably valued at US$20 million.

All in all, Trust Bank is going to kill Grab and Sea. As a personal finance blogger, I would recommend choosing Trust Bank over the other 2 for your banking needs. 

Rich in Singapore Providing Their Children an (Unfair) Headstart and How Can the Less Well Off Keep Up

Stackedhomes provided an interesting analysis on the sale of the Reserve Residence.

For context, the cheapest homes for the Reserve Residence are priced at $1.2-$1.4 million with approximately 20% of homes placed in this price range. However based on data: "22 per cent of (70% sold) were to buyers of profile aged 30 years and below". Stackedhomes added: "This suggests that the younger have financial support from elsewhere, most likely parents"

Rich Parents Help Their Child Get Ahead in Life

While there are a few financial and lifestyle comic/blogs advocating for the inflow of the rich (likely written as sponsored content for certain agencies), what happens is that such flows create a spiralling upward effect on property prices. Rich parents have stepped in to help their young kids to own private homes before prices appreciate further. This is based on what is observed for the Residence sales.

While the middle class can wallow in pity about how unfair Singapore is where the rich act to make themselves richer and the government allows for such inequality to persist without policy intervention, I think it is an opportune time to remind others how we can keep up with the Joneses. 

Hopefully the rich are busy indulging in their indulgent activities and not read this. At this juncture, it might be good for me to caveat this article is not sponsored or politically motivated in any means.

Keeping Up with The Joneses- CPF SA

1.  The CPF Special Account (CPF SA) helps the middle class accumulate wealth for retirement efficiently. The CPF SA currently provides 4.01% interest, which is higher than bank fixed deposit rates. In addition, if you accumulate a large enough SA amount, you can withdraw it at age 65 beyond the retirement minumum sum amount. Hence you can use CPF SA as your main retirement funding. To act on it, top up into your CPF SA early, maxing out the annual contribution limit. What's more, the government even offers tax rebates for top ups. Do read here for more information.

2.  Avoid insurance agents! Use NS Term (avaliable for all Singaporeans and Spouses) + CPF SA. Singapore has a national insurance scheme that is better than any insurance plan agents in Singapore are selling. You do not need those insurance agents on the street to help you retire early (in fact such agents tend to make your retirement situation worse). Read here on how you can DIY your own insurance plan that is superior to most insurance plans sold.

Parting Thoughts

While CPF especially the CPF SA is an amazing tool for us to build our retirement; thus enabling us to devote the rest (most of) our energy to servicing a high housing loan or care for our families needs, I feel the government still has to step in to intervene.

As rich parents are partially financing houses under their child's name, the current government has to review its housing policies. Pherhaps one way is for an individual who has bought a private home, they will no longer be eligible to apply under the BTO scheme. 

After all, since they can afford a private home in their 20s or early 30s, why should they have the opportunity to apply for BTO later in life as they have demonstrated the finanical means. 

Secondly, the government should consider increasing the tax rate for annual value of homes that are $40,000 and above for both owner occupied and non owner occupied. The property taxes in Singapore is one of the lowest in the world. And it presents an opportunity to increase tax coffers.

Thursday, 1 June 2023

China Loses Investment Money From Abroad

In the latest string of funds pausing investments in China, a Canadian pension fund has joined in after Singapore did the same. Article here

Is China Uninvestible?

This is an ongoing question among investors as they have seen the likes of Baidu, Alibaba, Tencent, ICBC, CCB, ABC beaten down such that the valuation ratios are at all time lows. 

I would attribute this sell down of China companies to sentiments.

Countries Lost Money Due to China Policies

Due to the clamp down with extreme regulations by the communist party since 2020, many countries soverign funds realised large amount of losses. Singapore soverign funds lost a few hundreds in millions in their investments especially after the regulatory clamp down by Xi Jinping. These led to many countries simply distrusting China due to its erratic system similar to the days of President Donald Trump. This is because their investment team has to add in another dimension of political risk.

With the loss of sentiments, China is seeing less investment money from abroad. Its own citizens too are growing weary of President Xi's regime and since the border reopening, capital flight has occurred. We have read news of wealthy china citizens setting up family offices abroad and renting properties to live overseas. While not openly said, I have noticed some China companies listed, outside of China, facing difficulty in moving money from China to where they are listed.

PMI Not Growing

Manufacturing has not returned to China as its labour cost base has risen. This has resulted in PMI figures contracting based on the latest data. These again is likely due to the negative sentiments to Xi Jinping's rule in China and the lack of faith in the policies of the communist party.

With the move away from relying on China, expansion of factories are now situated in Vietnam and Thailand. This has resulted in China not growing much.

Right now, due to the mismanagement by the President over the past 3 years and companies diverisfying away from China, money is moving out to greener pastures where governments are making better policies. Sentiments towards China is bad and as a result, despite the RMB devalution, no one wants to put money into China.

Until the communist party finds a way to improve the sentiments, the valuation of its companies are going to be low. Companies like TSMC and Nvidia have flown the flag high for Taiwan while on the opposite side of the coast, the sentiments are as low as the low tide. This has made the valuation of the 5 largest companies in China lower than that of TSMC and Nvidia combined.

Tuesday, 30 May 2023

Intrinsic Valuation from Financial Modelling is Dead in the Current Market

If one follows the Singapore Scene on investing in Alibaba, there are a few who espouse the value propostion of investing in Alibaba. Yesterday, one of them, Tay Chi Keng used the textbook valuation models of EBITDA and P/FCF to show Alibaba's intrinsic valuation as US$240 per share.

Textbook is Textbook, Real Life is Different

Like the above "financial influencer" who is young and still in his last year at a prestigious business school in Singapore, my comment is that if valuation models are the law; many of us, including yours truly, would be millionaires applying the valuation models I learnt at my university. 

From what I have experienced in my investment journey, other factors never taught in our academic textbooks are more important.

Sentiments to a Company

They say the stock market in the short run is a voting machine while in the long run, it is a weighing machine. To be honest, I don't know what the caveat is "in the long run", it could be holding it till I am dead and the intrinsic value will not be realised until 10 lifetimes later. Hey thats still called "long run"!

To me, the most important determinant of a share price is sentiments. It contributes to definitely more than half of the company's value. The China stock market bubble and Tech Bubble in 2020/2021 are evidence. For China companies, their forthy valuation were curtailed when China clamped hardly on them and now companies are trading at less than half of the multiples they were commanding in 2020.

Ditto to US tech companies who have risen and fell. Nvidia is another example where it rode the tech wave, then moved down, then with the AI wave now and good guidance, Nvidia's share prices is moving back to its 2021 highs. However, valuations and growth trajectory has remained unchanged through these years. It is just people expecting their business will "huat" with each mentioned of a new wave.

Structure of the Company- Kingboard Copper Foil

This is another component I learnt where whatever fancy valuation model is thrown at it, due to this, the company will never reach the target price.

9 years ago, I chanced upon this SGX company called Kingboard Copper foil which was trading below its net net value with a good cashflow generating ability. Even before i chanced upon it, its 5 years financial results stretching to FY2010 was reporting a high net profit with good cashflow.

However, the controlling shareholder, who was the parent company, never gave out good dividends to reward shareholders. Cash was just accumulating in the balance sheet. Privatisaion eventually followed and those who held on made insignificant gains.

There are a few companies such as Sing Holdings which had a low price to book ratio and strong earnings; however due to its structure where the controlling family had little chance to be voted out from their management positions, offered low dividends to minority shareholders and paid themselves a high management salary. The price today and price when I sold off (at a loss) has not changed since 8 years ago. I was forecasting a doubling of price based on "valuation models", this has never been reached for 8 years. So what is "long run"?

While still a value investor type, I will like to say sorry to the Accounting and Finance professors who had taught me at University. Those models and what nots are not useful in real life. I scored an 'A' for my finance valuation projects but truthfully its not even worth a D grade in the real world of investing.

Investing is like how many of our Asian Chefs and Hawkers cook- in two words, its called "agar agar". To non malay readers, agar agar is a terminology where people estimate the amount of ingredient to add into a dish as and when they cook it, there is no definite amount that is added. Investing is the same, it is based on estimate and not some complex number crunching excel modelling.

Monday, 29 May 2023

Property Crash- HDB reaffirms the launching and building of 100,000 flats from 2021-2025

In the latest news on HDB launch, HDB has continued its pledge to deliver 100,000 flats for launch in 2021 to 2025. This means from early 2025, 100,000 flats will flood the Singapore market until 2029.

146,000 new housing units in 5 years time

As what I have written in my previous housing post, without a dramatic increase in population, housing prices will tank with the addition of 146,000 confirmed new housing units. This is because the growth in foreigner population has been relatively slow; in turning leading to a large rental supply  in the market with rental demand from foreigners not catching up.This will force rental prices down.

I will not be surprised to see rental rates falling, unless Singapore decides to increase the foreigner population tap to save property investors.

Current OCR condo yields are at the low 4-4.2% and a reduction in rental rates will force yields to be far below the interest rates of property loans that are currently pegged to SORA. 

Do not forget among the housing types, HDB flats are eligible for the lower interest CPF loan provides at 2.6%, this means HDB owners who are renting out their flat can undercut private condo unit's investors. This may force OCR condo to fall to the 3% yield level based on current prices.

Effect of 3% Yield for Condo Units

If loan interest rates are 4.1% (current rate), while the rental yield is lower than that; the leverage effect will mean private unit investors will earn pittance even if they are renting out. And if they are unable to rent out, they are in a deeper cashflow negative state.

Magnitude of the Crash in the Private Market

With HDB housing loan able to sustain a compression in yields thanks to the 2.6% loan interest rate, I will be genuinely unsurprised that the private market can fall to a 3% yield because the premium of a swimming pool + gates will not be enough to justify a large differential from HDB flats.

Without a drastic increase in the foreigner population (e.g. +500,000 foreigners until 2027), I really forsee a compression in yields especially in the private condo market. My prediction is that yield rates will fall to a 3.2-3.5% level, this translates to a 20% drop in housing prices.

Current private property investors will suffer a loss or otherwise be continuously funding a loss making venture in their property market. This is the likely scenario. 

The saving grace will come from the government should it decide to increase the foreigner population dramatically or increase the annual citizen naturalisation rate drastically from its annual 21,000 rate; otherwise I believe a crash is imminent.

Who Benefits?

The fall in prices will definitely benefit the youths of Singaporeans who will enjoy the effects of an affordable house. Otherwise, current youths will continue to suffer from the effect of skyhigh housing prices especially in the HDB resale market that is directly correlated to the housing privates of the private condo market.

There is a side story if the government wants to help the future of the country or bail out the leveraged property investors who bought a house not to build a home but to profit from it.

Sunday, 28 May 2023

Why Singapore's Interest Rate Remain Low and a Way to Earn More Interest?

I have seen a few articles covering Singapore's low interest/T bills rate. There are a few reasons why these rates have remained low and will likely remain at such levels for the next few years (venture a guess it could be for the next 3-5 years)

High Leveraged Society on Real Estate

Look no further beyond Singapore's property market. The market is in a buying overspree mode, with people leveraging heavily to buy multiple properties in hopes of profitting from it

The overbuying of properties help spurs Singapore's GDP as the construction industry overbuilds ahead of population growth. While the government is aware of the overleverage, it has sought to minimise interest rates hikes that kills property investors. This is because a higher interest means it is more difficult to service debt obligations, foreclosure happens and this will trigger a downturn of prices which causes margin call among property investors. This will freeze Singapore's banking sector via a domino effect. Hence it is important currently to keep SORA (the SIngapore's offical benchmark) rates low to prevent it.

The pace of SIngapore's interest hikes (SORA) is only 60% the pace compared to the US mortgage industry.

With the ever appreciating SGD, investors have parked their cash here with no complains of the low interest rate. This is because the appreciation of SGD against their foreign counterparts helps to earn a few percentage in "extra interest". Take for example the Japanese Yen and Korean Won, SGD has appreciated by 6-10% in a year. Japan and Korean investors would have profitted from such movements. It is the appreciation of the SGD where foreign investors are earning and not from the SGD deposit rates.

Outside of US Interest Rates are Still Low

Singapore's 3 month SORA is at 3.6%

The 3 month Euribor (Europe Interbank) is at 3.7%.

China's Prime 3 month rate is at 3.65%. 

Hong Kong 3 month Interbank is 4.63%. 

Japan's 3 month TIBOR is 0.08%

Only the US is at the 5-5.25% range.

Singapore might be slightly lower but it is not totally far off from the rest.

What Can We Do Living in Singapore?

Given the low (but not so low) interest rates, strong Sing Dollar, I have been considering to exchage some Sing Dollar into foreign currency deposits.

Among UOB and other local banks, USD foreign deposits are at highs of 4.9% 

There is an opportunity to aribitage where if one is able to change SGD into USD/HKD at money changers at Raffles Place Arcade Exchange, deposit in our local banks in the stated foreign currency, the returns is higher vis a vis a Sing dollar deposit. 

The current spread at Arcade from the offical FX rates are about 0.2%, so a 2 way conversion means you lose 0.4% in spread. This still netts a positive 0.7%. Do note you are subjected to foreign exchange risk if the Sing Dollar keeps appreciating non stop, like as present.

I am not sure if the method of changing foreign currency at Raffles Place Arcade and then depositing the currency as FD at a bank branch in Raffles Place is allowed. 

For readers, if you are aware it is allowed, please dispense your advice on how it works. I am sure many will be grateful for this advice to earn more interest in the low interest rate Singapore environment.

With Just $1 Deposit for 30 days, Get US$50-500 + $20 cash via paynow for New Webull Sign Ups

Until 30 May 2023, this is the final chance to Register here and individuals can receive 5 free fractional shares worth between US$50 to US$500 + a $20 cash gift when they (i) sign up a new account (via Singpass), (ii) make a deposit of any amount and (iii) keep the amount in webull for 30 days. It is better than many fixed deposits out there because putting in $1 or a few dollars will nett you at least US$50! The new fractional shares can be found under the "My rewards" tab

The offer is valid until 30th May 2359hrs. please remember to maintian the amount that you had first deposited for 30 days, then your last 2 free shares entitlment will appear under the "rewards tab" on day 30. Otherwise, without putting the money in for 30 days, you will only get 3 fractional shares.

Steps to Sign Up and How to Get the Free Gifts

To qualify for the promotion:

  1. Register for a webull account here
  2. Click on the "Get Free Shares Now", complete the sign up process.
  3. Then deposit any amount (S$1 also can) and you will get 3 free shares worth between US$30-US$300. After which complete this google form with details to get your $20 cash paynow
  4. Maintain your funds for 30 days and you will get 2 free shares worth between US$20-US$200

Each free share is a fractional share worth between US$10 to US$100 each. It is a roulette with each spin giving you a certain amount, if you are lucky, you will be able to get US$500 with 5 spins. Most of the time, it is US$10 worth of Tesla shares per spin. 

How to Deposit Funds into your new Webull Account:

After your account is approved, it’s time to make a deposit. Inside Webull mobile app, select “menu" at the bottom left of the screen, then clock on the "more" word icon boxed red

Next click "Deposit", boxed red.

There are a few ways to make a deposit: eDDA, Fast or Telegraphic Transfer. 

The eDDA Deposit method is the easiest, where you will authorise Webull to transfer money from your bank account into your Webull account. To use this method, you can select the “eDDA Deposit” option, as a first time deposit, login to your internet banking, and set the transfer limit. 

If you'd prefer to manually transfer funds from your bank account, then you can use the FAST method. However, do note that this option is applicable only for SGD deposits, and you'll need to remember to notify Webull that the transfer has been completed. So the eDDA deposit option is the easiest


How to Redeem Your Free Shares

On the homepage, click "My Rewards" which is boxed green and then claim your free shares there

Every fractional share sale will incur a $0.02 Commission

Do note for every different company fractional share sold, a $0.02 commission is present due to the charges incurred by the US Stock Exchange. Example if you get Tesla, Amazon and Alphabet fractional shares and you sell all the total is $0.06 comission ( 3 multipled by $0.02 commission for each company). Feel free to sell and encash them upon the end of the 30 days you have deposited your first fund into webull.

Disclaimer: I may receive an affiliate/referral fee when you sign up for services/products on this site. I only recommend services/products I am personally using to readers, however I do not provide any warranty or guarantee for the quality of these services/products