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Category: Finance

Retail News Asia is committed to providing both local and global retailers with the latest Finance news throughout the Asian market. This on a daily base.

  • ADB offers new loan scheme to Indonesia

    ADB offers new loan scheme to Indonesia

    The Asian Development Bank (ADB) has offered a new loan scheme to the Indonesian government, and currently, both parties are still reviewing the potential financing that can be availed through it.

    Development Financing Deputy of the Indonesian National Development Planning Agency (Bappenas) Wismana Adi Suryabrata stated that the newly offered scheme is different from the earlier three schemes of result-based lending, direct lending, and conventional loans.

    “They are offering the loan based on the need to fund projects in the state budget. So, it is not similar to procurement, but when the project is completed and there is still a shortage of funding, then they can cover it,” Wismana explained here on Friday.

    Wismana noted that the loan scheme is directly based on the matrix of infrastructure projects in the state budget, and it is a new scheme that has not yet been offered to other multilateral or bilateral financing institutions and partners.

    Indonesia will benefit from the governments criteria for the projects under this new scheme. Moreover, the government has received assurance for additional sources of funding if there is a shortage of funds to finance any government infrastructure projects.

    “This new scheme is only for infrastructure projects,” Wismana stated while referring to the ADB, which is also expanding its role to finance social and environmental projects.

    However, the Indonesian government and ADB are still formulating other provisions in this new scheme, Wismana added.

    Currently, the ADB is offering a lending rate of 1.2 percent, with a five-year grace period and a repayment tenor of 20 years.

    Previously, the ADB had increased the loan limit to Indonesia in 2014, when it had disbursed funding worth US$710 million.

    The loan was then increased to US$1.5 billion.

    In 2016, the ADB has committed to lend US$2 billion to Indonesia.

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  • BNI Syairah resolved to attract more investors

    BNI Syairah resolved to attract more investors

    State-owned Bank BNI Syariah is determined to attract more strategic investors this year as part of its efforts to increase capital, according to its President Director Dinno Indiano.

    The Bank BNI Syariah has opened itself to investors over the past three years.

    “This year we will make even more intensive efforts to lobby for investors. After all, we have the confidence, supported by good performance over the past three years,” Dinno told a press conference in Jakarta on Tuesday.

    Earlier, President Director of Bank BNI, Achmad Baiquin, said the state-owned bank was exploring the possibility of cooperating with strategic investors to support the BNI Syariah business. Bank BNI Syariah is a subsidiary of Bank BNI.

    Bank BNI was willing to sell 20 percent or more of the stake of its subsidiary to strategic investors. Yet, Bank BNI will remain the majority holder of the Bank BNI Syariah stake.

    Last week, Bank BNI said it was optimistic that its Peoples Business Credit (KUR) would increase rapidly in 2016 after the interest rate on the credit scheme was cut to 9 percent per year.

    Achmad Baiquni said in a statement that between August 2015 till 2015-end, the publicly traded state lender had already disbursed more than Rp3 trillion in KUR.

    Baiquni said this amount is predicted to surge to more than Rp10 trillion in 2016 .

    KUR disbursement by BNI was made symbolically at the Glenmore sugar factory in Banyuwangi, East Java, on Wednesday in the presence of the Minister for State Enterprises Rini Soemarno and Achmad Baiquni.

    Baiquini said the KUR funneled by BNI in 2015 represented an increase of 70 percent from 2014.

    In 2015, there were more than 12,200 KUR recipients all over Indonesia. In East Java alone, BNI funneled Rp476.5 billion in KUR to 2,022 clients, including micro businesses, retailers and workers.

    In East Java, KURs are offered to labor intensive and productive sectors such as processing industry, agriculture and trade.

    There is a potential KUR market in East Java, and it may attract sugar farmers under the coordination of state plantation company, PT Perkebunan Nusantara (PTPN).

    BNI is optimistic that there would be more KUR users in 2016 because of the cut in interest rate and improved economy.

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  • Should We Worry About The Hong Kong Dollar?

    Should We Worry About The Hong Kong Dollar?

    Winter is coming to Hong Kong. The Hong Kong dollar breached its 2007 low today, down to as low as 7.8226, just haircuts away from the 7.85 level that would prompt the Hong Kong Monetary Authority to intervene.
    After China decoupled its loosely pegged yuan from the dollar last August, we Hong Kong residents are understandably worried Hong Kong may de-peg its currency as well.

    But really, rather than the Hong Kong dollar, we should worry about the Hong Kong economy instead.

    First of all, it is highly unlikely Hong Kong would want to rock the boat even though Hong Kong’s economy is more closely tied to China (and so should its monetary policy be). After all, this is the government that lets its citizens kidnapped across the border without consequences.

    Second, HKMA has enough gun power to defend its currency when it comes to it. Hong Kong’s foreign reserve is currently at $359 billion, which covers 1.75 times its monetary base. See my last week’s blog for Credit Suisse‘s commentary on the possibility of Hong Kong de-pegging.

    But what this means is that Hong Kong has to raise its interest rates to compensate for the Hong Kong dollar outflow, estimated to be around 300 billion Hong Kong dollars, or $38 billion. This certainly is not good news for the Hong Kong economy, especially when it is already in the downturn. In 2015, Hong Kong retail sales, a growth engine in recent years, is expected to slump over 5%, even worse than the SARs epidemic in 2003.

    Hong Kong investors are catching up to reality today, sending the Hang Seng Index down 3.1% a new 40-month low. No surprise, Hong Kong property developers tumbled today. Cheung Kong Property fell 5.6%, Wheelock dropped 4.8%, Wharf Holding was down 3.7%.

    Year-to-date, the iShares China Large-Cap ETF (FXI) fell 13.5%, the iShares MSCI China ETF (MCHI) fell 13.4%, the iShares MSCI Hong Kong ETF (EWH) was down 10%.

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  • China quarter feeblest since ’09

    China quarter feeblest since ’09

    China’s economy slowed in December, capping the weakest quarter of growth since the 2009 global recession, as the Communist leadership grapples with a transition to consumer-led expansion.

    Industrial production, retail sales and fixed-asset investment all slowed at the end of the year, while gross domestic product rose 6.8 percent in the fourth quarter from a year earlier. Full-year growth of 6.9 percent, the least since 1990, was near the government’s target of about 7 percent.

    Policymakers must weigh the need for further monetary easing with the risk it would spur more weakness in the yuan and additional capital outflows. Arguing against major stimulus: A rise in services, which became more than half of the economy for the first time, cushioned the slowdown and underpinned employment.

    “2016 will be another challenging year as the old capital-intensive, highly levered industrial sector continues to be placed under severe strain,” said Kenneth Courtis, former Asia vice chairman at Goldman Sachs Group Inc. and now chairman of Starfort Holdings. “But we remain constructive on the outlook for the period ahead,” he said, citing steady job gains and retail sales that are rising faster than GDP.

    Industrial production posted one of the weakest gains in the past quarter century, increasing 5.9 percent in December from a year earlier, compared with a 6 percent median estimate of analysts and November’s 6.2 percent.

    Retail sales increased 11.1 percent from a year earlier, compared with the 11.3 percent projected by economists. Fixed-asset investment excluding rural areas expanded 10 percent last year, the slowest pace since 2000.

    The Shanghai Composite Index closed 3.2 percent higher as the data fueled speculation of increased stimulus and industrial shares rallied on prospects of state-fund buying.

    In an update to its annual outlook published Tuesday, the International Monetary Fund left its estimate for China’s growth this year unchanged at 6.3 percent even as it lowered the global projection to 3.4 percent. The fund said risks to the global outlook remain tilted to the downside, with the world facing three big adjustments: the emerging-market slowdown, China’s shift to growth driven less by exports and manufacturing, and the Federal Reserve’s gradual exit from ultra-low interest rates.

    China’s top leadership has signaled in recent months it may allow some additional slowness as officials tackle delicate tasks such as reducing excess capacity, but nothing that could threaten President Xi Jinping’s goal of at least 6.5 percent growth through 2020. The world’s second-largest economy will slow to 6.5 percent this year and 6.3 percent next year, according to the median of economist estimates.

    Reaching the official 6.5 percent target “is fast becoming a challenge,” Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong, said in a note.

    China’s economy is going through a “tough transition to make, but critical if growth is to be sustainable,” former Fed Chairman Ben Bernanke said at a forum Tuesday in Hong Kong. “You have to have a transition to more services if you want to keep the economy growing and providing jobs.”

    China’s economy is growing at two speeds, with old rust-belt industries from steel to coal and cement in decline while consumption, services and technology do better. Services accounted for 50.5 percent of output last year.

    The policy response to last year’s slowdown included accelerated monetary easing with six interest-rate cuts since late 2014 and increased fiscal spending. Through market turbulence, the central bank forged ahead with interest-rate liberalization by removing a cap on deposit rates and won the IMF’s approval for the yuan to enter its Special Drawing Rights basket of reserve currencies.

    This year, attention is likely to turn more to a new focus on supply-side tactics such as cutting excess industrial capacity and labor in state enterprises, lowering taxes and increasing productivity.

    Information for this article was contributed by Xiaoqing Pi, Ailing Tan, Jeff Kearns, Enda Curran and Christopher Anstey of Bloomberg News.

    Business on 01/20/2016

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  • Indonesia to speed up EU CEPA negotiation

    Indonesia to speed up EU CEPA negotiation

    Indonesia will speed up negotiations on the Indonesia-European Union (EU) Comprehensive Economic Partnership Agreement (CEPA), aiming to have an agreement with the EU come into effect within two years.

    The two parties had discussed the implementation of the CEPA in a meeting with EU trade ministers during the World Economic Forum (WEF) in Davos last week, Trade Minister Thomas Lembong said.

    “It has been decided in a Cabinet meeting that we will have a trade agreement with the EU. We must start it immediately because the President gave us two years to complete the agreement,” Thomas said in Jakarta on Tuesday.

    In contrast to the discussion of trade agreements in the Trans Pacific Partnership (TTP), which still required time for assessment to solve the challenges, Thomas underlined that there were no special constraints on the Indonesia-EU CEPA discussion.

    The planned Indonesia-EU CEPA has been stagnant since 2013. Vietnam, which started free trade agreement negotiations with the 28-member trading bloc in the same year reached an agreement in August last year.

    The EU CEPA covers issues of trade and business, including the reduction of trade barriers and liberalization of government procurement. The two points are also included in the TPP framework.

    Aside from the two agreements, Thomas continued, the ministry also held meetings with trade ministers from several countries to discuss bilateral trade agreements.

    “We are exploring bilateral trade agreements with Australia. Also with the EFTA [European Free Trade Association] which consists of Norway, Switzerland, Iceland and Liechtenstein,” Thomas said.

  • Malaysian banks in Indonesia to gain from BI rate cut

    Malaysian banks in Indonesia to gain from BI rate cut

    The interest rate cut by Bank Indonesia (BI) last week and further anticipated rate cuts in that country could be a game changer for Malaysian banks in Indonesia as they could see an uplift in their loan growth and earnings amid a challenging economic environment following weaker commodity prices and slower economic growth.

    Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd’s units had been bogged down by provisions due to pressure on their asset quality but this scenario is set to change amid signs of further rate cuts by the Indonesian central bank.

    Maybank operates in Indonesia via PT Bank Maybank Indonesia Tbk and has about 80% shareholding in Maybank Indonesia Tbk while CIMB Group has 97.94% stake in PT Bank CIMB Niaga Tbk.

    CIMB Group chief executive Tengku Datuk Seri Zafrul Aziz, via an e-mail, told StarBiz the move to cut interest rates by BI would see further uplift in CIMB Niaga’s loan growth this year.

    “BI is adopting a growth strategy for its 2016 monetary policy. As such, we believe there will be further interest rate cuts this year. We expect CIMB Niaga earnings to improve this year on the back of sustained net interest income, improved non-interest income as well as lower loan provisions,” he said.

    He said the group was still positive on the longer-term growth and opportunities in Indonesia and were placing added focus on the consumer and small-medium enterprise (SME) segments in a bid to boost earnings growth.

    “With the government’s economic policy packages that aim to boost the economic growth in Indonesia, we are cautiously optimistic of our business growth there.

    “On the direction of the gross non-performing loans (NPL) of the industry, it is highly dependent on the macroeconomic shifts from commodity prices, the currency and consumer consumption. For CIMB Niaga, we expect gross NPLs to gradually reduce, going forward, from the high of 2015,” Zafrul added.

    For the third quarter ended Sept 30, 2015, CIMB Niaga’s gross NPL ratio improved to 3.17% compared with 3.35% in the same period a year ago as a result of sales of asset to an affiliated company of CIMB Group. Its loan loss coverage during the period increased to 120.96% from 82.89% a year ago.

    The group’s Indonesian arm posted a net profit of 442 billion rupiah (RM137.4mil) for the third quarter. Comparatively, it recorded 93 billion rupiah a quarter ago.

    The bank kept its position as Indonesia’s fifth largest bank by assets, with total assets standing at 244.29 trillion rupiah, representing a 7.3% increase year-on-year.

    Total gross loans rose 7.2% year-on-year to 178.89 trillion rupiah, driven largely by growth in corporate loans, consumer loans and in micro small-medium enterprise banking, while commercial loans remained flat.

    BI, on Jan 14, announced a 25-basis-point cut in its benchmark policy rate to 7.25% in a bid to lift an economy growing at its slowest rate in six years.

    Zafrul said CIMB Niaga would follow suit with the rate reduction and also make adjustments to its lending interest rate accordingly as the cost of funds would be correspondingly lower.

    He said the banking group has also identified a few key priorities for CIMB Niaga this year. These include looking at ways to optimise its SME franchise, further developing its treasury and market capabilities and growing the consumer banking business while focusing efforts to increase CASA (current account/savings account), improve asset quality and continuing with its stringent cost management initiatives.

    Additionally, Zafrul said CIMB Niaga would play a more active role as the leading digital bank in Indonesia with the support of a new core banking infrastructure.

    Meanwhile, despite weakening asset quality, Maybank Indonesia’s net profit for the nine months ended Sept 30, 2015 increased by 70.7% to 592 billion rupiah (RM187.1mil) from 347 billion rupiah a year ago. Its gross NPL stood at 4.34% in the third quarter from 2.55% last year. The bank posted loans growth of 6.6% to 111.5 trillion rupiah in the nine months from 104.6 trillion rupiah in the same period in 2014.

    On the loan growth for CIMB Niaga and Maybank Indonesia as a result of the interest rate cut, Malaysian Rating Corp Bhd head of banking Sharidan Salleh said: “During the nine months of last year, the two banks’ loans grew by about 7% year-on-year. We expect the banks’ loan growth could be higher in 2016 at about 9%-10% in tandem with the expected higher GDP growth at 5.3% in 2016 from 4.73% in 2015.

    “The economic growth is expected to be supported by Indonesian government-driven infrastructure projects. However, banks’ profits from Indonesian operations could be pressured by provisions and compressed margin. Given the current challenges in the economy, we expect the asset quality of these banks would remain under pressure in 2016.”

    UOB Kay Hian analyst Alexander Margaronis said that based on historical data, significant loan growth in Indonesia might take three quarters to pick up after the first rate hike.

    Furthermore, he said the relationship between time-deposit (TD) rate cuts to BI reference rate cut was 1:1 in the short term with no lag time.

    “As we expect further BI rate cuts down the road, cost of funds could come down further as time deposit rates decrease. This should keep the industry’s net interest margin relatively stable or even higher.

    “In the last major round of rate cuts by the BI (2009-2013), BI reference rates came down by a total of 350 basis points (bps) versus TD rates declining by about 500 bps whereas lending rates came down by about 300 bps,” Margaronis noted.

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  • Thai Central says keen to bid for Casino’s units in Thailand, Vietnam

    Thai Central says keen to bid for Casino’s units in Thailand, Vietnam

    Thailand’s largest retail conglomerate Central Group is keen to bid for Casino Group’s Thai and Vietnam operations, a company executive said.

    Casino owns 58.6 percent of Big C Supercenter Pcl, which has a total a market value of $5.5 billion. Casino said last week it was keen to sell this stake after announcing it would sell its Vietnam unit in the first quarter.

    “We are interested in both Big C in Thailand and Vietnam,” Prin Chirathivat, deputy chief executive officer told Reuters.

    “If the prices are not too expensive, we will be keen to bid,” Prin said adding his family, the Chirathivats, has a combined 25 percent stake in Big C. Central has been actively looking to buy assets overseas as it wants to expand into Southeast Asia and Europe.

     

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  • China on track for a more sustainable economic expansion

    China on track for a more sustainable economic expansion

    Investors world-over fear that China could record another worse-than-expected slowdown this year. Over the past two decades, annual GDP growth in China has averaged around an impressive 10 percent, underpinned mostly by investments, as well as exports. The IMF expects China to account for almost 18 per cent of world economic activity in 2016. Hence a bump in China’s economy can definitely not be ignored. A drop in China’s growth rate from an expansion of more than 10 per cent in 2010 to 6.3 per cent expected this year could directly knock-off about 0.75 percentage points off the global growth rate.

    The recent week’s turmoil in China has hit both stocks and currency markets, sending shock-waves through global financial markets. Stock indexes around the world have seen massive sell-offs, global markets have fallen by 7.1% since January 1st, their worst ever start to a year. The instability brings back to light China’s stock market crash and a surprise Yuan devaluation by Beijing in August 2015 which sparked a global rout, and wiped out trillions of U.S. dollars in value from Chinese equities.

    Some of China’s leading economic indicators, such as its manufacturing index and factory output, are indeed slowing. This is a rational slowdown which would deliver a healthier and more sustainable growth path. The emerging markets and the rest of the world may just have to the deal with the “new normal” of global growth as the Asian giant seeks a slower, but more sustainable, economic expansion.

    Markets will keep focus on China data-deluge, including the GDP, industrial production and retail sales due tomorrow. Expectations are for data to remain weak. Barclays forecasts Q4 GDP growth data to have slowed further to 6.6 % y/y (consensus: 6.9%) from 6.9% in Q3. Industrial production is likely to have moderated, (Barclays: +5.9%y/y; consensus: 6.0%), retail sales (+11%y/y) and fixed asset investment (+10.1%y/y).

    PBoC has strongly signaled a desire for near-term stability by keeping its USD/CNY fixings stable at about 6.56 over the past week. On Monday, the PBoC said they will start implementing RRR to some banks involved in the offshore yuan market, in a move that seemed intended to soak up additional liquidity. The spot market opened at 6.5800 per dollar on Monday and was trading at 6.5792 in early trade, 48 pips below the previous close and 0.31 percent away from the midpoint, which was set at 6.559. The offshore yuan was trading -0.18 percent away from the onshore spot at 6.591 per dollar, firmer than the previous day’s close of 6.6165.

     

  • Jakarta index closes higher on Friday

    Jakarta index closes higher on Friday

    The Jakarta composite index (JCI) closed 42.61 points higher on Friday on selective buying by market players.

    The index of the Indonesian Stock Exchange rose 0.96 percent to 4,456.74 points with index of 45 blue chips up 1.48 percent to 779.31 points.

    Selective buying of big capitalization shares pushed up the JCI slightly, HD Capital analyst Yuganur Wijanarko said.

    “In addition, share prices in foreign markets generally rose on oil prices being on the increase lately , prompting market players on the domestic market to buy shares< he said.

    The price of WTI on Friday afternoon rose 4.3 percent to S$30.80 per barrel and Brent pri9ce was up 5.09 percent to US$30.74 dollar.

    Satisfaction expressed by the Capital Investment Coordinating Board (BKPM) with the achievement in direct investment to Rp545.4 trillion in 2015 gave positive sentiment to the market.

    In 2016, BKPM set growth target at 9.3 percent for direct investment to Rp594.8 trillion .

    There were 213,493 transactions in the market on Friday with 4.07 billion shares valued at Rp5.25 trillion changing hands .

    Regional markets such as Hang Seng, Nikkei and Straits Times recorded gain in index.

    Meanwhile the national currency rupiah closed stronger trading at 13,834 per U.S. dollar gaining from the previous level of 13,906 per dollar.

    “Rising trend of oil prices propped up the currencies of emerging countries ,” financial market observer from Bank Himpunan Saudara, Rully Nova, said.

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  • Barclays to pull out of Korean market

    Barclays to pull out of Korean market

    British banking group Barclays will close its Seoul office as part of its global slimming down strategy, an official from the financial regulator said Wednesday.

    A director at the Financial Supervisory Service (FSS) said Barclays told the authorities of its plan to close its banking and securities business in Korea.

    “Barclays plans to pull out of the Korean market,” said the director, asking not to be named.

    Foreign banks have been withdrawing from the local market, or downsizing, as part of their global strategy to exit non-core businesses. Last month, U.S. banking giant Citigroup signed an agreement with Apro Service Group to sell its consumer finance subsidiary in the country, Citigroup Capital Korea.

    Barclays confirmed that it is looking for business chances in other countries, but said no firm decisions have been made.

    “We are constantly monitoring our opportunities in different geographies and businesses over the cycle,” Barclays said. “If any firm decisions are made, we will provide an update.”

    In December, Barclays said it had agreed to sell its Italian retail banking network of 89 branches, including a broadly balanced portfolio of assets and liabilities, to CheBanca!, a member of the Mediobanca Group.

    “This transaction is further evidence of the reshaping of Barclays Group to focus on our core businesses,” said Barclays Group CEO Jes Staley. “We continue to make progress in the reduction of Barclays non-core assets as we target risk-weighted assets of around 20 billion pounds at the end of 2017.”

    According to Barclays, its rundown of non-core businesses continued last year, with risk-weighted assets (RWAs) decreasing to 55 billion pounds in September from 57 billion pounds in June.

    The U.K. banking group said its announced sale of the Portuguese retail business in the third quarter last year, which will be completed in the first quarter this year, is expected to result in a further 1.7 billion pounds reduction in non-core RWAs.

    Barclays reported 4 percent growth in the group’s adjusted profit before tax to 5.2 billion pounds for the first three quarters of 2015 from the previous year, reflecting improvements in all core operating businesses. Its adjusted return on average shareholder equity also increased to 7.1 percent during the period.

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  • CIMB: No more job cuts in Malaysia, Indonesia this year

    CIMB: No more job cuts in Malaysia, Indonesia this year

    CIMB Group will not undertake any more job cuts in Malaysia and Indonesia in 2016 after last year’s mutual separation scheme exercise.

    CIMB Group chief executive Tengku Zafrul Aziz said the bank was now focused on improving productivity and meeting its business agenda.

    “We have done the mutual separation scheme and we are not planning to do it any more here or in Indonesia,” he told reporters after presenting prizes to winners of the CIMB Asean Stock Challenge 2015 in Kuala Lumpur today.

    On Friday, CIMB cut 32 jobs in its Hong Kong investment banking and equities business due to worsening capital market conditions.

    Zafrul said for the first six months of 2016, the bank expected the outlook to be challenging based on the current economic environment.

    “But having said that, I think the bank has started to appreciate because if we look at the capital and equity ratio of all banks in Malaysia, we more than meet the requirement by the central bank.

    “We are also looking at a compatible growth economic growth of between 4.5 and 4.8 percent for the banking industry this year,” he added.

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  • How Chinese Companies Borrow Without Banks

    How Chinese Companies Borrow Without Banks

    China’s new credit surged the most since June as companies increased borrowing in the corporate bond market. Aggregate financing rose to 1.82 trillion yuan ($276 billion) in December, according to a report from the People’s Bank of China. That compares with the median forecast of 1.15 trillion yuan in a Bloomberg survey.

    The data shows companies are turning to alternative sources for credit given banks’ reluctance to lend. It also adds to signs the economy is stabilizing, not slumping as its falling currency and plunging stock market seem to suggest. The First Word Asia team spoke with Mikio Kumada, Executive Director/Global Strategist, LGT Capital Partners.

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  • Learn to build winning portfolio with new investment series

    Learn to build winning portfolio with new investment series

    Here’s your chance to learn how to build a winning portfolio amid the uncertain market.

    Over the next 12 months, The Sunday Times will feature a new series that will showcase and track the simulated portfolios of three types of retail investors. The year-long Save and Invest Portfolio Series campaign aims to encourage and equip investors with the knowledge to save for the future.

    The initiative will involve the Singapore Exchange (SGX) collaborating with CFA Society Singapore and MoneySense, the national financial education programme.

    Starting next Sunday, the series will feature simulated portfolios of a young working adult, a married couple with two young children and a retiree.

    Their portfolios are guided by a panel of four CFA charterholders who are volunteers with CFA Society Singapore and have 77 years of experience collectively as investment professionals.

    SMART INVESTING

    We are excited about this initiative that showcases real-life investment portfolios of people at different life stages that the average investor can relate to. This series is an extension of SGX’s commitment to educating and engaging our retail investors, and to arm them with skills and confidence.

    MS LYNN GASPAR, head of retail investors at SGX.

    The series aims to guide retail investors in basic investment techniques and how to build a portfolio in accordance with their investment goals and risk tolerance.

    The portfolios will be tracked over 12 months. Different types of investment instruments and choices, including relatively new ones such as the Singapore Savings Bonds, will be introduced.

    Mr Lee Boon Ngiap, Monetary Authority of Singapore’s assistant managing director of capital markets, says it is essential to save and invest for the long term to grow our retirement nest egg.

    He says: “In investing, one should consider one’s goals, investment objectives, existing commitments and risk appetite.

    “We encourage the public to visit the MoneySense website and Facebook page which regularly feature informative guides and useful articles on investing.”

    He adds that the Save and Invest Portfolio Series will help enhance financial knowledge and complement MoneySense in empowering investors to make better-informed decisions.

    Ms Lynn Gaspar, head of retail investors at SGX, says: “We are excited about this initiative that showcases real-life investment portfolios of people at different life stages that the average investor can relate to. This series is an extension of SGX’s commitment to educating and engaging our retail investors, and to arm them with skills and confidence.”

    She adds: “We hope this will set the momentum for more investors to start or progress in their investing journey.”

    The SGX Academy and CFA Society Singapore will jointly host six public seminars that are aligned with themes featured in the series.

    These seminars will allow retail investors to meet SGX Academy trainers and CFA Society professionals.

    Ms Jan Richards, president of CFA Society Singapore, says one of the most fundamental and effective ways to protect investors is to equip them with the knowledge and tools to make informed decisions.

    “This has become ever more imperative as global markets remain uncertain and the investment environment challenging,” she adds.

    “We hope that the Save and Invest Portfolio Series can introduce The Sunday Times readers to a more disciplined way of investing, inspire them to learn more and eventually help them grow their hard-earned savings into a comfortable nest egg.”

    Business editor Lee Su Shyan believes readers will get an in-depth look into how different investing decisions play out in real life. She says: “We at Sunday Times Invest feel very strongly about financial literacy and this series will enhance retail investors’ understanding of investing.

    “Readers are welcome to write in with their views and suggestions to Invest editor Lorna Tan.”

    Watch this space.

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  • ‘Don’t blame retail investors for China’s flash crash’

    ‘Don’t blame retail investors for China’s flash crash’

    Picture this: the market plunged 9 percent in around 30 minutes of hectic trading. Regulators raced to contain the damage, that was estimated in the trillions. Later, the plunge was repeated with a market collapse of 6.5 percent as 1,100 points were wiped in about five minutes. Trading was halted multiple times and circuit breakers were praised for preventing a full-on market crash of epic proportions.

    It just goes to show that this is an untrustworthy, poorly developed market that has to be managed externally by imposing trading halts.

    Hang on, there’s just one problem with this assumption. The 9 percent plunge happened on May 6, 2010. It was the infamous Flash Crash on the New York Stock Exchange. The second 6.5 percent fall was the August 24, 2015 flash crash, also on the NYSE.

    And rather than signaling the end of the financial world as we know it, markets simply shrugged their collective shoulders and moved on.

    But analysts seem to apply a different yardstick to the China market and are using this week’s Shanghai Composite flash crash to highlight what they see as China’s economic disaster.

    This is more than easily dismissed as double-standard analysis, because closer examination suggests some alternative explanations.

    Let’s first go back to the US flash crashes. The 2010 crash was widely attributed to the activity of exchange traded funds (ETFs). The 2015 crash was attributed to high frequency trading because sell algorithms cascaded in a falling market.

    The true reasons are certainly more complex, but it’s the nature of these suspects that is interesting because they highlight the connection between the derivative markets and the underlying market.

    One of the key connections is the rapid placement and withdrawal of trading orders that lies at the core of high frequency trading. These are placed in the futures and associated markets. In its subsequent investigation, the Commodity and Futures Trading Commission (CFTC) concluded that this activity was at least significantly responsible for order imbalances in the derivatives market, which in turn affected the stock market.

    The key feature is that these types of extreme and rapid market collapses are most often associated with markets dominated by derivative trading. These crashes are caused by institutional trading from ETFs and HFT. They are not caused by mums and dads trading because mums and dads simply do not act in such a coordinated fashion in such a short timeframe. Mums and dads also do not have the leverage to shift markets in this way within 30 minutes or an hour. That power lies in the hands of large-scale derivative traders.

    So, heres the rub. The onshore China market is dominated by retail traders. The offshore derivative market is dominated by institutional funds and ETFs and trading activity has been facilitated by the Shanghai-Hong Kong Stock Connect that opened in November 2014.

    Chinese authorities have been concerned for some time by allegations of Qualified Foreign Institutional Invetor (QFFI) funds being used in offshore shadow derivative trading. In June 2015 there were claims that the Shanghai index sell-off from the high of 5,176 was preceded by a spike in the placement and rapid removal of sell orders that is typical of HFT activity. It took the CFTC 4 years to deliver a final report on the 2010 Flash Crash so its unreasonable to expect a CSRC report on the June 2015 fall anytime soon.

    The January 1 Shanghai flash crash has all the characteristics of the NYSE flash crashes but in a market that is not dominated by fund managers and institutional trading. It’s the imposition of circuit breaker-thinking, imported directly from the flash crash-vulnerable NYSE market, that stopped this Shanghai flash crash from worsening.

    It’s convenient but far too simplistic to blame Chinese retail traders. The pattern of order placement in the physical and derivative markets need further investigation.

     

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  • Maybank Launches Market Outlook Roadshow Across Malaysia

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