23 June 2009
Talks between Bank of China (Hong Kong) (2388) and the Securities and Futures Commission have stalled over how much Lehman minibond investors should be compensated despite nearly two months of discussions.
BOCHK will not accede to the regulator's demands that it pay back 100 percent of the purchase value of the toxic investments and is suggesting a maximum offer of 70 percent, sources said.
Peter Chan Kwong-yue, chairman of the Allied Victims of Lehman Products, said he is disappointed by the development and demanded BOCHK take responsibility.
``They did not even show they felt sorry for the situation and it is not acceptable to just pay back 60 percent,'' he said.
Investors aged 65 or older would get up to 70 percent of their capital back. Everyone else would be offered 60 percent. Both offers are on the condition that BOCHK does not accept liability for misselling of the toxic products.
The government has no intention of intervening, The Standard has learned.
A government spokeswoman said: ``We hope the matter can be resolved as quickly as possible.''
BOCHK, the city's largest distributor of Lehman minibonds products in Hong Kong, has submitted a proposal to the SFC and is awaiting its response, sources said.
BOCHK's proposal was based on the government's buyout plan submitted last year with an ``additional premium,'' a source said.
The administration last November suggested banks refund 55 percent of the principal on all minibond products but this proposal was scrapped for legal reasons.
The SFC has insisted on pursuing the same 100 percent rebate for investors that it has already negotiated with Sun Hung Kai Investment and KGI Securities.
BOCHK led minibond sales in Hong Kong with 40 percent of the market. Dah Sing Financial was the second-biggest seller of the structured products, according to research.
BOCHK's settlement will set a precedent for other banks' negotiations with the SFC.
Its 60 percent proposal will cost it HK$2.52 billion, according to Citigroup Global Markets, while paying back 100 percent would cost HK$4.2 billion.
It has so far set aside HK$769 million in provisions.
Dah Sing Financial sold about HK$1.1 billion in Lehman minibonds. So far it has put aside HK$300 million in provisions, according to Citi.
Monday, June 22, 2009
Brain Workout (aka Intelligence Quiz)
I have got 5 orders through the website for my books now. Payment for 3 orders were made through ATM and 2 by internet banking transfer. The process is working smoothly. I will be offering more products through the website later.
Click on these links:
Play online
Order books
A customer called me today as she wanted the book urgently for her children. They love the puzzles which appeared in The New Paper on Sunday.
Click on these links:
Play online
Order books
A customer called me today as she wanted the book urgently for her children. They love the puzzles which appeared in The New Paper on Sunday.
Correct approach to select an insurance policy
Many people think that a good insurance policy provides the widest cover. This is not the correct approach.
A good insurance policy meets the following criteria:
a) Provides cover that is relevant to the needs
b) The cover is clearly defined (i.e. not ambigious)
c) The premium is computed fairly.
The consumer should avoid a policy that provides wide cover that is irrelevant to the needs, have a negligible chance of occurence, and are ambigiously defined. Many of the coverages provided under a critical illness policy fall into this category.
To ensure that the premium is computed fairly, the ratio of claims to premium should be at least 60% in the case of a policy that covers the risk and does not accummulate any savings. If the ratio is less than 60%, the premium is overcharged, and gives poor value to the consumer.
Many travel insurance policies have a claim ratio of less than 30%. A large part of the premium goes to commission, expenses and profit to the insurance company. Many Shield plans also have claims ratio of less than 50%.
Motor insurance has a claim ratio of more than 70%, due to intensive competition. It gives good value to the consumer, except that the claims are inflated due to incompetency in claims control.
When you buy an insurance policy, make sure that the coverage is clearly defined and that the claim ratio is more than 60% of the premiums.
Tan Kin Lian
A good insurance policy meets the following criteria:
a) Provides cover that is relevant to the needs
b) The cover is clearly defined (i.e. not ambigious)
c) The premium is computed fairly.
The consumer should avoid a policy that provides wide cover that is irrelevant to the needs, have a negligible chance of occurence, and are ambigiously defined. Many of the coverages provided under a critical illness policy fall into this category.
To ensure that the premium is computed fairly, the ratio of claims to premium should be at least 60% in the case of a policy that covers the risk and does not accummulate any savings. If the ratio is less than 60%, the premium is overcharged, and gives poor value to the consumer.
Many travel insurance policies have a claim ratio of less than 30%. A large part of the premium goes to commission, expenses and profit to the insurance company. Many Shield plans also have claims ratio of less than 50%.
Motor insurance has a claim ratio of more than 70%, due to intensive competition. It gives good value to the consumer, except that the claims are inflated due to incompetency in claims control.
When you buy an insurance policy, make sure that the coverage is clearly defined and that the claim ratio is more than 60% of the premiums.
Tan Kin Lian
Sunday, June 21, 2009
Politics of Fear - Reader's Views
There were 7 replies from readers. All of them mostly agreed with the views contained in this article. Here are their reasons:
1. 40-50 years ago in Singapore, I always heard 2 news among my friends and elderlies : a) Ghost stories b)Secret police terrorised the oppositions. But since 1990 onwards I hardly hear such news. I believe, as our society progresses, most of the ghosts and secret police have gone for reincarnation. It is a more civilised society now.
2. Many years ago, someone found an intrusion into their home computer from the internet. The intrusion was later found out to be authorised from MOHA. Strangely this was reported in the press. WKS defend the move stating they are doing Singaporean a favour by checking for virus on the computers of singaporean. I think I was in my teens then and did not understand much about politics. The fact is that the gov is snooping on us and collecting intelligence. They can add any law they want and they have the power of ISA. They even have the control of the press and media. If Singaporean can see this control being broken or a change, they may become less fearful.
3. Take me as an example, I will criticize government poor policy with similar minded friends only. And will not go beyond that or go public. Largely, the mass follow local press and accept what is reported in the newspaper even it is sometime biased reporting. They do not challenge it. Hence, it is tough to enlighten them, as they will ask me to shhh... This is also fear on my part, sadly.
Any points to add?
1. Singaporeans should have more moral courage to speak up. This is our country.
2. Singapoeran males are not only afraid to vote. Some of them(20-39yrs old) that are civil servants even express their fears of deferment of their reservists even when they have valid reasons on fear that their promotion chances will be compromised.
3. There are some very prominent politicians who if they are willing to make a anti PAP stand, become the opposition party, it will definitely sway singaporean into changing their mindset. But that is if they are willing to open their eyes and see the trouble ahead for singaporean under PAP continued rule - example Tan Soo Khoon. If in this election we have PAP turn anti PAP, the tides will finally changed.
4. Besides the point you raised on the secrecy in election, the slogan "compulsory in voting" is a malpractice. Nobody should be force to vote against his/her wish. I believe Singapore has the highest turn out rate for voting in election. Coupled with the fear of the vote can be traced (serial number), most (fearful) vote will go to the party-you-know-which.
5. Even Francis Seow, a prominent public figure from a respectable background, can be so easily dealt with. Dear Mr Tan, please be careful. But I will definitely vote for opposition in this election.
1. 40-50 years ago in Singapore, I always heard 2 news among my friends and elderlies : a) Ghost stories b)Secret police terrorised the oppositions. But since 1990 onwards I hardly hear such news. I believe, as our society progresses, most of the ghosts and secret police have gone for reincarnation. It is a more civilised society now.
2. Many years ago, someone found an intrusion into their home computer from the internet. The intrusion was later found out to be authorised from MOHA. Strangely this was reported in the press. WKS defend the move stating they are doing Singaporean a favour by checking for virus on the computers of singaporean. I think I was in my teens then and did not understand much about politics. The fact is that the gov is snooping on us and collecting intelligence. They can add any law they want and they have the power of ISA. They even have the control of the press and media. If Singaporean can see this control being broken or a change, they may become less fearful.
3. Take me as an example, I will criticize government poor policy with similar minded friends only. And will not go beyond that or go public. Largely, the mass follow local press and accept what is reported in the newspaper even it is sometime biased reporting. They do not challenge it. Hence, it is tough to enlighten them, as they will ask me to shhh... This is also fear on my part, sadly.
Any points to add?
1. Singaporeans should have more moral courage to speak up. This is our country.
2. Singapoeran males are not only afraid to vote. Some of them(20-39yrs old) that are civil servants even express their fears of deferment of their reservists even when they have valid reasons on fear that their promotion chances will be compromised.
3. There are some very prominent politicians who if they are willing to make a anti PAP stand, become the opposition party, it will definitely sway singaporean into changing their mindset. But that is if they are willing to open their eyes and see the trouble ahead for singaporean under PAP continued rule - example Tan Soo Khoon. If in this election we have PAP turn anti PAP, the tides will finally changed.
4. Besides the point you raised on the secrecy in election, the slogan "compulsory in voting" is a malpractice. Nobody should be force to vote against his/her wish. I believe Singapore has the highest turn out rate for voting in election. Coupled with the fear of the vote can be traced (serial number), most (fearful) vote will go to the party-you-know-which.
5. Even Francis Seow, a prominent public figure from a respectable background, can be so easily dealt with. Dear Mr Tan, please be careful. But I will definitely vote for opposition in this election.
How to construct a diversified portfolio
Dear Mr Tan,
I've read several articles that you've written where you've advocated buying the STI ETF. Thanks for taking the time to explain in simple terms the pros and cons of the issue.
I belong to the passive investing camp and believe in buying and holding a diversified basket of index-tracking, low-cost funds tracking several world markets and different asset classes. The STI ETF appears to be one such index-tracking, low-cost fund.
However, investing in the STI ETF only gives you exposure to the Singapore market, which is less than 1% of the global market. While it is a good way to participate in the local stock market, it is certainly inadequate if one wants to create and hold a diversified portfolio.
I'm interested to know if you or your readers have managed to construct a portfolio of low-cost (less than 1% expense ratio), passively managed index funds that track global market indices, investing from Singapore?
REPLY
I advise people to invest in an ETF rather than to manage their own stocks. They may forget to take up rights issue or sell the rights, leading to loss due to dilution of their shares. The dividends due to them may be paid to the wrong account. To avoid these losses, the investor has to keep track of the shares - which is quite tedious. It is better to leave these matters to the fund manager of the ETF.
I've read several articles that you've written where you've advocated buying the STI ETF. Thanks for taking the time to explain in simple terms the pros and cons of the issue.
I belong to the passive investing camp and believe in buying and holding a diversified basket of index-tracking, low-cost funds tracking several world markets and different asset classes. The STI ETF appears to be one such index-tracking, low-cost fund.
However, investing in the STI ETF only gives you exposure to the Singapore market, which is less than 1% of the global market. While it is a good way to participate in the local stock market, it is certainly inadequate if one wants to create and hold a diversified portfolio.
I'm interested to know if you or your readers have managed to construct a portfolio of low-cost (less than 1% expense ratio), passively managed index funds that track global market indices, investing from Singapore?
REPLY
I advise people to invest in an ETF rather than to manage their own stocks. They may forget to take up rights issue or sell the rights, leading to loss due to dilution of their shares. The dividends due to them may be paid to the wrong account. To avoid these losses, the investor has to keep track of the shares - which is quite tedious. It is better to leave these matters to the fund manager of the ETF.
Incomplete information on shares
Dear Mr. Tan
It is easy for an ordinary share investor to be cheated when they are provided with incomplete information. Below are some examples:
1) The investors are told that a company has huge cash on hand to the tune of say several hundred millions of dollars which give the impression that the company is cash rich and hence will pay good dividend or ready for business expansion. But they are not aware that the company also has huge debt to the tune of say several billions of dollars to clear.
2) The investors are told that the current year profit of a company will exceed say $100 millions which give the impression that the company is making a lot of money. But the investors are not aware that the earning of the company is only a mere 5 cents per share because there is a total of 2 billions shares in the company.
3) The investors are told that the earning of a company has increased 100% over the past 3 years but they are not aware that the company share price has increased 500% over the same period.
4) The investors are told that a company is wining a big contract worth $50 millions which give the impression that the company business is very good. But they are not aware that the wining of a $50 millions contract is not significant to a company with annual turnover of several billions of dollars.
Pang
It is easy for an ordinary share investor to be cheated when they are provided with incomplete information. Below are some examples:
1) The investors are told that a company has huge cash on hand to the tune of say several hundred millions of dollars which give the impression that the company is cash rich and hence will pay good dividend or ready for business expansion. But they are not aware that the company also has huge debt to the tune of say several billions of dollars to clear.
2) The investors are told that the current year profit of a company will exceed say $100 millions which give the impression that the company is making a lot of money. But the investors are not aware that the earning of the company is only a mere 5 cents per share because there is a total of 2 billions shares in the company.
3) The investors are told that the earning of a company has increased 100% over the past 3 years but they are not aware that the company share price has increased 500% over the same period.
4) The investors are told that a company is wining a big contract worth $50 millions which give the impression that the company business is very good. But they are not aware that the wining of a $50 millions contract is not significant to a company with annual turnover of several billions of dollars.
Pang
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