This is an update to http://help-your-money.blogspot.com/2011/08/market-commentary-on-stock-market.html
I made a post on 14 Aug 2011 of my belief that a strong rally will come before the market collapses further due to the huge amounts of cash sitting on the sidelines, insider purchases and strong earnings despite the market rout. I acted on my belief and deserved the painful consequences. Based on recent market action, I have been proven wrong and suffered losses. From 12 Aug 2011 to 23 Sep 2011, the Straits Times Index has fallen more than 5%. This is the criteria which I use for being wrong. In investing, I regard losing money as equivalent to being wrong. No point in using excuses like "I am a long-term investor" (as if the stock will surely bounce back later), "The market is irrational" (as if everyone else is stupid except myself), "Short-term fluctuations do not bother me" (self-deception? Losses always hurt)
The global financial markets have grown too dependent on money-printing from central bankers like drug addicts. When QE1 (quantitative easing) neared its end around middle of 2010, global markets slumped like a drug addict as the drug effect wore off. Then, Bernanke administered a fresh dosage in QE2. Global markets rallied in September 2010. The drug effect wore off again after the middle of this year. Come QE3, also known as Operation Twist. Unfortunately, the drug dosage is not enough this time because the appetite of drug addicts grows with every dosage. The immediate negative market reaction is evident of this fact. The bullishness of the precious metals market is a measure of the amount of central bankers' money-printing activities. Look at how Gold and Silver crashed after Bernanke announced Operation Twist.
Operation Twist aims to lower the interest rates of long-term debt by selling short-term Treasury securities and buying the longer-term ones. What else can the Federal Reserve do? The short-term interest rates of US Treasury securities is already near-zero. How to lower the short-term rates further? This is why Bernanke could only work on longer-term interest rates this time. I am not quite sure how to interpret the market's reaction to Operation Twist. Should one interpret the recent market crash as the Fed not doing enough or the Fed has lost the ability to do anything to stimulate the economy? When short-term interest rates are near zero, monetary policy has clearly lost much of its power as an economic tool. Therefore, the US economy has to look towards fiscal policy for stimulation. The recent US debt-ceiling crisis shows that political bickering has paralysed fiscal policy. When one party says taxes are too bloody low and the opposing party says spending is too bloody high, stimulative fiscal policy is impossible because taxes cannot be cut and spending cannot be raised. Actually, the rich world does not have much room to stimulate the economy using fiscal policy given high government debt levels and persistent budget deficits. Austerity is the only way out. If austerity is chosen, the near-term prospects for financial markets will be terrible and uncertain in the longer-term. If fiscal austerity is abandoned in favour of the more political palatable monetary money-printing, then inflation will follow. In this scenario, the financial markets will do well even if fundamentals are poor. When you have too much money chasing too few assets, asset bubbles will be formed. Holding cash in such a situation will be disastrous. Seeing the American politicians in action during the debt-ceiling crisis point towards money-printing being the preferred option.
Indeed, Operation Twist may boost speculative activities, particularly in the property market, by reducing longer-term mortgage rates. Already, the loose monetary policy in the US is being exported to Asia and creating bubbles in our property market. In 2008, we had the US banking/real estate crisis. Come 2011 and 2012, we will suffer a full-blown European sovereign debt crisis. The nightmare scenario is that in 2014-2015, it may be Asia's turn to suffer a financial crisis when the property market bubble burst in China, Hong Kong and right here in Singapore.
There is an even darker nightmare. It is the social instability that persistent high inflation and unemployment will bring. This is chaotic and totally unpredictable. High inflation in China in the late 1980s created the conditions for the Tiananmen protests that led to the massacre. Hyperinflation in Germany gave us World War II because the German people voted Hitler into power out of anger.
Most of what I wrote will probably turn out to be empty worrying. It is a habit borne out of worrying about the downside before investing. By the way, I will still be buying stocks however pessimistic. As the macro-picture worsens, it is likely that even good stocks will go down further. However, the chance of permanent impairment (go down and never recover) is quite low when buying in times of recession/depression.
Sunday, September 25, 2011
Standard Chartered XtraSaver Master Debit Card - maximizing cash rebates
Update: From 1 Apr 2013, Standard Chartered has revised the cashback. Cashback on NETS payment has been removed totally. Cashback on Master card payment has been reduced to 1% from 2%. The benefits mentioned in the post below is no longer valid. Please compare with your other credit cards as there may be better deals around.
http://www.standardchartered.com.sg/personal-banking/deposits/xtrasaver/en/
The Standard Chartered XtraSaver Mastercard debit card can be a great money-saver by offering cashbacks on all your basic expenditures. Combining it with other credit cards have maximized my monthly cash rebates from these cards.
I get 2% cash rebate on all expenses paid with this card. This card can also be used as a NETS card with the added advantage that all NETS transactions enjoy a cash rebate of 0.5%. You can enjoy rebates on NETS transactions up to SGD3000 per month (monthly cap of SGD15). Total monthly cap on rebates for all types of transactions is SGD300.
I use other credit cards like the SMRT card for paying my groceries when I shop at Sheng Siong, Carrefour because the cash rebate is around 5% (higher than using XtraSaver card). When I make payment for these credit card bills, I use the XtraSaver card as NETS to enjoy a further rebate of 0.5%. By using other credit cards which offer higher cash rebates and then using Xtrasaver as NETS to pay the bills, the cash rebates I enjoy with these cards will be maximized. I use the XtraSaver card for most transactions to enjoy the 2% cash rebate.
The Standard Chartered Xtrasaver card is a debit card. A debit card does not allow the card-holder to spend money which he does not possess. To use the card, you must have sufficient cash balance in the bank account linked to this card. It is similar to NETS. This is a good thing for those who fear they lack the discipline to check on their credit-card spendings. It is also suitable for those who have a bad habit of forgetting to pay their credit card bills on time.
To enjoy these cash rebates, you have to place at least SGD6000 in the XtraSaver account with Standard Chartered. The bank account also functions as a checking account. The first 2 years are free after which SGD15 will be charged annually. This is still cheaper than the local banks who charged SGD2 monthly (SGD24 annually) for their checking account. However, the minimum deposit in the checking account of the local banks is much lower than the SGD6000 required in the XtraSaver account.
For further details, please visit the link
http://www.standardchartered.com.sg/personal-banking/deposits/xtrasaver/en/
http://www.standardchartered.com.sg/personal-banking/deposits/xtrasaver/en/
The Standard Chartered XtraSaver Mastercard debit card can be a great money-saver by offering cashbacks on all your basic expenditures. Combining it with other credit cards have maximized my monthly cash rebates from these cards.
I get 2% cash rebate on all expenses paid with this card. This card can also be used as a NETS card with the added advantage that all NETS transactions enjoy a cash rebate of 0.5%. You can enjoy rebates on NETS transactions up to SGD3000 per month (monthly cap of SGD15). Total monthly cap on rebates for all types of transactions is SGD300.
I use other credit cards like the SMRT card for paying my groceries when I shop at Sheng Siong, Carrefour because the cash rebate is around 5% (higher than using XtraSaver card). When I make payment for these credit card bills, I use the XtraSaver card as NETS to enjoy a further rebate of 0.5%. By using other credit cards which offer higher cash rebates and then using Xtrasaver as NETS to pay the bills, the cash rebates I enjoy with these cards will be maximized. I use the XtraSaver card for most transactions to enjoy the 2% cash rebate.
The Standard Chartered Xtrasaver card is a debit card. A debit card does not allow the card-holder to spend money which he does not possess. To use the card, you must have sufficient cash balance in the bank account linked to this card. It is similar to NETS. This is a good thing for those who fear they lack the discipline to check on their credit-card spendings. It is also suitable for those who have a bad habit of forgetting to pay their credit card bills on time.
To enjoy these cash rebates, you have to place at least SGD6000 in the XtraSaver account with Standard Chartered. The bank account also functions as a checking account. The first 2 years are free after which SGD15 will be charged annually. This is still cheaper than the local banks who charged SGD2 monthly (SGD24 annually) for their checking account. However, the minimum deposit in the checking account of the local banks is much lower than the SGD6000 required in the XtraSaver account.
For further details, please visit the link
http://www.standardchartered.com.sg/personal-banking/deposits/xtrasaver/en/
Sunday, August 14, 2011
Market commentary on the stock market collapse that began on 2 Aug 2011
The recent global stock market collapse began on 2 Aug 2011. As of today, the Straits Times Index has dropped more than 10%. As of now, I do not have a significant position in the market to bias my opinion on the market. Differing opinions are most welcome.
Even if the global economy is headed for recession, I am actually quite confident that we will at least have a strong rally before the Singapore stock market heads down further (assuming it does). I don't think the Singapore market will continue its decline at this point.
In the week before 2 Aug 2011, I was surprised by the resilience of the Singapore market in the face of weaknesses in the European and US markets. Compare the price charts of the Straits Times Index with the European and US markets to appreciate its resilience. I suspected foreign fund inflows into the Singapore market to explain our market's resilience. The negative swap offer rates complained by UOB reinforced this suspicion.
There are plenty of cash on the sidelines. In fact, there is so much cash hanging around that the Bank of New York Mellon is charging fees on big deposits instead of paying interest.
The market needs cash to feed a rally. Otherwise, expressions of optimism are just empty talk that cannot be translated into action. At this moment, there is plenty of cash in waiting to jump in once the market stabilises and rationality comes back.
In the past 2 weeks, I observed several SGX announcements on insider purchases. Meanwhile, there are still several stocks on the watchlist with valuations which allows one to buy with peace of mind. In the US, CEOs have been buying back their stock in the past two weeks.
Hence, I am quite confident that we will at least have one more strong rally even if a global recession is impending. I do not think the Singapore market will continue its decline at this point.
Even if the global economy is headed for recession, I am actually quite confident that we will at least have a strong rally before the Singapore stock market heads down further (assuming it does). I don't think the Singapore market will continue its decline at this point.
In the week before 2 Aug 2011, I was surprised by the resilience of the Singapore market in the face of weaknesses in the European and US markets. Compare the price charts of the Straits Times Index with the European and US markets to appreciate its resilience. I suspected foreign fund inflows into the Singapore market to explain our market's resilience. The negative swap offer rates complained by UOB reinforced this suspicion.
There are plenty of cash on the sidelines. In fact, there is so much cash hanging around that the Bank of New York Mellon is charging fees on big deposits instead of paying interest.
The market needs cash to feed a rally. Otherwise, expressions of optimism are just empty talk that cannot be translated into action. At this moment, there is plenty of cash in waiting to jump in once the market stabilises and rationality comes back.
In the past 2 weeks, I observed several SGX announcements on insider purchases. Meanwhile, there are still several stocks on the watchlist with valuations which allows one to buy with peace of mind. In the US, CEOs have been buying back their stock in the past two weeks.
Hence, I am quite confident that we will at least have one more strong rally even if a global recession is impending. I do not think the Singapore market will continue its decline at this point.
My preferred end-of-day SGX price/volume data vendor
Update: This product is no longer available on the market. If someone knows what happened to the developer Cho Sing Kum, do drop a note. I emailed him but no reply.
There are 2 types of analytical toolboxes available to investors - Fundamental Analysis (FA) and Technical Analysis (TA). Some investors rely on financial statements only for their investments (FA) and some traders rely on price/volume charts only for their trading (TA). I think it is wise to rely on both. You need TA because it provides useful market information like whether the stock you are buying is in an uptrend or downtrend, the strength of the buying and selling, how it reacts to corrections, whether a climax buying or selling is happening ... You use FA because it is common sense to read financial statements before buying a stock since you are buying part of a company. In the long-term, it is the financial performance of the company that drives the price.
You need data for both types of analysis (FA and TA). Financial statements are basic data for FA and the price/volume information is data for TA.
This post is about the best price/volume data vendor I have found for SGX stocks and indices. Please note that you will still need a Technical Analysis software like Metastock, Amibroker, TradeStation to present the data in a chart and analyse the data using technical indicators.
The best value-for-money bargain that SGX price/volume data is DataFolio.
http://www.technical-analysis.com/prodDataFolio.html
It is the cheapest in town. Other data vendors charge annual subscription of more than SGD100. For DataFolio, there is no annual subscription. You just pay a one-off SGD88. In terms of price, it is a no-brainer.
The data quality is superb. Its data source comes from SGX website itself, so I do not question its accuracy.
Prices for individual stocks are auto-adjusted for corporate events like stock-splits, rights and dividends. These auto-adjustments are needed so that awkward price gaps that distort analytical results are removed. However, I noticed that not all stocks are adjusted, at least not in a timely fashion.
Some may argue that this is not a good recommendation because there are free data vendors around like Yahoo. Although Yahoo provides price/volume data for free, it is not suitable for SGX stocks. Yahoo provides price data up to 2 decimal places. This is inadequate for the majority of SGX stocks which are penny stocks and require price data up to 3 decimal places.
DataFolio provides historical price/volume data all the way back to 1987.
ChartNexus is also a good product for Technical Analysis. However, I prefer the flexibility of specialized TA software like Metastock or Amibroker which gives me the power to write my own proprietary indicators and algorithms. This is my edge as an engineer and it makes sense to make use of one's strengths to beat the competition.
I recommended DataFolio to a relative. He praised Mr Cho Sing Kum for his excellent technical support. Mr Cho is the creator of DataFolio. I do not have first-hand experience of his technical support service because being an engineer, I have a tendency to figure things out and solve problems myself. However, when I asked question on the ChartistUnited forum whom Mr Cho frequents, his response speed is simply incredible.
By the way, if you do buy DataFolio, please keep your password in a safe place. Mr Cho is quite sick of people asking for passwords. This is actually what prompted me to write this post to lend him support.
I am not paid to do advertisement for DataFolio. Mr Cho does not know who I am. I am just a grateful customer for a product that gives me value-for-money.
Lastly, this is a Singaporean product created by a Singaporean that beats all foreign competition hands-down. As a Singaporean, what is there not to support?
There are 2 types of analytical toolboxes available to investors - Fundamental Analysis (FA) and Technical Analysis (TA). Some investors rely on financial statements only for their investments (FA) and some traders rely on price/volume charts only for their trading (TA). I think it is wise to rely on both. You need TA because it provides useful market information like whether the stock you are buying is in an uptrend or downtrend, the strength of the buying and selling, how it reacts to corrections, whether a climax buying or selling is happening ... You use FA because it is common sense to read financial statements before buying a stock since you are buying part of a company. In the long-term, it is the financial performance of the company that drives the price.
You need data for both types of analysis (FA and TA). Financial statements are basic data for FA and the price/volume information is data for TA.
This post is about the best price/volume data vendor I have found for SGX stocks and indices. Please note that you will still need a Technical Analysis software like Metastock, Amibroker, TradeStation to present the data in a chart and analyse the data using technical indicators.
The best value-for-money bargain that SGX price/volume data is DataFolio.
http://www.technical-analysis.com/prodDataFolio.html
It is the cheapest in town. Other data vendors charge annual subscription of more than SGD100. For DataFolio, there is no annual subscription. You just pay a one-off SGD88. In terms of price, it is a no-brainer.
The data quality is superb. Its data source comes from SGX website itself, so I do not question its accuracy.
Prices for individual stocks are auto-adjusted for corporate events like stock-splits, rights and dividends. These auto-adjustments are needed so that awkward price gaps that distort analytical results are removed. However, I noticed that not all stocks are adjusted, at least not in a timely fashion.
Some may argue that this is not a good recommendation because there are free data vendors around like Yahoo. Although Yahoo provides price/volume data for free, it is not suitable for SGX stocks. Yahoo provides price data up to 2 decimal places. This is inadequate for the majority of SGX stocks which are penny stocks and require price data up to 3 decimal places.
DataFolio provides historical price/volume data all the way back to 1987.
ChartNexus is also a good product for Technical Analysis. However, I prefer the flexibility of specialized TA software like Metastock or Amibroker which gives me the power to write my own proprietary indicators and algorithms. This is my edge as an engineer and it makes sense to make use of one's strengths to beat the competition.
I recommended DataFolio to a relative. He praised Mr Cho Sing Kum for his excellent technical support. Mr Cho is the creator of DataFolio. I do not have first-hand experience of his technical support service because being an engineer, I have a tendency to figure things out and solve problems myself. However, when I asked question on the ChartistUnited forum whom Mr Cho frequents, his response speed is simply incredible.
By the way, if you do buy DataFolio, please keep your password in a safe place. Mr Cho is quite sick of people asking for passwords. This is actually what prompted me to write this post to lend him support.
I am not paid to do advertisement for DataFolio. Mr Cho does not know who I am. I am just a grateful customer for a product that gives me value-for-money.
Lastly, this is a Singaporean product created by a Singaporean that beats all foreign competition hands-down. As a Singaporean, what is there not to support?
Friday, July 8, 2011
Investment advice as a newbie
Many years ago, I started a thread entitled "Investment lessons learnt this year and advice for newbies" on a now-defunct investment forum called WallStraits. I thought it was lost but I retrieved some of the posts which I wrote 6 years ago on another blog (http://whereiszemoola.blogspot.com/).
It is quite embarrassing to talk about my own performance in my first year as a retail investor. The year was 2004 and I suffered stomach-rending losses in a year when the Straits Times Index rose 17%. To lose money was bad enough. To lose money when everyone else seems to be making it made it far worse. To top it off, the losses came in a year of extreme hard work with great passion. I had to really question myself ... am I stupid?
Below were my thoughts written 6 years ago to fellow newbies as I pondered over my failure in my first year of investing as a newbie. The losses were caused by a large, concentrated position due to repeated averaging-down in a China S-chip stock.
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It is quite embarrassing to talk about my own performance in my first year as a retail investor. The year was 2004 and I suffered stomach-rending losses in a year when the Straits Times Index rose 17%. To lose money was bad enough. To lose money when everyone else seems to be making it made it far worse. To top it off, the losses came in a year of extreme hard work with great passion. I had to really question myself ... am I stupid?
Below were my thoughts written 6 years ago to fellow newbies as I pondered over my failure in my first year of investing as a newbie. The losses were caused by a large, concentrated position due to repeated averaging-down in a China S-chip stock.
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Investment lessons learnt this year and advice for newbies
When I just started investing late last year, this was the first investment website I stumbed upon. I was greatly influenced by its FA bent and the eloquent arguments from fellow forummers.
I have some advice for newbies from personal experiences as a newbie.
There are certain practices advocated by FA(fundamental analysis) proponents that newbies need to be careful of. (If you are a grandmaster like d.o.g or Sage, you can ignore the warnings below. I need your advice more than you need mine. This post is more for the benefit of newbies)
The first one is with regards to averaging down. FA proponents like to say when the share price of one of your holdings goes down, you should buy more because it has become cheaper. So, when prices are depressed, you should be happier because you can buy more of the same good thing more cheaply.
You could try that if you have sufficient grounds to be so confident of your investment. But if you are just starting out as a newbie like me, please cut your losses and don't compound your mistake. You make a purchase, the share price goes down -> probably you made a mistake. Who are you, little junior, to argue against the market? If you are a newbie, assume you are an idiot waiting to pay school fees and don't average down. Cut your losses!!
Perhaps the most valuable advice that I have received from FA proponents is to know your investments very well and avoid those which you only vaguely understand. If you know your investments with the depth that Warren Buffett has with his, then you can average down with less worry.
One of my mistakes was to make investments based on superficial understanding. True, I read prospectus, annual reports and even taught myself accounting so that I could understand financial reports better. Most of my investments were made based on favorable financial ratios without a deep understanding of the business nature. I did not try out the company's goods and services. I don't know if the company's customers, employees, suppliers are satisfied with it.
My main fault as a newbie was to be over-confident. I thought after reading and learning so much, I was ready. I thought I could be as good as the masters and followed one of their strategy -- concentrate your eggs in one basket and watch that basket carefully. Once again, I reiterate that such a strategy is meant for the masters. If you are an amateur, it is safer to assume that you are an idiot and to protect yourself from stupidity, please diversify. By putting all your eggs in one basket, you may have fatally injured yourself by catching all the falling knives with one hand.
Some FA practitioners do not have a stop-loss policy. They use a similar argument - if a good thing becomes cheaper, I should buy more instead of selling it away.
The TA(technical analysis) approach "Cut your losses and let your profits run" is worth considering. It is a safe way to protect your capital. Sell after your losses reach 10% of the intial capital outlay no matter what. After all, he who fights and runs away may live to fight another day. In fact, by adopting such an approach, you could protect yourself against CAO (China Aviation Oil), Informatics and Auston.
Unfortunately, I did not follow the advice above. I waited until fundamentals have clearly decayed before thinking of selling. In the meantime, I continued to average down as the price slided down. When the financial report was out, fundamentals did look bad but ALAS!!, it is too painful to sell now.
This is one of the problems with FA. You can only make decisions an a quarterly or half-yearly basis which by then, the price may have slid to a psychological unacceptable level to sell.
FA proponents like to say making decisions based on price movement is nonsense. Say, the management has been trying to hide important fundamental data from the financial reports for as long as they can. The silent accomplices - auditors and independent directors - who are on their payroll prefer to close one eye or both eyes as long as they have ready excuses to plead ignorance and other disclaimers when the situation implodes.
The poor FA practioner will continue to average down, thinking that he is profiting at the expense of the foolish irrational market. Meanwhile, the insiders are selling the stock down to the sucker - that foolish guy averaging down.
In such a situation, the TA practioners will be safe. Having observed that the price has been in a downtrend caused by insiders selling down, they would have already sold out before the bombshell explodes. In the cases of CAO, Informatics and Auston, the price chart has shown an obvious downtrend before the explosive truth was out.
Are there any other advice and warnings fellow forummers can share with future newbies?
PS: I do not want to get into a TA vs FA debate. If any FA proponent thinks I am wrong, please point it out objectively without making personal remarks. I am still learning and am considering using a mixture of both FA and TA at the moment.
Saturday, June 11, 2011
Standard Chartered Online Shares Trading Brokerage in Singapore
Update: I have switched to DBS Treasures away from Standard Chartered as my broker for Singapore stocks. Main reason is for the lower commission fees of 0.12% compared to SCB's 0.18%. This is one-third cheaper. I don't see good reason to stay with SCB. The choice of Standard Chartered as broker for Singapore stocks recommended in this post is no longer valid.
Update (21 Jul 2012): Clients lose their voting rights in shareholders' meetings when their shares are held in the SCB nominee account. I came to know about this when I was not able to vote against the takeover of Nera Telecommunications by ST Electronics. I felt bad about this after calling upon fellow shareholders to vote against the takeover but was not able to act on my own call.
This week, Standard Chartered has announced a new online trading with a pricing structure which will shake up the brokerage industry in Singapore. The cheaper pricing will be good for retail investors and SGX as it will stimulate trading volume. To paraphrase the Jedi Masters, I sense a disturbance in the Force.
The easy part in evaluating this new platform is finding what is good about it. The promoters will blare out their strengths with a loudspeaker. The difficult part is finding out the things to watch out for beneath their strengths. For this, you have to dig hard and ask questions to get answers which are not readily available.
Since I have a personal interest in getting the best offers from brokers, I have been digging for information this week. I will share what I found here. I will pay more attention with what makes me not so comfortable because it is more important as discerning customers to know what is not so good rather than what is good. However, I will state upfront that I am very pleased with what I learn so far with the new online platform from Standard Chartered bank. Even though my account is still not activated yet, I would like to express a big thanks to the new online SCB(standard chartered bank) trading platform.
Commission rates for the SCB platform are highly competitive versus the other brokers. For the Singapore market, SCB commission rates are 0.18% of traded amount if you are a priority banking customer and 0.2% if you are not. 0.18% matches the DBS cash-upfront account which I earlier recommended. In fact, for trading Singapore stocks, its closest competitor is the DBS cash-upfront account.
The SCB platform beats the DBS cash-upfront account on some aspects. Firstly, the 0.18% commission applies for both buy and sell transactions. In contrast, DBS cash-upfront can only be used on buy transactions. After the shares are deposited into CDP, 0.18% does not apply (unless you sell within 3 days before the shares reach CDP).
If you cannot qualify as priority banking customers, DBS cash-upfront is still cheaper. To qualify as priority banking customers, you have to put in at least SGD200k with SCB. I have checked with SCB that shares held in their nominee account can also be counted as assets to qualify as priority banking customers. Otherwise, it will be a problem after customers become fully invested.
Like the DBS cash upfront account, you have to deposit cash upfront to be able to buy stocks. In other words, no contra-trading.
The major pricing advantage SCB has over all other Singaporean brokerages is NO MINIMUM COMMISSION. 'No minimum commission' is a wonderful thing for small, young retail investors who cannot afford to trade in reasonably large amounts to minimize brokerage fees as a percentage of the investment. It will save money for small and disciplined investors who practise dollar-cost-averaging in the Singapore market. The minimum commission has been a sticking point for Singaporean retail investors who want to buy illiquid penny stocks (some of them can be neglected, value stocks). Sometimes, I end up paying the minimum commission of SGD25 on a tiny SGD200 transaction of an illiquid penny stock. This works out to more than 10% of the investment.
On first look, SCB commission rates charged for foreign markets look like a winner compared to the other brokers. Don't jump to conclusions yet. One has to factor in the currency exchange rates. From my experience, the exchange rates offered by brokers are much better than banks. If SCB uses the bank rates, then it is no longer as cheap as what it appears. I cannot confirm on the exchange rate until I start using the account (not activated yet). Anyone knows better out there?
One advantage of SCB platform compared to other Singaporean brokers for foreign markets is that a nominal interest is earned in the settlement account. I have checked with SCB that the interest rate is 0.1% for all currencies (even for the Aussie dollar). This is low but still better than the other Singaporean brokers that I know who pay zero interest. However, compared to other US brokers like Interactive Brokers, it is not as good. For example, click here to find out what Interactive Brokers is paying on the various currencies in their accounts. To enjoy better higher interest, one way is to open foreign currency accounts with SCB and shift your idle funds from the settlement accounts to the foreign currency accounts which enjoy higher interest rate during periods when you want to stay out of the market. This is important for the Australian market as the Aussie dollar currency enjoys one of the highest interest rate in the developed world.
Another advantage of buying foreign shares using SCB is that there are no custodian fees to be charged on the shares held in the nominee account unlike most other Singaporean brokers with the exception of DBS Vickers.
On pricing, SCB is considerably cheaper for the Australian, Japanese and European markets compared to the other Singaporean brokers. If the currency exchange rate is reasonably good, then it is a no-brainer to use SCB online brokerage (among the Singapore brokers) for trading foreign equities. I will still use a US broker for trading US stocks.
Singapore shares bought using SCB platform are stored in a nominee account unlike the rest where shares are deposited into our CDP account. There are some risks to consider;
1. You can only sell your shares using SCB because shares are not deposited into the CDP account. One may face the risk of not being able to sell out on a high-volume panicky day because the IT system fails due to heavy traffic. Traders hate to be stuck in their positions, particularly when they want to sell. Compared to the US brokers, Singapore brokers still have much room for improvement in terms of the stability of their IT infrastructure on high-volume trading days. Experienced Singaporean investors will know what I mean.
I called up the SCB hotline and the customer officer told me that in such an event, customers can phone the bank and execute their trades. The commission will still be the same rate as online trading if it is their system's fault. However, it is highly doubtful if the phone service will be able to take in the traffic should their website break down on a high-volume day.
By the way, the hotline number is 1800 242 5333. Don't call their general helpline number because the customers officers manning that line are not knowledgeable on online trading matters.
2. Are clients' assets protected if SCB becomes bankrupt? Are they segregated into a safe, untouchable account in which the custodian cannot use it for their own purposes? The hotline officer told me that SCB cannot touch our shares in the custodian account. The chances of SCB becoming bankrupt is remote. There are those who argue that Barings bank, Lehman Brothers, Bear Stearns have gone bankrupt. Never say never. However, big banks do not go bankrupt overnight. There will be ample warnings signs in the newspapers to signal us to get our money out. Besides, SCB is a big bank and their big size gives me confidence. The events of 2008 has shown us that in the banking industry, the Darwinian rule survival of the fittest does not apply. Survival of the fattest (too big to fail) is what matters.
3. Can clients still exercise their voting rights as shareholders when their shares are kept in a nominee account? How about charges for corporate actions? I was assured that by the hotline officer that there will be no charges for corporate actions. However, clients will lose their power to vote in shareholders' meetings. Therefore, the SCB brokerage account is suitable for small-time retail investor but not suitable for the big players who are accumulating shares for control.
One thing I like about a nominee account is that the risk of a accidental short-sell is removed. The system knows exactly how many shares you own and should prompt you if you try to sell more than you own. This is what happens with my US broker and I expect the same thing for SCB platform. The SCB platform does not permit shorting.
The usual disclaimer applies: Do your own due diligence before believing my words. I am not paid to advertise or advise. So, don't hold me responsible for bad advice. I will be grateful if readers can correct factual mistakes or unintended misconceptions.
Update (21 Jul 2012): Clients lose their voting rights in shareholders' meetings when their shares are held in the SCB nominee account. I came to know about this when I was not able to vote against the takeover of Nera Telecommunications by ST Electronics. I felt bad about this after calling upon fellow shareholders to vote against the takeover but was not able to act on my own call.
This week, Standard Chartered has announced a new online trading with a pricing structure which will shake up the brokerage industry in Singapore. The cheaper pricing will be good for retail investors and SGX as it will stimulate trading volume. To paraphrase the Jedi Masters, I sense a disturbance in the Force.
The easy part in evaluating this new platform is finding what is good about it. The promoters will blare out their strengths with a loudspeaker. The difficult part is finding out the things to watch out for beneath their strengths. For this, you have to dig hard and ask questions to get answers which are not readily available.
Since I have a personal interest in getting the best offers from brokers, I have been digging for information this week. I will share what I found here. I will pay more attention with what makes me not so comfortable because it is more important as discerning customers to know what is not so good rather than what is good. However, I will state upfront that I am very pleased with what I learn so far with the new online platform from Standard Chartered bank. Even though my account is still not activated yet, I would like to express a big thanks to the new online SCB(standard chartered bank) trading platform.
Commission rates for the SCB platform are highly competitive versus the other brokers. For the Singapore market, SCB commission rates are 0.18% of traded amount if you are a priority banking customer and 0.2% if you are not. 0.18% matches the DBS cash-upfront account which I earlier recommended. In fact, for trading Singapore stocks, its closest competitor is the DBS cash-upfront account.
The SCB platform beats the DBS cash-upfront account on some aspects. Firstly, the 0.18% commission applies for both buy and sell transactions. In contrast, DBS cash-upfront can only be used on buy transactions. After the shares are deposited into CDP, 0.18% does not apply (unless you sell within 3 days before the shares reach CDP).
If you cannot qualify as priority banking customers, DBS cash-upfront is still cheaper. To qualify as priority banking customers, you have to put in at least SGD200k with SCB. I have checked with SCB that shares held in their nominee account can also be counted as assets to qualify as priority banking customers. Otherwise, it will be a problem after customers become fully invested.
Like the DBS cash upfront account, you have to deposit cash upfront to be able to buy stocks. In other words, no contra-trading.
The major pricing advantage SCB has over all other Singaporean brokerages is NO MINIMUM COMMISSION. 'No minimum commission' is a wonderful thing for small, young retail investors who cannot afford to trade in reasonably large amounts to minimize brokerage fees as a percentage of the investment. It will save money for small and disciplined investors who practise dollar-cost-averaging in the Singapore market. The minimum commission has been a sticking point for Singaporean retail investors who want to buy illiquid penny stocks (some of them can be neglected, value stocks). Sometimes, I end up paying the minimum commission of SGD25 on a tiny SGD200 transaction of an illiquid penny stock. This works out to more than 10% of the investment.
On first look, SCB commission rates charged for foreign markets look like a winner compared to the other brokers. Don't jump to conclusions yet. One has to factor in the currency exchange rates. From my experience, the exchange rates offered by brokers are much better than banks. If SCB uses the bank rates, then it is no longer as cheap as what it appears. I cannot confirm on the exchange rate until I start using the account (not activated yet). Anyone knows better out there?
One advantage of SCB platform compared to other Singaporean brokers for foreign markets is that a nominal interest is earned in the settlement account. I have checked with SCB that the interest rate is 0.1% for all currencies (even for the Aussie dollar). This is low but still better than the other Singaporean brokers that I know who pay zero interest. However, compared to other US brokers like Interactive Brokers, it is not as good. For example, click here to find out what Interactive Brokers is paying on the various currencies in their accounts. To enjoy better higher interest, one way is to open foreign currency accounts with SCB and shift your idle funds from the settlement accounts to the foreign currency accounts which enjoy higher interest rate during periods when you want to stay out of the market. This is important for the Australian market as the Aussie dollar currency enjoys one of the highest interest rate in the developed world.
Another advantage of buying foreign shares using SCB is that there are no custodian fees to be charged on the shares held in the nominee account unlike most other Singaporean brokers with the exception of DBS Vickers.
On pricing, SCB is considerably cheaper for the Australian, Japanese and European markets compared to the other Singaporean brokers. If the currency exchange rate is reasonably good, then it is a no-brainer to use SCB online brokerage (among the Singapore brokers) for trading foreign equities. I will still use a US broker for trading US stocks.
Singapore shares bought using SCB platform are stored in a nominee account unlike the rest where shares are deposited into our CDP account. There are some risks to consider;
1. You can only sell your shares using SCB because shares are not deposited into the CDP account. One may face the risk of not being able to sell out on a high-volume panicky day because the IT system fails due to heavy traffic. Traders hate to be stuck in their positions, particularly when they want to sell. Compared to the US brokers, Singapore brokers still have much room for improvement in terms of the stability of their IT infrastructure on high-volume trading days. Experienced Singaporean investors will know what I mean.
I called up the SCB hotline and the customer officer told me that in such an event, customers can phone the bank and execute their trades. The commission will still be the same rate as online trading if it is their system's fault. However, it is highly doubtful if the phone service will be able to take in the traffic should their website break down on a high-volume day.
By the way, the hotline number is 1800 242 5333. Don't call their general helpline number because the customers officers manning that line are not knowledgeable on online trading matters.
2. Are clients' assets protected if SCB becomes bankrupt? Are they segregated into a safe, untouchable account in which the custodian cannot use it for their own purposes? The hotline officer told me that SCB cannot touch our shares in the custodian account. The chances of SCB becoming bankrupt is remote. There are those who argue that Barings bank, Lehman Brothers, Bear Stearns have gone bankrupt. Never say never. However, big banks do not go bankrupt overnight. There will be ample warnings signs in the newspapers to signal us to get our money out. Besides, SCB is a big bank and their big size gives me confidence. The events of 2008 has shown us that in the banking industry, the Darwinian rule survival of the fittest does not apply. Survival of the fattest (too big to fail) is what matters.
3. Can clients still exercise their voting rights as shareholders when their shares are kept in a nominee account? How about charges for corporate actions? I was assured that by the hotline officer that there will be no charges for corporate actions. However, clients will lose their power to vote in shareholders' meetings. Therefore, the SCB brokerage account is suitable for small-time retail investor but not suitable for the big players who are accumulating shares for control.
One thing I like about a nominee account is that the risk of a accidental short-sell is removed. The system knows exactly how many shares you own and should prompt you if you try to sell more than you own. This is what happens with my US broker and I expect the same thing for SCB platform. The SCB platform does not permit shorting.
The usual disclaimer applies: Do your own due diligence before believing my words. I am not paid to advertise or advise. So, don't hold me responsible for bad advice. I will be grateful if readers can correct factual mistakes or unintended misconceptions.
Saturday, May 21, 2011
My favorite credit cards in Singapore
This post has been updated with a new post on the Standard Chartered XtraSaver Master debit card which allows me to maximize on my cash rebates using credit cards.
Credit cards have been denigrated as a financial evil. I used to have a friend who was a part-time financial adviser and he refused to own a credit card because of the harm done to some of his clients. Credit cards are not inherently evil. They are simply tools in our financial toolbox and if used properly, they can serve rather than harm us.
Credit cards are my favorite financial tool to help me save money. Here are some of my favorite cards in Singapore;
(Note to readers: I don't get paid for advertising these cards. Neither am I paid as an adviser for recommending these cards. So, please do your own homework and don't blame me if my recommendations do not suit you or I got my facts wrong. I only know they suit me well for my lifestyle. )
1. CIMB Platinum Master Card
The favorite feature that I look for in a credit card is cash rebates. It is like getting discounts on all your purchases with the card.
The CIMB Platinum Master Card offers 0.5% cash rebate on all local spending. It offers 1% cash rebate on all foreign spending with no monthly cap. This is useful for people who make purchases from overseas (recently, I made an online foreign purchase but there was no cashback. Is the 1% rebate still valid? Anyone who knows better?). Unlike some other cards, there are no monthly minimum expense to enjoy the full rebates.
The rebates are automatically deducted every month. You do not need to wait for points to be accumulated nor take the trouble to redeem the points.
Another great feature of this card is that there is no annual fee for life. You can save yourself the effort each year to call up the bank to waive off the annual fee as well as the risk of forgetting to do so and being charged the annual fee. I always assume that I will become unemployed eventually in some point of my life. Once the banks know you are unemployed, there is no guarantee that banks will waive off the annual fee because an unemployed person assumes a higher risk profile to the bank. Having a free-for-life card saves me that worry.
One reader told me about the UOB One card. The cashback rate is up to 3.33% but I am not sure if there is a minimum expense in order to enjoy the rebate. I do not own this card, so I better not comment further.
2. Standard Chartered Manhattan card (newly updated)
I just got this card a few weeks later after a kind reader alerted me to it. The cashback rate is better than the CIMB Platinum card - 0.5% for SGD1-SGD999, 1% for SGD1000-SGD2999 and 5% for SGD3000 and above on your monthly statement. The cashback is credited every 3 months. Given the superior cashback rate compared to CIMB card, it makes better sense to spend using this card.
Unlike the CIMB card, this card is not free for life. So, I will still keep the CIMB card as a backup in case the free annual subscription fee waiver is not granted. It is actually quite stupid to pay annual subscription fees on your credit card because all it takes to get a waiver is a phone call.
3. SMRT Citibank card
This card can be used like an ez-link card which we use for public transport. It gives you 2% rebate on each ez-link topup which is the same as shaving 2% off your public transport expense.
Please take note that you are charged SGD0.25 for every topup. Therefore, it makes sense to maximize the top-up amount (SGD50) to reduce the frequency of top-ups to save money.
Because of my thrifty lifestyle, I prefer cards that offer high rebates on basic unavoidable expenses to cards that focus on luxury spending. One helps us to save money, the other tempts us to spend money. It is a matter of lifestyle choice. Just spend if it makes you happy.
The SMRT card offers high rebates on grocery shopping which are necessary household spending. You can get good discounts from the major supermarkets in Singapore like Giant, Carrefour, selected NTUC outlets etc
So far, I cannot find another card with rebates that covers so many supermarkets. Another kind reader has pointed out that the Maybank Family and Friends card offers 5% rebate for some supermarkets as compared to the SMRT card which offers 4.7% unless you spend more than SGD600 per month. By combining both cards, we can get better deals at the supermarkets.
4. POSB Everyday Card
I use the POSB Everyday Card to pay for my utilities bill which is an unavoidable basic expense. I get 1% off my utilities by using this card. This is the only card I found in Singapore that can be used to pay utilties bill. Again, if you know of a better card, please share.
Credit cards can be a good financial friend. Just don't owe money on your credit card but if you do, the top financial priority should be to pay them off. NEVER ROLL OVER YOUR CREDIT CARD DEBTS. Nobody can be rich if they have to carry debt at 20% compounded. Even a small amount can kill.
Credit cards have been denigrated as a financial evil. I used to have a friend who was a part-time financial adviser and he refused to own a credit card because of the harm done to some of his clients. Credit cards are not inherently evil. They are simply tools in our financial toolbox and if used properly, they can serve rather than harm us.
Credit cards are my favorite financial tool to help me save money. Here are some of my favorite cards in Singapore;
(Note to readers: I don't get paid for advertising these cards. Neither am I paid as an adviser for recommending these cards. So, please do your own homework and don't blame me if my recommendations do not suit you or I got my facts wrong. I only know they suit me well for my lifestyle. )
1. CIMB Platinum Master Card
The favorite feature that I look for in a credit card is cash rebates. It is like getting discounts on all your purchases with the card.
The CIMB Platinum Master Card offers 0.5% cash rebate on all local spending. It offers 1% cash rebate on all foreign spending with no monthly cap. This is useful for people who make purchases from overseas (recently, I made an online foreign purchase but there was no cashback. Is the 1% rebate still valid? Anyone who knows better?). Unlike some other cards, there are no monthly minimum expense to enjoy the full rebates.
The rebates are automatically deducted every month. You do not need to wait for points to be accumulated nor take the trouble to redeem the points.
Another great feature of this card is that there is no annual fee for life. You can save yourself the effort each year to call up the bank to waive off the annual fee as well as the risk of forgetting to do so and being charged the annual fee. I always assume that I will become unemployed eventually in some point of my life. Once the banks know you are unemployed, there is no guarantee that banks will waive off the annual fee because an unemployed person assumes a higher risk profile to the bank. Having a free-for-life card saves me that worry.
One reader told me about the UOB One card. The cashback rate is up to 3.33% but I am not sure if there is a minimum expense in order to enjoy the rebate. I do not own this card, so I better not comment further.
2. Standard Chartered Manhattan card (newly updated)
I just got this card a few weeks later after a kind reader alerted me to it. The cashback rate is better than the CIMB Platinum card - 0.5% for SGD1-SGD999, 1% for SGD1000-SGD2999 and 5% for SGD3000 and above on your monthly statement. The cashback is credited every 3 months. Given the superior cashback rate compared to CIMB card, it makes better sense to spend using this card.
Unlike the CIMB card, this card is not free for life. So, I will still keep the CIMB card as a backup in case the free annual subscription fee waiver is not granted. It is actually quite stupid to pay annual subscription fees on your credit card because all it takes to get a waiver is a phone call.
This card can be used like an ez-link card which we use for public transport. It gives you 2% rebate on each ez-link topup which is the same as shaving 2% off your public transport expense.
Please take note that you are charged SGD0.25 for every topup. Therefore, it makes sense to maximize the top-up amount (SGD50) to reduce the frequency of top-ups to save money.
Because of my thrifty lifestyle, I prefer cards that offer high rebates on basic unavoidable expenses to cards that focus on luxury spending. One helps us to save money, the other tempts us to spend money. It is a matter of lifestyle choice. Just spend if it makes you happy.
The SMRT card offers high rebates on grocery shopping which are necessary household spending. You can get good discounts from the major supermarkets in Singapore like Giant, Carrefour, selected NTUC outlets etc
So far, I cannot find another card with rebates that covers so many supermarkets. Another kind reader has pointed out that the Maybank Family and Friends card offers 5% rebate for some supermarkets as compared to the SMRT card which offers 4.7% unless you spend more than SGD600 per month. By combining both cards, we can get better deals at the supermarkets.
4. POSB Everyday Card
I use the POSB Everyday Card to pay for my utilities bill which is an unavoidable basic expense. I get 1% off my utilities by using this card. This is the only card I found in Singapore that can be used to pay utilties bill. Again, if you know of a better card, please share.
5. Any cards that offer useful free gifts. Cash is best.
The rare occasions when retail customers can make money off the banks (and not the other way) is through credit cards. The banks dangle free gifts and sometimes even money to get people to sign on their cards. If the gift is useful one, I will probably take the card. If cash is being offered, I will surely take the card.
Recently, Citibank gave me a free USB speaker for my computer. Thank you, Citibank. Not to forget Maybank and Standard Chartered, thank you very much for your free cash.
This finishes the list of my favorite cards. There may be better credit cards out there. I can't know all of them and new cards keep springing up. Please share if you have good recommendations that I have missed out.
Credit cards can be a good financial friend. Just don't owe money on your credit card but if you do, the top financial priority should be to pay them off. NEVER ROLL OVER YOUR CREDIT CARD DEBTS. Nobody can be rich if they have to carry debt at 20% compounded. Even a small amount can kill.
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