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| Banking Scandals Rocked the World |
JP Morgan, Barclays, HSBC - All
these are well respected global banking titans that sets the bar for global
banking standards. Seems like these are also some of the worst culprits
for breaking the rules that they claimed to be upholding. JP Morgan,
which is championing for bank deregulation, can't seems to regulate their own
trading desk, as they racked up $USD 5.8 billion worth of losses and
potentially more as they tried to unwind the complicated trades. Barclays was
fined $USD 450 million for attempting to manipulate the London Interbank Offered
Rate (Libor) and there are hints that the LIBOR manipulation of a conspiracy of
the highest degree, with the government and various global banks involved. HSBC
and Standard Chartered Bank were accused of Money Laundering for Mexican Drug
Lords and Iranian financial intuitions who were trying to launder money into
United States despite being slapped with a sanction. Knight Capital, one of the
biggest market makers for US equities, lost USD$440 million, in a single hour,
due to a glitch in their automatic trading system and the company nearly went
under, due to liquidity problems. The global financial crisis, now into its 5th
year, has humbled the financial titans of US and Europe and exposed many of the
decay and corruption that has went unchecked for the past 10 years. Within
Singapore, MAS conducted a mystery shopping survey, with 126 mystery
shoppers made 500 visits to 11 licensed banks and 4 registered insurance
companies seeking financial advice from their representatives.The findings is probably a known fact by most
Singaporeans: Only 30% of the product recommended are deem as suitable. A
clean-up of the financial industry is underway, and hopefully, the clean-up is
real and concrete, rather than something cosmetic, with only lip service being
paid.
On the global front. The outlook is as usual:
mixed. The market has a rather good rally towards the end of July as investors
were expecting that US, Europe and China will loosen up their purse and start
pumping money into their ailing economies again. So far, other than China, the
western developed nations were all talk and no action, as the central bank
chiefs were promising to "do everything in their ability to boot up the
economy" and hoping that their bold proclamations will be to boost some
confidence back into capital markets. The tactic worked, and the market
rallied, hoping that words will finally match action, now that the economic
front is getting from bad to worse. The best news came from US, with their job
creation engine purring again and soundly beat the expectations of economists,
who were expecting a much lousier figure. In spite of all these market
rallying, Singapore investors who are invested around the world did not benefit
much due to the extremely strong Singapore dollar. In the past one month, SGD
appreciated 1.7% against USD, 3% against Euro and 2% against HKD. MAS allowed
the SGD to appreciate so much, is due to the worsening inflation rate of 4-5%
in Singapore, though the main reason to inflation is due to domestic inflation
and not imported inflation, which an appreciating SGD will help. The top
contributors to inflation , mainly transport (SkyHigh COE) and property. The
government claims that most Singaporean will not be affected by rising
inflation as most of them already own a home and most of them do take public
transport. Are we forgetting that businesses, whom the average Singaporean
purchases goods and services from, do suffer rising cost as their property and
transport rental cost jumped, and passed on the price increase to the
consumers. To be fair, the rising SGD did shaved off 1% off the inflation
figures and domestic inflation will take some time for the government to make
structural changes to amend the mistakes which they have incurred in the past.
A side benefit of the rising SGD did attracted a strong flow of hot money into
Singapore, as speculators seek better returns in the form of the appreciating
SGD. As a result, the Singapore stock market became a beneficiary of this flow
of hot money and the Straits Times Index became the best performing market for
the past 3 months. The US stock market came in second, but the appreciating SGD
wiped off a substantial amount of the profit from the US stock market.
Some of the clients asked if it is the right
time to invest in Singapore stock, given its strong performance. I can only say
that, hot money comes and goes, and by the time you realized that it is a good
time to invest, the hot money is probably searching for another potential
opportunity that will eventually coming along. My call for to move into
Malaysia a month ago was a pretty good call, as Malaysia became the second best
performing Asian market for the past month. With the outlook of the global
markets becoming slightly brighter, I am contemplating move the rest of the
money markets back into equities again. The most obvious target is of course,
Europe, given the fact that they have been beaten down quite badly as the Euro
crisis flared up again earlier in the year, but given that the totally
unpredictable political situation in Europe, any profits made will be quickly
eroded if the situation turned sour again. India and China, for reasons which I
have stated in an earlier email, may not be suitable at this point of time. I
will prefer a more calculated bet, Korea, which will benefit greatly, should
the economic situation in China turned around. One of the biggest challenge I
have, is that Korean funds are limited to cash and SRS and I am having problems
deciding which sector the CPF funds will best be allocated in. I will keep you
posted once the decision is made. I will probably call for a switch in the next
few days, once I have finished observing the recent market movements.
The sample portfolio has gained 1 % in the
month of July as the performance is dragged down by the surging SGD, despite of
the good performance of the US stock market. The underperforming commodity
funds remain as a drag on the portfolio, but performance is improving as
investors believed that commodities demand will such to recover if the major economies
start to recover again. There are many investors who are asking for an idea of
the composition of the sample portfolio which I draw my monthly returns from.
Here is the composition:
US: 23%
Asia/Emerging
Market: 12%
South East
Asia: 31%
Singapore Bond:
12%
Gold/Commodities
9%
Malaysia:
12%
The
performance of the individual customer portfolio will be slight better or worse
depending on the composition of the portfolio is the difference in performance
should be around plus minus 1%. You can reference the performance with the
individual fund performance which I attached every month.
As usual,
the best and worst performing fund in the fund universe is at the top and
bottom.
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