Friday, 10 April 2009
Shanghai orders full property disclosures
Shanghai has ordered high-ranking city officials to disclose their property assets to municipal Communist Party authorities in a bid to repair the party’s image, tainted by a string of real-estate-related scandals in recent years in the nation’s business capital.
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Shanghai orders full property disclosures
10 April 2009
Shanghai has ordered high-ranking city officials to disclose their property assets to municipal Communist Party authorities in a bid to repair the party’s image, tainted by a string of real-estate-related scandals in recent years in the nation’s business capital.
However, observers said they saw the move as another toothless regulation that would not stop corruption.
The disclosure, expected to be completed by the end of the month, covers more than 2,000 officials and executives of state-owned enterprises, incumbent and retired, who had been department heads or above, Caijing magazine reported
Close family members, such as spouses and children, are also required to report properties that are in their names.
The move came two months after Kang Huijun, a former deputy government chief in Shanghai’s financial district, was sentenced to life in prison for graft.
Apart from accepting cash bribes, Mr. Kang accepted about 18 million yuan (HK$20.44 million) worth of flats - about two dozen - at below-market prices from real estate agents currying favour, and resold some for large profits.
Two former city land regulator chiefs were found guilty of amassing millions of yuan in a similar fashion last year.
Neither the Shanghai municipal government nor the city’s party authorities were available for comment yesterday. But the municipal party publicity department issued a memo to the city’s newspaper editors and television producers warning against “making a fuss of the topic”.
Caijing broke the news on its website yesterday morning.
Observers lauded the new regulation strengthening top-down oversight as “pressing the right button” by authorities in Shanghai, the city with the most prosperous local property market on the mainland.
But they said they could see no end to this kind of corruption until public scrutiny helped change any internal supervision process into an efficient official mechanism for the declaration of assets.
“Many Shanghai officials have bought apartments at below-market prices ... the practice has been prevalent among bureaucrats for a long time,” a retired city official said.
“I doubt this [latest] kind of campaign-style check will yield any substantial results.”
The issue was first addressed in a document issued by the Chinese Communist Party Disciplinary Committee dated July 2007. The Supreme People’s Court also clearly defined the property scam by government officials as a crime in a judicial interpretation last summer.
Pu Xingzu, a politics professor at Fudan University, urged the government to give the regulation teeth instead of simply collecting information “for reference”.
“Of course, it takes time [to improve transparency], but without material punishment hanging over it and full access to the information by the public, you don’t expect this kind of disclosure to help fight corruption,” Professor Pu said.
The issue of officials’ assets disclosure inspired heated discussion at last month’s annual National People’s Congress plenary session and has continued as a hot topic in the mainland media. The central government has tried sporadic asset-disclosure experiments around the country since last year.
Getting ready for a market upturn
Sebastian Chong
01 April 2009
Sebastian Chong was a guest speaker at the SMART Investment & International Property Expo held at Suntec City on Mar 28-29. The crowd had filled the seats long before he was due to speak. After his presentation, many people milled around him with lots of questions to ask about stocks. Below is Sebastian’s article on the key things he said at the event.
THE LAST FEW years have taught us the importance of knowing when to buy and hold equities, when to trade, and when to simply hold cash no matter how low the interest income is. Capital protection is vital in equity investing.
A continuous buy-and-hold strategy adopted since October 2007 would have led to a “Great Depression” of the mental kind. Those who held small cap stocks especially have lost 70% to 90% and those who held blue chips have lost 50% to 70%.
Would it have been helpful if long-term investors had held only the most defensive stocks like SingTel, SingPost, SPH, SMRT and ST Engineering? After taking dividends into account, their shareholders may have lost 40% to 50% since October 2007.
That is still a very significant loss compared with holding cash or the most affordable mass-market condo unit.
Time to start buying again?
The real economies, including those of the US and China, are beginning to show signs of bottoming out in certain economic sectors. Housing stats have improved in February over January in the US.
The Purchasing Managers Index (PMI) has improved in January and February and I do hope that for March it could hit the 50 mark. A PMI of above 50 is a positive indication of an impending growth in manufacturing activity.
Inflation has come down nicely in most economies but there is no threat of significant deflation in the coming months. The world’s two largest of customized chip makers, Taiwan Semiconductors Manufacturing Corporation and United Microelectronics (also Taiwanese) have reported strong rise in orders for their chips.
OPEC has decided not to cut oil production and yet the crude oil price is holding up around USD50 per barrel.
In Singapore, recent launches of mid-end and low-end condos attracted good responses. In retailing, the offering of discounts and free gifts are attracting buyers even for big ticket items like LCD televisions, cameras and laptops as evidenced by the record sales at the recent IT Fair at Suntec.
If the fear of job losses is that widespread, we won’t see Sony Brava televisions and Cyber-shots being grabbed as if they were free. Singaporeans still have money to spend. It is just that they are ordering lower priced dishes at restaurants to show that they are financially responsible!
To decide whether to start buying stocks now or whether to wait for the STI to pull back to 1400, I always compare the downside with the upside for the stocks that I like. They include the following stocks:
• SGX
• DBS
• Ping Ann Insurance
• Capitaland
• Keppel Land
• Cambridge Industrial Trust
• Capita Retail China Trust
• Epure
• CNOOC
• BHP Billiton
• Rio Tinto
• Indo Agri
• Golden Agri
Yes, if worse-than-expected economic or corporate news hits the US, Europe, Japan, China or Singapore, we may see a 20% to 25% downside (based on intra-day lows) but the potential upside is 100% or more over the next 24 to 36 months.
Even if a piece of economic bad news or a huge corporate fraud implosion in the US or elsewhere causes the STI to pull back to 1400 (intra-day low), chances are that bargain hunters would jump in and the index could strongly rebound to above 1,600 within that same day. In my opinion, there is a 70% probability that we have already seen the bottom (and not merely a bottom) of the Dow and the STI a few weeks ago.
Here’s when to trade equities with a horizon of up to a few weeks or at most a few months:
* When most economic and market indicators suggest strongly that you are in a bear market rally.
* When you are trading fairly volatile stocks in a bull market rally and you believe that a significant correction will set in before the bull cycle resumes
Checklist for picking stocks and derivatives
Stocks
• Right products and services
• Right geographic markets and customer segments
• Above average gross and net profit margins
• ROE (return on equity) of at least 20% in most years
• Strong balance sheets
• Fair dividend policy
• CAPABLE AND HONEST MANAGEMENT
• Transparency and good corporate governance
• Reasonable valuation in terms of PE and P/NTA, risks and returns
• Importance of diversification of assets
• Allocate wealth to different asset classes e.g. Property, cash, bonds, mutual funds and ETFs, self-picked equities, commodities, fine wines, fine art, collectibles
• Reasonable geographical spread for your wealth
• Ensure that equities are well diversified by industry and geographically
• Strike a balance between defensive stocks and potential multi-baggers
• Doing research is important
• Listening to the market is just as important
• Reconcile the two whenever possible
• What if your research and Mr Market are prompting you in opposite directions?
• Don’t procrastinate in cutting loss
• Don’t be too quick to take profit in a bull market or too slow in a bear market rally
Fed downgrades view of economy
From Times Online
April 8, 2009
Federal Reserve policy-makers, faced with bleaker forecasts for a rapidly worsening recession, decided to buy a “substantial” amount of US Treasury and mortgage debt to halt the slide, minutes of their most recent meeting showed today.
Staff economists for the Federal Open Market Committee lowered projections for US real gross domestic product in the second half of 2009 and 2010, indicating a more gradual recovery. However the minutes, which were from the central bank’s March 17-18 meeting, did not offer any revised figures.
“The deterioration in labour market conditions was rapid in recent months, with the steep job losses across nearly all sectors. Industrial production continued to contract rapidly as firms responded to the falloff in demand and the build up of some inventory overhangs,” the Fed said in the minutes.
The Fed had already given up on any growth in 2009 when it released its last quarterly forecasts in February, saying that the US economy would shrink 0.5 per cent to 1.3 per cent for the year. At that time, it anticipated a 2010 rebound to growth of 2.5 per cent to 3.3 per cent.
But the Fed staff forecasts indicated the GDP decline would flatten out gradually over the second half of 2009 and then turn to expansion “slowly next year as the stresses in financial markets ease, the effects of fiscal stimulus take hold, inventory adjustments are worked through and thecorrection in housing activity comes to an end.”
The revisions caused the Dow Jones industrial average to turn negative and other indexes to pare gains amid renewed worries about the health of the economy. The dollar extended its drop against the yen, while longer-dated U.S. Treasury debt held onto price gains.
“The assessment of the economy is very bad. This is clearly a big problem that they are worried about,” said Robert Brusca, chief economist at Fact and Opinion Economics in New York, adding that he saw very little encouraging language.
The Fed minutes said FOMC members particularly noted a sharp fall in foreign activity that was reducing exports as a key development since their January meeting.
At the conclusion of the March 17-18 meeting, the Fed announced plans to buy up to $300 billion of longer-term US Treasury securities and an additional $850 billion of agency mortgage debt to deal with the weak economic outlook. It agreed to keep its benchmark federal funds rate in a zero to 0.25 per cent range.
But there was some division among members over which securities to buy and the appropriate amount, given the expansion of the Fed’s balance sheet through a new securities loan program.
“One member preferred to focus on additional purchases on longer-term Treasury securities, whereas another member preferred to focus on agency MBS (mortgage-backed securities).
However, both could support expanded purchases across a range of assets, and several members noted that working across a range of assets and instruments was appropriate when the effects of any one tactic were uncertain,”
Fed policy-makers saw little chance of a pickup of inflation as rising unemployment and falling capacity utilisations were holding down wages and prices.
“Several expressed concern that inflation was likely to persist below desired levels, with a few pointing out the risk of deflation,” the minutes said.
The Fed participants expressed a wide variety of views about the strength and timing of recovery, and did not interpret an uptick in housing starts as the beginning of a new trend, although there was only “limited scope for housing to fall further.”
They noted some signs of stabilization in consumer spending in January and February, but said the fear of unemployment could damp consumption growth in the near term.
FOMC members said they anticipated demand for funds from the Fed’s new Term Asset-backed Securities Loan Facility would be modest initially, and some firms might be reluctant to borrow from TALF out of concern about potential future changes in the government’s policies for financial rescues.
Some members also expressed concern about risks that expansion of the Term Asset-backed Securities Loan Facility would raise if it were expanded to include older and lower-quality assets.
The US Treasury a few days later announced plans to expand the TALF to include older commercial and residential mortgage-backed securities as a way to help clear problem assets off bank balance sheets.
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