Nonsense. Who cares you are the bigger player. People can still steal your pie if you don't innovate. I have not been using DBS vickers at all. Been using FSM.

16 August 2020
The Straits Times
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© 2020 Singapore Press Holdings Limited
I practise 'impactful investment', focusing on my life, kids, rather than accumulation of wealth

I am 73 and still working. I started working in 1965 - it was the year after my O levels and I started working to pay my way through college.

After 55 years of working in several industries and non-profit sectors - which paid for the entirety of my education, including a law degree and several graduate degrees from Canadian universities - I am able to look back with gratitude for having been blessed with a wife of 50 years and a family of 11 scattered across the world in six cities.

Two of my four grandkids are already graduates.

I am also grateful to have enjoyed my work almost all the time, experienced the joys of cross-cultural challenges living in eight cities and treasured the friendships of many around the world. As the saying goes: "Find a job you enjoy doing, and you will never have to work a day in your life."

Many friends have asked me if I am retiring soon. And that has prompted me to reflect on what I have done to plan for it.

In my recent book on the art of living and leaving well, I write about "refiring" rather than retiring. In a sense, I have "retired" more than once but immediately found myself "refired" into another chapter of my life.

I have many friends who have taken the route of retirement in the traditional way. They stopped "working" at a certain age, some as young as 49! They have invested wisely and live on their investment income. Some investment gurus tell us that it is possible to retire early if we plan well and ahead enough to have millions in our investment portfolio.

My perspective about investment is a little different. Retiring in the traditional sense has never appealed to me.

INVESTING IN MYSELF

I've heard the argument that we have but one life to live and thus we should focus on accumulating funds for a comfortable season come retirement. I agree with the former but not the latter. I choose to focus on living and making some impact in whatever I find myself doing in every season of my life, not just my waning years.

In a sense, I practise "impactful investment", except that it is my life that I am investing in. In my own faith tradition, I see my existence as a stewardship - I do not own my life.

I do not spend what I do not have; I do not live on money charged to credit cards and paying interest for it. I use credit cards as a convenient means of transaction and always pay what's owed in full. It also means that I distinguish between wants and needs.

This is an important mutual understanding we have with our children. This means that there is no pressure for us to accumulate wealth for them. Neither do they need to feel obliged to spend money looking after us. This, I believe, is true financial independence and financial freedom, which removes all pressure to accumulate.

Neither do I own anything that I have. I am only a trustee to make myself and what I am entrusted with useful. I give as I live, believing that what I have is only truly mine when I am able to make it useful to those who need it.

So, I live to the fullest, giving myself to do the things I am passionate about and living within or below, but never beyond my means.

That means, among other things, that I do not spend what I do not have; I do not live on money charged to credit cards and paying interest for it. I use credit cards as a convenient means of transaction and always pay what's owed in full.

It also means that I distinguish between wants and needs. I need a car for my work, especially when I was living abroad where public transport is not so efficient, but I have no desire to splurge on an expensive vehicle just because of prestige or any other frivolous reason. Almost all our cars were bought pre-owned and paid in full.

The only item I bought on borrowed money was our family home, which, fixed asset though it is, could always be sold whenever we moved and the earnings used to purchase our next abode.

I am also blessed with a wife who shares my view of stewardship. I often tell my friends that I have a low-maintenance wife and she tells her friends that I am a low-maintenance husband. I remember making her unhappy because I bought gifts for her that she did not need. "I know what I need and I can buy them myself", she would say.

INVESTING IN OUR CHILDREN

When our children came, three within the first 10 years of our lives together - all well spaced, I should add - I started to plan responsibly for their well-being, as all good parents should.

One of the first things I did was to invest in a college education fund. I also bought some life insurance when the kids were little to ensure that my wife would have the means to take care of herself and them should death overtake me.

The college fund paid for our kids' education, and our life insurance plans have been self-maintaining for years now. The plan is to borrow against it when I need the money for "retirement", since encashing it is not a good idea because of its lower value and we have to pay taxes on them as they were bought in Canada.

I believe in investing in our children. We brought them up and provided for their education. All of them got married and started their own families, and we invested in them by helping them to purchase their first homes. Beyond that, I expect them to make what they need on their own and learn to be responsible stewards of their lives and possessions, the way we have.

Though we "invested" in them, even to the extent that my wife spent most of her life raising them full time as a homemaker, we do not expect our ROI (return on investment) to be in monetary terms. We do not expect that they should take care of us in our old age, as we plan to take care of ourselves.

They know not to expect to inherit from us - and if we still have anything to bequeath post our demise, it would be a bonus, rather than an entitlement. In the same way, should we find ourselves in need of their support and they choose to support us, it would be a bonus.

It is not in our thinking that just because we raised them and invested in them, that we are entitled to their support. As for their inheritance, we figure it does not mean much to give them more at the end of our lives, for by which time, they should have made their own money sufficient for their needs.

This is an important mutual understanding we have with our children. This means that there is no pressure for us to accumulate wealth for them. Neither do they need to feel obliged to spend money looking after us. This, I believe, is true financial independence and financial freedom, which removes all pressure to accumulate.

Thankfully, even as my family and I have spent most of our lives investing in work that is meaningful and not focused on accumulation of wealth, we are blessed that we could still give to causes we believe in and save some for a rainy day.

In this regard, I am influenced by the teachings of English theologian John Wesley "to earn what I can, to save what I can and to give what I can".

So, what are our plans for self-support when retirement comes?

Though our children and grandchildren are not living in Singapore, we plan to retire here. We figure we will have about 20 years to live from the time I stop receiving an income from work. We would need to downsize our home and cut our coat according to our shrinking cloth. We would not need a car but will probably need a domestic helper.

Assuming we need between $3,000 and $5,000 a month to live for the next 20 years in relative comfort, we will need between $720,000 and 1.2 million. That is within our means when we use our life-insurance savings, Central Provident Fund payouts, some savings and some cash from downsizing our home if we need to. Should we extend our lifespan another five years, we will need between $900,000 and 1.5 million. That is still doable.

We will probably have some extra money to spend on hospitalisation insurance, travel, treats and even some to donate to good causes we espouse.

That is where we are at. I feel blessed to have lived simply and responsibly for a lifetime and to be able to look to the end of our lives with peace, equanimity and contentment. Having not lived it up, our retired lifestyle will not need to be a great let-down.

In many ways, I believe that investing in our lives is an act of faith.

I was reminded of this gem of truth about God's grace, when my medical specialist recently said: "All the diagnostic tests I administered are not 100 per cent accurate. The best is about 90 per cent. The 10 per cent or more of the unknown makes me realise that we are all dependent on God's grace."

Medical science is not exact science. Neither is investment science. There is always an element of the unknown. We can plan and invest wisely, and it is good to do that.

* Dr William Wan is the general secretary of the Singapore Kindness Movement and the author of Straits Times Press' book, Through The Valley: The Art Of Living And Leaving Well.

Singapore Kindness Movement general secretary William Wan and his wife Ruth celebrating their 45th wedding anniversary in 2015. After 55 years of working, he is grateful for having a wife of 50 years and a family of 11 scattered across the world.

Sue-Ann Tan

16 August 2020
The Straits Times
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© 2020 Singapore Press Holdings Limited
Finance exec believes in daring to invest in asset classes that might not be traded often by the public

Looking to the future and entering uncharted territory are part and parcel of investing for finance executive Marcus Lim.

While most investors might still stick with Singapore's low-risk blue chips, Mr Lim ventures out into the world of digital assets such as bitcoin and technology giants.

His own business - he is co-founder and chief executive of digital asset exchange Zipmex - is also on the cutting edge of digital currencies.

It focuses on providing retail and institutional investors with the ability to invest securely in cryptocurrencies and asset-backed tokens.

The Zipmex platform's advanced trading features and charting tools let users access a liquid market for a wide selection of cryptocurrencies while providing round-the-clock support.

Mr Lim, 34, said: "I realised how local exchanges were lacking. The opportunity to aggregate global benefits to allow locals to trade legally on the Zipmex platform is exciting, and a huge step forward for South-east Asia."

The business started in late 2018 with seed funding of US$1.9 million (S$2.6 million). It turned profitable in Indonesia at the end of last year. It also has teams in Singapore, Australia and Thailand.

"Like most start-ups, we're in the growth phase, which means we are spending a lot on customer acquisition and product development," Mr Lim says.

"This means we're not trying to break even yet, but rather establish our growth potential while keeping in mind the unit economics."

Mr Lim worked at Deloitte as a consultant after completing a bachelor of commerce and economics degree from the University of New South Wales in Sydney before heading tech firms Oneflare and OneCash. He is also managing director of venture capital investment company Segway Ventures.

Mr Lim is married to a 32-year-old veterinarian and they have no children.

* Best and worst bets

Q: What has been your biggest investing mistake?

A: It was in February 2018, when bitcoin topped and I should have seen the bubble pop.

The run-up from last September to the high of $20,000 was completely speculative and there were a lot of trading signals that warned of a huge price correction.

I could have taken profit and waited for the market to correct before going back in.

I also invested in other blockchain projects that promised a lot of new developments. In hindsight, technology typically takes a long time to develop and mature, and I should have waited to invest in the right company before going in too early.

I learnt to always have a goal of what your expected return is and be disciplined enough to take profit.

Q: And your best investment?

A: My start-up in Oneflare. I started it in 2013 and exited in 2016, when Fairfax Media invested A$15 million (S$14.7 million), at a A$43 million valuation. At the point of exit, it gave me a return on investment of 1,570 per cent. I started the business with an investment of A$70,000.

Oneflare is an online marketplace for local services that was set up to disrupt local directories and yellow pages when the process of finding the right service provider (like plumbers, electricians and cleaners) was a difficult and non-transparent process.

We made it far simpler by allowing customers to submit their job requests online and through our proprietary matching engine and find the best service provider for the job. We provided customers with pricing, reviews of businesses and helped them book and complete their job.

I started the company in the living room of my apartment with my co-founder when we realised how difficult it was to find a trusted local service provider to conduct renovations to my place.

Sue-Ann Tan

Q: What's the next stage of growth for your businesses?

A: I believe digital assets should be traded like any other financial product out there. That's why we're not too focused on cryptocurrencies like some of the local exchanges in the countries we're in. In fact, we have only five major ones listed.

We'll be listing a gold-backed token later this year and we have launched a stable coin fixed to the Indonesian rupiah. These two types of digital assets help bridge the gap between traditional finance and digital assets.

With the gold-backed token, for example, our customers can invest in just one gram of gold. This opens the door of opportunity for a much larger pool of people who want to put some of their savings into gold but previously found the minimum ticket size too large to do so.

Q: What's in your portfolio?

A: The stocks I invest in are: Tesla (American electric vehicle and clean energy company), Zoom (communications tech company), Alphabet (parent company of Google), Tencent (Chinese multinational conglomerate) and Alibaba (Chinese e-commerce and tech giant).

I also buy digital assets in bitcoin.

The businesses I invest in are Zipmex, Australian online marketplace Oneflare, payment solution firm MC Payment, Ascenda Group and RehabVet, where my wife works.

The percentage allocation to the respective asset classes in my portfolio are 30 per cent in stocks, 30 per cent in digital assets and 40 per cent in businesses.

The average annual return of the stocks has been about 18 per cent. This figure has been 30 per cent for digital assets and 400 per cent for businesses.

Q: Describe your investing strategy

A: It is to have a healthy risk appetite and daring to invest in asset classes that might not be traded often by the general public. Having an allocation of 30 per cent per cent of your portfolio in digital assets is not usual for those who are not in the industry.

Most people who are already invested in stocks start off with a mere 3 per cent. However, we're seeing more and more people allocating a larger share of their portfolio to these alternative asset classes.

Conventional asset classes are so-called "tried and true". It's similar to why bitcoin is the most famous cryptocurrency and the most traded, because when so many people believe in it, that in itself has value.

For instance, previously, our money system used to be based on the gold standard whereby each dollar was backed by an amount of gold. Now, the dollar is simply fiat money that is backed by no commodity, just the trust that people have in the government. The relative strength of the US economy supports the value of the dollar.

Alternative investments, on the other hand, are not investments that have been made by the majority. As they have not been commonly adopted, people are not used to investing or trading in them, hence whether they put money in them depends on their risk appetite.

It's like going to visit a place you have very little knowledge of. The risk of encountering something you don't expect is higher.

Similarly, with cryptocurrencies, the risk of evaluating the market incorrectly could be higher since there's much more volatility and the investor needs to study that specific digital currency more.

However, at Zipmex, we found that a lot of our customers in Indonesia prefer to actually invest in alternative investments like bitcoin because they are decentralised. That means that unlike their local equities market (which is often seen as being manipulated by insider trading), they feel that they have a fairer chance at gaining in their investments.

Q: How are you planning for retirement?

A: I would like to have an expected retirement fund of between US$5 million and US$10 million, drawing an annual income of 4 per cent from the total fund.

Q: What is your likely retirement age?

A: This depends on how you define retirement, as for some, retirement means not working for money and playing golf or indulging in recreational activities on a weekly basis.

However, knowing myself, I would not be happy with being not productive. I'd rather work on philanthropic causes when I don't have the need to work for money and be able to contribute back to society in a meaningful way.

Q: Moneywise, what were your growing-up years like?

A: My father is the head of operations for the Chicago Mercantile Exchange (Asia-Pacific). My mother is a housewife. I have three siblings.

In childhood, I learnt that it's not about how much money you can save but how much money you can make.

Q: What does money mean to you?

A: It means being able to live the best life possible with my loved ones.

Q: Home is now...

A: A condominium in River Valley that I own, with two bedrooms and spanning 1,055 sq ft.

Q: I drive...

A: I don't drive in Singapore because I spend half my time travelling, and ride sharing is very affordable.

Mr Marcus Lim, co-founder and chief executive of digital asset exchange Zipmex. The company focuses on providing investors with the ability to invest securely in cryptocurrencies and asset-backed tokens.

Singapore Press Holdings Limited

Tan Ooi Boon

16 August 2020
The Straits Times
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© 2020 Singapore Press Holdings Limited
Overspending is the main reason that many people are in debt

They are rich, successful and highly educated. These three men share so much in common that they could end up as buddies if they ever met.

All three are in their 40s, have tertiary degrees, are married and hold top jobs in their respective organisations that coincidentally pay them about $30,000 each a month.

With such high incomes, it is fair to assume that all three are likely to share the same lifestyle of living in million-dollar private homes and driving expensive cars.

Things should have been working well for them financially until they made the mistake of overleveraging their means.

As a result, they now also share the fate of being in financial ruin.

One gambled his wealth away and ended up with $1.7 million in debt, another made an investment loss to the tune of $2.5 million, while the last ended up with $2.3 million in business and investment debt.

The first man was put on a debt management programme and paid back what he owed after seven years. The other two men have yet to finish paying off their dues.

These three cases in the ledger of debtors of Credit Counselling Singapore (CCS), a charity dedicated to helping people avoid financial disaster, present an important lesson: If you spend without any regard for what you have, you will be in serious trouble even with a high income.

MANY FAMILIES HAVE POOR FINANCIAL PLANNING

The downturn has revealed that tens of thousands of families here do not have sufficient savings, let alone retirement planning, to cushion them when things turn for the worse.

They use loans to support a lifestyle that they may not be able to afford, and when the pandemic hit, they did not have the means to keep up with the repayments.

The number of people who have asked to defer loan repayments paints a grim picture of widespread financial trouble. Data from the Monetary Authority of Singapore shows:

•34,000 home owners have asked to stop paying their loans and interest until December;

•2,100 people have problems paying renovation and education loans;

•More than 6,200 have asked to convert high credit card debt into term loans on lower interest rates;

•Around 3,200 vehicle owners want help with loans;

•About 25,000 policy holders have asked to defer premiums for life and health insurance for six months; and

•About 600 people have asked for instalment plans to pay general insurance policies that are normally paid in lump sums.

But deferment is only a temporary relief; the loans and premiums will eventually have to be paid and the postponement actually incurs interest costs that mean bigger outstanding balances.

HOW PEOPLE FALL INTO DEBT TRAP

CCS has helped more than 32,000 people since 2004 to manage their finances better.

Of this group, around 22,000 have been put on management programmes that help them slowly pay off their debts.

To date, only about 6,000 have completed the programme. This means more than 16,000 people are still trying to pay off sizeable debts chalked up before the pandemic.

Most of these debtors are in their 30s and 40s, and about 70 per cent of them are men.

In total, people under the CCS programme owe almost $2 billion in debt, or an average of $85,000 each. Their average take-home pay is around $3,300.

They are in this state not because they are clueless about money matters. More than 60 per cent of them have an A-level education or higher, and 12 per cent live in five-room Housing Board flats or private properties. Around 25 per cent own cars.

Half of them are in this state because they overspend. Financial advisers note that those who do this usually rely on credit cards to pay for a lifestyle that they cannot afford with their regular incomes.

But this does not mean they are splurging on expensive items. The overspending can be moderate and gradual, such as not setting a budget for regular shopping and dining or taking too many short breaks overseas that might cost only $1,000 or $2,000.

While they would normally be able to afford such expenses if they spent in moderation, they choose to let the debt roll over on credit cards by making only the minimum repayments.

As they continue to do so without keeping an eye on their income, the original debt and the increasing interest begin to grow until these people can no longer clear them on their own.

As CCS notes, this can happen to anyone, even those with high salaries, if their expenditure is disproportionate to their income.

CCS cases also reveal another unhealthy trend - that of people not managing their monthly finances prudently.

While almost 9,000 of them may not overspend, their outlays, including monthly mortgage payments and other expenses, are too close to their regular incomes.

This is a precarious situation because if they suffer pay cuts or worse, lose their jobs, they will immediately find themselves unable to keep up with their expenses.

Many of those who ask to defer loan repayments are probably in this state because their income has been affected by the downturn.

Housing-related loans play a substantial role in causing people to fall into the debt cycle. For instance, more than 4,000 people sought help from CCS because they had problems paying for home renovation and furnishing loans.

Gambling is commonly thought to be a cause of debt, but only about 15 per cent of CCS' cases say they have dabbled in it.

An even smaller percentage, about 7 per cent, say they lost money on the stock market.

NEED TO WATCH WHAT YOU SPEND

As routine lifestyle expenses are the common reason people end up in high debt, CCS general manager Tan Huey Min urges families not to spend on expensive and non-essential items, especially during this downturn.

Cutting back does not mean your families have to face hardship.

It simply means spending according to what you can afford. You can still have fun doing so.

For instance, you can allocate a fixed sum each month for such expenses and the whole family can decide how they want to spend it.

This way, families will always spend within their means.

Ms Tan also advises families to think twice about using credit cards to fund their desired lifestyles.

"Never treat the credit facility as your supplementary income or savings. And don't make the mistake of making impulsive purchases of expensive items with credit cards," she says.

Many of the cases CCS handles involves the overuse of credit cards. This is why one of the strict requirements for those who seek its help is that they must terminate their cards.

So if you have the tendency to overspend and do not want to fall into a debt trap, you may want to start by always paying off the total amount charged to your credit card in full and to pay on time every month.

Many of the cases CCS handles involves the overuse of credit cards.

ST
Valid reasons for MAS' call to cap dividends: David Gerald

16 August 2020
The Straits Times
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© 2020 Singapore Press Holdings Limited

SINGAPORE - The Monetary Authority of Singapore (MAS) recently instructed local banks and finance companies to cap their total dividends per share for the 2020 financial year at 60 per cent of total dividends paid in 2019, and offer investors the option of receiving payouts in shares not cash.

The move led to some raised eyebrows, primarily because the regulator has never before interfered in dividend policies, which are usually left to the discretion of directors.

For example, a letter in The Straits Times on Aug 10 argued that many investors rely on dividends to help pay loans and mortgages.

Indeed, it is likely that investors who rely on dividends as an important source of passive income would be the most unhappy with the move, especially with payouts by most real estate investment trusts or Reits already having been severely cut because of the pandemic.

Moreover, some might argue that Singapore banks are well-capitalised and have sufficient reserves to withstand most shocks - in fact, the MAS said as much in its July 30 statement: "MAS stress tests have shown that the local banks remain resilient even under adverse conditions consistent with a serious and prolonged public health crisis."

The most common ratio to assess a bank's financial strength is the Common Equity Tier 1 (CET1), which measures CET1 capital against risk-weighted assets. The ratio was adopted after the 2008 financial crisis with a minimum requirement ratio of 4.5 per cent.

Since the ratio measures a bank's coverage of its risky assets, the higher the number, the stronger its finances.

Although the MAS requires that banks here have a minimum CET1 ratio of 6.5 per cent, the ratios of DBS, OCBC, and UOB have been estimated to be at least twice this figure, which to begin with, is higher than the global requirement.

Critics of the MAS's move argue that since Singapore banks are so much stronger than what regulations require, then surely it might be better to just leave individual banks to decide on how much they want to pay shareholders?

While this is a valid question and while shareholders, particularly retirees, who rely on dividends to supplement their incomes, can justifiably feel upset at the prospect of reduced payouts, there are valid reasons for the MAS move. IN SYNC WITH GLOBAL MOVES

Before going further, it is worth bearing in mind that banks and finance companies are required to comply with the rules and regulations issued by the MAS. In other words, investors must be cognisant of potential regulatory changes or supervisory directions when buying shares in financial institutions.

However, regulatory risk does not usually surface as a major factor in normal circumstances.

The first is that it is in line with similar moves across the world, and as a key financial centre, Singapore is not out of sync with practices set by other major central banks.

The European Central Bank (ECB) for example, asked banks under its supervision on July 28 not to pay dividends or perform any share buybacks until January 2021.

It said the instruction " is aimed at preserving banks' capacity to absorb losses and support the economy in this environment of exceptional uncertainty", adding that the uncertainty makes it difficult for banks to accurately forecast their capital positions.

In April, the Reserve Bank of New Zealand ordered banks to stop paying dividends or redeem capital notes, saying the order "supports the stability of the financial system by maintaining higher levels of capital during the period of falling economic activity resulting from the Covid-19 pandemic".

The Australian Prudential Regulation Authority (APRA) said in April that it expected "prudent reductions in dividends" paid by banks during the crisis.

In July it updated this to say banks "do not need to continue to defer capital distributions, provided they moderate payments to sustainable levels based on robust stress testing and continue to prioritise supporting customers and the economy".

The APRA said dividend payout ratios for banks should be below 50 per cent for this year.

The Bank of England's Prudential Regulation Authority in April urged the country's commercial banks to preserve capital to help the economy and not pay dividends.

"Although the decisions taken today will result in shareholders not receiving dividends, they are a sensible precautionary step given the ... economic disruption," it said.

Second and more important, although more examples from around the world can be presented, the message should already be clear from the common thread: The devastation wreaked by Covid-19 is extensive and could have massive consequences on the financial system and the economy.

Seen in this light, the MAS instruction is a pre-emptive, prudent move to ensure that the vital banking sector remains resilient and retains its capacity to support lending to businesses and individuals during a massive crisis of unknown tenure.

It is also relevant to note that the MAS is paying close attention to what could happen at the end of the year when relief measures introduced to ease the burden on households and businesses expire.

For example, home mortgage borrowers can defer repayments until December, which lifts pressure on their immediate cash flow.

However, if the situation does not improve by then - and there is little reason to think it will - what would be the impact on banks if those who opt for this deferment are unable to resume their repayments?

MAS managing director Ravi Menon said in July that the MAS is looking at ways to ease borrowers into resuming payments because relief cannot continue forever. The results of its study are due in October and should provide some clues on what lies ahead for banks.

In the meantime, because the three Singapore banks are well-capitalised and well-managed, their long-term outlook remains positive but they should engage stakeholders during this difficult period to maintain investor confidence.

Shareholders may therefore wish to consider the scrip dividend option instead of cash for this year.

For those prepared to hold their investments for many years, receiving more shares today could mean more capital gains tomorrow, which could make up for dividends sacrificed in the interim.

The writer is the founder, president and chief executive of the Securities Investors Association (Singapore).

Singapore Press Holdings Limited

Choo Yun Ting

23 August 2020
The Straits Times
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© 2020 Singapore Press Holdings Limited

Finian Tan hopes his support of research breakthroughs will help needy gain access to the benefits

Venture capitalist - and father of eight - Finian Tan hopes the fruits of his investments in medical research and technology will reach those who may not be able to afford them.

Providing the less privileged with access to medical advancements is something he intends to do with his foundation, which he started with his wife in 2018.

Dr Tan, 58, founder of Vickers Venture Partners, says that a lot of his portfolio companies work on finding cures and vaccines.

He worked at Shell and Goldman Sachs as well as in the public sector before starting Vickers in 2004 with primarily his own capital and investments from some former colleagues.

He and his wife Fiona Goh, 40, have quadruplets who are under one year old - three with the help of surrogates.

Dr Tan's four older sons are aged between 18 and 32, with two currently doing their national service.

Vickers focuses on deep tech firms around the world. One of the portfolio companies he is most excited about is Awak Technologies, a Singapore firm that invented a dialysis machine which weighs around 2kg and can be carried in a handbag.

On the current economic landscape given the virus pandemic, he says the scale of the impact of Covid-19 has been hidden so far because of government aid, which is not sustainable for most countries.

While he is confident an effective vaccine will eventually be found, he feels stock markets are currently priced as if the vaccine will definitely be found soon, and supply for the world available immediately.

This, he says, "is rather bullish in my view as the risk premium has not been properly priced in".

Fortunately, deep-tech venture investing is not exposed to market risks but rather whether the breakthrough technology works.

Venture capitalist Finian Tan, who has eight children, says: "My house is full of little children at the moment so I often have my meetings on my catamaran which is moored downstairs at One15 Marina Sentosa Cove." PHOTO: ONG WEE JIN

* Worst and best bets

* Q: What was your biggest investing mistake?

A: Our biggest loss was on 24 Quan, a company similar to Groupon which was based in China.

It was third in terms of market share at that time, but only one company in the sector survived, so we lost our investment of over US$10 million (S$13.7 million).

Most companies fail because of a lack of capital. 24 Quan was in a red ocean competition - where the company had to spend its way to the finish line.

At that time, we didn't have the same deep pockets to keep the company going.

Thankfully, the fund still did very well because we were well diversified and there were several home runs in the fund. We no longer invest in B2C (business-to-consumer) companies that require a lot of spending on marketing to acquire customers where the biggest wallet wins.

My biggest miss was Alibaba. Jack Ma and his team came to see us when their valuation was US$110 million, and we said no, because they were then a B2B (business-to-business) marketplace, which we were not too keen to invest in. We invested in Baidu instead, but could have done both.

The biggest miss in terms of internal rate of return (IRR) was more recent. A good friend, John Hood, the ex-chief scientific officer of Samumed, one of our portfolio companies, started a company called ImpactBio and invited us to invest US$5m at a valuation of US$55m.

But our investors' money didn't come in time, so we didn't make the cut-off time. He subsequently sold the company for US$7.5 billion 18 months later.

Q: And your best investment?

A: The best investment in terms of absolute returns was Baidu, with a multiple of over a thousand times for those that kept their shares. But in terms of IRR, it was 43 per cent, and my 10th best investment. The top nine have IRRs from 46 per cent to 800 per cent.

One of them is JJE, an electric motor and systems specialist for electric vehicles. It just filed for an initial public offering on the Shanghai Stock Exchange's Star Market, and will be my seventh unicorn - valued at over US$1 billion.

Choo Yun Ting

But, he acknowledges, his firm is not always right. "Our write-off rate is about 6 per cent, but when we are right, we are able to achieve multiples that are almost never seen in more mature markets."

Dr Tan, who holds a PhD in engineering, says most of his wealth will be donated to charity and go towards the underprivileged.

Asked what money means to him, he says: "The more I can earn, the better, because there are so many underprivileged people in this world that I can never earn enough to help."

Q: What's in your personal portfolio?

A: Almost all my net worth is tied up with Vickers, other than the properties that I live in here in Singapore and in Los Angeles.

While it means I am exposed to just one asset class, my exposure within Vickers is also well diversified across over 50 companies.

Since 2012, we have morphed into a deep-tech venture firm, with most of our later investments in breakthrough technologies across the globe, ranging from life science, nanotechnology, artificial intelligence, clean energy to fintech.

We have achieved an annual net return - internal rate of return (IRR) - of 25 per cent over the last 15 years, with the highest IRRs coming from our later funds.

But venture capital returns are normally measured on multiples. Our two latest funds have projections of a net return of over 10 times at the end of life, which is typically 12 years.

Q: What are your immediate investment plans?

A: We have seen good success with our current strategy of investing in breakthrough technologies across the globe. We are currently ranked in the top 10 most consistent high performing managers in the world and aspire to climb further up the ranks in the coming years.

Q: Describe your investing strategy.

A: We don't like risk. I know this sounds like a misnomer since venture capital (VC) is often perceived as a risky asset class.

However, investing with a top quartile VC fund is one of the lowest risks in the industry due to the halo effect - the best deals go to the best VCs.

(This creates) a virtuous cycle resulting in the most persistent percentage of all asset classes, meaning a top quartile VC has a higher chance of staying in the top quartile compared to other asset classes.

For us, we take risks on the technologies that companies are developing. For example, if we pick a company that is trying to cure cancer, there will be demand for the drug regardless of markets. Even in a pandemic, people still suffer from cancer and will need the drug.

The risk we take is whether we are right with our view of the science, and whether the drug is approved. As a result, our write-off rate is less than 6 per cent, which compares very well with the industry average of over 60 per cent write-offs.

Q: What else is in your financial plan?

A: I have told my children that a majority of our wealth will be given to charity. The rest will remain in our family office for those inclined to manage.

We have drafted a family constitution which takes care of the management of both the family office and the foundation, which requires a super-majority to change. The first sentence in the family constitution says, "to whom much is given, much is required".

Q: How are you planning for retirement?

A: I have told my investors that I intend to step back from day-to-day management of Vickers when I turn 70, which is 12 years from now, because I hope to focus more on our foundation, which my wife Fiona and I started in 2018 when we pledged the first million in the foundation to the Wild Rice Theatre in Singapore.

We subsequently expanded our giving to the Musical Factory in New York and to Actions for Dolphins in Australia.

Next year we hope to fund an organisation called Charity Water, which brings clean water to over six hundred million people in the world with no access to fresh clean water. I expect to be working on the ground in Africa and India as the foundation kicks into higher gear when I retire from active fund management.

Q: Moneywise, what were your growing-up years like?

A: My father was a trained accountant who worked in the public sector before becoming a partner in a stockbroking firm.

In the 1985 Pan-Electric crisis, the company went bankrupt and so we had to move from our bungalow near the sea to a Housing Board flat in Pasir Ris.

By then I was about to graduate and had won a scholarship for my final year as an undergrad at Glasgow University. I went to Cambridge University later, on scholarships from Shell and Christ College, so I became financially independent.

I still have many fond memories growing up by the sea and that's why I love living in Sentosa so much.

Q: Home is now...

A: In Singapore, we live in Sentosa with about 10,000 sq ft of built-up space in total.

My house is full of little children at the moment so I often have my meetings on my catamaran, which is moored downstairs at One15 Marina Sentosa Cove.

Our Los Angeles home has about 7,000 sq ft of space. We are in the process of building a larger house in LA which will comfortably fit the growing family. We managed to find a really nice 18-acre (7.3 hectares) plot in Beverly Hills just a 12-minute drive away from Rodeo Drive, so we decided to build our family home there.

Q: I drive...

A: I like cars and I enjoy collecting them. But ever since we started the foundation, I've made it a point to pledge an equal amount to the foundation every time I indulge in increasing my collection.

Mr Finian Tan, 58, and his wife Fiona Goh, 40, with their eight children. The four older sons are aged between 18 and 32, with two currently doing their national service, and the four youngest are quadruplets under a year old.

Singapore Press Holdings Limited

Kelly Ng

22 August 2020
Business Times Singapore
STBT
English
© 2020 Singapore Press Holdings Limited

They are tweaking their miles spending as customers spend more online, and also expanding award redemption options

Singapore

AIR travel may be largely off the table this year, but banks aren't letting up on the lucrative miles-card market.

Banks and card issuers are getting tactical for now by tweaking the miles spending for most customers who are changing their spending habits.

To be sure, overall retail spending has suffered as economic conditions deteriorate. Takings at the till saw record falls in April (40.3 per cent) and May (52.1 per cent), but the slump eased in June after the resumption of some business activity.

Yet, most banks have reported an increase on spending on their miles-cards. This is not just because of more generous miles accrual programmes for now, but also as banks have targeted their promotions on online spending. They have also expanded award redemption options.

DBS's deputy head of cards Huong Tran said the bank saw online spending on Altitude cards more than double year-on-year, from April to May. The number of customers who spent on their Altitude card also rose by 10 per cent during the same period.

This comes as DBS has doubled the miles earned - to up to four miles per dollar - on its Altitude cards for all online spending and in-store purchases until the end of August.

To ride on the growing demand for staycations, the bank has also partnered with travel search engine Agoda to offer up to 10 miles per S$1 spent on accommodation bookings. The partnership with Agoda will run for the rest of the year.

Citi Singapore adopted a similar approach for its Citi PremierMiles cards, partnering with Agoda to offer up to 7 Citi Miles per dollar spent on bookings made till the end of August, for stays until March 2021.

Citi has also given out bonus miles and points to cardholders who spend on groceries, food delivery, products from pharmacies, as well as entertainment.

With the pandemic digitalising consumption habits, especially among younger consumers, HSBC has revamped its Revolution card, which now earns four miles per dollar spent on online purchases and contactless payments, where previously, cardholders would earn two miles per dollar spent on online purchases, local dining and entertainment.

UOB has also increased miles earning rate to up to three KrisFlyer miles per dollar spent (up from 1.2 miles), when KrisFlyer UOB card members purchase essentials such as groceries, electronics, and health and beauty products.

The bank also saw expenses on its flagship miles cards - the UOB PRVI Miles card and the KrisFlyer UOB credit card - rise during the pandemic. Spending on groceries and electronics went by 85 per cent and 44 per cent, respectively, from January to June 2020 compared with the same period last year.

Cards with miles are flexible too, in that they also allow customers to use the miles as points to redeem for vouchers, rewards, or cash to offset against the card bill. Each bank and card issuer determines its own conversion rate, so customers can also pick which miles-card is now offering the best deals - from Foodpanda vouchers, to direct cash offsets.

So as working from home becomes a new norm, American Express has introduced promotions for card members to redeem miles for coffee machines, laptop stands and seat rests. AmEx has also been offering bonus miles when cardholders spend on rides and food deliveries via ride-hailing giant Grab.

OCBC's head of cards business Vincent Tan said the bank has built in sufficient flexibility to its 90ºN Mastercard credit card such that it saw no need to make changes to or boost its existing value propositions despite travel restrictions.

There are no publicly available figures on the size of the miles-card market, but an internal market survey by personal finance comparison site SingSaver showed that about three in 10 Singapore resident hold a miles card, and about a quarter consider air miles one of their top three benefits when choosing a card.

Since the onset of the pandemic, however, interest in miles cards has more than halved, whereas interest in cashback cards has risen by a third, according to the platform's metrics.

Aaron Wong, who runs travel hacking site The Milelion, said that banks have been doubling down on promoting rewards and air miles cards, rather than cashback cards, with cashbacks more expensive to offer as the cost is borne solely by the banks.

The cost of rewards are partly borne by the merchants, including airlines.

"People who use miles and rewards cards tend to come from a more affluent section of the market and hence spend more than those who use cashback cards," he added.

Even as issuers are pulling out all the stops, there is a concern among cardholders that airlines may devalue miles such that when travel resumes, a larger number of miles will be required to purchase each flight.

Still, Mr Wong said this is less likely to happen for flag carriers backed by national governments, such as Singapore Airlines.

"Devaluations don't generate cash for the airline, it is purely an accounting exercise. (It could make sense) if there is strong competition between passengers paying by miles and those paying by cash," he said.

"Given that the load factor for most airlines are at an all-time low, this is unlikely to happen, particularly for carriers that have managed to shore up financing."

The resilience of the miles-card market has also been enhanced by banks' moves in recent years to offer points and rewards that will never expire - DBS, OCBC and Citi are among the banks that have done so.

Banks remain eager to entice prospective customers to accumulate miles ahead of the time when travelling becomes a norm again.

At Standard Chartered, new customers will get up to 85,000 KrisFlyer Miles or up to S$800 in cash rewards when they sign up for the bank's Visa Infinite X Card from now to the end of the year.

Maybank said it also has "tactical programmes" in place for customers to earn points at an accelerated rate, for which they can exchange for air miles, said Karen Low, Maybank's head of cards and unsecured lending. "When the situation improves and air travel is gradually permitted, we believe that cardholders would still like to redeem air miles with their loyalty points," she said. Apart from encouraging KrisFlyer members to use their miles for other purchases, Singapore's flag carrier Singapore Airlines have also launched programmes to encourage members to use their miles to buy meals for healthcare workers, public transport operators, cabbies and migrant workers.

KrisFlyer members can also donate their miles to frontline healthcare providers and essential workers.

Singapore Press Holdings Limited

Zhang Weina and Ruth Tan

23 August 2020
The Straits Times
STIMES
English
© 2020 Singapore Press Holdings Limited
The Singapore Interbank Offered Rate is set to transition to a new benchmark in three to four years

There have been much talk about Sibor and Sora lately. Here is how they matter to you.

SIBOR

The Singapore Interbank Offered Rate (Sibor) is based on the interest rates reported by member banks in Singapore when lending unsecured funds denominated in Singapore dollars. It is a daily average rate that is administered by the ABS Benchmarks Administration Co (ABS Co) since July 2015. Currently, 20 member banks contribute to the calculation of Sibor.

They are the three local banks (DBS, OCBC and UOB); eight banks from the Asia-Pacific region (Australia and New Zealand Banking Group, The Bank of Tokyo-Mitsubishi UFJ, Bank of China, CIMB Bank, HSBC, Mizuho Bank, Malayan Banking and Sumitomo Mitsui Banking Corporation); and nine international banks (Barclays Bank, Credit Swiss, Citibank, Bank of America, BNP Paribas, Deutsche Bank, Standard Chartered Bank, JP Morgan Chase Bank and UBS).

If fewer than 12 banks submit their quotes, the Sibor rate will be unavailable for that day. After deleting the top and bottom quartiles, the remaining rates (which should come from at least 10 banks) are averaged to get the day's Sibor.

Sibor has been the benchmark interest rate not only for Singapore but also for other Asian economies. This is to a great extent due to Singapore's political stability and reliability as an Asian financial hub. Sibor has a term structure of one-month, three-month, six-month and 12-month. The one-month and three-month Sibor are the most popular benchmarks. The six-month and 12-month are less widely used and will be discontinued from end-2021 and end-2020 respectively.

Sibor commonly serves as the benchmark interest rate for debt instruments such as commercial loans, syndicated loans, mortgages, trade financing and working capital financing, and for currency and interest rate swaps in Asia. It is applied to debt instruments by adding a credit spread to the quoted rate, for example, three-month Sibor plus a spread of 25 basis points.

SORA

The Singapore Overnight Rate Average (Sora) is the rate for unsecured overnight interbank Singapore dollar transactions brokered in Singapore daily between 8am and 6.15pm. Sora has been published by the Monetary Authority of Singapore (MAS) since July 1, 2005.

On July 19, the Association of Banks in Singapore (ABS), ABS Co, SFEMC (Singapore Foreign Exchange Market Committee) and SC-STS (Steering Committee for SOR Transition to Sora) released a consultation paper proposing the phasing out of Sibor over the next three to four years in favour of Sora.

The financial industry has, till the end of next month, to provide its feedback before a final verdict on the fate of Sibor is passed.

On Aug 5, the MAS announced key initiatives to provide more clarity on the reporting of Sora which will be administered by the MAS.

WHY IS SORA IMPORTANT

The story began with the Libor (London Interbank Offered Rate) scandal uncovered in 2012. It exposed market manipulation of Libor by member banks that falsely inflated or deflated their rates so as to profit from trades.

The rigging of Libor resulted in billions of fraudulent interest payments. After the scandal, many countries sought a more robust benchmark interest rate. The Libor will likely cease after end-2021.

The search for a suitable replacement was arduous. Libor is deeply embedded in a range of financial contracts. In the United States alone, it serves as a reference rate for contracts worth over US$200 trillion (S$273 trillion), which is about three times the total market capitalisation of all stocks worldwide last year.

In Europe, the Sterling Overnight Index Average (Sonia) will replace Libor by next year. In Switzerland, the Swiss Average Rate Overnight (Saron) will be used.

Japan, Australia, Canada, Hong Kong and the US will use respectively the Tokyo Overnight Average Rate (Tonar), the Reserve Bank of Australia Interbank Overnight Cash Rate (Aonia), the Canadian Overnight Repo Rate Average (Corra), the Hong Kong Dollar Overnight Index Average (Honia) and the Secured Overnight Financing Rate (Sofr) in place of the Libor.

These alternative "risk-free" rates are based on real transactions, making them less vulnerable to coordinated price fixing.

The Sofr has been criticised for its excessive volatility, backward-looking nature and lack of term structure. Hence, many financial institutions are still hesitant about adopting Sofr in case of a liquidity crunch and financial instability.

Given that Sofr does not have a forward curve like Libor, the Chicago Mercantile Exchange started offering Sofr futures in 2018. By end-2019, there were about US$345 billion in outstanding Sofr swaps. But the size of Sofr derivatives is relatively small compared with Libor's.

There are similar issues with Sora introduced in 2005.

On Aug 5, the MAS announced that Sora will be based on the volume-weighted actual transacted rates of 24 reporting banks that are most active in the Sora market.

They include three local banks (DBS, OCBC and OUB); 10 Asia-Pacific banks (Australia and New Zealand Banking Group, Chang Hwa Commercial Bank, CIMB Bank, HL Bank, ICBC, Malayan Banking, Mizuho Bank, MUFG Bank, National Australia Bank and HSBC); and 11 international banks (ABN Amro Bank, Barclays Bank, BNP Paribas, Citibank, Commerzbank, Credit Agricole Corporate & Investment Bank, Deutsche Bank, ING Bank, KBC Bank, Natixis and Standard Chartered Bank).

This list is subject to periodic review by the MAS. Naturally, the shorter list of reporting banks from the Sora market will reduce Sora volatility, an important quality for a robust benchmark interest rate.

Second, the Sora for one-month, three-month and six-month tenors are compounded from past daily Sora. Hence, there is no corresponding forward-looking term spreads.

The financing cost of interest-rate-related products such as loans and mortgages under Sora will depend on the specific creditworthiness of the borrowers and the market conditions.

To have a more complete picture of the impact on the final financing cost, more data will be needed.

DBS and MAS have recently offered Sora-based Floating Rate Notes (FRN) to facilitate a deepening of the Sora market. The phasing out of Sibor over three to four years will provide ample time for the market to adjust and transit to Sora whereas other countries face a more urgent timeline, given that Libor will cease by next year-end.

* Zhang Weina is senior lecturer and Ruth Tan is associate professor in the National University of Singapore Business School's department of finance. The opinions expressed are of the writers and do not represent NUS' views and opinions.

DBS, OCBC and UOB are part of the 20 member banks that contribute to the calculation of Sibor.

Singapore Press Holdings Limited

S&P500 up, STI down

S&P500 down, STI down more

really cannot this STI

Invest

Choo Yun Ting

20 September 2020
The Straits Times
STIMES
English
© 2020 Singapore Press Holdings Limited
Financial services industry veteran says it is never too early to start planning for retirement

Asset management executive Wendy Lim is well aware that trying to time the market in this volatile environment is a fool's errand, but she believes it is important to stay invested.

"Many retail investors fall into the trap of buying high because everyone is buying, and selling low as people panic and are exiting the market," she notes.

Instead of trying to time the market, it is more important for investors to revisit their financial objectives and adjust their investments accordingly, says Ms Lim, the 50-year-old chief executive of Manulife Investment Management Singapore.

She is also the regional head of the high-net-worth segment for Asia at insurer Manulife's asset management arm.

One of her strategies in recent years has been to scale back on risk-taking investments in favour of seeking income and capital preservation rather than growth.

Ms Lim, who is married with a 16-year-old daughter living in the United States, has close to three decades of experience in the financial services industry, working in positions from retail banking to wealth management.

Her current role involves working with Manulife and its distribution partners to develop investment and retirement solutions across the mutual fund, pension and investment-linked insurance platforms for high-net-worth and retail clients, as well as asset management solutions for institutional clients.

Her advice? It is never too early to start planning for retirement: "Invest according to your risk appetite and never focus on just the high headline rate, as higher returns come with higher risks.

"What is too good to be true is generally so, and do not invest in anything that you do not fully understand."

Q: What's in your personal portfolio?

A: My personal investments consist of bonds, a few stocks, mutual funds /unit trusts investing in fixed income, equities and multi-assets, and real estate. The largest allocation is in real estate as property prices in Singapore are high.

Manulife Investment Management Singapore chief executive Wendy Lim, 50, and her husband Gregory Trinh, 48, an IT consultant, posing on a Jeep at their River Valley condo. ST PHOTO: ALPHONSUS CHERN

* Worst and best bets

* Q: What has been your worst investment?

A: I have always invested within my risk appetite, so I have not had any big mistakes.

One of my not-so-great investment decisions was investing in United States equities a week before the 2001 terrorist attacks.

It was my very first investment in the US equities market, through a unit trust, and I suffered a huge paper loss after the tragic event.

But I stayed invested and my investments recovered over time.

Another of my not-so-great investments would be in depreciating assets called cars.

Q: And your best investment?

A: One of my key lessons learnt is to start investing, as opposed to just having cash, as early as possible. This has been a challenging year for financial markets but my investments in US dollars, US equities and income funds have mitigated the downside from other asset classes.

Diversification is key to building a long-term investment portfolio. I have invested in individual bonds and stocks, and also in these instruments through unit trusts and mutual funds.

If you have no access to advice or time to monitor your investments, investing through a unit trust or mutual fund would be a better choice.

It is not prudent to have all your investments in one market or one issuer because of concentration risk, in case something goes wrong.

Choo Yun Ting

Excluding the real estate investments, 50 per cent is in bonds and bond funds, 25 per cent in cash and cash-equivalents and the rest in stocks and equities funds.

Investing in property provides a natural hedge against inflation and my non-real estate investments are largely in income-generating investments, like the income funds managed by Manulife that provide quarterly payouts.

My targeted annual return for my personal investments is 5 per cent.

Q: What are your immediate investment plans?

A: My husband and I are taking action to crystallise our evolving retirement plans.

We purchased a house in Orlando, Florida, in May, which is right across the street from a golf club. We have spent quite a few summers in Orlando and have always enjoyed our time there. It is a potential retirement destination as my husband is a US citizen and Orlando has plenty of golf courses. The property market in Orlando is soft and this property with its good location became available recently.

We have another property in Dubai. My in-laws live in Dubai and this influenced our property purchase decision.

Q: How did you get interested in investing?

A: My interest started when I was at Citibank and was part of the pioneering team that promoted wealth management services in Singapore in the late 1990s.

Q: Describe your investment strategy.

A: My investment objective has been to achieve financial security. It is about planning for tomorrow, today. My greatest financial achievement is being loan-free. Also, what is often overlooked is strategic re-allocation, which is key to meeting one's evolving financial goals over time. In recent years, I have dialled back my risk-taking and re-oriented my non-real estate investments more into bonds and income funds.

Q: What else is in your financial plan?

A: I have put in place my will and lasting power of attorney. I also have life insurance plans that were purchased when I was in my 20s. What my husband and I are considering is a global medical plan that will serve our needs during our retirement years.

Q: How are you planning for retirement?

A: When I started my career, I envisioned retiring when I was 50. Now that I have reached this age, my targeted retirement is when I no longer feel that I can contribute to the financial services industry.

But I cannot really see myself not working even in retirement. I will likely be trying to contribute to the community in some way.

My plans for my retirement fund is to generate sufficient passive income from my investments that will fund my husband's and my loan-free lifestyle.

Q: Moneywise, what were your growing-up years like?

A: Being independent was the biggest life lesson that my parents instilled in my younger sister and me, and we were given weekly pocket money from a young age to manage and budget.

When I was 15 years old, I took up a part-time role as an assistant ballet instructor on the weekends to earn extra pocket money.

My father has passed on and my mother has always reminded me to enjoy life and travel while I am young, rather than wait till I am retired as travelling can be a physical challenge then.

Q: What does money mean to you?

A: When I was younger, money was a yardstick for success. Now, it's about financial security and having the freedom to live life.

Q: Home is now ...

A: A modest, freehold three-bedroom apartment in River Valley.

Q: I drive ...

A: A red Porsche Boxster, although I would love to have a Jeep too!

Manulife Investment Management Singapore chief executive Wendy Lim, 50, and her husband Gregory Trinh, 48, an IT consultant, posing on a Jeep at their River Valley condo.

Singapore Press Holdings Limited

Companies & Markets
HOCK LOCK SIEW; OCBC's shift from offshore exposure to sustainable financing no less challenging
Vivien Shiao
Vivien Shiao , OCBC's shift from offshore exposure to sustainable financing no less challenging
1217 words
24 September 2020
Business Times Singapore
STBT
English
© 2020 Singapore Press Holdings Limited
WITH the recent slashing of OCBC's exposure to the offshore support vessels (OSV) sector, the question is whether the bank's plan to rev up its sustainable finance portfolio will be able to make up for the gap.

Analysts said that while it is clear that sustainable finance is on an upward trajectory, it comes with its own set of challenges and should not be looked upon as a "replacement" to offset the decline of the OSV sector.

For a start, OCBC's sustainable finance portfolio already exceeds its loans to the OSV sector. The bank surpassed its earlier S$10 billion target for sustainable finance by 2022 two years early in the first quarter of 2020. As of the first half of 2020, it accounts for 5 per cent of OCBC's total loan portfolio.

In comparison, its OSV book came up to about 2 per cent of loans at end-June. The focus on OCBC is particularly so as the bank said in its second-quarter results it had written down the carrying value of the existing OSVs amid a dismal outlook of the sector. Excluding conglomerates, the bank's OSV portfolio is now down to less than 0.3 per cent of total outstanding loans.

Thilan Wickramasinghe, analyst at Maybank Kim Eng, said that given low energy prices and an uncertain Covid-19 outlook, the OSV sector will remain challenging going forward.

"On the other hand, there is increasing demand for green and sustainable financing as companies look to rebuild and restructure their business models coming out of this pandemic," he added.

With the risks of global warming and unsustainable business activities being brought to light, it will become essential for banks to increase their green and sustainable exposure to mitigate some of these risks, and also to improve returns, he noted.

Willie Tanoto, director, Asia-Pacific banks, Fitch Ratings, noted that OCBC's new goal of S$25 billion by 2025 represents an average growth of more than 20 per cent a year, which means that the gap between its sustainable finance portfolio and OSV financing will only widen.

Despite operational obstacles, he noted that there has been "tangible progress" spearheaded by the government and the regulator to create an enabling environment for green financing to take off.

Among the various initiatives include a US$2 billion green investments programme announced by the Monetary Authority of Singapore (MAS) in November 2019 to drive growth in sustainable finance.

In June this year, MAS launched a consultation with the local financial sector that zoomed in on stricter environmental risk management guidelines.

That being said, Mr Tanoto does not view OCBC's sustainable finance portfolio as an offset or a replacement of lending to the OSV sector.

"A green loan is still subject to the same credit underwriting process as conventional loans, so it is not inherently more or less safe or profitable," he said. "Green financing's impact on the bank depends on what sector it is in and the risks and economics of lending to each borrower."

The challenges in originating bankable green assets are not OCBC's alone, but for banks in the region, he noted.

He said some of these green sectors in South-east Asia are relatively young or small-scale and may not always be suitable for bank financing in terms of commercial viability.

"The ability of banks to quantify a project's green impact, certify its green credentials and monitor the use of proceeds are also ongoing challenges, in part due to the lack of consistent definitions and standards," added Mr Tanoto.

Kevin Kwek, managing director of Asian financials at Alliance Bernstein, concurred. "Not every claim to be 'green' will be so. (It is) a bit like Shariah financing - it is not universally agreed by different countries what qualifies, so secondary trading is a challenge."

However, he still expects sustainable finance to accelerate on the back of growing investor interest, while OSV financing will moderate.

The move by OCBC is in line with many banks, which is to reduce exposure to environmental, social and governance (ESG)-sensitive areas, while stepping up the pace on green financing, said Mr Kwek.

"The motivation for ramping up green financing isn't just to offset the slashed exposure in fossil fuel related industries, but to allow the banks to move up ESG ranks for investors," he noted. "But considering origination breadth and depth as well as secondary market liquidity, it might take some time for a full 'match' of what's dropped in OSV."

To be sure, he noted that Singapore banks have been participating in sustainable finance deals for some time. In August, DBS, OCBC and UOB topped the Bloomberg Asia (ex Japan) league table for green loans, making up almost 30 per cent of the table share.

While sustainable finance is on the way up, the OSV sector appears to be in decline, with the sharp fall in demand and subsequent drop in oil prices wreaking havoc in the industry. Fitch Ratings' Mr Tanoto pointed out that the OSV sector is dependent on market conditions in the upstream oil and gas sector, and the headwinds are "broadly expected to persist for the near term".

"The banks' writing down of collateral values and higher provisions are probably a recognition of such a sector outlook," he said.

Andrea Choong, analyst at CGS-CIMB Securities, said that any pickup in OSV financing will very much depend on increased charter demand, which could be sluggish given the current modest rate of economic recovery. This is in contrast with sustainable finance, as more investors place more emphasis on renewable energy and hold corporates accountable via a shift in investment mandates towards sustainable financing.

Even with the challenges ahead, analysts are in agreement that sustainable financing in Singapore will continue to see rapid growth, but the jury is still out on just how fast this will be.

Ms Choong said: "We do expect sustainable financing to eventually be a key focus area for all banks, but the pace of growth of this segment will depend greatly on investors' push towards renewable energy and climate change."

She pointed out that it is "typically not a quick process" for corporates to have the entire operation chain to comply with various guidelines to be considered green or sustainable, given the scale of sectors such as palm oil and water treatment.

In response to queries from The Business Times, Mike Ng, OCBC's head of structured finance and sustainable Finance, said that he expects the sustainable finance momentum to gain even more pace, as Covid-19 has helped to draw attention to wider sustainability issues, including social ones.

"In the wake of the pandemic, the collective action taken by both the public and private sectors can help to rebuild economies in a more sustainable fashion," he added. "We see opportunities in industries such as renewable energy, clean transportation, water and waste management."

Singapore Press Holdings Limited

HOCK LOCK SIEW; What will Singtel's new CEO mean for its share price?
Joan Ng
Joan Ng , What will Singtel's new CEO mean for its share price?
1085 words
2 October 2020
Business Times Singapore
STBT
English
© 2020 Singapore Press Holdings Limited
INVESTORS craving a change in management direction at what was once Singapore's largest public-listed company have finally got what they want - sort of - with the appointment of Yuen Kuan Moon as the new chief executive of Singtel.

The argument for change is strong, given that Singtel's earnings are now lower than they were 10 years ago. Its balance sheet is more heavily geared, and its capacity to service its debt load has deteriorated. Meanwhile, many of its digital investments - pay-TV, music streaming and online advertising - have not paid off.

Singtel's dividend for FY2020 was S$0.1225 per share, versus S$0.175 per share for FY2019. Last month, its shares slumped to a 12-year low.

There were nine contenders for the top job at Singtel, said its chairman Lee Theng Kiat. He did not reveal how many - or, indeed, whether any - were outsiders.

But there is something to be said for having an individual with a deep understanding of the sprawling group at the helm at this difficult time, especially one with Mr Yuen's particular approach to business.

Known simply as Moon to just about everybody who knows him, he has been all about the small wins. An engineer by training, his focus has largely been on incrementally upgrading the experience of consumers.

He personally lobbied major mobile phone manufacturers to ensure Singtel's customers would be among the first in the world to hold hot, new releases. Under his watch, Singtel was also the first to deliver 4G speeds to mobile customers, and the first to raise data prices on the grounds of commercial sustainability.

Mr Yuen also championed Singtel's entry into the mobile money space, giving the group the experience that could be useful in its race to secure a digital-banking licence as part of a consortium.

In 2018, he was picked to fill a new role at Singtel as group chief digital officer to ensure that the company did not pass up on opportunities for disruption.

Internal competition

Singtel has a deep bench of management talent.

One possible alternative candidate could have been Mark Chong, 56, who joined Singtel in 1997 and has accumulated experience across a number of roles within the enlarged group.

He was chief operating officer of Singtel's Thai associate, Advanced Info Service; he also represented Singtel on the board of its Philippine associate, Globe Telecom, and served as the chief of the international business group from 2013 to 2017.

He is currently Singtel's chief technology officer, and would have brought both his international experience and possibly a tech-driven focus to Singtel's strategy.

Many telecom-sector watchers might also have expected Allen Lew to be in the running.

Mr Lew started his career in 1980 and, like Mr Chong, has done tours outside the country - in Thailand and Australia. While CEO for Singtel Singapore, he was also at one time leading Singtel's Singapore consumer business - a role Mr Yuen later assumed.

Under Mr Lew's watch, Singtel expanded its market share in Singapore and invested significantly in pay-TV. As head of Singtel's digital business, he oversaw the building of a startup-like wing at Singtel's Comcentre and staffed it with people to push the envelope of the group's digital strategy.

But, at 65, he is older than Singtel's outgoing CEO Chua Sock Koong, who is 63. And his recent stepping down as chief of Singtel's Australian business Optus might signal that he is easing off the company's top leadership bench.

Then there is Jeann Low, currently Singtel's group chief corporate officer, who joined Singtel in 1998. She oversees several functions, including mergers and acquisitions - a suitable background for an environment in which cheap assets might be available for a company with a balance sheet the size of Singtel's.

The 59-year-old was also Singtel's group chief financial officer for seven years - a portfolio Ms Chua had held before being made CEO.

Two newer joiners could have been candidates too: enterprise business CEO Bill Chang and international business CEO Arthur Lang.

Mr Chang, 53, oversees the side of Singtel's business that is arguably more scalable and pandemic-proof: connectivity and technology services for enterprises. He was also appointed as Singapore country chief officer in 2014, acting as a liaison between Singtel and regulatory bodies.

He joined Singtel only in 2005, but has many years of experience in Cisco and HP, equipping him with the skills to build Singtel into the multinational service provider it could be.

Mr Lang is even newer to the company, having joined Singtel only in 2017. Prior to that, he had run CapitaLand's real estate fund-management business and jointly headed Morgan Stanley's South-east Asian investment banking division.

A somewhat unusual hire for Singtel's management bench, which is filled with engineers, the 48-year-old Mr Lang would have, potentially, been able to bring very different ideas to the table.

Big challenge

Whatever the case, when Mr Yuen officially assumes the role of CEO in January, investors will be eager to hear his plans to staunch the group's deteriorating profitability and reset its balance sheet.

The market will also be looking for indications of Singtel's longer-term direction.

Will it pursue an asset-light structure by selling its network infrastructure and using the money to fund digital initiatives?

Will it, for instance, try to become a digital consumer-services brand, offering entertainment, banking, communication and an array of other super-app services?

Or, will it focus on scaling its business internationally to offer enterprise services to companies around the world?

Or, will it try to buy up other companies - whether telcos or otherwise - and model itself after Vodafone or Softbank?

Of course, Mr Yuen will, from his long experience, already be aware that consumers want new technologies but are unwilling to pay for them; that size and market share matter in the telecom industry; and that digital bets need to pay off quickly if they are to pay off at all.

Singtel's shares are already rebounding. If they continue in this direction, he will know he is on the right track.

MON, OCT 05, 2020 - 5:50 AM
BEN PAULbenpaul@sph.com.sg@BenPaulBT

WHEN I heard last week that Singtel was appointing a new CEO, my first thought was that it could be time to buy the stock.

Then I read the news release from the company, and changed my mind.

Among other things, the news release suggested that Singtel's outgoing CEO, Chua Sock Koong, is leaving the company well-positioned for the future; and that new CEO, Yuen Kuan Moon, will build on the success Singtel has achieved.

For investors like me, these are not harmless platitudes but a worrying signal that Singtel's board and senior management - who surely must have endorsed the news release - do not plan to change the way the company is run and unlock the potential value of its depressed shares.

Singtel has none of the hallmarks that investors would ordinarily associate with being successful and well-positioned for the future.

This column pointed out back in August that Singtel generates less earnings now than it did a decade ago. Its cumulative "underlying" earnings per share for FY2018 to FY2020 is almost 24 per cent lower than for FY2010 to FY2012. (Singtel has a March 30 financial year-end).

Singtel also has a balance sheet burdened with significantly more debt than 10 years ago. It ended FY2020 with net debt of S$12.5 billion, almost twice the net debt of S$6.3 billion it had at the end of FY2010.

Moreover, Singtel's accumulation of debt has outpaced its profit growth. For FY2020, the ratio of Singtel's net debt to its earnings before interest, taxes, depreciation and amortisation (Ebitda) and pre-tax profit contributions from its associates stood at 2.0 times. In FY2010, the same ratio stood at just 0.9 times.

With the Covid-19 fallout and the need to keep investing in its network, Singtel now appears to be heading for a financial crunch. Notably, the company cut its final dividend for FY2020 to S$0.0545 per share, bringing its total ordinary dividend for the year down to S$0.1225.

Singtel paid total ordinary dividends of S$0.175 per share for each of the preceding five financial years. It also paid a special dividend of S$0.03 per share for FY2018.

None of this has gone unnoticed by the market. Last month, Singtel's share price hit a 12-year low.

Yet, there is a huge amount of value that can be unlocked at Singtel. In a report last week, DBS Group Research said the combined market value of Singtel's public-listed regional associates - which include Telkomsel in Indonesia, Bharti Airtel in India, AIS in Thailand and Globe in the Philippines - is equivalent to S$2.49 per Singtel share.

Singtel's shares closed at S$2.16 on Friday. So, in effect, the market is ascribing a negative value to Singtel's core business in Singapore and Australia.

Failing to acknowledge the market's currently weak confidence in Singtel and express an awareness of the potential value of its underlying assets was a wasted communications opportunity by the company to turn the page on its past with the appointment of its new CEO.

Keppel's big plan

Singtel should perhaps take a leaf from Keppel Corp's book to win back the support of investors.

Much like Singtel, Keppel has faced strong headwinds for some time. Things came to a head recently, when the group made major impairments to the carrying value of various assets related to its offshore and marine (O&M) business.

For H1 2020, Keppel reported a net loss of S$537 million, compared to a net profit of S$356 million for H1 2019, after S$930 million of impairments.

Besides making investors nervous, these impairments provided Temasek Holdings with the opportunity to back out of an unfortunately-timed partial offer by invoking a "material adverse change" pre-condition.

In October last year, before Covid-19 emerged, Temasek had proposed to acquire 554.9 million shares in Keppel at S$7.35 each, to raise its direct stake in the company from 20.45 per cent to 51 per cent.

With the withdrawal of the partial offer, Keppel's share price tanked. The stock is down about 35 per cent since the beginning of this year. It closed at S$4.40 on Friday.

At their current level, shares in Keppel are trading at a nearly 23 per cent discount to its net asset value as at June 30 of S$5.70 per share, which some analysts say is unwarranted.

Unlike Singtel, however, Keppel is not shying away from telling the world how it intends to fix its problems and lift its depressed stock price.

On Sept 29, the company said in a news release that it had identified S$17.5 billion worth of assets that can be monetised and channelled towards growth initiatives. Over the next three years, Keppel plans to monetise S$3-5 billion worth of these assets.

Keppel also said it would conduct a strategic review of its beleaguered O&M business, exploring both organic and inorganic options.

"Organic options include reviewing the strategy and business model of Keppel O&M, assessing its current capacity and global network of yards and restructuring to seek opportunities as a developer of renewable energy assets; while inorganic options would range from strategic mergers to disposal," the company said.

Face up to reality

So, what exactly should Singtel's new CEO do to unlock value?

The first step is to face up to reality. Singtel's profitability has been weakening for years, and the company was becoming increasingly indebted. The economic fallout of Covid-19 is simply accelerating the process. A recovery in economic activity may bring some respite, but it will not fix Singtel's underlying problems.

In the short term, Singtel should address concerns in the market about its ability to maintain its dividend. It should consider options to strengthen its balance sheet, by identifying assets that can be monetised. It should also carefully consider the likelihood of its listed associates - which account for the bulk of its value - needing its support to weather the Covid-19 fallout.

If further dividend cuts may be necessary, Singtel should proactively prepare the market for the disappointment and ensure that any adjustment it makes is more than sufficient from the outset. Yet, it should prioritise investing in its 5G network in order to maintain its market position and profitability.

In the longer term, Singtel should ensure that its retained earnings are consistently put towards initiatives that deliver tangible financial returns and lift its market value.

Singtel's new CEO should determine why the group's return on equity and return on invested capital trended lower during the past decade even as its debt levels climbed. And, he should commit to closely tracking and reporting Singtel's performance on these fronts in the future.

Worse can alao mean strongest upside when things improve. But no guarantees of course.

Im planning to top up my STI exposure next week. Been moving my Singapore bonds exposure to equities bit by bit.

ETF.. ABF Singapore Bond Index Fund.

I started buying lots of it in Feb as safe heaven investment. My capital gains is now 5+% in SGD (in about 8-9 months). It was my biggest portfolio position for most of this year.

My game plan is to realize those gains and slowly rotate to equities by adding to my STI positions in the hope of economic recovery next year.

Forget about buying sg bond. If you really want bond go and buy parkway life REIT/Fortis/railroad stock/visa/MasterCard.
Alternatively buy DBS preference share at SGS10X+ per share.

Sg bonds cost Sgd250k/piece. Unless you are loaded it's beyond reach for most of us. The only retail bond price cheaply was astrea by temasek.

Another way is to via FSM SG and pay yearly platform fees.

Trust me just avoid sg bonds. Go straight for us bonds. It cost  only USD25.00/unit. No tax.

You don't need a bond cause you already have your EPF. Know function of bonds. It's to preserve capital. Do you have lots of capital to preserve now? Sorry to be blunt.

Second with low interest rate, how much is your bond going to pay you? The safer the bond the lower the yield.

Ask yourself the following questions
1. Why do I need a bond?
2. Do I really need to have bond? Am I so scared of price fluctuation of my stocks? (PS I live crazy dive when market panic. Love to see all the investors, BB, fund house panic).
3. Are there replacement/alternative for bonds which can work like bonds but are better than bonds?

These are basic questions I asked myself everytime I want to buy something. Rather than buy on impulse.
For me, my answer would be
1) No.
2) No.
3) Yes.

Yes I am bias as I against bond and bond have no place in my portfolio at all. I don't have bonds nor I intend to buy any in the future. Perfect waste of good money. I work on efficiency. Using the least amount of money to get the best return at safest possible way.

I didn't buy in March. I bought last year during semi conductor crash.

I don't have Fortis. I have Canadian utilities. Yes in CAD. I don't look at SG market anymore. It's a lousy dead market. Nothing to buy there. Unless reits or my micro mech goes on sale again.

I don't buy railway bonds but I love railroads after reading article by Jason Fieber (some US guy who built his port on DGI). His portfolio have been turn to paywall.