Virgin purchase of H-share Index ETF-2828:HK

Ever since the china stock market bubble and its subsequent crash correction i have been toying with the idea of thinking how i can unleash my greed. In a moment of absolute folly, i changed a sum of money into HKD without understanding the Hong Kong Stock Exchange, worse still, i didn't check the exchange rates given by my broker. Now i'm stuck with HKD with the broker with no interest given and just thinking about changing it back into SGD with their  lousy exchange rates puts me off. Better to see the glass half full now and thinking about what i learnt with this 'play' money.

• Hong Kong stock exchange really sucks man. Their board lots are different for its different shares. Now i know 2828:HK has a board lot of 200 shares, 00005:HK (HSBC) a board lot of 400 shares e.t.c.See convoluted exchange
• Hong Kong stock exchange don't have live prices, giving 15 minutes delayed prices. See super convoluted exchange. I have to go to aastocks to get live prices instead.

Anyway, i really hate adding another variable ( currency) into my speculations investing. I need things really simple as my IQ isn't high and i can't think fast enough and most importantly i'm immensely risk averse. But a trip to a particular toilet cubicle changed my life as i stared at this phrase scribbled in ink 'a life lived without risks pretty much wasn't worth living'  for 15 minutes. Damn this phraseee!!!

Looking at the AH Premium index, the mainland A-shares (only for domestic China citizens to purchase who are made up of mainly retail investors) is trading at a hefty 30ish% premium to the H-shares (shares that the international community like you and me can buy) for the same group of companies. Historically the premium for A-shares is roughly a 5ish%-10ish premium to the H-shares and there are times where H-shares trade at a discount to A-shares, below the 100 level. 

So what are the possibilities?

1. H-shares rise  (A-share fall or stays the same)
2. H-shares fall by a small amount( A-share must capitulate, crash and burn to narrow the premium)

Well the above is just pure speculation based on price and the theory of mean reversion of prices. Anyway, since i have HKD AND H-shares index having a P/E ratio of only 7.77 and a dividend yield of 3% ( better than an interest of 0% on my dead HKD with my broker) and no dividend withholding tax on this 2828:HK. Heck lah..just buy.

Now, what to do with the remaining dead HKD?

Oxley Retail bonds 5% pa 4 years...in the wake of Trikomsel

Occupying my thoughts of late is whether to invest some money into Oxley Retail bonds..yes im yield hungry and a whore.

Lest you weren't aware. Trikomsel is an Indonesian company which is in the business of selling cellular phones in Indonesia. They issued SGD corporate bonds to mainly PB (mainly accredited investors a.k.a quite rich people) but now they are very likely to default on their SGD bonds. What sucks about this is they would rather default than to issue rights to raise funds. It seems they are going to give their Indonesian creditors priority over PB folks in Singapore. It's all still unclear at this stage but some lessons are to be learnt here.

1. Buying bonds from a foreign corporation is risky as they may not follow local laws and MAS can't do much. Besides, nearly all of Trikomsel's business is conducted in Indonesia, so it makes sense that they don't piss people in Indonesia.
2. Having powerful shareholders may not be a sign that buying the bonds are safe. Trikomsel has Softbank (Big boy) as its substantial shareholder and i guess by this token, many would have been led to believe that investing in their bonds are safe but it seems that Trikomsel is "protecting" the shareholders to the detriment of bondholders.
3. Being an accredited investor ain't a good thing as you get thrown junk by banks since you are believed to be savvy, so you are less protected by MAS, so to speak. Fortunately, one can opt-out of this "accredited" status now in Singapore.
4. Given the worst case scenario, how much can you liquidate by selling their inventory of handphones?

Now, about Oxley retail bonds. This is a Singaporean company, not like Trikomsel, so Oxley follows the laws of Singapore. It develops ,sells and invests in properties, not like Trikomsel . Properties keeps much better value than handsets.Sounds good, but the problem is i'm an ultra conservative,risk averse chicken who prefers to walk up stairs and take a ship, just in case the lift drops from the 28th storey or the plane crashes.

Financial Convenants

.

Balance Sheet

Part of the financial convenants (a.k.a terms) is that Oxley's consolidated total borrowings to consolidated total assets from 1 July 2016 onwards must be 0.70:1. Breaching any of the financial convenants, bondholders ( if more than 25% agree) can take action to demand return of capital and accrued interest.

Done by a risk-averse chicken

0.65 VS 0.70. 

This is too close for comfort for this chicken here, given that mark to market value of the assets could change rapidly especially when Oxley have lots of property development overseas, exposing itself to currency risk ( which i guess the fall in rupiah against SGD is a factor in Trikomsel's woes).

Goodbye Oxley.

Child Development Account (CDA) Comparison

So we have a baby and since Standard Chartered has this priority banking feature for the whole family, i thought let's sign up the whole family to be under the scheme and along with it came the Standard Chartered Child Development Account (CDA). A few weeks later, they announce they were exiting this business which coincidentally, many local banks started to come up with a slew of promotions to entice one to sign up for their CDA accounts.

POSB CDA 

UOB CDA

OCBC CDA

Summary

POSB - 5 year guarantee of 2% pa for first $12,000 and 0.05% pa, thereafter.

UOB - 1.7% pa for first $20,000 amd 2 % thereafter.

OCBC - 2% pa for first $36,000 and 0.05%pa thereafter.

Seriously, UOB can go fly kite, since who in their right mind will put in so much money to be locked up in a CDA account just to reach that "promotional" 2% pa.  For a single baby family, the optimum amount to put in will be $12,000 ( i place in $6000 + the maximum government matching of $6000). POSB and OCBC is similar for the optimal amount but i went for POSB instead for their transparent guarantee of 5 years.

Thankfully, the process to switch CDA account was painless and surprisingly quick as our fabulous government made it easy to switch online through this link.

Time to look for a breast pump as the hand me down medela swing ( this only pumps one breast at a time) took more than one freaking hour to use, which makes Wifey very frustrated which results in a not that great time for the Hubby. Buy a double pump one(pumps two breasts concurrently) instead as it takes half the time. 

The Stock Market Bugger and Portfolio

The recent correction revived my interest in the stock market with some deployment of my hard-earned war chest. Since my last post in December 2014 about the US interest rates, i am getting ready for it by first repricing my home loan to the DBS FHR (1.1%+FHR, no lock-in) and boy was i in the nick of time as they increased it the next day to (1.5% +FHR, 3 years lock) which is no longer attractive in the market currently(UOB 1.68% is better now,imo). My home loan has effectively decreased from about 2.1%(1 month +1 month sibor) to 1.5% currently.

The second thing i did was to sell half of my capmalltrustbonds3.05% at a price of $1.05 (acquired during IPO) immediately after the interest was given. The original intention was to sell all of it but given the current sub-IPO price of about $0.993 with some interest having accrued, heck it, as there is still some uncertainty about when interest rate will rise since US inflation is still pretty low. Selling this was to bolster my warchest to whack the sunken stock market bugger real hard if it ever becomes a 2009 crisis but i doubt it.

The third thing i did was to buy shares, namely, UOB,OCBC, Stamford land, Ireit, Accordia, ST Engineering, Jardine C&C, Keppel and M1. Having experienced the 2009 crisis, learning and profiting from it, i bought the shares 1 lot ( yes 100 shares each time) as it tanks...the more it tanks i increased it to 2,3,4,5 lots, capping my purchase to a max of 5-7K each day to pace my warchest. Having to pay only 0.18% commission with no minimum allowed me to do that. The cold comfort of Wee Cho Yaw buying UOB at about $22 and $18.76 per piece and OCBC's discounted DCA price of $8.71 gave me a benchmark to work with and heck, these bank shares price/book has been the lowest in 5 years with the former giving 4.6% dividend yield and the latter 4% dividend yield. Having ST Engineering director buy STE at about $2.75 with its dividend yield of 5.6% makes me shake off any losses i get hit with as i average down. I try not to average up, only average down, so the purchases came to an end with the recent bullish state of the stock market, leaving me with 2/3 of my warchest still languishing in high-yield bank accounts, namely, ocbc360 and CIMB. 

$14580 per annum of passive income from bonds and equity ( non-CPF). The journey of a trillion miles continues.

Direct From the Federal Open Market Committee

Forget about CNBC, Bloomberg, Reuters, Analysts Reports, Newspapers e.t.c. It's best to be informed from the source. 

"......When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run......"- Federal Open Market Committee, 17 Dec 2014

Seems like those who are heavily leveraged in loans, especially floating rate home / mortgage loans can heave a great sigh of relief. 

Current US inflation rate: 1.3% as reported by the Bureau if Labor Statistics (BLS) on December 17, 2014.