The Singapore Population Ponzi … Short SGD as funding FX

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Singapore has experienced the fastest rate of population growth anywhere in the world over the last 10 years.  However, if you go back in history to examine its rate of population growth and also literature on Total Factor Productivity, you will realise that there have been arguments from early 1990s levelled on the unsustainable and also myopic and unproductive utilisation of pure increase in labour as an input in Singapore to drive economic growth. http://www.nber.org/chapters/c10990.pdf

Asianmacro as a trader believes in the brevity of my musing & you can click on the above link to read in detail if you are interested in the paper by Prof. Alwyn Young from MIT published in 1992.  From the illustration above, we can see the close correlation between SGD appreciation and stock market (Straits Times Index – FSSTI) with Population growth % yoy.  It makes you wonder with the announced deliberate slowing down of the influx of foreigners by the Singapore government that drove this unprecedented pop in population, what will happen to SGD and FSSTI?

Anyway, the Monetary Authority of Singapore (MAS) recently concluded its semi-annual policy meeting in April 2014 without much fanfare http://www.mas.gov.sg/News-and-Publications/Speeches-and-Monetary-Policy-Statements/2014/Monetary-Policy-Statement-14-Apr-14.aspx .  For the longest time since 2008, SGD has unfailingly appreciated into and after each and every MAS policy meeting as a strong SGD policy (which is also the only policy tool MAS has that it uses) is trumped out time and again.  However, such an antiquated policy is long past its use-by date and it has been a case of weak USD against all major currencies in recent months rather than a strong SGD that resulted in $/SGD at 1.25 today.

Asianmacro will be very keen to established short SGD against GBP, AUD and EUR (*actually Asianmacro already have these positions for awhile and will add to them) on any potential SGD appreciation in May/summer if some mistaken belief by portfolio flows in SGD as a safe haven results in inflows over May/summer driving $/SGD to 1.2350-1.2450 levels.

 

64 footer houseboat for less than a Ferrari … in time for FIFA14 World Cup!

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It is only in Singapore that the all knowing government implementing its various policies very often distorts the prices of various consumption goods and also exacerbate the economic shocks that buffet this island from time to time.

Asianmacro looking out of his window across to the Indonesian islands is sore that we have to pay the highest price in the region and probably the world just to watch the upcoming FIFA 2014 World Cup http://www.goal.com/en-sg/news/3880/singapore/2014/03/18/4690244/singapore-costliest-place-to-watch-world-cup.

Well lo’ and behold, fret not. For less than a price of a Ferrari (any new model basically), you can have more metal by weight and horsepower too in getting this houseboat. http://www.simpsonmarine.com/en/brokerage/brokerage-yacht-details.aspx?id=300&fType=0&fPriceMin=3&fPriceMax=4 . All 3000 square feet of living space in this 64 footer, to plonk down the latest Ultra-Wide screen TV. And sail it nearby to Sister’s Island or just off Batam or Bintan if the TV signals are better; and you can watch all the FIFA 2014 World Cup action to your heart’s content … FOR FREE!

Asianmacro is always on the look out for an arbitrage and this probably comes close to one.  OK, now to get the Powered Pleasure Craft License http://www.mpa.gov.sg/sites/recreation_and_leisure/leisure_boating/introduction_to_pleasure_craft_licensing.page … or to find somebody who already has one and split the bill for the boat !  *OK, it’s just a thought but Asianmacro will be tuned to Indonesian TV during summer.

 

 

 

Time to OZ …. AUD has probably lucked out!

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Illustration 1: AUD/USD vs. IMM Commitment of Traders (Non-Commercial) positions vs. AUD/USD 1-month risk reversal vol skew … all points to AUD at risk of correction lower

Asianmacro has previously opined on Australia and AUD .. the lucky country that happened to have all the minerals underground that China and the rest of the world needed http://tradehaven.me/2013/02/12/to-oz-or-not-to-oz/.  The range for AUD/USD is 1.03 – 1.05 on the narrow with risk of overshooting on either side especially the lower bound on any significant China flu or global risk off.

Australia employment report is out this coming Thursday 11 April 2013 and I don’t know about you but with all the global economic data hitting a softer patch especially on the employment front, and with commodities (precious, base and softs) correcting lower over the past month, I will be damned surprise if Australia can be so lucky again !  From Illustration 1: the market in AUD/USD still seem pretty long from the IMM CFTC commitment of traders report (non-commercial).  In addition, there is still a skew to calls over puts in the options market.  There exist relatively cheap opportunities to be playing Australia turning on its luck via outright short AUD/USD or put options spreads and strategies like 1.035 put RKO (reverse knock out) 1.0550.  We target 1.01 level in the next 1 month if this plays out well enough for us.

The nail in the coffin I think for Australia is the recently announced changes to the Superannuation plan where new taxes (where there wasn’t are introduced) to rob the chaps down under.  *Please see summary below (where essentially Superannuation contribution are after your earned income already already taxed and now you are taxed again on your returns from your superannuation that is supposed to support your retirement!)

Superannuation changes

  • From July 1 2014, earnings on superannuation pensions and annuities of more than $100,000 annually will be taxed at 15 per cent, instead of being tax-free.
  • Superannuation earnings below $100,000 a year will remain tax-free and this threshold will be indexed to the Consumer Price Index.
  • The change will not apply at the accumulation stage.
  • The Government says around 16,000 people will be affected by this reform, which will save around $350 million over the four-year forward estimates period.
  • From 1 July 2013, people aged 60 and over will see increased concessional caps from $25,000 to $35,000.
  • Excess concessional contributions will be taxed at the individual’s marginal rate, plus an interest charge.
  • The Government says this will mean individuals are taxed on excess concessional contributions in the same way as if they had received that money as salary or wages.

There are some opinion on this matter http://www.afr.com/p/business/financial_services/super_tax_may_hit_accounts_under_3xxgtzhxnNCaKTJU67cMHP.  If I am a chap down under, I will find various ways and means to get all my money out of the country before it is rounded up unfairly by the Australian government … no surprises why so many Australian billionaires have or are thinking of moving to Singapore!

http://www.globalpost.com/dispatch/news/business/120609/australian-economy-billionaire-nathan-tinkler-singapore-tax-rate-asia#1

http://blogs.wsj.com/scene/2012/08/01/australian-billionaire-sets-new-property-records-in-singapore/

And we definitely expect to see more Aussie names in the richest Singapore residents list shortly http://www.altiusdirectory.com/Society/top-singapore-richest-list.html

 

 

*Asianmacro is a beach bum managing his own wealth.  Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself.  While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or  implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith.  Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication.  This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.

Bird Flu .. better be worried … How can Singapore stock market be unconcerned?

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Illustration 1: Bird flu onset in Jan 2003 … Hang Seng & Straits Times Index plunge 15% to March-April 2003

Asianmacro remembered the dark days of SARS / bird flu onset circa January 2003.  That was when there was a real sense of doom that is palpable in the air,  especially in Singapore where NOBODY ever voluntarily wears a mask over one’s nose and mouth when he/she has a cold or flu (unlike in Japan or Hong Kong) … you can actually see people in that period in 2003  (if you are lucky to spot a few brave ones out doing grocery shopping!) wearing them.

From Illustration 1, both Hang Seng and Strait Times index plunged about 15% within the next 2 months.  There is a new strain of bird flu with some deaths reported in China http://uk.reuters.com/article/2013/04/05/uk-birdflu-idUKBRE93402H20130405.  Hang Seng is currently off by 600 points (approx -3%) while Straits Times is holding up very well and off only -0.10%.  Looks like there must be a lot of ‘safe haven’ flows buying into Singapore stocks holding them up according to all the brokers!

Maybe it is an opportune time to remind ourselves, firstly, Singapore is not as good a safe haven as before both from an economic, political and geographical stand point.  Secondly, when it comes to bird flu, it is different from bringing your money over from Cyprus, Luxembourg or any other tax-haven of dubious origins to Singapore as the bird flu virus do not differentiate between Hong Kong or Singapore.  In fact, Singapore as a major transportation hub and also with a great number of its residents doing business in China and its companies depending on China, it is just as exposed to Hong Kong to such an exogenous event.

As the 2003 SARS / Bird Flu impact on Singapore stocks has proven before … this time, it shall not be any different.  Anybody who claimed otherwise had better remember the last episode.  as Singapore stocks is far too high up to justify its insulation from what that is panning out whether this bird flu is going to get worse or better, you can be sure that it is not going to get any better first and China always play down negative events!

Short SIMSCI April futures at current 372 level to 360 region as this represent a good risk-reward proposition now!  *This is either a hedge against your underlying cash stocks or outright bet on a decline.

*Asianmacro is a beach bum managing his own wealth.  Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself.  While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or  implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith.  Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication.  This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.

Let’s Drink to That !

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Illustration 1: Liv-EX Fine Wine 50 Index … market has bottomed!

Because of QE and the great amount of liquidity that has been sloshing around the world, many financial assets from bonds to stocks and also hard assets like property, farm land, commodities and also fine wines have all been ramped higher at different points in time over the last five years since 2008.

One of the more interesting market had been in fine wines where the exuberant Chinese had driven Bordeaux and then Burgundies to sky high prices.  The former had corrected significantly since 2011 and a significant bottom could be in place.

The 2008 vintage of Saint-Emilion wine producer Chateau Angelus climbed to a record high of 1,800 pounds ($2,730) a case on the London-based Liv-ex wine market this week, according to data on its Cellar Watch website.

The price was 15 percent up from a transaction last month and 61 percent above a trade conducted last August, according to Cellar Watch data. It was also higher than the HK$19,600 (1,570 pounds at the time) paid for each of two cases in a Sotheby’s (BID) sale in Hong Kong in October, according to Sotheby’s online auction data. Angelus was promoted to the ranks of one of the four top growers in the appellation in September. http://www.bloomberg.com/news/2013-02-26/chateau-angelus-2008-saint-emilion-rises-to-liv-ex-record-2-730.html

Asianmacro is pretty happy as he had previously bought Angelus 2008 en primeur during the midst of the global financial crisis.  (*2008 will always be a lucky year for the Chinese and Angelus in Mandarin/Chinese is 金钟 aka ”Golden Bell” … pretty auspicious for the Chinese tycoons!).  Will be looking to make some room in my cellar for other acquisitions shortly and anybody that wishes to get a case or two from me will be welcomed to send me a private message.  The current price is even higher by another 6% from February last month http://www.farrvintners.com/wine.php?wine=81 but will be available from me at previous auction price of GBP1,800 per case still …. let’s drink to that !

*Asianmacro is a beach bum managing his own wealth.  Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself.  While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or  implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith.  Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication.  This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.