Sunday, 19 October 2008

DBS Hi Notes 5

I read with sadness the cases of so many retirees who put all their life savings into the structured products and lost it all. All they wanted was to 'renew' their fixed deposits.

While i have written an article on the "risk" of fixed deposits before, it is really sad to read about people who are 'pressured' into buying an investment which they were "told" that it was very 'safe'.

I remember my own encounter whereby i was depositing the cheque from my sale proceeds from the sale of property at a POSB branch in Dec last year and immediately the teller asked if i need any financial planning and whether i am interested in investments which will give me a higher return. I politely turned down her "kind gestures" and told her that i managed my own finances.

In any case, I think DBS will be bearing the full brunt of their 'folly' in marketing the DBS Hi Notes 5. If the MAS start doing what the Hong Kong government is doing by making the banks 'pay back' the amount lost by the investors, then DBS will have to fork out millions in compensation. Unfortunately, since DBS's majority shareholder is THE Governement, i really doubt MAS is going to make DBS compensate for the losses of Singaporean investors who bought into the Lehman minibonds or the DBS Hi Notes. Looking at the chart of DBS, i think we can see more downside ahead. My view is that it could be heading towards the $8 to $10 support zone in the coming months.

In life, timing is important. There is a saying in Chinese "风水轮流转" and this is what cycles are all about. I believe that if one wants to be rich, one will have to catch the cycle. Remember my previous posting in July on the run in commodities coming to an end? While i am happy that my petrol bills are finally coming down, i am sad that many retail investors are once again caught in the euphoria of "chasing bubbles" and losing tons of money in the commodities fund. I have also shared my view with you on the pending "breakdown" in Singapore property prices in Oct and i read in The New Paper today that many property owners are starting to cut their losses on their properties after being burnt in the stock market and are trying to get out before the TOP of their properties as they are either unable to get mortgage loans or that the falling rentals will not be sufficient to pay for their mortagages. There is an interesting chart at where the URA property prices and the STI index is 'superimposed' and we can see a 'pending crash' in the property market here as well.

Take care and happy investing. Hold your cash tight and make sure you are there where the property market crashes so that you can scoop up some nice bargins.... Happy Investing :)


Loh Hon Chun said...

I am actually somewhat disappointed with MAS actions on the Lehman issue.

Do you have any recommendations on what sector would be great? Defensive stocks are no longer defensive already. I am actually looking into RSP on financial stocks from end of Nov onwards.

2Y Capital said...

Hi Hon Chun

It is always very difficult to pick bottom but if you believe in "cycles", the fundamentally sound stocks will come back up again. I will stick to the banks, SGX, Oil&Gas sector. Should be fine to do a RSP if you have a 3-5 years horizon from Nov onwards.

Loh Hon Chun said...

I am currently holding onto SGX, oil sector (just got into) and a RSP on ST Engineering.


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