05-06-2011, 07:47 AM
This is Part 1 of a 4-part series conducted by Lorna Tan with various private bankers and their views on investment. Enjoy!
Jun 5, 2011
Banking on his 'private' expertise
In the first of a four-part series, Senior Correspondent Lorna Tan invites a private banker for lunch and asks for investment tips.
Singapore is fast becoming one of the world's biggest wealth management hubs, with thousands of private bankers based here.
Every day, these bankers talk to million-dollar clients from Singapore and all over the world, pitching new ideas on how to invest their money.
Given that their high-powered clients are usually no slouches themselves when it comes to the business world and financial markets, a private banker not only has to keep abreast with the very latest developments, but also earn his keep with the very best strategies.
So if you had the rare chance to sit down with one of these experienced professionals for lunch, what would you ask?
I start by complimenting 44-year-old Jeffrey Tan on his youthful looks before attempting to milk him for money-making ideas.
The managing director of Bank of Singapore, the wholly owned private banking arm of OCBC Bank, thanks me but adds that in his profession, it is not always better to look younger than your age.
'Clients want to know if I have seen the crisis,' he says, explaining that more 'mature-looking' private bankers look like they have had 10 to 20 years of experience dealing with the recent financial crises and violent market cycles.
'How can I suggest that they buy something without experiencing at first-hand the hectic market situation when markets fell? Customers want to know how to react, what can be done.'
It is perhaps for this reason that Mr Tan is decked out in a sombre and discreet black suit as he tucks into his prawn salad at Peach Garden restaurant in OCBC Centre.
The youngest child in a family of nine, Mr Tan graduated from Monash University in Melbourne, Australia, with a business degree specialising in banking and finance in 1992.
A Malaysian who grew up in Johor, he initially intended to work in his home country but kept his options open. His siblings were already working and had settled down in Singapore so he decided to follow suit.
After a career mostly in corporate banking, he entered the profession exactly 10 years ago when he was headhunted in 2001 to join the private banking arm of Merrill Lynch as its chief representative of its Singapore representative office.
There, he worked extensively on a new type of insurance product for the very rich called 'universal life plans' which gave customers the flexibility of deciding the amount and frequency of additional premiums after paying a minimum initial premium.
Such plans, which range from US$500,000 (S$618,000) to more than US$25 million in life coverage, are clearly out of the reach of most investors, so I wait until the sauteed garoupa arrives before fishing for more 'down-to-earth' investment tips.
United States stocks is his first recommendation. So far, 75 per cent of US corporates have beaten analysts' expectations for first-quarter earnings, he points out.
'Some US companies with international product penetration reported strong revenue contributions from emerging markets (especially Asia) in the past few years,' he said.
He especially likes firms like Apple and McDonald's, which have benefited from the strong economic conditions and increasing consumer consumption in this region. US stocks can be traded online through many local brokers now, with commissions as low as 0.35 per cent.
For example, Apple's sales in the Asia-Pacific grew strongly by an average of 89 per cent a year between 2008 and last year. Mr Tan also likes Apple for its key strengths of product innovation, strategic foresight and careful brand management. The company recently reported better than expected second-quarter results and its products remain very mainstream and highly in demand.
In the case of McDonald's, sales in the Asia-Pacific and Middle East hit US$5 billion last year from US$4.2 billion in 2008.
Emerging market economies are another bright spot, says Mr Tan. Countries like Brazil and Russia are benefiting from high commodity and oil prices, and many Asian economies are also in a position of strength as a result of high savings and domestic consumption.
Because the fundamentals are strong in these markets and benchmark interest rates in the US are expected to remain low, investors should be overweight in emerging market bonds, reckons Mr Tan.
His advice for those with a mid- to long-term investment horizon is to buy emerging market corporate bonds through bond funds such as the Lion Global Emerging Markets Bond Fund.
Another fixed income option would be to invest in the investment-grade sovereign bonds and currencies of emerging markets through funds such as the Templeton Global Bond Fund.
I ask him for his views on investment instruments closer to home. What Singapore stocks would he recommend investors look into?
He likes high-yield dividend stocks as they offer investors regular income streams and can be used to hedge against the high inflation rate in Asia.
Mr Tan recommends CDL Hospitality Trust as he says it is a beneficiary of strong tourist arrivals here, with 80 per cent of its net property income derived from its Singapore hotels. The dividend yield is also attractive, being last estimated at 5.2 per cent.
But is it generally a good time to be investing more, I ask. Or should investors start to become more cautious?
'Considering the very low interest rate environment and the relatively higher inflation in Asia, it is still worthwhile to have some exposure in the equity market.
'However, the markets have been quite volatile in recent months, and I would suggest that investors remain vigilant and selective,' he said.
He warns of possible spikes in oil price from escalating tensions in the Middle East and North Africa, a deterioration in the euro zone sovereign debt crisis and a hard landing in Asian economies from overly aggressive policy tightening to control inflation.
As lunch draws to an end, he debunks the common belief that private bankers are at the beck and call of their ever-demanding clients.
'We are contactable anytime but in reality, weekend appointments, if any, are pre-fixed so there are seldom any nasty surprises or last-minute demands,' he said.
Besides, even if work eats into a weekend, it is a small price to pay for a rewarding career where one gets to meet successful people, help them with their financial objectives and build trustworthy relationships, he adds.
lorna@sph.com.sg
-----------------------------------------------------------
Taking stock
'Considering the very low interest rate environment and the relatively higher inflation in Asia, it is still worthwhile to have some exposure in the equity market. However, the markets have been quite volatile in recent months, and I would suggest that investors remain vigilant and selective.'
MR JEFFREY TAN
BUY, SELL OR HOLD?
Technology stocks: BUY
'I'm positive on the IT sector as it is a growth sector with upside leverage to any global growth. At the same time, it is defensive, given its high margins. The average pre-tax earnings of 26-27 per cent and the net margins of 15-16 per cent are high compared to 23 per cent and 9 per cent respectively for the rest of the market.
Most IT firms are also cashed up, implying they have the balance sheet buffer to make acquisitions. Investable long-term tech names, on the back of recent price weakness, include Apple, Google and Microsoft.'
Gold: BUY
'Gold has dipped from an all-time high of US$1,575 an ounce on May 2, dragged down by declines across the commodity complex and silver specifically. Gold remains a buy on dip in my view. I continue to expect gold to test US$1,600 an ounce over the next three to six months. Resurfacing of sovereign debt concerns set against a backdrop of still low interest rates should keep gold price supported.
However, gold may not be a long-term investment. Gold price may peak sometime late this year, especially once the US Federal Reserve starts to flag tighter monetary policy ahead.'
Aussie dollars (AUD): BUY
'AUD has fallen back after breaching the US$1.10 level as risk sentiment soured and commodity prices fell. I think it is vulnerable to a further pull-back to about $1.01-$1.03 over the one-two months' horizon. But I believe AUD can make new gains and reach near to the US1.10 highs again over the next three to six months. Supported by a multi-year investment boom in the resource sector, Australian economic growth and given the links to Asia's economic boom, AUD should enjoy renewed strength.'
Jun 5, 2011
Banking on his 'private' expertise
In the first of a four-part series, Senior Correspondent Lorna Tan invites a private banker for lunch and asks for investment tips.
Singapore is fast becoming one of the world's biggest wealth management hubs, with thousands of private bankers based here.
Every day, these bankers talk to million-dollar clients from Singapore and all over the world, pitching new ideas on how to invest their money.
Given that their high-powered clients are usually no slouches themselves when it comes to the business world and financial markets, a private banker not only has to keep abreast with the very latest developments, but also earn his keep with the very best strategies.
So if you had the rare chance to sit down with one of these experienced professionals for lunch, what would you ask?
I start by complimenting 44-year-old Jeffrey Tan on his youthful looks before attempting to milk him for money-making ideas.
The managing director of Bank of Singapore, the wholly owned private banking arm of OCBC Bank, thanks me but adds that in his profession, it is not always better to look younger than your age.
'Clients want to know if I have seen the crisis,' he says, explaining that more 'mature-looking' private bankers look like they have had 10 to 20 years of experience dealing with the recent financial crises and violent market cycles.
'How can I suggest that they buy something without experiencing at first-hand the hectic market situation when markets fell? Customers want to know how to react, what can be done.'
It is perhaps for this reason that Mr Tan is decked out in a sombre and discreet black suit as he tucks into his prawn salad at Peach Garden restaurant in OCBC Centre.
The youngest child in a family of nine, Mr Tan graduated from Monash University in Melbourne, Australia, with a business degree specialising in banking and finance in 1992.
A Malaysian who grew up in Johor, he initially intended to work in his home country but kept his options open. His siblings were already working and had settled down in Singapore so he decided to follow suit.
After a career mostly in corporate banking, he entered the profession exactly 10 years ago when he was headhunted in 2001 to join the private banking arm of Merrill Lynch as its chief representative of its Singapore representative office.
There, he worked extensively on a new type of insurance product for the very rich called 'universal life plans' which gave customers the flexibility of deciding the amount and frequency of additional premiums after paying a minimum initial premium.
Such plans, which range from US$500,000 (S$618,000) to more than US$25 million in life coverage, are clearly out of the reach of most investors, so I wait until the sauteed garoupa arrives before fishing for more 'down-to-earth' investment tips.
United States stocks is his first recommendation. So far, 75 per cent of US corporates have beaten analysts' expectations for first-quarter earnings, he points out.
'Some US companies with international product penetration reported strong revenue contributions from emerging markets (especially Asia) in the past few years,' he said.
He especially likes firms like Apple and McDonald's, which have benefited from the strong economic conditions and increasing consumer consumption in this region. US stocks can be traded online through many local brokers now, with commissions as low as 0.35 per cent.
For example, Apple's sales in the Asia-Pacific grew strongly by an average of 89 per cent a year between 2008 and last year. Mr Tan also likes Apple for its key strengths of product innovation, strategic foresight and careful brand management. The company recently reported better than expected second-quarter results and its products remain very mainstream and highly in demand.
In the case of McDonald's, sales in the Asia-Pacific and Middle East hit US$5 billion last year from US$4.2 billion in 2008.
Emerging market economies are another bright spot, says Mr Tan. Countries like Brazil and Russia are benefiting from high commodity and oil prices, and many Asian economies are also in a position of strength as a result of high savings and domestic consumption.
Because the fundamentals are strong in these markets and benchmark interest rates in the US are expected to remain low, investors should be overweight in emerging market bonds, reckons Mr Tan.
His advice for those with a mid- to long-term investment horizon is to buy emerging market corporate bonds through bond funds such as the Lion Global Emerging Markets Bond Fund.
Another fixed income option would be to invest in the investment-grade sovereign bonds and currencies of emerging markets through funds such as the Templeton Global Bond Fund.
I ask him for his views on investment instruments closer to home. What Singapore stocks would he recommend investors look into?
He likes high-yield dividend stocks as they offer investors regular income streams and can be used to hedge against the high inflation rate in Asia.
Mr Tan recommends CDL Hospitality Trust as he says it is a beneficiary of strong tourist arrivals here, with 80 per cent of its net property income derived from its Singapore hotels. The dividend yield is also attractive, being last estimated at 5.2 per cent.
But is it generally a good time to be investing more, I ask. Or should investors start to become more cautious?
'Considering the very low interest rate environment and the relatively higher inflation in Asia, it is still worthwhile to have some exposure in the equity market.
'However, the markets have been quite volatile in recent months, and I would suggest that investors remain vigilant and selective,' he said.
He warns of possible spikes in oil price from escalating tensions in the Middle East and North Africa, a deterioration in the euro zone sovereign debt crisis and a hard landing in Asian economies from overly aggressive policy tightening to control inflation.
As lunch draws to an end, he debunks the common belief that private bankers are at the beck and call of their ever-demanding clients.
'We are contactable anytime but in reality, weekend appointments, if any, are pre-fixed so there are seldom any nasty surprises or last-minute demands,' he said.
Besides, even if work eats into a weekend, it is a small price to pay for a rewarding career where one gets to meet successful people, help them with their financial objectives and build trustworthy relationships, he adds.
lorna@sph.com.sg
-----------------------------------------------------------
Taking stock
'Considering the very low interest rate environment and the relatively higher inflation in Asia, it is still worthwhile to have some exposure in the equity market. However, the markets have been quite volatile in recent months, and I would suggest that investors remain vigilant and selective.'
MR JEFFREY TAN
BUY, SELL OR HOLD?
Technology stocks: BUY
'I'm positive on the IT sector as it is a growth sector with upside leverage to any global growth. At the same time, it is defensive, given its high margins. The average pre-tax earnings of 26-27 per cent and the net margins of 15-16 per cent are high compared to 23 per cent and 9 per cent respectively for the rest of the market.
Most IT firms are also cashed up, implying they have the balance sheet buffer to make acquisitions. Investable long-term tech names, on the back of recent price weakness, include Apple, Google and Microsoft.'
Gold: BUY
'Gold has dipped from an all-time high of US$1,575 an ounce on May 2, dragged down by declines across the commodity complex and silver specifically. Gold remains a buy on dip in my view. I continue to expect gold to test US$1,600 an ounce over the next three to six months. Resurfacing of sovereign debt concerns set against a backdrop of still low interest rates should keep gold price supported.
However, gold may not be a long-term investment. Gold price may peak sometime late this year, especially once the US Federal Reserve starts to flag tighter monetary policy ahead.'
Aussie dollars (AUD): BUY
'AUD has fallen back after breaching the US$1.10 level as risk sentiment soured and commodity prices fell. I think it is vulnerable to a further pull-back to about $1.01-$1.03 over the one-two months' horizon. But I believe AUD can make new gains and reach near to the US1.10 highs again over the next three to six months. Supported by a multi-year investment boom in the resource sector, Australian economic growth and given the links to Asia's economic boom, AUD should enjoy renewed strength.'