Financial planning is all about investing

LOTS of people shy away from financial planning because they think they may be pressured into investing. And when you think investing, what comes to mind are horror stories of people who lost their life savings during the Asian financial crisis and Dot Com Bubble.

We hear tales of greed and chasing the hottest sexiest investment themes that has led them down the path of poverty and for some great debt due to leverage.

Admittedly, in the wealth management business, investments do form a large part of conversations that happen between ourselves and our clients.

For the most part, people speak to financial planners or wealth managers about how to make their money grow faster so they can meet their goals.

How much return can I get? What can I get if I invest in equities? How about properties? How can I start investing in currencies?

When people engage in a conversation about investments, inevitably, we get seduced by the quest to find the highest yielding asset. We steer into instruments we are not familiar with, drawn by the allure of high headline returns.

Think dotcoms. Think gold investments. Think land investments. Think bitcoin. Not necessarily bad investments but the basic concept of risk and diversification fall by the wayside as we chase returns.

But, step back for a moment.

Are you asking the right question? Is financial planning only about finding the next best investment?

While investing will likely play a key role in your financial plan, there are a lot more questions that need to be answered before you can choose the right investment, or if you even need to invest aggressively.

First question, how much do you need? Second question, when will you need it? Third question, how much have you set aside or are prepared to set aside? Last question, what returns are you going to get?

So say, I would like to buy a property in five years, of which I plan to make a downpayment of RM50,000. I have currently set aside RM10,000. I can currently save RM500 monthly.

Let’s assume I have no experience investing and decide to place it in fixed deposit at 3% per annum. Doing my maths, after five years, with interest compounded, all this adds up to only RM43,000. You are RM7,000 short.

In such an example, most people approach an adviser to find out what could yield them higher returns. In the above example, any misadventures in your investments could possibly set you back in your acquisition of your next property.

What if this was your children’s education? You may not want to risk your child entering university two years late. These are things your adviser needs to know as there other alternatives.

Financial management is very much about balancing between these four requirements. While getting higher returns so you can meet your goal is one way, it’s not the only way! You have other options. So, let’s go back to the four questions.

Firstly, you could buy a cheaper property with RM43,000. Alternatively, you could wait another year to purchase that property, giving you more time to save up. Or, you could increase your monthly savings to RM600 at 3% per annum. Lastly, consider investing in something that yields you 7% per annum. So, really, out of four options, only one is about investing.

For the most part, investing plays quite an essential role in most people’s portfolio. However, before you even have that discussion, think about the goals you want to achieve and whether investing is required and what kind of investment performance is needed.

By Ong Shi Jie

For the most part, investing plays quite an essential role in most people’s portfolio. However, before you even have that discussion, think about the goals you want to achieve and whether investing is required and what kind of investment performance is needed, says Ong.

Ong Shi Jie (CJ) is head of wealth management, OCBC Bank (M) Bhd.

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Home, sweet home for young couples will lead to housing industry boon in M'sia

A NEW Youth Housing Scheme has been set up by the Government to help young couples, whose household income does not exceed RM10,000, buy their first home.

Prime Minister Datuk Seri Najib Tun Razak said the maximum 35-year loan offered a funding limit not exceeding RM500,000 for married youth, aged between 25 and 40 years old.

“The Government will provide monthly financial assistance of RM200 to borrowers for the first two years to reduce the burden of monthly instalments,” he said.

Najib described the scheme as a smart partnership between the Government, Bank Simpanan Nasional, Employees Provident Fund (EPF) and Cagamas.

The Government will also give a 50% stamp duty exemption on the instrument of transfer and loan agreements, as well as 10% loan guarantee to enable borrowers to obtain full financing, including cost of insurance.

Borrowers can also withdraw from their EPF Account 2 to top up their monthly instalment and other related costs.

“I urge the youth to grab this opportunity which is offered on first-come-first-served basis for 20,000 units only,” he said.

To address the issue of home ow­­nership at affordable prices, RM1.3bil will be allocated to build 80,000 units under the 1Malaysia People’s Housing Programme (PR1MA).

To enable more people to own houses, under the scheme, the cei­ling of household income has been raised from RM8,000 to RM10,000.

“In addition, a Rent-To-Own Scheme will be introduced specifically for individuals who are unable to obtain bank financing,” he said.

RM644mil will be allocated to the National Housing Department (JPN) to build 26,000 units under the People’s Housing Programme (PPR).

He said Syarikat Perumahan Negara Berhad (SPNB) would build 12,000 units of Rumah Mesra Rakyat, 5,000 units of Rumah Idaman Rakyat and 20,000 units of Rumah Aspirasi Rakyat on privately-owned land.

For first-time house buyers, the Government has agreed to extend the 50% stamp duty exemption and increase the purchase limit from RM400,000 to RM500,000.

Exemption will be given until Dec 31, 2016.

The minimum eligibility for hou­sing loans will be increased from RM80,000 to RM120,000 while the maximum eligibility limit will be increased from RM450,000 to RM600,000.

The RM100 application processing fee for housing loan will be abo­lished.

The Government will improve the1Malaysia Civil Servants’ Housing (PPA1M) by reducing the minimum price of houses currently at RM150,000 to RM90,000 per unit.

He added that the qualifying requirement of household income for this would be increased from RM8,000 to RM10,000 per month.

Housing industry boon

PETALING JAYA: Measures under Budget 2015 will positively impact the housing industry, especially in promoting home ownership among the lower and middle income group, said the Real Estate and Housing Developers’ Association Malaysia (Rehda).

The association supported the Government’s effort to raise the ceiling of household income from RM8,000 to RM10,000 for PR1MA homes and the Rent-To-Own scheme to help those unable to obtain financing, said Rehda president Datuk Seri FD Iskandar.

He said Rehda also lauded the new Youth Housing Scheme which would “certainly benefit young couples who wish to own a home.”

He said the 10% loan guarantee to enable borrowers to obtain full financing and the RM200 monthly financial aid would help reduce the burden of borrowers.

HBA secretary-general Chang Kim Loong also said the housing scheme for young married couples was commendable.

However Chang said providing the RM200 subsidy, in the first two-years, may send a wrong message.

He said borrowers may start to spend beyond their means and might end up in financial difficulty after the subsidy ends.

Chang said the Government must also ensure eligible first time house buyers actually stay in these units and not rent it out.

Chang said HBA supported the move to build more affordable housing but wanted these homes to reach the right target market. “These homes must be built at the right place and reasonable prices of between RM150,000 to RM300,000; and not more than RM400,000 in prime locations,” he said.

By Neville Spykerman The Star/Asia News Network

‘First-time house-buyers will spur property market’

GEORGE TOWN: First-time housebuyers are sure to spur the property market following the introduction of the Youth Housing Scheme.

International Real Estate Federation Malaysia vice-president Michael Geh said the scheme announced under Budget 2015 will help them to own property costing less than RM500,000.

He said the property market had been “cool” for the past six months since the developers interest-bearing scheme was abolished, resulting in many first-time buyers unable to obtain bank loans.

“The scheme shows our Government is well aware of the plight faced by this group.

“It will certainly spur the property market,” he said.

The scheme, a smart partnership between the Government, Bank Simpanan Nasional, Employees Provident Fund and Cagamas, is offered on a first-come first-served basis for 20,000 units only.

It offers a funding limit for a first home not exceeding RM500,000 for married couples between 25 and 40 years old with a household income not exceeding RM10,000. The maximum loan period is 35 years.

The Malaysian Association of Hotels Penang Chapter said that the RM89bil from tourism targeted under Budget 2015 was an ambitious figure.

Its chairman Khoo Boo Lim said the RM316mil allocation for various programmes under the Ministry of Tourism and Culture should be used wisely to ensure good returns.

By Tan Sin Chow AND Chong Kah Yuan The Star/Asia News Network

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New kid on the block: Singapore's 'shoebox king' Oxley spices up Kuala Lumpur a record RM3,300 per sq ft

IN just 10 months, Singapore-listed Oxley Holdings Ltd has quietly amassed a gross development value (GDV) of close to RM10bil in Malaysia.

That’s RM1bil for every month since it first bought land in Kuala Lumpur last May – a tough act to follow even for the most seasoned developer.

And it isn’t stopping there.

Known as the “shoebox king” in Singapore, Oxley has hired former Selangor State Development Corp (PKNS) general manager Datuk Othman Omar as CEO of its Malaysian operations, indicating its seriousness in making Malaysia a core market.

Oxley now has on its plate 15 projects outside of Singapore – one in the UK, four in Cambodia, two in China and eight in Malaysia.

Only a month into the job, Othman already has his hands full with enquiries from landowners for joint-ventures, as well as expressions of interest for properties that Oxley Malaysia is yet to launch.

“Oxley has the brand name and database of buyers. However, we have to careful with whom we work with,” he tells StarBizWeek.

“You’ll be surprised at how many land pockets there are in Kuala Lumpur. We must be selective with not just the location, but also the business model.”

Othman, who studied civil engineering in Tasmania, had helmed PKNS for five years until his contract expired on Jan 31, injecting a much-needed private sector efficiency into the state-owned unit.

Under his watch it even achieved a record profit in 2011 of RM420mil.

He had had a stellar run in PKNS at least until the end of his term, when it became clear that he and Selangor Menteri Besar Tan Sri Khalid Ibrahim could no longer see eye-to-eye.

Before his contract expired, Othman was removed as general manager and transferred to the state secretariat to facilitate an investigation over the controversial sacking of Parti Keadilan Rakyat deputy president Azmin Ali as a PKNS board member.

But all that is water under the bridge now for Othman. He looks eager to have work for his hands again, after taking a short break in February to perform the umrah.

While he hesitates to delve into project details due to the sensitivity of ongoing negotiations, property sources say Oxley Malaysia’s landbank includes parcels on Jalan Ampang worth RM2.5bil-RM3bil, Jalan Hang Tuah (RM3bil), Section 16, Petaling Jaya (RM900mil), Beverly Heights in Ampang (RM900mil), Seputeh (RM120mil), Medini in Johor’s Iskandar Malaysia (RM1bil) and Fettes Road, Penang (RM1.5bil).

More JVs with landowners are understood to be in the pipeline.

Quick turnaround

According to Othman, Oxley favours integrated developments and a “quick turnaround”.

“The margins may not be as high (if turnaround is fast), but the banks love us because of our cashflow. That kind of velocity also reduces our finance and holding cost, and we don’t need to wait for years to realise the profits.

“We are aiming for affordability – build it fast and sell it cheap.”

Oxley made headlines here in November when it acquired a prized stretch of land along Jalan Ampang in Kuala Lumpur from the Loke Wan Yat estate for some RM450mil, or a record RM3,300 per sq ft.

The project – which will comprise a mall, two luxury hotels, serviced residences, offices and a theme park – is a stone’s throw from KLCC and opposite from Corus Hotel.

Big name investors such as Lembaga Tabung Haji, BlackRock, five-star hotel chains Jumeirah and Waldorf Astoria, and theme park operator Sanderson are speculated to have shown an interest in the development, industry executives say.

On Jalan Hang Tuah, Oxley Malaysia is planning residences and a three- or four-star hotel with 350 rooms and retail space.

The land, acquired by a local company in a government tender, is across the road from the Hang Tuah monorail and LRT stations.

Oxley’s plot in Section 16 near the Phileo Damansara commercial complex could feature residences starting from RM650 per sq ft and some retail space to serve a proposed three- or four-star business hotel.

Othman says he may delay sales for Robson Heights, an 80-unit premium dwelling in Seputeh in the vicinity of Mid Valley Megamall, given the current soft market conditions.

Depending on the market, Oxley Malaysia could roll out the Jalan Ampang, Jalan Hang Tuah and Section 16 properties this year, he adds.

“We’re already seeing strong interest in the Hang Tuah project from en bloc buyers. Some have offered to take up 50%. But we need to make sure they aren’t speculators,” Othman quips.

This is a lot to handle for the new kid on the block. Can Othman take the heat?

“Our competition is not the other developers,” he replies coolly. “It’s what we don’t know yet.”

Former PKNS chief Othman now CEO of Oxley”

PETALING JAYA: Barely a month after leaving the Selangor State Development Corp (PKNS), Datuk Othman Omar (pic) has been tapped by Singapore-listed developer Oxley Holdings Ltd to head its Malaysian operations as CEO, overseeing eight projects worth almost RM10bil in gross development value (GDV).

According to a stock exchange filing last Friday, Othman, 54, was appointed CEO of Oxley’s wholly-owned subsidiary, Oxley Holdings (M) Sdn Bhd, on March 1.

Othman, a civil engineer by training, had previously served as general manager of PKNS for five years until his contract expired on Jan 31.

Oxley, which has a market capitalisation of S$2bil (RM5.22bil), was listed on Singapore’s Catalist Market in Oct 2010 before transferring to the Mainboard in February last year.

The firm, better known for its shoebox apartments in Singapore, made headlines here in November when it bought a highly-coveted piece of land along Jalan Ampang from the Loke Wan Yat estate for some RM450mil, or a record RM3,300 per sq ft.

Images for KLCC Wisma Central, Restaurant Chef Choi ...

The prime freehold land, down the road from KLCC and sandwiched between Wisma Central and a Chinese temple, is currently occupied by Restaurant Chef Choi, Nasi Kandar Pelita and four bungalows.

Property sources told StarBiz that Oxley’s estimated RM9bil-RM10bil portfolio in Malaysia included the Jalan Ampang project with a GDV of RM2.5bil, developments in Jalan Hang Tuah and Medini Iskandar worth RM3bil and RM1bil, respectively, and others in Selangor and Penang.

Under Othman’s watch, PKNS implemented a full open tender system in 2010, which resulted in savings of RM100mil a year.

He had also inked integrity pacts with PKNS’ vendors and the Malaysian Anti-Corruption Commission, even as he sought to inject private-sector efficiency into the otherwise staid government-linked corporation (GLC).

But towards the end of his term, Othman fell out with Selangor Menteri Besar Tan Sri Khalid Ibrahim over the running of PKNS.

Before his contract expired, Othman was also removed as general manager and transferred to the state secretariat to facilitate an investigation over the controversial sacking of Parti Keadilan Rakyat deputy president Azmin Ali as a PKNS board member.

Still, sources close to Othman claim he had not been short on job offers from other GLCs and listed firms in Singapore and Malaysia.

For the six months to Dec 31, 2013, Oxley saw its net profit surge 15 times to S$275.9mil (RM720.1mil) from S$18mil (RM46.98mil) in the same period a year ago, while revenue jumped 709% to S$888.2mil (RM2.32bil) from S$109.8mil (RM286.84mil) on progress billings for various developments in Singapore.

Contributed by John Loh The Star/Asia News Network

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OXLEY TOWERS

http://www.nst.com.my/business/natio...yline-1.555023

An artist’s impression of the Oxley Tower in Kuala Lumpur. The average launch price for its serviced apartments are expected to be around RM3,000 per sq ft.

More images for KLCC Wisma Central, Restaurant Chef Choi, four bungalows

Investing in 2014

Value Investing Summit 2014 - 'Live'

The end of the year is the time to reflect on the past and the beginning of the year is time to reflect on the future. 

SO how did your portfolio do last year?

The Dow Jones Industrial Average for US stocks hit 16,576 with a 26% gain for the year, the best year since 1996. By comparison, the Hang Seng Index performed 3%; Tokyo Nikkei did best at 57% and Bursa Malaysia ended 10.5% higher, just a tad off its record high.

On the other hand, the fastest growing economy in the world had the worst stock performance – the Shanghai A share index closed the year at -8%. Gold prices fell 27% to US$1,196 per oz, while property prices seemed to have done well in the United States and China. Bond prices are now extremely shaky, with the JPM Global Aggregate Bond Index falling by 2% during the year.

What is going on?

The answer has to be quantitative easing (QE) by the advanced country central banks. The world is still flush with liquidity and since investors are unclear on what direction to invest in, they have reversed investments in commodities (such as gold), avoided bonds because of prospective rises in interest rates and essentially piled into stocks.

Individual investors like you and I tend to forget that the market is really driven today by large institutional investors, including fast traders with computer-driven algorithms that have better information than the retail investor and can trade in and out faster and cheaper. It is not surprising that retail investors who have traditionally driven Asian markets have been moving more to the sidelines.

Even institutional investors are not equal. Long-term fund managers like pension funds and insurance companies are, by and large, highly regulated, with restrictions on what they can or cannot buy. So it is not surprising that the biggest money managers are today even larger than banks. BlackRock, the largest independent fund manager alone looks after nearly US$4 trillion, larger than most banks in emerging markets.

There are, of course, two types of asset management – active (where the managers actively invest according to their judgement on your behalf) and passive, where they simply follow the market indices or buy exchange traded funds (ETFs) that track market indices. According to the Towers-Perrin study of top 500 global asset managers, during the last decade, passive managers did better than the group as a whole.

So should we trust the market experts? I have been reading for years Byron Wien’s annual Predictions for Ten Surprises for the Year. Byron used to be a top investment pundit for Morgan Stanley but he is now working for Blackstone. His prediction of surprises is defined as events where average investor would assign one-third change of happening, but which he believed would have a better than 50% change of happening. He got roughly seven out of ten wrong in 2013, the more relevant mis-calls being the price of gold, a possible drop in S&P 500, the price of oil and the A share index.

Bill Gross, one of the top bond fund managers, pointed out that retail investors tend to be conservative, focusing largely on safe portfolios, such as investment grade and high yield bonds and stocks. But institutional investors have gravitated instead into alternative assets, hedge funds and more unconventional assets. Unfortunately, all these assets are “based on artificially low interest rates”. So if low interest rate policies are reversed, investors have to be prepared.

He rightly pointed out that the advanced country central banks are “basically telling investors that they have no alternative than to invest in riskier assets or to lever high-quality assets.” But if they withdraw QE or “taper”, then higher interest rates will cause a reversal of investment prices and also cause de-leveraging.

In other words, in order to bail out the world and keep the advanced economies afloat, their central banks are asking global investors to bear quite a lot of the risks of the downside. The smart money might be able to get out fast enough, but most retail investors do not have the skills to time their investments right.

So what should the retail investor do?

Peter Churchouse, who writes one of the best reports in Asia called Asia Hard Assets Report, quoted his son’s advice as “Buy good companies with strong earnings, strong growth and rock solid management. The world will go on.”

Quite right.

But how do we know which companies have rock solid management? My answer is: watch not what the annual report say (by all means read them), but look at what the management does. I have always tended to shy away from companies with high-profile CEOs who tend to win “Manager of the Year” awards.

There is, of course, no substitute for solid own research and look for yourself how the company or the economy that it operates in is doing.

The consumer or tourist is still the best investor because seeing for yourself gives you a feel of what is quite right or wrong with the country and just visiting the retail outlet, getting a sense of the service quality and the employee attitude would give you first hand what is right or wrong with the company you are investing in.

My favourite economy in Asia right now has to be Indonesia. I spent nearly 10 days over Christmas going through the markets of the most densely populated cities in Java and my conclusion was that Indonesia is on the move – literally. The population is young, mobile and connected. Every other shop seems to be selling mobile phones, cars or motorbikes. The quality of the retail shops, design and service has been improving over the years. And despite the coming elections, there is hope for change.

My bet, therefore, for 2014 is that if we stick to the better-run companies in the stronger economies, we should be better prepared for any tapering of QE to come.

Contributed by Tan Sri Andrew Sheng

Tan Sri Andrew Sheng is president of the Fung Global Institute.