Kelvin Khoo Online

Eighteen ETFs are listed on the Singapore Exchange (SGX), the latest of which made its debut last month - the Lyxor India Nifty ETF 10, a diversified stock index that accounts for 21 sectors of the Indian economy, including chemicals, oil and gas, banks and technology. Others listed here include the CIMB FTSE Asean 40 ETF, iShares MSCI India ETF, ABF Singapore Bond Index Fund and StreetTRACKS Gold Shares.

Also operating on the same principle are participation certificates, which, like ETFs, track the performance of an underlying asset or index on a one-for-one basis. Those on SGX include the ABN Amro Indonesia Index Zero Cert, ABN Amro Pakistan Index Zero Cert, Dow Jones Euro STOXX50 Index Zero Cert and Kuala Lumpur Composite Index Zero Cert. This month, ABN Amro launched new certificates linked to the Rogers International Commodity Enhanced Index or RICI Enhanced, which comprises 37 listed commodities including energy, agriculture, industrial and precious metals.

‘The main difference between ETFs and Zero Certs is in the legal framework,’ explained Miles Ashton, ABN Amro’s head of sales and public distribution of private investor products in Asia. ‘For an ETF, the assets are segregated from the balance sheet of the issuer, so it’s a fund, whereas Zero Cert is a security issued by - in our case - ABN Amro.

‘The difference is that an investor buys a fund in one case and in the other, (he buys) ABN Amro paper that is linked to the performance of an underlying index.’

Another difference is that Zero Certs have a tenor or maturity period of three years, while ETFs are open-ended.

Shares in each ETF and Zero Certs can be bought and sold via a broker, like any equity. Investors will need two accounts: a trading account with a stockbroking member of SGX, and a securities account with the Central Depository. They can then buy or sell the instruments - which are traded intra-day and in board lots - through their broker or online trading account. Once issued, the price of an ETF or Zero Cert moves up and down in line with the target index.

Advantages and risks

One of the factors that make ETFs and Zero Certs attractive is that they are cheaper than unit trusts or mutual funds.

‘The costs are relatively similar for both (ETFs and certificates), which are much lower than actively-managed funds,’ said Mr Ashton. ‘If you buy a fund from your broker or consumer banker, for instance, it’s 3 to 5 per cent of upfront loading fees and management fees of 2 per cent per annum.’

Conversely, for an ETF, about 0.75 to 1.5 per cent per annum of asset is deducted from the investment daily, while for the Zero Cert, the issuer receives after-tax dividend of the index components.

Another factor is that both vehicles enable investors to get their foot into specific markets and asset classes, including shares of companies listed on overseas exchanges, thereby offering them diversification.

‘I see an ETF as an investment tool rather than an end-product. It helps investors build a customised portfolio,’ said Joseph Ho, managing director and head of ETFs in Asia at Lyxor, which has eight ETFs on SGX. Investors bullish on India, for instance, can allocate a percentage of their investment into the market through ETFs and reap returns should their view prove correct, he explained.

Mr Ashton said of certificates: ‘The platform can be summed up by saying it’s essentially like a supermarket for retail investors, where they can pick from a variety of different Zero Certs linked to investment themes and create their portfolios.’

However, the ETFs’ performance is directly affected by that of their underlying component stocks or bonds. The impact, however, is cushioned to some extent by diversification, as an ETF itself is a diverse pool of stocks or bonds.

Another risk to consider is the possibility of tracking errors. An ETF may sometimes not reflect the performance of its underlying index due to factors such as timing differences between countries.

‘When the ETF is not doing what it’s supposed to do, when you want it to give a return but it doesn’t replicate its benchmarked index, you’re in trouble,’ warned Mr Ho. ‘It’s something investors have to look out for.’

Bright future for the market

ETFs were first introduced in the US in 1993, and have grown to more than $250 billion today. And while Asia has only recently started playing catch-up to that, the products have been growing in popularity.

At an ETF conference in late February, Morgan Stanley managing director and head of investment strategy Deborah Fuhr said Asia ‘will see many more (ETF) products coming on the market and a lot of people using them here, as well as elsewhere’.

Mr Ashton has also seen ‘tremendous growth in this area already’, but noted that more education is needed for Asian investors to familiarise themselves with the products.

‘Here in Asia, the market is at the more junior stage compared with that in Europe,’ he said. ‘But I think it’s a matter of education and awareness-building, and investors will see that the track record of these rule-based certs or ETFs has outperformed active fund managers who charge a much steeper fee structure.’

The model has been tested and is working well for Changi General Hospital and St Andrew’s Community Hospital in the east. Both are located next to each other in the Simei area.

The proposed Jurong General Hospital will have a capacity of 550 beds, while the adjacent community hospital will have 200 beds. A hospital planning committee led by current Tan Tock Seng Hospital CEO Lim Suet Wun has been set up.

A site in Jurong East has been allocated for the hospital. It will be within walking distance from the Jurong East MRT Interchange and Jurong East Bus Interchange. The development will form part of the larger Jurong Lake District Plan, recently unveiled by the Urban Redevelopment Authority.

Apart from a new hospital, Singaporeans can also look forward to enhanced benefits from their Medishield plans. The MOH yesterday also released details on new Medishield claim limits, which are between 11 and 180 per cent higher than the ceilings they are entitled to today.

Significantly, the claim limit for implants and approved medical consumables has gone up to $7,000, from $2,500. Patients hospitalised in normal ward can also claim up to $450 per day, instead of $250, while ICU-warded patients will be entitled to have Medishield pay for up to $900 for each day of their stay.

The revision will take effect from December. They are designed to improve the insurance coverage of large Class B2/C bills to 80 per cent, from 60 per cent currently.

While premiums will go up correspondingly, the adjustments are less than $10 a month for the majority of Medishield policyholders. For those above 80, the enhanced benefits will cost them an increase of $35-40 in monthly premiums.

This group of policyholders will also see their deductible double. To buffer the effect, the MOH recently announced that it will raise their annual Medisave withdrawal limit to $1,150 to help pay for the higher Medishield premiums. The government will also top up Medisave accounts of the elderly in September, as announced by Finance Minister Tharman Shanmugaratnam during his Budget Speech this year.

By EMILYN YAP

TRANSACTIONS of resale HDB flats fell 6 per cent from the fourth quarter of 2007 to 6,360 in Q1 this year, against the backdrop of rising asking prices and high cash-over-valuation (COV) demands.

‘With escalating resale prices and more and more COV transactions, we saw the resale market hit resistance in Q4 last year as HDB flat buyers do not have or are not willing to part with so much cash,’ said property agency ERA’s assistant vice-president Eugene Lim. ‘This resistance carried through to the first quarter this year.’

In Q4 2007, a total of 6,750 resale flats changed hands, which was itself a 13 per cent drop from Q3 2007.

HDB’s resale price index rose 3.7 per cent in Q1 this year compared with Q4 2007.

But this increase was lower than the 5.7 per cent quarter-on-quarter rise in Q4 2007.

The median COV of all resale flats in Q1 this year was $21,000, slightly down from $22,000 in Q4 2007.

In some estates, the drop was much larger.

The median COV of executive flats in Bishan, for instance, plunged $25,000-$45,000 in Q1 2008, and that of five-room flats in Marine Parade fell $15,000-$50,000.

On the resale price trend, PropNex CEO Mohamed Ismail believes an increase is sustainable in the long term and that double-digit growth this year is attainable, given the robust economy.

Mr Ismail reckons the falling COV reflects a smaller number of private property and en bloc downgraders in the market.

He expects the COV to stabilise at $20,000 islandwide for the year, as demand for resale flats increases and the number of surplus flats falls.

ERA’s Mr Lim also expects the resale market to remain healthy for the rest of the year, though price growth may be more measured.

‘For the whole year, we do not expect resale prices to increase more than 10 per cent,’ he said.

He noted that some demand for resale flats may be diverted to the increasing number of new flats coming on stream.

‘First-timers and those that can wait a couple of years are likely to go for new flats, as buying direct from HDB involves little or no cash outlay,’ he said.

HDB said yesterday it plans to offer 5,000 new flats under the Build-To-Order (BTO) system during the next six months.

Together with 1,100 launched in Q1, the planned BTO supply of 6,100 new flats for January to September will exceed the numbers of BTO flats launched in 2007 or 2006, which were 6,000 and 2,400 respectively.

Net property income totalled $49.6 million or 8.8 per cent above forecast. ‘CapitaCommercial Trust achieved higher rental income as Singapore experienced considerable rental growth in the office market over the past 12 months,’ said Richard Hale, chairman of CapitaCommercial Trust Management, which manages the trust. ‘This growth, together with our strategy of pro-active asset and prudent capital management, increased the first-quarter 2008 distribution per unit significantly by 22.7 per cent over the same quarter in 2007.’

Mr Hale said that if the acquisition of 1 George Street at a purchase price of $1.165 billion is approved and completed, CCT’s total asset size will grow to $6.5 billion, ahead of the target of $6 billion by next year.

‘Given Singapore’s still-strong economic fundamentals and continued healthy office leasing demand, we are confident of exceeding the forecast distribution per unit of 10.04 cents to unitholders in 2008,’ he said.

Lynette Leong, chief executive of the manager of the trust, said that there is continuing keen demand by banks and financial institutions for greater space in CCT’s quality buildings. CCT’s portfolio includes Capital Tower, 6 Battery Road, HSBC Building, Starhub Centre, Robinson Point, Bugis Village, Golden Shoe Car Park and Market Street Car Park.

Grade A and prime office rents averaged $18.65 per square foot (psf) per month and $16 psf per month respectively in Q1 2008, representing increases of 8.7 and 6.7 per cent from the preceding quarter.

‘Given the prime quality of CCT’s portfolio, we have signed leases above $20 psf per month in Q1 2008,’ Ms Leong said. ‘Our well-balanced lease expiry profile, together with our pro-active asset management, will enable us to benefit from the tight office market . . . and gain continued rental upside.’

The debate on these questions has grown hotter as the global battle for talent intensifies. And it continued yesterday, with two studies offering seemingly opposite conclusions.

A study by human resources firm Hewitt Associates shows the top reason employees in Asia quit is ‘external inequity in pay’. And 70 per cent of the ‘best employers’ - more than for any other factor - see a big link between improved performance and higher pay.

But according to another study by Robert Walters, 38 per cent of employees the recruitment consultancy polled in Singapore said they would feel compelled to walk out the door if they faced limited career prospects. One in four said they were likely to leave if they did not feel appreciated by their boss.

When it comes to pay and perks, just one in five of the employees would throw in the towel, according to the Robert Walters survey, which covered 6,300 workers globally, including 1,415 Singaporeans.

Indeed, Singaporeans would seem happier with their pay than workers elsewhere. The Hewitt study shows 42 per cent of employees here are dissatisfied with their compensation, against 54 per cent for Asia as a whole.

More employees are unhappy with their pay in Australia (52 per cent), China (71), Hong Kong (51), India (44) and Japan (73).

Still, money figures strongly in the minds of Singaporean workers - perhaps more than many others in the region.

Robert Walters’ survey shows Singapore workers to be the most bonus-driven in Asia - 3 per cent of them would resign if they were disappointed with their bonus, compared with less than one per cent of Australians and New Zealanders, just over one per cent of Malaysians and 2.5 per cent of Hong Kongers.

Hewitt principal Nishchae Suri said that to keep employees happy and make them stay, pay must not only be fair but must be seen to be fair in terms of the job and compared to the pay of other employees. Employers in Asia are generally doing a bad job at this, according to him.

While Asian employers have ‘increased investment’ in compensation, they are ‘not yet’ getting the ’strategic and financial results’, he said.

Poor communications on the part of employers is the chief culprit, especially with the new breed of talent that seeks to switch jobs every other year wants complete transparency, is increasingly competitive and eager for fast promotion.

Still, the debate is far from settled. Robert Walters reckons employers should put their money into career progression.

‘Investing in career progression is one of the most important things that any employer can do to retain staff,’ said Mark Ellwood, managing director of Robert Walters Singapore. ‘While pay is important, far more vital to staff is knowing how their job will develop. Paying out the biggest bonuses and highest salary won’t guarantee that staff will stay put.’