Wednesday, April 29, 2009

TD Lowers Residential Mortgage Rates

TD Canada Trust (TSX:TD) has lowered its residential mortgage rates between 0.1 and 0.6 percentage points, bringing the signpost five-year closed mortgage rate down 0.2 points to 5.25 per cent.

Among the changes to the bank's posted rates, a one-year open rate fell 0.15 points to 6.55 per cent, a three-year closed mortgage was reduced 0.75 to 4.15 per cent and the seven-year closed rate dropped 0.1 to 6.6 per cent.

The 10-year closed rate was unchanged at 6.7 per cent.

The moves brought TD rates roughly in line with those of Bank of Montreal (TSX:BMO) and Royal Bank (TSX:RY), both of whom lowered fixed rates last week on the heels of a Bank of Canada overnight rate cut.

Royal and BMO's five-year closed rates were also dropped 0.2 points to 5.25 per cent.

Last Tuesday the central bank took the overnight target rate to 0.25 per cent, the lowest level practical and committed to keep it there for a year.

The commercial banks quickly cut their prime lending rates in step with the Bank of Canada, moving the benchmark for variable-rate mortgages and other loans by a quarter-point to 2.25 per cent.

At the same time

Scotiabank (TSX:BNS) lowered its rates by between 0.3 and 0.2 per cent. Its five-year closed mortgage rate is now also 5.25 per cent.

Laurentian Bank (TSX:LB) dropped its rates by between 0.25 and 0.4 per cent. Its five-year closed rate is also 5.25 per cent, a drop of 0.2 per cent.

Tuesday, April 28, 2009

Stock Market Manipulation - US Markets and elsewhere

Retail brokerage customers generally never learn that they paid money for something that failed to be delivered to their accounts. That is because retail customers’ brokerage account statements do not reveal whether delivery takes place; even when no shares are delivered at settlement, share entitlements are still credited to the buyer’s account. Those credited share entitlements then trade in the market as if they were real shares issued by the company. - WorldAffairsJournal Regulation (Spring 2008)

Huh? What's the above about? It's about the practice of selling shares without owning any shares, also called "Naked Shorting" and then failing to deliver the shares. In the US market, they use the term "Failure to Deliver" to describe it. The consequence of this act is to increase the number of outstanding shares of a company and basic economics of demand and supply states that when the supply increases, price goes down.

So, let's say Company A issued 1000 shares. Anyone who owns 1000 of these shares own 100% of company. Let's say a hedge fund "naked short" another 1000 shares and "fails to deliver" it. These 1000 "naked short" shares are credited as electronic digits into the buyer's online brokerage account and are paid for by the buyer. The total number of shares appearing as electronic digits are now 2000 shares, but the number of shares legally issued is only what now? The buyer has effectively paid for nothing! It has been said that such practices resulted in many good fundamentally strong companies being driven to bankruptcy in the US and it is claimed that this is rampant in that country. It is also conservatively claimed that about 1% of daily shares volume traded in the US market are such " phantom shares".

Guess SGX did a fine job to mandate that investors buy back any naked shorted shares in the market within 1 day or else face a fine of $1000.

Read the articles below for more information. Hmm...we wonder how will the companies issue dividends in this case?

Click this for greater understanding.

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Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Sunday, April 26, 2009

VA Myth - VA loans are only available to $417K

VA Myth - VA loans are only available to $417K. Myth no more, read below.

It is a common myth with VA Loans is that they don't work for your area, or the loan amounts are too low for your area. In the past this was true, but recent changes have changed the picture. VA loans are available much higher than $417K.

Please see our VA Loan Limits page for details on your county limits.

The loan limits above $417,000 are called VA Jumbo Loans. While many counties in the country are limited to the $417,000 amount, that isn't the highest VA loan available for that county. VanDyk Mortgage offers VA loans up to $1,094,625 in all the states we serve. What changes is the amount of required home equity or down payment. Each case is unique.

In counties where the loan limit is lower than your purchase price or refinance loan amount, you may have to have equity (for a VA Jumbo refinance) or put a down payment (for a VA Jumbo Purchase).

So what is the benefit of using a VA loan in this scenario? - Lower down payments than conventional alternatives, fixed rates, no Mortgage Insurance.

Let's say you live in a county where the VA loan limit is $417,000 (such as Riverside or San Bernardino counties in California). You want to purchase a home that is $450,000 with a little of down payment possible. Assume that you have full VA eligibility & fully restored Entitlement. VanDyk Mortgage will allow a VA loan in this scenario up to $441,750, requiring just $8,250 down payment, or 1.83%.

The goal of the VA calculation is the reach a guarantee figure of 25% of the loan amount. This can be a combination of the Entitlement and a down payment.

Here is the math to figure this out:
1. Take your county loan limit (in this case $417,000) and multiply times 25% to reach your maximum entitlement and guaranty available ($417,000 x .25 = $104,250)
2. Take your purchase price and multiply times the minimum guaranty required. ($450,000 X .25 = $112,500)
** since this figure is higher than your maximum guaranty and entitlement from #1, we must now figure out how to handle the shortage.
3. Take #2, the Minimum required guaranty ($112,500) and subtract the available guaranty and entitlement for you ($104,250) and it yields us $8,250.

$8,250 represents the required down payment for purchasing a $450,000 property in a county with a VA loan limit of $417,000 for a Veteran or Active Duty Service Member with full Entitlement available. $8,250 is a 1.83% down payment. Now that is a huge benefit for our Veterans. This is far superior to the conventional loan alternatives or even FHA loans.

When your bank tells you that you need to put down 10% for a conventional loan, Call VanDyk Mortgage and go with a VA loan instead. You will be glad you called.

VanDyk Mortgage is a VA Direct Lender (since 1987) offering VA Loans such as VA purchase loans, VA Streamline Refinance, VA IRRRL, VA Refinance Loans, VA Jumbo purchase loans, VA Jumbo Refinance Loans, VA Jumbo Streamline Refinance loans, VA Jumbo IRRRL , VA Mortgages of all types.

As a Government Direct Lender, VanDyk Mortgage is also a HUD Full Eagle FHA Direct Endorsement Underwriter, ie FHA Direct Lender offering FHA Loans such as FHA Purchase loans, FHA Refinance, FHA Streamline Refinance, FHA 203K Streamline Rehab loans, FHA Jumbo, FHA Jumbo Purchase, FHA Jumbo Refinance, FHA Jumbo Streamline Refinance, FHA mortgages of all types. We offer FHA & VA loans in California, Georgia, Texas, Washington, & More. Visit us at to get started or just find out more.

VA loans fast becoming the best choice for Vets to Refinance

VA loans are fast becoming the best choice for Vets to Refinance their home loans.

Recent enhancements to VA guidelines now allow Veterans and Active Duty Military to refinance out of Conventional, Jumbo, Sub-Prime, Alt-A, Option ARM, and other non VA loans into Safe fixed rate VA Loans. (see our recent post on VA loan changes here). The old VA Limit for these refinances was $144000, regardless of where you lived and your county loan limit.

2009 brought changes to both the VA Loan limits and the way VA calculates your eligibility for Guarantee. If you have full elibility (or fully restored entitlement) you can purchase or refinance up to the Loan Limit for your county (of course, other qualifications do apply such as property value, income, liabilities, etc).

Here is a list of all the counties in California that exceed the $417,000 standard VA loan maximum: ALAMEDA $1,094,625, ALPINE $503,750, CONTRA COSTA $1,094,625, EL DORADO $516,250, LOS ANGELES $737,500, MARIN $1,094,625, MONO $575,000,
MONTEREY $525,000, NAPA $643,750, NEVADA $518,750, ORANGE $737,500, PLACER $516,250, SACRAMENTO $516,250, SAN BENITO $ 937,500, SAN DIEGO $593,750, SAN FRANCISCO $1,094,625, SAN LUIS OBISPO $610,000, SAN MATEO $1,094,625, SANTA BARBARA $656,250, SANTA CLARA $937,500, SANTA CRUZ $805,000, SOLANO $435,000, SONOMA $566,250, VENTURA $650,000, all other California counties are capped at $417K.

VanDyk Mortgage is a VA Direct Lender (since 1987) offering VA Loans such as VA purchase loans, VA Streamline Refinance, VA IRRRL, VA Refinance Loans, VA Mortgages of all types. As a Government Direct Lender, VanDyk Mortgage is also a HUD Full Eagle FHA Direct Endorsement Underwriter, ie FHA Direct Lender offering FHA Loans such as FHA Purchase loans, FHA Refinance, FHA Streamline Refinance, FHA 203K Streamline Rehab loans, FHA Jumbo, FHA Jumbo Purchase, FHA Jumbo Refinance, FHA Jumbo Streamline Refinance, FHA mortgages of all types. We offer FHA & VA loans in California, Georgia, Texas, Washington, & More. Visit us at to get started or just find out more.

FHA Jumbo Refinance, FHA Jumbo Purchase loans & FHA Jumbo Streamline Refinance loans - California

FHA Jumbo Refinance, FHA Jumbo Purchase loans & FHA Jumbo Streamline Refinance loans - California

We are continuing to see the FHA Jumbo Refinance become a more common option for California Homeowners. This loan allows you to refinance your first mortgage into a Safe, Fixed Rate FHA Loan at terms that are typically more favorable than conventional lending options. If your home has come down in value, the FHA option may still be able to help you refinance out of your Adjustable rate loan. FHA requires less equity in your home than Conventional loans.

FHA Jumbo Loans are loans that are $417,001 up to your county's Mortgage limit. For example, in California, the FHA Jumbo Loan limit is $697,500 for San Diego, $729,750 for Los Angeles, $729,750 for Orange County, $729,750 for Ventura, Santa Clara, San Francisco, Santa Cruz, Contra Costa, Alameda, & Napa counties, and San Bernardino & Riverside counties are eligible up to $500,000.

VanDyk Mortgage is able to help with FHA Jumbo Loans for the purchase of your new home. Please visit our 2009 FHA Loan Limit page for details on your county. These loans require just 3.5% downpayment. Call for details to see if it could be your best choice.

FHA Jumbo Streamline Refinances with VanDyk Mortgage do not have a minimum time requirement since you purchased your home (or last refinanced). These can save you hundreds per month with no appraisal or income qualifying. We do require a good mortgage payment history.

FHA Jumbo Refinances are available to help: Consolidate debts, Consolidate a first & second mortgage, or Refinance your Non-FHA loan into a Safe FHA fixed rate loan.

Call the Government Loan Experts at VanDyk Mortgage today at 866-900-2342. VanDyk Mortgage has been making FHA & VA loans since 1987. We are a HUD recognized Full Eagle FHA DE underwriter and FHA Direct Lender.

VanDyk Mortgage is also a Proud VA Direct Lender. Go with the Government Loan Pros, go with VanDyk. Visit us at or call Brian Skaar direct at 760-752-4480 for help with your VA or FHA loan. We are your VA Jumbo Direct Lender and FHA Jumbo Direct Lender and we offer FHA, FHA Jumbo, FHA Manual Underwrite, FHA Jumbo Streamline refinance, FHA Jumbo Purchase, FHA Streamline, VA, VA Streamline, VA Jumbo purchase, VA Jumbo Refinance, VA Cashout refinance, FHA Rehab 203K, VA, Conforming & Jumbo Loans. We serve the following areas for VA, FHA and Conventional loans: California,Southern California, Northern California, Washington, Texas, Georgia, Florida, San Diego, San Marcos, CA, WA, GA, FL, MO, MI, TX, Carlsbad, Oceanside, Vista, Escondido, Fallbrook, Bonsall, Riverside, Los Angeles, Orange County, Irvine, Corona, Anaheim, Santa Ana, Seattle, Washington, Bellevue, Kirkland, Redmond, Lynnwood, Olympia, Tacoma, Puyallup, Buckley, Auburn, Kent, Federal Way, Seatac, San Francisco, San Jose, Carson, Gardena, Hawthorne, Lawndale, Inglewood, Ladera Heights, View Park, Windsor Hills, Baldwin Hills, Fox Hills, Culver City, Beverly Hills, Malibu, Santa Monica, Brentwood, Calabasas, Encino, Oakland, Bel Air Estates, Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates, Manhattan Beach, Redondo Beach, Hermosa Beach, Torrance, Sacramento, Stockton, Bakersfield, Fresno, San Marcos, San Diego, Rancho Bernardo, Carlsbad, Escondido, Poway, Oceanside, Vista, Encinitas, Carmel Valley, Scripps, Tierra Santa, El Cajon, La Jolla, Chula Vista, National City, San Ysidro, Santee, Eastlake, Ramona, Long Beach, Artesia, La Palma, Cerritos, Compton, Lynwood, Bellflower, Temecula, Murrieta, Southern California, Northern California, Washington, Everett, Lynnwood, Tacoma, Kent, Federal Way, Auburn, Renton, Bellevue, Redmond, Kirkland, Whittier, Santa Fe Springs, Downey, Irvine, Newport Beach, Los Angeles, San Bernardino, Riverside and Orange County.

VanDyk Mortgage is your FHA Lender & VA Lender of choice.

Fundamental Analysis is Useless without Integrity

'Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don't have the first, the other two will kill you. You think about it; it's true. If you hire somebody without the first, you really want them to be dumb and lazy., -Warren Buffett

One thing good about this crisis is that it gives people a chance to learn things. Having received that mass circulated email as published in the previous article, we just decided to take a look at a randomly chosen certain textile S- share company that has its shares suspended lately. Below is a snippet of announcement issued by the company on 13 March 2009 where it states that Fibrechem is in default of a loan of US$26,365,581 to a consortuim of local and international banks. So who are these banks?

See below for a snippet of the annoucement made on 22 Aug 2006 by Fibrechem.

What really amazes us is that there was little or no clue based on publicly available information that could have led to somebody predicting this could have happened. By looking at their financial statements, both audited and non-audited that were released, leading up to this default, it seemed that this company was flush with cash and settling bank loans were a non-issue.

See below for the financial statements leading up to the event.

Audited Annual Report 2007 ( By One of the Big Four Audit Firms )

The Cash and Cash Equivalent is enough to pay more than twice the bank loans owed!!

29 April 2008 - Unaudited First Quarter Financial Statement

The Cash and Cash Equivalents are again more than enough to cover 2 times the Bank loan!

4 August 2008 - Unaudited 2nd Quarter Financial Statement

Ok maybe now the Cash and cash equivalent is not able to pay twice the bank loan...but it still looks pretty decent. (Maybe the astute analyst might notice the sudden decline in excess cash over bank loan due to the huge jump in non current bank loan and question it..but we don't think we would have noticed it ....heng ah..luckily never look at this counter.)

3 Nov 2008 - Unaudited 3rd Quarter Financial Statement

The Cash and Cash Equivalent is nearly twice the bank loan...a huge jump in cash and cash equivalent amount this time.

So thats the last financial statement Fibrechem released. So who would have suspected that Fibrechem would have difficulty repaying the bank loan of a mere US$26,365,581 since they have HKD1,166,140,000 in Cash or USD$151,598,200 ( 1HKD = USD0.13) based on the last statement released??

Where did this cash go? Is it real in the first place? Which bank did Fibrechem stash this cash in? Did the big four auditor verify this cash in year 2007? What is going on!...This proves that fundamental analysis is useless if given rubbish data. Warren Buffet is right...Integrity of management is the most important! All else is secondary. S shares can go eat shit.

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Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Friday, April 24, 2009

Confessions of An S-Chip CEO - Is this true or someone wants to short something?

[Email circulation received by SGDividends]

We are victims as well!!! Let me tell you the story. By the time you read this article, it would have reached hundreds of investors, bankers, regulators and journalists. My purpose was to shed some light on the "dark sides" of the business of S-Chips (Chinese companies listed on Singapore Stock Exchange), so as to help prevent more financial losses in the future hurting the ordinary people on the
street. From this angle, I wish to redeem myself somewhat.........

It all started some 6-7 years ago. My colleagues and I were just a few of the million of entrepreneurs in China struggling to make ends meet at the textile fibre factory that we bought from the government. Some of our older colleagues had laboured for more than 20 years before having the chance to "privatise" the state-owned textile fibre factory in Fujian Province that we have worked for since the day we left school under the Premier Zhu's "government retreat, private sector advance" scheme, literally at a song. We thought we were going to be very rich very soon. Little we knew that when the local governments of the various counties and villages decided to "retreat", we end up with thousands of "privately-owned" textile fibre spinners that competed ever more aggressively. Despite ever rising revenue, margins were disappearing fast....... Sometime, we just wonder why we have worked so hard only to earn next to nothing. Perhaps, our only reward was meant to be "the master of our own destinies"...... But we never really gave up hope...... One day, we shall strike gold.......

1990, the year after the TianAnMen Incident, was really a very difficult year. Many of our clients, the textile manufacturers who were enjoying the initial euphoria of the burgeoning export demand, went belly-up within a short 2 years of economic contraction. However, we pulled through all the vanishing receivables and anguish cashflow-balancing exercises. By 1993, we were off for the biggest boom ride of our life-time. Our textile fibre business blossomed as China becomes the clothing factory of the world, benefiting not least from the one-off Renminbi devaluation that the Chinese government engineered in 1994. Those were the good old days, where sufficient numbers of our competitors were eliminated by the TianAnMen-induced recession, and the world began to look to China for every piece of garments stretching from the heads to toes. Money was easy......and we expanded our production capacity as quickly as we could, limited only by the fact that the state-owned banks were not really very keen to lend money to private enterprises like ours, and we just have to borrow from our villagers at some 15% interest rates!!! Nevertheless, we did good business and our leader, the general manager of the factory, could even afford a chaffer-driven Santana. In any case, he was too old to learn new trick, even as simple as driving itself. I was the rising star which had to bide my time, as I was the only person who speaks decent English. I was meant to be the tongue of the company in dealing with the external world. But I am getting impatient. For while the company was booking increasing profits, we never seems to have cash to be distributed as any excess cash generated from the business was never enough to cover the capital expenditure needed to expand the production. We just owned an ever-growing production business.

Unfortunately, good profit margins never last in China. Good demand quickly attracted new entrants into the business as the barrier of entry is relatively low. At the same time, some of the so called "obsolete capacities" came back from the grave and soon, we found ourselves struggling to churn our profit. It was like working for free again......lots of revenues but just no profit!!!

By the middle of 1990's, we were doing great business selling to our customers in different areas of the coastal areas. In 1995, we suddenly found ourselves having to deal with fast rising cost pressure. However, the market was buoyant enough for us to raise our product prices to pass on the cost increase to our customers. Then, we realized that we must move ahead in term of technology and product offering. Like everyone else around us, we took advantage of the tax concession offered by the government to the so-called joint venture companies. We recycled our "cash" to Hong Kong, set up a "foreign company", which in turn pumped back the cash to Fujian in the form of a joint venture entity, using the cash to purchase some second-hand German equipment to produce the chemical fibres needed in all kinds of fabrics and artificial leathers.

However, luck did not really favour us, at least thus far. Soon, we were told that our economy was experiencing very high inflation rates and soon, the then Premier Zhu Rongji stepped a hard brake on the economy, cutting the bank credit to many state-owned enterprises which were producing things that no consumers wanted. While as private enterprise we did not enjoy the benefit of bank credit, its sudden massive contraction hurt us as bad as the state-owned enterprises who received such reckless loans. We were entangled like the other enterprises in what we called the "triangular debt" problem, where everyone owes the next person money and there was just no money at the source for anyone to get paid.......!!!

The situation last for quite sometime as we lived from hands to mouths, sometimes having to send out local thugs to chase for receivable payments from cash-strapped clients. Then again, what else can we do? We had so much or our friends' and relatives' money with us investing in all these machinery now that the only road for us is to struggle forwards......turning back would have made us the "outcast" of the village.......

By the time the rest of the Asian economies cracked in 1997 amidst the so called Asian Financial Crisis, we were already becoming numb to bad news. I remembered there were days that I wished I had not joined the textile industry, or any industry at all......for making money out of making something is so darn difficult....... I thought I might have just wasted my youth.

Somehow, we managed to pull through as a group. The general manager of the factory, who is now getting seriously old, made his sacrifice along the way by selling his Santana in order to keep more mouths fed. We all had no where else to turn to but to continue pushing hard to sell our new product, the chemical fibres. Finally, by year 2000, the economy began to recover. Our hard work and persistence were also beginning to get paid off handsomely as China had become the centre of all textile, shoe and furniture manufacturing in the world, and all these products required some forms of chemical fibres. We were beginning to rake in cash beginning 2002!

Then my life-changing incident took place. One fine day in late 2002, I was introduced over the dinner table to one Singapore "Deal-maker" who was to become one of the richest men in his country in the next 5 years. Mr D was still a "relatively" poor deal-maker at that time. Just like many so called "deal-makers" running around China at that time, they hope to make small fees introducing companies to capital, or vice versa. Mr D claimed that he had successfully engineered a number of private equity transactions in China, helping companies with so called "mezzanine" financing to prepare the companies to be listed in stock exchanges outside of China. He was fully aware of the psychology of Chinese entrepreneurs and their deep dissatisfaction with the bias of the Chinese government in allowing only state-owned enterprises to list on the local stock exchanges. To us, having a listing status in China is like having acquired the right to print money. One just has to cook up a nice investment story and he could get Chinese investors to subscribe to the right issues of a listed company at any price. It was so much more an elegant way to make some money, rather than to have to toil for a few cents selling chemical fibres.......

Mr D went further to claim that he had taken some of the invested companies public in both Hong Kong and Singapore Stock Exchanges and given his investors had made some money, he always have a group of ready-investors willing to back all his "stock picks". He went on to ask quite a number of detailed questions on the operating conditions of our companies over the dinner, jotted them down carefully on a small note book along the way. Later on, we adjourned up-stair the restaurant for a KTV session. I must admit that I remembered clearly Mr D was a good Chinese song singer, having sung some hot-off-the-chart songs that I heard my niece hummed sometime shortly before the incident. His smooth handling of the KTV girls, which he asked for two concurrently, also showed that he had been around.........

The next time I met Mr D was three months later, quite unexpectedly as I had thought he could have decided to give our company a miss given our relative small size. He requested for a factory visit which, after having consulted our old general manager, I accompanied throughout. As usual, no serious business until after dinner and getting slight tipsy after a few drinks forced down by the KTV girls in the evening. I must admit that Mr D is a seasoned operator. He was quick to recognise that I was an impatient young man to take over the operation from my older colleagues. Throughout the entire evening, he was trying to convince me to move the gear one notch faster to accept some private investors into the company, beyond which he was confident to help us to get the company listed in one of the foreign stock exchanges, where everyone will be able to cash out their profit if they so chose. I pretended to be sceptical while deep in my heart, I need no convincing as I have known many Fujian entrepreneurs shot to fame and riches, 2 of them by turning large tracts of collective land into vegetable farms and the other bending float glasses he bought from state-owned factories into auto wind-screens and sell them to car manufacturers. I never doubted that one can make a lot of money from car wind-screen, but I could have never imagined striking it rich planting vegetable.......!!!

Mr D and myself both agreed later that we need to convince the other older colleagues of mine to approve such a scheme, and over time, move them aside to allow someone young and dynamic person like myself to be the face of the firm to cater to the likings of the investors, who were mostly English speaking. In the meantime, my task was to convince the existing shareholders to allow a group of Mr D's friends into the shareholding first, while paying Mr D a "structuring and introduction" fee along the way. The easy part was, as Mr D coached me on how to present to the rest of the shareholders, his fees will not be in "cash" but rather in equivalent value of "shares". He said that was to assure everyone that he could only make money should he be able to engineer an eventual listing of the company on a stock exchange, after another year of lock-up period for promoter shares after listing. All interests would be aligned, as he put it.

Mr D was indeed an experienced operator. He had anticipated all the concerns of the "older" colleagues of mine, who feared that this was another one of those "leather-bag-company" deal-makers that was trying to make money out of no commitment. So he got through the first "hurdle of trust" after my carefully orchestrated presentation to the "board" of the company. However, there was still one important issue we could not resolve amongst the board members. The finance manager correctly pointed out that the company indeed, did not need substantial amount of cash at this moment as we were not expanding aggressively anymore. The market place for our products was relatively stable right now with demand and supply growing organically. We will not be able to drive higher sales without sacrificing our margins by cutting prices. In short, we can only grow organically at around 10% per annum, which was probably not the most exciting story for the investors. In fact, the board members did not see the need for new capital. However, the idea of getting listed did appeal to them. They too had many friend who had become "paper millionaire" after the companies got listed. They too were looking for
the big-pay-off day. So I was tasked to come up with a solution. In other words, there was a "green-light"! I did not expect my luck!

Almost immediately after the board meeting, I called Mr D to tell him the outcome, as well as the issues raised. Again, I thought he must have expected the outcomes. As he explained calmly over the phone, the first round investors (which he called angels) will not put in a lot of money so that they would not dilute the existing shareholders very much. These angels are the "connected persons" that will come in with their own money (through Mr D's personal vehicle) that will help cement the way for some of the well known direct-investment funds to step in at a slightly later stage, which would provide the company with the credibility, other than funding, to convince the stock exchanges to allow the company's listing, and the subsequent active participation of other institutional investors during the IPO. Mr D went on to explain that the process of getting a Chinese company listed was in fact, an art. There were not many people like him that could have the trust of many influential people to conceal their names behind his vehicle to invest in a company, not unless they have been working on other cases together before and having developed deep working relationship. These angels will see the company through the process from getting "restructured" to "listed", rendering their helps in one way or another
through exerting subtle influences on counter-parties, bankers, regulators and other investors. Mr D's vehicle will participate in the shareholding of the company first, where they will invest up to 5% at book value. In other words, they demand for very cheap entry. Mr D will only take his fees later after having brought in the money from direct investment funds, in larger quantum, in the form of shares of the company at book value before the entry of new capital. He wanted 2% worth of the amount of money he would bring in from the funds in such shares. Subsequently, he went on to explain that this was the modus operandi these days as he could introduce us to the senior executives of the companies who had done business with him for further due diligence on his reputation. In particular, he emphasized that my colleagues should not be worried at all given the fact that it was going to be his and his friends' money that will be in their hands, rather than the other way round. My older colleagues did find some solace in this argument later on.

As for the use of money, Mr D simply pointed out that we will have 6 month to a year to come up with a new plan on spending the proceed of investment, in the form of new technology and new products. "Aren't you guys always looking for money to upgrade production machinery to produce new stuff for the market? It the same bunch of the customers anyway......", so he quipped.

So the decision process took a few months, where in between, Mr D sent in some accountants and lawyer to conduct some checks on our operation and accounts. We had nothing to hide then as we had no reason to fake anything. Everything was ours.......then. Subsequently, the "angels"
came in, followed by, indeed, a number of reputable direct investment funds a few months down the line. We got a whopping US$20mn to put up a new plant to produce a new type of artificial fibre, the machinery of which was to be imported from Germany. The new product was in fact,
attractive to a lot of customers. However, none of them were going to buy a lot of it at the beginning as they were not sure their customers were going to like the new types of yarns made of this new fibres. Business was not as brisk as Mr D had hoped for.......

On the other hands, Mr D seemed quite keen that we could move forward in our listing process. He began to educate us the process and requirement of the stock exchanges for listing. We paid visit to Hong Kong and Singapore, talking to bankers and exchange officials, attending
seminars, as organised by Mr D. We were all psyched up to be a rich millionaire once the company is listed. However, there was just this little problem.....our new products were not accepted by the market as fast as we had wished for. Most of our customers operate under very
tight cash flow situation. They only have working capital to provide for the acquisition of raw materials to produce the yarns ordered by their customers. No one was going to spend a lot of money buying our new fibres, produce large quantity of products to purvey them in trade
shows, despite they all fed back with good comment on the potential of the new fibres.

Very quickly, Mr D came up with an idea. In order to boost our sales numbers fast, he will raise another US$20mn of money from all the direct investment funds in the name of working capital need. As he explained, they often did the same tricks with those companies they listed before.
They will raise new capital to produce the new products to sell to customers, encouraging them to help push the new products by offering them more favourable and longer payment terms. With the increased sales and profitability number, he could get the company to list very quickly
to get more money to help push for more sales....... He claimed he had done it many times before and it had always worked out. The economy was recovering quickly in 2003, nothing was to going to go terribly wrong. When I asked whether that would be considered "artificially inflating
sales number", he laughed and quipped, "with the capital markets on your side, you can engineer self-fulfilling prophesies!"

Of course, this article cannot be complete, at this juncture, without citing Mr D's favourite quotable quote. "Water enough money into any company, even a fake one could become real some day." He believed so much in this that I thought one day, this could cause his downfall.

So we went ahead, sold the new shares at higher valuation to another bunch of investors Mr D arranged. He took another round of commission in the form of shares. We were beginning to admire Mr D. Money flows through his hands like water and he did it so effortlessly. We were no
less impressed by his connection to some of the richest and most influential people, particularly in Singapore. You see, he was viewed as a successful Singapore entrepreneur made good in the vast land of the North. Through diligence and perseverance, he carved a niche for himself
identifying promising Chinese companies to groom for listing on the Singapore Stock Exchange which was losing out in race to Hong Kong Stock Exchange as the Chinese state-owned enterprises were encouraged to list in Hong Kong. Mr D was their hero, directing promising private Chinese enterprises to list in Singapore and along the way, enriching many "angels" and local investment banks in Singapore.

I chanced upon many of these angels as well. There were occasions Mr D would have called me to help arrange for some transport and accommodation in Xiamen for groups for "secret" visitors. They are usually small groups of 4-8 people. I would generally put them in
comfortable Buick mini vans, receiving them from the airports, ferrying them to golf courses, restaurants and night clubs. They would usually visit one of two factories invested by Mr D. From my impression, these were the angels behind Mr D, which for obvious reasons, he had to
please. There were bankers, lawyers, other deal makers, stock brokers, fund managers and people that do not have a job, simply because they were so rich already. Occasionally, there were ex-CEOs or Chairmen of large government controlled enterprises in Singapore. Once, I even met a supposedly ex-member of parliament in Singapore. It was obvious to me that Mr D entertained them in separate groups at separate times, taking pains in ensuring that some of them were not aware of the involvement of the others, for some reasons. I was always invited to all these golf and night entertainment events for a simple reason: I speak English and Mr D
wanted to be seen as having someone like me to watch over his investment in this part of the world and helped him to tap into different kinds of local relationship. The other Chinese entrepreneurs may not be comfortable in dealing with the whole bunch of English speaking

One common trait of all these trips was that all these guys from Singapore seemed to love the night clubs in China. The daily programme always ended in some night clubs, where these guys would party till the wee hours, every night they were there. Mr D would sometime, when he was half drunk, tell me that he had again "nailed" some key relationship and one of the travellers in the group would soon be in his "Club". He would whispered that someone in the group was the senior partner of an investment fund, or someone in another group was connected to the
so-and-so in Singapore, or someone was closely associated with the chiefs of some Singapore banks, or someone had "influence" over the listing approval process of the stock exchange, and some would just be some new investors that he was trying to woo to invest in his pre-IPO
projects or the shares in the companies that he sponsored the IPOs. When I asked why they were all so tireless in their nocturnal activities, Mr D laughed, "This is what I call pent-up demand. You know these people cannot even come 100-meter close to any KTV in Singapore because of their social status. The opening up of China is probably the best thing
that happened to all these Singaporean men, for they can at least release their "valves" once in a while........ Do you know how boring Singapore is? I have a permanent KTV room booked up in one of most posh KTV in Singapore, costing me half a million Dollar at the minimum every
year. Guess what, the only important guests I have using that rooms are from China!"

Watching Mr D in action, I finally understood the true meaning of "club". He had managed to combine the "social club of friends" and KTV clubs so well that I thought every successful Chinese businessman should learn. And in so many ways, the "club" in Singapore is really not that different from the "club" in China........

So finally, we got our act together to attempt a listing towards the end of 2003, after much of the financial twisting and engineering to make our company look like a well-funded high-tech textile fibre company on the verge of experiencing explosive sales take-off. In truth, we
produced a lot of the new fibre products and literally give them to our customer to produce new fabric for marketing purposes, with the promise that we will not collect money until their products are sold. Nevertheless, we book these as receivables. To the dismay of Mr D, my
older colleagues had insisted on listing the company on the Hong Kong Stock Exchange, rather than the Singapore one, where Mr D has greater control on the process. They felt that the company would probably be accorded higher valuation in Hong Kong. Besides, they were not
comfortable with Mr D's influence in Singapore fearing the ultimate loss of the control of their company. Mr D went along grudgingly, helping to smooth the way to facilitate the IPO.

We got a small investment bank to underwrite the IPO. The big ones were really not interested in this small piece of business. We went on to file the application to list to Hong Kong Stock Exchange, who was equally high-handed as Hong Kong was flushed with quality large size
state-owned enterprises queuing up to list there. Being relatively uninterested in small size listing and more experienced in evaluating the quality of smaller Chinese private enterprises, they were quick to notice the sudden expansion of account receivables on our accounting
statements. They followed up with a number of questions with the clear purpose of delaying our listing, probably to see how these receivables will behave given longer period of time. In short, there would be no quick IPO for us.

Mr D was quick to use this delay to his advantage. He hinted to everyone on the company board was that one of the reason for the stock exchange delay was due to the lack of a convincing younger manager helming the company, and that our senior colleague was already too old to project a "dynamic" image to the Exchange and the investors subsequently. He wanted me to be promoted to the CEO position while our existing GM to become the Chairman of the board. With his insistence, my appointment was pushed through the board, which made one of my older colleagues very angry as he was supposed to be the next-in-line in seniority. But heck, he should have spent some time learning English!

Mr D, being truly worried about the age of the receivables on our book that would become increasingly dubious as days go by, pushed us to shoot for a Singapore listing where he feel, with his broad relationship will help a smooth IPO. This time round, my older colleagues obliged
grudgingly. So we quickly filed an application to list in Singapore. It proceeded relatively smoothly and we went through an initial hearing very quickly. The market was in relatively stable conditions and we felt we could get the IPO proceeds quickly at the turn of the year. With lot of money, like Mr D's famous words, a fake company can become real....... To be fair, ours was not really a fake company. We were just doing what the Chinese proverb describes: Accelerating the growth of the seedling by pulling it up a little everyday......

To our surprise, we got a letter very soon from the stock exchange questioning us the reason for the failure to disclose to them we had applied to the Hong Kong Stock Exchange earlier. They asked whether we had been rejected previously and on what ground we had been rejected.
Just as we wonder how they found out so quickly since one could safely assume due to competitive relationship, these exchanges should not be talking to each other on micro matters like this, Mr D came storming in over-night. "Someone wrote a poison letter to the stock exchange", so he explained. "Someone who knows the situation very well and who is not very happy with the whole thing", he concluded. We were fortunate, he went on to exclaim, as he felt that given the Hong Kong Stock Exchange never really rejected our application, he could still salvage the situation using his relationship and influence.

While there was no hard evidence, we nevertheless took the precaution of asking for the early retirement of the senior colleague who was passed over for the post of CEO as we suspected him to be the whistle-blower. We made sure he was well compensated in monetary terms as we thought that would sooth his anger, with promises to allocate more of the shares to him so that he would share our desire to see a successful IPO. Then we went on to reply to the stock exchange disclaiming the fact that we were previously rejected, citing our need to access capital markets fast as ours business was expanding rapidly. Hong Kong was just going to be too long a wait for us. On the other hand, Mr D worked his network and "club of friends" to sooth the nerves of the exchange officials, who were working hard to promote Singapore as the "second board for China" as the launch of "second board of China in Shenzhen" hit a snag when the
National Peoples' Congress decided that the Chinese investment public was still too unsophisticated to handle investing in non-State-controlled enterprises that even the Chinese government may not be able to police effectively.

So after 3 month, we were informed that we manage to secure the final hearing. Mr D and some young lawyers and accountants spent a few days preparing me to handle the questions "correctly". I saw the signs of satisfaction on the faces of the officials during the hearing. One of
them even went on to comment on the fluency of my English...... Mr D was right again. My Chairman could have fumbled and rumbled on just like any other Chinese CEO during such occasions. They were just the hardworking mulls that built the foundation of the Chinese's manufacturing might. I belong to the generation that would take the company to soar higher as
we understand and speak the language of high-finance, in English!

The battle to IPO was hard won. We got listed in 2004 and to our pleasant surprise, some of our customers came back to pay down the receivables and asked for more of our new chemical fibres. By now, China has become the "factory of the World" that churned out all kinds of
consumer and industrial products so cheaply that the Americans and the Europeans were so addicted to. The stock markets and physical property markets in the world were becoming buoyant and everyone was beginning to feel wealthy and began to spend more. Our new fibre products found more commercial uses and we bought more machines using the IPO proceeds to
produce more products to cater to the booming demand. Again Mr D was right. Pour more cash into the business and you will get a real company.........just like the pig-farmers listed on the stock he put it.

Sensing potential to make a lot of money out of the good performance of the company and the buoyant market conditions, Mr D descended into town one day and asked me out for a dinner. As usual, we headed to his favourite KTV after dinner. After a few drinks, he leaned over and
whispered to me, "Hey, this is your chance to grow really big very fast. The IPO proceed was not enough to fund your growth. Now that we are listed, we can place more shares out to raise more money to accelerate the business expansion to capture more customers before the competitors
in China could replicate our capabilities, which always happen in every industry and business in China." I was reluctant to agree to help sell the idea to my older colleagues as their shares were still in lock-up period and I imagined they would hate to see any dilution of their interests further at this juncture. Mr D went on, "I really needed your help as I need to get the shares placed out to some of those who helped us through the difficult times just not too long ago. We need to let them make some money as we are entering a bull market soon. In any case,
the issuance of more new shares will give us more power to cement your position as the number one man in your company as we all support you rather than your older colleagues."

As usual, we kind of half forced the issue through the board with my older colleagues grudgingly approved some kind of convertible issue to assuage their fear that the new institutional investor would not be able to sell before they were allowed to. In Mr D's effort to consolidate his
hold of the board further, a new director from the institutional investor group was appointed to the board. I had known him earlier as one of those that visited our plant before the IPO, when Mr D was just beginning to restructure the company shareholding where this new
director was once introduced to me as an "angel" investor. Apparently, they were good friends that "make money together".

By 2005, the Chinese economy had entered into another "boom era" and our business was literally flying, just like any other businesses in China. Profit margins were good while sales expanded quickly, and our share prices rose more than 3 to 4 times from the IPO price. Many of older colleagues sold their shares and retired happily into the sunset in 2006, only to regret to see the shares they sold almost doubled again in 2007. Being the new helmsman, I could not easily sell my shares as it would have been construed as management not having confidence in the business.

By then, Mr D had become one of the richest men in Singapore. Leveraging on his experience and the capital he accumulated from earlier successful IPOs he conducted, where in some case he made more than 50 times his capital, he exploited his new reputation as the "preferred deal-maker in Singapore" to the maximum. His "club" became increasingly larger as many people with money and "influence" joined the "club" to participate in this unprecedented "Chinese feast". He doled out hot IPO share allocation through investment banks to repay old favour and to cultivate new relationship. Success begets success and money begets money. It all
seemed so easy and so natural. Everyone got what they wanted. The Chinese companies got their money to expand their business (which at a later stage, no one is really sure which company really had any business to start with), the entrepreneurs were handsomely rewarded for the risks they undertook, the deal makers got their fees, the angels made their killings, the bankers collected their fees and dished out new loans, the lawyers and accountants recruited more young graduates to cope with the record work volume, the stock exchange got their "new mandate as the second board of the Chinese companies", the investors got their hot-and-sizzling China concept stocks and above all, the rich and the influential members of the "invisible clubs" were all happily enriching their own pockets......

The reason why Mr D was successful, I realised, was that he always try to help the people who helped him in one way or another to become richer. Despite the fact that I could not sell my shares, I got the help of one of his banker friends to obtain some financing by securing my
stake in the company to join in the biggest "Chinese feast in Singapore". Just like all the Chinese entrepreneurs Mr D helped, I became one of his "angel investors", taking stakes in promising new companies through his vehicles, got allocated hot IPO shares and reaped substantial gains within short span of time. I too, was becoming not only asset, but also cash rich. I took advantage of the Singapore immigration rule and got myself a permanent resident by purchasing a
property in Singapore. I wanted my son to study in the English school in Singapore and grow up as part of the establishment there. In any case, I would be able to help him join the "club" and he will be taken care of the rest of his life. As for Mr D, he was purchasing properties in the form of "tracts of land" as he moved to diversify his assets from stock holdings to land holdings, with a sight to become a serious property developer. The Singapore property market was getting sizzling hot by the middle of 2007 and it seemed nothing could go wrong, particularly when 2
casinos were being constructed in an otherwise very conservative society.

For myself, Mr D was going to be my role model. I went on to fund entrepreneurs and Chinese companies directly, hoping one day to bring these companies to someone like Mr D, and make more than the Singaporean deal-maker, at least equal........ Oh, I forgot to mention that the
Chinese local stock market went through the roof as well. To take advantage of this, I needed no advice from Mr D. My friends in the local banks helped me secure the capital easily just like what they did for thousands of state-owned enterprise officials. They took the company's
cash as "invisible lien" to lend money to the managers of these companies to punt in the stock markets. The profits of such stock market speculation go directly into the pocket of the managers. However, only in hindsight after the stock market collapse at the end of 2007 that it
became obvious a lot of Chinese companies' cash in the bank vanished into thin-air alongside the stock market bubbles.

Our worlds began to unravel at the end of the third quarter of 2007. By then, the Sub-prime Crisis, as we knew it now, had hit the U.S. economy. We were still busy feasting in the spoilt of the capital market excesses, unaware of the impacts of such a crisis that originated from the housing bubbles in a country so far away. We were blind-sighted by the ease of making money from stock markets and at the peak of the markets in the middle of 2007, we all felt like the "masters of the universe".

The first sign of trouble amongst the Singapore listed Chinese companies appeared when the share price of a Chinese steel company got sold off aggressively. In good times amidst a vibrant economy, this company presented to the investing community a story of their ability to turn in
good profit margins by buying hot-rolled steel coils, coating them in zinc and sell them to car and consumer durable makers. One analyst, whom everyone ignored when the stock prices were rocketing, did question its business model as firstly, such production method is highly inefficient
as most modern steel mills produce zinc-coated plates in one continuous process, and secondly, the investing world also knew that the prices of hot-rolled coils became excessively expensive as there was a preponderance of such downstream processing plants who got squeezed by
the few integrated steel giants who have the capability to smelt iron-ore. Then there was the rumour of the company being privatised by a foreign steel giant seeking easy entry into the China market and its stock prices shot up before the trading of this steel company was suspended one day. Rumour had it that it had been reporting fake profits, an official report of which the investing community is still awaiting after a few months. It was so obvious an insider job to cash out their position to the retail investors and apparently, the company management was not contactable anymore!

By the second half of 2008, I believed many Chinese company CEOs were having tough times struggling to keep their business afloat amidst the most serious and swift crisis in memory as the credit situations around the world got frozen up. Worst, many of us were facing more serious
issues in our personal finances. All our investments in stock and property markets were plunging in values amidst the so-called sub-prime crisis. Worse, we could not sell our stocks and properties as the transaction volume of these investments just vanished quickly together with the confidence of the investors globally. While we busy feasted in the spoilt of the capital market excesses over the last 2 years, we did not realise that we were piling on quite a fair bit of leverages as we secured our investments for more bank loans to attempt to reap more profits, when it all seemed so easy. We never thought we could have any problem of repaying any of our borrowing as we were sitting on a lot of gains on our investment holdings.

There was only one easy way out for all the Chinese company CEOs and that was to dip into the honey jugs. We all understood the importance of having our closest allies to be the finance managers of our companies so that any small "problems" could always be ironed out. In this case, I just "borrowed" some cash from the company accounts to fill some of the "margin calls" from the banks outside of China, which financed my "investments" in the stocks listed on Singapore Stock Exchange, as these foreign banks were ruthless in coming to seize the underlying security when the "margin calls" were not met. In some cases, I just pledged more
of my personal assets to the foreign banks. I was becoming very stressed by all these happening and was not sleeping well.

Mr D was not having a good time either. He too was suffering from exactly the same problems as we were just emulating his investment styles and leveraging activities. I heard of incidents where he turned to some of other more cash-rich companies that he invested in to
"borrow" some cash to bridge through some "margin calls". He sold down quite a fair bit of his investment holdings to some "friendly hands" in a series of stock placements. At this moment, the goodwill and friendship he built over the years came to his rescue in these moments
of "illiquidity" as the market transaction volume just dried up almost completely. However, the market prices of the stock holdings we used to secure our financing continued to drop by the days. Some of our friends and fellow "angels" were selling their holdings........and may just be
in the same kinds of troubles as well. No one trusted each others at moments like these. Those that were selling their investments would not pre-warn their "fellow investors" as everyone would rush to sell at the same time! It was a time where everyone was for himself!

My anguish did not escape the attention of the "director" on our board that Mr D posted in earlier. He flew over one day and was visibly concerned about the situation of my finances and of course, more importantly, that of the company. He sensed troubles as he knew that I too, had quite a fair bit of personal investments that were vanishing into the thin air in values. By now, at the end of 2008, I was becoming desperate. Our company was going into the "audit season" and obviously, there was a large cash deficit that we would not be able to explain to the auditor. In the past, we could have just "arranged" for some cash to be credited into the bank account for a brief period to satisfy the auditors' check. However, there was no such "temporary cash" to be found at any price as the sub-prime crisis had now developed into a full blown credit-crisis around the world. China was not spared in the process. With no where to turn to and the audit dateline closing in, I took the risks to "brief" the director of the true situation and asked for his
help. I was surprised that he was not shocked by my confession. He had probably guessed it!

In any case, the director asked me to remain calm while he would consult Mr D to seek some kinds of new financing to help bridge this difficult period. He asked that everything remained confidential as the last thing we wanted the world to know was the "missing cash" in the company accounts. H told me that quite a number of the S-chip CEOs were on the same boat and some of the "funds" that used to backed their IPOs have been able to extend some credit directly to them ease the pressure from the foreign banks, secured by again, stock holdings of the CEOs. Little did he know that my assets had almost been entirely secured by all kinds of creditors already!

Then the irreparable damage struck. I had borrowed some money from the local Chinese banks to punt in the local stock markets. The arrangement was such that I had to return such cash to the Chinese banks at the end of the year because they too, were subjected to annual audit. I had
carefully maintained sufficient cash in our company accounts, which served as the "collateral to the conscience" of my friends in the Chinese banks. As I began to use them to fund the "margin calls" of the foreign banks and the amounts got further depleted by operation losses of the company amidst the worst economic crisis the world was now facing, my "friends" in the local Chinese banks were not going to take a chance on their own fate. They were definitely not "friends in need". They simply deduct the amount I owed personally from our company
accounts two days before their auditors came in, which was of course, a few days before our company auditors came in. The rest was history...................

The auditor, which was an international firm, was not going to take a chance with their reputation. They formally informed our board of directors in early 2009. In other words, they were warning the board that the financial statements they were going to publish would be "disastrous" and could cause a serious enquiry by the regulators. I think some insiders proceeded to sell some of their shares before any official announcements were made but most of us were warned not to do anything with our holdings as that would be considered "insider trading". Of course, all my older colleagues and company directors hated me as a consequence. I was asked to absent myself from all their meetings as they attempted to come up with a solution before the mandated result announcement date stipulated by the Stock Exchange.

I was very scared. I had no one to turn to as even Mr D had stopped answering my phone calls. Everyone was trying to distance himself from me and it became obvious that I was going to be the "scapegoat". To protect myself, I seek the advice of some lawyers in China who in turn, consulted their friends in Singapore. To my relief, I was advised that should I be found guilty in the Singapore courts for misappropriating company assets, there was no established bilateral treaty as yet for Singapore court to extradite me from China. The China Securities Regulatory Commission, the securities regulator in China, had never once recognised their responsibility to regulate the S-chip companies listed in Singapore. In fact, the Hong Kong Stock Exchange had faced similar issues for decades in their attempt to regulate the P-chips, which were Chinese private enterprises listed on Hong Kong Stock Exchange, to no avail. In other words, as long as I refrained from stepping my feet on Singapore soil, nothing could be done to me. In any case, I thought given the hatred I faced from all my older colleagues and friends in the hometown, I should be taking some long overdue holidays. I relocate my family to a Chinese seaside town. Although I was now an ordinary citizen, I was glad that my wife kept quite a far bit of the money I gave her along the way and that should be enough to last us a life time, at least in China.

Through internet, I came to know that the company finally disclosed the incident to the Stock Exchange and the stock was suspended. They appointed an investigator but I was no where to be found. So it would be interesting on how the story could turn out post the investigation report. In fact, a number of S-chips suffered from the same problems and were suspended from trading soon after us. Inevitably, there were cases of over-stated revenues, fathom receivables, missing cash, over-leveraged financial positions of the founding entrepreneur who mortgaged away their own stocks, as well as outright manipulation of stock prices. In many cases, i suspected the irregularities had begun right from the very beginning, before the companies were even listed. Many were not real companies at the first place. My friends in the know told me that a few more had been discovered as suffering from "missing cash" and jokingly commented that the Exchange had to arrange for a smooth sequence of announcements just like the way they schedule result announcements of listed companies.

With all these irregularities exposed and more promised to appear, the stock prices of all S-chips have literally collapsed. All my friends and their "club members" must have suffered tremendous losses. Some dealmakers and their syndicate members apparently were facing margin calls on daily basis and some even declared themselves bankrupt. It must have been a very trying period for everyone. However, I did not seem to have much sympathy to all these people. I witnessed how some of them became filthily rich in a short span of time without having to work hard, while other enjoyed a good ride in fortune just because they (or their friends or relatives) were in position of influence. I was the only one that would be made a "scapegoat" and had to live a life of "exile", while these guys could still just lick their wounds secretively
and continued on with their life. I do not sympathize those institutional investors who lost their money as if they did, they were simply either incompetent or someone had benefited personally along the way in having committed their funds' money in such investments.
Curiously, I wonder who will speak on behalf of all the many ordinary people in Singapore who came to believe the investment potential of these S-chip companies after all the beautiful "packaging" the dealmakers and entrepreneurs wrapped around them, and went on to invest
their life savings in the S-chips, only to find out one day that all these were worthless!

So when dust finally settles one day, we shall all look back and evaluate what had gone wrong and who are to be blamed. I am sure all fingers will be pointing at the Chinese entrepreneurs such as myself, who are usually labelled as "greedy and unscrupulous". There is a ring of truth to that accusation and I admit I am guilty. But how about those dealmakers, who taught us how to cook the books? How about those angels, who hid their identities behind some dealmakers and exerted influences to assist them to succeed in their schemes? How about those institutional investors who trifled with the money entrusted to them? How about those intermediaries and professionals who were not vigilant enough to protect the interest of the investing public?

I would like to end with a comparison. The Ming Dynasty collapsed only after the General (Wu San Gui) they sent to defend the border against the Manchurians opened the gate voluntarily to allow the Manchurian's army to come into the Great Wall. General Wu did that probably out of a
promise to be made a king later on and be endowed tremendous amount of riches by the Manchurians. Of course, the historians would like to add that he also needed the help of the Manchurians to defeat another general that had taken his favourite concubine. In short, the thieves and robbers are only usually allowed in by the insiders..........

If you have read the story till this part, I am sure you are either a victim or someone who is deeply interested in the development of the S-chips going forward. Please help to forward this email to any many such interested parties as possible. We need to put an end to all these
irregularities lest more ordinary people on the street suffer unnecessary losses.

In the process, you will help me to partially clear my name...... For I am not the only one to be blamed.................


1. Not everything is true in this story that I have just
presented in order to protect some friends that still remain friends. In
particular, the story before 1995 was inserted in only to give you a
perspective of the difficulties that most Chinese entrepreneurs went
through, and how they eventually all came to resent the ease and
ruthless manner in which people like Mr D made great fortunes leveraging
off their hard work.

2. At the same time, I sincerely hope that the investigation
report that was pending in the case of my company comes out being at
least "fair" to me. Otherwise, the more "real truths" will follow in
subsequent emails......... hahahaha, the power of internet........

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Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Wednesday, April 22, 2009

The End Probably Isn’t Near

The closest thing to a real estate crystal ball in the last few years has been the house auctions that are regularly held around the country.

In 2006 and early 2007, the official housing statistics were still showing that house prices were holding up. But that was largely because so many sellers were refusing to sell. The auctions, made up mostly of foreclosed homes, showed the truth: house values were starting to plummet in many places.

So a few weeks ago, I decided to go to an auction at a hotel ballroom in Washington — and to study the results of several others elsewhere — with an eye to figuring out whether prices may now be close to bottoming out.

That’s clearly a huge economic question. Last week, JPMorgan’s chief financial officer told Eric Dash of The New York Times that JPMorgan, and presumably other banks, would be under pressure “until home prices stabilize and unemployment peaks.” As long as home prices are falling, foreclosures are likely to keep rising and the toxic assets polluting bank balance sheets are likely to stay toxic.

There are reasons, though, to think that prices may be on the verge of stabilizing. Relative to fundamentals, like household incomes and rents, houses nationwide now appear to be overvalued by only about 5 percent. You can make an argument that the end of the housing crash is near.

But that’s not what I found at the auctions.

“This is a perfect storm of opportunity,” Bob Michaelis, goateed with a shaved head, told the 300 or so people who had come to downtown Washington for the auction.

Mr. Michaelis, the auction manager, spoke from a lectern on stage, and his goal seemed to be to persuade people that they might never see a buyers’ market as good as this one. Prices have plunged, and interest rates, he said, are at “generational lows.”

“Look around to your left and your right, and you’ll see someone who sees an opportunity just like you do,” Mr. Michaelis said. “We’re approaching the bottom of the market, I think. We’re approaching the bottom of the market, if we’re not there already.”

He then told the audience that, in the last 100 years, house prices have recovered from every downturn and gone on to reach record highs. Oh, and Wells Fargo and Countrywide were standing by, ready to offer financing to qualified auction buyers.

If nothing else, this sales pitch certainly had chutzpah. It combined the old bubble-era notion that house prices always rise over time (ignoring the fact that incomes, stock values and the price of bread do, too) with the new postcrash idea that houses must be a bargain because they’re a lot cheaper than they used to be. Even Countrywide, which was taken over by Bank of America after so many of its subprime mortgages went bad, is still part of the housing pitch.

Yet as soon as the auction began, it was clear that the pitch wasn’t working.

The winning bid on the first home auctioned off, a two-bedroom townhouse in Virginia Beach, was $115,000. Just last July, it sold for $182,000, according to property records. A four-bedroom brick house with a two-car garage in Upper Marlboro, Md., went for $375,000. Last year, it sold for $563,000.

Throughout the evening, such low-ball prices continued to win the bidding. At one point, the auctioneer, Wayne Wheat, interrupted his sing-song auction call to cheerfully ask, “Where are my investors?”

The tables that had been set up around the edges of the ballroom, reserved for people planning to buy multiple houses, were mostly empty. Many audience members, like the man in a camouflage baseball cap just in front of me, were attending their first auction.

On Sunday, my colleague Carmen Gentile went to a larger auction, in Miami, to see if my experience had been unusual. It wasn’t. The homes there also sold for just a fraction of what they would have even a year ago. The rate of decline in Miami hasn’t even slowed noticeably in recent months, according to data kept by Real Estate Disposition Corporation, known as R.E.D.C., which runs the auctions.

A recently transplanted New Yorker named Michael Houtkin won the bidding on a one-bedroom condominium on the outskirts of Boca Raton, a few blocks from three golf courses, for the incredible price of $30,000. “Things were almost being given away,” he said later.

As is often the case at these auctions, the seller of the condo — Fannie Mae — retained the right to refuse the winning bid and keep the property. But Mr. Houtkin told me he was optimistic his bid would be accepted. An R.E.D.C. employee suggested to him that $30,000 wasn’t much below the minimum price that Fannie Mae had hoped to receive.

How could that be? Because Fannie Mae, like many banks, is inundated with foreclosed properties. In recent weeks, banks have begun accelerating foreclosures again, after having held off while waiting to find out which homeowners would be eligible for the Obama administration’s assistance program.

The glut of foreclosed homes creates a self-reinforcing cycle. Falling prices lead to more foreclosures. Foreclosures lead to an excess supply of homes for sale. The excess supply then leads to further price declines. Jan Hatzius, the chief economist at Goldman Sachs, says that the “massive amount of excess supply” means that home prices nationwide will probably fall an additional 15 percent.

This estimate hides a lot of variation, too. In Miami, Goldman forecasts, prices could drop an additional 33 percent, which is pretty amazing since they’ve already fallen 50 percent from their 2006 peak.

Nor is excess supply the only reason prices still have a way to fall. Nationwide, homes may not be overvalued by much. But in some cities, including New York, San Francisco, Los Angeles, Boston, Chicago and Miami, they remain very expensive. So while Mr. Hatzius and his Goldman colleagues are somewhat more pessimistic than most forecasters, the difference isn’t enormous.

I’ll confess that this bearish picture isn’t exactly what I had hoped to find. A year ago, as part of a move from New York to Washington, my wife and I bought our first house. We did so fully expecting prices to continue falling (though perhaps not as much as they ultimately will, given the severity of the financial crisis). But we decided they had fallen enough for us to take the plunge. We preferred buying before the bottom of the market instead of renting and having to move again in a year or two.

Still, when I wrote about that decision last spring, I argued that anyone who didn’t have to move probably should not buy yet. Prices still had a way to fall.

They don’t have as far to fall today, but the great real estate crash is not over, either. So if you are part of the 30 percent of American households who rent and you’re trying to decide when to buy, relax.

The market is still coming your way.

Sunday, April 19, 2009

Regarding the Recent Bull Rally - Irritated SGDividends

We are very irritated by CNBC and the presenter whose name is something Cutlow or Cudloh or Cartlow. He keeps talking up the market and sometimes we really wish to stuff his mouth with some spicy chicken drumstick but it will be a waste of money. So well......Anyway our auntie and uncle unofficial radar has detected some interest in stocks of late among their ranks which to us contrarians sounds like a bear market rally. Anyway, we really don't know and your guess are as good as ours. It's just eye popping to know that Goldman Sachs has issued a Target Price of $3 for SGX. Wow...way to go man.

So since we are unsure, let us look at the recent past to derive some form of tangible data to work with. Of cos past events might not be reflective of future events but hey....thats the best. Let us look at 3 counters which are pretty reflective of the general market sentiment in Singapore. SGX, DBS Bank ( Our late respect for Richard Stanley) and Keppel Corp.


DBS Bank

Keppel Corp

From the above chart, it shows that during this period from March - May of last year , share counters go up in value, before plateuing or going down slightly. So will this pattern repeat? Let us see.

Anyway, though we don't usually give out target prices but we have been looking at a certain indicator and are testing it now. So ( Please take it with a pinch of salt and we are not liable ah...don't be stupid, unless u believe in Ghost busters or fortune tellers), so SGX should not go above approx $6.50 ( plus minus 10 cent) in May 2009, and it will go down to below $5 in June 2009. Let's see if it works.

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Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Wednesday, April 15, 2009

Canada Mortgage Rates Not Likely to Fall

Mortgage rates in Canada, which have plunged by almost 50 percent in the last year, aren’t likely to fall further, said Phil Soper, chief executive officer of Brookfield Real Estate Services Fund.

“Certainly with the Bank of Canada’s target rate set at virtually zero, there’s very little room,” Soper said today at a conference in Toronto on Canada’s real estate market. The rate is “the lowest it’s been in anyone in this room’s lifetime.”

Rates for home loans have been dropping during the biggest financial crisis since the Great Depression, with some lenders offering mortgages approaching 4 percent, Soper said. That compares with an average posted five-year rate of 7.5 percent a year ago, according to the Bank of Canada. He added that home prices in Canada aren’t likely to rise “sharply” over the next two years.

Bank of Montreal, which sponsored the conference, lowered its rate for a five-year fixed-rate mortgage this month to 4.15 percent.

“We are approaching almost zero interest rates,” at the Bank of Canada, said John Turner, the Toronto-based bank’s director of mortgages. “The question becomes, how much upward pressure will there be as we come out of this recession?”

The Bank of Canada last month cut its benchmark lending rate to 0.5 percent, its lowest ever, and said it’s preparing to use policies beyond interest rate moves to revive an economy hit by a recession and tight credit markets. The next rate announcement is April 21.

Canadian existing home sales rose in February for the first time since September as buyers took advantage of lower mortgage rates and prices, according to the Canadian Real Estate Association’s Multiple Listing Service. Sales of existing homes rose 8.6 percent from January to28,669 units.

Bank of Montreal senior economist Sal Guatieri predicted that Canada’s housing market will decline further this year, without the “crash” experienced in the U.S.

Friday, April 10, 2009

Comparison of Wastewater Treatment Companies Listed in SGX

Ok a reader requested us to provide an overview of the waste water treatment. Before we go on, Wastewater pictureit should be prudent to note that we are not experts, in fact, we are just "wannabes", you know..those act smart kind who always puts up their hands when the teacher asks questions but answer pls verify...The information is culled from various sources, such as prospectus, reuters, annual reports, analysts reports..e.t.c.

The wastewater companies listed in SGX are Hyflux, Asia Environment, Sinomem, Epure and Bio-treat and they are highly dependent on the China market, with the exception of Hyflux which has diversified to MENA ( Middle-east and North Africa).
In terms of treatment methodology, Sinomem and Hyflux mostly focus on the use of membrane technology while the rest mostly focus on the use of the biological treatment. (Note: mostly is used as often they combine both membrane and bio treatments)
Segmental revenue for wastewater companiesIn very very general terms, membrane technology is generally used in pharmaceutical or electronics industry to filter out the small stuff or to recycle water, or desalinate seawater into drinking water. The biology method is generally used to treat urban water before discharging into the environment.

In terms of revenue, Hyflux, undoubtedly makes the rest bite the 'dust'.
Revenue snapshot-----------------------------------------------------------------------------
Their customers are segregated into municipal or private enterprises ( industrial). Generally, payment terms from municipal government are longer than private enterprises and range between 6 and 18 months. But, the risk of non payment by municipals are lower. As can be seen, most of their revenue are from municipals.

Revenue from Municipal and Industrial customers -----------------------------------------------------------------------------
In addition, this industry is a highly competitive industry with numerous companies competing for a piece of the pie in China. In the prospectus of Bio-Treat, the following was mentioned.
Quote "Our Directors believe that there are currently more than 350 Chinese companies that are active in the environmental protection industry in the PRC, mainly in the field of water and water treatment or drinking water treatment. Our Directors expect the number of players in this market to increase to up to 1500 by 2005 and possibly up to 6000 in 2010."Unquote
As noted by the following from DBSV 2006 report. The following are the major players. This could be useful for comparing the fundamentals.
Global Competitors ------------------------------------------------------------------------------
This industry is generally project based and income is non-recurring, in industry jargon, it is called "Turnkey" which means they complete the whole project from start to finish and hand it over to the customer for them to operate.
However, there is this trend towards achieving recurring income through the model of BOT ( build-operate-transfer) where the wastewater companies build the wastewater thingy as though its their own, operate it for a period of time under a contract ( 10-30years) , earn recurring income from producing the 'clean' water for the customer, and then handing the thingy over to the customer after the contract ends. Other jargon for recurring income is TOT. Aiyah, as long as you see a O in the middle means recurring lah!

It should be noted that for a company to embark on BOT, they need a lot of capital to do so as they built the projects as their own. With this current 2008-2009 credit crunch, where funding is difficult, many such BOT projects are stalled.
Segmental breakdown to show recurring vs non recurring income-----------------------------------------------------------------------------------
Generally, for "Turnkey" projects, the wastewater companies require an initial down payment of 20%-30% before commencing on the project, with another 30% to 60% payment paid according to percentage of completion of the relevant project and terms of the contract. There is usually a retention fee of 5%- 10% of the total contract value as quality retention monies which are generally held for a warranty period of generally one year after completion ofthe installation
Receivables Collection period and Inventory turnover period Given that most of their business is in China and given the importance of collecting money especially in China, we thought it's vital to see how these companies fare in terms of how efficient they get their money back and how efficient they manage their inventory.

Again Hyflux leaves the rest in her wake with a collection period of only 49 days.....In terms of inventory turnover period, Epure is doing pretty well....
Let us look at their profitability ratios based on only 1 year.

Profit MarginsEpure seems to be doing pretty decent and has quite a lead among its peers in terms of Net Profit Margin. Gross Profit Margin is purposely placed their as this ratio has not undergone layers of 'possible' manipulation by the management. Anyway, its reflective of the "room" they can play with in case their cost of sales ( direct raw materials go up).

In our opinion, this kind of business requires a lot of customisation as every customer is unique, depending on the local regulations, specific type of pollutant produced or environment, so its quite a tough business to be in.

Though one can take comfort in the Chinese Government's strong push for better enviromental legislation and their increase in investment budget for this sector as spelt out in their 11th Five-Year Blueprint (2006 to 2011) issued in March 2006.

So should you invest in this sector, you decide!

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Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team