Recollections – 2011

Chinese New Year was celebrated like any other years. The usual reunion dinner was held at a Chinese restaurant with extended family members attending. A few days later and still within the fifteen-day celebratory period, my mother suffered a mild stroke and was warded for treatment. Luckily, no invasive operation was required but she was not as mobile as before. She recovered sufficiently as the year wore on. This is how I remember the start of 2011.

Then natural disaster struck Japan. The Japan earthquake and tsunami happened on Friday, 11 March. As if this was not bad enough, two Fukushima Daiichi nuclear reactors blew up over the same weekend. I remember fearing the worse that the nuclear crisis might erupt to something more catastrophic for the region. This disaster too came to pass and Japan has moved on.

At the start of second half, the European sovereign debt crisis became an issue that the world cannot ignore. The problem with Greece took a long while to stabilise and the contagion has spread to Italy, which is too big for a bail-out. This crisis is not over and it has affected the economies of the European nations and the rest of the world.

At a personal level, my wife, my daughter and I went on a trip to Switzerland, Germany and Salzburg in June. Subsequently in October, my wife and I went to Penang for a short trip. For the first time, we went on this trip without our daughter tagging along. My daughter turned 21 this year, a milestone in itself. In December, this time my wife and my daughter went on a tour of Laos without me. Yet another first.

Investment Climate

Singapore economy rebounded strongly in 2010 at 14.5 per cent. But it was forecast to slow to around 5 per cent this year impacted by slowing economies of US, Europe and Japan.

The stock markets, including Singapore’s, were volatile over the year caused by the uncertainties of the Eurozone sovereign debt crisis.

At the beginning of the year, few analysts predicted that the Straits Times Index (STI) would touch 3,600 points by the end of the year. Instead, 2011 started with STI at 3,190 points but as at 23 December it was down to 2,676 points, a drop of 16 per cent and not an increase of 13 per cent as predicted by the analysts. The 52-week range of STI was 2,521 and 3,280 points. Throughout the year, the STI was volatile. One can easily make a wrong bet with the direction of STI. (see separate post “The peril of predicting STI”, 23 Dec 2011)

Singapore Equity Portfolio

My Singapore equity portfolio lost 13.5 per cent of its value from costs as at 23 December 2011. This was better performance than the STI. Besides equity, I bought preference shares and corporate bonds that were traded on the Singapore Exchange. These instruments held up well during the year and they cushioned the fall seen in value of my equity portfolio. Overall inclusive of bonds and preference shares, portfolio paper loss was 9.1 per cent.

Book losses

I decided to cut losses on some of my investments this year. These investments include unit trusts on Commodity Fund, Middle East Fund and a currency linked investment. They were started in early 2008 and their values were below costs for an extended period of time. I see no reason that I can recover these costs in the future. The losses came up to 4 per cent of my total investible assets (invested or otherwise uninvested). Now, my balance sheet is rid of these under-performing assets and it saved me time from tracking their performances and not to mention the heartache associated with them.

Income earned for year

With dividends and interests earned for the year, the total income came up to 1.7 per cent of my total investible assets (invested or uninvested). This return was better than the interest rates offered by local banks.

Asset allocation

I was conservative for this year. I took less risk and kept the bulk of investible assets in cash and cash equivalents as follows:

Cash & Cash Equivalent 41.4%
Insurance-related and structured deposits 24.4%
Currency-linked investments 12.4%
Singapore equity 11.0%
Unit trusts 6.6%
Preference shares and bonds 4.2%

Looking ahead

The Eurozone sovereign debt crisis will persist into 2012. President Obama is facing challenges for his re-election bid. US is still grappling with high unemployment rate. The global economy will slow as forecast by OECD, World Bank, IMF and United Nations. Singapore economy will grow slowly too because of the global condition. There is uncertainty. No one can predict how it will end.

As the 2011 draws to a close, I take this opportunity to wish all a Happy New Year in 2012. May all be well and happy. Live in the present moment, leave the future aside and address it as it comes.

Copyright © 2011, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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