It was with some concerns that I wrote the latest commentary "A cautionary tale for S-chip investors" asking why Sino-Environment was allowed to trade for a further six months when it seemed likely that the firm might not survive the problems that beset it.

The problems faced by Sino-Environment were similar to those that had befallen Fibrechem Technologies and China Sun Bio-chem earlier – and it is difficult to believe that its boss will behave any differently.

For those who have not followed the Sino-Environment saga, a swift recap: Its founder and chairman Sun Jiangrong defaulted on a $120 million loan extended to him by a hedge fund in February. This resulted in his 56 per cent stake in Sino-Environment being seized by the hedge fund and sold on the open market.

His personal financial difficulties plunged the company into turmoil because it was faced with potential early redemption of a $149 million bond.

Under such circumstances, one would have expected someone – anyone in a position of influence in the company – to try to safeguard the company’s precious financial resources and keep it out of harm’s way.

The alarm bells should have been set ringing when the company failed to come out with its first quarter results – due out by mid-May – and had to hire auditors PwC to review "significant cash transactions" between January and March – the period which coincided with Mr Sun’s loan default.

This would have been the first indication of somebody’s suspicions that money might have been moved out of the company – and that an independent party was being hired to track down the transactions.

Instead, our attention was diverted by the charade staged by the management threatening to walk out on the beleaguered company that month, and the independent directors having to beg them to stay to ensure that operations run smoothly.

But buried in a May 25 announcement asking the executive directors to withdraw their resignations was also a "request that the key management co-operate on certain matters in the meantime".

On hindsight, I will not be surprised if these certain matters refer to the suspicious cash transactions that had been made between January and March.

But it will take more than a Sherlock Holmes to decipher all the cryptic meanings in the announcements made by the firm.

It certainly speaks volume about the manner in which Sino-Environment implements the disclosure-based practices. Surely, disclosures should be made in a coherent and transparent manner to let investors make an informed decision – to trade, or in this case, not to trade at all.

We would all be still in the dark about the subsequent report of the PwC findings to the CAD and the boardroom tussle to get rid of Mr Sun, if the management had not sacked the Singapore unit’s financial controller, Mr Raynauld Liang - and caused all these developments to spill into the open.

It makes me wonder once again what can be done if these offshore firms, which are listed here, refuse to play by our rules.

Sino-Environment’s independent directors are clearly out of their depth dealing with a boss who decides to turn roguish.

But I wish that they could have been more forthcoming right from the start about the problems that are festering in the company and not let them suddenly explode in the public eye last week.

Tightening the regulations further or ensuring that the chief financial officer is based here isn’t going to help – if the precious cash resources are out of reach – and in the hands of management far away from Singapore.

The biggest headache now is the sort of redress an investor who bought the stock after May could get from the whole sorry saga when trading should have been stopped after disclosures of the "significant cash transactions" were made by way of the PwC review.

The Bloomberg machine shows that about 15 million Sino-Environment shares were traded daily between March – when Mr Sun’s loan default came to light – and September when trading was suspended.

That is an awfully large number of shares each day during those fateful six months to answer for.

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ASIAN markets are rallying as the greenback falls to fresh lows against regional currencies, giving the giant US dollar carry trade a fresh lease of life.

As I write, the US dollar has fallen to a record low against the Singdollar.

It is difficult to fathom why the greenback is so weak today, but it is the biggest reason for propelling regional stock indexes on a fresh upward trajectory.

This has sent the Hang Seng hurtling towards the 23,000 resistance level, while STI is up nearly 50 points at 2,777.

Some will say that the renewed weakness over the greenback is a reflection of falling US economic might.

One newspaper has described US President Barack Obama's nine-day trip to Asia as a visit to his creditors.

"Mr Obama can only grin and ask his hosts to bear with the weakening greenback. He does not have the means to rescue the US dollar on his own," it noted.

And for traders the world over, the most telling sign of US humility was the picture of the deep bow which Mr Obama made before the Japanese emperor in Tokyo.

It is also a sign of China's growing confidence that its president, Mr Hu Jintao, left Singapore after Mr Obama took off to Shanghai.

A far less assured leader would have cut short his Apec summit visit to Singapore and return back to Beijing early to make sure that nothing goes wrong with Mr Obama's first state-visit to his country.

This is why faith is being renewed among traders that they can safely "short" dollars and "long" emerging market equities, without having to fear that a sudden rebound of greenback will wipe them out.

In the short-term, a weakening green-back will give strength of the US dollar carry trade – and like the precedessor yen carry trade a decade ago – trigger a sharp rise in the value of all types of assets – stocks and shares, precious metals like gold, as well as crude oil.

But in the long-term, the trend of the weakening dollar is unhealthy, as it may prompt other major trading nations to try to devalue their currencies as well to try to stay competitive.

It reminds many of the Asian financial crisis a decade ago, when several nations indulged in what is known as "competitive devaluation" to protect their exports markets to keep up with the falling value of their neighbours’ currencies.

The end-result was near bankruptcy for them.

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WATCHING the stock market the past few days and I am reminded of a man heaving a heavy sack, as he climbs up a hill. Each foot-fall becomes heavier as he climbs higher, as he turns wearier with every step.

Global stock markets have been flirting with 2009 highs, ever-since Wall Street's Dow Jones Industrial Average successfully breached the 10,000 level last Thursday.

But traders don't seem to be much cheered by the prospects of higher stock prices at all.

Instead, trading volumes around the world have been drying up, as buyers melt away as share prices climb higher.

What is supporting the global stock market rally is the increasingly shaky US dollar carry trade - with big-time punters borrowing heavily in US dollars to buy all sorts of assets from crude oil to emerging markets equities.

What they are betting is a further drop in the US dollar and a rise in the value of the assets they are buying. This will give them both forex gains and capital gains.

But as one economist points out, there is no chance of the US dollar falling to zero, even though the economic prospects of the US look awful. This explains why every drop in the greenback is viewed by traders with concern, as the prospect of a sudden rebound becomes more likely, wiping out those who are "shorting" the US dollar in a big way.

It seems strange to be placing a bet in the stock market when so much of the outcome hinges on the health of the ailing US dollar and almost nothing else matters – whether it is the underlying fundamentals of a blue-chip DBS Group Holdings share or the demand for crude oil going forward.

And just to give an example of the surreal situation which the market is finding itself trapped in, I got this note from a Hong Kong broker this morning.

It advised investors to buy HSBC Holdings up to a price of HK$91 on hopes that it would rise to HK$98. But if the stock should fall to HK$85, investors should take the loss in the chin and clear out of the stock altogether.

Strange, that such a trading recommendation should be made, considering that HSBC appears to be properly chastened by its US adventure and could not seem to be getting out of the troubled US mortgage market fast enough. On the flipside, it had even despatched its CEO to Hong Kong to show that it meant business in Asia.

Surely, if its share price falls sharply, isn't it more attractive to buy more of the stock?

But that is the ridiculous situation we are finding ourselves in the market today.

The buy high, sell low syndrome is back.

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ONE step forward and two steps back – this seems to be the direction that stock markets across the world are taking after hitting their highs for the year last month.

On Tuesday, market jitters were becoming audible, with the Wall Street’s Vix index – which measures the volatility of the S&P 500 Index – hitting its highest level since March.

While US stock index futures predicted another jaw-dropping fall on Wall Street, legendary investor Warren Buffett struck the biggest deal of his life – a US$26 billion (S$36.4 billion) purchase of Burlington Northern Santa Fe – in what he labelled as his "all-in wager" on America's economic future.

The question again being asked, like last October when he made huge bets on Goldman Sachs and General Electric, is whether Mr Buffett is losing his Midas touch.

He was even willing to issue new shares of his highly-prized investment firm Berkshire Hathaway as part of the purchase package to complete the deal.

But investors had their eyes firmly fixed on the communiqué to be issued by the US central bank at the end of a two-day interest rates fixing meeting tonight.

Despite splurging so much money on a single deal, Mr Buffett failed to move Wall Street at all. The Dow Jones Industrial Averages ended slightly down, spooked by renewed concerns over the business outlook of the US financial giants whose problems had sent the global financial system reeling last year.

What to make of all the mixed signals coming from Mr Buffett and the rest of the US markets so far?

As I write, the benchmark Straits Times Index is up a meagre 17 points to 2639.03. But it is still way below the high-water mark of 2,716 reached last month. Like investors elsewhere, the players here are keeping their powder dry, as they wait for the dust to settle on the latest bout of market uncertainties.

But as my small change column "On the trail of smart money" suggested, a retail investor should track the moves of shrewd market operators like Mr Buffett to time their own purchases for the long-term.

Mr Buffett has, as he had succinctly put it, put both his words and money where his mouth is.

I guess that even for an investor of Mr Buffett’s age – he is after all pressing on to 80 years old – taking a long-term view of companies and economic trends often wins out when they are temporarily depressed by short-term uncertainties - something which I hope to take up in a future small change column.

He may not be making money on his latest "elephant" purchase for years. But then Rome is not built in one day. He may yet be proven right on his latest bet on America’s future.

On another note, I have received several queries from readers to my the latest "small-change" column on how they can track insiders' trades.

The ST publishes a list of insiders’ trades every Friday which highlight some of the big trades of the week.

To get a better handle of the trades themselves, it is best for a reader to identify which corporate titans they wish to follow and the stocks they regularly trade. As these biggies are often the biggest shareholders of the companies, their trades will be reported on the Singapore Exchange website.

Just tracking a couple of trades will not give the reader a hang of the views which these insiders hold on their stocks. You will have to track them over time – months or even years to do so.

One last note: I have made the effort to write the market blog regularly with a view to give online readers a handle on market directions and highlight possible trading trends. Over time, I hope to attract readers to give their views and turn the blog into a vibrant discussion on the market.

The blog has recently attracted comments on topics opposition politics which is inappropriate to the topics being discussed here.

I am glad that some readers have endeavoured to point this out to those polluting this blog with their irrelevant comments.

Those people who are unhappy about non-stock market issues should really air their grievances elsewhere and leave this space for those who are keen to learn more about the equities market and grow their nest-eggs.

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I WAS among the one hundred-odd people who got to watch the Singapore premiere of the documentary which featured late singer Michael Jackson’s London comeback shows last night.

The film left viewers musing over what they had missed had Mr Jackson been alive to perform the show — the 3D imagery, pyrotechnics and elaborate stage sets — not to mention the incredible precision of his performance.

His various rehearsals were inter-weaved in the film and they flowed smoothly into the one performance reflecting what he proudly labelled as his "This is it" performance — the gold-plated standard which other performers will have to live up to.

But the strenuous rehearsals — the precisions in the choreography demanded by Mr Jackson of himself and his dancers – not to mention the marathon singing practices — would have exhausted a man half Mr Jackson’s age.

The effort in putting on the show was probably the major cause behind the death of the 50-year old singer, come to think of it.

Still, reflecting on the theme of his London come-back shows reminds me of the uncertain state of the stock market.

Is it "This is it" time for the Dow Jones after it breached the 10,000 level, the benchmark Straits Times Index crossed the 2,700 mark and the Hang Seng swung above the 22,000 level — all at about the same time?

At their respective current levels, the major stock indexes are half-way between their March lows and all-time highs — reached incidentally in late October 2007.

It is not surprising that after the recent losses on the Dow Jones, stock pundits believe that a 7 to 10 per cent correction in share prices is at hand. "This is it", they say. The indexes have reached their targets and bulls are looking tired. Time for the market to take a break and fall lower.

The jury is still out whether this is a correction before markets test fresh high levels next year, or a gentle descent back to lower levels to reflect the awful state of the "real" economy in developed countries such as United States and Europe where unemployment is still growing and consumption remains tepid.

The only parallel with current trading patterns is October 2007, when a massive dose of liquidity injected by the US central bank with an interest rate cut — plus a plan by China, now shelved, to allow its investors to buy shares directly from overseas — caused share prices to surge to record high levels.

Of course, this time around, the swing up has been much higher, since the Fed not only cut interest rates to almost zero in March, but also printed around US$3 trillion to provide a cushion of support for the global financial markets.

China has been helpful too, giving out a US$500 billion economic stimulus package and getting its banks to lend generously.

But getting the Fed to print even more money may be tough — with the Europeans and Japanese complaining loudly about the systematic devaluation of the US dollar and the implicit threat by China to swap out of its large US dollar hoard.

As for China, both the stock market and the real economy look like over-heating from the economic stimulus measures and the fear is that it might have to tighten up, just as the Fed is forced to stop its printing presses.

Regional bourses like Hong Kong and Singapore are caught in a pincer between Wall Street and Shanghai. So it is no wonder that they have tumbled on the sudden barrage of bad news that suddenly seem to become the norm once again.

No wonder, there are cynics who believe that investment bankers on Wall Street and in London are stubbornly clinging on to the eye-popping bonuses due to them, despite the big storm of protests this has generated in the Western media.

Given all the fresh uncertainties, there might not be any huge bonuses to collect any more next year. After all, a bird in the hand is worth two in the bush; and paraphrasing Mr Jackson, they might say "This is it."

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IT'S been a while since I have written a blog on the stock market.

At first glance, nothing much seems to have changed. Except for stock market indexes pressing past key resistance levels in the past two weeks, lots of investors are contented to sit back and let the rally pass them by.

As I write, the benchmark Straits Times Index is languishing around Friday's close of 2,715, unable to shake off the lethargy which has afflicted stock markets around the world since August.

The bulls have been arguing for a while now that stock prices should continue to move upwards. Investors are earning nothing, keeping their money in the bank, with interest rates at close to zero levels.

And with the greenback showing no signs of revival against regional currencies, it is attractive for investment banks and hedge funds to borrow more heavily in US dollar to make even bigger bets in the region’s stock markets.

But a report by Citigroup this morning shows that foreign fund managers' attention seems to be fixated elsewhere.

"About US$781 million (S$1.09 billion) of new money flowed to offshore Asian funds last week. But this was less than one-third of the global emerging market funds, 37 per cent below global funds and even 10 per cent smaller than the amount taken in by Latin American funds whose assets under management are just one-fourth of Asian funds," it observes.

So what is holding back foreign funds from making bigger bets here?

Citigroup believes that the problem stems from the large number of cash-calls made by companies as they strengthen, or repair, their balance sheets after the recent massive financial fire-storm.

"Over the past three months, total cash-calls (both IPOs and secondaries) reached US$54 billion in Asia ex-Japan, which was 3.6 times the funds raised in Latin America, emerging Europe, Middle East and South Africa added together."

By coincidence, both ST and BT highlight today the large number of share placements made by Singapore firms this year.

I suppose that it is prudent house-keeping for management to make hay while the sun shines by raising money in whatever way they can – and share placements seem to be the easiest route currently – as there is no guarantee that the going may get tougher going forward.

But the discount is so big in some cases – loss-making bio-technology play Transcu gave new investors a eye-popping 38 per cent discount to last traded price – that it arouses unhappiness among existing shareholders.

With such share placements, these shareholders not only fail to get a bite of the cherry, but find that their existing shareholdings are diluted in percentage terms as well.

With the end of the year approaching in just over two months, I expect the "watchful peace" in the stock market to continue for a while yet.

At the start of the year, I wrote that the stock market mood was so bleak that dealers were wishing that the clock could, at that instant, strike at midnight on Dec 31, 2009 just to get the year over with. Today, many must be wishing that the current year never comes to a clsoe, as this could mean the end of the stock market party.

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GOOD ideas inspire me. Over the past year, I've particularly enjoyed interviews and meetings with entrepreneurs and innovators.

These self-starters inevitably have an infectious enthusiasm and stubborn optimism, borne probably from the knowledge that they’ve a great solution that no one else has.

In fact, innovators seem to have a solution for everything.

As I write this, researchers in Singapore are finding ways to make buildings more eco-friendly, to recycle all sorts of waste, and to come up with new foods and flavours with better nutrition.

For their part, the authorities are pouring more resources to make these innovations available to the public. This process, in geek speech, is known as tech transfer.

All five Singapore polytechnics have, in one way or another, established their own tech transfer offices, and last year, even formed a network to centralise resources.

The hope, says Mr Walter Lee, head of the Technology Transfer Network (TTN) secretariat, is that Singapore can become a regional tech transfer hub, much like American cities San Diego and Boston.

But the road ahead is long, admits Mr Lee, who reckons it may take Singapore up to 15 years to reach this goal.

What's sorely lacking is funding from venture capitalists and business angels to commercialise these innovations.

It is Mr Lee's hope that the Exploit Technologies Innovation and Enterprise Week this week will draw keen investors game enough to take risks on local innovations.

"Singapore is quite financially endowed, but a lot of money is in real estate, food and beverage and hotels," he says.

"The goal is to get a culture of investing in innovations started, and slowly by word of mouth, more and more people will join in."

A number of networks such as the Angel Investment Initiative, and the Business Angel Network (South East Asia) have come up to help this culture along.

But the reason for the slow uptake, it seems, boils down to the risk of utter and complete loss should the product fail, much like an investment in a start-up.

The one question that is crying out to be asked as Singapore pushes hard towards a knowledge-based economy is this: Are Singaporean ideas risky investments?

What do you think?

My answer to that is, if it inspires you, it’s probably worth a shot. After all, you’ll never know until you try, right?

E-mail you answer to Cassandra Chew or leave a comment below. Read more about this idea in Saturday's edition of The Straits Times.

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I GOT several inquiries from readers on exchange traded funds, following my small change column last Sunday. This is my reply.

Exchange traded funds (ETF) – the vanilla type at least – are made up of baskets of stocks which closely mirror widely-watched stock indexes such as Singapore's Straits Times Index and Hong Kong's Hang Seng benchmark.

Many readers want to know where they can buy the STI ETF which tracks the STI.

Well, it is listed on the Singapore Exchange. As I write, it is up two cents at $2.75 with 472,000 shares traded. STI is up 5.74 points at 2,674.3. This means that the STI ETF is traded at a small premium to the index.

I've mentioned the volume traded so far to dispel any misconception that the STI ETF is thinly traded. For retail investors, there should be a sufficient number of shares traded each day to ensure that they can easily get in and out of the counter.

One thing good about the STI ETF is the low management fee involved - about 0.2 per cent of the value of the assets in the funds. In contrast, a conventional unit trust will charge you anywhere between 1 per cent and 5 per cent of the value of the assets for the pleasure of managing them on your behalf.

Some readers confuse the STI ETF with the multitude of STI warrants displayed on the screen.

With the STI ETF, you actually get to “own” a basket of blue-chips such as SIA, DBS and UOB. You will also get an annual dividend payout. The latest dividend yield works out to 4.4 per cent – far higher than what banks are paying. You can also use CPF or SRS monies to buy into the STI ETF.

However, with STI warrants, what you get is an option contract. An option does not confer ownership on the underlying assets. Instead, what it offers is a bet on whether the price of the asset goes up or down. If it goes up, you walk away with a prize, but if it goes down, you may end up losing everything.

I hope this article helps to clear the air on STI ETF.

Enclosed below is a page from Shareinvestor.com which gives salient features on STI ETF:

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THE great British economist John Maynard Keynes coined the term "animal spirits" to describe the impact which human emotion had on decision-making in the financial markets.

When there is literally nothing to explain the wild price swings in the stock market since the onset of the global financial crisis two years ago, animal spirits have been used time and again by market strategists to describe the seemingly bizarre behaviour of investors.

Looking over the e-mails sent to me by investment banks over the weekend, I believe that animal spirits will be at work again soon in the stock market — to propel prices higher.

If sufficient investors believe these glowing reports, we will probably round up the remaining months of the year with another bout of exuberance.

This is despite the weaker-than-expected September job data in the United States released two weeks ago (how many investors actually recall that figure now?) which implied that people in the world's biggest economy were still losing jobs at a horrendous rate and that the recovery, if anything, would be patchy and difficult.

The brokerage reports that I have seen are unanimous in believing that the worst is over.

Below is just a sample of what I have read so far:

"We think the regional upturn is sustainable and the key issue is not the risk of a double-dip recession but the need for Asian central banks to normalise macro policy through interest rates hikes and currency appreciation." – Merrill Lynch.

"The firming economic recovery in China and improved employment outlook have boosted consumer confidence and brought along consumption growth." – Merrill Lynch again.

"We believe we are now at the tail-end of the earnings recession." – Morgan Stanley.

"China discretionary performed well this week as China reported solid sales growth during its Golden week holidays." – Citigroup.

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THE buoyancy in Asian stock markets today reminds me of a law in physics — the Principle of Flotation — which every student would have studied during his secondary school education.

Essentially, it says that an object can float on water because there is an equivalent mass of fluid beneath it which is giving it support.

With equities levitating to levels last seen in 12 months ago, I wonder if there is a similar principle at work in the financial markets.

I spent yesterday writing an analysis on an esoteric subject —  US dollar carry trade. No many people understand what it is all about or how to track the size of the trade, but it is probably the biggest factor influencing the direction of the financial markets currently.

With US interest rates at almost zero per cent and the greenback sinking to almost all-time low against the Japanese yen and the euro, it is a no-brainer for any bright trader to borrow heavily in greenback to make big bets on other asset classes.

In doing so, he is betting that when he has to repay the greenback loan, the US dollar would have fallen sharply, and so the asset he has brought would be worth a lot more in greenback terms.

This has propelled the stock market here, as well as those elsewhere in Asia sharply higher, as cheap money floods the market and the resulting rising tide lifts all equities – quite literally.

The carry trade is also providing the fuel for the renewed spate of mergers and acquisitions.

Just watch Wall Street last night when the Dow shot up 123 points on a wave of M&A fever. When money becomes so cheap, chief executives start becoming empire builders again.

But apart from the equity investors who stand to make a killing from the galloping stock markets, why should anyone else bother about it?

A weakening greenback has consequences far beyond the equities markets.

As the Japanese have discovered to their horror, the switching out of yen into US dollar borrowings has caused their currency to surge to near record high levels, raising fears that their companies may be priced out of business altogether.

This is despite all the warning signals flagging red that it is in danger of falling into a deflation trap again because of falling demand, as people anticipate tougher times ahead and cut back on their spending.

For the rest of us, another fear looms – the spectre of run-away inflation if the prices of oil and other raw materials surge and cause an untenable rise in consumer prices.

So far, this has not happened. Because the US and Europe have been mired in recession, demand has been weak and there is more than ample supply of oil available, and this has dampened the pricing power of the producers.

But this sweet spot may not last forever.

Eventually, the supplies would have been used up, and there would be pressure to raise oil prices to compensate for the weakening dollar.

For investors, the best strategy going forward is to track the US dollar.

I expect regional markets to enjoy the sea of support provided by the US dollar carry trade, until the greenback strengthens and forces a un-winding of the carry trade.

Then it is time to get hell out of the market and stay in cash. It is worth recalling the violence which had accompanied earlier unwinding of the yen carry trades during the Asian financial crisis in 1997-98 and again during the recent global financial crisis,

How long will this rally last?

It is hard to tell, but bearings on the equities markets in the near future, in all likelihood, will come from the currency market.

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