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IHC ex group CEO charged for failing to submit statement to bankruptcy trustees
THE former group chief executive officer of International Healthway Corp (now known as OUE Lippo Healthcare), Fan Kow Hin, has been charged for failing to submit his statement of affairs to the trustees of his bankruptcy estate.
Fan, a bankrupt since March 2017, was required to file his statement of affairs that would disclose his assets and liabilities by Dec 24 last year, a deadline extended by the trustees of his bankruptcy estate.
However, he allegedly failed to comply with the requirement and now faces a charge under the Bankruptcy Act for which he is liable to a maximum fine of S$10,000, an imprisonment term not exceeding two years or both.
According to the law, a bankrupt must submit the statement of affairs within 21 days from the date of the bankruptcy order, as well as provide documents to support his declaration of assets, income and expenses.
Fan' s case will be mentioned in court on Oct 11.
The 65-year-old applied in 2017 to make himself a bankrupt on grounds of business failure.
The trustees of Fan' s bankruptcy estate have taken out a lawsuit against One Organisation and two others to seek the avoidance of transactions allegedly at an undervalue and unfair preferences in a bid to claw back claims. Judgment for the lawsuit is pending.
Fan was previously the group CEO and a co-founder of the Catalist-listed International Healthway Corp from May 2015 to January 2016, and the executive chairman of Healthway Medical Corp prior to that.
OUE Lippo Healthcare' s CFO resigns to ' pursue other career opportunities'
OUE Lippo Healthcare announced on Friday that its chief financial officer (CFO) Vincent Yik Yen Shan has tendered his resignation to pursue other career opportunities, slightly more than two years after taking on the role.His last day of service with the company will be Nov 30. He took on the role on July 1, 2019.
The company is looking for a suitable replacement for the position and will make an announcement when this is done.
The company' s sponsor PrimePartners said that after having interviewed Mr Yik, there appears to be no other material reasons for his departure from the post and the company. There are also no concerns regarding financial reporting or disagreement with the board that would have affected the company' s financial reporting that led to his resignation as CFO, said the company in a filing.
One-off loan conversion boosts OUE Lippo Healthcare' s H2 profit to S$113.8m
CATALIST-LISTED OUE Lippo Healthcare $ OUE Lippo HC: 5WA -4.76% (OUELH) posted a net profit of S$113.8 million for the six months ended June, boosted by a one-off S$110 million gain from a shareholder loan conversion.
Excluding the gain, the company posted a S$3.67 million net profit for the period, reversing the year-ago loss of S$1.26 million.
OUELH' s revenue dipped 2 per cent year-on-year to S$9.67 million, mainly due to the weaker exchange rate of Japanese yen to Singapore dollar. Its revenue comprises rental income from 12 nursing homes in Japan, as well as earnings from pharmaceutical distribution and the Wuxi Lippo Xi Nan hospital in China.
The weaker exchange rate also contributed to a 10 per cent fall in OUELH' s cost of sales for the half-year. Another reason for this was lower sales from the pharmaceutical distribution business, which was affected by delays in customers' orders.
Looking ahead, OUELH is closely monitoring the Covid-19 situation in China, given new Delta variant cases in the country. The construction of China Merchants - Lippo Obstetrics & Gynaecology Changshu Hospital and China Merchants - Lippo General Hospital Prince Bay Hospital are ongoing as planned. The hospitals are expected to commission in 2023 and 2024 respectively.
It is also remaining cautious in Japan. " Given that Japan is still in the midst of the latest Covid-19 wave, we will continue to monitor the situation closely," the company said.
Meanwhile, OUELH' s joint venture hospitals in Myanmar also continue to operate despite the political instability. The Pun Hlaing Hospital Hlaing Tharyar in Yangon has been designated as one of the few private hospitals to test and treat Covid-19 patients. The Myanmar operations are not expected to impact OUELH' s results for this financial year.
One-off loan conversion boosts OUE Lippo Healthcare' s H2 profit to S$113.8m
Catalist-listed OUE Lippo Healthcare (OUELH) posted a net profit of S$113.8 million for the six months ended June, boosted by a one-off S$110 million gain from a shareholder loan conversion.Excluding the gain, the company posted a S$3.67 million net profit for the period, reversing the year-ago loss of S$1.26 million.
OUELH' s revenue dipped 2 per cent year-on-year to S$9.67 million, mainly due to the weaker exchange rate of Japanese yen to Singapore dollar. Its revenue comprises rental income from 12 nursing homes in Japan, as well as earnings from pharmaceutical distribution and the Wuxi Lippo Xi Nan hospital in China.
The weaker exchange rate also contributed to a 10 per cent fall in OUELH' s cost of sales for the half-year. Another reason for this was lower sales from the pharmaceutical distribution business, which was affected by delays in customers' orders.
Looking ahead, OUELH is closely monitoring the Covid-19 situation in China, given new Delta variant cases in the country. The construction of China Merchants - Lippo Obstetrics & Gynaecology Changshu Hospital and China Merchants - Lippo General Hospital Prince Bay Hospital are ongoing as planned. The hospitals are expected to commission in 2023 and 2024 respectively.
It is also remaining cautious in Japan. " Given that Japan is still in the midst of the latest Covid-19 wave, we will continue to monitor the situation closely," the company said.
Meanwhile, OUELH' s joint venture hospitals in Myanmar also continue to operate despite the political instability. The Pun Hlaing Hospital Hlaing Tharyar in Yangon has been designated as one of the few private hospitals to test and treat Covid-19 patients. The Myanmar operations are not expected to impact OUELH' s results for this financial year.
Shares of OUELH closed at S$0.04 on Monday, down 4.76 per cent.
https://links.sgx.com/1.0.0/corporate-announcements/4EQJW3S4JCMNJ6LL/9d11eb92752a5d19d5e5c2d8191488d464c4078374b93bec33c10a2038ed0097 so is this stock worth vesting?
OUELH' s Myanmar hospital temporarily shuts emergency department
OUE Lippo Healthcare (OUELH) said on Wednesday that its flagship hospital in Yangon has temporarily closed its emergency department amid a recent spike in Covid-19 infections in Myanmar.
In an exchange filing, OUELH said the Hlaing Tharyar Hospital had announced last Thursday that the emergency department would be temporarily closed due to " a shortage of manpower, oxygen and medical supplies" . It noted that the hospital' s other departments were still functioning.
The group jointly operates and manages three hospitals, three clinics and a medical centre in Myanmar through a joint-venture partner, First Myanmar Investment Public Company Limited.
OUELH said: " Hlaing Tharyar Hospital is expected to resume the operations of its emergency department once it is able to stabilise its oxygen and medical supplies and manpower needs to continue to provide quality care for all its patients."
The company said the temporary closure of the emergency department is currently not expected to have any material impact on the group' s financial performance for the current financial year ending in December.
However, it added that, given the " rapidly evolving situation of the Covid-19 pandemic and the supply-chain disruption for oxygen and medical supplies in Myanmar" , it is difficult to determine at the moment how long the temporary shutdown would last, or whether it would need to be extended in duration or scope - including to other departments or hospitals.
OUELH said: " It is therefore not currently possible to ascertain the financial impact on the group if an extension of the temporary closure of emergency department in any form is required."
Reuters, citing state media figures, reported that Myanmar registered a record 281 Covid-19 deaths on Monday, and 5,189 new infections. However it noted that medics and funeral services have said that the real toll is much higher than the military government' s figures.
OUE Lippo Healthcare flags interested person transactions
OUE Lippo Healthcare has entered into certain interested person transactions (IPT) during the current financial year with the manager of First Reit and with OUE Treasury, it said in a filing to the Singapore Exchange on Friday night.
First Reit' s manager is a joint venture between the company and OUE, while OUE Treasury is a wholly-owned unit of OUE, which in turn is a controlling shareholder of OUE Lippo Healthcare.
In January, First Reit had launched a non-underwritten rights issue to raise gross proceeds of about S$158.2 million while First Reit' s manager had subscribed for its pro rata entitlement of the rights issue. On Feb 11, 2021, OUE Lippo Healthcare granted an interest-free loan of about S$5.92 million to First Reit' s manager in order for it to subscribe for its total provisional allotment of units under the rights issue.
" The value at risk to the company for the First Reit manager' s loan for the financial year ending Dec, 31 2021 is the value of the loan (of around S$5.92 million)," said OUE Lippo Healthcare.
Meanwhile, on Aug 14, 2019, a subsidiary of the company, OUELH Medical Assets (OMA), entered into a loan agreement with OUE Treasury where OUE Treasury advanced S$4.15 million to OMA at an interest rate of 4 per cent per annum.
On Jan 22, 2021 and June 25, 2021, OUE Treasury and OMA entered into extension letters, where the term of the OUE Treasury loan was extended to June 29, 2021 and Dec 29, 2021.
The value at risk to OMA for the OUE Treasury loan extensions for FY2021 is the interest payable on the loan in FY2021 - or S$165,000, the company said.
The total value of all transactions entered into between the group and the interested group for FY2021 is nearly S$195.7 million, which represents 141.6 per cent of the group' s latest audited net tangible assets (NTA) as at Dec, 31 2020.
This includes another transaction on Feb 23, 2021 for the allotment and issuance of convertible perpetual bonds to Treasure International Holdings following the conversation of existing shareholder loans. The value for that transaction was about S$189.6 million.
As it exceeds the relevant threshold of 3 per cent of the group' s audited NTA under the Catalist rules, an announcement was required by OUE Lippo Healthcare.
The company' s audit and risk committee has reviewed the First Reit manager loan and OUE Treasury loan extensions and is of the view that they are not prejudicial to the interests of the company and its minority shareholders, OUE Lippo Healthcare said.
Worse counter..
never recover no matter what..
ppl issue rights already recovered yet this one still .. haizzzz
never recover no matter what..
ppl issue rights already recovered yet this one still .. haizzzz
I am vested under both SRS and Cash.
Tks.
Tks.
OUELH receives S$249,000 from judgments
OUE Lippo Healthcare (OUELH) has received about S$249,000 in costs and disbursements from its legal proceedings involving funds owned by Crest Capital Asia and OUELH' s former executive director Lim Beng Choo.
In a bourse filing on Friday night, it also provided updates on other legal proceedings, including some involving David Lin Kao Kun.
OUELH has received S$80,000 from Crest Capital Asia, Crest Catalyst Equity and The Enterprise Fund III as payment of costs and disbursements in a lawsuit that was ruled in OUELH' s favour.
Another S$50,000 was received from Ms Lim' s solicitors as payment of costs and disbursements to OUELH, after her appeal against part of the High Court' s decision regarding her breaches of duty and liabilities was dismissed.
A payment of S$119,077.54 was received from her solicitors pursuant to a letter of undertaking they issued in favour of OUELH to make payment of costs and disbursements after the final disposal of her appeal against the lawsuit.
OUELH also updated that Value Monetization III (VMIII), which previously sent a letter of demand for the return of S$10.7 million, has written to the Court of Appeal to request that consequential orders be made for the return of the sum. OUELH has responded to the Court of Appeal with its objection to the request.
Separately, OUELH has been informed that the receivers of a Hong Kong private company called Healthcare Solution Investment Limited (HSIL) have prevailed in the appellate proceedings in a dispute with Mr Lin.
Mr Lin holds 40,000 shares in HSIL, which is the sole shareholder of Weixin Hospital Investment Management (Shanghai). He appealed against the decision of the Shanghai Pudong Court which ordered Chiang Hui-Hua, Weixin' s former executive director and general manager, to return the company' s business licences and company stamps to Weixin.
The Appellate Court has dismissed Mr Lin' s appeal against the Shanghai Pudong Court' s decision, and the receivers of HSIL successfully applied to the court for an enforcement order.
Wuxi Yilin Health, an OUELH subsidiary, has applied to withdraw its appeal against a decision by the Wuxi Intermediate Court that dismissed its claims against Mr Lin for breach of fiduciary duties to the subsidiary. The court documents for the appeal were not successfully served on Mr Lin, and Wuxi Yilin Health decided to withdraw the appeal on the advice of its counsel in China. It is now waiting for the Jiangsu Higher Court to accept the withdrawal application.
Why management bought 6% back from Japanese at more than double the current price...
Stupid or what ?
1 day ago · OUE on Tuesday said it has signed a share-purchase agreement with Tokyo-listed Itochu Corporation to purchase 266.6 million shares, or a 6 per cent stake, in OUE Lippo Healthcare (OUELH) at S$27.7 million in cash, equivalent to S$0.10375 per share. Read more at The Business Times.
Stupid or what ?
OUE to buy 6% stake in OUELH from Itochu for S$27.7m ...
https://www.businesstimes.com.sg/companies-markets/oue-to-buy-6-stake...
1 day ago · OUE on Tuesday said it has signed a share-purchase agreement with Tokyo-listed Itochu Corporation to purchase 266.6 million shares, or a 6 per cent stake, in OUE Lippo Healthcare (OUELH) at S$27.7 million in cash, equivalent to S$0.10375 per share. Read more at The Business Times.
Good price to buy?
Wuxi court declares OUELH subsidiary ' rightful and legal' owner of Wuxi land plot
OUE Lippo Healthcare (OUELH) was informed on Monday by the receivers of Healthcare Solution Investment (HSI) that the Wuxi Intermediate Court has accepted Weixin Hospital Investment Management (Shanghai) Co' s application to withdraw its appeal over a land-litigation matter.
In legal proceedings initiated by Weixin against OUELH' s subsidiaries, it was declared that a 2015 land-transfer agreement between two OUELH units over a 22,681 sq m plot of land in Wuxi Jiangsu Province was void.
In November 2019, the Court found that the land-transfer agreement was legitimate and binding on all relevant parties, and dismissed Weixin' s application for litigation.
A month later, Weixin appealed against the judgment.
But in May 2020, Weixin (under control of the receivers of HSI) applied to withdraw the appeal. However, the appeal was stayed pending the outcome of separate legal proceedings commenced by Weixin before the Shanghai Pudong Court over other matters.
The effect of the Court' s Monday judgment is that the decision of the Wuxi Xinwu District Court in 2019 is final and binding on all parties.
OUELH' s subsidiary, Wuxi Yilin Real Estate Development, is therefore the rightful and legal owner of the Wuxi Land, and there are no pending legal challenges in relation to the ownership of the Wuxi plot, OUELH said.
OUE Lippo Healthcare increases First Reit stake to 15.4%
OUE Lippo Healthcare (OUELH) has been allotted about 163.3 million units of the rights issue of First Real Estate Investment Trust (First Reit), OUELH said in a bourse filing on Wednesday evening.
Following the completion of the rights issue, OUELH indirectly owns approximately 15.4 per cent of the total number of First Reit units in issue, or about 246.9 million units.
First Reit Management, the manager of First Reit, is an associated company of OUELH.
OUELH submitted its acceptance for about 81.9 million rights units and applied for 81.3 million excess rights units through its wholly-owned subsidiary OUE Healthcare Investments, for an aggregate consideration of about S$32.7 million. It received the full allotments at the close of the rights issue, amounting to about 20.6 per cent of the total number of rights units issued.
With clean slate, is OUE Lippo Healthcare on road to recovery?
SHAREHOLDERS of OUE Lippo Healthcare (OUELH) appeared to welcome the news of the company' s recapitalisation exercise. The counter added S$0.002 or 5.41 per cent to close at S$0.039 on Wednesday.
Shares of OUE, on the other hand, dipped S$0.02 or 1.79 per cent to end at S$1.10.
OUELH is converting shareholder loans from OUE to convertible perpetual bonds.
Tata Goeyardi, managing director and co-head of equities at SooChow CSSD Capital Markets, thinks the plan is a good deal for OUELH shareholders.
On a pro forma basis, OUELH' s gearing would improve from 2.5 times to 0.6 time as at Dec 31, 2020. Its net tangible assets per share would more than double from 3.11 Singapore cents to 7.38 Singapore cents.
OUELH' s loss per share of 2.22 cents in FY2020 would also reverse - into an earnings per share of 0.45 cent.
The perps will have a lower fair value than the loan amount, allowing OUELH to book some S$112 million in gains.
Furthermore, OUELH will save some S$6.6 million each year in interest expenses.
Mr Goeyardi believes OUELH' s performance should bottom out from here.
He expects the company to report a better set of results in FY2021, now that the weight of its borrowings has been removed.
Signalling confidence
Companies within the OUE stable have mostly performed poorly over the past year.
With the recapitalisation, OUE appears to be signalling its confidence in OUELH - albeit at some cost to OUE shareholders.
The pricing for the conversion of the perps - at S$0.07 - is significantly higher than the current level of OUELH' s shares.
OUE had said on Tuesday that by agreeing to convert its interest-bearing loans to perps, it was showing its " commitment" to the longer-term prospects of OUELH' s healthcare business.
Assuming OUE converts all its perps into shares on or after Aug 31, 2026, its direct shareholding in OUELH would be about 78 per cent of the enlarged base.
" With a strengthened capital structure, OUELH will be better-placed to tap on the capital markets to fund future growth opportunities. At the same time, the perpetual securities will provide an opportunity for the group to increase its interests in OUELH in tandem with the growth of its healthcare business," it said.
Unattractive in near term
Unfortunately, OUELH faces some immediate headwinds.
It is currently developing and will operate a hospital in Prince Bay, Shenzhen. It will also lease and operate another O& G Hospital in Changshu, Jiangsu. In 2019, it expanded into Myanmar and now has three hospitals and four clinics.
But the Covid-19 pandemic and the current political turmoil in Myanmar have hurt OUELH' s prospects in the near term.
Meanwhile, OUELH' s income from its unit First Reit will dip in the year ahead. OUELH is part owner and sponsor of First Reit, which has recently had to restructure its leases at a lower rental rate.
On the plus side, the new rate more accurately reflects the operating performance of the hospitals within First Reit' s portfolio.
First Reit has also announced its intentions to diversify its portfolio outside of Indonesia.
It could do so by injecting stabilised assets such as OUELH' s nursing homes in Japan into the Reit, which would free up capital for OUELH to make further acquisitions or developments.
OUE' s various business units appear to be undergoing a general housekeeping.
Perhaps, with a clean slate, OUELH will be able to make a recovery.
OUELH explores recapitalisation to repay loans to OUE
OUE Lippo Healthcare (OUELH) on Tuesday announced a recapitalisation plan backed by its major shareholders to convert its S$189.6 million of shareholder loans from OUE to perpetual bonds.
These 4 per cent convertible perps can be converted into ordinary shares at seven cents each.
This came the same evening it announced a staggering net loss of S$97.5 million in its second half ended Dec 31, 2020, a reversal from a profit of S$3 million a year ago. Revenue was flat at S$10.1 million for the six months.
For the full year, it incurred a net loss of S$98.7 million, compared to its year-ago net profit of S$3.4 million, despite revenue inching up 2 per cent to S$20 million mostly due to stable rental income from its 12 nursing homes in Japan.
Its bottom line was affected by impairment losses for its assets and fair-value losses for its investment properties of up to S$57.9 million, versus an income of S$10.9 million a year ago, due to global economic conditions caused by Covid-19.
OUELH also incurred a share of loss for FY20 of about S$35 million, mainly due to First Reit' s results which were impacted by net fair-value losses of more than S$400 million as a result of its lease restructuring as well as from the four months of rental relief provided to lessees in FY20. The Reit also suffered a decrease in the fair values of its properties.
OUELH said that its move to convert its loans was aimed at strengthening its balance sheet, as the company has been in a net current liability position over the last few years due to the shareholder loans which are payable on demand.
OUELH said a stronger financial position will enable it to explore financing options to fund future growth opportunities.
The conversion of the shareholder loans into equity will also remove uncertainties over the firm' s going-concern assumption, as well as the encumbrances over its assets from the loans.
OUE can only convert the perps 5.5 years later on or after Aug 31, 2026. This will keep OUELH from being distracted by having to seek funding for redemption of the perps or diluting existing shareholder value from the conversion. After Aug 31, 2026, the perps have no fixed redemption maturity deadline.
The indicative fair value of the perps is S$77.3 million, which represents a discount of about 59 per cent to the fair value of the loans. This will result in a one-off indicative gain of S$112.3 million to the group' s statement of comprehensive income for FY21.
There will also be recurrent interest savings of about S$6.6 million per year as there will be no more interest payment on loans.
The conversion price is also at a premium of 125.1 per cent over OUELH' s net tangible assets per share as at Dec 31, 2020 and 79.5 per cent over its Feb 16 closing price.
Shares of OUE added one cent to S$1.12, while those of OUELH closed flat at S$0.037 on Tuesday.
The deal will also bring about an improvement in OUELH' s net tangible assets per share, gearing ratio and earnings per share.
Assuming a full conversion of the perps, OUE' s direct shareholding in OUELH would be about 77.9 per cent of the enlarged share issue.
Majority shareholder Itochu has given an irrevocable undertaking to vote in favour of the deal. It owns 25.32 per cent of OUELH, while OUE owns 64.35 per cent.
The company will convene an extraordinary general meeting to seek shareholders' approval. OUE and its associates will abstain from voting.
RHT Capital advised OUELH, together with Zico Capital as independent financial advisor.
OUE Lippo Healthcare issues H2 2020 profit warning
CATALIST-LISTED OUE Lippo Healthcare expects to post a " significant loss" in its half-year and full-year results, the board warned on Friday.
The group, which is scheduled to release its unaudited results by Feb 23, 2021, pointed to the impact of the Covid-19 pandemic on the period ended Dec 31, 2020.
OUE Lippo Healthcare expects provisions and impairments on the carrying value of its investments, including First Reit, which is planning a rights issue to avoid a debt default.
" Given the current pandemic situation and the fact that the group operates businesses and owns assets and has investments across several countries, there have been material repercussions on the financial performance of the group," the board said.
The group thus forecast a net loss for H2 2020 and FY2020 based on its preliminary assessment of its unaudited consolidated financial results.
OUE Lippo Healthcare in joint venture with China Merchants Group to operate Changshu hospital
OUE Lippo Healthcare will jointly manage a obstetrics and gynaecology hospital in Changshu, China with Hong Kong-based state-owned conglomerate China Merchants Group (CMG).
This 50:50 joint venture in the south-east of China' s Jiangsu province will house 140 beds, with a gross floor area of about 25,000 square metres.
It is expected to be commissioned in 2023.
The project will be structured as a lease and operate model under a long-term lease of 19.5 years, with OUE Lippo Healthcare having the right of first refusal to renew the lease upon expiry.
Catalist-listed OUE Lippo Healthcare currently operates one hospital and is developing another two in China.
Derivatives trading spikes as investors embrace risk in volatile markets
Retail traders more likely to incur losses due to lack of experience or understanding
BROKERAGES are seeing a surge in the use of derivatives in uncertain times - a trend that they say reflects a lift in sophistication of retail investors here. But the risks of losses on these products are also higher, and the products are sometimes not well understood.
Derivatives markets have historically proven useful for generating gains in economic downturns, especially as investors can take advantage of leverage to boost returns.
Benjamin Yeo, head of derivatives dealing at Phillip Futures, told The Business Times (BT): " Derivatives trading allows investors the flexibility to hold short positions and gain from falling prices. The unprecedented volatility earlier this year has presented investors with many opportunities to profit from short-term price movement."
OCBC Securities said more clients have enquired about gaining access to derivatives markets over the last few months.
" With each crisis, we notice that the public becomes more informed about the various instruments and options they have to manage and grow their wealth," said Keeve Tan, head of futures and foreign exchange at OCBC Securities. " The current group of investors or traders we interact with is a lot more sophisticated compared to those we saw 10 years ago." OCBC Securities registered a 168 per cent increase in trading volumes of over-the-counter (OTC) derivatives in Marchcompared to pre-pandemic times. Trading in exchange-traded derivatives increased 93 per cent.
At CGS-CIMB, overall retail volume for exchange-traded derivatives increased 72 per cent, while OTC derivatives was up by 13 per cent. OCBC' s Mr Tan attributed the trading surge to fear in the markets. The CBOE Volatility Index (VIX), often referred to as the fear index, reached a high of above 80 on March 16 - a level not seen since the 2008 financial crisis. Any value under 12 on the VIX is described as " little fear" , while values above 20 are typical of a " fearful market" . The VIX is derived from the implied volatility of options on the S& P 500 index, and rises as options traders price in greater volatility.
As the VIX rises, investors and speculators " either seek safe haven assets in a flight-to-safety play, or look to ride on the increased volatility in the markets" , said Mr Tan.
Investors have been unnerved by the global spread of the novel coronavirus and a sharp contraction in oil prices as countries started to close their borders, said Franky Ng, CGS-CIMB Securities' regional head of futures.
" Each alone would be a massive event in its own right," he said. " Having both (events happen) back to back created a crazy economic storm which almost no investor could avoid."
Popular products
Equity indices have been among the most favoured derivatives across the brokerages, as investors turn to exchange-traded derivatives to hedge their stock portfolios. Some of Phillip Futures' popular products are based on the S& P, Dow and Nasdaq indices. The E-mini S& P, for instance, saw a 71.3 per cent month-on-month jump in volumes in March.
At OCBC Securities, equity index contracts including the S& P and Hang Seng rose by as much as 157 per cent. CGS-CIMB said that energy contracts, mainly crude oil, were its most popular derivative products. These made up some 57 per cent of total volume from March to June.
Gold has also been a favourite. Trading in OTC and exchange-traded gold contracts collectively increased 123 per cent at OCBC Securities.
Risky products
Investors who want to trade derivatives on platforms regulated by the Monetary Authority of Singapore (MAS) must undergo a customer knowledge assessment. Financial institutions offering derivatives must also implement safeguards to protect inexperienced customers from large losses.
Such rules exist because losses from trading derivatives can stack up quickly. Some products incorporate leverage to boost returns. Daily leverage certificates (DLCs), for instance, are structured so that the value of the certificate will rise or fall several times more than its underlying asset.
In May, BT reported that a group of investors had lost all their initial investment after the value of their Singapore Airlines (SIA) DLCs fell to zero. The DLC SOCGEN5XSHORT SIA was designed to rise by 5 per cent for every 1 per cent fall in SIA' s share price, and was wiped out when SIA shares rose by more than 20 per cent after they began trading ex-rights. The DLC issuer Societe Generale later made a goodwill payment to the DLC holders, to account for circumstances related to the published calculation of SIA' s theoretical ex-rights price.
Derivatives are often traded on margin, meaning the investor only deposits a fraction of the value of a trade with the broker. An investor could buy S$10,000 worth of derivatives, but only deposit a 25 per cent margin of S$2,500. This allows investors to make huge trades - beyond the amount for which they have the cash.
Margin trades that go well generate large returns. But when they go badly, the leverage used means losses are multiplied.
Checks by BT found that brokerages have seen more margin top-ups following the virus outbreak. Margin calls are triggered when the value of the assets in an account falls below the required margin or percentage. CGS-CIMB said net top-ups were particularly high in March, jumping 60 per cent from February.
Phillip Futures has increased margin requirements substantially to encourage clients " to maintain more than sufficient funds" and to " safeguard" investors. In March, when crude oil prices turned negative, margins were increased by 20 per cent for crude oil-related products and selected contracts hit by oil. Said Mr Yeo: " While this (leverage) makes trading derivatives more affordable, freeing up capital to invest in other products, retail investors need to understand that their profits and losses can be amplified, and there is a risk of running into over-loss."
Last month, 20-year-old Alex Kearn in Nebraska, United States killed himself because he thought he had lost US$730,000 from his leveraged options trades. Reports said he had likely misunderstood the numbers in his trading app.
While many derivatives traders do suffer from heavy losses, such risks have not deterred Shannon Sin, a retail investor who trades options because they allow him to enter the market at a price he deems acceptable in such volatile times. " Selling puts, for example, is a great way to collect premiums while waiting for a counter to retrace," he said.
He believes margin calls are often the result of poor risk management and a misunderstanding of the underlying traded counter. " With the increased financial literacy and access to so much information, you can get a reasonable idea of the financial strength and reasons behind substantial movements intraday quickly," he said.
Been watching this ctr since it bought 10% of First REIT and owns ALL of the property mgr of First REIT, namely Bowsprit Capital.
Still a very weak ctr,... but it owns a Gem REIT and ALL of the REIT manager,... how will it play out in future ? Any opinions, bros ?
Still a very weak ctr,... but it owns a Gem REIT and ALL of the REIT manager,... how will it play out in future ? Any opinions, bros ?