Discuss about the Investment and Portfolio Management for Risk-Sensitive Investment.
Investment is defined as the consumption, which involves purchasing assets, giving a loan or keeping of funds in bank account to safeguard the future. The main focus of doing an investment is to generate future returns in which one can rely on especially during the old. Moreover, it is also a plan to setting up better lives for the family. A country does investment in order to safeguard future of its citizens.
Concepts of Investment
One of the major concepts used in understanding of investment is economy. This is because every investment is entailed in the formation of new and productive capital. This capital is required to be in a form, which is constructive and produces investments, which are durable and long-term in its workability. An example of such is plant and machinery. Additionally, financial investment is also among basic concepts in venture. It is a kind of investment, which is allocated in monetary terms and resource (Chellaraj & Mattoo, 2015, p. 8). It is expected to yield returns over a give n period of time. It is facilitated through exchange of claims such as shares, debentures, savings, premiums, and fixed deposits (Davis & Lleo, 2015, p. 21).
Investment approaches are classified into four units. The first is the short-term high priority investment objectives. It is an investment which factors in high priority in achieving of certain objectives in a short period of time. This can be building of a house for living. The second one is the long-term high priority investment. This refers to investment scheduled to be realized at future date though it is worked for from a tender date. An example of this is the retirement benefits and education of the children. Thirdly is the low-priority. These have very low investment mechanism. The final approach is the moneymaking objectives. This is a kind of investment entailed in investing of surplus money and maximizing of wealth. It can be done through touring and purchasing of unnecessary luxuries car.
History of Singapore Exchange
Singapore is a country located in continental Asia. Its exchange market is called Singapore Exchange Limited (SEL). It was formed on December 1, 1999 as a holding company. After its formation, shares of the companies such as Stock Exchange of Singapore were cancelled and the shares were issued fully were issued to this new company. Other companies who used to trade in the exchange market of Singapore (Singapur, 2014, p. 23) initially owned the shares being transferred. This exchange company falls under the Asian and Oceania exchange federation. According to the recent statistics provided by KOH, it is deduced that it dominates the stock exchange in the two continents (Koh, 2014, p. 25). It provides different services, which are related to security exchange, trading, and derivatives among many others. In the year 2000, it was listed as the second exchange house in the Asian-Pacific region obtaining both public and private privilege of exchange. Later in 2010, it entered into merger contracts with Australian Security Exchange (ASE). This was propagated by fast growth in computer technology in Australia. The major shareholders in this limited liability company of Singapore are SEL holdings. This company holds 23.66% of the total shares of the company. DBS Nominees is a private company in Singapore and part of shareholders of Singapore Exchange Limited. Its shares are cumulatively 9.85% (Chellaraj & Mattoo, 2015, p. 42). Moreover, DBSN services Pte limited is also a great investor in this exchange firm. It holds 5.70% of shares in the company. Citibank Nominees also have a say in the running and management of this security company with shares relatively 18.55% of the total shares. Lastly, it is the HBSN Company having close to 7.16% shares in the Singapore Exchange (Koh, 2014, p. 23).
Operation of Singapore Exchange
According to research, Singapore Exchange Limited is seen to own and operate securities and derivatives and their related products in the country. Apart from its operations in the country, it has links in other countries such as China, Thailand, and Australia. It provides the supplementary securities of processing and information technology services to the participants in the financial markets in an explicit and reliable manner (Wong, 2014, p. 27).
This company is based in trading of securities, derivatives, and commodities. Furthermore, it also deals with clearing and settlement of swaps for their clients. It has the responsibility of performing duties dealing with depository and broker services to its members at an affordable pricing mechanism. Derivatives are one of the main businesses being delved on in this company (Koh, Chang& Koh, 2014, p. 16).They are rolled out based on the wider range of Asian assets, which originate from Chinese equation to the Indian currency in the region. This allows high yielding to the hungry investors through exposing them to a hard-to-buy market concept in the exchange model. This has enabled Asian investors to obtain investment opportunities (Ong et al, 2015, p. 41). This helped them in beefing up connections with their counterparts who are exposed to less developments but faster growing markets in the continental Asia and Oceania. Through this mechanism of trading derives, Singapore has developed a link with HongKong and Shangai in order to allow for easy purchasing from each other with sole aim of maximizing profits. They also want to cut on the cost, which arises in the event where one is stipulated to trade from companies in which they do not partner in any way. Through the analysis, Thailand has closed worked with bank of china with sole aim of promoting products from Thailand. According to J.P Morgan, this has increased competition and the business in the stock exchange risen up to 9%, which is accumulation of 28.8 million contracts (Thomsett, 2015, p. 24).
Securities are also part of the great concern in any exchanged market. According to the statistics produced last in the SEL, securities slapped at 50%, which is relative to 1.8 billion shares a day. This was based on the quarterly system from the previous year, which was 2015.This led to a struggle with the aim of attracting big-ticket listings that were entailed to drive trading activities in the country. The traders in the security market were estimated to own at least 7.7% of the securities yearly which when converted to Singapore dollars it is relatively 7.82. Therefore, it led to introduction of series of sweeping changes which include circuit breakers, liquidity providers and the market markers (Davis & Lleo, 2015, p. 28).
Singapore Commodity Exchange (SICOM) is rated to providing of highly and the most efficient market place for trading of futures and clearing businesses in Singapore. It is deduced to selling of large and commodities whose origin is of proven quality to balance market prices in the trading zone. In order to maintain this, they had to develop initiatives, which are customer friendly. This mechanism is through offering of the best conditions in the country for an active wholesale trading. This have a reduced price and thus many clients are enticed to buy from them. As a result of this, the market is widened indefinite (Lim, 2011, p. 15). The trading volume of over of about 27.6 million was realized as a result of this method of engagement in the market. These stimulate them to begin investments on grain and real estate develops as they are rare and they are highly profitable. The grain business is relatively cheap with minimum risks involvement.
Portfolio is defined as the spreading of risks in which the investor is bound to experience during the business tenure. This is done through the grouping of financial investments such as bonds, cash equivalents, and stocks and other things involved in trading in stock exchange market. Portfolio is held directly by the investor or the financial projector of the business. In most cases, it is constructed according to the risk tolerance of the business one is investing in. Most investors who fail in business do so because of lack of knowledge in the stock market. The managers ought to develop a mechanism of managing portfolio in the companies they run in order to avoid the havoc brought by unforeseen calamities in the business world (Ong et al, 2015, p. 53). The Asians countries should always be alarmed due to continues increment in the United States of America dollar. They are entitled to regulate their businesses through implementation of Federal Reserve’s in order to aid in curbing risks during recession period. This is possible since it much predictable due to the fact that United States is most developed economically than any other country in the world.
Moreover, it is prudent for Asians countries to invest earlier before the interest rate escalates as a result of appreciation in dollar by borrowing of loans from financial institutions on time. This is because of the foreseen probability in weakening of their currency and thus the economic standards might depreciate. Additionally, Asian investors ought to embrace on the foreign exchange reserves since this greatly helps in countering of the challenges brought about by the weaken of their currencies. This will help them to be resilient in the times when the capital inflows are experienced in the country. To add on this, the country should engage in structuring of the reforms which have a better impact to its investors. This will create a room for lots of investment opportunities and thus make the country an investment destination (Wong, 2011, p. 22). By creating such an environment, a lot of risks will be avoided. This will shift the graph of the investment rates towards the positive dimension economically.
Ong, K. L., Li, C., Soin, B. S., Teoh, L.-E., & Seah, C.-L. (2015). Business operations in Singapore.
Chellaraj, G., & Mattoo, A. (2015). Can the knowledge capital model explain foreign investment in services? the case of Singapore. [Washington, D.C.], World Bank. https://documents.worldbank.org/record?docid=000158349_20150129161242.
Thomsett, M. C. (2015). Getting started in stock analysis. https://public.eblib.com/choice/publicfullrecord.aspx?p=4040565.
Davis, M. H. A., & Lleo, S. (2015). Risk-sensitive investment management.
Koh, B. S. (2014). Learning for life: Singapore's investment in lifelong learning since the 1950s.
Wong, J. (2014). The political economy of Deng's Nanxun: breakthrough in China's reform and development. https://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=752583.]
Koh, T. T. B., Chang, L. L., & Koh, J. (2014). The little red dot: reflections of foreign ambassadors on Singapore. Volume III Volume III. https://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=925669.
Singapur. (2014). Foreign equity investment in Singapore. Singapore, [s.n.]. https://www.singstat.gov.sg/publications/publications_and_papers/investment/foreign_investment.html.
Lim, J. S. K. (2011). Route to successful property investment in Singapore. [Singapore], [publisher not identified].
Wong, M. C. S. (2011). The risk of investment products from product innovation to risk compliance. Singapore, Hackensack, NJ. https://www.books24x7.com/marc.asp?bookid=49913