An elite investment gets its day in the sun

Business Times - 13 Aug 2009

Sales of Good Class Bungalows gather steam, with some predicting healthy price rise

By KALPANA RASHIWALA

(SINGAPORE) The Good Class Bungalow (GCB) market has sprung to life with high-net-worth individuals stepping up their purchases.

July was an especially action-filled month which saw about 20 GCB transactions worth a total of more than $300 million. To put this in perspective, the entire first quarter of this year saw GCB deals worth only $27.5 million.

The action picked up in April, when $56 million worth of GCBs were transacted. It gathered pace in May and June, each month seeing deals amounting to around $188 million. In July, the market went ballistic.

So far this year, around 50 GCB deals have been transacted, according to caveats data compiled by property consultants and information on the latest transactions obtained by BT.

The year-to-date tally of over $800 million is healthy, considering that the whole of last year saw just 51 deals worth $830 million.

GCB agents expect the sales flow to continue in coming months. CB Richard Ellis's director, luxury homes, Douglas Wong said: 'It's likely that a total of 60-65 GCBs will be sold in the whole of 2009 - more than the 51 GCBs sold in 2008. The total quantum is likely to be around $1.1 billion to $1.2 billion, about 35-45 per cent higher than the quantum of $830 million in 2008.'

Savills Singapore director of investment sales & prestige homes Steven Ming says that 'although we do not expect the spike in GCB sales that was seen in May to July to be sustained, we do expect to still see healthy buying activity continue for the rest of the year'. He expects 60-70 transactions for the whole of 2009.

Apart from the general feeling that the worst of the financial crisis is over, he cites the low mortgage and deposit rates as reasons for the GCB market revival.

Agreeing, Newsman Realty managing director KH Tan notes that high-net- worth individuals prefer GCB investments to letting their cash idle in banks. They are also wary of investing in financial products following the Lehman debacle, he said.

'Another group of GCB buyers are foreigners who have become Singapore PRs and PRs who have become citizens,' adds Mr Tan, who recently brokered the $38 million sale of a Cluny Park bungalow.

BT understands the property was sold by former Kim Eng Securities managing director Douglas Ooi to a buyer who also picked up No 3 Cluny Hill earlier this year.

'When the IRs (integrated resorts) are ready, even more rich people from overseas will come to Singapore and become citizens. Some would be interested to invest in the GCB market,' said Mr Tan.

Typically, one has to be a Singapore citizen before one can own a GCB. However, PRs are known to have been given permission by the government on a case-by-case basis to buy small GCBs with land areas of about 15,000 sq ft, depending on their contribution to Singapore, according to Mr Tan.

Major GCB deals in recent months include a site at Dalvey Road said to have been sold by a certain Thomas Chan Ho Lam, for $27.01 million. Interestingly, a person with the same name is also understood to have bought a bungalow at Belmont Road for $30.5 million last month from Ong Kok Thai, managing director of Vanguard Interiors and the Peranakan Place Group.

Meanwhile, GuocoLand chairman Sat Pal Khattar is believed to be the seller of a bungalow at Rochalie Drive, which fetched $18.32 million. BreadTalk founder and chairman George Quek is reported to have sold his 2 Swettenham Road bungalow for $29.2 million to developer Simon Cheong.

The GCB market peaked in 2006 with $1.23 billion of transactions involving 119 deals. The following year saw 87 deals for a total $1.15 billion, according to CBRE figures. In the first seven months of this year, 47 deals totalling $710 million took place, CBRE said.

However, BT has learnt there are about six other transactions not yet captured in caveats, located in places like Belmont and Leedon roads, Maryland Drive and Astrid Hill. If these were to be included, the year-to-date tally would cross $800 million.

GCBs are the creme de la creme of Singapore's housing market, with stringent planning requirements.

There are only about 2,400 such bungalows in Singapore's 39 gazetted GCB Areas.

Mr Tan estimates GCB prices could increase about 20 per cent on average over the next 12 months.

Says Savills' Mr Ming: 'GCBs, being limited in availability, are a highly sought-after investment among the well heeled. As more rich are created, demand for these exclusive bungalows will gradually outstrip available supply for sale.'

Oil be not proud

(An abridged version of this essay appeared in the Business Times of 4 October 2008)

Looking beyond the current financial crisis, the future is bright and breezy as solar and wind energy will spell the end of oil's importance.

By JOSEPH CHONG

CEO, New Independent

In the Sunday Times of 6 July 2008 (oil was trading at about US$140 a barrel then), I predicted that the price will fall to US$50 in ten years. Since then we have moved half way there. The price of crude oil rose by 50% in 7 months and fell by 35% in 6 weeks. Until today, many policy makers insist that it is because of supply and demand and speculation played only a minor role. Did demand rise or supply fall by 50% in 7 months? Clearly not.

Published data shows that, physical demand and supply are approximately in balance at around 86 million barrels per day. Indeed, demand worldwide has been decelerating since the beginning of the year. For example, US demand has fallen by about 4% yoy in June to about 20.4 million barrels a day. On the other hand, available spare capacity in the oil producing nations have been thin – perhaps 1.5 million barrels per day. To aggravate matters, demand and supply for crude oil is inelastic in the near term. Most cars can only run on petrol and it takes 5 to 10 years to bring new field discoveries into production. Thus, no matter what the price, consumers and businesses have to pay up until they cannot.

Why then should prices continue to rise when crude oil demand is falling? I believe this is because of the demand from financial investors such as hedge and pension funds and, more mundanely, ETF holders. If spare capacity is plentiful, the impact of financial investors would not be significant. However, if spare capacity is small, financial demand of just the equivalent of 1 million barrels/day could drive prices skyward. This would be equivalent to an investment inflow of about US$50 billion per annum or about 3 months of China’s trade surplus or about 1.5% of the US$3 trillion in Sovereign Wealth Funds i.e. US$50 billion is thus a fairly small sum. It is even smaller if one remembers that oil futures are bought on margin.

I also suspect that both buyers and sellers of oil have been hoarding. As a producer of crude oil, I would delay bringing my product onto the market if prices are rising at the rate of 10% per month if my finances are in good shape.

There was also a huge divergence between the price of oil and the performance of oil stocks such as BP, ExxonMobil etc., which underperformed the price of crude oil by some 55% in the first six months of 2008. Exxon Mobil, based on a present value analysis, was being valued as if crude oil will trade at an average of US$80/barrel over the long term. The reason for this is clear. Buy US$50 billion of the public oil companies and the needle hardly moves. Throw US$50 billion into oil futures creates a quake because it is a relatively small market. The financial speculators know this.

Another anomaly is the huge premium over the marginal cost of production. The most expensive marginal barrel of oil is estimated to be around US$60 -70 a barrel. Being a commodity, that should be the sustainable price. Indeed, coal, which is many times more plentiful than crude oil, could apparently be converted into crude oil at around US$40 a barrel. Being replaced by another fossil fuel, however, is not the crude oil killer. It is renewable energy.

Renewable energy sources, together with the re-tooling of our energy supply infrastructure, will spell the end of oil’s importance. It will come sooner than many think. A view shared by the perpetually pessimistic “Economist “in its June 21st edition. It is not a pipe-dream such as aiming to go the moon in 1960. Most of the technologies are already commercially viable – it is a question of how fast mankind can re-tool.

The most promising alternatives are wind and (thin-film) solar energy – our nuclear fusion reactor in the sky. The earth absorbs 400 times more energy from the sun than all of mankind’s energy needs. Investments in solar energy are growing at 200% per annum. Indeed thin-film solar using nano-tailored ink as the energy absorbing medium is analogous to one of nature’s more potent processes – photosynthesis. Yes, plants get most of their energy needs from sunlight - not crude oil. Apparently, the leaders in this new technology are able to generate electricity as cheaply as coal if the cost of pollution is factored in.

Even as we get excited about solar energy today, the developments in the laboratory are even more exciting. Scientists have now developed material that could absorb infra-red radiation (heat) and convert it to electricity. The potential here is mine boggling e.g. air conditioners as we know them may be obsolete in future.

Although renewables are relatively small suppliers of energy currently, their rapid growth and huge potential will erode demand for oil at the margin as their share of total supply grows. For example the US could generate the equivalent of 6 million barrels per day of oil in its “wind belt” running north-south from Texas to the Canadian border. If the oil market were oversupplied by 6 million barrels today, the price of crude oil would plunge fairly quickly to US$50.

This rapid growth in alternative energy is happening not only in the developed world. China is now the world’s second largest wind turbine market after the US and the central government has set clear goals for the exploitation of wind and solar energy. Renewable energy makes even more sense for China given that China requires about 80% more energy than the US for every GDP dollar generated.

Unlike a coal plant that takes 5 years to build or a nuclear one which takes 10 years, and would be useless if only half completed, a solar or wind generator takes less than a year to build and could generate electricity even if half finished.

However, can land scarce Singapore be energy independent? Just like our water supply, there is good possibility that careful planning and technology will make this a possibility to a certain extent. Every HDB block is a potential solar generator not only for the residents but could sell surplus electricity to the grid. Another possibility for Singapore is to float the solar generators over our numerous reservoirs or along our sheltered coastlines. This is what small Denmark, which gets 20% of its electricity from wind energy, has done. It has installed some of its wind turbines offshore. Indeed, the world’s largest wind turbine maker is a Danish company, Vestas Wind Systems.

On a more global scale, the commercialization of alternative renewable energy has tremendous implications for mankind. Especially, the rural third world where the main hurdle to development has always been affordable electricity. Cheap solar has the potential to make irrigation, mechanization, sanitation and communication assessable for these people. It has the potential to reverse the trend towards urban overpopulation and squalor.

Indeed, we see this happening to rural communities in the US. Sweetwater in Texas has seen a major rejuvenation in jobs and population after the installation of a major wind farm. Ironically, farmers in Texas earn more leasing their land for wind turbine use than from farming. Texan farmers get $3000 per acre from wind compared to $150 per acre from corn. Wind farming is the most profitable cash crop.

In many ways, this renewable energy revolution will dwarf the internet in its potential to improve the lot of mankind. Looking beyond the current financial crisis, the future is indeed bright and breezy.

Harnessing the ETF revolution

Business Times - 24 Jun 2009

MONEY MATTERS

Exchange-traded funds now straddle virtually all asset classes and have become a global phenomenon

By JOSEPH CHONG

GLOBAL equity markets are roughly unchanged year to date. But this statistical calm masks a roller-coaster ride. Stocks fell 30 per cent until the second week of March - before rebounding 40 per cent. It was fear on a grand scale.

During this mayhem, we predicted in our column 'The paradox of thrift, and other thoughts' (BT, Feb 7, 2009) that things would soon sort themselves out.

Looking at big-picture data, we predicted that equities and hard assets such as precious metals and property would do well. So far, so good with our predictions.

Looking at forward indicators, most developed economies will be out of recession in the second half of 2009. This includes even Europe.

However, this recovery will be different from previous ones. The global economic landscape has changed markedly. Investors now need to scrutinise Chinese retail spending and PMI data as closely as they watch figures out of the United States. Ten years ago, few cared what the Chinese consumer spent.

Amid on-going fundamental shifts in the global economy, the money management industry is undergoing significant changes. And one factor behind the changing complexion of the wealth management business is the exchange-traded fund (ETF). Essentially, ETFs are open-end index funds that are listed and traded on exchanges - like stocks.

From the first humble listing in the US in 1993, ETFs now straddle virtually all asset classes - long and short - and have become a global phenomenon. There are currently more than 1,600 ETFs worldwide, with almost US$660 billion in assets. Twenty-five per cent of all trades on the New York Stock Exchange are driven by ETFs.

ETFs are also the choice instrument for macro bets by hedge fund managers. For example, when hedge fund manager John Paulson, the billionaire who made a fortune shorting the US sub-prime market, wanted to bet on gold recently, he did it through an ETF.

During the savage bear market of 2008, ETFs experienced net inflows, while unit trusts experienced net outflows. Indeed, most traditional unit trust managers see ETFs as one of the biggest threats to their business. Just as mutual funds did to bank deposits, ETFs are disintermediating traditional mutual funds as more investors chose to do away with the cost of active stock-picking work. Indeed, the ETF business is one of the main reasons Blackrock coughed up US$13 billion to buy Barclays Global Investors.

And on an infinitely more humble scale, that is why we soft-launched a new portfolio management service on June 1 to harness the global ETF revolution.

Utilising more than 1,000 ETFs traded on 22 exchanges around the world through one consolidated Internet account, we are providing clients with the flexibility to invest long and short in equities, fixed income, commodities and currencies globally. The goal is to achieve absolute returns regardless of market direction.

ETFs allow us to go long and short efficiently, while automatically achieving diversification and avoiding single-stock risks. But while avoiding single-stock risks, the investor can pursue targeted sectors as opportune.

Investment theory and practice show we can eliminate specific risk of individual securities by diversifying broadly, thus only having exposure to market risk - that is, the ups and downs of the market in general. Market risk cannot be diversified away in a long-only portfolio, unlike one that can go short.

Given the expected uneven nature of the recovery and eventual policy tightening by central banks around the world, the flexibility to go short is expected to be very useful.

The following is an example of a long-short strategy from the recent past. At the beginning of 2008, the outlook was poor for the US but benign for the rest of the world. Reflecting this, the US dollar was weak but US exports were growing because the rest of the world was still prosperous. Overall equity valuations in the rest of the world were not expensive.

One would, therefore, expect equities ex-US to outperform US equities, but US government bonds to do well. A typical strategy congruent with this outlook would be to invest in a global equity ETF but short (or eliminate) the US exposure by investing in an inverse US equity ETF.

Exposure to US government bonds would be through a US Treasury ETF with a maturity of around five years, which would be relatively stable. Therefore, the strategy would have been translated into three ETFs:

· iShares S&P Global 100 Index (IOO) - 45 per cent of portfolio.

· Short S&P500 ProShares (SH) - 25 per cent of portfolio.

· iShares Barclays 3-7 Year Treasury Bond (IEI) - 30 per cent of portfolio.

Such a construction would position the portfolio for upside but provide protection on the downside. Despite the most horrendous year for global equities since the 1930s, this simple three-ETF portfolio would have lost only 1.8 per cent at the end of 2008.

Our new portfolio management service built around ETFs gives individuals the flexibility to invest like a hedge fund but at low cost and with real-time transparency.

It gives investors the scope of large institutions - without the need for massive portfolios and outlays. The advent of the Internet technology and the richness of ETF choices have made this possible. Investors and advisers tend to look at events through the lens of their mandate and available instrument choices. Hence, long-only mandates result in a bias to interpret events on the upside, unlike a strategy that can go both long and short - one that is indifferent to market direction.

Psychologically, this has important consequences for portfolio performance. The changing world suddenly looks less frightening when one can make money whether markets are up or down.

It's just a business cycle as usual

Business Times - 12 Aug 2009

MONEY MATTERS

Pushing break-even points down will ensure profits, which will lead to re-investment and re-hiring - and thus growth

By JOSEPH CHONG

I AM gratefully astonished by the very positive response to our last BT contribution of June 24, 2009 - 'Harnessing the ETF revolution'. Searching on Google with the key phrase 'ETF revolution' two days after publication, I was surprised that of 85,000-plus articles listed, 'Harnessing the ETF revolution' was number one, besting similar pieces from far larger media houses such as FOX Business. It remained that way, until the piece was archived a week later. Readers, who wish to access the article can still do so at www.ni.com.sg. Perhaps the marketing experts at SPH may have some thoughts about monetising such articles, instead of archiving them?

Apropos revolutions, the good recent second-quarter announcements from global bellwether companies such as Intel, Apple, ABB and Honda were treated like revolutions in the business media. It is not a revolution - it is the business cycle at work.

We had a financial crisis that precipitated a deep recession. Companies globally reacted swiftly, throttling production and shedding excess inventory, production capacity and excess labour and benefits, thus pushing revenue break-even points down. At micro-level, we saw this in our general insurance business, as companies cut back coverage and benefits. Labour, which is in excess now, has little bargaining power.

Pushing break-even points down is the needed pain for the economy. This will ensure profits, even in a weak revenue environment. Profitability will eventually lead to re-investment and re-hiring - and thus growth. No revolution here, just the business cycle.

Profit announcements have shown other key traits besides cost cuts - better revenue estimates in the second half and margin expansion. This bottom-up perspective is congruent with the macro view that we have had for some time. We knew that revenue would be better going forward from the PMI sub-indices for new orders from the major economies, led by China.

From the macro perspective, we expected margins to improve because of the divergence in CPI and PPI around the world. The PPI, producer price index or a measure of input costs for businesses, has been falling far faster than the CPI, consumer price index or a measure of what businesses charge consumers, in most major economies. When PPI lags CPI, it is normally good news for businesses and the equity markets as it generally signals improving margins.

The accompanying chart shows the trend of CPI less PPI over the past 20 years for the US. Readers will notice that periods when CPI less PPI was positive have correlated with improving corporate margins and healthy equity markets.

We are now entering a sweet spot in the business cycle for equity markets - expanding margins and revenues. Corporate profit growth is back. Throw excess liquidity (M3 minus nominal GDP growth) into the cocktail and that's a recipe for very strong equity markets, as we had predicted in our contrarian call in BT of April 8, 2009 ('No, the recovery isn't a mirage any more'). Readers who want to access the article can still do so on www.ni.com.sg. Indeed, the Shanghai stock market's 90 per cent climb from the bottom could be a precursor for developed markets.

The improving demand picture and corporate profits are also correlated to the performance of the Singapore residential property market. When we stuck our neck out with our bullish contrarian call in BT on Dec 10, 2008 ('A city of two tales') amid widespread fear, we had an internal forecast of 25 per cent upside in 12 months. It looks as if we may have been too conservative.

Even without the expected additional demand generated by the integrated resorts in 2010, annual average take-up has been around 8,100 units since 1995. With the recovering global economy, we should at least see this number in 2010. Unfortunately - or fortunately, if you are an investor - there will be only 5,500 completions in 2010. This shortfall will push the rental vacancy rate down.

I estimate that this will fall from the current 5.9 per cent to below 4.9 per cent. The last time this happened, in early 2007, rents and capital values surged. Unlike in 2006, the cushion of surplus HDB flats is probably no longer there. I say probably because HDB, unlike URA, has yet to publish data on the inventory of unsold flats.

It looks like quite a party for the residential property market in the next 12 months, barring an external shock or government action. It is strange that when the Straits Times Index jumps 80 per cent in five months, no one screams speculation. However, when the residential property market prices begin to turn around (according to most recent URA data), many are calling for a change to the rules and the guillotine for 'speculators' while demanding 'affordable' prices.

What signal are we sending to those brave investors who take risk and prop the market (and banking system) in the despair of the first quarter of this year, when even the government was issuing statements full of gloom? In future, we may find no buyers at any price when things turn down because we acquire a reputation as rule changers. Curb 'speculation' with care. Otherwise, we may regret what we wish for.

The writer is CEO of financial adviser New Independent. He welcomes feedback at josephchong@ni.com.sg. This article is for information only. Readers should seek independent advice before making any investment decisions

Beijing fails to capitalise on success at Olympics

Business Times - 12 Aug 2009

By FRANK CHING

A YEAR after the Beijing Olympics, China is showing greater confidence and its international standing is rising, largely as a result of the global financial crisis, which has showcased its economic success at a time when the United States is seen as being in decline.

After the International Olympics Committee voted in July 2001 to give China the right to stage the 2008 Summer Games, many people overseas hoped that its human rights situation would improve, while within the country it was commonly believed that China's prestige would grow.

Hope for human rights progress was based on pledges made by Chinese officials. For example, Liu Jingmin, vice- president of the Beijing 2008 bid committee, had said that 'by allowing Beijing to host the Games you will help the development of human rights'. In the end, very little, if any, progress was made.

Beijing also promised that the international media would be completely free to report. This was one area where there was movement. Liberalised rules were put in place from the beginning of 2007 to Oct 17, 2008, whereby foreign journalists were no longer required to get government approval to conduct interviews across the country. After the Olympics ended, China announced that these rules would continue to apply. To date, that is the one tangible improvement in human rights. Even so, the Foreign Correspondents' Club of China, while acknowledging that the relaxed rules have made travel within the country easier for correspondents, also reported that 'intimidating of sources and domestic staff mar this progress towards internationally accepted reporting conditions'. Journalists said such intimidation is 'a trend that threatens progress towards greater openness'.

Actually, the 12 months since the Olympics have been marked by heightened repression, with human rights lawyers being especially targeted for harsh treatment. They have been kidnapped, beaten up and even disbarred. There are now signs that the government is turning its attention to non-governmental organisations.

Last month, the Open Constitution Initiative, or Gongmeng, a group that offered legal assistance, was shut down, ostensibly for tax evasion. The group had released a report on Tibet in May that challenged the official position on the 2008 protests in Lhasa.

At about the same time, the office of the Beijing Yirenping Centre, which is dedicated to promoting the interests of health-disadvantaged groups, such as carriers of the Hepatitis B virus, was raided. Copies of its newsletter opposing discrimination were confiscated. There is now fear of a crackdown on NGOs not only in Beijing but across the country.

Many people think that this crackdown is due to the current politically sensitive period, with the approach of the 60th anniversary of the founding of the People's Republic on Oct 1. However, it is not at all clear that there will be any easing after that date.

As for China's international prestige, there is little evidence of an Olympics-related rise. A BBC World Service poll released in February, six months after the Olympics, showed that public views of China had slipped considerably. Whereas in 2008 those polled leaned towards saying China had a positive influence in the world, the 2009 survey showed positive ratings had fallen from 44 per cent to 39 per cent, while 40 per cent felt that China's influence was negative.

The Pew Global Attitudes survey this year, released last month, did indicate that China's image has improved, but only slightly. This is likely to reflect the impact of the financial crisis more than that of the Olympics.

American public opinion of China has grown more positive, with 50 per cent of Americans rating China favourably, compared with 39 per cent in 2008 and 42 per cent in 2007.

But in Western Europe, the improvement was much less. True, in Britain, favourable views rose from 47 per cent in 2008 to 52 per cent this year. However, views remained mostly negative elsewhere. There were slight improvements in France and Spain, with positive views rising from about 30 per cent to 40 per cent. In Germany, however, opinions remained negative, with only 29 per cent holding a positive view. It is only in Africa that the attitude towards China is overwhelmingly positive.

The two issues - human rights and China's international standing - are clearly related. If China had made use of the Olympics to improve its human rights record, as it had promised, there is no doubt that its prestige today would be much higher, even without a financial crisis. Beijing dazzled the world at the Olympics, especially with its spectacular opening ceremonies. What a pity China did not capitalise more on such a wonderful opportunity.

The writer is a Hong Kong-based journalist and commentator

Causeway expansion rejected

Business Times - 12 Aug 2009

(JOHOR BARU) The Johor Baru Umno Youth division has opposed a Singapore proposal to expand the Johor Causeway as it will not solve the pollution problem in the Johor Straits.

Its chief, Khalid Mohamad, said that the proposal to expand the 85-year-old Johor Causeway by Singapore Prime Minister Lee Hsien Loong should be rejected as it was not based on mutual benefit.

'The expansion of the Johor Causeway will only prolong the water pollution problem in the Johor Straits. It will not address the problem,' he said.

He said that the proposal to expand the Johor Causeway was made in the interest of one party and would not solve the many problems faced by Johor and Malaysia.

He added that Johor Baru city folk wanted to see free flow of water from the East and West of the Johor Straits\. \-- Bernama

Lawyers may stop holding conveyancing monies

Business Times - 12 Aug 2009

Govt suggests that such funds be held by Law Academy or banks

By JAMIE LEE

LAWYERS may soon be prohibited from holding conveyancing monies if a new proposal by the Ministry of Law goes through.

This follows the infamous case of lawyer David Rasif running off with some $10 million of his clients' money in 2006, as well as a string of recent cases in which lawyers absconded with clients' conveyancing money.

Aimed at preventing lawyers from holding large sums of cash for their clients, the new move is unlikely to dampen business in this area of legal work, market watchers said.

Conveyancing money refers to money used as part of transactions for housing purchases. This includes stamp duty payment and option deposits.

A seller receives an option deposit - typically amounting to 4 or 9 per cent of the purchase price which a buyer pays - once the option to purchase is exercised.

In a public consultation paper released yesterday, the ministry has suggested having the Singapore Academy of Law as the main entity appointed to hold conveyancing money.

The option deposit can also be held by entities approved and appointed by the Ministry of Law.

The three local banks have also been engaged to look into offering services in this area.

'We have been in discussions with the Ministry of Law on the possibility of providing the service to hold the option deposit,' said Chow Theng Kai, head of cash management, group transaction banking, at OCBC Bank.

Lawyer Gan Hiang Chye from Rajah & Tann LLP told BT that this move would not take away any business.

'The law firm will still be doing the administrative work for the client,' he said, noting that the clients can use a cashier's order to be paid to the respective parties, but this can be deposited by the law firm.

'The legwork is still being done by the law firm for the client. The client just has to make one small visit to the bank to buy the cashier's order.'

He added that the recent cases of lawyers absconding with clients' money has 'diminished' the profession.

The proposed changes come after Chief Justice Chan Sek Keong expressed concern last year that such criminal conduct of lawyers harms not only the reputation of the legal profession, but also the victims who could not get full compensation.

This is despite tightening the Solicitors' Accounts rules in July 2007, such that no sum exceeding $5,000 can be drawn unless two lawyers okay it.

With the amendment, a lawyer also could not receive or hold conveyancing monies unless he had at least two signatories to his client account.

A review committee chaired by Justice VK Rajah was then set up to look into making changes to the conveyancing system.

The central recommendation to prohibit lawyers from receiving such monies was made in the committee's report.

The Chief Justice agreed with the recommendation and forwarded this to the Ministry of Law.

The proposed changes are likely to be implemented at the end of the year.