Leverage
Leverage is a powerful tool that greatly enhances a trader’s ability to profit from financial markets. However, it’s important for traders to understand how it works and use it responsibly to avoid excessive risk and potential losses. Stocks, indices, forex, commodities, and exchange-traded funds (ETFs) are just a few examples of financial markets where leverage can be used.
The main idea of leverage is to provide investors, both individual and corporate, with a means to increase their possible returns by accessing borrowed capital. In this article, the details on leverage are outlined: what it is, types of leverage, how leverage affects investment returns, and some real-life examples will be given. We will review several frequently asked questions to view leverage better.
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Leverage
Gearing, also known as leverage, uses borrowed capital to raise the potential return on investment. With credit availability, investors can purchase more than they had initially intended to buy using their own money. The fundamental principle investors will often depend on is that returns on their investments will exceed the cost of obtaining the loan, thus increasing their profit.
In other words, the debt-equity relationship, in financial terms, would imply that a high leverage ratio means a high level of borrowing for investment to exaggerate profits and losses. The fundamental concept is just like a lever in physics whereby a small amount of force can move an object many times its size similarly; financial leverage enables investors with much smaller funds to hold more significant investments.
What is leverage?
Leverage is a term that refers to the trading of financial instruments with borrowed funds. In the trading world, leverage is a crucial tool that allows traders to maximize potential profits while minimizing the capital required to enter a position. Essentially, leverage allows traders to control larger positions with smaller amounts of capital.
It’s important to note that while leverage can increase potential profits, it also increases potential losses. This is because traders borrow funds to enter a position, and any losses incurred will be magnified by the leverage used. As such, it’s crucial for traders to use leverage
Understanding leverage
Instead of directly holding the underlying assets when you trade, you speculate on their price swings to earn a profit. When you use leverage, your broker will put up most of the capital, and you will only need to contribute a small deposit to establish a larger position.
For instance, opening a position with a broker to trade stocks using leverage would entail borrowing most of the position’s value from that broker, depending on the leverage ratio. No fees will apply regardless of the leverage you use, whether 5x or 20x your initial deposit.
Trading using leverage is quite alluring because winnings can be massively increased. But leverage has a flip side, and it’s crucial to remember that losses can be doubled rapidly.
Types of Leverage
Leverage can be divided into several types, each serving different purposes in financial management:
- Financial Leverage is the condition wherein one borrows funds to invest in assets, hoping their returns will be higher than the cost of debt. Usually, companies use financial leverage to finance growth initiatives, acquisitions, or any other capital expenditure.
- Operating Leverage: This refers to the part of a company’s fixed costs in the cost structure. A company with high operating leverage shows very high profits with increased sales, but at a decline, this leaves the company with the burden of fixed costs.
- Combined Leverage: This shows not only financial and operating leverage but is combined in one measure that gives an all-around view of a company’s risk exposure. It reflects how fixed costs and debt together are affecting overall profitability.
Effects of Leverage on Investment Returns
Leverage may affect investment returns in many ways, both positively and negatively. Among the significant effects of leverage on investment returns it includes at least one of the following:
Amplitude of Returns: It refers to the magnitude of returns. While investments are going great, leverage amplifies your profits. Suppose an investor leverages to buy an asset; rental income could help pay the debt but will also result in additional profit due to the appreciation of the property.
Higher Risk: Higher risk, on the other hand, involves leverage, which amplifies losses. In case of a fall in the value of the investment, the investor may still be committed to repaying the finance and, therefore, may incur losses more significant than their initial investment.
Volatility: Leveraged investments are typically volatile; small movements in the underlying asset value can result in much larger movements in the investor’s equity. Such volatility is especially acute in leveraged trading instruments, options, and futures.
Advantages and disadvantages of leverage
While leverage can offer significant advantages, it also comes with certain risks and disadvantages.
- One of the main advantages of leverage in trading is the ability to generate higher returns. Financial leverage increases the impact of each dollar you invest. With leverage, traders can earn larger profits than they could with their capital alone.
- Additionally, leverage can provide greater flexibility in trading, allowing traders to take positions in a wider variety of assets and markets.
However, leverage also comes with substantial risks.
- One major disadvantage of leverage is the potential for significant losses. As leverage amplifies the size of a position, even a small decline in the value of an asset can result in substantial losses. Additionally, leverage can increase the risk of margin calls, which require traders to deposit additional funds to cover losses.
- Another potential disadvantage of leverage in trading is its psychological impact on traders. When using leverage, traders may be more likely to take on excessive risk and make impulsive decisions. This can lead to emotional trading, which is detrimental to long-term success.
Leverage can be a powerful tool for traders seeking higher returns and taking advantage of market opportunities. However, it is necessary to consider the risks and disadvantages of using leverage, including the potential for significant losses and the psychological impact of trading with borrowed funds. To successfully use leverage in trading, it is essential to have a well-defined trading plan and risk management strategy in place.
Calculating leverage
To calculate leverage, traders must first determine their margin requirement. This is the percentage of the total position that must be deposited as collateral to open a trade. For example, if a trader wants to enter a position worth US$10,000 and the margin requirement is 5%, they must deposit US$500 to open the trade.
Once the margin requirement is determined, traders can calculate their maximum leverage by dividing the total position size by the margin requirement. In the above example, the maximum leverage would be 20:1 (or 5% margin requirement divided into the US$10,000 position size).
Example of leverage
- For example, assume a trader wants to buy US$10,000 worth of a particular share. In that case, they may only need to put up US$1,000 of their own funds if their broker offers a leverage ratio of 10:1. This means that the broker is effectively lending the trader the remaining US$9,000 to make the trade.
While leverage can be useful for experienced traders, it carries significant risks. If the trade goes against the trader, they could lose more than their initial investment, leading to substantial losses. Therefore, traders must use leverage wisely and cautiously to avoid undue risks.
- Being aware of how leverage works in practice, let us consider the following example.
Investment in Real Estate
Consider an investor who is seeking to purchase a US$500,000 investment property. Reluctant to pay the entire amount in advance, he instead gears his investment to a 20 percent deposit of US$100,000, and the remaining 80 percent is financed via a US$400,000 loan from any bank at 4 percent per year.
Scenario 1: Successful Investment
If the property appreciates to US$ 600,000 after a few years, he can sell his property at a profit. The amount of profit after repayment would be calculated as illustrated below:
Sales Price: US$ 600,000
Loan Repaid: US$ 400,000
Investor’s Profit: US$600,000 – US$400,000 – US$100,000 = US$100,000
Of this amount, in the above example, the investor doubled his money through leverage.
Scenario 2: Unsuccessful Investment
Consider the unsuccessful investment, for example, when the property’s market value falls to US$400,000. For the investor, his calculation would look something like this:
Sale Price: US$400,000
Loan Repayment: US$400,000
Investor’s Loss: US$400,000 – US$100,000 = -US$100,000
In this case, the investor, in addition to losing his money, is at an acute risk of not covering the loan from his rental income.
Frequently Asked Questions
The whole amount a person invests, including any offered collateral, is called their “margin,” This approach creates a trading advantage known as leverage. Margin is mostly utilised to produce large leverage levels, which can enhance both profits and losses.
The link between leverage and margin is the opposite: the higher the margin is required, the lower your leverage ratio will be.
Financial leverage is borrowing money to undertake investments to generate higher returns. It is based on the notion of investing money to generate income.
The objective of financial leverage is for the return on such assets to be greater than the costs of borrowing the capital used to purchase those assets. Financial leverage boosts an investor’s earnings without necessitating more personal funds.
Debt financing a home purchase, bank loans to launch a business, and corporate bonds are examples of financial leverage.
By industrial standards, a financial leverage ratio of less than 1 is typically favourable. Potential investors and lenders may view a company as a risky investment if its financial leverage ratio is greater than 1, and it is the reason for alarm if it is greater than 2.
Leverage allows investors to increase their buying influence over the market. Yet, there are risks associated with this opportunity; therefore, before taking on leveraged positions, it is often suggested that amateur investors have a thorough grasp of what leverage means and its possible drawbacks. Financial leverage may be systematically utilised to structure a portfolio to profit from successful investments and incur even more when bad ones come along.
This allows traders to hold much more prominent positions than their capital would generally support. With a given amount of capital, say US$1,000, and with 10:1 leverage, for instance, one can hold a position of value up to US$10,000. Thus, the leverage ratio magnifies the gain or loss on this position, making the trade both potentially very profitable and dangerous.
The risks of leverage include but are not limited to:
Higher Loss Potential: Losses more than the principal invested.
Margin Calls: During trading, when the leveraged position falls below the minimum requirements set by the brokers, they can declare a margin call, in which the investor is asked to deposit more money or liquidate his position.
The other problem is that high debt levels can lead to financial burdens, especially when investments do not yield expected returns.
Yes, leverage is utilised in real estate investment. Often, investors mortgage a large portion of the purchase price for properties, enabling them to hold valuable assets using only part of their capital.
A leveraged ETF is an investment fund that uses financial derivatives and borrows money to magnify the returns of an underlying index. These funds attempt to return a multiple of an index’s daily performance with increased risks by using daily compounding, which may sometimes show colossal volatility.
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SATS Builds Global Platform to Navigate Market Volatility
Company Overview SATS Ltd is a leading aviation services provider specializing in ground handling and cargo operations across multiple international markets. Following its successful integration of Worldwide Flight Services (WFS), the company has evolved into a comprehensive global air cargo operator with an expanded network spanning multiple continents. Key Investment Highlights SATS demonstrates remarkable operational resilience by strategically redeploying capacity to high-demand routes during periods of trade volatility. The company's proactive business development efforts have resulted in significant new contract acquisitions, positioning it favourably in the competitive aviation services sector. The transformational integration of WFS has fundamentally changed SATS' business model, shifting from station-specific or project-based incremental wins to securing network-wide cargo handling mandates. This strategic evolution enhances the company's value proposition to major airline clients seeking comprehensive global solutions. Major Contract Wins Drive Growth SATS has secured several landmark contracts for FY26, highlighting its emergence as a significant global air cargo operator. Notable achievements include an overseas hub-carrier contract with Riyadh Air, a multi-station cargo contract with Turkish Airlines in the United States, and a contract renewal for cargo handling operations in the US and Europe with Saudia Cargo. These wins demonstrate the company's ability to compete successfully for large-scale, multi-regional mandates. Research Recommendation and Outlook Phillip Securities Research has downgraded SATS to a NEUTRAL recommendation, while raising the target price to S$3.84 from S$3.66. The higher target price reflects expectations that the removal of the De Minimis exemption will have less disruptive impact on SATS' cargo operations in the Americas, supported by rising demand from US domestic freight routes. The research firm has increased its FY26e PATMI forecast by 5.5% to S$249 million. Earnings stability is expected to be underpinned by approximately 20 contract wins and renewals secured in FY25 and FY26, with phased revenue recognition across long contract tenures providing operational stability and predictable cash flows. Frequently Asked Questions Q: What is SATS' current stock recommendation and target price? A: Phillip Securities Research has downgraded SATS to NEUTRAL with a raised target price of S$3.84, up from the previous target of S$3.66. Q: How has SATS' business model changed after the WFS integration? A: SATS has transitioned from station-specific or project-based incremental wins to securing network-wide cargo handling mandates, establishing itself as a global air cargo operator. Q: What major contracts has SATS won for FY26? A:Key FY26 wins include an overseas hub-carrier contract with Riyadh Air, a US multi-station cargo contract with Turkish Airlines, and contract renewal for cargo handling in the US and Europe with Saudia Cargo. Q: How does SATS maintain operational resilience during trade volatility? A: SATS maintains resilience through capacity redeployment to routes with higher demand amid trade volatility and securing new contracts through business development efforts. Q: What are the revised earnings forecast for SATS? A: The FY26e PATMI forecast has been raised by 5.5% to S$249 million. Q: How many contract wins and renewals has SATS secured recently? A: SATS has secured approximately 20 contract wins and renewals in FY25 and FY26. Q: Why was the target price increased despite the downgrade? A: The higher target price reflects expectations that the removal of the De Minimis exemption will be less disruptive to SATS' cargo operations in the Americas, supported by rising demand from US domestic freight routes. Q: What provides earnings stability for SATS going forward? A: Earnings resilience is underpinned by the contract wins and renewals, with phased revenue recognition across long contract tenures providing stability. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.
Yoma Strategic Holdings Delivers Strong Property Performance in 1H26
Record Revenue Performance Yoma Strategic Holdings Ltd achieved its highest six-month revenue in 1H26, demonstrating significant operational improvements despite challenging market conditions. The company reported narrower losses of US$8.7 million compared to US$10.5 million in 1H25, marking a substantial improvement in overall financial performance. Property Development Drives Growth The standout performer in Yoma's portfolio was its property development division, Yoma Land Development, which delivered exceptional results with net profit doubling to US$15 million. This represents a remarkable 104% year-over-year jump in earnings, primarily driven by the success of Pun Hlaing Estate's landed projects. These premium developments have benefited from superior pricing power and healthy profit margins, positioning the division as a key growth driver for the company. Company Overview and Market Position Yoma Strategic Holdings operates as a diversified conglomerate with significant exposure to Myanmar's developing economy. The company's business portfolio spans property development, food and beverage operations, and mobile finance services. Through its property arm, Yoma focuses on developing high-quality residential and commercial projects that cater to Myanmar's growing middle class and expatriate community. Financial Resilience and Strategic Progress Despite a 9% currency decline, Yoma demonstrated remarkable operational resilience, growing core EBITDA by 50% year-over-year to US$20.5 million in 1H26. The company's ability to implement price increases in an inflationary environment has been crucial in maintaining and expanding operating margins across its business segments. The property development division continues to perform strongly, driven by its focus on projects with superior amenities and infrastructure. Meanwhile, the food and beverage segment has maintained stable earnings through strategic price adjustments to preserve margins. The mobile finance division is undergoing a strategic transition toward payments and deposit float as primary sources of profitability. Finance costs remain the company's most significant expense at US$18 million, down from US$20.1 million in 1H25. The company has initiated a deleveraging process to reduce interest expenses, supported by significantly improved operating cash flow, which climbed 150% year-over-year to US$16.9 million. With a current book value of S$0.189 per share, Yoma appears well-positioned for continued growth. Frequently Asked Questions Q: What were Yoma Strategic Holdings' key financial highlights in 1H26? A: Yoma reported its highest six-month revenue in 1H26 with narrower losses of US$8.7 million compared to US$10.5 million in 1H25. Core EBITDA grew 50% year-over-year to US$20.5 million despite a 9% currency decline. Q: Which business segment performed best during the period? A: Property development was the standout performer, with Yoma Land Development achieving a 104% year-over-year jump in earnings to US$15 million, driven by strong performance from Pun Hlaing Estate's landed projects. Q: How did Yoma manage to grow earnings despite currency headwinds? A: The company successfully implemented price increases across its business segments in response to inflationary pressures, which helped sustain margins and drive operating earnings growth. Q: What is driving the success of Yoma's property development business? A: The property development division benefits from projects with good amenities and infrastructure, particularly the premium-priced landed projects at Pun Hlaing Estate that enjoy healthy profit margins. Q: How is the company addressing its finance costs? A: Yoma has initiated a deleveraging process to reduce interest expenses. Finance costs decreased from US$20.1 million in 1H25 to US$18 million in 1H26, while operating cash flow improved significantly. Q: What is the current book value per share? A: The company's book value is currently S$0.189 per share. Q: How did operating cash flow perform in 1H26? A: Operating cash flow showed strong improvement, climbing 150% year-over-year to US$16.9 million in 1H26. Q: What strategic changes are occurring in the mobile finance business? A: The mobile finance division is transitioning toward payments and deposit float as primary sources of profitability, representing a strategic shift in its business model. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.
Buffer ETFs — What Are They and How Do They Work?
Introduction to Buffer ETFs Buffer ETFs are constructed using options and are also known as defined-outcome ETFs, offering investors a preset range of potential returns and risks over a typical one-year period. In other words, they’re designed to limit downside losses while still allowing you to stay invested in the market. Think of them as a way to smooth out volatility without completely giving up growth opportunities. First Trust Vest US Equity Buffer ETF - December 2025 (FDEC) Here’s a quick illustration: FDEC.US offers up to 14.76% potential upside while absorbing the first 10% of market losses. This allows investors to participate in potential growth with a built-in buffer. If SPY.US finishes the outcome period with returns between 0% and –10%, the investor would not incur losses (before fees). Overview of MAS SIP Requirements As Buffer ETFs use more complex structures, they fall under Specified Investment Products (SIPs). This means investors must demonstrate a certain level of knowledge before trading them. Since 2012, in alignment with the Monetary Authority of Singapore's efforts to enhance trading protections for retail investors, brokers are required to assess an investor's relevant knowledge and experience before permitting investments in SIPs. As a result, investors must complete the Customer Account Review (CAR) eligibility form before being allowed to invest in listed SIPs. If you’re new to these products, you can build your understanding by completing the SIP product knowledge module offered through the SGX Academy to become eligible to trade. How does Buffer ETFs work? Buffer ETFs achieve their defined outcomes through the use of options strategies, primarily by combining long and short options on market indices such as the S&P 500. By understanding how these option combinations work, you can better appreciate how the ETF is constructed and how its risk-reward profile is designed. This makes it easier to evaluate whether a Buffer ETF aligns with your investment goals, especially in volatile market conditions. First Trust Vest US Equity Buffer ETF - December 2024 (FDEC) The payoff structure of FDEC.US can be visualised via the risk-return chart available on the First Trust website, as well as those of other Buffer ETF issuers. The diagram illustrates how the downside buffer and upside cap interact to shape investor outcomes over the defined outcome period. According to the fund’s Objective/Strategy section, FDEC.US aims to deliver returns (before fees and expenses) that match the price return of the SPY ETF (which tracks the SP500 index), up to a predetermined upside cap of 14.76%, while providing a 10% buffer against the first losses of the reference asset for the outcome period from 23 December 2024 to 19 December 2025. Buffer ETFs, such as FDEC.US, typically reset annually. The options contracts that underpin the buffer-cap structure expire at the end of the outcome period, after which a new outcome period begins with newly defined cap and buffer levels, based on prevailing interest rates and market volatility. Investors can hold the ETF through the expiry of one period and into the next; however, it is essential to note that the cap and buffer terms may vary from one period to the next. Why Buffer ETFs Are Designed for Long-Term Investors Buffer ETFs work best when held for the entire outcome period, as this allows the built-in options strategy to fully deliver the intended balance between downside protection and capped upside participation. Entering or exiting mid-period can result in different outcomes from those originally designed. S&P 500 Historical Annual Returns (1927-2025)Source: Macrotrends Looking at the historical data, the S&P 500 has delivered strong average returns over time. While positive years are more common, market downturns can still occur, and the index is typically down by around 10% during negative periods. Therefore, Buffer ETFs may serve as a useful tool for managing downside risk, given the built-in buffer. The Drawbacks and Risks of Buffer ETFs 1. Limited Upside (Capped Returns) Buffer ETFs offer downside protection but cap upside potential. If the market rallies strongly, investors will not fully participate, resulting in an opportunity cost compared to traditional index ETFs. 2. Protection Only Works Within a Specific Outcome Period Each Buffer ETF operates within a defined outcome period (typically one year). The buffer and upside cap apply only when the ETF is held for the full period, due to the structure of the underlying options. Selling before the end of the outcome period may lead to unexpected losses or reduced gains. Buying mid-cycle may result in a partially utilised buffer or a lower effective cap. 3. The Buffer Can Be “Used Up” If the underlying index declines more than the stated buffer (e.g., a 10% buffer versus a 20% market drop), the ETF will begin to experience losses beyond the protected range. The buffer does not eliminate all downside risk. 4. Potential Underperformance in Flat or Choppy Markets When markets are sideways or mildly volatile, the combination of capped upside and embedded options costs can cause Buffer ETFs to underperform a standard index ETF tracking the same benchmark. 5. Higher Expense Ratios Buffer ETFs generally carry higher management fees, typically around 0.5% to 1%, compared with traditional S&P 500 ETFs, which often charge less than 0.05%. 6. Return Lag in Volatile Markets Because Buffer ETFs are constructed using options, sharp market movements can cause pricing lag due to changes in option premiums. For example, if the S&P 500 (SPY.US) rises 5% during a volatile period, a corresponding Buffer ETF might rise only around 4.2%, depending on where it is in its outcome period and how its options are priced. List of Buffer ETFs Buffer ETFs are designed to provide downside protection while allowing investors to participate in market gains, making them an attractive choice for those seeking a more controlled approach to equity investing. Below is a list of popular Buffer ETFs available in the market: Issuer Underlying Offered Buffer ETFs Ticker Code First Trust SPY Monthly 10% Buffer FJAN, FFEB, FMAR, FAPR, FMAY, FJUN, FJUL, FAUG, FSEP, FOCT, FNOV, FDEC iShares IVV Quarterly 10% Buffer STEN, TEND, TENM, TENJ First Trust QQQ Quarterly 10% Buffer QMAR, QJUN, QSPT, QDEC First Trust EFA Quarterly 10% Buffer YMAR, YJUN, YSEP, YDEC These ETFs are suited to investors seeking strategic market exposure with controlled risk, particularly in volatile market environments. Should You Invest in a Buffer ETF? Buffer ETFs can be an attractive choice for investors looking to gain exposure to equity markets while actively managing risk. These ETFs offer built-in downside protection, which can help mitigate the impact of moderate market declines and provide clearly defined potential gains and losses over a fixed outcome period. They are particularly suited for investors with a tactical investment approach who intend to hold the ETF for the full outcome period to fully benefit from the buffer structure. By tracking major indices such as the S&P 500 or the Nasdaq 100, Buffer ETFs also offer diversified exposure to both US and international equities. However, investors should be aware that the upside returns are capped, meaning they may miss out on large market rallies, and that early exits or mid-cycle purchases can reduce the effectiveness of the protection. In addition, higher expense ratios and embedded option costs can slightly impact returns compared with traditional ETFs. Overall, Buffer ETFs are best viewed as a complement to a broader investment portfolio, offering a balance between growth potential and controlled downside risk, particularly in uncertain or volatile market conditions. Start Your Global Investment Journey Today! Open an account with POEMS and take the first step toward a diversified, globally-focused portfolio! For more information about trading on POEMS, you can visit our website or reach out to our Night Desk representatives at 6531 1225. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. 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Oracle Corporation Raises FY27 Revenue Guidance by $4 Billion Amid Strong Cloud Growth
Oracle Corporation, a leading enterprise software and cloud computing company, has demonstrated solid performance in the first half of fiscal 2026, with revenue and adjusted profit after tax and minority interests meeting expectations at 47% and 43% of full-year forecasts respectively. The technology giant specialises in database management systems, cloud infrastructure services, and enterprise software solutions, positioning itself as a comprehensive provider in the rapidly evolving artificial intelligence and cloud computing landscape. Strong Performance Driven by Cloud Infrastructure Demand The company's financial results showcase robust momentum, with group revenue climbing 14% year-over-year, primarily propelled by Oracle Cloud's impressive 34% annual growth. This expansion reflects the increasing enterprise demand for cloud infrastructure services as organisations continue their digital transformation initiatives. Additionally, Oracle recorded a substantial $2.7 billion pre-tax gain from divesting its interest in Ampere Computing, further strengthening its financial position. Raised Capital Expenditure and Revenue Projections Oracle has significantly increased its capital expenditure forecast to $50 billion for FY26, representing a $15 billion upward revision from the first quarter projection. This substantial investment reflects the company's commitment to expanding its data center infrastructure to meet growing demand. The company has also raised its FY27 revenue guidance by $4 billion, supported by higher remaining performance obligations this quarter. For the third quarter of FY26, Oracle projects group revenue growth of 16-18%, with Oracle Cloud expected to accelerate dramatically to 37-41% year-over-year growth, compared to 23% in the previous year. Adjusted earnings per share are anticipated to increase 16-18% to $1.70-1.74. Investment Outlook and Strategic Position Phillip Securities Research maintains a BUY recommendation with a slightly adjusted DCF target price of $344, down from the previous $350, primarily due to the increased capital expenditure requirements. The research firm expects performance acceleration in the second half of FY26 as additional data centres become operational. Oracle's strategic positioning as a specialized Oracle Cloud Infrastructure provider and comprehensive AI solutions company, backed by a significant remaining performance obligations backlog, supports the positive outlook. The company's potential upside depends largely on the successful execution of multi-billion-dollar artificial intelligence deals. Frequently Asked Questions Q: What were Oracle's key financial highlights for the first half of FY26? A: Oracle's 1H26 revenue and adjusted PATMI were within expectations at 47% and 43% of FY26 forecasts respectively. Group revenue rose 14% year-over-year, led by Oracle Cloud's 24% growth, and the company recorded a $2.7 billion pre-tax gain from selling its Ampere Computing interest. Q: How much has Oracle raised its FY27 revenue guidance? A: Oracle has raised its FY27 revenue guidance by $4 billion following higher remaining performance obligations this quarter. Q: What is Oracle's current capital expenditure projection for FY26? A: Oracle has increased its FY26 CAPEX projection to $50 billion, which is $15 billion higher than the 1Q25 forecast Q: What growth rates does Oracle expect for Q3 FY26? A: For 3Q26, Oracle expects group revenue growth of 16-18%, with Oracle Cloud accelerating to 37-41% year-over-year growth, up from 23% a year ago. Adjusted EPS is projected to rise 16-18% to $1.70-1.74. Q: What is Phillip Securities Research's recommendation and target price for Oracle? A: Phillip Securities Research maintains a BUY recommendation with a DCF target price of $344, down from the previous $350 due to increased CAPEX requirements. Q: What factors support Oracle's positive outlook according to the research? A: Oracle's position as a niche Oracle Cloud Infrastructure provider and full-stack AI provider, supported by a significant remaining performance obligations backlog, supports the bullish outlook. The company is expected to benefit from acceleration in 2H26 as more data centers come online. Q: What could drive potential upside for Oracle's stock? A: Potential upside for Oracle hinges on faster execution of multi-billion-dollar artificial intelligence deals, which could accelerate the company's growth beyond current projections. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. 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Adobe Inc Delivers Solid FY25 Results as Semrush Acquisition Strengthens Marketing Portfolio
Strong Financial Performance Meets Expectations Adobe Inc. has delivered solid fiscal year 2025 results in line with analyst expectations, with revenue and adjusted profit after tax and minority interest reaching 101% and 100% of forecasts, respectively. The company's fourth-quarter 2025 adjusted profit after tax and minority interest grew 8% year-on-year to US$2.3 billion, driven by stronger revenue performance and improved operating leverage across its business segments. Company Overview and Market Position Adobe Inc operates as a leading software company specializing in creative and marketing solutions for professionals and enterprises. The company's core business revolves around subscription-based services, positioning it as a dominant player in the digital content creation and marketing technology sectors. Strategic Acquisition and Forward Guidance Looking ahead to the first quarter of fiscal year 2026, Adobe has provided optimistic guidance, with adjusted earnings per share expected to be US$5.85 to US$5.90, representing 16% year-over-year growth. Revenue is projected to reach US$6.25 to US$6.30 billion, marking 10% year-on-year growth. This growth is expected to be driven primarily by a 10% increase in Creative and Marketing Professionals Subscription revenue, forecast to reach US$4.3 to US$4.33 billion. The company's strategic US$1.9 billion acquisition of Semrush is anticipated to close in the first half of fiscal year 2026, with minimal earnings-per-share impact in the initial year, before becoming accretive thereafter. This acquisition is expected to strengthen Adobe's marketing capabilities and expands its addressable market. Investment Outlook and Recommendation Phillip Securities Research maintains a BUY recommendation for Adobe Inc, though with a revised DCF target price of US$487, down from the previous US$560. For fiscal year 2026, analysts expect 10% revenue growth and 6% earnings-per-share growth, supported by increased adoption of artificial intelligence and higher subscription revenue. The research firm retains a 7.3% weighted average cost of capital but has lowered the terminal growth rate to 3.5% from 4%, reflecting increased competition from generative AI solutions among smaller customers. However, risks remain limited for enterprise clients utilizing Adobe for complex workflows, where third-party models complement rather than compete with the platform. Frequently Asked Questions Q: What were Adobe's FY25 financial results compared to expectations? A: Adobe's FY25 results met expectations with revenue and adjusted PATMI at 101% and 100% of forecasts, respectively. The 4Q25 adjusted PATMI increased 8% year over year to US$2.3 billion. Q: What is Adobe's guidance for 1Q26? A: Adobe expects adjusted EPS of US$5.85-5.90 (16% YoY growth) on revenue of US$6.25-6.30 billion (10% YoY growth), with Creative & Marketing Professionals Subscription revenue growing 10% to US$4.3-4.33 billion. Q: When will the Semrush acquisition close, and what is its expected impact? A: The US$1.9 billion Semrush acquisition is expected to close in the first half of FY26 with minimal EPS impact in the first year but will be accretive thereafter. Q: What is Phillip Securities Research's recommendation and target price? A: Phillip Securities maintains a BUY recommendation with a DCF target price of US$487, down from the previous US$560. Q: What are the expected growth rates for FY26? A: For FY26, analysts expect 10% revenue growth and 6% EPS growth, supported by rising AI adoption and higher subscription revenue. Q: What factors led to the lower target price? A: The lower target price reflects a reduced terminal growth rate to 3.5% from 4% due to increased competition from generative AI among smaller customers, while maintaining a 7.3% WACC. Q: What risks does Adobe face from AI competition? A: Risks remain limited for enterprise clients using Adobe for complex workflows, where third-party AI models complement the platform rather than compete directly with it. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. 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Magnificent 7 Tech Stocks Post Mixed Performance in November 2025
The Magnificent 7 technology stocks experienced a challenging November 2025, with the group declining 1.9% as investors rotated out of mega-cap technology names into cyclical and financial sectors. Despite underperforming the S&P 500's 1.2% gain, the group still outperformed the NASDAQ, which fell 2.0% during the month. Market Rotation Drives Mixed Results The month was characterised by significant profit-taking and renewed valuation concerns, triggering a pronounced sector rotation away from large-cap technology stocks. This shift reflected investors' growing appetite for cyclical and financial names as market dynamics evolved. Individual performance within the Magnificent 7 varied dramatically. Google (GOOGL) emerged as the standout performer, surging 14% following the successful launch of its Gemini 3 AI model. Apple (AAPL) also posted solid gains of 3%, benefiting from strong iPhone demand and effective cost-cutting measures that supported margins. However, these gains were offset by notable declines in other group members. NVIDIA (NVDA) fell 13% as investors rotated out of AI-focused stocks amid growing valuation concerns in the sector. Tesla (TSLA) declined 6% as intensifying price competition in the electric vehicle market led to margin erosion pressures. Investment Outlook Remains Positive Despite November's mixed performance, Phillip Securities Research maintains an OVERWEIGHT recommendation on the Magnificent 7 stocks. The team believes that earnings growth for these companies, excluding Tesla, will continue to outpace both the S&P 500 and the NASDAQ 100. Several key tailwinds support this optimistic outlook. The adoption and demand for artificial intelligence technologies continues to expand globally, with sovereign nations including the European Union and United Arab Emirates increasing their AI investments. Additionally, the US government's AI Action Plan, unveiled in July 2025, is expected to provide further support for the sector. The research also points to anticipated monetary policy changes, with more rate cuts expected in 2026, which could provide a favourable environment for technology stocks to resume their growth trajectory. Frequently Asked Questions Q: How did the Magnificent 7 perform compared to major indices in November 2025? A: The Magnificent 7 declined 1.9%, underperforming the S&P 500's 1.2% gain but outperforming the NASDAQ's 2.0% decline. Q: What caused the sector rotation away from mega-cap technology stocks? A: The rotation was triggered by profit-taking and renewed valuation concerns, leading investors to move into cyclical and financial sectors. Q: Which Magnificent 7 stocks performed best in November? A: Google (GOOGL) was the top performer with a 14% gain due to its successful Gemini 3 AI model launch, followed by Apple (AAPL) with a 3% increase. Q: Why did NVIDIA decline during the month? A: NVIDIA fell 13% due to investor rotation out of AI-focused stocks and growing valuation concerns in the artificial intelligence sector. Q: What is Phillip Securities Research's recommendation on the Magnificent 7? A: The firm maintains an OVERWEIGHT recommendation on the Magnificent 7 stocks, believing their earnings growth will continue to outperform major indices. Q: What factors support the positive outlook for these stocks? A: Key tailwinds include greater AI adoption by sovereign nations like the EU and UAE, the US government's AI Action Plan from July 2025, and expected rate cuts in 2026. Q: Which stock is excluded from the positive earnings growth outlook? A: Tesla (TSLA) is excluded from the expectation that Magnificent 7 earnings will outperform the S&P 500 and NASDAQ 100. Q: What challenges did Tesla face in November? A: Tesla declined 6% due to price competition in the electric vehicle market that led to margin erosion pressures. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. 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Sembcorp Industries Enters Australian Energy Market via S$4.8bn Alinta Deal
Strategic Acquisition Overview Sembcorp Industries Ltd has announced its agreement to acquire Alinta Energy for S$4.8 billion in an all-cash transaction, marking a significant expansion into the Australian energy market. The acquisition will be funded through a bridging loan, with no equity fundraising required. This strategic move reflects Sembcorp's efforts to secure new growth opportunities amid challenges in traditional markets. The company has been seeking sustainable growth avenues amid diminishing opportunities in China and softer electricity spreads in Singapore. The potential listing of its Indian renewable energy assets could further dilute the company's growth trajectory, making the Australian market expansion particularly strategic. Company Profile and Market Position Sembcorp Industries operates as a leading energy and utilities company with a significant presence across multiple markets. Alinta Energy Asset Portfolio The acquisition of Alinta Energy brings substantial energy generation capacity to Sembcorp's portfolio. Alinta Energy operates 3.4 gigawatts of power generation capacity across Australia, with a diversified energy mix comprising 43% gas, 33% coal, 17% wind, and 7% solar generation. Additionally, the acquisition includes access to a development pipeline of 10.4 gigawatts of largely renewable capacity, providing significant future growth potential. Financial Impact and Investment Merits The acquisition demonstrates substantial financial benefits for Sembcorp Industries. On a trailing 12-month basis through June 2025, the transaction is expected to be 23% accretive to profit after tax and minority interests on a pro forma basis, excluding amortization of intangibles—post-acquisition, the enterprise value to EBITDA multiple drops modestly to 8.3 times. However, the acquisition will increase financial leverage, with net debt to EBITDA rising from 3.6 times to 4.6 times, representing an additional S$5.8 billion in net debt. The Australian energy market structure differs from Singapore's, featuring fewer long-term contracts, which may result in higher margin volatility. Research Recommendation and Outlook Phillip Securities Research maintains its BUY recommendation for Sembcorp Industries while adjusting their target price from S$7.90 to S$7.10. The price reduction reflects lowered Singapore electricity spread assumptions, with EBITDA and net profit forecasts reduced by 7% and 12% respectively. The Alinta acquisition has not been incorporated into current forecasts, pending shareholder approval and expected completion in the first half of 2026. Frequently Asked Questions Q: What is the total value of Sembcorp's acquisition of Alinta Energy? A: Sembcorp Industries has agreed to acquire Alinta Energy for S$4.8 billion, to be paid fully in cash through a bridging loan facility. Q: What type of energy generation capacity does Alinta Energy operate? A: Alinta Energy operates 3.4 gigawatts of power generation capacity across Australia, with 43% gas, 33% coal, 17% wind, and 7% solar generation facilities. Q: How will the acquisition impact Sembcorp's financial performance? A: The acquisition is expected to be 23% accretive to profit after tax and minority interests on a trailing 12-month basis, while the EV/EBITDA ratio will drop modestly to 8.3 times post-acquisition. Q: What are the potential growth opportunities from this acquisition? A: The acquisition provides access to a development pipeline of 10.4 gigawatts of largely renewable capacity for future expansion opportunities. Q: How will the acquisition affect Sembcorp's debt levels? A: Net debt to EBITDA will increase from 3.6 times to 4.6 times, representing an additional S$5.8 billion in net debt following the acquisition. Q: What is Phillip Securities Research's recommendation and target price? A: Phillip Securities Research maintains a BUY recommendation while reducing the target price from S$7.90 to S$7.10 due to lower Singapore electricity spread assumptions. Q: When is the acquisition expected to be completed? A: The acquisition requires shareholder approval and is expected to be completed in the first half of 2026. Q: What are the main risks associated with this acquisition? A: The Australian energy market has fewer long-term contracts compared to Singapore's market, which may lead to higher margin volatility for the combined entity. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. 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Singapore Banking Sector Sees Mixed Outlook Amid Rate Declines
Singapore's banking sector continues to navigate in a challenging interest rate environment, with Phillip Securities Research maintaining a NEUTRAL stance on the sector while highlighting both headwinds and opportunities ahead. Key Market Developments Recent data points to mixed conditions across the secor. November's 3-month Singapore Overnight Rate Average (SORA) declined 14 basis points month-on-month to 1.26%, marking the lowest level since July 2022 and representing a substantial 203 basis points year-on-year decrease. Despite the softer rate environment, loan growth momentum remained positive, with October 2025 figures showing 6.5% growth and year-to-date loans up 5.7% year-on-year. Banks continue to guide towards low to mid-single-digit growth expectations for the remainer of the year. On the deposit front, Current Account and Savings Account (CASA) balances rose 13% year-on-year, though the CASA ratio to total deposits dipped slightly to 19.4% in October 2025. Nevertheless, higher CASA balances serve as a tailwind for banks by helping to lower funding costs. Investment Outlook and Challenges The continued decline in interest rates across both Singapore and Hong Kong markets has pressured banks' net interest margins (NIMs), directly impacting net interest income and overall earnings. Phillip Securities Research expects earnings to decline in FY25, due to lower net interest income, despite anticipating that deposit rate cuts will benefit funding costs in the second half of 2025 and help ease NIM compression. Sector Recommendations and Preferences Within the sector, Phillip Securities Research upgraded OCBC from Neutral to ACCUMULATE, raising the target price to S$20.00 from S$17.00. This upgrade reflects adjustments to the terminal growth rate to 3% from 2% and the beta value from 1.2 to 1.1, recognising OCBC's strong wealth management growth and excess capital position. The research house expresses a preference for DBS, citing its fixed dividend policy, and OCBC, highlighting its strong wealth management growth and excess capital. Despite earnings headwinds, the sector's 5.5% dividend yield remains attractive, with capital return initiatives expected to continue in FY25. Share buyback programmes are expected to improve return on equity and earnings per share. Frequently Asked Questions Q: What is the current outlook for Singapore's banking sector? A: Phillip Securities Research maintains a NEUTRAL stance on the sector, citing declining interest rates that are affecting banks' net interest margins and earnings, though dividend yields remain attractive at 5.5%. Q: How has loan growth performed in Singapore banks? A: Loan growth continues to climb with October 2025 showing 6.5% growth and year-to-date 2025 loans up 5.7% year-on-year, with banks guiding for low to mid-single digit growth. Q: What happened to interest rates in Singapore recently? A: November's 3-month SORA declined 14 basis points month-on-month to 1.26%, the lowest since July 2022, and fell 203 basis points year-on-year. Q: Which banks does Phillip Securities Research prefer and why? A: The research house prefers DBS for its fixed dividend policy and OCBC for its strong wealth management growth and excess capital position. Q: What changes were made to OCBC's rating and target price? A: OCBC was upgraded from Neutral to ACCUMULATE with the target price raised from S$17.00 to S$20.00, reflecting a higher terminal growth rate of 3% and lower beta of 1.1. Q: How are deposit trends affecting Singapore banks? A: CASA balances rose 13% year-on-year, but the CASA ratio to deposits dipped slightly to 19.4%, which serves as a tailwind by lowering funding costs for banks. Q: What is expected for bank earnings in FY25? A: Earnings are expected to decline in FY25 due to lower net interest income from compressed margins, though deposit rate cuts may help ease this pressure in the second half of 2025. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. 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The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned. This advertisement has not been reviewed by the Monetary Authority of Singapore.
