Future Singapore Seasons to be collaborative efforts with host countries

Future Singapore Seasons to be collaborative efforts with host countries

By Glenda Chong

Future S’pore Seasons to be collaborative efforts with host countries

SHANGHAI: Singapore is a cosmopolitan city with a strong Asian flavour and this creates an environment for experimentation and innovation in the arts.

Information, Communications and the Arts Minister Lee Boon Yang said not all art forms will strike a chord with the audience, but the government will continue to support their works.

Cultural medallion winner Isa Kumari and renowned writer Edwin Thumboo were among several Singaporean writers and poets who presented their works to a full house at the Shanghai Library on Sunday.

Dr Lee said: “While their cultural backgrounds differ, be they poets, novelists or journalists, they have a common role in society. They are observers, chroniclers and storytellers, and they have the power to inform, educate and entertain. Through their works, they capture slices of a society’s culture and life.”

Wrapping up his visit in Shanghai, Dr Lee said he is heartened that the Singapore Season has been well-received with most performances playing to packed houses.

He said: “The arts and culture can help foster greater mutual understanding and respect between China and Singapore. I think it’s an important contribution – they must rise up to this challenge, they must be able to participate in this engagement, and do work that will interact and excite Chinese audience as well as the international audience.”

Dr Lee added that the government would support not just the major art players, but also the smaller ones.

“You experiment, innovate and over time, some of the works will become accepted as part of Singapore culture, art, reflecting society values, reflecting heritage and tradition, and yet be relevant to a vibrant cosmopolitan environment,” he said.

Leveraging on the Singapore Season, 18 memorandums of understanding have been concluded with China, mainly in the business and media sectors.

Dr Lee said Singapore wants to engage the world through its arts platform, and he lauded artists who had volunteered their services to participate in the Singapore Season in China.

Audiences can expect future Singapore Seasons to be collaborative efforts with host countries.

Dr Lee said: “Here in China, we have learnt it’s important to have good partners because the partners provide useful advice and guidance on what local arts audience would be interested in and that is something which we value.

“Whichever city we embark on in the future to organise the Singapore Season, we will make great effort to look for appropriate partners so that it’s not just purely a Singapore effort. It is also a whole city wanting to have us, inviting us to be there, and wanting to know more about Singapore art and Singapore culture.”

Overall, the Singapore Season has led to increased awareness and more opportunities for arts and cultural exchanges between China and Singapore.

The Singapore Season in Shanghai ends next month.

Source : Channel NewsAsia - 29 Oct 2007

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Getting burnt when you play with derivatives fire

Getting burnt when you play with derivatives fire

These complex instruments can stymie even big league players

By Goh Eng Yeow, Markets Correspondent
FAR FROM SHIPSHAPE: Shipyard counters in Singapore took a bad hit after SembMarine revealed that former group finance director Wee Sing Guan (next picture) had made unauthorised forex trades that could mean millions in losses for the company. — BT FILE PHOTOS

THE huge forex derivatives losses suffered by SembCorp Marine (SembMarine) might remind some readers of investment guru Warren Buffett’s famous warning that such complex instruments are financial weapons of mass destruction.
He also noted that such trades are ‘like hell - easy to enter and almost impossible to exit’.

The objective of these instruments - anything from futures to options and swaps - is laudable. They were developed to let investors hedge their risks, providing a form of insurance against market movements.

A derivative allows an investor to gamble on the price of a foreign currency or a commodity without having to buy the underlying investment itself.

In recent years, they have been put to a myriad of uses. Some investment banks sell them to big companies such as SembMarine as a way to offload or manage market risks.
MORE SURPRISES IN STORE?
Financial derivatives are hard to value. Many wonder if the US$165 million (S$240.4 million) in unrealised losses announced by SembMarine might be optimistic and if its balance sheet might hold more surprises.

Sifting through the many choices

THE Singapore Exchange (SGX) is jumping into the act with plans to launch futures contracts on stocks traded in Singapore next year. It says such instruments will provide retail investors with ‘hedging and arbitraging opportunities’.

Any Singaporean who has done National Service will attest that great care is needed around explosives. Get it wrong and they are likely to blow up, maiming or killing anyone in the vicinity.

As Mr Buffett observed, financial derivatives behave in very much the same way.

In September 1998, the global financial system was brought to the brink of collapse after US-based hedge fund Long-Term Capital Management (LTCM) defaulted on contracts believed to be worth US$1.25 trillion (S$1.82 trillion).

LTCM was not a fly-by- night operation run by a rogue trader. Its board included Nobel laureates in economics Myron Scholes and Robert Merton, who shared the 1997 award for their work in developing financial models used to price derivatives.

Granted, LTCM might have been an extreme case, but even in their less destructive forms, financial derivatives still have the power to push a company into a ’spiral that can lead to a corporate meltdown’ - to borrow another phrase from Mr Buffett.

That was exactly what happened to China Aviation Oil (CAO) here in 2004.

Its then-chief executive Chen Jiulin recounted in chilling detail how the company descended into hell in less than six months, brought down by oil trading derivatives that had gone spectacularly wrong.

Believing CAO could recover the small loss of US$5.8 million that it had incurred on oil trades in March 2004, Chen ‘doubled up’ on his bets - a trading term for enlarging positions.

It is a misguided strategy that many remisiers have seen trading clients adopt to their peril.

As losses surged to US$30 million over the next three months, CAO continued to indulge in bigger and bigger gambles.

By October, it had made bets on 52 million barrels of oil - said to be enough to supply the fuel needs of all the world’s airlines for six months.

It had, by then, used up all its resources to meet margin calls, as well as a US$108 million loan given by its parent from a share placement.
No tallying the loss till it’s too late

HOWEVER, what was supposed to have been a ‘mark to market’ loss of US$180 million on the contracts congealed into an actual loss of US$381 million as the company was forced to close some positions over the following two weeks.

When the final tally was in, after all positions were closed, it showed that CAO had lost US$550 million.

The trauma CAO went through was uncannily similar to the pain SembMarine must be suffering now.

Mistakes on such a colossal scale are not as isolated as some might think.

Last week, US investment bank Merrill Lynch shocked investors by increasing the write-down on its collateralised debt obligations (CDOs), pooling loans and bonds with different yields and maturities on sub-prime mortgages, to US$7.9 billion.

Experts will say that it is notoriously difficult to mark to market the true value of financial derivatives as they are complex and illiquid instruments.

In many cases, the profits and losses from such trades are booked straight away, even though no actual money changes hand. The real costs hit the companies trading them only when the positions are unwound.

This has left many traders wondering if the US$165 million (S$240.4 million) in unrealised losses announced by SembMarine due to unauthorised trades is too optimistic a figure.

SembMarine’s estimated loss is based on the mark-to- market information for the forex transactions provided by the various banks.

It would be all too easy to be lulled into a false optimism and believe that the worst is over, that the event was just a one-off, so everyone can get back to business as usual.

But no one can be sure whether there are more surprises tucked away on SembMarine’s balance sheet until the forex positions are closed.
Risky game for the unwary

SEMBMARINE’S experience certainly vindicates Mr Buffett’s warning about the slippery slope that firms - or individuals - can find themselves on when they play with derivatives fire.

The case also raises concerns about whether SGX should push ahead with its plan to introduce futures trading on stocks next year for retail investors.

If Nobel prize winners and blue-chip companies can land themselves in a mire over derivatives, what morass might naive retail investors find themselves bogged down in?

For the bold trader who insists on navigating such treacherous courses, the only counsel that can be offered is caveat emptor (let the buyer beware).
Source : Straits Times - 29 Oct 2007

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Exit of deferred payments not a fatal blowing: Goldman

Exit of deferred payments not a fatal blowing: Goldman

Mid to mass market may be hardest hit as some projects see 50% opt for scheme
By OH BOON PING
(SINGAPORE) The withdrawal of the deferred payment scheme (DPS) for property purchases may quell demand in the short term, but will not deal a fatal blow to Singapore’s residential market, says Goldman Sachs.

Negative sentiment: Analysts have trimmed their forecast residential selling prices by around 3-4%
The investment bank also expects negative investor sentiment on property developers in the short term, but kept its ‘buy’ on GuocoLand and a positive view on real estate investment trusts (Reits).

Goldman Sachs Global Investment Research’s report is among the first to be made available after the government announced last Friday that it was removing a scheme that allowed the bulk of payments for property purchases to be deferred till the project was completed.

Goldman said that parties that are likely to be affected by the move include property speculators, foreigners buying Singapore properties here and ‘buyers who are stretching their affordability to buy a property’.

The bank says that the key test bed for the negative impact is the mid to mass market, even though the prime to luxury end of the residential market will be affected as well.

This is because ‘there are projects in this segment where over 50 per cent of purchases are accounted for by buyers opting for the DPS route’, and ‘the need to secure financing upfront will cause buyers in this segment to hesitate in committing to buying’.

However, its analysts see certain mitigating factors like strong job creation and economic growth, which supports a positive long-term outlook on this segment.

In the short run, the pace of new launches and take-up of new launches are expected to slow over the next three to six months as property prices are likely to come under marginal pressure.

Goldman said that this would result from undiscounted selling prices, which could have been set higher using DPS, negative impact on certain pools of demand and negative impact on sentiment.

Indeed, the removal of DPS raises the risk of government intervention to curb rising property prices, the report added.

‘Given such a backdrop, we foresee developers being less aggressive in recycling monies earned from successful launches into beefing up residential land banks,’ it said.

Hence, its analysts have trimmed their forecast residential selling prices by around 3-4 per cent, assuming flat prices in 2008 as well as slower growth going forward.

‘We also remove the 10 per cent premium to return on net asset value, where applicable, to reflect a more murky picture on developers recycling capital to expand land bank.’

Against this backdrop, Goldman kept its ‘buy’ on GuocoLand with a price target of $6.20 as ‘we continue to like the China projects and find valuation attractive’.

Also, it maintains its ‘neutral’ stance on CapitaLand, City Developments and Keppel Land with price targets of $8.30, $15.70 and $8.90 respectively.

Source : Business Times - 29 Oct 2007

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Bursa out to woo back S’pore retail investors

Bursa out to woo back S’pore retail investors

By CONRAD TAN
(SINGAPORE) Nine years after Singapore retail investors fled from the Malaysian stock market, Bursa Malaysia is out to charm them back.

‘What has happened in the past with things like Clob will not recur and cannot recur if we want to regain investor confidence.’

- Bursa Malaysia’s head of strategy Adhha Abdullah

The environment today is ‘almost unrecognisable’ compared to what it was 10 years ago, said Bursa Malaysia’s head of strategy, Adhha Abdullah, over the weekend.

‘We see our market as still offering a lot of potential. It’s diversified, provides good returns; and the government and the stakeholders remain committed to further liberalising and enhancing the global competitiveness of the exchange. The macro-economic fundamentals are also looking positive at the moment,’ he said.

He was in town to promote Bursa both as a marketplace and as an investment opportunity to retail investors here at a seminar organised by the Securities Investors Association of Singapore (SIAS).

The chief executives of seven other Malaysian public-listed companies, including Malaysia Steel Works and Hunza Properties, were also at the seminar to showcase their firms to the 600-odd investors who turned up at Suntec on Saturday.

Mr Adhha said that he wanted to reassure investors here that ‘what has happened in the past with things like Clob will not recur and cannot recur if we want to regain investor confidence’.

‘What we want to do is try to get them comfortable again with Malaysia and our stock market.’

Before September 1998, trading of Malaysian shares on Clob International - a self-regulated over-the-counter market based here - was popular among Singapore investors who wanted to trade the shares without opening accounts with the Kuala Lumpur Stock Exchange, as it was then known.

But as part of its capital controls to prevent people taking money out of Malaysia during the Asian financial crisis, Kuala Lumpur stopped the trading of Malaysian shares on Clob in September 1998. The move froze 172,000 Clob accounts and some US$4.5 billion worth of Malaysian shares.

The shares were eventually released, but the anxiety and losses suffered by retail investors here as a result of the measures caused some of them to shun Malaysian stocks long after the fiasco was resolved.

Bursa, the Singapore Exchange (SGX) and Hong Kong Exchanges and Clearing (HKEx) are the only bourse operators in the region whose shares are publicly traded. All three have benefited from record trading volumes in shares and derivatives, and takeover speculation amid a frenzy of consolidation among exchanges in the US and Europe.

Bursa’s share price has soared 83 per cent this year, boosting its market capitalisation to RM7.7 billion (S$3.3 billion). But its performance and market cap still lag that of its peers.

SGX’s share price is now 2.6 times what it was at the end of last year, giving it a market cap of $16.1 billion while HKEx’s share price has tripled since then and the exchange is now worth HK$271.5 billion (S$51 billion).

‘Why we’ve been seen to be lagging these two exchanges is primarily because of perception issues - what happened during the crisis. But all that has changed . . . there are no longer capital control issues,’ Mr Adhha said.

‘We really think that with the caveat that the global environment does not deteriorate significantly, our performance will catch up with that of Singapore and Hong Kong and other markets that have done very well in the last two or three years.’

He said that Bursa was ‘not actively looking’ for a merger with its regional counterparts. Instead, the exchange is more interested in ’strategic tie-ups’ such as the sharing of technology.

To develop the market further, Bursa plans to launch more products, including futures contracts based on the FTSE Bursa 30 index, a US dollar version of its existing crude palm oil futures contracts and a tradable syariah index. It is also upgrading its trading platforms and other infrastructure.

‘We feel that we are introducing a lot of changes to the market that will make us an even more attractive and accessible exchange,’ Mr Adhha said.

While the current drive is aimed at drawing in more foreign retail investors, Bursa also hopes to eventually attract foreign companies to list in Malaysia, such as those from Vietnam and Indonesia. There are just ‘one or two’ foreign companies listed on Bursa now, he said.

‘We look at SGX and we are encouraged by the kind of success they have had in attracting not only foreign investors but also foreign issuers to list.’

Today, there are just over 1,000 companies listed on Bursa with a total market cap of about RM1 trillion, compared to 736 companies worth just RM375 billion in 1998.

Foreign investors, including institutions, accounted for 36 per cent of the total trading volume on Bursa for the first nine months of the year, roughly the same proportion as in 2005-6.

Source : Business Times - 29 Oct 2007

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