Fed seen cutting rates further to head off slump - WASHINGTON

Fed seen cutting rates further to head off slump - WASHINGTON

Analysts say Fed will err on side of easier money in view of dire economic risks

(WASHINGTON) The Federal Reserve is widely expected to trim borrowing costs again at an upcoming meeting as insurance against a possible economic calamity.
The two-day meeting opening tomorrow is likely to see heated debate on the economic outlook in view of a global stock market swoon and heightened recession fears that prompted the Fed to slash rates by 0.75 of a percentage point last week.

Last Tuesday’s rate move placed the federal funds rate at 3.5 per cent, and was the fourth cut since Sept 18, when the rate was 5.25 per cent.

Although the cut was the biggest since the Fed began using the federal funds rate as its main policy tool in the 1990s, many analysts say the Federal Open Market Committee (FOMC) is likely to ease the rate further at its two-day meeting.

‘Given the still-fragile state of the financial markets, it is difficult to imagine the policymakers skipping a rate cut,’ said Aneta Markowska at Societe Generale in New York.

The Fed’s statement after the rate action last week ‘was very friendly for further rate cuts’, said Joseph LaVorgna, senior economist at Deutsche Bank.

Mr LaVorgna said that the Fed used ‘fairly bold language, and it strongly suggests the Fed is going to trim rates further - and likely in increments larger than 25 basis points.’

Many economists say another rate cut is likely but that the panel headed by Ben Bernanke is mulling many options, ranging from no change in rates to another 75-basis-point cut.

Analysts said that the Fed is erring on the side of easier money in view of the considerable risks facing the economy - the worst housing market decline in decades, massive losses by banks and troubles facing bond insurers that threaten to destabilise the financial system.

‘Simultaneous and intertwined deterioration in the real and financial sectors is just the kind of combination that can throw a weakening economy into recession, particularly if that deterioration is manifest in a contagion-like roiling of global stock markets,’ said Lehman Brothers economist Paul Sheard.

Mr Sheard said that a recession is far from certain at this point but that the Fed is using all its ammunition to head off such an outcome. ‘But the Fed is playing a high-stakes game,’ Mr Sheard added.

‘By moving between meetings and in response to what appeared to be shaping up as an equity market meltdown, and with only limited information on what was driving it, the Fed risks giving the impression that it is targeting equity prices and offering a ‘Bernanke put’,’ he said, referring to the notion that investors will get a bailout or ‘put option’ even after making risky bets.

‘It also risks signal-jamming the Fed’s communications - now market volatility can be expected to trigger speculation of other inter-meeting moves and markets may become more endogenously volatile as a result,’ Mr Sheard added.

Scott Brown, chief economist at Raymond James & Associates, said of the emergency move by the Fed last Tuesday: ‘A lot of people have described it as a panic, but I think it was a move designed to stop a panic in financial markets.’ Mr Brown said that the Bernanke Fed has handled policy moves appropriately in view of the unpredictable economic environment. — AFP
Source : Business Times  - 28 Jan 2008

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NPOs enticed to set up in Singapore

NPOs enticed to set up in Singapore

New EDB office to attract them, target is to have 150 NPOs here by 2015
By MATTHEW PHAN
THE Economic Development Board (EDB) has launched a new International Organisations Program Office to attract non-profit organisations (NPOs) to set up their headquarters in Singapore.
NPOs - increasingly professional bodies that play a wide variety of roles - include industry organisations, standards boards, research and development houses or think-tanks, grant or charity foundations, humanitarian groups, corporate social responsibility set-ups, among others.

Their needs are similar to those of companies, such as logistics, financial management, good staff, and specialists, said Kenneth Tan, head of EDB’s New Business Group, which is in charge of the program.

NPOs are one of the group’s five targeted growth sectors, the others being clean energy, water and environment, natural resources, and lifestyle and sports.

Mr Tan said well-funded NPOs offer a different set of career opportunities, provide good jobs and are ‘recession-proof’.

Singapore is now host to some 60 international organisations such as the Business Software Alliance, the World Intellectual Property Office, the World Wildlife Fund and the International Air Transport Association.

The EDB wants to grow this number to 150 by 2015, providing some 2,500 jobs.

Just as with other growth sectors, its officers seek to understand the ecosystem of the sector, categorising various sub-segments - such as philanthropic grant makers, or medical and humanitarian groups - and targeting key organisations within those.

Among its policies, it has enhanced tax incentives, tried to improve publicity, and put in manpower training schemes.

Its focus for this year is to set up a centre for the physical co-location of such international organisations and to establish a world class institute for training non-profit managers.

The office will also provide ‘one-stop shop’ assistance and support the NPOs after they have set up.

This is led by the EDB, the Monetary Authority of Singapore and the Singapore Exhibition and Convention Bureau, and supported by other government ministries.

According to the EDB, Singapore is a good base for NPOs because of its strategic location that puts three billion Asians within a seven-hour flight radius, its English-speaking population and a politically stable environment.

NPOs can also have their pick of over 7,000 multinationals across all sectors here with which to partner, said the statutory board.

Source : Business Times  - 28 Jan 2008

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Rising inflation a worry for Singapore

Rising inflation a worry for Singapore

WHILE fears of a US recession loom large, Tony Tan’s larger concern is if the downturn drags beyond the first six months of 2008 into the second half.
But the ‘biggest worry to the world economy’, he said, is inflation.

‘I myself do not believe that if the US runs into a deep recession, the rest of the world will be unaffected,’ he told Singapore reporters in Davos.

He added that he was worried, not so much about the first half of the year as the second half. ‘That’s the real test.’

‘Even if there’s a recession, if the rescue measures taken by the US government and the Federal Reserve succeed in stabilising the economy and recovery gets underway in the second or third quarter, then basically it’s normal adjustments,’ he said.

‘We have had three, four very good years when markets were rising, economies were expanding, credit was widely available, so every fund manager did very well, including GIC. We all looked like geniuses. It’s easy to do well in a rising market, not so easy to do well in a choppy market or in a downturn.

‘I would worry a great deal if the recession continues into the second half of this year. If that’s the case, then we’re in a different situation and we may face difficult times, not for a few months but maybe one or two years.

‘That’s why we’ve structured the UBS and Citigroup investments so that if this happens, we will still be well protected. But my overall worry for 2008, even more than this economic recession, is inflation. Oil prices are high, food prices are going up, we’ve already felt the effects in Singapore.’

A return of high inflation would have a serious impact on the US and other economies, and ultimately on Singapore, he said.

Already, Singapore has had to offset rising prices with a faster appreciation of the Singapore dollar, he said. ‘If oil is at about $80, $90, $100 (a barrel), it remains a very serious concern. And you can see the price of gold, it’s reached a record level. That’s always a good indication about how analysts, market participants out there, view how likely inflation will come back, because gold is a classic hedge against inflation.’

Source : Business Times  - 28 Jan 2008

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‘Look after the downside, the upside will look after itself’ - Singapore

‘Look after the downside, the upside will look after itself’ - Singapore
‘OUR philosophy is, if you look after the downside, the upside will look after itself.’ So says GIC deputy chairman Tony Tan about the investment agency’s ‘risk over returns’ approach. ‘When we consider an investment, we always look at the risk first, whether it comes within our risk management framework, whether it is not excessive,’ Dr Tan, who is also executive director of GIC, told Singapore reporters in Davos. ‘Having decided that the risk is acceptable, then we look at the returns.’
GIC assesses not only financial risks but also political and institutional risks. Since its early days when its mandate was to earn a rate of return that at least offset average global inflation, GIC has always taken a very conservative approach to its investments, he explained.

‘Today, we conduct our investments under the risk parameters specified by the Ministry of Finance. We adhere rigorously to these risk parameters. We don’t breach them at all.’ The approach has not hurt: GIC’s returns have averaged a ‘respectable’ 9.5 per cent in US dollar terms over the years, he said.

Hence its investments in UBS and Citigroup have been structured in the form of convertible notes that provide some downside protection. But it does not mean that GIC takes no risk at all, Dr Tan said. ‘If we take no risk at all, we would do nothing at all.’

But one GIC trait that has had to go, if not totally, amid the recent spotlight on sovereign wealth funds, is staying low-key.

‘The environment in which GIC was able to operate in the 1980s, for example, where we kept very much below the radar screen and there was very little notice taken of GIC, is the way we would like to conduct our business,’ Dr Tan said. ‘But we also know that we have to change some modes of our operation. The Ministry of Finance has agreed that in the coming months, GIC will disclose more. We’ll be more transparent in some of our operations.’

It will, for example, disclose its returns more regularly, though probably not every year.

Noting that the last time GIC announced its rate of returns was in 2006 at its 25th anniversary celebrations, Dr Tan said: ‘It’s impossible to do it only once in 25 years, we’ll do it at regular intervals.’ But it also does not make sense for GIC, a long-term investor, to report yearly figures, ‘which may vary widely’. ‘So we’ll probably do it in some form of average 10-year returns. But we still have to settle this and discuss with the Ministry of Finance.’

Meanwhile, GIC is drafting a ‘document’ - possibly by the second quarter - that tells more about its investment process and purposes, and governance.

Dr Tan said it would be ‘good for GIC over the next few months or years (to) become much more open with regard to our investment process’, particularly as GIC has over the years been venturing beyond its main markets - the US and Europe - to higher-risk emerging markets.

The Singapore public has a right to be concerned about whether the ‘hard-earned’ national reserves are invested recklessly. ‘We have a fiduciary duty at GIC and it is good that GIC, the Ministry of Finance, explain this to the public.’

Offering a peek into GIC’s books, Dr Tan told the reporters how far the agency has come since its ‘very modest’ beginnings investing in public equities and bonds in the US and Europe. Today it is invested in ‘more than 30, 40 countries in all the asset classes - public equity, bonds, hedge funds, commodities, private equity, venture capital’.

And while some 80 per cent of its assets are still in the American and European markets, GIC has steadily increased its investments in markets like China, India and South-east Asia that offer higher returns - at ‘of course, higher risks’.

GIC has also raised its stakes in the private markets, including private equity, venture capital and real estate. ‘Asset allocation is probably the most important investment decision which we make in GIC - what currencies we should invest in, what markets, what sectors. If we get that right, it probably accounts for about 90 per cent of your success.’

Dr Tan said the current interest and concerns surrounding SWFs - the subject of at least four sessions at the World Economic Forum last week - are understandable, valid and have to be addressed. ‘We believe the situation concerning SWFs has changed fundamentally and it’s best to bring these issues out into the open to be discussed. The question is how.’

The code of best practices for SWFs that the International Monetary Fund and the World Bank are working on will be a good starting point, he said.

Singapore has offered inputs. It feels that any code for SWFs should not be too prescriptive, but be general, flexible and, to some extent, voluntary, because ‘SWFs are not all the same, countries are not the same’, said Dr Tan. ‘We don’t think that a one-size-fits-all code of practice is going to work.’

Whatever guidelines emerge must not disadvantage SWFs, Dr Tan said, noting that there are suggestions to ‘copy’ the fully transparent model of Norway. But requiring full financial disclosure of SWFs when other vehicles such as hedge funds and private equity funds do not have such obligations ‘will not be fair’.

Beyond any code of practice, what is more important is how each SWF conducts itself, he said. In Singapore’s view, it is key to clarify the purpose of each SWF’s investments and be transparent about its governance.

As for notions about SWFs becoming saviours in today’s turbulent financial world, Dr Tan said: ‘I should make it clear that when GIC invested in Citigroup and in UBS, we did so because we thought this was a good opportunity which only comes maybe once in two or three decades.

‘GIC did not do these investments to bail out the banks or to help stabilise the US financial system, obviously.’

Source : Business Times  - 28 Jan 2008

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GIC declines UBS board seat - IN DAVOS

GIC declines UBS board seat - IN DAVOS

Tony Tan says, as a financial investor, GIC also invests in other banks
By ANNA TEO

IN DAVOS, SWITZERLAND

IT’S final: GIC will not take up a seat on the UBS board.
The Singapore investment agency’s deputy chairman and executive director, Tony Tan, told UBS chairman Marcel Ospel of its decision when they met on the sidelines of the World Economic Forum in Davos last Thursday.

A seat on the board was not a condition in GIC’s 11 billion Swiss franc (S$11.4 billion) purchase of a 9 per cent stake in the Swiss banking giant last December, Dr Tan told Singapore reporters. But Mr Ospel subsequently wrote to Dr Tan, inviting him to nominate a GIC representative to the UBS board.

‘This was in December. Over the last few weeks, we have considered the invitation seriously. And our view is that as a financial investor, investing not only in UBS but also in other banks, and in the light of our intention to clearly not seek any control of UBS, or to have a say in the direction and management of UBS, we have decided that under these circumstances, we will not be taking up the seat on the board. I’ve seen Mr Ospel on Thursday, I thanked him, of course, for the invitation, but have informed him that GIC will not be taking up his invitation. He said he understood the reasons, and he agreed that under the circumstances, it’s best for GIC not to accept the invitation. But it was very good of him to extend the invitation to us.’

Dr Tan added: ‘We feel that we have adequate access to the UBS board and management as a shareholder. As a shareholder, we have a right to express our views. We already have a small investment in UBS accounting for less than half a per cent of their equity even before this large investment, and we give our views. But we have also been making it very clear to them that these are our views as a shareholder. It is up to the management and the board of directors to make the decisions. They are the ones who are running the bank, we are not running the bank. We want to make that clear.’

And one view that GIC has conveyed to UBS is that it prefers the Swiss bank to tackle its investment banking problems, rather than hive off the unit.

GIC ’still believes’ in UBS’ fundamental model of a combined bank with wealth management, investment banking and commercial banking, Dr Tan said.

‘Being a combined bank with all these businesses is a strength rather than a weakness. Problems which they have in the investment bank are problems which they should work out rather than jettison the whole investment bank, which will weaken UBS.

‘If they spin it off, then it’s a decision of the management. I had a good meeting with Mr Ospel on Thursday. We discussed some of these issues, we put up our views as a shareholder, that we think it’s easier to fix the problems rather than take drastic surgery to the bank.’

There are some ‘quite obvious’ problems, he added, citing the fact that UBS group CEO Marcel Rohner is also the CEO of the investment bank. ‘Obviously, that’s not a situation that is tenable for the long term - he’s got a big enough job looking after UBS as a whole, you can’t be running two big corporations at the same time, and so you’ve to find some way to relieve Mr Rohner of these two responsibilities, which I’m sure they are doing.’

Source : Business Times  - 28 Jan 2008

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Singapore Robinson CEO clarifies position on Lippo

Singapore Robinson CEO clarifies position on Lippo
I REFER to the article ‘Robinson CEO throws weight behind Lippo’ (BT, Jan 25).
I am concerned that the headline of the article may give readers the wrong impression that I have, in my capacity as CEO of Robinson & Co Ltd, expressed a view on the announcement of a general offer by ALF Global Private Ltd. I would like to clarify that I had never mentioned, nor implied, at any time during the interview that I am ‘throwing my weight behind Lippo’. What I did say, and I quote from the third paragraph of the article, was that ‘Lippo, as is the entire board, is fiercely supportive of management’s strategy’.

I feel strongly that the significant progress and growth that Robinson has achieved in the past two years have not been adequately captured in the media articles that were published in the past week. Hence, I believe that it was very important that I, as CEO of Robinson, convey the group’s achievements to the media, such as the fact that we have more than doubled the number of brands in our portfolio as well as the number of stores, and also increased our trading footage and improved our financial performance. I am glad that our views, as management and staff of Robinson, have been expressed, and that is my only intention.

I would like to reiterate that the management team at Robinson, myself included, is focused on leveraging on Robinson’s strong foundation, built on 150 years of heritage and goodwill, to further grow the business, with a view towards enhancing the long-term interests of all our stakeholders, including investors, staff and customers.

The Editor replies: We agree that Mr Cheston did not express a view on the announcement of a general offer by ALF Global during the interview and we are sorry if our headline inadvertently conveyed that wrong impression to readers. We thank Mr Cheston for the clarification.

Source : Business Times  - 28 Jan 2008

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New Business Group breaks fresh ground - Singapore

New Business Group breaks fresh ground - Singapore

By MATTHEW PHAN
(SINGAPORE) Set up a year ago and charged with spotting future trends and positioning Singapore to benefit, the Economic Development Board’s New Business Group (NBG) is now nearly four times larger than some of EDB’s other key clusters, like biomedical sciences or electronics.
It boasts a staff of some 80 people, including dual appointment holders from several government ministries. This number does not include dozens of other civil servants and scientists involved in one way or another.

Apart from government scholars, the unit counts bankers, emcees, techies and even a former singer - reflecting the diversity of the group’s activities.

The unit was set up by EDB chairman Lim Siong Guan shortly after he joined the organisation in October 2006.

‘Their job is to look out, see trends, see technologies, see business models that come up and explore new geographical areas,’ he said in an interview with The Straits Times at the time. Effectively, they were Singapore’s business development officers.

The group has already done much work on the clean energy, environment and water, and lifestyle and sports sectors. But the NBG is also doing work on two others that may be less well-known: natural resources, and non-profit organisations.

Speaking with BT last week, Kenneth Tan, who heads the unit, described four trends the group has identified.

The first is the emergence of urban societies. With people migrating from rural to urban areas, cities must learnt to deal with larger and denser populations. The second trend is the growing importance of health and wellness amid an aging population.

The emergence of a large middle class with high purchasing power and an appetite for a more affluent lifestyle is the third trend. And lastly, the growing demand for natural resources, which are tied to a finite supply.

Singapore must both ‘future-proof’ itself - which means to mitigate the risks associated with these trends - as well as take advantage of the next ‘S-curves’, a concept that describes the gradual gestation, rapid growth and eventual maturity of new technologies, said Mr Tan.

A former SAF scholar who directed Citibank’s Asia-Pacific private equity division before returning to public service with the EDB in 2001, Mr Tan said these trends present challenges for Singapore.

But if the city-state is able to tackle these challenges, it can provide solutions for a large proportion of the world, he said.

Thus the focus on new industry sectors.

The clean energy, water and environmental thrusts address the themes of urban solutions and limited resources. ‘Perhaps we can be net exporters of clean energy’, envisioned Mr Tan. After all, he said, ‘a solar cell is basically energy, in a different form’.

And energy solutions - if made portable, like fuel or solar cells, could even be integrated into new consumer lifestyles.

The sports sector fits the growing middle class and health themes. As a growing middle class takes up more sporting activities, commercial opportunities will emerge, like in sports science or talent management, Mr Tan said.

In the sphere of natural resources, Singapore could be a centre for resource management and trading, or for research into areas such as improving yields on fish farms and plantations or the purity of metals when refined.

Singapore’s own lack of natural resources, and the limited public exposure to agricultural and mining activity here need not hinder its competitiveness in this sector.

‘It comes back to a basic understanding of the natural sciences’, said Mr Tan. Furthermore, Singapore is surrounded by countries rich in natural resources, which gives scientists based here the chance to interact regularly with the market, he said.

As for non-profit organisations, Mr Tan said their scope, reach and numbers worldwide have grown at a pace five to six times faster than those of for-profit firms.

The group also oversees a new technology unit that presently watches for breakthroughs in three areas: nanotech, robotics and new materials.

In 2007, the NBG worked on 195 projects, which, if successful, would contribute nearly $7.5 billion in value added and create over 8,100 jobs.

This was up from 57 projects, worth $624 million in value added and over 1,200 new jobs, in the previous year.
Source : Business Times  - 28 Jan 2008

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Singapore Changi park shaping up as financial backroom hub

Singapore Changi park shaping up as financial backroom hub

URA studying plans for Changi Business Park as part of 2008 Master Plan Review
By ARTHUR SIM

(SINGAPORE) OCBC could soon follow Credit Suisse, Citibank and DBS to Changi Business Park to form a growing alternative financial hub there. And with prime land going for about $60 psf and rentals at between just $4-$5 psf per month, it does seem to make sense.

Citibank’s Changi hub: OCBC could be joining Citibank, Credit Suisse and DBS at the business park. And C&W has 2 financial clients looking for possible sites there
In response to a query by BT, OCBC head of operations (group operations and technology division) Eugene Sng said: ‘We are currently assessing the feasibility of Changi Business Park as an alternative location to house our operations units.’

A-Reit has also revealed that Credit Suisse has committed to take up about a quarter of its new 200,000 sq ft HansaPoint@CBP building, scheduled to get its TOP (temporary occupation permit) in February.

A-Reit is already developing a built-to-suit building for Citibank and Tan Ser Ping, CEO of the reit manager said: ‘A-Reit continuously evaluates all potential investment opportunities, both in acquisitions and developments. The outlook for properties in the business and science parks and hi-tech industrial sector is especially strong.’

While business parks are still categorised as industrial space, where at least 60 per cent of the space must be an approved ‘predominant activity’ like R&D, a check with JTC’s website reveals that financial backroom operations now constitutes an approved predominant activity.

The Urban Redevelopment Authority does appear to have new plans for CBP. In response to a BT query, URA said: ‘We are studying the plans for the area as part of our Master Plan 2008 Review. More details will be made available later this year.’

CBP is a 66.54 ha business park which currently comprises about 61 development plots. A JTC spokesman said that about 50 per cent has already been allocated. Depending on location and plot ratio, the 30-year leasehold land is leased for about $28.50 to $57 psf.

JTC said that land rents are revised quarterly with a 5.5 per cent annual adjustment escalation cap over the preceding year’s rent.

And unlike the Government Land Sales programme, there is no public tender for business park sites and prices are fixed. JTC added: ‘All the land plots in CBP are prepared land which can be allocated immediately to companies that can meet our criteria.’

Not surprising then, Cushman & Wakefield (C&W) managing director Donald Han expects that between two to five more sites at CBP could be allocated this year. Already, Mr Han reveals that C&W has three clients looking for possible sites for built-to-suit buildings. Two are from the financial sector.

One of the advantages of built-to-suit premises in a business park is that the potential tenant can specify its own needs. ‘As land cost is less, you could have bigger workstations or provide special amenities like a gym and childcare facilities for your staff,’ he said.

And for developers, attractive yields of between 5-7 per cent are achievable, added Mr Han, although only JTC approved developers need apply.

The demand for such alternative space was brought about by the severe space crunch in the city. While this may be remedied by a new surge of supply coming onstream around 2010, Colliers International director (industrial) Tan Boon Leong believes that as long as rents remain ‘competitive’, business park space will remain a viable option.

He added: ‘Based on a lease period of 10 years, the developer could recoup 70-80 per cent of its initial investment from its tenant. If the tenant then chooses to move out, the developer can then afford to lease the space out at a lower rent. It’s a win win for both developer and tenant.’

Mr Tan does not, however, expect CBP to be a dedicated backroom for the financial sector. Business environments change and he noted: ‘CBP was originally targeted for the aerospace sector.’

Savills Singapore director of commercial services June Chua added that alternative sites in the Alexandra area are also popular. At Comtech, where Deutsche Bank, HSBC and American Express have taken space, rents are equally competitive at around $4.50 psf per month.

Competition for tenants should also increase as Ms Chua expects more industrial grade buildings to be retrofitted and made available for backroom offices as office rents rise.

On the future of the central business district (CBD), Ms Chua believes there will always be businesses who cannot afford to be out of the CBD, despite high rents. ‘They may however, be more selective in the future, when more space becomes available,’ she said.

Source : Business Times  - 28 Jan 2008

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Timely divestments enabled GIC to buy into UBS, Citi - IN DAVOS

Timely divestments enabled GIC to buy into UBS, Citi - IN DAVOS

Some holdings were sold in Q3 in still buoyant markets
By ANNA TEO

IN DAVOS, SWITZERLAND

BACK in the third quarter of 2007, when global financial markets were still buoyant and the investor mood fairly exuberant, the Government of Singapore Investment Corporation (GIC) pulled back: it sold some of its equity holdings. As a result, when the opportunities to invest in UBS and Citigroup arose, it had the cash in hand to do so - some US$16 billion.
Speaking to Singapore reporters in Davos on Saturday, after a few days of discussions on sovereign wealth funds at the World Economic Forum, GIC deputy chairman and executive director Tony Tan said one question that came up during interviews he had with foreign journalists here was - where did GIC get the resources for its recent huge investments?

Explaining how and why GIC had the means, he said: ‘We have been very worried about the financial markets for many months. We thought that the level of leverage in the US market was excessive, risk was not being priced correctly, asset prices were going up at a rate which was not sustainable. These worries have been growing over the years.

‘And in the second quarter last year, looking at all of these developments, we took a fundamental review of the GIC portfolio. Until then, GIC had been fully invested in the markets - they had served us very well, giving us very good returns, but we felt that under these circumstances, we should move towards a more conservative portfolio and convert part of our equity holdings into cash, which is something we have not done for many years.’

GIC did just that in Q3 2007, ‘in order to raise cash, because we were very worried about the outlook for the economies and the financial markets’.

At that point, the markets were still doing well - ‘there had been modest falls, but they were still strong’, Dr Tan noted. Of course, ‘everything fell apart’ by Q4. And by then, GIC had raised a ‘considerable amount of liquid resources’, he said.

‘So when the invitation from UBS and Citigroup came to invest in their equity, we had the resources which were available without having to take emergency measures to raise cash. A lot of money, but it’s well within the risk limits which we had prescribed for the finance sector.’

As it turned out, GIC’s reading of the market direction proved right, Dr Tan said.

‘What surprised us was the fact that when the markets actually turned, they did so at such a speed and the contagion effect was so broad that they affected even the best known and well regarded banks like UBS, Citigroup and Morgan Stanley.’

But he reiterated that the recent ‘confluence of events’ that hit banks in the US and Europe, and which led to GIC’s UBS and Citigroup ventures - the US sub-prime crisis, recession fears, credit tightening - were highly unusual circumstances.

‘We will not do this on a regular basis,’ Dr Tan said. While GIC is ‘always on the lookout for opportunities’, he hopes ‘there won’t be another confluence of events which will give us this opportunity again’, he added. ‘I think if there is another such confluence of events which will make such opportunities available, then the world is in real trouble.’

Source : Business Times  - 28 Jan 2008

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Singapore backs code of practice for SWFs

Singapore backs code of practice for SWFs

But guidelines should apply to other investors as well, says Tony Tan

By Warren Fernandez, Deputy Editor & Foreign Editor
LEADING BY EXAMPLE: Dr Tan says GIC is now working on a document which would give more information on the processes, governance and purposes for its investments. — JOYCE FANG

DAVOS - SINGAPORE supports the initiative to establish a code of best practices for sovereign wealth funds (SWFs), which would help ease concerns about their operations, Dr Tony Tan has said.
The deputy chairman of the Government of Singapore Investment Corporation (GIC) disclosed that Singapore was among several SWFs which had been asked by US Treasury Secretary Henry Paulson last October to offer suggestions for guidelines being drawn up, and had thrown up some ideas.

Among its suggestions: any new code should neither be overly prescriptive nor a one-size-

fits-all affair, given the wide diversity of funds which were labelled SWFs.

The guidelines, which should be largely voluntary, must also be kept general and flexible and be applied to other investors, such as hedge and private equity funds, so as to ensure a level playing field, he said.

More disclosure on the purpose and intention of investments made, whether they were for commercial reasons or some other purpose, as well as the governance processes within the funds would also be helpful, he said.

For its part, GIC was now working, in consultation with the Finance Ministry, on a document which would give more information on the processes, governance and purposes for its investments. This might be made public in the second quarter of this year. GIC would also report the rate of return on its investments more regularly, he added.

‘The SWFs are here to stay. We believe it is good to have better understanding, some form of code of good practice, so that operations of the SWFs, and the reactions of the recipient countries, will not lead to further problems,’ Dr Tan said.

‘The SWFS can play a role… It is just a matter of working out a process whereby they can continue their operations, which is good for them and good for the companies they invest in.’

He was speaking to reporters at the end of a trip to Davos, Switzerland, where he participated in several high-level discussions on SWFs - a hot topic at this year’s World Economic Forum meeting, which wrapped up yesterday.

GIC had drawn attention with two high-profile deals in recent months, investing US$6.88 billion (S$9.8 billion) in US banking giant Citigroup soon after forking out 11 billion Swiss francs (S$14.3 billion) for a stake of about 9 per cent in troubled Swiss bank UBS.

Dr Tan said that given the concerns about SWFs, he had decided to come to Davos to listen and exchange ideas on the issue. It was understandable, he said, that there would be some concerns about the purpose and intentions of SWFs, as there were many more players these days, including some large new ones from Russia and China.

‘Our view is that the concerns are valid, and have to be addressed,’ he said.

GIC had decided not to take up an invitation by the UBS to have a nominee elected to its board. GIC’s position was that it was a long-term commercial investor in the Swiss bank, with no intention of taking control of its operations, he said.

Giving an insight into GIC’s operations, he said it preferred to stick with the low-key approach it had adopted over the past 27 years, taking small stakes in a wide range of companies for the long haul.

But an unusual set of circumstances in recent months had led to some American and European banks needing to raise large sums of capital quickly. As it was difficult for them to do so from their traditional sources and shareholders, they had sought out the SWFs.

GIC decided to proceed only after careful consideration of the risks, he added, stressing that GIC was not in the business of making headlines.

Nor did he see the role of GIC and other sovereign funds to be white knights ‘riding to the rescue of financial systems in the US or Europe’.

Instead, GIC had a duty to the Government and people of Singapore to protect their hard-earned national reserves and make sure they were not invested recklessly, he said.

GIC had decided in the middle of last year to convert some of its equity holdings into cash, given concerns about the direction of the markets. This was how it had the US$16 billion needed to invest when the opportunity arose, he said.

‘In retrospect, GIC was right in determining the direction in which the markets would go. What surprised us was the fact that when the market actually turned, it did so at such a speed and the contagion effect was so broad that it affected even some of the best-known and well-regarded banks.’

Source : Straits Times  - 28 Jan 2008

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For every idea, there’s a 3P strategy - Singapore

For every idea, there’s a 3P strategy  - Singapore
RAINMAKING: Mr Kua says EDB’s 3P approach involves looking at an idea’s potential, plan and proof.

PREDICTING the future is exciting business - and listening is the key to getting it right. This is the philosophy of the Economic Development Board’s (EDB’s) new business unit director, Mr Jonathan Kua - an EDB ‘rainmaker’.
‘We listen to conversations from all over the world and constantly evaluate these ideas to determine if they are suitable for Singapore,’ he said.

EDB’s business unit, set up by EDB chairman Lim Siong Guan a year ago, is the ’structural expression’ of EDB’s mission to create the best jobs for Singapore. And this involves adopting a futuristic perspective on things, said Mr Kua.

Robots, for instance, are not common now but he believes they will dominate homes in a few years’ time. Thus, he is keeping an eye on the industry, which he views as a possible future growth strategy for Singapore.

The 36-year-old, who has worked at EDB for 12 years, said ‘there is no such thing as a typical day’ for EDB officers.

‘Our work changes every day, whether it is thinking up new industries, making them happen or putting the right people in touch with each other,’ he added.

EDB has a ‘rainmaking process’ where for every idea, they have a ‘3P’ strategy, he said. ‘The three questions we ask ourselves are very Singaporean: Got potential? Got plan? Got proof?’ said Mr Kua.

‘We get our ideas from things we read, conversations we have, people we meet. If we think there’s potential, we have 90 days to think up a plan. And then the hardest part is proving that the ideas can work.’

Since its inception, the team has been hard at work building new industries, said Mr Kua. ‘These jobs are ready for Singaporeans today as a result, and we hope to grow them further.’

EDB recently announced a record-setting $16.1 billion worth of fixed asset investment in Singapore’s manufacturing sector last year, which saw a record 28,600 jobs created.

Source : Straits Times  - 28 Jan 2008

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Mindy Yong

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EDB’s crystal-ball gazing throws up the key growth areas and jobs

EDB’s crystal-ball gazing throws up the key growth areas and jobs

Board’s business unit identifies five industries to develop in Republic’s long-term strategy

By Jessica Cheam
A YEAR ago, a group of Economic Development Board (EDB) officers were given the task of crystal-ball gazing for the country.
The brief was this: Spot global trends, identify new growth engines, create the best jobs for Singapore.

Today, a slew of exciting careers stemming from five newly identified industries are in the offing as a result.

In an interview last week, EDB assistant managing director Kenneth Tan outlined the country’s ‘game plan for the future’ for the first time. The five chosen industries for Singapore’s future: clean energy, environment and water, natural resources, lifestyle and sports, and non-profit organisations.

Mr Tan, who heads EDB’s new business unit - set up a year ago by EDB chairman Lim Siong Guan for the purpose of thinking up new growth areas - said the industries are the outcome of some major global trends.

The flow of people from rural to urban areas in developing nations, for example, has led to greater demand for sustainable technologies for the environment and water; while demand for natural resources from booming economies like China means a greater need for better extraction technologies.

‘If Singapore can provide these technologies and solutions, we can export them globally and ensure we’ll always have good jobs,’ said Mr Tan.

While these industries have been widely publicised by the Government in recent months, others have been developing slowly but surely.

EDB is courting international organisations such as think-tanks and humanitarian foundations to get them to set up base in Singapore.

These organisations, such as the World Bank or the World Wildlife Fund, often have operations that match those of multinational companies in scale - and reports show that they have grown at four to five times the rate of for-profit companies in the last decade, said Mr Tan.

‘These organisations offer good job prospects too. They’re often recession- proof, and for some, these jobs are regarded as having more soul.

‘We want to cater to a wide range of Singaporeans with different aspirations,’ Mr Tan added. That is also why EDB intends to launch an ‘arts belt’ this year, which will put in place an entire precinct of private museums, art galleries and auction houses.

‘For talent to come in, and to retain our own Singaporeans, we must offer a lifestyle environment that is second to none,’ Mr Tan said.

The plan does not stop there. EDB’s team of visionaries is constantly looking for new ideas for Singapore. It currently has other strategies, like looking into futuristic technology - such as robotics and nanotechnology - talent growth and building industry clusters.

So where does EDB’s crystal- ball gazing team get its ideas?

EDB has a digital database called the Matrix, which records all reports written by EDB officers for the last four decades, said Mr Tan.

Interviews with companies, research reports and market surveys, as well as a host of literature relating to virtually any industry are at the disposal of EDB officers - who are also called ‘rainmakers’ because they ‘make things happen’, said Mr Tan. These officers are also posted overseas to roam the globe and act as business development officers for Singapore Inc.

So how successful will these industries be?

Mr Tan says failure is not an option.

CIMB-GK economist Song Seng Wun said that although the industries look like good wagers, how much they can contribute to Singapore’s gross domestic product remains to be seen.

Traditional industries are still to likely dominate, he said. And the biggest challenge ahead will be competition from other countries, many of whom are eyeing similar industries.

‘Whether we can get organised quickly and get things off the ground will make that crucial difference,’ he added.

Job-hunter Yvonne Koh, 24, who will graduate in a few months, said she was glad to hear the range of new career options available.

‘There’s a perception that these jobs don’t offer as good a career as those in traditional areas like engineering or banking. But hopefully this will change in the future,’ she said.

Source : Straits Times  - 28 Jan 2008

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Mindy Yong

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Banking shares’ recovery draws interest in their contracts - Singapore

Banking shares’ recovery draws interest in their contracts  - Singapore

By Yang Huiwen

NEWLY issued covered warrants on banks are likely to be in the spotlight with the rebound in the underlying banking stocks.
Banking shares had been battered badly recently, so much so that many of the call warrants issued on them went out of the money. In other words, the warrants’ strike prices were way higher than the mother shares’ current prices.

This prompted foreign banks, including Societe Generale (SG), BNP Paribas and Macquarie Bank, to issue new contracts on them last week, which have strike prices closer to the underlying counters’ share prices.

The Straits Times Index rose for three consecutive days to close at 3,159.48 last Friday, up 55.23 points, or 1.78 per cent for the week, thanks to a 75-basis-point cut in the United States federal funds rate. Financial shares saw a swift recovery as well.

DBS Group Holdings shares, which fell to as low as $16.40 last Tuesday, rose 48 cents last Friday to close at $18.94.

Mr Ooi Lid Seng, SG’s vice-president of structured products for Asia excluding Japan, said: ‘Singapore is in a better position to ride through the US sub-prime crisis and the outlook for the local banking industry looks promising.’

Loan demand grew by 16.3 per cent year-on-year in November and is expected to remain robust this year, he added.

Investors who hold a positive view of DBS can consider a call issued by SG which has a strike price of $20 and expires on July 21.

‘The outlook for DBS is positive in the short term. The share has recovered over the last three trading days,’ he said, adding that ‘buying momentum is strong’. Support in the short term is at $18.42 while the resistance level is at $19.85.

For those keen on United Overseas Bank (UOB), SG has a call which expires on July 14 with a strike price of $19. It also has a call for OCBC Bank that expires on July 7 and has a strike price of $8.

These warrants have a long shelf life of more than three months, which gives investors more time to ride the recovery following the recent sell-off.

OCBC shares rose 12 cents or 1.6 per cent to $7.80, while UOB shares gained 50 cents or 2.8 per cent to $18.08.

Source : Straits Times  - 28 Jan 2008

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Mindy Yong

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Banks, property stocks turn out winners in Singapore market rebound

Banks, property stocks turn out winners in Singapore market rebound

But small caps, oil and gas stocks fail to make up for lost ground

By Lee Su Shyan, Assistant Money Editor
ATTRACTIVE BUY: Investors are looking to Reits such as CapitaMall Trust, which owns malls such as Junction 8, for better returns. — ST FILE PHOTO

AS THE market turbulence of early last week subsided, property stocks and the benchmark S