Singapore losing about 1,000 capable people every year

1Singapore losing about 1,000 capable people every year

Main draw isn’t China, but the US and other English- speaking countries
By Clarissa Oon
CAUSE FOR CONCERN: Mr Lee believes the exodus can only grow because ‘every year, there are more people going abroad for the first or second degree’.

SINGAPORE is losing about 1,000 capable people every year and the numbers are growing, said Minister Mentor Lee Kuan Yew, sounding the alarm on the severity of the brain drain.
And the main magnet for these talents is not regional powerhouse China, but the United States and other developed English-speaking countries, he told the United Press International (UPI) news agency in an interview earlier this month.

Citing figures of Singaporeans who gave up their citizenship and took out their savings and CPF funds, he said this meant ‘losing about, at the top end, 1,000 a year, which is about - if you take the top 30 per cent of the population - about 4 or 5 per cent’.

Mr Lee believes this exodus can only grow because ‘every year, there are more people going abroad for their first or second degree’.

Some of these Singaporean talents head for China, but return eventually because, at the end of the day, they do not want to compete with the Chinese, he said.

‘You go to China, you’re going to compete against 1,300 million very bright fellows, hardworking, starving.

COMPETE ON A DIFFERENT PLATFORM
‘You go to China, you’re going to compete against 1,300 million very bright fellows, hardworking, starving. Do you stand a chance to be on top of that pole? No. But if you go there as a Singaporean with a different base, speaking English which they can’t, with connections to the world, then you’ve got a different platform.’ - MM LEE

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Read the full transcript of the interview
‘Do you stand a chance to be on top of that pole? No. But if you go there as a Singaporean with a different base, speaking English which they can’t, with connections to the world, then you’ve got a different platform.’

In comparison, the pull of the US is difficult to reverse, he said, noting that American firms recruited bright Singaporean students straight out of universities there.

After acclimatising to life and work in the US, ‘if they decide to take the green card and settle in America, then I think we’ve lost them’, he said. Singaporeans who do not want the stiff competition in the US go to Australia and Canada.

The brain drain has been a regular issue addressed by Mr Lee. To stem this loss of talent, Singapore has wooed many top professionals from China and India here, he said.

The draw for the Chinese is that their children can learn both English and Chinese, while the Indians like Singapore because it is close to home, yet a step up in terms of First World infrastructure.

‘The trouble is many of the Chinese then use us as a stepping stone to go to America, where the grass is greener.

‘But even if we only keep 30 to 40 per cent and lose 60 to 70 per cent, we’re a net gainer,’ he said.

Mr Lee said, however, that the Chinese would cease to come in 20 to 30 years’ time, when China’s living standards rise to match Singapore’s.

Source : Business Times - 14 Feb 2008

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Interest rates higher than private sector’s - Singapore

Interest rates higher than private sector’s - Singapore

By Keith Lin 
 
MANPOWER Minister Ng Eng Hen has assured Singaporeans that the new national annuities scheme will give a higher interest rate than similar private-sector products.
The CPF Board, its administrator, will give payouts based on a minimum guaranteed interest rate of 3.5 per cent.

In comparison, most commercial annuity providers guarantee only a 2 per cent rate of return, Dr Ng said. Whether they give more depends on how well their investments fare, he added.

The minister was responding yesterday to a committee’s recommendations for a national annuities scheme, made public on Tuesday.

Called CPF Life, it is for workers aged 50 and below this year.

When they turn 55, their Minimum Sum cash balances will be split into two parts: Retirement Account and Refundable Premiums.

Starting Jan 1 this year, the interest rate for the Retirement Account will be a floating rate pegged to 10-year Singapore Government Securities rates.

But for this year and next year, the account will get a minimum interest of 4 per cent.

After next year, the rates will be floated but account-holders are guaranteed a minimum interest of 2.5 per cent.

Also, the Government will give an extra 1 per cent interest to a worker’s CPF account but this is only for the first $60,000, with up to $20,000 in the Ordinary Account.

Together, they add up to a higher interest rate which is the basis for the relatively higher payouts from CPF Life.

But, Dr Ng stressed, the CPF Board, on its part, did not set out to run the scheme.

It is shouldering the task because the committee tasked to design the scheme received ‘overwhelming response’ favouring the board as its administrator.

While the CPF Life payouts are relatively better, they however will not factor in rising living costs. Explaining the reason, Dr Ng said CPF Life gives a fixed income for life.

If it was to take into account inflation, the scheme would have to give smaller payouts initially in order for participants to get bigger payouts as they grow older. Those who are keen on such annuities can choose to buy a private-sector plan, said Dr Ng. But such a plan must be approved by the CPF Board.

Actuaries interviewed by The Straits Times said that it would be onerous for a national scheme to factor in inflation.

Mr Andrew Linfoot, an actuary at the local office of Scottish Annuity & Life Insurance Company, noted that the scheme is meant only to provide ‘basic income’.
Source : Business Times  - 14 Feb 2008

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Most will opt for Refund 80 plan: Ng Eng Hen - Singapore

Most will opt for Refund 80 plan: Ng Eng Hen  - Singapore

Minister believes the standard plan will cater to the majority’s needs

By Keith Lin 
YET TO CHOOSE: ‘You know, most of us are quite lazy and will just leave it. So you’re quite right, I haven’t thought about it.’ - MANPOWER MINISTER NG ENG HEN, 49, when asked which plan he intends to choose
 
AROUND eight in 10 CPF members will opt for the standard plan in the new annuities scheme, according to Manpower Minister Ng Eng Hen.
The Refund 80 plan is the ‘most sensible option’ which, Dr Ng believes, caters to the needs of the majority.

It is one of 12 annuity plans under the CPF Life scheme and a CPF member will be automatically opted into it in the event that he fails to choose a plan when he turns 55.

Under the Refund 80 plan, a man with $67,000 cash in his CPF Minimum Sum account at age 55 will get a monthly payout of around $610 from his Retirement Account from the age of 65 to 79.

From 80 onwards, he will continue to receive such monthly payouts, but from his annuity plan. It is for the rest of his life.

The 12 plans were unveiled on Tuesday when a government-appointed committee made public its recommendations for a compulsory national annuities scheme.

Yesterday, in responding to the recommendations, Dr Ng expressed confidence that most of the others will attract smaller groups.

The committee had proposed two groups of six plans each, with varying payout ages that range from 65 to 90.

One group allows refunds to family members if the CPF member dies before reaping the payouts, while the other is made up of non-refundable plans.

The non-refundable options are for people with no beneficiaries and Dr Ng estimates that they will make up around 10 per cent of a cohort.

The Refund 65 option is also for another small group with smaller balances but who want higher payouts, while he reckoned that the Refund 90 option will not be popular because people feel that collecting money at age 90 is ‘too far off’.

‘So in effect, CPF Life is simpler than what it is made out to be,’ Dr Ng said.

‘Most people don’t have to do anything and just go for the default plan. So I don’t think it will be a problem.’

The minister also explained that people will not be allowed to switch plans because the scheme is based on ‘actuarial principles’.

‘If you allow people to change, then the risks change,’ he said. ‘The insurance works on a certain level of uncertainty and choice.’

He also said the CPF Board is working on a ‘gold standard’ when testing if the average man in the street can understand the scheme.

‘Basically at the end of it, a three-minute or five-minute or two-minute test, I explain to you and you should be able to understand.’

The CPF Board will introduce online calculators for people to calculate their retirement needs before choosing a plan.

And for those unfamiliar with computers, CPF staff will be on hand to guide them through the scheme and answer their queries.

A guidebook on CPF Life, in the four official languages, will also be distributed islandwide.

Meanwhile, those with burning questions can call the hotline 1800-Life CPF (1800-5433-273).

Making plain that the CPF Board has its work cut out for it, Dr Ng said only between 30 per cent and 50 per cent of Singaporeans understood what the scheme entailed when it was first discussed in public.

‘Because this is going to involve all Singaporeans, we’ll still have to make sure that they understand the initial messages before we come up with a more sophisticated one.’

SOONER WOULD’VE BEEN BETTER

‘If I have any regrets, it would be that we couldn’t introduce the scheme earlier.’ - DR NG ENG HEN

BUILT TO LAST

‘If there is any possible downside, it would be that we over-promise and run the scheme on the basis that somebody else is going to finance this if it’s not financially viable… But I have confidence that this will be a scheme that will last and serve successive generations of Singaporeans well for their retirement.’ - DR NG ENG HEN

Source : Straits Times  - 14 Feb 2008

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Household incomes up but Singapore rich-poor gap widens

Household incomes up but Singapore rich-poor gap widens
 
By Bryan Lee, Economics Correspondent 
THANKS to a booming economy and rising salaries, the average family in Singapore saw its household income rise by 9.6 per cent last year, the biggest increase in at least a decade.
But the rich again got richer in 2007. Higher-income households generally enjoyed bigger pay hikes than lower-income ones, widening the income gap between the rich and poor.

Data published yesterday by the Department of Statistics (DOS) showed that average monthly household income from work last year rose to $6,280, up from $5,730 the previous year.

Much of this was due to strong economic growth and a tight labour market, which drove up just about all salaries last year.

The data comes on the heels of a set of rosy numbers for Singapore’s workers. The unemployment rate is at a 10-year low, while average bonuses paid out are at their highest since 1990.

Even after accounting for inflation, income still grew 7.4 per cent, beating a previous high of 6.2 per cent in 2001 at the height of the dot.com boom.

Citigroup economist Chua Hak Bin said: ‘It’s very encouraging that workers are finally seeing big gains from the economic boom of the past few years.

‘The earlier part of the recovery from Sars in 2003 had benefited companies more, with wage gains being relatively modest in previous years.’

But yesterday’s figures from the DOS also showed that the wages boom was clearly skewed in favour of richer families.

Income per family member in the top 10 per cent income bracket surged 11.1 per cent.

This is compared to 3.3 per cent for the lowest 10 per cent income bracket.

The result is that the Gini coefficient, a widely used measure of income inequality in a country, has gone up to 0.485 from 0.472 - one of the biggest increases in the past seven years.

The DOS acknowledged this yesterday, saying that it reflected ‘higher wage increases for skilled and knowledge workers’.

Economists agreed, positing that the unusually large jump could be due to more top global business executives relocating here.

But they also noted yesterday that a widening income gap is to be expected in a globalised economy. This is because low-skilled workers may not have as much bargaining power even in a tight labour market as companies can easily turn to cheaper foreign labour.

This means the Government will have to help poorer families more as the spoils of globalisation are not equally distributed, they added.

Indeed, economists said that with economic conditions turning south, more help should be announced at tomorrow’s Budget statement as lower-income, lower-skilled workers may be more vulnerable.

Said DBS Bank economist Irvin Seah: ‘I would not be surprised to see many measures at this Budget to alleviate the lower-income families from the escalating costs of living.’

In this vein, the DOS noted yesterday that Government benefits targeting the lower-income, such as the Goods and Services Tax offset package offered at last year’s Budget, helped to narrow the income gap.

If those were taken into account, the Gini coefficient would come down to 0.46, it said.

Source : Straits Times  - 14 Feb 2008

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Revision of Singapore DC rates expected to be ‘moderate’

Revision of Singapore DC rates expected to be ‘moderate’

Consultants project smaller DC rate rise for residential and commercial use
By KALPANA RASHIWALA
THE coming March 1 revision of development charge (DC) rates - payable to enhance the use of sites or build bigger projects on them - is generally expected to be more moderate than the past couple of revisions, which imposed steep rises.
 
Exceptions: Hikes are possible where land sales took place at prices significantly above values implied by the prevailing Sept 1, 2007 DC rates. Orchard Boulevard where Westwood Apartments is located is an example 
That’s because on the whole, land price increases have slowed considerably in the the past few months. And collective sales, which traditionally account for the lion’s share of private-sector land sales, have virtually ground to a halt, property consultants have told BT.

‘We believe collective sale brokers are unlikely to feel inspired by the upcoming DC rate revisions,’ says Jones Lang LaSalle’s regional director and head of investments Lui Seng Fatt.

Most consultants project smaller average DC rate increases for residential and commercial use this time. However, JLL is predicting bigger hikes for industrial and hotel use, as hotel and industrial sites sold at government land sale (GLS) tenders in recent months have fetched top bids significantly higher than the land values implied by current DC rates.

This can be attributed to the shortage of hotel rooms and strong demand for industrial space by office tenants looking for cheaper backroom space, says JLL’s head of research (South-east Asia) Chua Yang Liang.

For non-landed residential use, JLL reckons the average DC rate will go up just about 5 per cent come March 1, compared with the 58 per cent hike that took effect on Sept 1, 2007.

CB Richard Ellis executive director (investment sales) Jeremy Lake also reckons that on the whole, non-landed residential DC rates are unlikely to rise significantly, although there may be hikes in locations where land sales have taken place at prices significantly above values implied by the prevailing Sept 1, 2007 DC rates.

Market watchers point to examples such as Westwood Apartments in Orchard Boulevard, Toho Garden in Yio Chu Kang Road and 15 terrace houses at Jalan Bunga Raya in the Balestier/Novena area.

Agreeing, Credo Real Estate executive director Yong Choon Fah says the increases for such locations could be in the order of 30-40 per cent, while the average islandwide hike will be much smaller at 5-20 per cent.

DC rates - revised every six months, on March 1 and Sept 1 - are listed according to use (for example, non-landed residential, commercial, and industrial) and 118 locations across Singapore.

Savills Singapore director Steven Ming, who predicts a 0-10 per cent rise in the average non-landed residential DC rate, reckons both prime and suburban/mass-market areas will see only moderate increases.

However, bigger rises may be seen in mid-tier locations like Pasir Panjang, Balestier, Upper Bukit Timah, Hillview and Upper Thomson, where condo prices have risen 20-40 per cent in the past six months.

For landed residential use, JLL projects the average increase this time could be 8-15 per cent - again lower than the 11.3 per cent rise in Sept 2007.

Jones Lang LaSalle expects the rates for places like Dunsfold Drive and Binchang Rise in the Bishan/Ang Mo Kio area, Sentosa and Chestnut Drive to increase about 20-25 per cent, as market values of landed properties in these locations are significantly above the values implied by prevailing DC rates.

JLL reckons that after a 42 per cent spike in the average commercial-use DC rate on Sept 1 last year, the rate could still rise a further 30-35 per cent come March 1. However, it believes rates may generally stay put in the central business district (CBD), and expects increases mostly in suburban locations, particularly in the Jalan Sultan and Toa Payoh areas. In the past few months in these areas, commercial GLS sites have been sold at prices more than double the land values implied by prevailing DC rates.

Agreeing, Credo’s Ms Yong sees the islandwide increase in commercial DC rates around 5-15 per cent, with increases mostly outside the CBD.

Market watchers highlight the sharply different top bids for two white sites - with stipulated minimum office components - at Marina View in the CBD sold just three months apart late last year, reflecting how swiftly investor sentiment in the office market turned cautious.

JLL estimates industrial DC rates will appreciate around 30 per cent on average, compared with a 2.2 per cent increase last round. It also expects the average hotel DC rate to go up 30-35 per cent, after a 23 per cent hike last round, pointing out that hotel sites offered under the GLS programme at Upper Pickering Street and New Market Road/Merchant Road have been sold at premiums of 80 and 64 per cent respectively above prevailing DC rate-based land values.

The coming round of DC rate revisions will have ‘minimum impact on the already slowing collective sales market’, according to Savills’ Mr Ming.

But for en bloc sites with a significant DC component, and where the reserve price has been fixed by owners, a substantial DC increase will make it even harder to find takers, says Credo’s Ms Yong.

JLL’s Dr Chua reckons owners of properties in fast-changing neighbourhoods like Buona Vista and Telok Blangah - and possibly Paya Lebar and Jurong East, which are earmarked by the government for development into business hubs - will be watching the coming DC rate changes as they may set the tone for potential change-of-use applications.

Potential bidders for reserve list sites under the GLS programme will also be watching the revisions to get a sense of the Chief Valuer’s sentiment before making any applications for these sites to be released, says Dr Chua.

Source : Business Times  - 14 Feb 2008

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Singapore world’s 7th most expensive office location

Singapore world’s 7th most expensive office location

Prime office rents rose 78% last year to US$130.48 psf per annum: report
By ARTHUR SIM

SINGAPORE has jumped 10 places to become the world’s seventh-most expensive office location.
 
On the climb: Rental increases here were the fifth highest globally last year, after locations in Turkey and Norway 
According to Cushman & Wakefield’s (C&W) report on office occupancy costs, prime office rents rose 78 per cent in Singapore last year. Occupancy costs are now at US$130.48 psf per annum, up from US$954 psf per annum in 2006.

Rental increases here were the fifth highest globally last year, after locations in Turkey and Norway. However, Singapore still ranks below London, Hong Kong, Tokyo, Mumbai, Moscow and Paris in terms of occupancy costs.

London remains on the top of the list, with occupancy costs rising 30 per cent to US$312 psf per annum followed by Hong Kong, with an increase in occupancy costs of 40 per cent to US$238.58 psf per annum.

Paris, which was put in sixth place, registered occupational costs of US$141.57 psf per annum.

C&W executive managing director (South-east Asia) Arsh Chaudhury said that rental growth in Singapore was led by strong demand from the banking and services sectors coupled with limited supply of quality office space.

He said: ‘Whilst the effect of a US slowdown on Asia will be muted, the uncertainty of growth plans of US institutions, especially banks, may possibly result in an easing of demand.’

But he said that C&W expects the upward trend in rents to continue, albeit at a slower pace.

The C&W report compares office occupancy costs in 203 locations in 58 countries. New entries include Kyiv in Ukraine at 16th place with occupancy costs at US$78.22 psf per annum, and Ho Chi Minh City in Vietnam at 17th place with occupancy costs at $75.81 psf per annum.

Of these 203 locations, 79 per cent registered rental growth, 20 per cent showed stable growth and only one per cent experienced a fall in rentals compared to 6 per cent in 2006.

Perhaps also interesting to note is that of the bottom 10 locations in C&W’s list of 58 countries, neighbouring South-east Asian cities took up four spots.

Bangkok took the 58th position, with office occupancy costs at US$26.52 psf per annum, preceded by Jakarta, at 57th position with occupancy costs at US$26.54 psf per annum, Manila in 50th place with occupancy costs at US$33.75, and Kuala Lumpur 49th, with occupancy costs at US$34.39 psf per annum.
Source : Business Times  - 14 Feb 2008

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Global commercial property sales top US$1t mark - LOS ANGELES

Global commercial property sales top US$1t mark - LOS ANGELES
(LOS ANGELES) Global commercial real estate sales rose to US$1.04 trillion for the first time last year, driven by Blackstone Group LP’s purchase of Equity Office Properties Trust and land transactions in Asia.
 
Land rush: Almost half of all land acquired by developers around the world last year was in China. Land transactions totalled US$50.7 billion in China, more than double the US$25 billion in the US 
One third of the total was office space, with nearly 1.2 billion square feet of offices worth US$434 billion changing hands, New York-based real estate research firm Real Capital Analytics said in a report on Tuesday.

In 2006, there were about US$700 billion of total global transactions.

Billionaire Sam Zell’s sale of Equity Office for US$39 billion including debt a year ago was the biggest leveraged buyout up to that time.

That deal and Blackstone’s subsequent sale of buildings from the Equity Office portfolio added US$66 billion to last year’s global transactions, Real Capital said in its report.

‘In the US, transaction activity was a record year, but it was all privatisation and massive portfolios,’ Robert White, president and founder of Real Capital, said in an interview.

‘In Asia, development land is where all the dollars are flowing to.’

Office space represented 32 per cent of total sales last year, Real Capital said. The total square footage that sold is equivalent to all of the office space in London, Tokyo and New York combined, the research firm said. With more than US$209 billion in transactions, the US accounted for half of global office sales.

Real Capital identified 114 cities worldwide that each had more than US$1 billion of commercial property sales.

Forty-eight of those cities were in North America, 35 were in Europe and 21 were in Asia. Real Capital limits the size of transactions it tracks to US$10 million or greater, meaning the total size of the global commercial real estate market last year may have been closer to US$1.5 trillion, the company said.

Almost half of all land acquired by developers around the world last year was in China. Land transactions totalled US$50.7 billion in China, more than double the US$25 billion in the US, the next most active country.

Land purchases in China and other parts of Asia were driven by a lack of available buildings in many growing regions, Mr White said. ‘There are really very limited institutional-quality, income-producing assets that are sold in the open market or even exist,’ he said. Commercial property sales slowed in the US and Europe in the fourth quarter of last year as the collapse of the sub-prime mortgage industry spread from the residential market to commercial lending, making it harder for real estate investors to find financing.

Growth in Asia will help make up for this year’s expected drop in transactions in the US and Europe, Mr White said.

‘The US was a little bit more than half of global volume in 2007,’ he said.

‘In 2008, it will most likely be well under half. Emerging markets will continue to grow.’

Worldwide property transactions this year likely will ‘be comparable’ to 2007, Mr White said. ‘It might even be off a little bit.’

Real Capital collects transactional information for property sales and financings and generates reports on capitalisation rates, market trends, pricing and sales volume.

The company compiled the Global Capital Trends report using its database of transactions. The sources of its information vary by country.

Its data partners include Property Data in the UK, Thomas Daily in Germany and HBS-Research in France. — Bloomberg
Source : Business Times  - 14 Feb 2008

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Singapore GIC RE takes 40% stake in Finnish mall

Singapore GIC RE takes 40% stake in Finnish mall

Deal worth 131.6m euros; partner Citycon Oyj to manage project
By ARTHUR SIM
GIC Real Estate, the property investment arm of the Government of Singapore Investment Corporation, has partnered Finnish retail property investment company Citycon Oyj to acquire a 40 per cent stake in a Helsinki mall called Iso Omena for 131.6 million euros (S$271.7 million).
Wealthy catchment: The mall in Helsinki, Iso Omena, has total net lettable area of 61,300 sq m, of which 49,000 sq m is retail space. Approval has been given for an extension of 7,000 sq m 
In a statement yesterday, GIC RE said Citycon will hold 60 per cent of Iso Omena upon completion of the deal.

Citycon - which owns 22 shopping centres in Finland, eight in Sweden and three in other Nordic Countries - will be responsible for the business and management of Iso Omena.

The centre is Finland’s fifth largest and has a wealthy catchment area, GIC RE said. Its total net lettable area is 61,300 sq m, of which 49,000 sq m is retail space.

Citycon acquired Iso Omena from funds managed by private equity firm Doughty Hanson for 329 million euros in September 2007.

According to a statement released by Citycon then, the shopping centre’s net yield on the purchase price was 4.5 per cent. Citycon said that after redevelopment and other improvements, it estimated the net yield would increase. Iso Omena has planning permission for an extension of some 7,000 sq m.

Citycon CEO Petri Olkinuora said of the GIC RE deal: ‘With this agreement we will release capital for the redevelopment of our property portfolio in accordance with our strategy. This business concept may also become part of our strategy and source of capital.’

This is the third property deal that GIC RE has announced this year. Last week it entered into a joint venture to take a S$416.1 million stake in Roma Est Shopping Centre in Italy with with ING Real Estate. It also said it will develop a township on a site in Russia with a market value of US$1.33 billion.

Also last week, it was reported that GIC plans to acquire The Westin Tokyo for about S$1.02 billion.

Source : Business Times  - 14 Feb 2008

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Scepticism rises as market weighs cost of Buffett bailout - NEW YORK

Scepticism rises as market weighs cost of Buffett bailout - NEW YORK

Analysts see it as a shrewd attempt to take advantage of insurers’ problems
(NEW YORK) Warren E Buffett volunteered on Tuesday to rescue Wall Street from its latest looming crisis. But the billionaire investor known as the Oracle of Omaha made clear that his offer would not come cheap.
 
Mr Buffett: Capitalising on the turmoil in the financial markets, he offered to shoulder some of the financial burdens of three insurance companies whose plunging fortunes have become a threat to the financial system. 
‘When I go to St Peter I will not present this as some act that should entitle me to get in,’ Mr Buffett said on CNBC television. ‘We’re doing this to make money … If you put up US$5 billion, you ought to make some money.’

That’s how much capital Mr Buffett said he offered last week to guarantee municipal bonds now backed by MBIA, Ambac Financial Group and FGIC Corp. He said he would insure the bonds for 50 per cent more than the insurers charge, an amount that analysts said was high.

And even then, jittery investors were unsure that his plan would work.

Capitalising on the turmoil in the financial markets, Mr Buffett offered to shoulder some of the financial burdens of three insurance companies whose plunging fortunes have become a threat to the financial system.
‘When I go to St Peter I will not present this as some act that should entitle me to get in. We’re doing this to make money … If you put up US$5 billion, you ought to make some money.’
 
- Mr Buffett 
 
 
 
 
The companies - MBIA, the Ambac Financial Group and the Financial Guaranty Insurance Co - guarantee interest and principal payments on hundreds of billions of dollars of bonds sold by states and municipalities, as well as complex mortgage investments. Investors fear that the deepening problems of the bond insurers could unleash a chain reaction of losses across financial industries.

Mr Buffett said he would stand behind, or reinsure, policies that the three companies had written on US$800 billion of municipal bonds, a move analysts called a shrewd attempt to take advantage of the companies’ problems.

Berkshire will refuse to take any risks associated with mortgage-related securities, the riskiest debt that the companies insure. Mr Buffett made his offer public on CNBC, the financial news network.

The insurers were considered unlikely to agree to Mr Buffett’s stringent terms. Ambac, in a statement, said the offer would not benefit the company.

The offer initially heartened investors, who have grown ever more alarmed by the drumbeat of grim news from the bond guarantors. Financial shares led the stock market higher for much of Tuesday before the rally faded in the afternoon.

But the insurers’ share prices fell as traders considered the implications of Mr Buffett’s statements on the companies’ business. The offer would do little to alleviate the problems the insurers are facing on securities backed by mortgages, consumer loans and other assets. In fact, reinsuring municipal bonds with Mr Buffett could make the companies more vulnerable because they would be left with only the riskiest insurance contracts.

‘Essentially, if any of the companies were to take him up on this offer, it would be almost like them waving a white flag saying that they are done,’ said Rob Haines, an analyst at the research firm CreditSights. ‘It does not make sense to give up what is the good part of your business.’ In trading on Tuesday, MBIA’s stock closed down 15.3 per cent, at US$11.50. Shares of Ambac were down 15.1 per cent, closing at US$8.90. FGIC is privately held.

Mr Buffett’s offer, along with news that mortgage companies would give delinquent borrowers more time to restructure their loans, helped buoy stocks for the better part of Tuesday, but prices fell back towards the end of trading. The Standard & Poor’s 500-stock index closed up 0.73 per cent, and the Dow Jones industrial average was up 133.40 points, or 1.09 per cent. The technology-weighted Nasdaq composite index was essentially flat. Shares of financial companies, which might benefit from a strong company like Berkshire Hathaway’s backing municipal bonds, rose 1.4 per cent.

Berkshire Hathaway’s offer was prompted by a call from the New York state insurance superintendent, Eric R Dinallo, who asked the company late last year to enter the bond insurance business directly and quickly gave it approval to do business in the state. The company has since had similarly warm receptions in other states.

In the last couple of months, investors and regulators have focused intensively on the bond guarantors. For state regulators, the main concern has been protecting the US$2.6 trillion municipal bond market, about half of which is insured.

For some states, cities and other public entities, the cost of borrowing has risen noticeably in recent months because investors are concerned that the guarantors’ backing will turn out to be worthless.

Mr Dinallo, who regulates MBIA and FGIC, has asked large banks like Citigroup, Merrill Lynch and UBS, many of which hold insurance policies from the guarantors, to devise a plan to shore up the insurers. The officials are discussing investing in the insurers or providing them with lines of credit to cover future losses and restore confidence in them.

While the banks and the guarantors continue to meet daily with each other and with Joseph Perella, an investment banker who is advising Mr Dinallo, the Berkshire Hathaway reinsurance plan is seen as a backup solution if those talks are unsuccessful, said a person familiar with the discussions. One analyst said that Mr Dinallo could be using the Berkshire offer to put pressure on the banks to come up with a plan that addresses both the municipal debt obligations and the mortgage-related securities insured by the bond guarantors. — NYT
Source : Business Times  - 14 Feb 2008

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S’pore is world’s 7th most expensive office location

S’pore is world’s 7th most expensive office location

By Loh Kim Chin,

SINGAPORE : Singapore has moved up 10 spots to become the world’s seventh most expensive office location.

According to Cushman & Wakefield’s global ranking, prime office rents shot up 78 percent in Singapore last year.

The property consultancy expects demand for office space from companies across most industry sectors to remain strong this year against a tight supply till 2010.

Cushman is predicting that the effect of a US slowdown on Asia will be muted.

However, it said the uncertainty of growth plans of US institutions, especially banks, may possibly result in an easing of demand.

Cushman said rents are likely to trend up, but at a slower pace compared with last year.

London retains its title as having the most expensive office occupancy costs in the world. A square metre of prime space in London’s West End cost US$3,354 a year.

In second place is Hong Kong, where rents were up 40 percent to about US$2,550 per square metre. - CNA/ms

Source : Channel NewsAsia  - 14 Feb 2008

Singapore Property - Buy , Sell , Rent , Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com
http://www.hotvictory.com