Dire warnings fail to sway senators on big bailout

Dire warnings fail to sway senators on big bailout

By Jeannine Aversa, AP Economics Writer

Senators push back on bailout plan despite dire warnings from Bernanke, Paulson

WASHINGTON (AP) — Refusing to be pushed, Republicans and Democrats alike rebuffed dire warnings Tuesday from the government’s top economic officials of recession, layoffs and foreclosed homes if Congress doesn’t quickly approve the administration’s emergency $700 billion financial bailout plan.
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Congressional leaders still predicted passage — with significant changes — but Wall Street’s nerves were hardly soothed. The Dow Jones industrials sank 161 points and now are off more than 500 this week after initially surging on the bailout announcement last week.

Deepening market trouble was just one piece of the economic havoc that Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson told senators would ensue if Congress lags in acting on the administration’s proposal to rescue tottering financial institutions.

“I share the outrage that people have,” Paulson said. “It’s embarrassing to look at this. I think it’s embarrassing to the United States of America. There is a lot of blame to go around.”

But without the bailout plan, Paulson and Bernanke sketched out a dire scenario for senators at a contentious daylong hearing: Neither businesses nor consumers would be able to borrow money, and the world’s largest economy would grind to a virtual halt.

In public and in private meetings, both Democrats and Republicans said big changes are needed, presaging a difficult road ahead for the measure.

The legislation the administration is promoting would allow the government to buy bad mortgages and other rotten assets held by troubled banks and financial institutions. Getting those debts off their books should bolster those companies’ balance sheets, making them more inclined to lend and easing one of the biggest choke points in the credit crisis. If the plan works, it should help lift a major weight off the national economy that is already sputtering.

One Wall Street firm got a boost Tuesday with word that Warren Buffett’s Berkshire Hathaway Inc. is investing at least $5 billion in Goldman Sachs. It was a huge vote of confidence for one of the survivors of the credit crisis that felled two of its investment banking peers.

The news sent shares of Goldman Sachs and stock index futures soaring in electronic trading, after the Dow Jones suffered declines.

Democrats were determined to wrest concessions from the administration on domestic spending and middle-class economic aid. And they said Republicans had to share in the politically tricky task of pushing through a financial bailout six weeks before the elections at a time when millions of everyday Americans are economically strapped.

“It’s their problem. It’s their bill. And they’re going to have to figure out if they can support it,” House Speaker Nancy Pelosi, D-Calif., said of Republicans.

“Nobody wants to have to do this,” agreed Rep. John Boehner of Ohio, the Republican leader. He said he was hopeful of a quick agreement, despite withering criticism from conservative GOP lawmakers who recoiled at the prospect of federal intervention.

Sen. Jim Bunning, R-Ky., said, “This massive bailout is not a solution. It is financial socialism and it’s un-American.”

Separately, law enforcement officials said the FBI had begun investigating four institutions whose collapse helped trigger the financial crisis.

The FBI is looking at potential fraud by mortgage giants Fannie Mae and Freddie Mac, Lehman Brothers Holdings Inc. and insurer American International Group Inc., said two officials, speaking on condition of anonymity because of the sensitivity of the investigations. The inquiries, still in preliminary stages, will focus on the financial institutions and the people who ran them, one senior law enforcement official said.

As for the bailout plan, both parties’ presidential candidates joined fellow senators in insisting on alterations in the administration’s drastic prescription.

Democrats and Republicans alike demanded that the bailout limit pay packages for executives of companies helped by the rescue.

“Clipping executive compensation is easy right now — everybody wants it,” said Rep. Jack Kingston, R-Ga.

Democrats also were pushing proposals to let the government take some type of stake in the companies that it helps. The administration has balked at that, fearing it would discourage financial companies from getting the help they need through the bailout, thereby blunting the plan’s effectiveness.

Democrats also want to let judges rewrite mortgages to lower bankrupt homeowners’ monthly payments, another demand the administration is resisting.

Both Sens. Chris Dodd, D-Conn., chairman of the Banking Committee, and the panel’s top-ranking Republican, Richard Shelby of Alabama, said significant changes are needed before the rescue plan can be passed. “We have got to look at some alternatives,” Shelby said.

Getting the action right is key, Dodd said: “There is no second act to this.” He later spoke disparagingly of the administration’s proposal. “What they have sent us is not acceptable,” he told reporters.

Bernanke’s remarks about the risk of recession came in response to a question from Dodd, who seemed eager to hear a strong rationale for lawmakers to act swiftly on the administration’s unprecedented request.

“The financial markets are in quite fragile condition, and I think absent a plan they will get worse,” Bernanke said.

Ominously, he added, “I believe if the credit markets are not functioning, that jobs will be lost, that our credit rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way.”

GDP is a measure of growth, and a decline correlates with a recession.

Across the Capitol complex, Vice President Dick Cheney and President Bush’s top advisers met privately with restive House Republicans, some of whom emerged from the session unpersuaded.

“Just because God created the world in seven days doesn’t mean we have to pass this bill in seven days,” said Rep. Joe Barton, R-Texas.

Added Rep. Darrell Issa, R-Calif., “I am emphatically against it.”

Paulson, seated next to Bernanke at the Senate hearing, objected strongly when Chuck Schumer, D-N.Y., asked if $150 billion might be enough to get the program started, with a promise of more to come.

That would be a “grave mistake,” and would fail to give the markets the confidence they needed to rebound, Paulson responded.

Rep. Barney Frank, D-Mass., the Financial Services Committee chairman who is leading talks with Paulson on the plan, also called phasing in the bailout “highly unlikely.”

Paulson was asked repeatedly why taxpayers should accept the burdens of a bailout.

“You worry about taxpayers being on the hook?” he replied at one point. “Guess what — they’re already on the hook.” Paulson suggested that the fallout from the credit crisis would hit almost everyone in the pocketbook unless forceful action was taken. Moreover, the flawed and outdated regulatory system, which didn’t catch abuses, needs to be overhauled, he said.

In New York, meanwhile, Bush was telling the U.N. General Assembly that the United States was taking “bold steps” to prevent an economic calamity that would be sure to have major effects around the world.

One of the tricky issues confronting policymakers is how to price the distressed assets that the government would ultimately buy.

Bernanke suggested buying the assets at a “hold-to-maturity” price, which would be based on an estimate of what the securities would eventually be worth as payments came in over the years.

“If the Treasury bids for and then buys assets at a price close to the hold-to-maturity price, there will be substantial benefits,” Bernanke said. “First, banks will have a basis for valuing those assets and will not have to use fire-sale prices. Their capital will not be unreasonably marked down.”

In contrast, if banks use existing “mark-to-market” rules that require them to value the holdings at what similar securities have recently sold for — in some cases pennies on the dollar — it could make the whole bailout futile because it would hurt many banks’ balance sheets, causing some to fail. “This creates something of a vicious circle,” he said.

Associated Press Writers Julie Hirschfeld Davis and Martin Crutsinger contributed to this report

Source : AP - 24 Sept 2008

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Singapore MM Lee says China is not a new power but an old power revived

Singapore MM Lee says China is not a new power but an old power revived

By Dominique Loh,

SINGAPORE: Minister Mentor Lee Kuan Yew said China is not a new power but an old one revived. That’s one lesson he took away from attending the Beijing Olympics.

In an interview with international broadcaster CNN last week, Mr Lee said China had put seven years of thought into how they wanted to present themselves to the world at the opening ceremony.

Even though there was an impressive display of the Olympic Games, MM Lee said other inland parts of China may take decades to catch up to coastal areas technologically.

Mr Lee believes the biggest challenge for China is tackling climate change and its energy consumption.

But he thinks it may take China five to ten years before the reality sinks in, when farmers and river basins are affected by weather changes.

Turning to developments in the US, Mr Lee said he wants the next American president to stay engaged with the world and keep trade going.

He said the US must maintain a balance so that peace and stability is assured without more conflicts.

And turning his attention to Singapore, Mr Lee said Singapore is now a fun city because of the transformation in the last decade or so.

Singapore’s success also happened despite being dubbed a “coercive state” by some.

Mr Lee said that in trying to create a First World oasis in a Third World situation, he didn’t follow any prescriptions on democracy. Instead, he preferred to work from first principles like ensuring social peace and stability, building a skilled workforce and good governance. - CNA/vm

Source : Channel NewsAsia - 24 Sept 2008

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SLA’s land sales double to $12 billion

SLA’s land sales double to $12 billion

10-year high comes in year marked by mega deals, strong demand

By Jessica Cheam

This Beach Road site, bought by a City Developments-led group at $1.69 billion, is one of the deals that helped SLA to its bumper result. — PHOTO: URA

THE property market’s bull run might have stopped but not before sending land sale revenue at the Singapore Land Authority (SLA) to a 10-year high of $12.4 billion.
Its bumper result for the 12 months ended March 31 was a twofold increase from the $6.2 billion in 2006 and is just shy of the 1997 record of $14 billion.

Some of the mega sales that added to the stellar figures included a plum site at Beach Road, bought by a City Developments-led consortium for $1.69 billion, and a 1.7ha site on Irrawaddy Road sold to Parkway Novena for $1.2 billion to build a private hospital.

SLA’s annual report, released yesterday, showed that land sale proceeds from the private sector hit a record high of $10.4 billion - well up on the $3.5 billion for 2006 and the $6.9 billion posted in the 1997 property boom.

Land sales to the public sector dropped slightly to $2 billion, from $2.7 billion in 2006.

The financial year was marked by strong demand for land for offices, hostels, international schools and other commercial uses.

The agency rolled out 78 tenders for such interim uses - about one every 4.5 days and 8 per cent up on 2006.

SLA’s operating income hit a record at $100.9 million - a 14 per cent increase from a year ago. Its total operating surplus was $17.1 million.

The gross floor area (GFA) of SLA- managed state properties also hit a record of 4.02 million sq m, translating into an 87 per cent occupancy rate of all existing state properties.

SLA said the largest use - at 1.7 million sq m GFA - of its state properties is by social and civil institutions, including voluntary welfare organisations, and for the arts and recreation purposes.

It also injected about 122,000 sq m of space to ease the office crunch and awarded more than 40 properties for educational uses.

‘The potential for good rental yield has drawn many new and experienced investors to bid for state properties,’ said SLA chief executive Lam Joon Khoi.

Mr Lam added that SLA has developed an integrated registration system for private and HDB properties.

This will extend search facilities, currently available only for private properties, to HDB flats.

For the coming year, SLA said it will focus on a new initiative: Establishing a national spatial data infrastructure.

It will develop a geographic information system that will coordinate and manage land data and data exchange across all the public agencies.

SLA chairman Greg Seow said the initiative is ’significant as it aids in both strategic planning and operations for the appropriate agencies’.

‘It will also demonstrate a government-wide approach to problem-solving and resource-sharing,’ he added.

More details on this initiative will be released later.

Source : Straits Times - 24 Sept 2008

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Singapore Flats near city cost up to 50% more

Singapore Flats near city cost up to 50% more
 
Central, Bukit Merah and Queenstown among popular HDB estates 

By Jessica Cheam 

IF YOU want to live in an HDB flat close to the city, be prepared to pay as much as 50 per cent more than if you choose to stay out in the sticks.
Prices for resale flats in estates near the city such as Central, Bukit Merah and Queenstown have left the rest of the country behind in recent years, according to new HDB data obtained by The Straits Times.
And what is particularly striking is how fast that price differential has widened.

PropNex chief executive Mohamed Ismail pointed out that in 1996, the difference between inner city flats and the national average was only around 11 per cent. Now it is around 50 per cent.

Take a four-room flat in Bukit Batok. In 1996, it sold for an average of $252 per sq ft (psf), while a similar one in Queenstown was sold for $280 psf.

The HDB’s latest second-quarter data shows that the Bukit Batok flat would now sell for about $303 psf while the Queenstown flat commands $458 psf.

The price gulf will only widen, say analysts, given the shortage of prized flats, and factors like increasing transport costs that make people more inclined to live closer to their place of work.

In the long run, ‘unless there’s a successful decentralisation strategy, the gap is unlikely to narrow’, said Mr Colin Tan, head of research and consultancy at Chesterton International.

About 52,000 HDB flats, or 6 per cent of total supply, are in inner city areas.

The new HDB data puts in stark terms how prices can differ.

January to July figures showed that resale prices of four- and five-room flats in estates near the Central Business District were about 48 to 52 per cent higher than the national average.

Popular locations include Smith Street, Tanjong Pagar Plaza, Cantonment Close, Jalan Membina and Stirling Road.

While a four-room flat commands an average price of $295 psf islandwide, this shoots up to $437 psf in city areas - a 48 per cent jump.

Similarly for a five-roomer, the average price of $303 psf spikes 52 per cent to $461 psf nearer the city.

The resale market is the obvious way in but homebuyers also have a chance via the HDB’s balloting exercises.

These are wildly popular, as offered units are in highly coveted central locations surrounded by amenities - and are priced with the HDB’s market subsidy.

In January, in the HDB’s latest ballot, 278 flats in Bedok, Clementi, Queenstown and Jurong West received a staggering 9,901 applications.

The price range for four-room flats was $141,000 to $398,000, the five- room units cost $218,000 to $532,000 and the executive flats $333,000 to $470,000. Prices depended on location and features of the units.

Some homebuyers, however, have baulked at the high cost of new flats.

Auditor Ho Koon Woei, 31, said he noted the new flat prices increasing at least $100,000 on average in mature towns in the last two years.

‘Such a hike in prices in a short timeframe makes it more unaffordable for first-timers,’ he said.

The HDB has not held a ballot since January, but analysts expect prices of any upcoming new flats in central areas to match the market prices.

While private home prices lost steam and inched up just 0.17 per cent in the last quarter, HDB resale prices rose 4.5 per cent.

Some, such as Mr Tan, feel that the HDB ’should be mindful that it does not add to the escalating price trend’ in the resale market.

The HDB’s new flat prices would effectively set a price floor - a level at which resale flats will not be sold below.

And if resale flats are priced above new flats, and new flats are pegged to market rates, there is a danger of a price spiral, he added.

‘In the pricing of its flats, it should err more towards affordability rather than market pricing,’ said Mr Tan.

However, this does not mean that the HDB should offer such low prices that it affects market prices, say analysts.

‘If prices are excessively cheap, that will affect the existing prices of city properties,’ said Mr Ismail.

Ultimately, he feels demand for city properties will price flats accordingly.

On a psf basis, HDB flats at premium prices are still far cheaper than private homes in the city, which are priced from $1,000psf upwards, he pointed out.

‘I wouldn’t be surprised if in the next 15 years, the premium of a city HDB flat achieves 100 per cent more than a flat in suburban areas.’

 
Source : Straits Times  - 24 Sept 2008

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Singapore GIC achieves 4.5% annual returns

Singapore GIC achieves 4.5% annual returns 

Objectives met, it says; it remains watchful in the present climate 

By Grace Ng, Finance Correspondent 
  
GIC’s disclosures will benefit the public and the international investment community, said Dr Tan.

THE Government of Singapore Investment Corp (GIC) released its first report card yesterday, which showed that it had grown assets at an average rate of 4.5 per cent per year after accounting for global inflation over the past 20 years.
It also disclosed details about the geographic and asset mix of its portfolio, which it said was valued at ‘well over US$100 billion’ (S$141 billion).

The disclosures, which will now be made annually, will ‘benefit both the Singapore public and the international investment community’, said GIC’s deputy chairman and executive director, Dr Tony Tan.

It also comes at a time when sovereign funds are under greater scrutiny for their massive investments, which have sparked controversy about their motives.

GIC, which uses both internal and external fund managers to achieve a ‘reasonable rate of return above global inflation’ for its portfolio, said it had met its objectives. Its annual real returns was 4.5 per cent, while its nominal return in Singapore dollar terms was 5.8 per cent over the past 20 years to March this year.

In US dollar terms, the nominal returns were 7.8 per cent per annum - higher than the 7 per cent annual rise in the MSCI World Index, which tracks shares in the developed world.

GIC has achieved ‘creditable returns’, Finance Minister Tharman Shanmugaratnam said in an e-mail statement.

Mr David Lee, managing director of Ferrel Asset Management, agreed that GIC’s performance was ‘respectable’.

It was higher, for example, than the 4 per cent annual real returns target of Norway’s 2 trillion kroner (S$506 billion) sovereign wealth fund.

However, analysts noted that California Public Employees’ Retirement System (CalPERS), which manages a pension fund of comparative size at about US$240 billion, averaged 10 per cent in nominal returns over the past 20 years. Analysts have estimated GIC’s assets to be valued at well above US$250 billion.

Still, Mr Wong Kok Hoi, APS Asset Management’s chief investment officer, noted that ‘real returns of between 3 per cent and 5 per cent for such a huge fund like GIC is a good performance’.

‘Generally, funds larger than US$100 billion are less nimble, making it harder to get high returns,’ he noted.

GIC is much larger than Temasek Holdings, whose US$130 billion portfolio has averaged annual returns of 18 per cent since its inception more than three decades ago.

In its initial years, GIC enjoyed ‘unusually high rates of returns’ on its relatively small portfolio, said its chief investment officer, Mr Ng Kok Song, at a press conference yesterday.

But now that GIC has grown much bigger, and with ‘the present challenging conditions in the world economy’, it is ‘not realistic to expect that such high returns will continue’, he added.

The worst of the financial crisis may not be over, added Dr Tan: ‘We continue to be watchful and prudent in our assessment of the economic risks and in our investments.’

Still, the ‘problems in the US would present very interesting opportunities in impaired assets’, noted Mr Ng.

GIC has a substantial cash hoard for any opportunistic investments, having cut back exposure to equities since mid-2007. GIC said cash makes up about 7 per cent of its portfolio at end March.

Based on analysts’ estimates of GIC’s fund size, cash reserves therefore could be well over US$17 billion, even after GIC invested about US$18 billion in Swiss wealth management firm UBS and US bank Citigroup in the past year.

Mr Ng said the timing of the two bank purchases could have been better, but reiterated that he is ‘confident’ both investments will offer long-term returns.

Detailing the geographical spread of its assets, GIC said the Americas made up 40 per cent, down from as much as 45 per cent two years ago. Investments in Europe rose to 35 per cent from 25 per cent. Asia now accounts for 23 per cent.

Mr Ng said GIC planned to increase its investments ‘particularly (in) Asia because this is where the growth potential is and this is our backyard’.

GIC has also invested in a wider range of assets. From holding 75 per cent of its portfolio in bonds 25 years ago, it has since cut this to just one-quarter.

Equities now make up 44 per cent of its portfolio. Alternative assets like real estate, private equity and infrastructure have risen to 23 per cent.
Source : Straits Times  - 24 Sept 2008

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Lower top bids expected for Singapore Mountbatten site

Lower top bids expected for Singapore Mountbatten site

Analysts also doubt need for more transitional offices
By KALPANA RASHIWALA
A 15-YEAR leasehold transitional office site in Mountbatten Road, launched yesterday, is expected to fetch top bids that are 15-40 per cent lower than a nearby site sold in January this year, according to some property consultants.
Some analysts again questioned the need for the government to keep releasing transitional office sites, given that a substantial supply of Grade A office space will be completed from 2010.

Separately, a UBS Investment Research report dated yesterday says that a 1.5-6 per cent cut in the number of jobs in Singapore’s financial industry could lower UBS’s forecast of monthly prime office rents from $16.20 per square foot (psf) currently to $8.60-9.50 psf in 2012 - a 41-47 per cent slide. This is more pessimistic than an earlier UBS forecast of a 34 per cent fall to $10.50 psf by 2012.

UBS also cited Urban Redevelopment Authority (URA) data showing that median office rents in the CBD had fallen in July. Monthly median rents in the Raffles Place, Tanjong Pagar and Cecil Street areas are now $12.50 psf, $7.28 psf and $6.50 psf, compared with $14.98 psf, $7.49 psf and $6.65 psf in June.

 
Cushman & Wakefield managing director Donald Han reckons that the highest bid for the Mountbatten Road plot will be $55-59 psf per plot ratio (ppr) - about 15-20 per cent less than for the earlier plot, which fetched $69.17 psf ppr. He said that the latest plot is farther from the future Mountbatten MRT Station - compared to the earlier plot which is just next to the station - and that sentiment in the office market is weaker now.

CB Richard Ellis executive director Li Hiaw Ho puts the range of top bids at $40-50 psf ppr - a 28-42 per cent decline from the price fetched by the nearby plot. Mr Li bases his estimate on the assumption of average gross monthly rent of $5 psf for a new office development on the site and a 10 per cent annual net return for the investor, given the short period of 13-14 years to recoup the investment.

Jones Lang LaSalle’s South-east Asia research head Chua Yang Liang reckons that demand for the latest site will be lukewarm given the spate of negative news in global financial markets.

Cushman’s Mr Han says that the plot is also less attractive than another transitional office site in Mohamed Sultan Road launched for tender last month by URA. ‘The Mohamed Sultan site is in a superior location, given its proximity to the CBD, although it has a narrow configuration which could make it harder to maximise the net lettable area and floor-plate efficiency for a new development,’ he said.

URA has launched eight transitional office sites since it introduced the scheme in July last year.

‘Such parcels on short 15-year leases were mooted primarily to cater to the office supply shortage situation prevalent a year ago. However, market fundamentals have changed since,’ CBRE’s Mr Li said.

‘Based on our estimated average annual demand for office space of 1.6 million sq ft, combined with the 1.7 million sq ft and 2.8 million sq ft that will come on-stream in 2009 and 2010 respectively, there is no supply crunch in the near future. We believe the government should review the necessity of launching more transitional offices in the immediate future.’

Agreeing, Savills Singapore’s director of marketing and business development Ku Swee Yong said: ‘By the time a development on the Mountbatten Road site launched today is completed, say in Q2 2010, there would be a large supply of Grade A office space in prime locations. We can say the objectives of the transitional office space programme have been met.’

Source : Business Times  - 24 Sept 2008

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Fed eases rules governing minority equity stakes in banks

Fed eases rules governing minority equity stakes in banks
(WASHINGTON) The Federal Reserve on Monday made it easier for private equity firms and other types of investors to take minority stakes in banks, a move that could usher new capital infusions to cash-hungry banks and help them cope with credit stresses.
The Fed issued policy guidance which said that it will allow investors under certain circumstances to take up to a 33 per cent equity stake in a bank without running into regulatory hurdles. Such an investment would not constitute a ‘controlling interest’ and thus would not trigger regulatory oversight. Historically, stakes of 25 per cent or more were viewed as triggering regulatory oversight.

The Fed also is making it easier for a minority investor to have representation on a bank’s board and would allow a minority investor to more freely communicate with banking management.

A global credit crisis has made it increasingly difficult for banks and other financial institutions to line up capital. Fed chairman Ben Bernanke and Treasury Secretary Henry Paulson have been encouraging banks to raise more money to rebuild balance sheets that have been hit by billions of dollars in losses from soured investments in mortgage-backed securities.

The Fed’s guidance would apply to all types of potential investors - such as private equity firms, hedge funds, sovereign wealth funds - that might be interested in taking a minority stake in a bank. — AP

Source : Business Times  - 24 Sept 2008

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Markets get cold feet over US bailout plan-NEW YORK

Markets get cold feet over US bailout plan-NEW YORK

Main worries turn on funding, whether plan can save US from recession

(NEW YORK) Financial markets appeared somewhat more upbeat yesterday, with stocks holding their ground after a huge sell-off as top economic officials updated Congress about efforts to hammer out a US$700 billion financial rescue for troubled credit markets.
 
The clock is ticking: Investors in Asia and Europe fear that the US bailout plan might not be enough to forestall a recession in the US - a vital export market for Asia 
Oil and gold prices retreated after shooting higher on Monday as investors went in search of hard assets, and demand eased for 3-month Treasury bills, considered the safest short-term financial asset. The US dollar, hit hard on Monday, regained ground.

After days of intense gyrations in financial markets, investors are anxious over whether the plan to absorb billions of dollars in banks’ bad mortgages and other risky assets will help steer the economy onto more solid footing or whether it will introduce another set of problems such as rising inflation.

‘People are watching what’s coming out of Washington closely to see what kind of form this package will take,’ said J Stephen Lauck, chief executive and portfolio manager at Ashfield Capital Partners in San Francisco. ‘The risks are too great in the marketplace if nothing happens and it stalls.’

Treasury Secretary Henry Paulson, Federal Reserve chairman Ben Bernanke and Securities and Exchange Commission chairman Christopher Cox testified before lawmakers, who are working with the Bush administration to complete the details of the bailout.

Mr Bernanke told the Senate Banking Committee that Congress risks triggering a recession if it doesn’t act on the plan. He said that inaction could leave a range of businesses unable to borrow the money while consumers could find it impossible to finance big purchases like cars and homes.

Investors appeared somewhat comforted that pressure remained for Washington to act on creating a lifeline for the banks and in turn the credit markets.

The dollar, whose decline on Monday drove some of the frenetic trading in other markets, was higher against other major currencies, while gold prices declined after Monday’s big advance.

‘We’re going to see this volatility for a while even after this package passes because I think we’re still facing a fundamental slowdown in the economy worldwide which is going to have some impact on earnings,’ Mr Lauck said.

In midday trading, the Dow Jones industrial average rose 57.51 points, or 0.52 per cent, to 11,073.20 after having risen more than 125 points in the early going. On Monday, the Dow fell more than 370 points as unease over the government rescue plan sent investors scrambling for the safety of hard assets like oil and gold.

Broader stock indicators also advanced yesterday. The Standard & Poor’s 500 index rose 2.81, or 0.23 per cent, to 1,209.90, and the Nasdaq composite index rose 10.54, or 0.48 per cent, to 2,189.52.

Global markets had dived earlier yesterday on concerns over the passage of the plan through Congress and whether it would work.

In Asia, Hong Kong shares led the region’s declines, with the bluechip Hang Seng Index losing 3.9 per cent to 18,872.85 points after two sessions of solid gains.

In China, the benchmark Shanghai Composite Index declined 1.56 per cent to 2,201.51. Benchmarks in Australia and Singapore were also down sharply.

At the close of trade in Europe, Britain’s FTSE 100 had dived 100.14 points or 1.91 per cent to 5,136.12. Germany’s DAX tumbled 39.22 points or 0.64 per cent to 6,068.53, and France’s CAC-40 slid 83.69 points or 1.98 per cent to 4,139.82. — Reuters, Bloomberg

Source : Business Times  - 24 Sept 2008

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Singapore GIC sharpens focus on Asia, keeps eye on US

Singapore GIC sharpens focus on Asia, keeps eye on US

Investment chief sees ‘a lot of opportunities’
By CONRAD TAN
The fund manager charged with investing Singapore’s foreign reserves has also diversified the company’s portfolio, which comprised mainly bonds and equities in its early years, to include alternative asset classes such as hedge funds, property, infrastructure and private equity, he said.
 
As at end-March, investments in Asia made up 23 per cent of GIC’s portfolio, which spans more than 40 countries. Twelve per cent was invested in Asia outside Japan.

‘If you consider the size of the markets in Asia - although they’ve grown in recent years, they’re still relatively small in global terms - I would say our portfolio is considerably overweighted compared to other global portfolios as far as Asia is concerned.’

‘But we’re likely to continue this process of increasing our exposure to the emerging economies, particularly in Asia, because this is where the growth potential is and this is our backyard.’

In Asia, ‘we’re seeing a lot of opportunities - in public markets but also in the private markets such as real estate’, he added. Still GIC will not close its door to new investments in developed markets, he said.

Since May last year, GIC has raised ’substantial levels of cash in anticipation of a crisis in the global credit and housing markets’, said GIC deputy chairman Tony Tan.

While the US may be facing its share of problems now, ‘in the medium- to longer-term, the US economy remains one of the most innovative and flexible developed economies in the world and will continue to be an important part of the portfolio of any global investor, including GIC’, he said.

In the GIC report published yesterday, Mr Ng also warned that ‘looking ahead, we see a more challenging investment environment than what we have experienced since GIC’s formation in 1981′.

‘The powerful trend of disinflation that propelled the global capital markets over 25 years seems to have ended. In addition, there are risks stemming from severe macroeconomic imbalances in the world economy, the rising cost of energy and food, and continued de-leveraging of global financial institutions.’

Still, ‘rising productivity and the potentially large domestic demand from the emerging economies, particularly China, India, Brazil and Russia’ were positive forces that could cushion the impact of the current problems facing the world economy, he said.

About one-third of GIC’s assets are managed by external fund managers and two-thirds are managed internally, said GIC, which only invests overseas.

It has more than 1,000 staff comprising some 20 nationalities. Fewer than half are Singaporeans. Fifty-seven per cent have less than five years of experience with GIC, while the rest have worked there for five years or longer.

While the fund says it invests solely to earn sustainable financial returns for the government’s assets, it is not a passive investor.

‘GIC will exercise ownership rights in the investments, as appropriate, to protect the financial interests of the government,’ its report says.

Source : Business Times  - 24 Sept 2008

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Move to help Lehman ‘victims’ gathers pace

Move to help Lehman ‘victims’ gathers pace

MAS asks banks to see what can be done for Minibond, High Notes investors
By SIOW LI SEN

(SINGAPORE) Efforts are underway to see if anything can be done to help angry investors, who claim that they were misled into buying the now worthless Lehman structured products.

 
Picking up the pieces: MAS says it is ‘in close contact with financial institutions that sold or issued structured products linked to Lehman, and has asked them to expedite their assessments of how investors will be affected’ 
The Monetary Authority of Singapore (MAS) is believed also to be involved in heavy-duty discussions with the financial institutions (FI) that were involved in selling the Minibonds and High Notes arranged by Lehman Brothers, which went bankrupt last week.

‘MAS is in close contact with the FIs that sold or issued structured products which are linked to Lehman Brothers, and has asked them to expedite their assessments of how investors will be affected,’ an MAS spokeswoman said last night.

As a regulator, MAS can punish FIs if there is evidence of a breach in regulations though it cannot force them to pay compensation.

Meanwhile, banks worried about their liability have begun consulting lawyers. A number of law firms including Wong Partnership, Drew & Napier and KhattarWong are acting for the nine banks, brokers and Hong Leong Finance, which had sold the structured products.

Over half-a-billion dollars worth of these products were sold over the last two years. But investors may find it more difficult to get legal recourse as they would have signed iron- clad contracts.

In Hong Kong, a lawmaker is leading the charge on behalf of investors there who too have lost HK$12.7 billion (S$2.3 billion) in Lehman Minibonds. Albert Ho, chairman of the Democratic Party and a lawyer, told the media that investors will meet Hong Kong’s Consumer Council tomorrow to see if they can get legal and financial assistance to try and recoup their losses.

Meanwhile, in Singapore, Tan Kin Lian, former NTUC Income chief executive, is trying to arrange a meeting with aggrieved investors to discuss taking collective action.

‘I’ve not decided what to do for them yet,’ he said last night.

There are several aspects to consider. ‘It’ll be pretty messy because the products were bought from different people. How to pull it off?’ said Martin Lee, who had bought $10,000 worth of Minibonds.

‘Banks are going to say ‘look at the contracts’,’ said Subhas Anandan, president of the Association of Criminal Lawyers of Singapore. ‘If a lot of investors came forward and there is some sort of pattern - despite the contract - it may help,’ said Mr Anandan.

Lawyers say investors can band together and collect fees from everyone to take representative action - similar to the Raffles Town Club case, where 5,000 members each paid $300 to sue for compensation.

But that involves a lot of work, said Alan Lee, who spent more than four years getting members together to fight the Raffles Town Club case.

MAS has said investors can bring their complaints to the Financial Industry Disputes Resolution Centre. From 2005 to 2007, out of 130 cases which were adjudicated, 25 monetary awards were in favour of consumers.

Some banks told BT they are working hard to help investors.

DBS spokeswoman Karen Ngui said the bank ‘has devoted additional resources to deal with customer concerns and we are treating this matter with the priority and importance it deserves’.

 
Source : Business Times  - 24 Sept 2008

Singapore Property - Buy, Sell, Rent, Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com ( email me )