Only 0.7% of HDB flats built in last 5 years have defects

Only 0.7% of HDB flats built in last 5 years have defects

By Ng Lian Cheong,

SINGAPORE : Stepping into a dream home has become a nightmare for a minority of Singaporeans.

The Housing and Development Board (HDB) has said 0.7 per cent of its flats built in the last five years have defects such as dislodged floor tiles.

One such example is a premium flat at Block 648, Punggol Central.

The S$241,000 apartment came with ceramic floor tiles, as well as some furnishings and built-in cabinets.

But already, sub-contractors engaged by the HDB have replaced some of the tiles - twice since 2006, when the owner first moved in.

This time round, the HDB has given the owner S$150 a day for alternative accommodation during renovation works.

But it capped this compensation at S$900, meaning renovation works must be completed in six days.

Still, the owner is unhappy with how things have turned out.

“Mr Ang” said: “This is the second time it happened. (The) first time, we did not even (get) a letter of apology or compensation…nothing at all.” - CNA/ms

Source : Channel NewsAsia - 08 Oct 2008

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Singapore’s financial and construction sectors set to weather crisis

Singapore’s financial and construction sectors set to weather crisis

By Desmond Wong,

SINGAPORE: Singapore’s marine engineering, construction and financial sectors are among those the government expects to thrive amid the current financial crisis.

Observers say the construction industry will be boosted by long-term contracts while the strong asset quality of local banks is shielding the financial sector from global turmoil.

Local financial institutions have been beefing up their risk management capabilities and improving asset quality in recent years.

These measures are expected to ensure the banks have a more robust capital base, and could also give them an edge over foreign players.

Senior director of Financial Institutions in Asia at Fitch Ratings Singapore, Ambreesh Srivastava, said, “At this point in time, capital is at a premium, and anyone who has capital would probably have the confidence of the market, and stand to gain at the expense of the others who are facing a crisis of confidence.”

The construction sector is thriving on long-term contracts signed during the 2007 property boom. Many of these projects are slated for completion in two or three years, and the industry is expected to be kept busy till then.

The downturn the construction sector experienced in 2005 also weeded out weaker players, leaving stronger firms which are more likely to weather the current storm.

President of Singapore Contractors Association, Desmond Hill, said, “We’ve had a bad patch where we were actually in negative growth, and in fact, only in the last one and a half to two years, the industry started to pick up again. So the contractors that are currently still around actually are quite resilient.”

According to industry players, this resilience has convinced banks of their reliability, and construction firms have yet to see any impact on their lines of credit.

- CNA/yt

Source : Channel NewsAsia - 08 Oct 2008

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Prime non-landed home prices fall 4.2% in Q3

Prime non-landed home prices fall 4.2% in Q3

By EMILYN YAP

PRICES of non-landed private residential properties fell in Q3 2008 with those in prime districts taking the largest hit, said real estate adviser DTZ yesterday.

Prime freehold non-landed resale residential units saw a 4.2 per cent quarter-on- quarter drop in prices. This marks the second consecutive quarter of price fall for the segment.

Outside the prime districts, freehold non-landed resale residential units reflected the first correction of 1.3 per cent.

DTZ highlighted that landed housing was the only segment that held firm since prices stabilised in Q2 2008, due to demand from owner occupiers and reduced supply. The Urban Redevelopment Authority’s (URA) flash estimates for Q3 2008 also registered a fall in overall private residential prices.

URA’s numbers, however, reflected smaller declines. Prices of non-landed private housing in the Core Central and Rest of Central regions slid 2 per cent and 2.1 per cent respectively, while those in the Outside Central Region actually edged up 0.1 per cent.

According to URA, its estimates are based on transaction prices in caveats lodged during the first 10 weeks of the quarter, supplemented by information on the number of new units sold.

The fall in the private residential market will accelerate as the US financial crisis deepens, said DTZ. It also pointed out: ‘Like in 1998 and 2002, there will be a higher proportion of buyers with HDB addresses as the price gap between HDB resale flats and private residential properties narrows.’

Besides prices, launches also fell in the private residential market, said DTZ. New launches in Q3 2008 generally involved small boutique projects and developers sold only 320 units in August, about a third of the 901 in July.

Source : Business Times - 08 Oct 2008

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Better to cut losses as things can get much worse: Oei

Better to cut losses as things can get much worse: Oei

By TEH SHI NING

THE credit crisis is likely to worsen and Europe will have a harder time than the United States, tycoon Oei Hong Leong said yesterday.

‘The US government has the capacity to bail out its banks, but Europe is in big, big trouble, with banks too big to be saved … I think the situation is getting worse.’

- Mr Oei

Speaking at an event to honour his $7 million donation to the Lee Kuan Yew School of Public Policy, Mr Oei reiterated his earlier assessment of current financial turmoil as ‘just the end of the beginning’.

While the $7 million was the handsome payoff on his gamble last month on one million American International Group (AIG) shares, Mr Oei said of the present situation: ‘If there’s any rally in the market at all, just get out. It’s better to cut losses. I think things can get much worse.’

He bought AIG stock at US$1.80 apiece in the belief the company was too big to be allowed to fail. The US government intervened with an US$85 billion bailout on Sept 17 - and he sold the stock on Sept 22 for about US$5 a share.

‘You’ve got $5 trillion in assets that are going to be deleveraged. $700 billion is far from enough,’ he said yesterday, referring to the US government’s bailout plan, which he reckons is insufficient to restore confidence in financial markets.

Mr Oei thinks the US government has the capacity to bail out its banks but reckons Europe is in ‘big, big trouble’, with banks too big to be saved.

‘Deutsche Bank’s exposure is about 80 per cent of Germany’s GDP,’ he said. ‘The combined exposure of Credit Suisse and UBS is six times that of the Swiss GDP. I think the situation is getting worse.’

European governments this week pledged to defend the European banking system’s stability, but no specific rescue plan has emerged yet.

Mr Oei’s donation will go into an endowment fund awarding scholarships to students from China. The government will match his gift one-for-one. Of the 283 students currently enrolled at the LKY School of Public Policy, 42 are from China.

Mr Oei said: ‘In China, they have learnt Western capitalism very quickly. But a lot of what has been learnt is bad capitalism - the greed and getting rich at all cost. What needs to be learnt are the good things about capitalism - proper governance, fairness, contribution to the community.’

Source : Business Times - 08 Oct 2008

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Fed to buy huge amounts of short-term US debt

Fed to buy huge amounts of short-term US debt

(WASHINGTON) The Federal Reserve announced yesterday a radical plan to buy massive amounts of short-term debt in a dramatic effort to break through a credit clog that is imperilling the US economy.

As the crisis worsened, European finance ministers, meeting in Luxembourg, finally agreed on a measure of coordinated action to tackle the crisis of confidence on the banking sector.

The European Union (EU) agreed to increase the minimum level of bank deposit insurance across the 27 EU countries and pledged in a joint statement to recapitalise any critical bank if needed.

The ministers agreed to raise the minimum to 50,000 euros (S$99,850), from 20,000 euros at present.

‘We all commit to take all necessary measures to enhance the soundness and stability of our banking system and to protect the deposits of individual savers,’ the ministers said in the statement.

But the EU failed to agree on a minimum bank guarantee of 100,000 euros - five times the current EU minimum of 20,000 euros - because some smaller and poorer nations feared they could not cover such an amount.

The Fed, invoking 1930s Depression-era power under ‘unusual and exigent circumstances’, will buy ‘commercial paper’, a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls.

The US$99.4 billion daily US commercial paper market contracted dramatically for a third straight week last week, the largest drop in at least seven years, according to Fed data.

Over a quarter of the market has disappeared since the start of the global credit crisis in the summer of 2007.

Most investors have become too jittery to buy paper for longer than overnight or a couple of days.

That has made it increasingly difficult and expensive for companies to raise money to fund their operations.

Commercial paper is a way of borrowing money for short periods, typically ranging from overnight to less than a week.

The Treasury will make a deposit with the Fed’s New York district bank to help set up the special-purpose vehicle, though it did not say how much.

The central bank will also lend to the programme at policy makers’ target rate for overnight loans between banks.

The notion under the plan is for the government to provide a ‘backstop’ that would give companies a new place to get cash. The action makes the Fed a source of credit for nonfinancial businesses in addition to commercial banks and investment firms.

The Treasury, which worked with the Fed on the programme, said the action is ‘necessary to prevent substantial disruptions to the financial markets and the economy’. If a company’s commercial paper is not backed by assets or other forms of security acceptable to the Fed, the company could pay an upfront fee, the central bank said.

The Fed said it hoped its effort would jolt the commercial paper market back to life.

‘This facility should encourage investors to once again engage in term lending in the commercial paper market,’ the Fed said. That should eventually spur financial companies to lend to each other and to their customers, including consumers, the Fed said.

The Fed said it planned to stop buying commercial paper on April 30, 2009 unless the its board agrees to extend the programme.

There was US$1.61 trillion in outstanding commercial paper on the market as at last Wednesday, according to the most recent data from the Fed.

That was down from US$1.7 trillion in the previous week. Since the summer of 2007, the market has shrunk from more than US$2.2 trillion. — AP, Bloomberg, Reuters

Source : Business Times - 08 Oct 2008

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Making sense of the post-bailout meltdown

Making sense of the post-bailout meltdown

US needs to urgently recapitalise its banks and Europe must get its act together fast

By VIKRAM KHANNA

THE global stockmarket meltdown in recent days and the still-frozen state of the interbank markets are clear signs that market participants have given a thumbs-down to the way the authorities in the United States and Europe are dealing with the worst financial crisis in 80 years.

The US$700 billion bailout package hastily put together by the US Treasury and the Federal Reserve has been far from effective in soothing market panic. While the case can be made that an imperfect package is better than none, after the package was passed by the US Congress and signed by President George W Bush, the market started focusing on its imperfections.

Unfortunately, these are considerable. Much of the money is intended to be used by the US Treasury to buy, in stages, the toxic assets off the books of US financial institutions. It is hoped that once they get rid of their junk, the institutions will resume lending as well as rebuilding their capital.

However, there are big holes in this story. One problem is the price which the Treasury will pay for the junk. If it’s the current market price (which is very low, if not zero), the banks would end up getting little help - and in fact would probably not even accept the deal (which is what happened in Japan in the 1990s; banks simply refused to step forward and admit how much junk they were carrying).

On the other hand, if it’s an artificially inflated price - which would require a suspension of mark-to-market accounting norms - there would be an uproar among taxpayers about overpaying Wall Street at the expense of Joe Sixpack.

The other problem is that the bailout plan does not directly address the issue of recapitalising the banks. While this might indirectly happen over time if banks were able to get the bad assets off their books and rebuild from there, the pricing problem mentioned above (plus the likely slow pace of recapitalisation) inspires little confidence.

Thus, many economists propose that another bailout plan is needed - which focuses on recapitalisation. This could be done via a direct injection of public funds into the banks, in return for preferred shares, with matching contributions by existing shareholders (to minimise costs to taxpayers). But however it is done, bank recapitalisation is of critical importance; a recent IMF study of 42 systemic banking crises showed that the vast majority of cases involved the government intervening to recapitalise financial institutions.

Meanwhile, to prevent bank runs, the US Federal Reserve needs to announce that it will stand behind any financial institution that experiences a run. Deposit insurance needs to be expanded as well. The markets are still waiting for all of this to happen.

But while the US is doing its best to deal with a systemic problem in a systemic manner - even if imperfectly - Europe is not even trying. The European Central Bank has a mandate to act on interest rates (and, bizarrely, raised interest rates early this year) but has no Europe-wide regulatory mandate. This is left to regulators in individual countries. And, so far, they have acted in total disregard of the consequences of their actions on other countries.

Ireland, for example, recently announced that it would guarantee all deposits in Irish banks. So money fled from all corners of Europe to Ireland. That forced other countries - starting with Germany and Denmark - to announce full deposit insurance as well. Germany, meanwhile, has so far refused to endorse a pan-European response to the crisis, even as it is obvious that the balance sheets of European banks are closely interconnected. And if Germany says no, no Europe-wide initiative is possible.

Eventually, a coordinated response will happen - because markets are unlikely to stabilise until it does. What we are seeing then is financial devastation caused by bad banking practices - and aggravated by inadequate policy responses.

Source : Business Times - 08 Oct 2008

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Govt to corporatise Singapore Changi Airport

Govt to corporatise Singapore Changi Airport

Temasek to buy newly created entity to be headed by Liew Mun Leong

By VEN SREENIVASAN

(SINGAPORE) Award-winning Changi Airport and its operating businesses will be sold to a Temasek-controlled company next year.

Class act: Given Changi Airport’s world-beating reputation, many observers believe a corporatised entity could emerge as a formidable and nimble contender to capture lucrative global airport management contracts
The yet-unnamed-company (Newco) will be headed by its new chairman, listed CapitaLand boss Liew Mun Leong. And its new chief executive officer will be Civil Aviation Authority of Singapore (CAAS) deputy director-general for operations Lee Seow Hiang.

Meanwhile, the government, through a newly created civil aviation authority, will continue steering national aviation policy and goals, while maintaining oversight and governance over the new monopoly operator. This authority will be headed by chairman Lee Hsien Yang, with Brigadier-General (NS) Yap Ong Heng as its new director- general.

The restructuring kicks in on July 1, 2009.

The changes were announced by Transport Minister Raymond Lim and Senior Minister of State for Transport Lim Hwee Hua yesterday morning.

This will be Temasek’s first major foray into an airport investment, although it already has significant airline investments, which include Singapore Airlines, Tiger Airways, Jetstar Asia and Great Wall Airlines in China.

Mrs Lim explained that the corporatisation would enable the airport to stay nimble and capitalise on new opportunities, while retaining its talent. ‘The whole idea of transferring ownership to Temasek is to have a clearer separation of the role of the policymaker, regulator and the operators,’ she said.

As to why no global private airport operator was invited to bid for Changi, she said the airport was a strategic national economic asset whose future development and growth strategy would have to be dictated by both commercial goals and national interests. For example, the regulator and the Newco need to work closely with each other on infrastructure and capacity planning for the airport.

She added that there were no current plans to privatise or sell the Newco.

Temasek will pay an undisclosed price for the entire airport assets and business. This price will be based on a valuation by the government in a separate exercise, Mrs Lim added.

Analysts like Vincent Ng of Standard & Poor’s Asian Equity Research believe that this price could be pegged to a matrix of factors, including Changi’s earnings and the valuations of airports around the region.

Changi Airport chalked up a surplus from operations of $367.7 million for the year ended March 31, 2007 - a 7.7 per cent dip from the record $398.3 million a year earlier. The fall was due to a 14.5 per cent rise in operating expenditure to $730.9 million, due mainly to increased operating activities and higher expenses incurred on maintenance, depreciation, as well as airline promotions and incentive schemes. Nevertheless, topline operating income rose to a record $1.099 billion for 2006-07 from $1.037 billion as buoyant market conditions saw aircraft movements rising to 214,224, from 204,138 the previous year. The airport gets 60 per cent of its income from non-aero and commercial activities.

Changi is also likely to be compared to competitors like Airports of Thailand (AOT), which manages half-a-dozen Thai airports, including Bangkok’s Suvarnabhumi. AOT’s market capitalisation is US$1.05 billion, which is half its listed net book value. Closer to home, Malaysia Airports Berhad, which manages KLIA and other airports around the country, has a market capitalisation of US$756 million, which is about 86 per cent of its book value.

Thus, analysts reckon Changi could be worth anywhere between US$1.5 billion and US$2 billion.

‘But it could be sold at a slight discount to Temasek, as the deal is an internal transaction,’ said S&P’s Mr Ng.

Temasek’s managing director of corporate development, portfolio management & systems, Ng Yat Chung, said his investment company expected to be able to ‘earn its costs of capital’ from the Changi investment.

Mr Ng added that Temasek would also stick to its strategy of keeping the actual operations of the business at an ‘arm’s length’.

He said: ‘I do not foresee Temasek departing from the way we deal with all our portfolio companies. We will help the company by assembling a good board and we will hold the board accountable for the proper running of the company, as we do with all our portfolio companies.’

Plans for the corporatisation first surfaced in August 2007 when Transport Minister Mr Lim said the move would give Changi Airport ‘greater flexibility to attract and retain top talent to compete with global airport operators’.

Changi Airport handled a record 36.7 million passengers in 2007, making its the sixth busiest airport in Asia after Tokyo, Beijing, Hong Kong, Shanghai and Bangkok. It expects to handle as many as 50 million passengers in five years.

Many see the corporatisation as a prelude to a possible privatisation and ultimate listing, 5-10 years later. It is a path similar to that taken by several others, including Singapore Telecommunications, Singapore Post, Singapore Power and the Port of Singapore Authority.

Also, given Changi’s world-beating reputation, many observers believe that a corporatised entity could emerge as a formidable and nimble contender to capture lucrative global airport management contracts.

Source : Business Times - 08 Oct 2008

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Street war in Bangkok

Street war in Bangkok

Violence erupts as thousands turn up for ‘final battle’

By Nirmal Ghosh & Leslie Lopez

BANGKOK: Bursts of tear gas outside the Thai Parliament shortly after dawn yesterday signalled the start of a vicious battle between police and protesters that left one dead and hundreds injured.
Two protesters had legs blown off and two policemen were stabbed with flag poles, as the early morning clashes in clouds of tear gas outside parliament spilled over into chaotic street battles.

The bloodshed came after days of growing tension in a test of wills between the government headed by new prime minister Somchai Wongsawat and People’s Alliance for Democracy (PAD) protesters who accuse him of being the proxy of ousted premier Thaksin Shinawatra.

The police moved in at 6.20am. Their mission: to clear a path through thousands of protesters laying siege to Parliament to allow Mr Somchai to give his policy address before the legislature.

Police said the gathering, which had swelled overnight into the thousands after the PAD called for volunteers for a ‘final battle’, had became rowdy, but eyewitnesses told The Straits Times there was no attempt to negotiate or issue a warning before police fired tear gas directly into the crowd.

‘They were not shooting over our heads. They were pointing their guns at us,’ said a protester who identified himself only as Ari.

Around 70 people were injured in the initial clash, and bloody protesters were seen fleeing as police cleared a path into Parliament for the PM and lawmakers.

‘How can they do this to the people?’ one PAD supporter shouted in the morning, his T-shirt soaked with sweat. Like many of the PAD’s frontline ‘guards’, he was wearing a helmet.

The battle was not over. At around 11am on the other side of the large leafy compound, not far from the royal palace, protesters - many of them, armed with steel pipes, bamboo batons and iron-rods - began lobbing firecrackers at police, prompting a fresh volley of tear gas.

Within the hour, the protesters had the upper hand, and as police retreated into a nearby building, the demonstrators were again able to seal off Parliament, this time with ministers and MPs trapped inside.

Mr Somchai was forced into an undignified exit when the parliamentary session ended, escaping the mob by climbing a fence before being ferried away by helicopter from an adjacent building.

Lawmakers had to wait until police could again clear an exit for them, which they did by firing tear gas on the crowd for the fourth time, shortly after 4pm.

‘We ran, ran, ran,’ said legislator Niyom Vejkarma, who whipped off his tie and jacket and fled, eyes smarting from the chemicals in the air.

Sporadic clashes continued during the day and late into the evening.

Cars and vans were overturned and set on fire. A man was killed when a bomb he may have been handling exploded, incinerating him and his vehicle outside the headquarters of the Chart Thai party, a member of the six-party ruling coalition. Local media said the vehicle was ‘believed to belong to anti-government protesters’.

There were reports throughout the day of gunshots being fired. According to a report by The Nation, protesters were seen firing handguns at police officers.

Adding to the threatening atmosphere, many protesters wore motorcycle goggles with their helmets, and many had their faces covered with scarves.

PAD supporter Sami Nath Pandey, 53, told The Straits Times: ‘We are going to stand our ground, it’s do or die.’

But by 9pm, most protesters had retreated to the nearby Government House, which remains occupied by the PAD, leaving behind a trail of charred vehicles, bloodied sidewalks and an uneasy calm.

Source : Straits Times - 08 Oct 2008

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Pump prices down

Pump prices down

PETROL stations have cut pump prices for the eighth time since July, amid economic bedlam in the United States and Europe that has driven oil prices to near 12-month lows.
Local retailers lowered petrol and diesel rates yesterday by five cents a litre across the board.

With the reduction, 92, 95 and 98-octane petrol now cost $1.863, $1.896 and $1.97 a litre respectively, before discount. Shell’s V-Power is now $2.099 a litre, while Caltex Platinum is $2.096.

Diesel, the fuel of commerce, is $1.703 a litre.

The cuts come as crude oil fell below US$90 a barrel on Monday from a high of US$148 in July.

Oil prices have been falling as the economic turmoil in the US and Europe, spurred by the worldwide credit crisis, dampens demand.

Drivers have also been switching to more fuel-efficient cars and cutting back on discretionary trips.

With the latest cuts, pump prices are now down 39 cents a litre since their July highs, while diesel is 33 cents lower.

Oil industry consultant Ong Eng Tong expects prices to slide even further in the coming months.

But Mr Ng Weng Hoong, editor of energy news portal EnergyAsia.com, said oil will resume its northward trek in the long term.

‘The most recent analyses by the International Energy Agency and Opec predict world demand will still be growing,’ he said. ‘The world will still be using more oil despite the financial crisis.’

Source : Straits Times - 08 Oct 2008

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‘Get out when market rallies’

‘Get out when market rallies’

GET out of the stock market when it rebounds, advised savvy stock picker Oei Hong Leong yesterday. He foresees the credit crisis getting worse as European financial institutions wobble.
‘I can tell you honestly, if there’s any rally in the market, just get out. It’s better to cut losses,’ he told reporters who had asked if he saw more opportunities in the stock market.

Mr Oei felt the US government’s US$700 billion (S$1 trillion) package to bail out banks by buying their toxic mortgage-linked debt is ‘far from enough’ to restore stability in the financial markets.

It is most important to restore confidence, he added.

During the US financial firestorm last month, Mr Oei had scooped up one million shares of American International Group (AIG) at US$1.80 apiece as the insurer faltered, and donated them to the Lee Kuan Yew School of Public Policy.

He sold them at US$5 apiece soon after, following the school’s request that the donation be made in cash. By then, the US government had given AIG an US$85 billion loan.

Yesterday, Mr Oei said US financial institutions like AIG were seen as too big to be allowed to fail. ‘And the US government is big enough to save them,’ he added. ‘They can print more money and IOUs. They can issue bonds.’

But in Europe, banks may be too big to save, he indicated. Citing Deutsche Bank as an example, he said its exposure or liabilities are equal to 80 per cent of Germany’s GDP.

Commentators have noted that European nations may not be able to bail out banks with such massive liabilities.

‘The Europeans are in big, big trouble,’ Mr Oei concluded. ‘I don’t know how they can settle it.’

Source : Straits Times - 08 Oct 2008

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