Singapore’s financial system is sound, S$150b guarantee for deposits sufficient

Singapore’s financial system is sound, S$150b guarantee for deposits sufficient

By May Wong,

SINGAPORE: The Singapore government said its financial system is robust and it will be able to pay for all the Singapore dollar deposits it has guaranteed.

Speaking in Parliament on Monday, Trade and Industry Minister Lim Hng Kiang said that if the government should have to payout money for failed banks, it may need to draw on past reserves.

The Singapore government announced on October 16 that it was guaranteeing all Singapore dollar and foreign currency bank deposits until 31 December 2010.

In Parliament, MPs kept equating the guarantee on deposits with a bailout package.

However, Mr Lim stressed that Singapore banks do not face funding difficulties.

Despite this, he said that Singapore has guaranteed deposits to ensure an international level playing field for banks, for if Singapore had not done so, people could move their deposits to other countries which have guaranteed deposits.

In recent weeks, countries like Australia and Hong Kong have introduced their own deposit protection schemes to build confidence in their banks.

The guarantee will also boost confidence in Singapore’s financial system and the move is critical as financial services are an important part of Singapore’s economy.

The sector accounts for 12 per cent of GDP and five per cent of Singapore’s employment.

Should financial institutions in Singapore become less competitive or credit becomes less readily available, Mr Lim said this will hinder the financing of economic activities and raise the borrowing costs of businesses.

This would aggravate the already challenging economic situation and thereby adversely affect growth and jobs.

The guarantee is also Singapore’s way to add to confidence in the international financial system.

However, some MPs felt the move could have come earlier.

MP for Ang Mo Kio GRC, Inderjit Singh, said: “Given that we have a strong financial system and fundamentals in Singapore, we should have been the first to react in Asia, maybe after Europe.

“I’m asking that MAS be proactive and to act fast. In case any changes come, we should be among the first to give confidence to everyone.”

Mr Lim disagreed, saying immediate reaction was not necessary, given the strong position of Singapore banks.

Singapore moved, only when there was reason to.

Mr Lim continued: “If you’re a DBS customer, and you can shift your deposits to a branch in Hong Kong and that’s guaranteed, you’re still supporting a Singapore bank, but now your deposits are booked in Hong Kong.

“So we don’t have to wait for all these things to happen. I think such a blanket guarantee by surrounding countries would spark off a dynamic and therefore we had to act.”

Mr Lim added that the likelihood of a bank failure in Singapore is small and even if a bank should fail, the guarantee of S$150 billion for S$700 billion worth of deposits is enough.

That’s because the guarantee will only be called on if a bank’s assets are not enough to repay depositors.

Mr Lim said: “Even after giving this guarantee, the government still has ample means with the full backing of our not insignificant reserves to safeguard our currency if this should prove necessary.

“The provision of a government guarantee on deposits is a necessary temporary measure to protect the interests of Singaporeans and the economy, which are in turn dependent on a strong and competitive financial sector. The risk of drawing on the guarantee and potential impact on Singapore’s reserves are low.”

Mr Lim said the guarantee on deposits is a measured, precautionary action that will help Singapore pull through this global economic slowdown. It will also help the country cope with the ongoing financial crisis in international markets.

He also addressed concerns that foreign banks may take the Singapore guaranteed deposits to fund their foreign subsidiaries or parent operations overseas.

The Trade and Industry Minister said: “This is something that we’re very mindful of and MAS - in its supervision of the various banks especially branches of foreign banks in Singapore - will insist that as the deposits increase in their branch here, they have corresponding liquid assets which are invested in Singapore to match these deposits.”

He also explained why the guarantee on deposits was not introduced just for local Singaporean banks.

“This is a much larger agenda. The larger agenda is that we want to make sure the financial system in Singapore continues to contribute to our growth and our employment and therefore that would involve the foreign banks. And secondly, also the ability of the entire financial system to service the economy.” - CNA/vm

Source : Channel NewsAsia - 20 Oct 2008

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Singapore govt warns of slower growth and higher unemployment ahead

Singapore govt warns of slower growth and higher unemployment ahead

By Wong Siew Ying,

SINGAPORE: Trade and Industry Minister Lim Hng Kiang has said the country is set for several quarters of slower growth. Speaking in Parliament on Monday, Mr Lim said this could stretch on for longer, depending on the state of the global economy.

Singapore, an open economy, cannot escape the impact of the financial crisis and the global economic slowdown. It is already in a technical recession and there are signs this is affecting the job market.

Mr Lim said: “The slowing economy and more cautious hiring have contributed to an increase in the overall unemployment rate from two per cent in March 2008 to 2.3 per cent in June 2008.”

Mr Lim said that the unemployment rate for this year is likely to be higher than the record low of 2.7 per cent in 2007.

For now, he said retrenchments are still unchanged from previous quarters.

The financial turmoil has hit the property, retail and tourism industries. For the construction sector, Mr Lim said it is expected to grow by 7.8 per cent in the third quarter of this year, falling short of the 18 per cent growth registered in the first half of 2008.

And construction on projects like the Downtown mass rapid transit line is expected to contribute strongly to the economy, but the slower growth is due to weaker market sentiments, contractor shortage and equipment delays.

Still, government projects will add S$13.5 billion to the economy this year and the government will bring forward more public sector projects, if needed.

While Singaporeans shopping for daily necessities found higher prices for basic goods this year, Mr Lim said inflation has peaked, so costs will come down, though there will be a lag.

He said: “I must caution that inflation will continue to be sticky in the next few months because some of these costs have a certain amount of lag. But going into the next year, over the next 15 months, both MAS and MTI are confident that our inflation will revert to the more normal two to three per cent that we saw previously.”

For professional workers, Mr Lim is hopeful as foreign companies like Halliburton and Qualcomm launch their Singapore operations this quarter. - CNA/vm

Source : Channel NewsAsia - 20 Oct 2008

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Property firms may feel squeeze as banks turn coy

Property firms may feel squeeze as banks turn coy

Gearing under scrutiny; but future proceeds, old ties could tip balance

By EMILYN YAP

(SINGAPORE) As the financial turmoil wrings precious liquidity out of markets, talk of tighter credit affecting property developers here has been making the rounds.

Analysts have scrambled to redo their math, and as the earnings reporting season kicks in, property developers will be closely scrutinised for their debt levels and overall financial standing. Not only are the property sector’s fortunes at stake, market watchers will also be on the lookout for any implications for banks, which have a significant exposure to real estate.

‘(We) could see banks continue to reduce their exposure to the property sector,’ said a recent OCBC Investment Research note. According to the outfit, the proportion of bank loans to the sector has already been reduced to 17.9 per cent in August, down from 18.1 per cent in June.

But just how leveraged are property developers and do numbers alone tell the whole story? While gearing ratios will shed some light, market watchers highlight other factors to watch in evaluating firms’ resilience to scarcer credit.

According to financial data on over 30 developers from DMG & Partners Securities, net gearing levels range from a negative 0.1x to 3.2x. Expressing net debt as a proportion of shareholders’ equity, the higher the net gearing ratio, the more debt a firm has comparatively.

Topping the list is Sim Lian Group, with a net gearing of 3.2x. SC Global Developments, Hiap Hoe, Sing Holdings and Soilbuild Group Holdings complete the top-five band.

‘Gearing will determine how much future funding property developers can get,’ an analyst told BT. ‘Highly-geared companies may face more covenants from banks, or get charged higher interest rates.’

But the market should not judge developers based on net gearing alone, analysts say. Another critical indicator to watch is the size of short-term debt and the amount of cash available to cover it.

Some property developers have more breathing space when it comes to short-term loans. In fact, Sing Holdings has no such debt to service. While SC Global has $19.5 million repayable till June next year, it has cash and cash equivalents of $70.8 million to meet this need.

A third factor to look at is the amount of proceeds going to developers in the near future. As the OCBC report also noted, with strong property sales in 2007 and progressive recognition of profits from sold projects, ‘developers are financially stronger to weather the storm’.

Sim Lian, for instance, will receive temporary occupation permits for The Premiere @ Tampines and Carabelle over the next 12 months. It expects to collect about $255 million from sales, which exceeds short- term debt of $136.2 million as at June 30.

For Hiap Hoe, Cuscaden Royale and Oxford Suites are due for completion in December next year. Their outstanding sales proceeds amount to over $100 million - far more than the $12.2 million held as short- term debt as at end-June.

DMG & Partners’ list also highlights a trend: smaller property developers are more likely to have higher net gearing ratios. This ratio is just around 0.5 for bigger players such as Keppel Land and City Developments. For CapitaLand, net gearing is 0.43x if capital from recent property divestments is included in the end-June results.

Some industry watchers attribute the trend to portfolio differences. Besides having development properties, larger firms tend to own other sites for rentals or capital gains. Such investment properties can be revalued to reflect higher fair values (though not all developers practise this). This boosts the equity base and shaves net gearing.

Smaller companies holding more development properties would hence benefit less from rising markets, because these sites can be reported only at the lower figure of cost or net realisable value.

But regardless of size, property developers across the board will find new loans costlier or harder to come by. ‘Banks are definitely more cautious these days,’ a banker told BT.

The softening property market provides little comfort. ‘Developers with ongoing projects that have limited flexibility in deferment . . . may find themselves stretched for cash, as sales and rental income slow down,’ warned a Credit Suisse report last month.

This is where developers’ past performance and relationships with banks count. ‘We take into account a host of factors which include the project’s viability, the parties involved (their financial strength, background, track record and our experience with them), the project’s cashflow and the market demand for the project,’ said Samuel Tsien, global head of OCBC’s global corporate bank.

‘If these factors are deemed to be present, we are open to considering financing under the appropriate terms and conditions.’

An industry insider also said that some banks are prepared to extend loans to existing clients but could shy away from new ones.

‘Soilbuild is well supported by financial institutions which have developed long-term relationships with us,’ said the firm’s executive director Low Soon Sim. To further strengthen its capital base, the developer is also raising funds through a rights-cum-warrants issue, supported by commitments from the founders and directors.

Source : Business Times - 20 Oct 2008

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Elderly, retrenched, jobless? Singapore Marina IR wants you

Elderly, retrenched, jobless? Singapore Marina IR wants you

By Lim Wei Chean

The integrated resort starts its first wave of hiring today, with a focus on rank-and-file staff such as housekeepers, security guards, waiters, technicians and cleaners. — PHOTO: LAS VEGAS SANDS

IF YOU are a senior citizen, jobless or in a low-wage job, have been retrenched or are a woman looking to work again, Marina Bay Sands wants you.
The integrated resort starts its first wave of hiring today, with a focus on rank-and-file operations staff such as housekeepers, security guards, waiters, technicians and cleaners.

It did not say how many people it would recruit this time, but the resort’s general manager George Tanasijevich said ‘as many as possible’ would be hired.

With the resort opening at the end of next year with 10,000 workers of all levels on its payroll, this round of recruitment of operations staff alone represents the first time an employer here has hired on this scale.

Recruitment is taking place now to give some lead time for worker training.

Mr Tanasijevich said of the resort’s pledge to take in as many Singaporeans as possible: ‘Our most important commitment to Singapore from the beginning was to go out and hire as many Singaporeans as we can to operate this great facility we are building.’

This hiring blitz is aimed at people without experience in the tourism and service industry.

To prepare them for jobs in the field, Marina Bay Sands is partnering the Singapore Workforce Development Agency (WDA) and the National Trades Union Congress’ (NTUC) Employment and Employability Institute (e2i).

WDA and e2i will run outreach programmes with briefings on the jobs available to the target audience.

Marina Bay Sands and e2i will screen applicants and separate those with relevant experience from those without.

Those who have held similar jobs before will be short-listed for interviews, while those without experience or requisite skills will be sent for training to make them eligible and ready for job interviews with the resort.

Mr Zee Yoong Kang, e2i’s chief executive officer, said: ‘For those who cannot access the jobs immediately because they lack the skills, we are putting in the extra effort to give them the leg up to up their skills.’

Even those who eventually do not make the cut for a job at Marina Bay Sands will be helped in hunting for jobs elsewhere in other tourism or service companies.

The aim, said Mr Zee, is to train as many Singaporeans as possible to take advantage of the 60,000 job openings that are expected in the tourism sector.

To this end, e2i and WDA will tap the $360 million kitty under the Tourism Talent (TOTAL) Plan launched a year ago to prepare Singaporeans to meet job requirements.

NTUC secretary-general Lim Swee Say lauded Marina Bay Sands’ ‘inclusive’ recruitment policy, especially one that comes ‘at a time of slower economic growth’.

Source : Straits Times - 20 Oct 2008

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World summit to fix financial system

World summit to fix financial system

Bush proposes meeting, but world leaders hold differing visions on what should be done

UNITED States President George W. Bush, looking for answers to a global economic emergency with just three months left in office, will host an international summit to discuss ways to fix the world financial system.

‘We will work to strengthen and modernise our nations’ financial systems so we can help ensure that this crisis doesn’t happen again,’ he said over the weekend, following meetings with French President Nicolas Sarkozy and European Commission President Jose Manuel Barroso.

There was no mention of when the summit will take place but it is anticipated to be held shortly after the US presidential election on Nov 4.

A joint statement from the three leaders said other world leaders would be contacted beginning this week, and there would also be subsequent summits, ‘designed to implement agreement on specific steps’.

Japan, which chairs the Group of Eight rich nations, declared its backing for the summits, but its finance minister warned they would only be worthwhile if they produced concrete results.

‘If a summit were to be held, it should come up with a strong action plan or a decision,’ Finance Minister Shoichi Nakagawa said yesterday, adding, ‘I think the Prime Minister is making preparations based on this understanding.’

But there are already signs of different visions for the summits.

While President Bush has backed the steps European nations have taken to fix the financial markets and is willing to listen to a range of ideas from both developed and developing nations, he has not signed on to the more ambitious, broad-stroke reforms that some European leaders have in mind to avoid a repeat of the market crisis that is rippling around the globe.

President Sarkozy has floated the idea of reforming rating agencies and even exploring the future of currency systems.

British Prime Minister Gordon Brown, who engineered a British bank bailout that inspired other European rescues, is proposing radical changes to the global capitalist system, including a cross-border mechanism to monitor the world’s 30 biggest financial institutions.

Mr Bush however said that any plan to rethink financial mechanisms should ‘preserve the foundations of democratic capitalism’ and include ‘a commitment to free markets, free enterprise and free trade’.

President Sarkozy, while agreeing with President Bush’s view that reforms not challenge the foundations of market economics, said: ‘We cannot continue along the same lines because the same problems will trigger the same disasters.’

He said hedge funds and tax havens cannot continue to operate as they have in the past; financial institutions cannot continue without supervisory control.

Meanwhile, China’s Xinhua news agency yesterday blamed US consumers for fuelling the crisis with reckless habits of spending on credit. It said in an opinion piece from New York: ‘Many people think that you cannot de-link the consumer concept of ‘eating the corn while it is still on the stalk’ and this financial crisis which has a deep impact.’

South Korea became the latest country to join worldwide efforts to shore up banks and markets. The authorities in Seoul yesterday pledged US$130 billion (S$192 billion) in state guarantees for and capital injections into financial institutions.

In the Middle East, the United Arab Emirates was reported to be planning to inject 70 billion dirhams (S$28 billion) into long-term bank deposits, and Oman’s Chamber of Commerce and Industry called for a cash injection into banks for financing.

In Britain, Finance Minister Alistair Darling said the government would have to borrow more to fund public spending to generate growth and employment.

‘This is a time when you have to support the economy,’ he told the Sunday Telegraph. ‘We can allow borrowing to rise.’

Dutch financial group ING is in talks with the Dutch government about a state-backed cash injection estimated to be worth up to ¥9 billion (S$17.9 billion), Britain’s Sunday Times newspaper said.

Governments around the world have so far pledged about US$3.2 trillion - about the same as the economic output of Germany - in schemes that guarantee bank deposits, bank-to-bank lending, and taking stakes in banks to shore up their capital.

ASSOCIATED PRESS, REUTERS

Source : Straits Times - 20 Oct 2008

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