Singapore DBS will pay up to $80m to investors

Singapore DBS will pay up to $80m to investors

Full compensation for some customers but others may get nothing

By Fiona Chan

DBS Bank will pay $70 million to $80 million in compensation to customers in Singapore and Hong Kong who bought its Lehman Brothers-related structured products, now almost worthless because they were linked to the collapsed investment bank.
‘To date, we have found that a number of cases did not meet the standards DBS upholds and the bank will be compensating these customers with effect from tomorrow,’ it said in a statement last night.

Some investors stand to get all their money back, while others may only get a partial payment.

But there are others who may get nothing back at all, the bank cautioned. ‘Regrettably, our initial expectation of the worst-case scenario whereby investors will lose their entire principal investment amount is likely to materialise,’ it said.

DBS’ statement, released at about 10.30pm, came in a flurry of similar statements from Maybank and Hong Leong Finance, all announcing action to help investors stuck with Lehman-linked products.

DBS was the only one to give a total expected compensation figure, as well as some details about customers who had invested in one particular product, High Notes 5.

For Singapore and Hong Kong as a whole, 4,700 customers invested a total of $360 million in Lehman-related notes.

In Singapore, 1,400 customers invested a total of $103 million in High Notes 5, the bank said.

Of these, 80 per cent were below the age of 60, and two-thirds were DBS Treasures customers who typically have at least $200,000 in cash, investments or both.

‘We will give every single case individual attention and hearing,’ the bank said. ‘We agree with MAS on the need to give priority to vulnerable customers and are fast-tracking such cases.’

DBS chief executive Richard Stanley said in the statement that the bank was committed to doing the right thing and working as hard as possible to resolve the situation.

‘Every customer is important to us and in cases where our standards are not met, DBS will not hesitate to make cash compensation,’ he said.

ABN Amro banking analyst Trevor Kalcic welcomed DBS’ move last night, saying it would help the bank regain the goodwill of the general public and regulators in Singapore and Hong Kong.

‘The big question is of course whether this will be adequate to satisfy the disgruntled customers,’ he added.

In its statement, Hong Leong Finance said it would buy back Minibond notes from customers with only primary school education and who are 62 years or older at the time of the investment.

The settlement amount will be the original investment made, minus all interest paid to date.

It pledged to review and deal with other customers ‘in a fair and equitable manner, and as expeditiously as possible’.

Maybank promised full compensation to some ‘deserving cases’ of Minibond investors who will be told as soon as the bank has worked out the details.

It said it had called more than half the customers identified as ‘vulnerable’ investors, and conducted or scheduled interviews with 70 per cent of those who contacted the bank.

COMMITTED TO DOING THE RIGHT THING

‘I am deeply concerned about the anguish our customers are experiencing. DBS is committed to doing the right thing and my colleagues and I are working as hard as possible to resolve the situation.’

DBS chief executive officer Richard Stanley

TACKLE EVERY CASE

‘MAS also expects financial institutions to deal with the remaining cases, regardless of the background of the investors, in accordance with the serious and impartial process that has been set out earlier.’

Mr Heng Swee Keat, MAS managing director

BETTER THAN EXPECTED

‘Very good! They’re very fast and I think it’s much better than anybody could have expected. I didn’t expect such a fast resolution and I didn’t expect full compensation.’

Mr Leong Sze Hian, president of the Society of Financial Service Professionals

REMOVE AGE CAP

‘I still feel that they should not cap at the age limit, that’s my concern. A lot of people are retired at a younger age and when (they) are between 50 and 60 years old…they are very heavily burdened, they have to take care of their parents and their children in university as well.’

Cynthia Phua, an MP for Aljunied GRC

RELIEVED

‘I am so relieved to hear this latest news; I will go down to the bank tomorrow to check if I can get some money back.’

Mrs Ng Ai Hua, 58, who bought Minibonds from Hong Leong Finance

GOOD STEP FORWARD

‘It’s wonderful news and a good step forward. I am relieved that DBS has chosen to not only look into the cases of vulnerable customers, but also into all cases of mis-selling.’

Ms Olivia Sun, in her 40s, a DBS High Notes 5 investor

Source : Straits Times - 23 Oct 2008

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Swift relief for most vulnerable investors

Swift relief for most vulnerable investors

Three financial institutions to give priority to the less-educated elderly

By Francis Chan

INVESTORS who lost huge sums in the High Notes 5 and Minibonds fiasco may get some - or even all - of their cash back after dramatic late-night moves by three financial institutions that sold the discredited products.

DBS Bank, Maybank and Hong Leong Finance said they are working hardest to help the ‘highly vulnerable’ investors, including the elderly and less educated.

They have fast-tracked handling such cases, contacting and meeting their affected customers to review their cases.

All three said that deserving investors may get all their money back. But such a settlement is not a sure thing for everyone.

Other Minibond investors could draw some hope from the news that two international institutions are interested in taking over the Minibond programme and letting these investment products run to maturity.

If either goes ahead, investors will likely have the choice of holding on or pulling out. The details are being finalised, the Monetary Authority of Singapore (MAS) said.

About 10,000 people sank over $500 million into the risky investment products which became virtually worthless after the American investment bank Lehman Brothers collapsed last month.

Weeks of unhappiness over their lost savings have seen them protesting at Speakers’ Corner, signing petitions, and even consulting a lawyer on the possibility of taking out a class action lawsuit.

In a night of fast-moving events yesterday, Maybank was first to announce that it is giving priority to vulnerable customers and will take ‘full responsibility in cases where the product was clearly inappropriate given the customer’s profile and circumstances’.

This refers to ‘mis-selling’ of the risky product to the elderly or lowly educated.

Its management had ‘reached a decision on deserving cases that warrant full compensation’. Affected investors would be told as soon as the details were worked out, it said.

Hong Leong Finance was next with its statement, saying it will buy back Lehman Minibonds from customers with only primary school education and over 62 years old when they invested.

DBS Group Holdings said it had found that ‘a number of cases did not meet the standards DBS upholds and the bank will be compensating these customers’ with effect from today.

It said the move could involve paying out $70 million to $80 million.

But it also said that for some, the worst-case outcome would hold true - they will lose the entire principal amount they invested.

The three institutions did not give exact details on the number of people affected.

Their action came five days after MAS managing director Heng Swee Keat urged banks to do the right thing by their unhappy customers who might have been mis-sold the products.

Last night, Mr Heng welcomed the news that the three were expediting efforts to help vulnerable investors.

It was right to give priority to such cases, he said, adding that MAS expected other financial institutions to take a similar approach.

He also said that MAS expected the financial institutions to deal with all remaining cases ‘regardless of the background of the investors’.

DBS High Notes 5 was sold exclusively by the local bank while Minibonds were distributed by nine other institutions, including Maybank, Hong Leong Finance, ABN Amro and other brokerages.

Initially Minibond investors were told they might get back about 30 cents on the dollar, but over recent weeks that value was rumoured to have fallen to zero.

Some investors contacted last night were relieved to hear the news of the banks’ action.

Mrs Cynthia Phua, MP for Aljunied GRC, said: ‘This outcome is better than I expected. Full compensation is something that is beyond my expectation.

‘The lower education level, I find that yes, that is a very good guideline. But the age of 62 could be more flexible. If investors are lower-educated, but younger, it could be their life savings as well.’

Source : Straits Times - 23 Oct 2008

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West Coast Plaza 70% leased ahead of launch

West Coast Plaza 70% leased ahead of launch

By TEH SHI NING

WEST Coast Plaza, which underwent a $26 million makeover by Far East Organization, is currently close to 70 per cent leased, ahead of its soft launch on Nov 15.

$26 million makeover: The mall has set aside 31 per cent of its three floors of retail space for F&B outlets
Property developer Far East has also committed $1.6 million to advertising and promotion programmes for the mall till January 2009.

Rentals at the mall, which has a net lettable area of 160,000 square feet, will range from $7 to almost $30 per sq ft per month.

The mall has set aside 31 per cent of its three floors of retail space for food and beverage outlets. Susan Leng, deputy director for retail management at Far East Organization, told BT that this is in line with the trend of Singapore’s malls ‘going bigger with food’.

The proportion of retail space typically allocated to eateries across Far East’s malls has grown from 20 to 25 per cent previously to between 28 and 35 per cent now, she said.

The refurbished West Coast Plaza will feature an alfresco dining area targeted at the visitors it aims to draw - students and working professionals from educational and research institutions nearby, and families from private residences in the area.

Positioned as a ‘mid-market suburban mall’, West Coast Plaza’s anchor tenant will be Cold Storage supermarket.

The fact that there has not been much uptake from fashion and accessories retailers yet is not a real concern, Ms Leng said. ‘That segment is pretty soft islandwide, they’re always the first to be hit in a downturn. We believe we can bring in a more focused and unique selection of retailers if we wait. We’re in this for the long haul and the economy will come round,’ she said.

Source : Business Times - 23 Oct 2008

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Buy property stocks now, reap fruits later

Buy property stocks now, reap fruits later

S’pore is going to be the big beneficiary of current turmoil, says Wheelock CEO

By KALPANA RASHIWALA

WHEELOCK Properties (Singapore) CEO David Lawrence, in his private capacity, is currently investing in Singapore property counters. Although Wheelock is in the business of selling apartments, Mr Lawrence reckons that next year may be a better time to buy condos. Instead, his advice to investors looking for value is to buy property counters at the moment ‘because they are so cheap and can give you great returns over the next couple of years’, he said in a recent interview with BT.

Mr Lawrence: Singapore home prices will see a correction
‘The indirect market - which is property counters - is completely out of line with the physical market. So the real value at the moment - and it won’t be there for long - is the indirect market. Some of these shares have come down so much. They’re good companies.

‘It’s an arbitrage opportunity, because they’ve come down so much they bear no relationship to property prices. What’s probably going to happen is that stock prices will go up, property prices will come down a little. They will meet eventually but at the moment there is a big arbitrage opportunity for people,’ he added.

He acknowledged that it will be a tough couple of years for the local property market. ‘But then Singapore is going to be the big beneficiary of this crash, crisis, credit crunch, whatever you call it. Because there aren’t many places like this left to go. I have a lot of international friends - from Europe, India, China, USA - with lots of money who will be retiring or moving to Singapore.

‘When you look around, where else can you get good security, drug-free culture, government investing heavily in new businesses, a reasonable balance between financial services and manufacturing?’

Most importantly, Singapore has integrity in government and the banking and corporate sectors, as well as security. ‘If ever Singapore loses that integrity and security, then it’s finished. But I don’t think it will. It’s ingrained,’ says the 62-year-old, who became a Singapore citizen two years ago.

Singapore will also stand out in the race among global property investment destinations because of the strength of its judicial system, he argues. ‘For me, property investment is all about judiciary. There’s no point going into countries where they are very happy for you to lose money. As soon as you start making money, they want to cut it up. You get sued. It goes to a corrupt judiciary. You don’t make money. I am not interested. Now I think there’s lot of opportunity to invest in financial centres with good judiciaries.’

He takes issue with investment guru Marc Faber who suggests buying property in the countryside, not financial centres. ‘I totally disagree with that. If you buy in financial centres and you buy good-quality products from good developers, you will always be able to let the property. When markets get really bad, and property starts emptying out, people upgrade to the best, and Ardmore Park is a perfect example. . . And long-term, quality property is a good hedge against inflation.’ Ardmore Park is a condo Wheelock launched in 1996, around the height of the property bull run.

Given the current global financial crash, Mr Lawrence acknowledges that Singapore home prices will see a correction, without specifying the quantum of price declines. He does not think the slump will be as bad as the one during the 1997/98 Asian crisis. ‘I don’t think things will be that bad, particularly for good products, because fortunately we have a strong banking system here,’ says Mr Lawrence. ‘We have the Monetary Authority of Singapore and strong banks. They never allowed this crazy lending like they did in other countries. Most people can service their loans.’

Other plus points this time round are low interest rates and huge liquidity in the system, he adds. ‘There will be job losses. Some people might not be able to make their mortgage payments. I think most will, if they have not been speculating in too many properties.’

Wheelock recently collected 25 per cent of sales proceeds for The Cosmopolitan, its fully sold condo at River Valley/Kim Seng roads, when the project received Temporary Occupation Permit. ‘We had a 100 per cent payment on time. No problems,’ he reveals.

Mr Lawrence acknowledges that in the short term, some developers - new players and underfunded ones - will have to cut prices. ‘But the strong boys like (Kwek) Leng Beng and Ng Teng Fong (chairmen of Hong Leong Group and Far East Organization, respectively), these people are not going to cut prices. They’ve been here before. They’ll hold it through to the next cycle, which will come.’

For the Singapore office market, prime Grade A rents may ease about 10 per cent in the next 12 months, Mr Lawrence predicts. But this is ‘OK and reasonable’ given that rents had been getting out of hand previously.

‘But long term, the government has plenty of land to expand. I think as government policy, it’s very important to have reasonably priced office accommodation to expand the Singapore economy in the same way as the government always had reasonably priced industrial land and space to expand the industrial economy.’

Source : Business Times - 23 Oct 2008

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World growth to recover in 2011: UBS

World growth to recover in 2011: UBS

By ANNA TEO

IT WILL be 2011 before economies around the world return to ‘normal’ growth, but Asia could begin to turn around a bit sooner, says a senior UBS economist.

The next two years will see below-par growth worldwide as the US, UK and Europe deleverage amid a global cyclical downturn, UBS deputy head of global economics Paul Donovan told reporters here yesterday.

Then, ‘hopefully a return to normal growth by around 2011′, he said. ‘And I’d suggest that normal isn’t what normal used to be - normal growth in the future will be lower than what it used to be in the past; trend growth rates come down.’

In the US, for instance, trend growth could be down to 2. 5 per cent, from 3.5 per cent previously. The bank sees US economic growth slowing sharply from a projected 1.4 per cent this year to 0.3 per cent next year.

‘UBS forecasts economic growth in 58 countries and regions around the world; we’re forecasting slowing growth in 58 countries and regions next year,’ he said. ‘Everybody is going to suffer; this is a synchronised global slowdown. But the damage will be limited in those countries that have the ability to stimulate domestic demand.’

Fiscal policy stimulus in Asia, in particular, will help to limit the impact of weaker exports, he said. Not as highly leveraged, the Asian economies are not additionally saddled with structural weaknesses during the downturn and, ‘with the benefit of domestic stimulus’, could ’start to improve’ in 2010, though not necessarily return to trend growth, he said.

‘Asia will probably require something closer to trend growth in the OECD countries, at least the G7 countries, before Asia gets back to trend growth.’

UBS’s forecasts see Asia leading globally with a projected 7.3 per cent GDP growth next year (down from 9.3 per cent last year) and 6.1 per cent next year.

Mr Donovan also reckons that the US has the potential to emerge ’somewhat earlier’ too from economic slump. ‘It is a relatively interest rate-sensitive economy, there’s a lot of stimuli that are being thrown at the economy. I think it has the potential to emerge maybe even in the second half of 2010.’

On Singapore, given its wide exposure to external demand and its place as a regional financial hub, UBS sees GDP growth here falling to 1.5 per cent next year. How quickly Singapore recovers will depend on the pace of domestic demand stimulus, he said.

Source : Business Times - 23 Oct 2008

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Three property, infrastructure funds allay fears

Three property, infrastructure funds allay fears

Two MacarthurCook funds and one Macquarie fund update financial positions

By EMILYN YAP

THREE property and infrastructure funds yesterday issued statements in a bid to allay market concerns about tighter credit, and to provide updates on their financial positions.

Facing a possible rating downgrade by Moody’s Investors Service, MacarthurCook Industrial Reit (MI-Reit) reassured investors that it is ‘advanced in negotiations’ to refinance a $220 million facility maturing in April 2009. Discussions should be finalised in January next year.

Moody’s said on Tuesday that MI-Reit, with a Baa3 corporate family rating, ‘faces significant refinancing risks’ as this amount of debt is not covered by available committed facilities.

Moody’s review also reflected concerns over MI-Reit’s asset and tenant concentration, which could be ‘much greater…than is consistent with a Baa3 rating.’

To this, MI-Reit said that its income is protected by a long lease expiry profile. For instance, only 3.6 per cent of the trust’s rental income will be subject to lease expiry in FY2010.

Head lease arrangements and a diversified portfolio of quality tenants also contribute to income security, it added. Around 36 per cent of rental income comes from manufacturing facilities which ‘tend to have higher tenant retention rates in an economic downturn’.

MI-Reit ended trading yesterday with an unchanged unit price of 33 cents.

Another fund, the MacarthurCook Property Securities Fund, also updated investors on its operations yesterday.

‘While interest rates around the world are now trending down, the ability to source competitively priced debt, combined with the anticipated slowing in economic growth, continues to be a concern for the market,’ said Richard Haddock, chairman of fund parent MacarthurCook Fund Management Ltd.

A priority is to further reduce debt and prudently manage its underlying portfolios, said the MacarthurCook Property Securities Fund. One strategy is to cut its weightings on unlisted property and use those funds to reduce debt.

A third fund, the Macquarie International Infrastructure Fund Limited (MIIF), said yesterday that it has no bilateral dealings with known troubled financial institutions.

According to the fund, borrowings held by its underlying businesses have remaining maturities of three to 14 years, and most of its interest exposures are also hedged for the medium to long term.

MIIF also said that its businesses are performing strongly in line with management’s expectations. It therefore expects income this year to be comparable with that received last year.

The unit price for MIIF rose 2.5 cents yesterday to close at 37.5 cents.

Source : Business Times - 23 Oct 2008

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Tough balance between growth, foreign talent - Singapore

Tough balance between growth, foreign talent - Singapore

S’pore needs skilled foreigners to grow and must continue welcoming them: SM

By CHUANG PECK MING

(SINGAPORE) The government faces a dilemma: should it go for maximum economic growth and accelerate the inflow of foreign workers and talent, or should it accept slower growth and slow down the inflow?

The answer lies somewhere in between. But Senior Minister Goh Chok Tong acknowledged yesterday that it would not be an easy balance to achieve.

‘For when growth slows down, so do the incomes of Singaporeans, while the cost of living may rise,’ he said in a keynote address to kick off the three-day Singapore Human Capital Summit conference.

‘Moreover, many Singaporeans may lose their jobs,’ Mr Goh said. ‘But if the government goes for growth, Singaporeans have to accept the increasing social costs of a growing foreign population in their midst.’

He noted that immigration policy ‘is potentially even more controversial than trade policy’ in many countries. ‘Unlike nameless production workers who live many thousands of miles away, guest workers are often seen as directly taking away jobs from locals. So governments are often forced to restrict the much-needed inflow of talent and foreign workers, at the expense of economic growth.’

Countries in need of foreign manpower must manage the political friction that can arise from the presence of large numbers of foreign workers, according to Mr Goh.

While Singaporeans may be more at home than most countries with foreign workers - partly because of Singapore’s history as a nation of immigrants - it is still important for the government to recognise Singaporeans’ anxiety and fear of foreigners taking their jobs, and places in schools and universities for their children, he said. ‘These are legitimate concerns that governments must deal with.’

Regardless of how this dilemma is fixed, the government’s policies must continue to make Singaporeans feel that it’s worthwhile for them to be Singaporeans, Mr Goh said.

They must therefore continue to enjoy benefits which foreigners do not - significant subsidies for public housing, education and health, and various top-ups from government budget surpluses.

But these benefits offered to Singaporeans do not amount to a policy to disadvantage foreign talent, he said. Welcoming foreigners remains one of two key planks of Singapore’s strategy to build human capital and talent - and human capital is even more critical in these uncertain times.

The other plank is to develop Singaporeans to their fullest potential, Mr Goh said.

Singapore’s talent strategy is simple, he said. The real challenge is in its execution - and there are three thrusts to it: heavy investment in developing Singaporeans, from the young to adults; building Singapore into a distinctive global city to attract and retain talent; and making Singapore ‘cool and funky’ for creative and entrepreneurial types to live in.

Source : Business Times - 23 Oct 2008

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Real economies will feel the pain in Asia: Singapore PM Lee

Real economies will feel the pain in Asia: Singapore PM Lee

By LEE U-WEN IN BEIJING

THE current financial crisis is the world’s most serious in over 60 years and will have a major impact on real economies, says Prime Minister Lee Hsien Loong.

‘People could see for some time that the credit bubble, the property bubble, was not sustainable, and at some stage it would have to come to an end. The question was how,’ he told journalists from China at the Istana on Monday.

Mr Lee, who arrived in Beijing yesterday for a five-day official visit, said it was unfortunate that the crisis unfolded in a way that was ‘much more disruptive and damaging than anybody had expected’.

‘It’s the most serious crisis of the financial system in many decades, at least since the Second World War,’ he said. ‘It will take time to overcome and it will have real impact on the real economy.’

The financial turmoil ‘will certainly’ be discussed between world leaders gathering in Beijing for the two-day Asia-Europe Meeting starting tomorrow, Mr Lee said.

While countries are taking individual action, they must coordinate their efforts to keep one another in the loop and ‘better understand’ the different lines of thinking, he said. This will ensure that whatever one country does will not complicate matters for others.

Governments have to act to stabilise their economies and restore growth, Mr Lee said. ‘They can do it through fiscal policy, coordinated action. I think they will be ready to do this because if you look at America, Congress is already talking about coming back after Nov 4 (after the presidential election) and having an extra session to pass a fiscal package. But even then, recovery will take time.’

He believes the overall impact on Asia will be ‘indirect’ because Asian banks are sound and property woes have not been as widespread. However, real economies in Asia will be affected because when developed nations go into recession, others invariably feel the effects, he said.

‘America is in recession. Europe is in recession too or soon will be. Japan also looks like it is in recession. I expect Asian countries to be affected, including China and India. China will not go to zero growth because you are at more than 10 per cent. You may go to 7, 8 per cent growth, but other countries in the region will be more affected.’

The best solution is for each country to keep its economy moving, increase investment where feasible and gradually raise the proportion of consumption, particularly in countries like China where this has been on the low side, Mr Lee said.

In Singapore, the government has already placed a $150 billion guarantee on bank deposits and is prepared to give more help if the need arises, he said.

‘We are watching the situation carefully as it unfolds. If we need to, we are in a position to do more, to help households tide through this difficult period, to help workers stay employed, to help businesses reduce costs so they can stay viable. In this way, we will not suddenly have a very high increase in unemployment. These are measures which we’re studying.’

In the wide-ranging interview, Mr Lee also touched on the historic signing of the Singapore-China free trade agreement (FTA) today - China’s first with an Asean country.

‘(The FTA) is a signal of the good bilateral relations between our two countries,’ he said. ‘The volume of trade has been growing, but with an FTA we can cement this and grow it even faster.’

Source : Business Times - 23 Oct 2008

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