Investors wary of Wall St’s latest rebound

Investors wary of Wall St’s latest rebound

Any Asian rally today likely to be short-lived with sentiment still fragile amid tensions

By Goh Eng Yeow, Markets Correspondent

Mr Geithner faces a massive task if he is named the next Treasury chief.

THE manner in which Wall Street greeted central banker Timothy Geithner’s likely appointment as the next United States Treasury Secretary smacked of desperation.
After enduring a wild roller-coaster ride last Friday, the Dow Jones Industrial Average staged a last-hour surge to close 494.13 points, or 6.5 per cent higher, following reports of his appointment.

This has raised hopes among traders that regional markets will enjoy an obligatory knee-jerk rise today and give them another opportunity to get rid of their stocks at a higher price.

Mr Geithner comes with impressive credentials. As the president of the Federal Reserve Bank of New York, he has been at the front line waging war against a banking crisis that threatens the world with financial armageddon.

Even so, few traders expect the stock market rally to have legs. Wall Street might simply be pinning too much hopes on Mr Geithner, even though he may be the best-placed person in the world to tackle the crisis, given his first-hand experience.

There will be a torrent of economic reports to keep them on their toes, such as US home sales data and consumer confidence figures.

On top of everyone’s mind will be the big issue confronting Mr Geithner even before he takes up his new appointment in Washington - the urgent need to restore confidence to embattled banking giant Citigroup as it faces a serious run on its share price.

Last Friday, Wall Street’s late rally failed to give the bank a boost, as it ended 20 per cent down at US$3.77 and brought its total loss for the week to 60 per cent.

Citigroup’s problems started on Monday, after it announced massive layoffs of 52,000 people to trim its global workforce to 300,000.

In normal times, this move would have been greeted as a positive sign that the bank was getting its act together and shoring up its bottom line.

But these are abnormal times after the ugly precedents left behind by other failed US financial behemoths such as Lehman Brothers and American International Group.

Faced with a collapse in Citigroup’s share price, investors would rather not take any chances and vote with their feet as they ignored analysts’ advice that the bank was viable.

But Citigroup is not the only company to suffer a backlash from cutting its headcount.

Since DBS Group announced on Nov 7 that it was cutting 900 jobs - mainly in Singapore and Hong Kong - its share price has slumped 13.5 per cent. Over the same period, United Overseas Bank (UOB) has dropped a smaller 12.6 per cent, while OCBC Bank is down 10.2 per cent.

Similarly, Neptune Orient Lines fell 3.9 per cent last Wednesday, after it said it was cutting 1,000 jobs globally.

Observers noted that this shows that while management might consider job cuts as a prudent move to strengthen the balance sheet, investors were treating it as a sign of panic.

To calm investors’ jitters, it is important for company bosses to keep cool and maintain the veneer that it is business as usual, no matter how tough things become.

While it may be necessary to trim unnecessary jobs, it would be wise to execute such moves quietly and not to trumpet them around the world.

This may send the company’s investors into panic and even attract financial barracudas like hedge funds to attack the company’s share price.

For companies which have maintained a ’silence is golden’ approach, the strategy seems to pay off handsomely.

Consider UOB, which has kept a low profile since the global credit crisis exploded in August last year.

Since January, its share price has fallen 41 per cent. This is smaller than the 51 per cent year-to-date drop in the benchmark Straits Times Index, which lost 97.04 points last week to 1,662.1.

Source : Straits Times - 24 Nov 2008

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Singapore Shophouses in Katong to become hotel

Singapore Shophouses in Katong to become hotel

$12m project involves a row of nine pre-war Peranakan-style units

By Joyce Teo, Property Correspondent

This row of shophouses will be converted into the 67-room Santa Grand Hotel East Coast which, Mr Ng says, will be the Santa United group’s grandest property. — ST PHOTO: DESMOND WEE

A ROW of nine pre-war shophouses, in the Peranakan enclave of Katong, are to be converted into a ‘character’ hotel aimed at leisure and business travellers.
Construction of the $12 million hotel on East Coast Road will start early next year and end in 2010.

Santa United International Holdings, a home-grown firm that started in the petroleum trading business but now boasts a growing hotel arm, will develop the project.

It will turn the property into the 67-room Santa Grand Hotel East Coast, keeping the conserved Peranakan-themed facade in the process.

The hotel will cover a land area of 1,150 sq m and will have a total gross floor area of 3,091 sq m.

This will include a new five-storey extension with 750 sq m of gross floor area at the back of the two-storey shophouses.

Some back portions of the shophouses will give way to the new block.

There will be a lap pool on the roof and a cafe, a restaurant and two shop units on the ground floor, where there will be alfresco sitting.

Santa United managing director Ng Cheng Lock told The Straits Times that he wanted to turn the property into a hotel because it is a rare stand-alone row of conserved shophouses situated in a charming area with a rich historical and cultural value.

Katong is home to many well-known eateries, particularly those serving Peranakan cuisine. And it was the place where Singapore’s wealthy elite set up homes in the late 19th to the mid-20th centuries.

When the opportunity to buy the row en bloc arose more than a decade ago, MrNg jumped at it. He paid about $17 million then as it was at the height of the property market, he said.

The hotel, near the Holy Family Church, will be a cosy character establishment, rather than a hip or upscale boutique one like Hotel 1929, he said.

While Mr Ng considered putting a hotel on the site a few years ago, work began on plans and paperwork only a year ago.

Provisional permission from the Urban Redevelopment Authority came about two months ago in a ruling that included changing the land use from ‘commercial’ to ‘hotel’ and the go-ahead for the extension.

Some of the 12 tenants occupying the shops or the offices have already moved out. Santa, which also operates from the shophouses, is in the process of moving to a new office in Changi South.

The Hotel Licensing Board said Santa Grand Hotel East Coast will be subjected to a new hotel ruling that requires hotels along Joo Chiat Road and its surrounds to be let only at full-day rates from next year.

But Mr Ng is unperturbed as the firm plans to charge a daily rate of about $200. Other hotels in the Santa group also now charge daily rates, he said.

Santa owns five hotels under the Santa brand name and manages Victoria Hotel.

It started with Santa Grand Hotel Aljunied, known formerly as Sunwell Hotel, in Geylang a decade ago, and the group now has Santa Grand Hotel in West Coast and Santa Grand Hotel in Little India.

Its 80-room Santa Grand Hotel Bugis - located in two buildings, one a new development and the other a conservation house - is set to open early next year.

But the hotel in East Coast Road will be its grandest property, said Mr Ng.

Santa, which employs 130 people, recorded a turnover of about $70 million last year. Its hotels has some cross-over clients from its petroleum trading business, he said.

Source : Straits Times - 24 Nov 2008

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REAL ESTATE AGENTS: Downgraders, bargain hunters are main clients

REAL ESTATE AGENTS: Downgraders, bargain hunters are main clients

Not all companies see gloom ahead. Tessa Wong and Jessica Lim find that some are getting sunshine as consumers turn to lower-cost alternatives.

THE real estate industry is keeping its head above water as a result of bargain hunters attracted to the falling prices and home owners downgrading to smaller, cheaper properties.
The higher number of sales transactions has translated to better pickings for property agents. Major agencies contacted say they have had better sales for lower-end housing in the last three months.

PropNex’s stable of 5,000 agents sold more than 400 condominium units in the price range of $1,000 per sq ft or less in that period, up a quarter from the preceding three months.

Sales of HDB flats and low-end landed houses have also jumped 10 per cent.

HSR Property Group, the largest agency here with 8,500 agents, is selling about 2,500 flats and low-end condo units a month - 5 per cent more than three months ago.

At Dennis Wee Properties, sales - particularly of three and four-room flats - are ‘going strong’.

Two recent launches from the housing board also saw brisk activity, with applicants outnumbering the number of available flats by more than 10 times.

The rise in number of transactions for lower-end units more than makes up for the fall in that for high-end properties, said industry experts, who cite an average 7 per cent drop for that sector.

The downturn has made for good times for agents.

The executive director of HSR Property Group Eric Cheng said in good times, new agents join the industry because they think it is easy to make a quick buck. The pie is split among more people. ‘But in a downturn, the number of agents falls and each tends to earn more,’ he added.

Mr Ryan Tan, 40, for example, has sold 12 properties this month, up from five last month. His clients are moving from prime areas to the suburbs, with many saying they need the extra cash.

His clients would know what it is like to be in the shoes of teacher C.Y. Leow, 51, who sold her five-room private apartment in Somerset two months ago after losing $150,000 in Minibond investments - money that was to be her retirement nest egg. She and her family will move into a five-room Bishan flat next month- a move that nets her about $750,000.

PropNex chief executive Mohamed Ismail said the business seems recession proof. ‘At the end of the day, everyone needs a roof over their heads. An agent will always have a job in any market.’

Source : Straits Times - 24 Nov 2008

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MOVERS: Services in demand as expats leave or downgrade

MOVERS: Services in demand as expats leave or downgrade

Not all companies see gloom ahead. Tessa Wong and Jessica Lim find that some are getting sunshine as consumers turn to lower-cost alternatives.

Business is booming for movers such as Ms Ching’s Moving Star Express. She says companies like hers thrive when the economy is on the upswing or in a downturn. — ST PHOTO: MUGILAN RAJASEGERAN.

AN INCREASE in real-estate transactions means lots of people are on the move.
Add to this expatriates having their benefits reduced or withdrawn, and moving companies find their services in demand.

A check with five movers revealed that some have been enjoying double the amount of business within Singapore since the downturn.

Moving Star Express in Kallang, for example, now does eight home moves a day, up from five a year ago.

Its owner Billie Ching, 24, said: ‘When they (expatriates) buy new homes or find cheaper places to rent, they come to us movers.

‘We thrive when the economy goes up, and also when the economy goes down.’

Crown Relocations, which has more than 200 offices in over 50 countries, said it has handled 25 per cent more home moves in the last two months than over the same period last year.

And prospects ahead look bright.

Major player Santa Fe Relocation Services, which handles domestic and international moves, is expecting business to boom on both fronts over the next two months.

With still a week to go till the end of this month, it has already handled 45 local moves - up from 20 last month.

Its managing director Bill Cain said the company is having one of its best years: ‘At this point, many finance companies are still waiting to see what will happen. After all, the recession is only about three months old.

‘But soon, layoffs will go up and there may also be more international moves, as key top positions get tweaked.’

Source : Straits Times - 24 Nov 2008

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Citigroup: Talks on but bailout unlikely - New York

Citigroup: Talks on but bailout unlikely - New York

Still searching for rescue plan; also takes out ads to reassure customers

NEW YORK: Officials from Citigroup and the government continued discussing ways to stabilise the bank’s stock price over the weekend, with hopes of unveiling a plan of action by today but a US government bailout seems to be off the table.
The US government will not take over Citigroup in the way it took control of US insurance giant AIG - by lending the firm massive amounts of money and assuming a huge equity position in return, officials say.

Unlike AIG’s, Citigroup’s balance sheet is relatively healthy, with fairly strong levels of capital, particularly when compared with those of most of its competitors.

Still, officials from the Treasury and Citigroup are unsure what it will take to restore confidence in the company. Options include a possible smaller capital injection or some sort of statement that Citigroup is financially sound.

For that reason, Citigroup officials are continuing to explore possible merger possibilities and a spin-off of some of Citigroup’s businesses, even as chief executive Vikram Pandit publicly stated that the sale of the firm’s massive and coveted broker business, Smith Barney, was off the table.

Because Citigroup is a bank, it has access to the Federal Reserves discount window and, because of its size, there is virtually no possibility of the bank failing and filing for bankruptcy as investment bank Lehman Brothers did.

‘Citigroup is too big to fail; the government won’t allow that because the firm is involved in so many business, both institutional and consumer, around the world,’ said one bond trader with detailed knowledge of Citigroup’s operations.

But the lack of confidence, coupled with the falling stock price, could pose other problems, such as worried depositors yanking their money out of their accounts or investors pulling their funds from their Smith Barney brokerage accounts.

A Citigroup spokesman declined to say if the company was experiencing either of those scenarios.

With executives fearing that the bad headlines could cause panic, Citigroup took out advertisements in major US newspapers yesterday in an attempt to shore up customer confidence, The Independent on Sunday reported.

The company is running full-page ads that acknowledge ‘our financial markets have been tested in unprecedented ways’, but argue that the company’s strength is rooted in a broad range of businesses and the expertise of its staff.

It says customers can look to Citigroup for ‘providing stability’ and ’securing the future’, and concludes: ‘Now, more than ever, you can feel confident that Citi never sleeps.’

But Citigroup and government officials concede that the situation facing the company is daunting. Because it operates in almost every country and competes in just about every financial business, its survival is a national concern.

Citigroup has spent the past week telling investors its capital position is strong.

But investors have lost confidence in the management led by Mr Pandit, who has been in the job for less than a year, and in the firm’s board, which appeared to ignore widespread calls by analysts to integrate the firm’s operations and slash its massive workforce until recently.

Meanwhile, various merger possibilities seem slim. A deal with investment banks Morgan Stanley or Goldman Sachs would create massive overlap and lead to huge layoffs. There aren’t many banks with a strong deposit base that Citigroup can buy with its depressed stock price.

Mr Pandit has cut the workforce to 350,000 from 375,000 and has just announced another 50,000-job cut by early next year.

But for investors, these moves were too little too late.

Nearly a year ago, Citigroup shares traded at around US$50 (S$76). On Friday, they traded at US$3.77 and failed to rebound even as the Dow Jones Industrial Average spiked nearly 500 points on the news that President-elect Barack Obama would name New York Fed President Tim Geithner as his new Treasury Secretary.

As of the weekend, there was no clear consensus on what the rescue plan would be, raising the possibility that company officials might have to roll the dice and attempt to ride out the current panic selling in the firm’s stock.

‘Everyone knows saving Citigroup is important to saving the economy but no one knows what to do,’ said one person close to the firm.

REUTERS

Source : Straits Times - 24 Nov 2008

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Bangkok tense as anti-govt protesters gather

Bangkok tense as anti-govt protesters gather

By Leslie Lopez, SOUTH-EAST ASIA CORRESPONDENT

PHOTO: ASSOCIATED PRESS

BANGKOK was on edge last night as anti-government protesters massed for what has been billed as the final, potentially violent, push to oust the administration of Prime Minister Somchai Wongsawat.
Mr Somchai, who is in Peru to attend an Apec summit, appeared on Thai television to plead with the protesters not to carry out their threat to blockade the Parliament House in their bid to stop an important legislative session today.

‘Protesters - please do not damage the country,’ he was quoted as saying by AFP.

But protest leaders and the roughly 100,000 supporters gathered at the Government House compound, say there is no turning back in their campaign to remove his administration, which they claim is a proxy of former premier Thaksin Shinawatra.

‘We are here to carry out what we set out to do, which is to get the government out,’ said Mr Somchang Sawangsri, a 40-something civil servant who says he will not go to work for the next few days.

Leaders of the protest movement, called the People’s Alliance for Democracy, said they were planning to descend on Parliament House, about a kilometre away, early this morning.

‘It’s useless to move in the dark,’ key protest leader Chamlong Srimuang told reporters yesterday as people gathered at the compound of the PM Somchai’s office, which anti-government groups have occupied since early last month.

Yesterday’s rally came on the heels of several tense and violence-laced days in the capital.

Over the past two weeks, bombs have gone off around Government House and on Thursday, one person was killed and another 29 wounded. Another bomb attack on Saturday injured eight people.

No group has claimed responsibility for the attacks and the police have yet to make any arrests.

The protesters were gathering peacefully to listen to speeches by their leaders yesterday evening.

But political analysts and diplomats did not rule out clashes with security personnel breaking out later in the night or early today.

A blockade of Parliament House on Oct 7 led to bloody street clashes between the protesters and security personnel, which left two people dead and scores of policemen injured.

Government leaders and the police say they want to avoid a repeat of last month’s violence.

‘Police and soldiers will not be armed with lethal weapons, only shields and batons,’ government spokesman Natawut Saikau was quoted as saying by the Associated Press, adding that security personnel would employ ‘non-violent ways to deal with the PAD protesters’.

Army spokesman Sansern Khaewkamnerd said 2,400 police personnel would be stationed outside Parliament, with 2,000 soldiers on stand-by to maintain public order.

But even if the protest remains peaceful, analysts say the plan to disrupt Parliament will cloud Thailand’s already troubled economy even further.

Source : Straits Times - 24 Nov 2008

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Low-income families to get more childcare subsidies from Jan 1

Low-income families to get more childcare subsidies from Jan 1

By Dominique Loh,

SINGAPORE: Low-income families who place their children in childcare will be getting more subsidies from next year and the Centre-based Financial Assistance Scheme for Childcare will be extended beyond the fourth child.

From January 1, needy families will get between S$200 and S$340 per month, depending on a family’s monthly income, on top of the universal childcare subsidy that working mothers get.

Moreover, there will not be any differentiation based on birth order as all eligible children in a family will get the same amount.

Speaking to Boon Lay residents on Sunday, Community Development, Youth and Sports Minister Vivian Balakrishnan said: “My key point is that for children, no matter how tough the times may be, we will look after every single one of them.

“(They) will have a place to go and study… hot meals, not just sandwiches… and adults to help look after them, teach them, give them hope, give them role models for success.”

Besides helping lower income families cope with the tough times ahead, Dr Balakrishnan said his ministry is also prepared to help the elderly.

Currently, each of the 84 Citizens Consultative Committees (CCCs) in Singapore receives S$52,000 a year from the S$6.25 million ComCare flexibility fund.

Dr Balakrishnan said he is prepared to give the CCCs more funds if needed. Boon Lay, which has more seniors than the national average, will get at least 20 per cent more.

The minister added: “I don’t want the constituencies to roll back any of their programmes because they’re worried about cash flows.

“So long as these programmes are good programmes, the grassroots leaders believe in them and residents are benefiting, we will continue to press on. And if we need more resources, we’ll make those resources available.”

Speaking to residents at an hour-long dialogue session, Dr Balakrishnan told them the country’s most important social safety net in these tough economic times will still be jobs.

He urged Singaporeans to be flexible when it comes to wages, especially when there are belt-tightening measures all around.

- CNA/so

Source : Channel NewsAsia - 24 Nov 2008

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Singapore investors unloaded US stocks before Lehman collapse

Singapore investors unloaded US stocks before Lehman collapse

US$10.3b sold in Q3, by far the largest sell-off among foreign investors

By CHUANG PECK MING

(SINGAPORE) It was the biggest sell-off on Wall Street. And we are not talking of the massive dumping of stocks in the aftermath of Lehman Brothers’ fall that sank shares listed on the New York Stock Exchange by about 25 per cent in the first two weeks of October.

Streets ahead: Two months before the sub-prime crisis hit in August last year, S’pore investors cashed out a net US$3.48 billion
We are talking about Singapore investors selling a net US$10.33 billion worth of US stocks in the July-September quarter (Q3), according to the latest figures released by the United States Treasury Department.

Not only was it the biggest sell-off by foreign investors during that quarter, but the bulk of the sales happened before September 15 when Lehman crashed, sending investors rushing for the exit. The French were the second biggest sellers, disposing of a net US$4.14 billion

It wasn’t the first time that Singapore investors showed such canny prescience. Two months before the sub-prime crisis hit in August last year, they already cashed out a net US$3.48 billion.

The latest withdrawals in Q3 this year were substantially higher than in Q2, when Singapore investors sold a net US$1.45 billion of US stocks. Half - a net US$5.18 billion - of the sale in Q3 were made in July.

Singapore investors dumped another net US$2.2 billion in August, and US$2.63 billion in September.

Asian investors as a whole pulled out a net US$7.42 billion in Q3, after acquiring a net US$13.58 billion in the previous quarter.

The Japanese, who are the largest Asian investors on Wall Street, were still piling up US stocks, adding a net US$1.78 billion to their portfolios. Hong Kong investors also bought a net US$2.27 billion in Q3, although this was much smaller than the net US$12.36 billion they purchased in Q2.

The Europeans, who have the biggest foreign presence in the US stock market, were the only ones who stepped up their investments, along with the Latin Americans. They raised their purchases from a net US$4.49 billion in Q2 to US$7.58 billion in Q3.

Thanks largely to the Europeans, foreign net purchases of US stocks nearly doubled to a net US$4.75 billion in Q3, when US share prices fell nearly 9 per cent as home values continued to decline, foreclosures rose and job cuts deepened.

Unlike in the past, Singapore investors did not seek shelter in US Treasury bonds. Instead, they continued to dispose of their holdings of T bonds in Q3, shedding a net US$1.69 billion of the debt instruments. This was up from a net sale of US$1.45 billion in Q2.

But China was still mopping up T bonds, adding another net US$36.09 billion to their holdings, after a net purchase of US$24.23 billion in Q2.

The Japanese, the other big investors in T bonds, dumped a net US$6.19 billion worth of bonds in Q3. They got rid of a net US$12.7 billion in Q2.

Overall, Asian investors snapped up a net US$30.83 billion worth of T bonds in Q3, up sharply from US$4.82 billion in Q2.

European investors, on the other hand, trimmed their purchases from a net US$72.81 billion in Q2 to US$55.15 billion in Q3.

Globally, investors showed a smaller appetite for T bonds in Q3, winding down their purchases from a net US$110.66 billion in Q2 to a net US$90.03 billion.

Source : Business Times - 24 Nov 2008

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US govt may rescue Citigroup - NEW YORK

US govt may rescue Citigroup - NEW YORK

Federal Reserve and US Treasury may create a special vehicle to purchase bad assets from Citi

(NEW YORK) The US government may step in to rescue Citigroup Inc after a crisis in confidence erased half the bank’s stock market value in three days, according to investors and analysts.

Citigroup’s US$2 trillion of assets dwarfs companies such as American International Group Inc (AIG) that got support from the US government this year. Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke may favour a rescue to avoid the chaotic aftermath of Lehman Brothers Holdings Inc’s bankruptcy in September.

One option is for the Federal Reserve and US Treasury to create a special vehicle to purchase bad assets from Citi. The Fed has already erected several such funds, such as the Commercial Paper Funding Facility (CPFF), to provide liquidity to the financial system. Typically, the Treasury would provide some first-loss equity or insurance fee, such as US$50 billion provided to the CPFF, to protect the central bank and give the fiscal authority a stake.

The arrangement allows the Fed to leverage the money provided by the Treasury with loans, enabling the purchase of assets worth a multiple of the money. Funding the purchases with loans makes them less onerous to the US Budget.

‘That is the working relationship they have settled into with the Fed providing US$1 trillion of the funding and the Treasury providing the equity tranche,’ said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

Citigroup management and some board members discussed ’several options’ for the company in a series of phone conversations with Mr Paulson and New York Federal Reserve Bank president Timothy Geithner last Friday, The New York Times reported on Saturday, citing unidentified people involved in the talks.

Among those options were the possible replacement of chief executive officer Vikram Pandit, a public endorsement of Citigroup by the government or a new financial lifeline, the Times said. No decisions had been taken as at late Saturday.

While Citigroup executives said that the company has adequate capital and liquidity to ride out the crisis, its tumbling share price may shake the confidence of creditors, clients and rating companies. A similar scenario played out at Lehman, when chief executive officer Richard Fuld declared that the firm was ‘on the right track’ five days before the firm went bankrupt.

‘The market may be implying some sort of regulatory intervention,’ Jason Goldberg, a former Lehman analyst who now works at Barclays Capital in New York, wrote in a note to clients on Saturday. ‘In situations where the government has stepped in, the equity holders have not fared well.’

Mr Pandit told employees on Friday that he does not plan to break up the company, aiming to reassure workers as the stock resumed its skid. Citigroup shares dropped 94 US cents, or 20 per cent, to US$3.77 in New York trading, giving the company a market value of about US$21 billion. The stock pared its loss after the close of official trading, fetching US$4.07 at 4.35 pm.

Mr Pandit and chief financial officer Gary Crittenden, speaking on a worldwide conference call on Friday, also said that they do not expect to sell the Smith Barney brokerage unit, according to two people who listened to the call and declined to be identified because it was not open to the public.

Once the biggest US bank, with a market value of US$274 billion at the end of 2006, Citigroup has now slipped to No 5 behind Minneapolis-based US Bancorp.

To some, the misery at Citigroup is no surprise. Lynn Turner, a former chief accountant with the Securities and Exchange Commission, said that the bank’s balkanised culture and pell-mell management made problems inevitable. — Bloomberg, NYT

Source : Business Times - 24 Nov 2008

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