Singapore HDB resale prices inch up but demand falls by 24%

Singapore HDB resale prices inch up but demand falls by 24%

The prices of HDB resale flats rose 1.4 per cent in the fourth quarter of last year, but the impact of the economic gloom is being felt as the cash-over-valuation portion for resale deals fell 21 per cent.

PRICES of Housing Board resale flats continue to defy the gloom, although the pace of increase is easing off a little.
Data from the last three months of last year show that prices inched up 1.4 per cent, following a robust surge of 4.2 per cent in the third quarter and 4.5 per cent in the second.

Valuations are still rising but not as much as before, said C&H Realty managing director Albert Lu.

HDB resale prices are supported by a relatively strong base of potential buyers, particularly for three- to four-room flats, said ERA Asia Pacific’s associate director, Mr Eugene Lim.

Experts say the impact of the gloomy economic outlook has seeped into the HDB market, reflected in the significant drop in the median cash-over-valuation portion for resale deals.

It fell from $19,000 in the third quarter to $15,000 in the fourth - a drop of 21 per cent - and back to levels last seen around the third quarter of 2007.

Demand was also down: Fourth-quarter resale deals fell 24 per cent to 6,186 transactions, while the number of resale deals for the whole year dipped 3 per cent from the figure in 2007.

Despite the relatively large fourth-quarter drop, property experts expect fairly strong demand as the continued economic slowdown will bring new buyers.

‘If the economy does not improve, there will be more downgraders and increasingly cautious home buyers in the wake of retrenchments and tighter budgeting,’ said PropNex chief executive Mohamed Ismail.

If the recession drags on, prices may fall, albeit marginally, said ERA’s Mr Lim, although C&H Realty’s Mr Lu said they could just level off.

‘This is about the peak for HDB (resale) prices, but they won’t fall immediately because there is demand and valuations are still holding,’ he said.

Median sub-let rents remained steady and owners are still keen to rent out their homes.

The total pool of HDB flats approved for sub-letting grew from 21,400 units in the third quarter to about 22,200 units in the fourth.

But demand has been hit. While sub-letting deals for the whole of last year grew by 20 per cent, the number of such deals for the fourth quarter fell 7 per cent to 3,690.

Source : Straits Times - 24 Jan 2009

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Singapore Property price slump worsens

Singapore Property price slump worsens

Private home prices fall 6.1%; more new projects delayed

By Joyce Teo

THE property slump gathered pace on two fronts late last year with rents moderating and private home prices registering their biggest quarterly fall in a decade.
Developers also continued to delay the completion of new flats as well as office projects as the recession tightened its grip.

Prices slumped 6.1 per cent in the last three months of last year, according to the Urban Redevelopment Authority (URA) yesterday, higher than the earlier estimate of 5.7 per cent.

The slump follows a 2.4 per cent fall in the third quarter, which was the first decline in over four years.

Private home prices - which started last year on an uptrend even as sales fell dramatically - dropped 4.7 per cent over the whole of the 12 months. It was a striking contrast to 2007 when prices surged a whopping 31.2 per cent.

The declines will likely continue this year with some consultants estimating that falls of 10 to 20 per cent are possible.

In the fourth quarter, homes in prime districts fell the most - by 6.5 per cent - while suburban home prices dropped 5.9 per cent.

The slump in suburban home prices reflects waning buying interest for mass-market property, said Knight Frank’s director of research and consultancy, Mr Nicholas Mak.

This segment was initially expected to hold up better than the high-end segment last year but the mood has become so cautious that some homeseekers are buying HDB resale flats instead, he said.

Rents are feeling the pain as well. Private home rents fell 5.3 per cent in the fourth quarter after a marginal 0.9 per cent decline in the third quarter.

Non-landed homes in prime districts recorded the largest drop of 6.1 per cent with mass-market homes down 4.3 per cent. Overall, private home rents rose 2 per cent last year.

Sales are on the slide as well. A total of 7,701 resale homes were transacted last year, down from 20,980 in 2007 while sub-sales, an indicator of speculative activity, fell to 1,628 units last year, down from 4,097 in 2007.

New home sales went into freefall last year, with a record low of only 4,264 changing hands, down from 14,811 in 2007.

Price declines should be accompanied by increased buying volumes, said Chesterton Suntec International’s head of research and consultancy, Mr Colin Tan.

But one reason that is not happening now is that prices have not fallen low enough. To generate demand, the price drops have to be bigger than seen in previous downturns as this is the worst downturn ever, he said.

To add to the gloom, there is also a standstill in the investment market due to the tight credit situation facing developers. ‘Those who want to capitalise on the lower prices today still find it hard to do so,’ said a market watcher.

The two parallel markets give rise to a divergence in the price expectations of buyers and sellers, he said.

The market will take several quarters to find its new footing with at least some price convergence between buyers and sellers, he added.

This quarter is likely to be a slow period due to the cautious sentiment, poor economic conditions and interruptions by the Chinese New Year celebrations, said CBRE Research.

While the market is expected to stay tentative, the continued price falls should kick-start some sales, especially in mid-tier and mass-market projects, said its executive director, Mr Li Hiaw Ho.

There is no lack of supply, even as developers pushed back the completion of more projects to beyond 2011.

The URA now expects 7,012 private homes to be completed next year, down from an earlier estimate of 8,538. The number for 2011 has been revised to 13,686, down from a forecast of 16,145.

Meanwhile, rentals of office space, shops and industrial properties all fell in the fourth quarter, as leasing interest softened in light of the economic climate.

Further drops in rentals are expected, experts said.

Source : Straits Times - 24 Jan 2009

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Cash grant will take a chunk off wage bills

Cash grant will take a chunk off wage bills

Employers say Govt’s novel new scheme offers temporary respite

By Alvin Foo and Robin Chan

Chief financial officer Hans-Martin Stech.

SUPERMARKET chain Sheng Siong is poised to slice about $567,000 per month from its wage bill as a result of the Government’s new cash grant to subsidise companies’ wage bills.
It is just one example of how 120,000 employers in Singapore will benefit from the newly-announced Jobs Credit scheme.

In Sheng Siong’s case, the funds are likely to be re-channelled into growing the company’s presence here and grooming its staff. Said managing director Lim Hock Chee: ‘It will ease our cash flow and help us and other companies to tide over the economic downturn.’

Other companies also cheered the latest measure, as they can now use the money to boost cash reserves or even channel funds into training and research.

PestBusters boss Thomas Fernandez said: ‘It’ll trim at least 8 per cent off my total wage bill, so I can shift excess funds into research, and raise training time for staff from 30 hours a year to 45 hours.’

Under the scheme, companies will get 12 per cent of an employee’s monthly wage, for up to $2,500. This works out to a maximum of $300 a month for each employee, equal to a 9 percentage point cut to their Central Provident Fund rate.

It covers only workers who are paid CPF and they must be Singaporeans or permanent residents.

In Sheng Siong’s case, 2,022 of its 2,945 staff are under the CPF payroll - translating to savings of $1.7 million a quarter, or about $567,000 a month.

But firms warn that the scheme would offer only a temporary means to rescue jobs at an extraordinarily difficult time.

The scheme lasts one year but could be extended, in some form, next year if the downturn continues.

Qian Hu’s executive chairman and managing director Kenny Yap said: ‘It offers a temporary comfort and cushion. If companies need to retrench, this scheme will delay the process and buy them more time to wait for the storm to be over.’

Thankfully, Mr Yap has no intention of cutting staff.

Bosses cautioned that with revenues falling 30 or 40 per cent, cutting the wage bill by 12 per cent may not be sufficient to prevent job losses. If they continue to bleed, layoffs will still be inevitable.

Others said they may also need more help to cope with slower business.

Network Courier’s managing director V. S. Kumar said the Government could offer more aid in reducing utility, phone and Electronic Road Pricing charges to ease the pain of a 20 to 30 per cent drop in business.

Although companies typically hire staff based on merit, some said that the new plan may encourage them to favour keeping Singaporeans on their payroll.

Qian Hu’s Mr Yap said: ‘With this scheme, if all things are equal, I’ll probably give the Singaporean more chance and priority to retain his or her job.’

Tax experts say companies with a large proportion of Singaporean staff who are interested in retaining them will benefit most from the new plan.

PricewaterhouseCoopers tax partner David Sandison said: ‘It’s definitely better than a CPF cut, as it is much more flexible and much more focused. For companies that are struggling, this could be the lifeline that keeps them afloat.’

AsiaTel, an IT and telecommunications company

Employs: 15 staff, all are eligible for Jobs Credit scheme

Saves: Up to $2,500 a month

‘This is a very direct cost reduction measure and definitely helps small companies like us. The amount my company can save is equivalent to one or even two persons’ wages.’

Chief executive Yeo Poh Seng

Infineon Technologies Asia Pacific, a German-based chip maker

Employs: 2,400, about 1,500 are eligible for Jobs Credit scheme

Saves: Up to $450,000 a month

‘The positive impact on the wages bill is quite significant. It will provide MNCs like Infineon some positive cash flow and help to ease the pressure off our labour cost for the time being.’

Chief financial officer Hans-Martin Stech

Network Courier, a courier services firm

Employs: 170 staff, about 90 are eligible for Jobs Credit scheme

Saves: About $12,000 a month

‘The scheme is good as it cuts my wage bill by 5 per cent. But my business is falling at least 20 per cent, so I’m hoping for more help with operating costs such as utilities and phone charges.’

Managing director V. S. Kumar

Jobs Credit scheme cuts costs directly
Temporary one-year scheme

120,000 employers to benefit

Automatically granted to all eligible employers via CPF - they do not have to apply

All businesses that make CPF contributions for their employees - with the exception of local and foreign government organisations - are eligible

Four quarterly payments in March, June, September, December

Amount paid depends on number of employees (Singaporeans and PRs only), and wage costs based on contributions to CPF made for them in the preceding quarter. Government pays 12 per cent of wage cost, subject to a monthly wage cap of $2,500 per employee.

Source : Straits Times - 24 Jan 2009

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Budget ‘will not pull S’pore economy out of recession

Budget ‘will not pull S’pore economy out of recession’
Govt moves factored into experts’ predictions of contraction
By Fiona Chan

THE generous Budget unveiled yesterday, with $20.5 billion in recession-targeted spending, will probably add between 1 and 2 percentage points to Singapore’s economic performance this year.
But economists said this has already been factored into their negative growth forecasts and will not pull the country out of recession. Even with the record deficit this year, the economy is officially tipped to shrink between 2 per cent and 5 per cent.

‘The Budget is an extraordinary package for the gloomy road ahead. However, we are facing a global phenomenon, a problem too large for this unprecedented Budget to resolve,’ said DBS economist Irvin Seah.

OCBC economist Selena Ling, who is predicting that the economy will shrink 2.8 per cent this year, said she would have expected a 4 per cent contraction without the massive fiscal stimulus.

Still, she thought the Government ‘could have been more generous in terms of helping individuals directly’.

‘A lot of the measures were biased towards helping companies because they expect that what helps companies will help individuals,’ she said.

‘They have prioritised saving jobs as the key theme this year, so they are thinking that as long as you have a job, you are okay.’

There was little help directed at white-collar workers, who belong to the ’sandwiched’ middle-class.

Personal income taxes were not cut alongside the 1 percentage point reduction in the corporate tax rate. Instead, taxpayers were given a 20 per cent income tax rebate, capped at $2,000.

This was ‘a bit disappointing’ as it was exactly the same measure given out last year, during the good times, said Standard Chartered economist Alvin Liew.

But Morgan Stanley economists pointed out that because of high import leakages, Singapore’s Budgets tend to be ‘defensive’ rather than ’stimulatory’, focusing on helping companies and households deal with costs rather than spending on demand-spurring measures.

‘We do not expect the fiscal Budget to enable the Singapore economy to buck the downtrend, but merely to cushion the overshooting on the downside,’ they said.

Morgan Stanley expects the economy to shrink by 3.5 per cent this year.

Mr David Cohen of Action Economics agreed. ‘Given the nature of the economy, it would be very hard to prime the pump with more spending,’ he said.

‘Demand-side measures would not have been all that effective because much of what is purchased here is bought from overseas.’

PricewaterhouseCoopers tax partner David Sandison added that the Government was right to focus on companies.

‘Having a job is a pre-requisite to having money,’ he said.

‘The Government recognises that the current crisis is beyond their control, and domestic spending could only scratch the surface of what is needed.’

Also, putting money in taxpayers’ hands through tax rebates ‘may have been seen as benefiting the better off, and in this context, there is no guarantee that the extra money would find its way into Singapore shops rather than a cheap United Kingdom property or a Japanese loan repayment’.

Some economists think the Government may have decided to address the problems of companies first because they are more pressing.

‘Individuals are feeling pressure, but so far you don’t see the widespread malaise of unemployment and large cutbacks in spending,’ said Mr Liew.

Since the Government chose to dip into past reserves rather than spending its current savings, it has left the door open for additional so-called off-Budget stimulus measures later this year if needed, economists said.

In earlier recessions in 1998 and 2001, two off-Budget packages were unveiled each year.

‘If retrenchments are kept to reasonable levels, they may not need any more measures, but they are probably preparing for the worst,’ Mr Liew said.

Some have estimated that the reserves could be as deep as $500 billion to $1 trillion, allowing the Government to withdraw more money, if needed, to improve on the job credits scheme and help defray the cost of living for individuals.

INTERNATIONAL FACTORS

‘The Budget is an extraordinary package for the gloomy road ahead. However, we are facing a global phenomenon, a problem too large for this unprecedented Budget to resolve.’

DBS economist Irvin Seah

JOBS COME FIRST

‘They have prioritised saving jobs as the key theme this year, so they are thinking that as long as you have a job, you are okay.’

OCBC economist Selena Ling

PLANNING AHEAD

‘If retrenchments are kept to reasonable levels, they may not need any more measures, but they are probably preparing for the worst.’

Standard Chartered economist Alvin Liew

Source : Straits Times - 24 Jan 2009

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SMEs, employees welcome Jobs Credit scheme

SMEs, employees welcome Jobs Credit scheme

By Cheryl Lim,

SINGAPORE: Small and medium-sized enterprises (SMEs) say the Budget 2009 is a business-friendly one.

And employees have welcomed it too, saying it is a worker-friendly one as well.

At interior furnishings company Goodrich, wages make up almost 60 per cent of total operational costs.

The company will go ahead with a planned 15 per cent wage cut from next month, and with the newly-announced Jobs Credit scheme, it expects to save about S$400,000 annually.

Chairman of Goodrich Global, Chan C B, said: “We are not going to do any retrenchment, the S$400,000 savings will be a good buffer for us if things get worse.”

Unlike Goodrich, environmental packaging company Greenpac has no plans to introduce cost-cutting measures yet, despite a 20 per cent slowdown in business over the last few months.

But with the reduced corporate and property tax, loan initiatives and Jobs Credit scheme, Greenpac will be able to shave up to 20 per cent off its total operational costs.

Managing director of Greenpac, Susan Chong, said: “This unusual Budget at this unusual time has been very pro-business. And we’re very happy especially with the Jobs Credit scheme because it really helps the company to save some costs.”

As being environmentally-friendly helps save costs, Greenpac hopes more incentives will be given for companies to go green.

SMEs say Thursday’s Budget announcement will give them some much-needed relief, especially during these tough times. They say they are confident the government is taking proactive measures to help.

Employees too have welcomed the move, saying it goes some way to ensuring job security.

One employee said: “At the end of the day, you do not want to see your colleague leave.”

Another said: “I’m glad that the government did help us, so at least we can hold on to our rice bowls longer.”

Both workers and SMEs say although the Budget has been generous, they hope the government will continue to step in if the situation gets worse.

- CNA/yt

Source : Channel NewsAsia - 24 Jan 2009

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142000 companies eligible for enhanced loan schemes

142000 companies eligible for enhanced loan schemes

By May Wong,

SINGAPORE: Almost all of the companies based in Singapore can now tap into enhanced loan schemes announced on Thursday as part of this year’s Budget. These 142,000 firms employ about 80 per cent of the workers here.

The various loan schemes, under a new Special Risk-Sharing Initiative, are aimed at helping companies with their cash flow during this global economic downturn.

Trade and Industry Minister Lim Hng Kiang said at a news conference on Friday that he expects the number of loan applications to increase.

Under the Loan Insurance Scheme Plus, the Singapore government is taking on 75 per cent of the default risk. Previously, the insurer bore that risk for the scheme which helps firms get working capital and trade financing facilities.

Singapore exporters said this is useful as more buyers are not paying on time.

John Lu, chairman, Singapore National Shippers’ Council, said: “In order to export, you need to find financing means to finance the export and now with the scheme, the bank can give the exporters the facility to tide through the period between the shipment and the payment.

“The most important part of the scheme is that it provides the psychological confidence, with the government giving up to 75 per cent guarantee for the risk. It should be reasonable for the banks to look at the situation and take on the rest of the risk, and have the confidence to lend to their customers.”

Mr Lim said executing the loan schemes will be critical. Over the next few months, government trade agencies will be organising seminars to explain the enhanced loan programmes to companies.

He added that the various agencies will also be tracking the progress of the loan schemes to monitor the success rate and obstacles faced by companies.

“For applications that are rejected, we would look at them and understand why they’re rejected so there’ll also be a feedback and review mechanism,” Mr Lim said.

On average, about 250 government loan applications are approved every month. But for the month of December and the first two weeks of this month, that number increased to 650.

The Special Risk-Sharing Initiative, which takes effect in February, will last one year. Under its Bridging Loan Programme, companies can apply for a loan of up to S$5 million. The cap was previously set at half a million dollars.

The government will also assume a higher share of the default risk of loans from 50 per cent to 80 per cent. Foreign small and medium-sized enterprises based in Singapore may also apply for the loans.

To help companies venture overseas, the government has plans to improve the Internationalisation Finance Scheme. The loan cap per borrower group under this scheme will be increased from S$15 million to S$50 million.

The scheme will also be enhanced to allow refinancing of loans for overseas asset acquisition and working capital for secured overseas projects.

- CNA/so

Source : Channel NewsAsia - 24 Jan 2009

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Singapore Property related Budget measures are deemed developer-friendly

Singapore Property related Budget measures are deemed developer-friendly

By Ng Baoying,

SINGAPORE: Market-watchers have welcomed Budget measures, announced by Finance Minister Tharman Shanmugaratnam on Thursday, which are aimed at helping Singapore property developers through the current downturn.

While analysts had already expected the government to unveil help for the depressed property market, they noted on Friday that some of the moves are particularly creative.

These measures include allowing developers to rent out unsold units and deferring property tax for land approved for development. This deferment allows developers to hold back projects, easing near-term supply in the weak market.

Brandon Lee, investment analyst, DMG & Partners, said: “It’s a positive thing for the medium to long-term growth of Singapore’s property sector. If you look at these measures, a lot are pro-developer.

“It shows the government is giving a very definitive stance to help the developers tide through this tough period, while at the same time re-tweaking the demand-supply disequilibrium right now.”

On the flip side, some analysts said few measures actually benefit home buyers.

Nicholas Mak, director, Consultancy and Research, Knight Frank, said: “In the previous downturns, one of the measures announced was the deferment of stamp duty. That will lower the cost and demand for cash for home buyers.”

Demand-side concerns extend beyond the property market itself. For example, people are unlikely to buy a home when job security is an issue.

The government expects unemployment to increase this year due to the severe global economic downturn.

- CNA/so

Source : Channel NewsAsia - 24 Jan 2009

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Commercial rents feel the slowdown

Commercial rents feel the slowdown

Leases and prices of industrial and office space fall in Q4 2008 after years of steady gains

By EMILYN YAP

AFTER more than four years of steady increases, rents and prices of industrial space have finally caved in to the economic slowdown, falling 3.7 per cent and 6.5 per cent respectively in Q4 2008 from Q3.

CUTTING COSTS
With a 40 per cent property tax rebate for industrial and commercial properties in 2009, property owners are expected to pass on savings to tenants
The office sector also continued to weaken, with rents and prices sliding 6.5 per cent and 4.9 per cent respectively.

Falling rents are likely to provide some comfort to companies hit by slumping demand amid the downturn. And with the government pushing out cost-cutting measures in the Budget, some property owners could pass on savings to tenants.

Q4 data from the Urban Redevelopment Authority (URA) yesterday showed the first signs of weakness in the industrial property sector, as several consultants had expected. Until then, rents and prices had been rising quarterly since Q2 2004.

‘The economic turmoil and shrinking manufacturing sector slowed the take-up rate for factories and warehouses in the fourth quarter,’ said CB Richard Ellis Research’s executive director Li Hiaw Ho. For instance, the amount of occupied factory space jumped 175,000 square metres in Q4, but this increase was lower than the 344,000 sq m in Q3.

Still, industrial rents chalked up a 4.2 per cent increase year-on-year in 2008. Prices also rose slightly, by 1.5 per cent. Performance was buoyed by strong take-up in the first three quarters of the year.

Unsurprisingly, the office sector softened again in Q4. ‘The continued price for office space reflects limited investor interest in quality office buildings as economic sentiment remains pessimistic,’ said Knight Frank’s director of consultancy and research Nicholas Mak.

Office rents rose 5.8 per cent year-on-year in 2008, but this was disappointing compared with 2007, when they soared 56.1 per cent. Prices in the office sector fell 7 per cent in 2008, a striking turnaround from the 32.6 per cent gain in 2007.

Mr Mak expected the office market to continue to weaken this year, but said that he sees a silver lining. ‘Sombre economic conditions will encourage office space providers to be more understanding,’ he said. ‘Landlords will be more willing to retain tenants by renewing leases at lower rents, and offer more generous incentives such as longer rent-free periods.’

The Budget’s 40 per cent property tax rebate for industrial and commercial properties in 2009 could also help. ‘The government strongly urges landlords to pass on the benefits of this rebate to their tenants,’ Finance Minister Tharman Shanmugaratnam said in Thursday’s Budget statement.

To help reduce business costs, ‘we intend to pass on the property tax rebates to tenants of CapitaLand’s wholly owned commercial and industrial buildings as well as the portfolio of properties owned by CapitaCommercial Trust’, a CapitaLand spokesperson said. Similarly, ‘we will pass on the property tax rebates in full to our tenants in properties owned by CapitaLand Retail and CapitaMall Trust’.

City Developments also told BT that it is looking at various ways to pass on savings to its tenants.

Source : Business Times - 24 Jan 2009

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No Obama, Budget or CNY rally; instead banking fears intensify

No Obama, Budget or CNY rally; instead banking fears intensify

Fall in S’pore, HK indices underlie forecast of US market performance

By R SIVANITHY

SENIOR CORRESPONDENT

IT APPEARS that some stock market traders were hoping for a rally of sorts this week. We’re talking about supposedly intelligent and rational people here - people who first pinned their hopes on an ‘Obama rally’ to lift stocks for no reason other than the perceived euphoria associated with the razzmatazz of a presidential inauguration.

When this failed - Wall Street indices collapsed 4-6 per cent on Inauguration Day on worries about US banks - these same intelligent and rational people spoke vaguely of the Singapore government’s Budget providing a fillip, never mind that the current crisis is a prolonged, synchronised and deep-seated global problem that no single government can mend.

When this failed - the Straits Times Index was propped up by four points on Budget Day on Thursday by the Jardine group while the broad market sagged - the last resort was to look to the heavens and hope that the arrival of Chinese New Year would produce a lift as it sometimes had in years past.

Instead, the STI sank 23.54 points to 1,685.23 yesterday - the last day before the long CNY weekend. To be honest, it wasn’t a surprising outcome because few people in their right mind would have wanted to maintain open long positions ahead of an extended holiday - not with Wall Street and Europe tottering.

Throughout the week, programme trades linked Hong Kong and Singapore, whose indices moved in lockstep every second of each day.

Underlying these moves were expectations of how the US market would perform later each session, confirming the view often expressed in this column that movements in this part of the world - mainly Hong Kong and Singapore - are an accurate predictor of later movements in the US.

Still, the consolation was that the weakness was perhaps not as bad as it could be - at least not yet. Over the course of the week the STI lost 45 points or 2.6 per cent, taking its loss for the year to 4.3 per cent or about 9 per cent in US-dollar terms.

That’s bad. But not as bad as Hong Kong, where the Hang Seng’s equivalent loss is 12.7 per cent. And not as bad as Australia, which has lost 18 per cent.

Incidentally, for those who may be wondering, the world’s best-performing stock market this year is Sri Lanka, where the main index in US dollars has risen about 17 per cent thanks to an easing of the threat posed by the guerrillas known as the Tamil Tigers.

Reports of interest this week included Credit Suisse’s Jan 21 ‘Population fall creates bigger hangover’, which said that Singapore’s population could dive as 200,000 foreigners leave in 2009-2010 - a fall that would have far-reaching implications for the economy because of the impact on consumption.

The foreign house is underweight on banks and property, but overweight on telecoms and transport.

On the same day, Morgan Stanley downgraded its 2009 real GDP growth forecast for Hong Kong to minus-3.8 per cent, saying it sees a ‘deeper recession for the Hong Kong economy this year’.

However, the US investment house also thinks Hong Kong now has stronger fundamentals to weather the storm, compared with 1998-2001.

Source : Business Times - 24 Jan 2009

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Tech giant Microsoft to slash 5,000 jobs - Washington

Tech giant Microsoft to slash 5,000 jobs - Washington

Cutbacks the latest in spate of dismal news from tech companies

(Washington)

Microsoft has announced its first major layoffs in company history, saying that it would cut about 5,000 jobs, one of several economic signals that emerged on Thursday indicating that the recession was spreading and deepening.

A stalwart of the technology sector, Microsoft was strong enough to weather the dot-com bust and the 2001 recession unscathed, but the severity of this decline has led to cutbacks. And two new government reports underscored that this downturn may be far worse than many workers have known.

The number of new housing starts has dropped to its lowest since the Commerce Department began keeping data in 1959.

The initial claims for jobless benefits, meanwhile, jumped 62,000 to 589,000 for the week ended Jan 17, matching the highest level since the recession of the early 80s. Unemployment stands at 7.2 per cent, but many economists expect it to continue to rise by at least another point.

At the same time, analysts and economists are predicting more staggering bank losses of US$1 trillion or more, a prospect that could overwhelm the US$700 billion federal financial rescue plan known as Troubled Assets Relief Program, or TARP.

‘We entered an economic free fall in the fourth quarter of last year, and in the first three weeks of January, we have not seen any evidence of that stopping,’ said Robert Dye, senior economist at PNC Financial Services Group.

The Microsoft lay-off announcement follows dismal news from many tech companies.

On Wednesday, another tech giant, Intel, announced cuts that would affect 5,000-6,000 jobs. It will also shutter its last manufacturing plant in Silicon Valley.

The trouble for technology companies is far-reaching: Motorola, Autodesk, Seagate Technology, Lenovo Group, eBay, Yahoo, Dell, Xerox, Nortel Networks and Sun Microsystems have all announced layoffs in recent months.

Even search engine juggernaut Google, which is weathering the recession better than most analysts had expected, announced on Thursday that its profits had slipped for the first time.

In the fourth quarter, Google made US$382 million, a 68 per cent drop from the same period in 2007. Although it was not the company’s first year-over-year decline, it was the largest since it went public in 2004.

Overhanging all predictions about the economy is what the government might do about it. Under consideration is an US$825 billion economic stimulus Bill, but some economists are calling for more direct support for banks.

A number of economists now think the volume of losses for banks could climb far higher than estimated.

New York University economist Nouriel Roubini, who has been credited with predicting much of the ongoing economic distress, on Tuesday estimated total losses at US$3.6 trillion.

Even given the TARP, that ’still leaves the US banking system borderline insolvent if our loss estimates materialise’, he and fellow economist Elisa Parisi-Capone said. — LAT-WP

Source : Business Times - 24 Jan 2009

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