Five statutory boards bought credit-linked notes

Five statutory boards bought credit-linked notes

By Francis Chan

THE Monetary Authority of Singapore (MAS) - Singapore’s central bank and financial regulator - was among five statutory boards that invested in complicated credit-linked notes.
But none of the statutory boards - including the MAS - invested in notes that have now become worthless, such as DBS High Notes 5 and Merrill Lynch Jubilee Series 3 LinkEarner Notes.

The central bank had invested only 0.1 per cent of its portfolio in such investments, which in fact made a net gain over the past year.

A Ministry of Finance (MOF) spokesman, who revealed this to The Straits Times yesterday, did not give the actual size of the investment.

He was responding to queries after Finance Minister Tharman Shanmugaratnam told Parliament that five statutory boards had invested in credit-linked notes, but only named four: Singapore Civil Service College, Singapore Land Authority (SLA), Infocomm Development Authority of Singapore (IDA) and Professional Engineers Board.

Mr Tharman had emphasised in Parliament that the four boards had invested in credit-linked notes, but not the ones which have gone into default or suffered credit events that have caused their value to plummet to zero and triggered early redemption.

The notes that have suffered this fate include Lehman Minibonds, Merrill Lynch Jubilee Series 3 LinkEarner Notes, DBS High Notes 5 and Morgan Stanley Pinnacle Series 9 and 10 Notes.

Although he did not provide the actual amount invested by each of the four named statutory boards, he said that the exposure as a percentage of their total combined investment portfolio was only about 0.05 per cent.

These investments are currently suffering paper losses of about 14 per cent over the past year, he added.

‘On a mark-to-market basis, these credit-linked notes held by the four statutory boards have not performed very differently from the performance of global markets generally this year,’ he said.

‘The four statutory boards are nevertheless monitoring the situation on all their investments, and will take the necessary steps to minimise any losses in these investments.’

MOF later told The Straits Times that the four statutory boards have had positive returns on their overall investment portfolios this year, averaging about 2 per cent.

And for the past three years, the average annual return on their investment portfolios had averaged 3 per cent.

Mr Tharman was responding in Parliament yesterday to questions from Non-Constituency MP Sylvia Lim, who asked whether statutory boards had invested in risky structured products which were linked to bankrupt United States investment bank Lehman Brothers.

Nominated MP Siew Kum Hong also wanted to know if those investments were linked to collateralised debt obligations (CDO) or credit default swaps (CDS), which are both complex investment products at the centre of the global credit crunch.

It was in response to Mr Siew’s question that Mr Tharman revealed a fifth unnamed statutory board had financial products linked to CDOs and CDS, aside from credit-linked notes.

‘These products comprise around 0.1 per cent of the statutory board’s portfolio, and have in fact made a net gain over the year,’ he added.

On how and why these statutory boards invest, Mr Tharman explained that all of them keep some surpluses for ‘future capital expenditures and as a buffer against unanticipated spending needs or budget shortfalls’.

‘They manage and invest these funds in financial assets to earn an appropriate return within acceptable risk limits, after taking into account their cashflow and liquidity needs,’ he added.

According to Mr Tharman, statutory boards also have to ensure they have appropriate investment management structures for proper oversight of its financial investments with prudent risk management.

Source : Straits Times - 19 Nov 2008

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More smaller Singapore HDB flats

More smaller Singapore HDB flats

Two- and three-room units in demand from low-income families, downgraders

By Aaron Low

SINGAPORE will have more two- and three-room HDB flats next year to meet rising demand.
The Government is building these smaller flats to help more low-income families own homes and those home owners who need to downgrade because of financial difficulties.

National Development Minister Mah Bow Tan made the announcement in Parliament yesterday.

However, he did not say how many more of these flats were to be built.

Instead, he stressed these flats were to meet a ‘niche demand’ and that the bulk of HDB homes being built will be three- and four-roomers.

The Housing Board stopped building two- and three-roomers in the 1980s.

But in 2004, three-roomers were re-introduced. Two years later, the HDB said it would resume building two-roomers to meet increasing demand and, since then, it has put on sale 539 of them.

The growing popularity of these smaller flats is a turnaround from the mid1990s when the overwhelming demand was for bigger four- and five-room flats, with few takers for the two- and three-roomers.

However, since 1997, following the Asian financial crisis, more and more people have clamoured for them as they were forced to downgrade.

These smaller homes, meant for lower-income families, cost between $77,000 and $275,000 each.

Adding to the demand in recent years are older singles, who have been snapping up the three-roomers in central areas such as Tiong Bahru and Queenstown.

Most recently, there was overwhelming interest when 150 smaller flats - from studios to three-roomers - were put on sale last month. These were sited across the island, from Geylang to Sengkang and Marine Parade.

In one week, 2,426 applications were received.

Realtors interviewed expect the demand to keep on rising, especially with the lousy economic outlook.

PropNex CEO Mohamed Ismail foresees the 2002 scenario re-enacted next year. ‘In the last cycle, with rising retrenchment figures, we saw many people who couldn’t maintain their four- and five-room flats selling them for smaller ones, some doing so even at a loss.’

In Parliament yesterday, MPs worried aloud about the economic impact of the global recession on their residents.

At least three MPs, including Madam Cynthia Phua (Aljunied GRC), said they were seeing four to five people each week seeking cheaper housing options.

Replying, Parliamentary Secretary for National Development Maliki Osman assured them the Government would do all it can to help Singaporeans hold on to their homes in bad economic times.

Mr Mah noted that HDB flats are affordable, pointing out that on average, owners use less than a quarter of their monthly household income for their mortgage. This is below the international benchmark of 30 per cent, he said.

Also, seven out of 10 new flat buyers service their mortgage entirely using their Central Provident Fund savings. ‘Based on this, HDB flats have remained affordable, even though property prices have risen over the years in tandem with Singapore’s economic growth,’ he said.

Source : Straits Times - 19 Nov 2008

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Funding boost for young entrepreneurs

Funding boost for young entrepreneurs

By NISHA RAMCHANDANI

SPRING Singapore launched a $12.5 million fund aimed at making seed money more accessible to young entrepreneurs to mark the official launch of Global Entrepreneurship Week 2008 yesterday.

The Young Entrepreneurs Scheme for Start-ups (YES! Start-ups) will tap the existing $25 million Entrepreneurial Talent Development Fund (ETDF) but allows a greater degree of flexibility. ETDF, which was started four years ago, has supported 48 business ventures so far, from nine participating polytechnics and universities.

YES! Start-ups is open to first-time entrepreneurs who are either Singapore citizens or PRs (permanent residents) aged 26 or under, to fund up to 80 per cent of their business venture. The other 20 per cent must be either self-funded or can be obtained from other sources such as schools. Upon approval, a Singapore-registered private limited company must be incorporated. Funding will be capped at $50,000 and will be available for the next five years. It aims to support 250 start-ups over this period.

‘We will continue to foster a pro-business environment and encourage entrepreneurship,’ Minister of State for Trade and Industry Lee Yi Shyan said at yesterday’s event. ‘This is important in these trying times. Entrepreneurial qualities such as resilience, a can-do attitude and relentless efforts will not only see us through this crisis but also help us emerge stronger.’

Global Entrepreneurship Week 2008 (Nov 17-23) is co-hosted by NUS Enterprise and the Action Community for Entrepreneurship. Thirty local partners - including institutes of higher learning, schools and private companies - have come together to organise 40 entrepreneurial events and activities.

Source : Business Times - 19 Nov 2008

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Singapore Employment Act changes to benefit more workers

Singapore Employment Act changes to benefit more workers

However, some MPs fear they could add to local companies’ business costs

By CHUANG PECK MING

DESPITE the economic downturn, Parliament yesterday gave the green light for changes to the Employment Act, which some MPs fear could add to the cost burden of companies in Singapore.

Mr Gan: Imperative to get fundamentals right in employment framework
‘There are areas in the proposed amendments which I feel could be introduced at a more opportune time than now, when businesses and industries are scrambling to keep themselves afloat amid this financial storm,’ Lim Wee Kiak (Sembawang GRC) said during the debate on the Employment (Amendment) Bill.

‘Employers have faced many cost increases in the past two years, including wage inflation, extension of the skills development levy to include all workers, an increase in medical insurance premiums for workers, rent increase, raw material increase, transport cost increase, utility bill increases and many more,’ he said. ‘It seems to me that the amendment in this Act will further increase the business cost to our enterprises and erode our competitiveness.’

Among the changes that concern Dr Lim: the Act will cover more employees, including confidential staff; there will be a new salary threshold for workmen and a higher salary threshold for non-workmen, and a shorter qualifying period for paid sick leave.

Tabling the changes, which were first unveiled in September, Acting Manpower Minister Gan Kim Yong said that it is understandable that employers may be concerned about the impact on business costs. But the amendments will benefit mainly lower-wage and vulnerable workers ‘who will feel the bite of the economic downturn most keenly’.

‘Moreover, many of the changes, such as the extension of public holidays and sick leave benefits to all employees, are already industry norms and should not significantly increase business costs,’ he said.

Mr Gan said that it is ‘imperative that we set the fundamentals right in our employment framework so that our labour force will remain responsive and productive, so that we will be well-positioned for when the economy recovers’.

He said that the Singapore National Employers Federation and Singapore Business Federation were both ‘closely consulted’ about the changes, and employers generally accepted that they are good in the long term.

Last amended in 1995, the Employment Act has been in need of updating, Mr Gan said. More people are now employed in services; professionals, managers, executives and technicians form almost half of the work force; contract workers have increased and wages have increased.

‘In light of these changes, it is timely to update the Employment Act to ensure it remains relevant and responsive to the changing labour market conditions,’ he said. ‘Employment protection and benefits for certain groups of vulnerable workers need to be enhanced. Employment standards also need to be revised to better reflect employment norms while maintaining labour market flexibility.’

The changes, which take effect from Jan 1 next year, will extend the Act’s coverage of employees, update employment standards and perks, and boost penalties and enforcement powers.

Source : Business Times - 19 Nov 2008

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Fed has done what it can, says US central banker

Fed has done what it can, says US central banker

He warns of a painful process of readjustment ahead

(WASHINGTON) The US central bank has done what it can to buffer the economy through a downturn, and a painful process of readjustment is likely ahead, Kansas City Federal Reserve president Thomas Hoenig said on Monday.

Mr Hoenig: Sharp consumption reversal a major part of slowdown
‘The Fed has done about as much as it can do,’ he said in an interview on PBS’s Nightly Business Report. Interest rates are already extremely low, he noted, according to a transcript of the programme.

‘We might put it out there, but banks are not able to, given their own capital constraints, able to lend as aggressively,’ he added.

Mr Hoenig said that he was surprised at how quickly economic activity has slowed, but that a sharp reversal of consumption was clearly a key development.

‘The consumer factor was a major part of the strong slowdown and the actual entering into the recession,’ he said.

The Fed has this year cut interest rates to one per cent from 4.25 per cent, offered hundreds of billions of dollars in loans to financial institutions and helped bail out major firms as part of extraordinary efforts to cushion the economy.

Mr Hoenig, who is not a voting member of the Fed’s interest rate-setting committee this year or next, said that there are likely tough times ahead as financial institutions and households pare debt.

‘Part of it is working through the deleveraging,’ he said.

‘I don’t know of any painless way to rebalance your economy, you have to go through this adjustment, and we will get through it, but it’s not going to be without consequence,’ he added.

He told a banking audience earlier in the day that authorities should find ways beyond monetary policy to resolve future financial crises.

‘Going forward, it will be essential that our financial system have a wider range of policy and market-based options to resolve crises, with less reliance being placed on monetary policy,’ he said in remarks to a private Institute of International Bankers conference on financial regulation in New York.

Mr Hoenig said that ‘an enormous burden’ has been placed on monetary policy to resolve the crisis.

‘Monetary policy is not designed to address many of the underlying factors, particularly when the problems extend beyond liquidity and raise issues of solvency and informational shortcomings,’ he said.

Mr Hoenig said that policy-makers must set clearer rules for financial institutions, and establish a better crisis management framework. Authorities must also consider how to take away the temporary assistance programmes that they have established, he said. — Reuters

Source : Business Times - 19 Nov 2008

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Citi to go for ‘modest’ trim in Singapore headcount

Citi to go for ‘modest’ trim in Singapore headcount

By CONRAD TAN

(SINGAPORE) Citigroup will make ‘modest’ job cuts in Singapore, even as it axes more than 50,000 workers worldwide, a Singapore spokesman for the bank said yesterday.

Taking a hit: Fewer than 300 of the 9,000 staff in S’pore face the axe, a report says. The city remains a regional centre for management and operations for Citigroup
The group may fire fewer than 300 of the 9,000 or so staff that it has here, Reuters reported, citing an unnamed source.

BT understands that the job cuts will hit both junior and senior staff across all of the group’s businesses worldwide.

‘In Singapore, there will be modest headcount reductions,’ said Adam Rahman, head of corporate affairs for Citi in Singapore.

‘In line with Citi’s global efforts to increase efficiency and productivity in the current difficult market conditions, some jobs will change and others will no longer be necessary.’

He added that the bank will continue to invest in Singapore, one of Citi’s key markets.

‘Our business in Singapore continues to register robust year-on-year growth and remains a regional centre for management and operations for Citi globally. We expect our headcount in Singapore to remain relatively stable overall.’

Vikram Pandit, Citi’s chief executive, stunned investors and staff on Monday, when he announced plans to reduce the group’s staff to 300,000 ‘in the near term’ from 352,000 at the end of September.

The cuts ‘will not be exactly’ by the year end, ‘it will likely take a little longer’, he said in a presentation to staff in New York.

About half the reduction in staff will come from the divestment of businesses, some of which had been announced previously, he added.

Reuters also reported yesterday that some 150 jobs would be cut at Citi’s wealth management business in Asia outside Japan, which employs 1,200 people. More than 60 per cent of the cuts would be in the region’s main wealth management centres, Singapore and Hong Kong, according to an unnamed source cited in the Reuters report.

Banks worldwide are firing staff in a desperate bid to slash costs as the world’s biggest economies slide into recession, raising fears of collapsing revenue and losses from soaring bad debts.

Collectively, banks have reported more than US$700 billion in asset writedowns and credit losses since the start of last year, according to Bloomberg. They have also sacked more than 150,000 workers, mostly in the US.

HSBC said on Monday that it would cut 500 staff in Asia, due to deteriorating economic conditions and a cautious outlook for next year, according to Bloomberg in Hong Kong.

Goh Kong Aik, HSBC’s spokesman in Singapore, said yesterday that ‘a very small number’ of the layoffs will be from Singapore. Of the 500 job cuts announced, 450 are in Hong Kong and the rest will come from the bank’s other Asian offices, he said.

And on Sunday, the UK’s Daily Telegraph reported that JP Morgan is preparing to cut thousands of jobs worldwide.

In Singapore, DBS Group is in the midst of cutting 6 per cent of its work force or some 900 jobs by the end of the month.

Source : Business Times - 19 Nov 2008

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Developers want Singapore govt to turn back clock on several policies

Developers want Singapore govt to turn back clock on several policies

Wish-list includes reinstatement of deferred payment, old formula for DC

By KALPANA RASHIWALA

(SINGAPORE) Some property industry players are yearning for the good old days, hoping the government will reverse some of the changes in property policies made in the past two years and thus go beyond the usual exemptions and rebates on property taxes with its off-Budget/Budget packages.

Such a strategy may be timely in helping to stimulate currently flagging property demand given that the measures were rolled out when the market was sparkling.

Developers are hoping the government will reinstate the deferment of stamp duty on property purchases where the property is under development (this was removed in December 2006) and revert to the old formula for computing development charge (DC) rates, based on 50 per cent of the appreciation in land value arising from changing the use of a site or building a bigger project on it. This was raised to 70 per cent in July last year.

Also high on the developers’ wish-list is a revival of the deferred payment scheme (DPS) - which was scrapped in October last year - to boost home purchases, with a qualifier that safeguards be introduced to address concerns that such schemes had spurred speculation.

A major property developer also suggested a demand-boosting measure in the form of changing the investment criteria for Economic Development Board’s Global Investor Programme to allow a higher quantum for property purchase or even lowering the total threshold value.

Under a new option to the Programme announced in July 2005, a foreigner can be considered for permanent resident status if he invests at least $2 million in business set-ups, other investment vehicles, and/or private residential properties, with up to half of the investment allowed in private residential properties.

‘More people taking up permanent residence or citizenship and landing on our shores will help the property market,’ said the developer.

KPMG Tax Services executive director Leonard Ong said that granting exemptions or rebates on property taxes for completed commercial and industrial buildings will help landlords and hopefully they will pass on some of the savings to their tenants.

‘Earlier this year, when property prices were on the rise, the government also raised Annual Values of properties. So based on this, owners would be paying more property taxes than last year. This makes it all the more important to introduce exemptions or rebates for property taxes,’ he added. Property tax is calculated as a percentage of a property’s annual value.

Developers are also hoping for property tax exemption for vacant land and land under development to reduce costs.

‘During this period, the market is so quiet we cannot launch projects,’ notes Ho Bee Investment chairman and CEO Chua Thian Poh.

Following the December 2006 rule change on stamp duty, property buyers are now required to pay stamp duty within 14 days from the date that the option to purchase is accepted.

The previous concession, introduced in June 1998, had allowed stamp duty payment to be deferred to the date of issuance of Temporary Occupation Permit for a project or date of sale of interest in the property, whichever was earlier, for properties under development.

Deferring payment of stamp duty for projects under development once more would lower upfront cash commitment for home buyers, some of whom may be stretched, especially since it could take a few years for the new homes they’ve bought to be completed, says Knight Frank managing director Tan Tiong Cheng.

Most developers are hoping the government will reinstate the DPS. They say DPS helped genuine home buyers, especially upgraders who may be able to sell their existing homes only when their new private home has been built.

Ho Bee’s Mr Chua suggests modifications be made to DPS to allay concerns that it also facilitated speculation in the past.

‘The most important thing is to require the buyer to secure a housing loan even if he does not need to draw down the loan immediately, to ensure a credit assessment of the buyer is done by the banks,’ he said.

However, Ho Bee’s Mr Chua disagreed with the suggestion by some analysts that the initial payment by the buyer - before the deferred payment kicks in - be raised from 10-20 per cent previously to 30 per cent, as that ‘would not help home buyers much’.

Although developers are currently not in a race to redevelop their sites given the property slump, many argue that going back to the pre-July 2007 formula for computing DC rates - which creamed off a smaller portion of the enhancement in land value - ‘would provide greater incentive for land owners to explore more productive use for their properties and could spur some activity’, the head of a listed property group said.

Developers are also concerned about banks tightening financing to home buyers and to businesses in general, and hope the Monetary Authority of Singapore will use ‘moral suasion’ to send the right signal to banks.

Source : Business Times - 18 Nov 2008

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Petrol prices down 5 cents per litre, diesel 6 cents

Petrol prices down 5 cents per litre, diesel 6 cents

By Cheryl Frois,

SINGAPORE: In Singapore, pump prices are down again.

Petrol stations across the island have lowered prices by five Singapore cents per litre for petrol and six cents per litre for diesel.

This comes as global crude oil prices continue their downward slide.

Shell led the way by reducing prices at 11 am, followed by ExxonMobil and Caltex at noon, and SPC at 12.30 pm.

Premium 95 grade now stands at S$1.636 a litre, while the price of diesel is reduced to S$1.373.

Tuesday’s decrease in prices marks the 12th consecutive drop since July this year.

- CNA/yt

Source : Channel Newsasia - 18 Nov 2008

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Long term measures to help HDB mortgage defaulters is best solution

Long term measures to help HDB mortgage defaulters is best solution

By Cheryl Lim Mei Ling,

SINGAPORE : The Housing and Development Board (HDB) will continue to keep tabs on flat owners who default on their HDB mortgage payments.

It stressed that long term measures to help these owners manage their mortgage payment is the best solution, and that compulsory acquisition of the flat is a last resort.

As of October 2008, some 33,000 flat owners owed HDB arrears of three months or more. They make up less than 8 per cent of the 420,000 households with outstanding HDB loans.

Giving this update in Parliament on Tuesday, Parliamentary Secretary for National Development Mohamad Maliki Osman said home owners should buy within their means.

But he recognised that there are some who are affected by the economic downturn and one option for them is to downgrade to a smaller unit.

More 2 and 3-room HDB flats will be coming on stream next year to cope with the growing demand for smaller flats.

Dr Maliki also said heavily subsidised rental flats should be given to those who are in dire need. - CNA /ls

Source : Channel Newsasia - 18 Nov 2008

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Credit card loans up by S$840m in 12 months to Sep

Credit card loans up by S$840m in 12 months to Sep

By May Wong,

SINGAPORE: Credit card loans in Singapore have grown by S$840 million in the year to September, up 18 to 19 per cent compared to the previous year.

The Monetary Authority of Singapore (MAS) is monitoring the situation closely and will maintain close contact with banks, said Finance Minister Tharman Shanmugaratnam.

The percentage of outstanding credit card balances rolled over for more than one month has remained around 15 per cent.

The charge-off rate, which measures credit card debt written off by banks and card issuers (as a percentage of the rollover balance), remains low at between 3 and 4 per cent.

Mr Tharman was giving these updates in Parliament in response to questions on Singaporeans’ debt accumulation in the past year in light of the flagging global economy.

He said the government is not too worried about the figures right now as they are in line with economic growth.

- CNA/ir

Source : Channel Newsasia - 18 Nov 2008

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