US bailout fails to unclog credit choke

US bailout fails to unclog credit choke

Dow ends 157 pts down as mood sours after rescue Bill is passed

By Goh Eng Yeow

US stocks retreated on Friday as investors, worried about the economic outlook, failed to be moved by the passing of the US$700 billion financial rescue plan. — PHOTO: XINHUA

FOR many investors, the unfolding drama on Wall Street resembles Hong Kong director Benny Chan’s latest movie Connected in many ways.
Those who stayed up on Friday night to watch the outcome of the US House of Representatives’ vote on a US$700 billion (S$1 trillion) bailout package would find one scene from the action-packed film particularly relevant.

In it, the car driven by the hero (Louis Koo) lurched out of control and went hurtling down a slippery slope. He managed to get out only seconds before the vehicle plunged down a cliff.

On Wall Street last Friday, feverish anticipation that the rescue package for financial institutions would be approved sent the Dow Jones Industrial Average up by as many as 313 points in early trading.

But the mood soured after the Bill was passed. The Dow slipped precipitously and ended 157 points down as selling accelerated in an alarming manner.

So what should investors do? Are financial markets careening out of control like Louis Koo’s car before it crashed?

The US$700 billion rescue package was supposed to inject a massive vote of confidence into financial markets, buy troubled assets off US banks and get them to start lending to each other again.

But the global credits markets have stayed frozen, despite efforts to unclog them.

The squalls unleashed by the death of Lehman Brothers and near-collapse of American International Group last month have transformed into a gale-force wind threatening even the world’s biggest banks.

The Libor rate - the interest rate for US dollars at which banks lend to each other - is almost double the US Federal Reserve’s short-term interest rate of 2 per cent.

There are reports that some banks are charging much higher rates and lending only on an overnight basis, in case their borrowers run into financial difficulties.

Even the world’s largest companies are not immune to the credit crisis.

Last week, rather than try to draw down on its massive credit lines, General Electric sold US$3 billion worth of preference shares to investor Warren Buffett on very generous terms.

The state government of rich and powerful California was forced to approach the US government for emergency funding to pay its bills.

To traders here, all these gloomy reports have a surreal feel. But beneath the sea of calm, there is increasing anxiety. Last week, the benchmark Straits Times Index fell 4.7 per cent to a 26-month low of 2,297.12.

Among the worst hit were biggies such as Keppel Corp and Sembcorp Marine which were considered to be strong defensive plays because they could ride out the financial storm with their fat order books.

But the credit crunch has also severely affected hedge fund managers, as they cope with the big flood of redemption orders from jittery investors. So it is no surprise that rig-builders should come under selling pressure, since these stocks were among their favourite picks last year.

How will it all end?

In Connected, Louis Koo was shown on top of a mountain resembling a Master of the Universe, back in charge of his destiny after his near-death experience.

For the central bankers charged with saving the global financial markets from hubris, a similar miracle will be appreciated.

Source : Straits Times - 06 Oct 2008

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Singapore GIC chief’s warning proves prophetic

Singapore GIC chief’s warning proves prophetic

Despite his July forecast of a recession coming true, Tony Tan still sees opportunities for fund

Dr Tan’s team is shopping for distressed assets in the US to boost long-term returns for the fund. — ST PHOTO: CAROLINE CHIA

WHEN Dr Tony Tan, executive director of Singapore’s biggest sovereign wealth fund, warned in July that the world might plunge into its worst recession in 30 years, many shrugged off his remarks as too gloomy.
Three months later, Dr Tan’s prophecy of doom is becoming a reality as the credit crisis ravages US and European banks and takes a toll on the global economy.

Dr Tan’s Government of Singapore Investment Corp (GIC) is meanwhile sitting with 7 per cent of its estimated US$300 billion (S$435 billion) portfolio in cash and another 26 per cent in G-7 government bonds.

Dr Tan, a 68-year-old former finance minister, professor and banker, and his team are now cautiously sifting through the financial carnage to shop for distressed assets in the United States in an effort to boost long-term returns for the fund.

GIC released its first performance report last month, after increased scrutiny of sovereign funds by Western lawmakers who want them to be more transparent, and revealed a 4.5 per cent real return in Singapore dollar terms over 20 years.

‘We should not assume that the worst is over and we continue to be watchful and prudent in our assessment of the economic risks and in our investments,’ Dr Tan, who is also the fund’s deputy chairman, told reporters at the launch of the report.

Mr Song Seng Wun, a Singapore-based economist with Malaysia’s CIMB, said Dr Tan’s long stint with the private and public sectors made him experienced enough to guide GIC through the crisis.

‘I don’t think you can compare him to an investor like Warren Buffett,’ he said. ‘But he is an old hand who has seen the ups and downs of the Singapore economy and it is good to have someone like him steering the ship.’

GIC, which manages part of Singapore’s foreign reserves, ploughed US$18 billion into UBS and Citigroup in December and January, though shares of the two banks have since fallen. By contrast, Mr Buffett, regarded as one of the world’s greatest investors, waited until the past two weeks to spend US$8 billion on shares in Goldman Sachs and General Electric.

Dr Tan has said US investments will remain a big part of his portfolio, but GIC has said it may use some of its cash to buy emerging market stocks in Asia.

Dr Tan joined GIC in 2005 after a stint as the chief executive officer of Singapore lender Oversea-Chinese Banking Corp and over a decade in politics, which followed a PhD in applied mathematics.

Dr Tan, who has his hair slicked back and wears vintage dark-rimmed glasses, became finance minister and was tipped by Singapore’s first prime minister Lee Kuan Yew as his successor. The post eventually went to Mr Goh Chok Tong in 1990.

‘He has a quick brain and there is a decisive quality about him. He listens, takes all points of view and decides,’ Mr Lee said of Dr Tan in 1988. Mr Lee is the chairman of GIC but leaves its day-to-day running to Dr Tan.

GIC has limited its losses on UBS and Citi by taking advantage of price reset clauses in its original agreements. Dr Tan has said GIC has room for investing in another bank.

‘We always look at the risk first,’ Dr Tan said in January. ‘Our philosophy is if you look after the downside, the upside will look after itself.’

REUTERS

Source : Straits Times - 06 Oct 2008

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Banks dangle attractive fixed deposit rates

Banks dangle attractive fixed deposit rates

Banks see term deposits as alternative source of funds amid credit crisis

By Gabriel Chen

BANKS that are hungry for cash amid the global credit crunch have unleashed a string of eye-catching promotional rates for fixed deposit accounts.
This spells good news for customers with cash parked in bank deposits.

The interest rates on offer may still be well below the inflation rate, but they are far higher than typical term deposit rates in Singapore.

And amid severe stock market volatility and a cooling property market, cash in the bank is a fairly safe investment.

Take Standard Chartered Bank (Stanchart), for example, which is dangling a rate of 1.688 per cent a year for a 100-day tenor on a deposit of at least $50,000.

If you have more money to put in the bank, you stand to reap a solid 1.958 per cent a year for a minimum deposit amount of $500,000 over two years.

This means after two years, $500,000 placed with Stanchart should return a depositer close to $520,000.

At Citibank, customers enjoy a rate of 1.65 per cent a year on a one-year time deposit of $10,000 and above if they set up a new salary credit account with the bank.

At Maybank, customers who place $25,000 to $500,000 receive a healthy interest rate of 1.9 per cent a year, for a three-year term.

Consumers even get their interest paid upfront, said Ms Helen Neo, Maybank Singapore’s head of consumer banking.

‘The upfront time deposit promotion is to reward our customers so that they can re-invest their interest earned. Customers would also appreciate receiving their interest earlier rather than upon maturity,’ she said.

Some local banks have also got into the fixed deposit promotional rates frenzy.

United Overseas Bank, for instance, is offering customers 2 per cent a year on a three-month fixed deposit, and 1.36 per cent a year on a 15-month fixed deposit when they place a minimum of $25,000 for each deposit. This dual-term fixed deposit promotion is available only for a limited period, the bank said.

Consumers point out that these rates are attractive, given that average three-month fixed deposit rates and savings rates from banks in Singapore can be as low as 0.425 per cent and around 0.25 per cent respectively.

‘I might move about $50,000 or more into one of these promotional offerings, because deposit rates are so low and inflation is eating away at my money,’ said 26-year old business owner Justin Kho.

Mr Kho, who currently has a one-month fixed deposit with DBS Bank yielding around 0.325 per cent, said he would review his options with the bank, in the light of these better returns.

Analysts say it is understandable why some of these banks are dishing out these tantalising returns.

‘The global credit crunch and interbank liquidity squeeze may have contributed to banks turning to fixed deposits as an alternative source of near-term funding,’ said OCBC Bank economist Selena Ling.

Basically, with the tighter credit conditions, banks are unwilling to lend money to each other, and this has the effect of making money harder to borrow.

This scarcity of short-term liquidity has seen the three-month Singapore Interbank Offered Rate (Sibor) jump by one percentage point in just a month to more than 2 per cent.

With banks needing fresh capital for their operational needs or to shore up their balance sheets, money roped in from fixed deposits would certainly come in handy.

‘If you’re a foreign bank, you either borrow from the interbank market or tap your own deposit base for capital, but unlike local banks, foreign banks may not have such a large deposit base,’ said Mr Joseph Chong, chief executive of financial advisory firm New Independent.

Phillip Securities Research analyst Brandon Ng suggested that DBS, for instance, has a huge retail deposit base. This could be one reason why the bank has not been launching promotional fixed deposit rates, unlike foreign banks.

Not surprisingly, DBS said it has not seen a rise in fixed deposits.

Stanchart consumer banking head Ajay Kanwal said that in the last month, the bank has seen a quick rise in deposit interest rates, mainly on account of the rise in three-month Sibor.

That, he said, is in turn influenced by two key factors: United States interest rates and domestic loans demand.

Source : Straits Times - 06 Oct 2008

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Thailand police arrest key anti-govt leader

Thailand police arrest key anti-govt leader

PAD leader Chamlong nabbed as he arrives to vote in Bangkok election

By Nirmal Ghosh, Thailand Correspondent

PAD strategist Chamlong Srimuang cast his vote in Bangkok’s gubernatorial polls yesterday, before the police took him away. His arrest may have derailed planned talks with the government, which had seemed last week on the verge of a truce with the alliance. — PHOTO: ASSOCIATED PRESS

BANGKOK: Police yesterday arrested a key anti-government figure as he turned up to vote in Bangkok’s gubernatorial election, in a move that could heighten the country’s political tension.

Polls opened across the capital at 8am, and there was immediate drama at a polling station in the historic Dusit district when former general Chamlong Srimuang arrived to cast his vote and was informed by police that he was under arrest.

Mr Chamlong, a former Bangkok governor, was among nine leading figures of the People’s Alliance for Democracy (PAD) who had arrest warrants issued against them in late August. PAD had invaded a government TV station and three airports before overrunning Government House, where the coalition and thousands of its supporters remain encamped.

The nine were accused of inciting unrest and trying to overthrow the government, charges that amount to treason and can carry the death penalty. However, police were unable to execute the warrants since they refused to leave the Government House compound.

Mr Chamlong, 73, was taken away in a police car after casting his vote. Police are expected to apply to a court today for permission to hold him for another 12 days.

Mr Abhisit Vejjajiva, leader of the Democrat Party, which has been overtly sympathising with the PAD, said he was concerned that the arrest would worsen the political crisis. Former prime minister Anand Panyarachun also said the arrest would heighten the political tension.

The PAD has accused the government of Premier Somchai Wongsawat of acting as a proxy for his brother-in-law, ousted former premier Thaksin Shinawatra.

Newly-appointed Deputy Premier Chavalit Yongchaiyudh was reported to be on the verge of reaching a truce with the PAD. Last week, Mr Chamlong even welcomed overtures from Mr Chavalit.

But yesterday’s arrest might have derailed the efforts. Mr Chamlong said following his arrest that PAD will cancel any planned talk with the government, The Nation reported.

‘He said there was no need to negotiate with the government now. He said the talks are no longer necessary and all protesters must remain within Government House,’ Mr Suriyasai Katasila, another PAD co-leader, was quoted as saying.

In a pre-written note read out on the PAD’s television channel, Mr Chamlong also urged his supporters not to quit. ‘We are gathering to repay the country and to make merit for Thailand,’ he said.

On Friday, another PAD co-leader Chaiwat Sinsuwong was arrested after he was spotted at a toll booth in the capital.

One source said police had been waiting to evaluate the PAD’s reaction to Mr Chaiwat’s arrest. While the PAD denounced the arrest and alleged a conspiracy to derail embryonic negotiations with the government, there was no greater mobilisation among supporters.

Later yesterday morning, another PAD co-leader, Mr Sondhi Limthongkul, vowed that demonstrations would continue until the government falls. ‘I am warning you, the government and police, that you are putting fuel on the fire. Once you arrest me, thousands of people will tear you apart,’ he told his supporters.

The developments could further destabilise Thai politics. But taken together with other recent events, they could equally signal a scripted behind-the- scenes manoeuvre to find a way out of the political impasse.

PM Somchai met for 45 minutes last week with Privy Council president Prem Tinsulanonda, believed to be one of the key people pulling strings from behind the scenes - and tacitly supporting the PAD.

Separately Mr Somchai proposed a new Constitutional Drafting Assembly to consider changes to the Constitution to promote political reform.

Meanwhile in the gubernatorial election, incumbent Apirak Kosayothin, yesterday looked on course to comfortably winning a second term. Exit polls showed Mr Apirak - a marketing specialist and poster boy for the Democrat Party - set to win over 40 per cent of the vote.

The polls showed Mr Prapas Chongsa-nguan of the ruling People’s Power Party (PPP) a distant second place, followed by independents Chuwit Kamolvisit - a former sex massage tycoon - and Kriengsak Chareonwongsak, a former Democrat Party MP.

Source : Straits Times - 06 Oct 2008

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Five times more rental Singapore flats recovered

Five times more rental Singapore flats recovered

147 units seized from tenants who made profit from illegal sub-letting

By Jessica Cheam

MORE rental flat cheats are being exposed, with the number of flats seized by the Government for illegal subletting increasing five-fold this year.
New figures obtained by The Straits Times show that 147 rental flats have been recovered by the Housing Board as at end August, compared to just 28 flats recovered last year. Less than 20 flats were seized in 2005 and 2006 each.

This year’s number is set to go up further as the HDB steps up its efforts to weed out errant tenants who abuse their rental flats to make profits.

Rental flats rates currently range from $26 to $205 for a one-roomer and $44 to $275 for a two-roomer, depending on household income and other factors.

There is a long waiting list of more than 4,000 applicants for these flats, which the Government reserves for needy, low-income families that cannot afford to buy a home or pay market rental rates.

What rental cheats do is sublet these rental flats at market rates instead of staying in them. Many flats are being sub-let for about $1,000 a month, netting their original tenants handsome profits.

The Straits Times had reported in May a surge in the number of such tenants illegally sub-letting rental flats to cash in on the demand for low-priced housing.

Demand has spiked on the back of last year’s property boom, which has upped rentals islandwide, and an influx of foreign workers looking for cheap accommodation.

Anecdotal evidence, based on interviews with residents, shows that in some estates, as many as one in five rental flats were illegally rented out, often to foreign workers or students from Malaysia, China and India.

‘It’s great that HDB is discovering more of such cases,’ said MP for Pasir Ris-Punggol GRC, Mr Teo Ser Luck.

‘These units shouldn’t be used for profit and denied to a citizen who is really in need,’ he said.

The HDB has stepped up its enforcement blitzes, extending its net to more areas across the country. This was partly in response to a call-for-action by MPs, residents of rental blocks and genuinely needy Singaporeans who have been left waiting in the queue.

‘I fully support HDB’s enforcement actions. Rental flats shouldn’t be used as a money-making machine,’ said North West District Mayor Dr Teo Ho Pin, who is also MP for Bukit Panjang.

HDB said the increased awareness of such abuse this year has helped in its enforcement, with more residents calling its hotline. Of the 147 units recovered, 31 units - or 21 per cent - could be traced to feedback from residents.

The increase in such cases comes at a time when local demand for rental flats have escalated - a ‘worrying trend’ singled out by Prime Minister Lee Hsien Loong in his National Day Rally speech.

The number of people seeking such flats has ‘tripled’ in just a year, he said. There are about 4,387 in the waiting list as at June, with a waiting time of nine to 18 months. In 2006, the wait was just two to six months.

HDB has since said it will ramp up its current stock of rental flats from 42,800 to 49,860 by end-2011. Tenants illegally renting out their home can lose the flat and face a five-year ban from renting or buying HDB property.

Source : Straits Times - 06 Oct 2008

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Help with electricity hikes on the way

Help with electricity hikes on the way

MEASURES to help ease the impact of the ‘rather large’ hike in electricity tariffs could be introduced in next year’s Budget.

Finance Minister Tharman Shanmugaratnam hinted at it yesterday during a dialogue with residents of Toa Payoh East.

He said: ‘We know the large increase this quarter has unsettled many people. We will take that into consideration in next year’s Budget when we decide on the U-Save (Utilities-Save) rebates and the total package solution for the economy.’

Electricity tariffs shot up 21 per cent last Wednesday - the biggest one-time increase in seven years.

Grassroots leader Rashid Hussein, 67, questioned the timing of the hike, given that oil prices had just gone down.

Mr Tharman acknowledged that it was ’sudden and surprising for most people’. But he placed it in context, saying that in the course of this year, the price of electricity had risen ‘much less’ than oil prices.

‘If you take the year as a whole, you take the electricity tariffs this year compared to last year’s, the increase is going to be 26 per cent,’ he said.

In contrast, oil prices from January to September had gone up by 45 per cent, he noted. ‘So the electricity increase has been reasonable, compared to the oil price increase.’

He reiterated the Government’s stance on not subsidising oil prices, noting that the practice had proved problematic for countries in the region and for developed countries.

‘When they try to subsidise, it either leads to shortage because the suppliers don’t want to supply, or it leads to the government having a bigger and bigger bill on its budget and eventually taxpayers have to pay,’ he said.

Instead, Singapore’s approach is to set a realistic price based on the global market price, but help the poor through measures such as the U-Save rebates.

For instance, families in one or two-room HDB flats would have received rebates amounting to four to five months of their utilities bills, he said. ‘People say the Government gives with one hand and takes with another,’ he said to smiles. ‘But the hand giving is much much bigger than the hand taking back.’

Mr Tharman also held out hope that electricity tariffs would go down, on the heels of lower oil prices. ‘Many people have forgotten that last year, for six months, the tariffs went down, so it is not always going up.’

Source : Straits Times - 06 Oct 2008

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US bailout plan fails to dispel investors’ fears

US bailout plan fails to dispel investors’ fears

Plan may spark bank lending again, but damage to economy seen as enormous

By ANDREW MARKS

NEW YORK CORRESPONDENT

INVESTORS had been waiting hopefully and impatiently over a week for the US Congress to approve the government’s plan to buy up to US$700 billion worth of the illiquid assets that have been weighing down banks’ balance sheets and operations. And when the approval came, their reactions were rather subdued.

‘Stock market valuations are attractive right now by many measures, making them potentially compelling investments, but given the extremely negative sentiment weighing on stocks right now, a sustained rebound looks increasingly unlikely given the market turmoil.’

- Tobias Levkovich,
Citigroup’s chief equity strategist

But if last Friday’s reaction to the passage of the financial bailout plan was any indication of what the stock market faces over the next several weeks, the hard times on Wall Street could be just getting started.

‘Getting the bailout plan in place is obviously vital to keeping the financial system, both here in the US and abroad, from an outright collapse, but no one is under the illusion that the government rescue means we’re okay again. We have a long period of struggle ahead of us,’ said Hugh Johnson, the chief investment strategist at Johnson Illington Advisors, who may request his clients’ permission to reduce their equity allocations below the minimum 35 per cent level to which he has already lowered their portfolios.

Indeed, while most Wall Street analysts and economists agree that the Troubled Asset Relief Program, or TARP, passed by Congress on Friday should ease constraints in the nearly frozen credit markets, encouraging banks to begin lending to one another again and to businesses and consumers as well, enormous damage has already been done to the US economy over the past month.

‘Considering how much of a fragile condition the economy was in prior to the devastation we’ve seen the past few weeks, the economic fundamentals are in pretty bad shape now,’ said Joel Naroff, president of Naroff Economic Advisors. ‘The September jobs report offered ample proof that the credit crisis has moved into the mainstream of the economy. We’ve got the potential for a steep and long recession and are likely to see more months of job losses before conditions turn around,’ he noted.

That gloomy assessment seemed to be the majority opinion on Wall Street last Friday, and with a third quarter earnings season that is expected to be a brutal one getting it’s unofficial kick-off tomorrow, when Alcoa reports its quarterly profits, investors should brace themselves for a continuation of the stock market’s downward spiral.

‘Stock market valuations are attractive right now by many measures, making them potentially compelling investments, but given the extremely negative sentiment weighing on stocks right now, a sustained rebound looks increasingly unlikely given the market turmoil,’ said Tobias Levkovich, Citigroup’s chief equity strategist, who added that he doubts the market will reach his price targets of 1,475 in the S&P 500, and 13,250 in the Dow, which he’d already lowered by 5 per cent each on August 15.

There could be a bargain hunting rally or two this week, as investors venture into the healthier companies in the heavily battered and, some say, oversold financial services sector. But investors will be doing themselves a disservice if they expect stocks to recover even the heavy losses sustained over the past two weeks as Wall Street awaited the outcome of the bailout plan negotiations.

‘The recovery from a bear market typically takes about twice as long as the fall,’ said Mr Johnson.

If Friday’s trading marked the bottom of the bear market, investors did their best to dig the hole as deep as possible. After rising as much as two hundred points earlier in the day, the Dow Jones began a midday swoon that only worsened after passage of the bailout bill, ending with a loss of 157.47 points, or 1.5 per cent, to close at 10,325.38. The S&P 500 lost 15.05 points, or 1.35 per cent, to 1,099.23, while the Nasdaq lost 29.33 points, or 1.48 per cent, to end the week at 1,947,39.

For the week, the Dow lost 7.3 per cent, its biggest weekly drop since July 2002, and is now down 22.16 per cent for the year. The S&P 500 slumped 9.4 per cent, its lowest close in four years, and is down more than 25 per cent year-to-date. The Nasdaq, which lost 11 per cent last week, is down 26.58 per cent for the year.

The stock market could get a quick boost if investors see that banks are willing to lend to each other, so Wall Street will be paying close attention to the London Interbank Offered Rate, known as Libor, which now stands at 3.93 per cent, an extraordinary 144 basis points higher than its 2.49 per cent rate just a month ago.

The fading economy will draw investors to several key pieces of economic data scheduled for release this week, starting tomorrow with the minutes from the Federal Reserve’s most recent meeting, which along with a Wednesday speech by Fed chairman Ben Bernanke could provide insight into whether the Fed will lower rates at its next meeting at end-October.

Consumer credit is also to be reported tomorrow. Pending home sales are released on Wednesday, and weekly jobless claims and wholesale trade are due to be reported on Thursday. Friday brings international trade and import prices.

It’s a light week for the beginning of third-quarter earnings reporting season, with only Alcoa and General Electric scheduled to release profit reports tomorrow and Friday respectively, representing the Dow Jones Industrials, and only six other S&P 500 companies reporting.

But that will be enough to get investors focusing on the estimated third-quarter profit contraction of 4.8 per cent. Most of the negative growth, of course, can be laid on the doorstep of the financial sector which is expected to post a drop of 68 per cent in profits, or a US$27 billion plunge, from the third quarter in 2007.

Source : Business Times - 06 Oct 2008

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Singapore Private home buyers cautiously optimistic about Singapore’s property sector

Singapore Private home buyers cautiously optimistic about Singapore’s property sector

By Wong Siew Ying,

SINGAPORE: Early estimates show prices of private residential properties fell for the first time in four years in the third quarter. Concerns are that times ahead may be rough.

Still, about one-third of MCL Land’s latest mid-range condominium project - The Peak@Balmeg - was snapped up over the last two days during its private launch.

Among the visitors at the launch were Panneer Selvi and her family, who have been shopping for their ideal home.

Over the last four months, they have visited 12 condominium projects, comparing prices, features and home loan packages.

Panneer Selvi said: “We have not made up our mind to buy one, we are checking with the bankers, at the same time looking around for a suitable unit.”

Some visitors said they are not overly concerned with negative market sentiments. And with prices of private apartments expected to fall over the next six months, they hope to cash in on a good deal.

Michael Tan, a potential home buyer, said: “I am not plunging into it. Sometimes buying a home, if it’s for a home, then there are other considerations other than just pricing alone.”

Ronald Wee, a property investor, said: “I do not foresee a slump like in 2003 or 2004. It’s just that if you have a good piece of property with a good location and nice view, I guess mid- to long-term is still very promising, especially the IR (integrated resort) is coming up next one to two years.”

Wee Hian Woon, a potential home buyer, said: “The market condition is so bad, the financial market is in the news all the time, the general sentiments I think are quite weak, so the feeling is that prices are likely to drop, then go up.”

MCL Land said it has yet to decide whether the project will be launched for public sales. The 180-unit project, going for S$1,000 per-square-foot, will be completed in 2011.

Overall, many home hunters are still confident that Singapore will be able to weather the financial crisis and economic slowdown in the US because the country has strong fundamentals in place.

- CNA/ir

Source : Channel NewsAsia - 05 Oct 2008

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JTC completes S$20m state-of-the-art theatre in Fusionopolis

JTC completes S$20m state-of-the-art theatre in Fusionopolis

By Valarie Tan,

SINGAPORE: Beijing has “The Bird’s Nest”. Singapore’s Esplanade is sometimes referred to as “The Durians”. Now, meet “The Egg” - Singapore’s new S$20m venue for arts performances.

The oval-shaped Genexis Theatre is sandwiched between two office buildings at Fusionopolis at one-north, an upcoming R&D hub in Singapore. It is the first theatre built by JTC, Singapore’s largest industrial landlord.

JTC’s Assistant CEO, Philip Su, said: “They (the tenants) wanted a space for them to launch their products, they wanted a space for them to hold specific conferences.

“And because of the proximity to all these scientists, engineers, media people, we wanted to position this theatre together with the common area here to be a science-based, arts-based location. So now, you can have a science festival here and an arts festival here.”

JTC had initially planned to build an auditorium, but decided to double their budget and go for an experimental theatre instead, since there is a demand for it.

Mr Su said: “Most of the performing arts centres, venues, they’re very much restricted to a fixed configuration. And those that are not fixed, whether it’s the Arts House or the Substation, you find that the numbers for the audience are not big enough.

“Here we want to marry both, the intimacy of a good performance with the closeness to the artists, and yet in the same breath be able to seat more people 50-70 cm away from the performances.”

Research for the theatre started in 2005. Surveys were done with several arts groups and venues in Singapore, including The Esplanade, which said that an experimental theatre like Genexis would add value to the local performing arts scene.

The theatre’s unique features include 560 adjustable seats which can be moved in any direction, or kept, depending on the event; 400,000 timber beads which line the curved walls as acoustic padding; and a cargo lift just behind the curtains so trucks can load up props minutes before a performance.

The Genexis also has a wired lighting grid, possibly the first built for a theatre in Singapore. Technicians can actually walk on it in any direction to reach and adjust the over 30 lights in the house.

Ahead of its launch on October 17 with Fusionopolis, Genexis has already been booked for a week-long science festival and a Christmas performance.

- CNA/ir

Source : Channel NewsAsia - 05 Oct 2008

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Bailout Bill passed but outlook remains bleak - New York

Bailout Bill passed but outlook remains bleak - New York

Some say US govt’s action comes too late and it is unclear if plan will restore confidence

New York - The United States government may have enacted a landmark US$700 billion (S$1 trillion) bank bailout, but jittery investors remain doubtful if it is able to contain a panic that began on Wall Street and spread to become a global financial crisis.
‘This probably comes a bit too late. If this had been done earlier, it probably would have had a much bigger impact in restoring confidence,’ said economist Anna Piretti, at BNP Paribas, of the plan passed by the US House of Representatives last Friday (early yesterday morning, Singapore time).

Stocks, which had been higher before the vote, dropped, with the S&P 500 index closing at its lowest level in almost four years. The Dow declined 157.47 points, or 1.5 per cent, to 10,325.38. The dollar was also in retreat.

Signs of a looming recession continue to spook investors,and analysts cautioned that it was still unclear whether the US bailout plan would work as advertised.

US Treasury Secretary Henry Paulson said he would move quickly to buy up distressed assets from banks. But Mr David Kelly, chief market strategist of JPMorgan Asset Management, said: ‘There are more questions than answers out there still. Even if the banks do participate, how willing will they be to make new loans into the economy if they can get rid of the bad ones?’

In signs of the spreading crisis, the state of California said it was running out of money, France said the world stood on the ‘edge of the abyss’, and European leaders were split yesterday as they headed for a summit to seek a collective response to the banking sector’s difficulties.

A collapse in the US housing market and resulting bad mortgages have shattered confidence in the financial sector, with banks across the US and Europe needing support from governments or outside investors.

Interbank lending and credit to businesses and private individuals have all but seized up.

A Labour Department report last Friday that the US economy lost 159,000 jobs last month added to the gloom. Some economists are predicting the US economy will contract in the months ahead. Those developments did not bode well for the corporate earnings that investors watch closely, creating a dour outlook.

‘Investors still have to face some significant challenges in the broad economy that can’t be magically removed by a group of our congressional leaders,’ said Bessemer Trust’s chief investment officer Marc Stern.

Analysts said it might take several days before the effect of the Bill’s approval could be seen on the credit markets.

On Friday afternoon, the signals were mixed: High-yield bonds eased slightly but Treasury bills moved against expectations, becoming more expensive as investors remained nervous about emerging from the safety of government notes.

It was too soon to tell whether interest rates that banks charge one another for overnight loans - a crucial measure of the flow of credit to businesses and consumers - would fall.

Said market strategist Douglas Peta of the bailout plan: ‘Credit is the lifeblood of the economy. Until the short-term funding markets start behaving regularly, and until banks are willing to play their role in the system, the direction in stocks is going to be down.’

New York Times, Reuters

Source : Straits Times - 05 Oct 2008

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House approves US$700b rescue Bill

House approves US$700b rescue Bill

The amended financial package authorises the government to buy troubled assets

In this photo rendered from video, the final vote tally is shown on the floor of the House of Representatives in Washington.

WASHINGTON: The US House of Representatives passed the eagerly-awaited US$700 billion (S$1 trillion) financial market rescue package yesterday (early this morning Singapore time), sending the Bill to President George W. Bush to be signed into law.
Needing 218 votes to pass, Congress passed the Bill by a majority of 263 votes to 171.

The legislation, a bipartisan effort to restore confidence in the nation’s banking system, authorises the government to buy troubled assets from financial institutions reeling from a record number of home foreclosures.

The measure also contains a US$149 billion package of tax breaks, a higher limit on federal bank-deposit insurance and changes in securities law.

It also restates securities regulators’ authority to suspend asset-valuing rules that corporate executives blame for fueling the crisis.

Some of these features were added to the Bill after it failed by a dozen votes to gain passage through Congress earlier this week. Mr Bush made more than a dozen phone calls to Republican lawmakers to lobby for the Bill.

The Bill’s defeat on Sept 29 caused a 778-point drop in the Dow Jones Industrial Average, prompting dozens of lawmakers to reverse their vote on the legislation, the government’s largest intervention in the markets since Franklin Roosevelt’s New Deal.

The Senate approved the revised Bill on Wednesday by an overwhelming majority of 74 votes to 25.

Before the tally began, vote counters said there was enough support for the plan to clear Congress. More than two dozen House members said they were dropping their earlier opposition to the plan.

‘I don’t like this at all,’ said Tennessee Republican Zach Wamp, who now supported the measure. ‘As a matter of fact I hate it. But we’re out of options. Congress has to act.’

‘The issue is stopping the panic,’ said Mr Adam Posen, deputy director of the Peterson Institute for International Economics in Washington.

‘The plan’s not perfect, but it’s certainly better than doing nothing. Now Treasury has to be very aggressive about purchasing a wide range of assets very quickly.’

Indicating its expectation that the Bill would pass, the Dow Jones Industrial Average pared early gains of more than 250 points immediately after the passage of the Bill. At 1.45am Singapore time, the Dow was up 120 points.

Even as US lawmakers sew up legislation to aid the financial markets, their counterparts in Europe are just starting the process of coming to grips with the current credit crisis.

France will hold a summit of European leaders today, amid sharp disagreement over how to respond to the crisis.

French President Nicolas Sarkozy will host a meeting in Paris of counterparts from Britain, Italy and Germany, in addition to the European Central Bank president Jean-Claude Trichet and Luxembourg Prime Minister Jean-Claude Juncker to prepare a European position on the financial crisis.

Mr Sarkozy’s office said the summit would help European members coordinate positions before next week’s meeting of rich world finance ministers in Washington.

Mr Sarkozy will ‘propose Europe secure its banking systems, unfreeze credit’ and coordinate its economic and monetary strategy, French Prime Minister Francois Fillon told lawmakers yesterday.

The build-up to the Paris talks, meanwhile, has revealed deep divisions between the European powers on how to protect the banking sector, with Germany dismissing calls for a joint European fund to bail out failing banks.

On Thursday, the Dutch government said it had come up with the idea, while France angrily denied that it had ever suggested such a plan, as had been claimed Wednesday by a European official in Berlin.

Many media commentators blamed France for the confusion, suggesting Mr Sarkozy was so keen to take credit for leading Europe’s response to the crisis that he had forged ahead with summit plans without consulting his partners.

Paris has been keen to develop a European response to the credit crisis but its European partners have so far preferred unilateral and bilateral measures to protect their own institutions and are looking forward to the G7 meeting of world finance ministers in Washington next week.

Separately, South Korean President Lee Myung Bak proposed yesterday that his country’s Finance Minister meet counterparts from China and Japan to discuss their response to the crisis.

‘It would be beneficial to seek a meeting of finance ministers of South Korea, China and Japan in order to strengthen regional cooperation,’ Mr Lee said at a meeting of economic ministers, according to his spokesman.

BLOOMBERG, AGENCE FRANCE-PRESSE, ASSOCIATED PRESS

Source : Straits Times - 04 Oct 2008

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AIG keeps its Asian life insurance business

AIG keeps its Asian life insurance business

Customers in Singapore unlikely to have their policies transferred to another insurer

By Gabriel Chen

Last night’s announcement that troubled American parent AIG will not sell off its coveted foreign life insurance units offers a new measure of certainty to AIA policyholders here, after many of them besieged its offices two weeks ago to redeem policies.

AIA policyholders in Singapore are now unlikely to have their policies sold or transferred to another insurer, after their insurer’s troubled American parent said last night it will not sell off its coveted foreign life insurance units.
This announcement offers a new measure of certainty to policyholders at the end of what has been a heartstopping two weeks that began with the near collapse of American Insurance Group (AIG) in the United States.

Staff members at AIA Singapore were also jubilant last night after AIG, one of the world’s largest insurers, said in a statement that it will retain majority ownership of the lucrative Asian operations but will seek ‘minority strategic investors’ to take a slice of the business.

This will let AIG retain the jewels in its crown - the foreign insurance units - while easing some of the financial pressure by attracting new investors.

One Singapore agent, who is also a policyholder, told The Straits Times: ‘It comes as good news. For some of us, AIA is our first career, and all these events over the past few weeks have a major disruption to our lives.’

The 39-year-old said the news was well received by many of his colleagues and his clients: ‘Confidence is coming back, and we’ve been receiving new business premiums already.’

AIA president Mark Wilson said in a statement that the ‘announcement is good news for AIA, our policyholders, staff, agents and distribution partners. We are delighted to be able to draw a line under the uncertainty of the last few weeks.’

AIA Singapore has had a traumatic time of late with clients besieging its offices two weeks ago to redeem policies after AIG was bailed out by the US government to the tune of a US$85 billion (S$123 billion) loan.

There were fears that AIG was so short of ready cash that it would reduce the capital of its subsidiaries or tap into its booming Asian operations for cash.

A series of statements from AIA and the Monetary Authority of Singapore eventually calmed the panic but the mood of uncertainty remained over the firm.

That will have been relieved, but only partly, by yesterday’s announcement out of New York.

Lawyer Valerie Quek, 26, is among a group of AIA policyholders that say they feel ’safer’ now that AIA Singapore will not be sold to another insurer.

‘I like the AIA service and in this kind of environment now, I don’t want more uncertainty,’ she told The Straits Times.

Other policyholders were more nonchalant, saying they had already braced themselves for change.

‘I guess the news means that we don’t have to wonder about another insurer taking over our policies,’ said AIA policyholder Low Ee Ping, 32.

‘But I was not really worried about that, because I think the transition to another insurer would have been smooth because so many people have AIA policies,’ she added.

‘I don’t think it would have been allowed to descend into chaos.’

But Mr Ng, 35, an AIA agent and policyholder, said that despite the upbeat mood in the office, there was still caution in the air. ‘It’s good news presently, but it might only be temporary. AIG might still sell AIA later, and for some of us, that is a big cause for concern,’ he said.

Mr Ng cited another potential concern - the high interest rate AIG has to pay the US Federal Reserve. This stands at 8.5 percentage points over Libor, the rate banks lend to each other.

This rate has soared to about 5 per cent amid the financial crisis so AIG’s total interest rate has hit 13.5 per cent.

It has drawn US$61 billion on the credit facility so far.

AIA is one of the largest insurers here with 4,000 agents and 2.6 million policies.

Across Asia, AIA has over 20 million policyholders and over 200,000 agents, according to Mr Wilson.

AIG chairman and chief executive Edward Liddy said in New York yesterday that the firm is refocusing on its traditional strengths in property and casualty underwriting.

‘We have a number of remarkable businesses with leading market positions and significant competitive advantages that could not be recreated today,’ he said.

AIG plans to retain its US property and casualty and foreign general insurance business.

The sale of other units will be used to pay off the government loan, while additional funds will be used to help address the insurer’s capital structure.

Source : Straits Times - 04 Oct 2008

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Temporary dorm in Serangoon Gardens

Temporary dorm in Serangoon Gardens

THE Ministry of National Development (MND) has decided to convert a former school site in Serangoon Gardens into a temporary dormitory for foreign workers.

Following concerns raised by residents in a petition against the conversion in early September, various measures will be put in place. These include the construction of a new access road, a reduction in the site area, and sealing off of the existing entrance at Burghley Drive.

The dormitory’s capacity will be capped at 600 initially, and it should be ready within a year to serve manufacturing and services factories in the Ang Mo Kio area. If there is demand, the government may consider raising its capacity to a maximum of 1,000.

Speaking at a news conference yesterday, National Development Minister Mah Bow Tan emphasised the balance to be maintained. ‘We need foreign workers, we need to provide adequate housing. We also need to make sure disamenities created in residential areas, whether HDB or landed, are minimised.’

While permanent purpose-built dormitories are being developed, temporary ones like the Serangoon Gardens site, with a lease of up to five years, have been sought to meet the high demand.

Fewer than 10 other temporary sites are being considered and Mr Mah said assessments of these should be completed in a month’s time.

Source : Business Times - 04 Oct 2008

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AIG to morph into global property, casualty firm

AIG to morph into global property, casualty firm

It will sell non-core business units to pay off US$85b govt loan

(CHARLOTTE, North Carolina)

INSURER American International Group said yesterday that it plans to sell off its ‘non-core’ business units to pay off its massive government loan.

The plans, expected by Wall Street, drove up AIG’s shares 19 per cent in mid-day trading. But it now leaves investors wondering if the sales will be enough.

AIG, one of the world’s biggest insurers, said that it plans to retain its US property and casualty and foreign general insurance businesses. The New York-based insurer also said that it plans to retain an ownership interest in its foreign life insurance operations.

AIG, once the world’s largest insurer, will refashion itself into a global property and casualty company with a stake in an overseas unit that sells life policies in China, South Korea and India, chief executive officer Edward Liddy said in a conference call. AIG may also sell its plane-leasing unit, consumer finance division, US car insurer, a reinsurance business and asset manager, he said.

‘We won’t exactly be the AIG of old, but we’ll have a very secure position,’ Mr Liddy said. ‘This is going to be a formidable company that emerges from this.’

‘I think what the Federal Reserve has provided us has been very generous and we are going to do everything we can not to have to go back to them.’

He added that he didn’t expect a fire sale and buyers would have to assume the debt of AIG businesses they acquired.

However, he added that ‘we’ll sell as many assets as needed to repay our obligations’.

AIG shares were up 76 US cents at US$4.76 in mid-day trading.

‘We are giving AIG credit that it can use its Fed-supported liquidity to pursue a measured and deliberate asset sale programme,’ said CreditSights analyst Rob Haines in a research note.

So far, AIG has announced only one deal, a sale of its 50 per cent interest in London City Airport to its partner in the venture, Global Infrastructure Partners. It bought the stake as a joint venture with the private-equity fund in 2006 for a total price estimated around US$1.4 billion. The companies didn’t disclose the terms of the deal.

However, it may sell its remaining stake in Blackstone Group, in which it spent US$150 million in 1998 for a 7 per cent interest. AIG recorded a US$398 million gain for the second quarter last year from selling some of the shares of the company which went public last year.

Mr Liddy said that the company has been contacted by ‘numerous’ parties regarding possible sales of businesses, and AIG will try to sell its operations to ‘brand-name’ buyers who have strong ratings and balance sheets.

He added that he wouldn’t be surprised to see sovereign wealth funds providing resources to acquire some AIG businesses.

One unit that analysts have said could be sold is International Lease Finance Corp., which leases out more than 900 aircraft with asset values topping US$44 billion at the end of the second quarter.

Another unit that could possibly be sold is consumer-focused lender American General Finance Corp. Other businesses that AIG operates include life, commercial car and accident and health insurers.

On the brink of failure last month, AIG was bailed out when the government offered it a two-year US$85 billion loan to avoid bankruptcy during one of the most tumultuous times during the ongoing credit crisis that saw Lehman Brothers Holdings Inc file for bankruptcy protection and the sale of Merrill Lynch & Co to Bank of America Corp.

In return for the loan, the government received warrants to purchase up to 79.9 per cent of AIG.

As at Sept 30, AIG had drawn US$61 billion on the credit facility, of which about US$54 billion has gone towards its securities lending and financial products area. The rest of the money has been for other liquidity needs amid an ‘unprecedented’ freezing of credit markets, Mr Liddy said.

While the sale of some of AIG’s businesses will be used to pay off the outstanding government loan, additional funds will be used to help address the company’s capital structure, Mr Liddy said.

AP, Bloomberg, AFP

Source : Business Times - 04 Oct 2008

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Smells like recession

Smells like recession

US lawmakers okay US$700b rescue plan but credit crunch knocks out economy

By CONRAD TAN

(Singapore)

THE bailout package has a nice ring to it, but economists now say that it is nowhere near enough to get the global or even the US economy out of jail.

The massive US$700 billion rescue plan aimed at saving the US financial sector returned yesterday before the House of Representatives with fresh sweeteners to sway them. It worked.

Having thrown out the plan last week and stunned stock markets across the world, the lawmakers voted yes in its latest incarnation by a margin of 263-171.

The Senate had already approved the plan earlier this week. So what happens next?

Quite simply, more trouble, economists say - with a US recession now increasingly likely. This was the case even before the rescue plan was approved. Crucial credit channels remain jammed, as banks everywhere grow increasingly nervous about lending to one another, choking the supply of credit to fund business operations and investment activity. ‘Whatever happens over the weekend, the outlook for the global economy is much dimmer,’ said Song Seng Wun, senior economist and head of research at CIMB here.

He warned that Singapore’s economy could stall or even contract in 2009, if the US slips into recession next year - a scenario ‘which now looks increasingly likely’.

‘The drag will be from lower exports as well as a significant slowdown through the economy, with perhaps the only exception being the construction sector,’ he added.

In a startling sign of how deeply the crunch was biting, nearly 100 US corporate treasurers took part in an emergency conference call on Thursday to warn one another that banks there are using any excuse to charge more to renew lines of credit, Bloomberg reported. Banks are afraid to lend even to investment grade corporate clients, who are struggling to keep credit lines open to pay employees and purchase raw materials. Some were charged an extra 75 basis points to keep credit lines open.

Meanwhile, the authorities are turning to every weapon in their arsenal - and finding it ineffective. This week, futures traders were betting heavily that the US Federal Reserve would slash its target for the federal funds rate - the rate which US banks charge one another for loans - by half a percentage point to just 1.5 per cent at its next policy meeting on Oct 29, in a bid to stimulate economic activity by reducing the cost of borrowing.

But with interbank rates already more than double the Fed’s official target rate of 2 per cent now, any cut in interest rates would be ‘more of a psychological move to boost confidence that things are being done’, said Mr Song. ‘Banks will still be fairly cautious about interbank lending and counterparty risk’ as a lot more US banks are likely to fail due to worsening economic conditions, he added.

Meanwhile, the real economy is being hit. Latest data showed that US employers slashed payrolls by 159,000 in September, the most in more than five years, a worrisome sign that the economy is hurtling toward a deep recession. Almost 760,000 jobs have disappeared this year. At a household level, that means millions of Americans will be forced to buy less ’stuff’ - bad news for an economy that relies on consumer spending for about 70 per cent of its growth. Goldman Sachs economists expect a recession worse than the ones seen in 1990 and 2001.

Treasury Secretary Hank Paulson and Fed chairman Ben Bernanke have resorted to increasingly bold and desperate measures to fight the flames. They saved mortgage finance giants Fannie Mae and Freddie Mac and insurer American International Group, and arranged rescues for Merrill Lynch, Morgan Stanley and Goldman Sachs. They guaranteed money-market funds, banned short-selling of stocks; and pumped hundreds of billions of dollars into interbank markets worldwide to bring down borrowing costs.

None of it was enough to stop the crisis of confidence sweeping through the financial sector, which has already reached European shores. Governments in Europe are desperately trying to prop up more banks crippled by a lack of short-term funding.

London interbank offered rates or Libor, the global benchmark used to price a wide variety of bank loans and debt securities worldwide, remain far above official central bank target rates for interbank lending - suggesting that the deep mistrust between financial institutions is unlikely to vanish soon.

The Singapore interbank offered rate or Sibor for three-month Sing-dollar loans - an important benchmark for housing and business loans here - remains much higher than in early September, before Lehman collapsed. This, despite coming down of late. ‘The bailout programme notwithstanding, things still could get worse,’ said David Cohen, director of Asian economic forecasting at Action Economics in Singapore. He expects fewer new jobs to be created here in the coming months compared to the strong employment growth earlier this year, which will mean less spending by consumers and leaner times for businesses. ‘Until the last couple of weeks, I was still optimistic that things could still get back on track. But now it does seem that the whole global economy is going to weaken going into 2009.’

Source : Business Times - 04 Oct 2008

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