HDB offers 683 new flats

HDB offers 683 new flats 

THE Housing Board (HDB) yesterday launched 683 flats in Punggol, Sengkang, Jurong West and other estates in its half-yearly sale of units which were not taken up in previous launches.
By 5pm, its website showed 2,626 applications for the flats, which range from three-room premium to executive units.

The biggest share of 288 flats is in Sengkang, while 153 are in Punggol, 77 are in Jurong West and the remainder are in various estates.

This year, the HDB also plans to launch another 8,400 units under the build-to-order scheme.

Prices for units launched yesterday range from $160,000 for a four-room flat in Woodlands, to $565,000 for a five-room flat in Bukit Merah.

Households with a gross monthly income of up to $8,000 are eligible to apply.
Source : Straits Times - 11 Oct 2008

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How Singapore achieved success

How Singapore achieved success 

By Kor Kian Beng 

FOUR key factors are behind the Singapore success story, said Minister Mentor Lee Kuan Yew, who led the team that laid the foundation for the country’s development after independence.
They are: a capable and incorrupt government, meritocracy, equal opportunities for all and making every Singaporean a stakeholder in the country.

He identified these factors when he replied to a participant at a dialogue with around 500 people at the Global Indian Diaspora Conference. The man had asked what lies behind Singapore’s development into one of the world’s cleanest cities with some of the best infrastructure.

Before replying, Mr Lee said he was aware of the vast difference between a small city state and a vast continent, like India. ‘But when you come to compare cities, it’s exactly the same,’ said Mr Lee, who was prime minister from 1959 to 1990.

First, Mr Lee said he was not involved in a solo effort as he had a very good team of very able ministers, whose integrity and ability were beyond doubt.

He said: ‘Yes, I captained the team and made decisive moves but I had people who understood what had to be done to get there.’

It was important to have a completely incorruptible government in place, he added. ‘Once you have a corrupt government, you’re in deep trouble…the whole system is skewed, including decision making.’

Another crucial factor was to set out a level playing field for everyone.

‘You get a job not on the basis of your connections - your father, your friends or whatever - but on the basis of your performance. We have equal opportunities for schooling, health, and I would say, life.

‘Regardless of race, language or religion…Who’s the best man? You do it.’

As for making every Singaporean a stakeholder in the country, Mr Lee noted that many Singaporeans own property.

‘So, today you can ask any taxi driver, any hawker, he owns a flat, he owns his home, the smallest of which is worth about $150,000 even in today’s depressed prices. And the biggest of them will be about $600,000, $700,000.

‘So he’s a little stakeholder.’

This means Singaporeans understand that voting-in a bad government could lead to a plunge in property values and a loss of jobs, Mr Lee added.

‘They may say this is authoritarianism, that’s how we get re-elected,’ he said. ‘They don’t know the economic rationale behind it. Everybody has a stake, everybody has to perform.’

Source : Straits Times - 11 Oct 2008

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What’s a technical recession?

What’s a technical recession? 

A TECHNICAL recession is defined as two consecutive quarters in which the economy has shrunk compared to the previous quarter.
The size of the economy is measured in terms of the total value of goods and services produced in a country, also known as its gross domestic product, or GDP.

Generally, the duration of a recession is the full period of the business cycle that economic activity is in decline.

There is no universally accepted way to measure a ‘real’ recession. Some suggest a full-year economic contraction or two consecutive quarters of the economy shrinking compared to the same period in the previous year.

Singapore’s last ‘full-scale’ recession was in 2001, when the economy shrank 2.4 per cent during the year after the bursting of the dot.com bubble.

Source : Straits Times - 11 Oct 2008

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Singapore Economy slips into technical recession

Singapore Economy slips into technical recession 

By Fiona Chan 
  
SINGAPORE is in a technical recession after the economy slipped into negative territory for the second quarter in a row, dragged down by a slump in exports and a weak property market.
But the real recession, which usually portends job losses, will probably come next year when the Republic feels the full impact of the global economic slowdown, warned economists.

Many have lowered their growth forecasts and are now tipping 0 to 3 per cent growth next year.

The economy shrank in the third quarter, declining by a worse-than-expected 0.5 per cent from a year ago, according to estimates released yesterday by the Ministry of Trade and Industry (MTI). Compared with the previous quarter, the economy declined 6.3 per cent, on top of a 5.7 per cent contraction in the second quarter, the ministry said.

Aside from growth in the first quarter, the economy contracted quarter-on-quarter in three of the last four quarters. This is the first technical recession since 2002, after the dot.com bust. Lowering the official forecast for full-year growth for the third time this year, the ministry now expects the economy to grow at ‘around 3 per cent’ this year, down from 4 to 5 per cent. The original prediction was 4.5 to 6.5 per cent growth.

‘External economic conditions have deteriorated more than expected and some sectors of the economy have weakened significantly,’ it said.

With the deepening global financial crisis, demand for exports has dropped, hitting Singapore’s key manufacturing sector, which shrank by 11.5 per cent in the third quarter amid a protracted slump in pharmaceuticals and electronic output.

Construction and services held nastier surprises. Construction, which had been powering along at double-digit growth, abruptly halved to lodge single-digit expansion for the first time since 2006.

MTI said that despite ‘a strong pipeline of construction projects’, a shortage of contractors, engineers and project managers had caused building delays.

Economists also pointed to the lacklustre property market, where a standstill in home sales has prompted developers to delay launching and building projects. With no relief in sight, construction growth is likely to stay at this slower pace.

But a boost could come from the Government bringing back $2 billion worth of building projects it had put off earlier this year to ease the construction squeeze, suggested OCBC economist Selena Ling.

The services sector held no bright spots either, cooling to lower growth as financial market activities slowed while the subdued property market weighed down on the real estate services industry.

‘This suggests that the global slowdown has had a much greater knock-on effect on services than we had anticipated and marks the start of a more protracted decline in services growth,’ said DBS economist Irvin Seah.

The key worry in this, he said, is that services employs the bulk of the labour force and lower growth may lead to job losses.

But Ms Ling noted that the unemployment rate remains at very low levels, so retrenchments may not hurt so much. She said: ‘If job losses come mainly from manufacturing, most of the people hit will be foreign workers.’

To address growth concerns, the Monetary Authority of Singapore has eased monetary policy, setting a zero appreciation stance for the Singapore dollar.

But economists said more immediate measures may be needed in the form of fiscal stimuli, focusing on lower-income groups and retrenched workers.

Source : Business Times - 11 Oct 2008

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Singapore slips into recession, risks skewed on downside

Singapore slips into recession, risks skewed on downside

Official 2008 growth estimate cut to 3%, but market economists already shaving 2009 forecasts
By ANNA TEO

EVEN with the market primed for recession, the Q3 flash GDP estimates still fell below expectations. And, with no quick rebound in sight, economists are looking ahead at a lean 2009 as well.

 
The early estimates produced yesterday by the Ministry of Trade and Industry (MTI) show a broad-based sharp slowdown, with the economy contracting not only sequentially as widely expected, but in year-on-year terms too. MTI now expects the economy to grow ‘around 3 per cent’ in 2008, down from its August forecast of 4-5 per cent.

Based only on July and August data, GDP fell 6.3 per cent in Q3 from Q2 in adjusted, annualised terms. Coming straight after a 5.7 per cent decline in the preceding quarter, this spells a technical recession - Singapore’s first since the second half of 2002.

But, against expectations, GDP has also fallen from a year ago in Q3, by 0.5 per cent. The last time the economy went into the red in year-ago terms was in Q2 2003 when GDP fell 1.8 per cent during the Sars outbreak.

Both MTI and the Monetary Authority of Singapore (MAS) - which yesterday eased monetary policy by moving to a neutral stance, from the ‘modest and gradual’ currency appreciation policy it had maintained since April 2004 - yesterday described the Singapore economy’s near-term prospects in plain stark terms.

The external risks remain on the downside as the ongoing financial turmoil has presented ‘new uncertainties’ for the Singapore economy, MAS says. A more severe global downturn cannot be discounted, and Singapore’s economic growth will ‘likely remain below its potential rate over the next few quarters’, the central bank adds.

A slip into technical recession here had been widely flagged, following months of sluggish manufacturing output due to pharmaceutical peculiarities. But now the precision engineering and chemicals clusters have also slowed because of weaker external demand, MTI says.

The ministry also expects the global financial crisis to take its toll in the months ahead on Singapore’s financial services sector, particularly ’sentiment-sensitive’ activities such as stocks trading and fund management.

MAS also sees services industries such as the transport-hub and tourism being hit by the global downturn.

As for the construction sector, ‘despite a strong pipeline of projects, a shortage of contractors, a tight labour market for engineers and project managers, and longer waiting times for equipment’ have delayed the projects, MTI notes.

Market economists share the official concerns - just more bearishly. Most had pared their forecasts of Singapore’s 2008 GDP growth well before the latest official revision, and some now cite the risks of the growth falling below 3 per cent - probably between 2.5 and 3.0 per cent, they reckon.

Indeed, OCBC Bank’s economists have belatedly cut their 2008 forecast to 2 per cent, and see the economic weakness extending into the first half of 2009.

UBS Investment Bank strategist Nizam Idris said the latest data show the economy to be in ‘deep recession’, with all the key figures ‘well below expectations’.

The Q3 flash figures - which will eventually be updated with the September data - imply that industrial production probably grew modestly by 1-2.5 per cent last month, economists estimate. Any lower and the final Q3 GDP figure could well be worse than the already weak flash figures, United Overseas Bank’s economists note. And, short of a strong pharma rebound soon, the manufacturing slump could extend into Q1 2009, they add.

Nanyang Technological University economist Choy Keen Meng notes wryly that his ‘worse-case scenario’ forecasts issued in March - of US recession and Singapore growing 3 per cent in 2008 - are coming true.

But he expects some recovery in year-on-year GDP growth to 3-4 per cent in Q4, partly on account of a low base in Q4 2007.

‘Sluggish growth of 2-3 per cent is expected in the first half of next year. If the financial turmoil can be brought under control by then, we might be lucky to see a gradual recovery beginning in the second half. All in all, the economic outlook for 2009 is not looking good. GDP growth is likely to come in at about 4 per cent or even lower, barring a protracted global economic slump.’

Others such as Standard Chartered Bank economist Alvin Liew recently halved his 2009 growth forecast for Singapore to 2 per cent.

One silver lining, perhaps, amid the gloom and doom: Inflationary pressures will ease. MAS sees Singapore’s headline inflation rate falling to 2.5-3.5 per cent in 2009, from 6-7 per cent this year. Not fast enough, says Stanchart’s Mr Liew, pointing out that Singapore’s ‘historical comfort zone’ for inflation is just 1-2 per cent.

Source : Business Times - 11 Oct 2008

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Prepare for a rough ride: Singapore PM Lee

Prepare for a rough ride: Singapore PM Lee

There is no escaping global impact of crisis
By CHUANG PECK MING

IN his first public comment on the global financial crisis, Prime Minister Lee Hsien Loong yesterday told Singaporeans to ‘prepare for a rough ride at least over the next year, and quite possibly longer’.
While Asian banks have been spared the woes of their US and European peers, stock markets everywhere have been battered in the fallout. Singapore shares tumbled 7 per cent yesterday.

The crisis will curb consumption and investment in the developed countries and affect economic growth beyond their shores, Mr Lee said. ‘Asian countries cannot avoid the impact of weakening US, European and Japanese economies.’

He was speaking on the first day of the two-day Global Indian Diaspora Conference, where Mauritian Prime Minister Navinchandran Ramgoolam and India’s Minister for Overseas Indian Affairs Vayalar Ravi were also present.

Mr Lee’s comments came after Finance Minister Tharman Shanmugaratnam on Sunday projected ’several quarters’ of slowdown for Singapore’s economy. And National Trades Union Congress (NTUC) chief Lim Swee Say warned on Thursday of possible wage and job cuts.

Expressing a similar view at the conference, Senior Minister Goh Chok Tong said: ‘This time, Asia is not as adversely affected as US and Europe because we are less sophisticated in derivatives.’

 
Banks have also recapitalised since the Asian financial crisis, he said. But there is no escaping the global impact of what is happening. ‘The worrying part is how it affects the real economy,’ Mr Goh said. ‘That will affect us. The US is one of the biggest exports markets for Asia. Asia and Singapore will be impacted. The worry for next year is how long will slow growth be dragged out for all of us.’

Mr Lee said that the problems facing financial institutions in the US and Europe are complex and grave, and will not be solved overnight or even ‘within a few months’.

‘The fear and panic gripping financial markets everywhere will take time to subside,’ he said. ‘The trust and confidence between banks, which lie at the heart of finance intermediation, will take time to restore.’ But the momentum from projects Singapore has secured, including the F1 race, will help see it through the financial storm, he said. Unemployment here remains low and ‘we are still on a steady course’. Singapore’s strategy of growing with Asia remains valid, ‘because we are confident that Asia’s dynamism will endure’, Mr Lee said. ‘Both India and China are continuing to transform their economies, and their emergence in a stable and peaceful region will benefit many other Asian countries.’

Singapore’s links through the Indian disapora - the second largest, with 25 million people of Indian origin scattered around the world - has helped Singapore and India boost ties, he said.

Also, the Comprehensive Economic Agreement signed between Singapore and India in 2005 has helped increase two-way trade to $24 billion in 2007. Singapore was India’s second-biggest investor last year. And Singapore was the choice investment location for Indian companies venturing overseas.

Mr Lee said that just as Singapore has built ties with India itself, it wants also to network with Indian overseas communities throughout the Asia-Pacific.

The conference is hosted by the Singapore Indian Chamber of Commerce, the Ministry of Overseas Indian Affairs and the Confederation of Indian Industry.

Source : Business Times - 11 Oct 2008

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Facing up to recession - Singapore

Facing up to recession - Singapore

Government should intervene to keep credit flowing to corporate sector
By VIKRAM KHANNA
THIS time last year, with the stock market near its all-time high, the property market booming and the Singapore economy cantering towards a growth rate of 7.5 per cent for 2007, who would have thought we were, in fact, on the cusp of a recession?

 
A PASSING PHASE

Storms don’t last forever and Singapore’s recession, like so many before it, will pass
But here we are, entering our first technical recession - two consecutive quarters of negative growth - since 2001; the flash estimate for Q3 growth was a worse-than-expected minus 6.3 per cent. We’re also in the first quarterly contraction on a year-on- year basis (minus 0.5 per cent) since the time of Sars, in the second quarter of 2003.

It’s a sobering reminder of how vulnerable even a fundamentally sound and well-run economy like Singapore can be to global economic headwinds; except that what we’re facing now is no mere headwind, but a gale-force storm.

There is nothing Singapore could have done to prevent this. There is not much that any Asian country could have done. And the financial market turbulence we are seeing is only the beginning of a long spell - at least a couple of years - of pain for any economy that depends heavily on doing business with the United States and Europe.

After the current phase of the financial storm subsides - which depends on what the G-7 finance ministers decide to do at their meetings in Washington - the theatre of action will shift to the real economy. The US, Europe and Japan will experience a marked slowdown, if not outright recession, and rising unemployment. The great American consumption machine, in particular, which accounts for more than two-thirds of US GDP, will be reduced to a shadow of its former self.

While the International Monetary Fund still resists calling a global recession - it forecasts 3 per cent global growth next year - that view could change.

But global recession or not, few Asian countries - certainly not those with export-oriented economies - will be spared from the backwash of slowing growth in the major economies. Not even China; while its growth rate will probably still be respectable at around 7-8 per cent, the economy of the coastal provinces, where hundreds of thousands of factories have to depend for their livelihoods on the American consumer, will be devastated. Thousands of SMEs in China have gone bust already this year.

India, for its part, has seen its financial markets ravaged as a result of selloffs by foreign institutional investors; but the real economy - which is still overwhelmingly domestically focused - will be relatively resilient.

But even if China and India boom, they cannot come close to compensating for a US slowdown: a mere 20 per cent reduction in consumption in the US wipes out the equivalent of all of the consumption of China and India combined. Add in a European slowdown as well and the problem is multiplied.

So in the circumstances, what are the policy options for a small open economy like Singapore? The focus would have to be on, first, ensuring that banking functions as normally as possible and businesses keep running.

Right now, banking is not functioning normally; the credit crunch and fear of counterparty risk has spread here too. Despite liquidity injections by the Monetary Authority of Singapore, interbank rates remain elevated. Banks have pulled in their credit lines to even well-run companies. If this continues, layoffs will inevitably rise.

There could well be more financial accidents, or at least strains, in the US and Europe in the months ahead, which suggests local banks will remain unusually risk averse. There is a strong case here for temporary government intervention to keep credit flowing to the corporate sector - whether through direct loans by government agencies such as SPRING (via their several loan schemes, which can be enhanced) or through credit guarantees.

There is a case, too, for an off-budget package of fiscal measures - particularly increases in public spending, as well as help to businesses and vulnerable groups - to cushion the impact of the slowdown. The last budget did not, and could not, see it coming, but it is here. And help can’t wait till the next budget. A philosophy of prudent economic management practised over decades has yielded a legacy of fiscal surpluses. It’s now time to put them to work.

This crisis is also an opportunity - for example, to ramp up infrastructure, to develop new capabilities through higher outlays on training and retraining, and promote new technologies.

Storms don’t last forever and Singapore’s recession, like so many before it, will pass. What matters now is how productively and creatively we handle it, and what shape we will be in when the global economy comes back.

Source : Business Times - 11 Oct 2008

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Singapore PM Lee says S’pore’s financial systems sound, economy competitive

Singapore PM Lee says S’pore’s financial systems sound, economy competitive

By S Ramesh,

SINGAPORE: Singapore’s Prime Minister Lee Hsien Loong on Friday said the country’s financial system is sound, and its economy remains competitive despite slowing down.

Mr Lee was speaking at a conference of overseas Indians held in Singapore.

He cautioned that with the ongoing financial storm, Asian countries must prepare for a rough ride at least over the next year and quite possibly longer.

Mr Lee said it will take time to subside fear and panic gripping financial markets, and the problems facing financial institutions in the US and Europe are complex and grave.

Said the Prime Minister: “The trust and confidence between banks, which lie at the heart of finance intermediation, will take time to restore. The crisis in the financial system will dampen consumption and investment in the developed countries and affect growth all over the world.”

While Asian banks have avoided the problems afflicting the US and European banks, globalisation has meant that Asian equity markets have been hit by the events in Wall Street.

As a result, Mr Lee noted that Asian countries cannot avoid the impact of weakening US, European and Japanese economies.

For Singapore, Mr Lee noted that over the last few years which saw good economical conditions, the country had pressed on with upgrading and diversifying the economy.

“This will mean new and better jobs, even if some old ones are lost,” he said. “The momentum from projects that we have secured will help to see us through this storm.”

He added that Singapore’s strategy of growing with Asia also remains valid as the country believes Asia’s dynamism will endure.

One way is by linking up with India through its diaspora which numbers 25 million around the world.

Their members have helped to integrate India into the Asia-Pacific region and made a critical contribution to the Indian economy by remitting US$27 billion back to India each year.

- CNA/yb

Source : Channel NewsAsia - 10 Oct 2008

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Parkway Life Reit raises rentals in line with CPI

Parkway Life Reit raises rentals in line with CPI

By CHEN HUIFEN

PARKWAY Life Reit’s manager says it has raised the rent at Singapore hospitals under its portfolio by some 6.25 per cent, in line with the rise of the consumer price index (CPI).

Parkway Trust Management, manager of the Reit, said the revised rates will be effective from Aug 23 this year to Aug 22 next.

The new rental rates are based on the CPI+1 per cent formula. ‘Based on the information obtained from the Singapore Department of Statistics, the CPI for the first year of the term has been agreed at 5.25 per cent,’ Parkway Trust Management said in a statement.

About 80 per cent of Parkway Life Reit’s revenues come from its Singapore hospitals, consisting of Mount Elizabeth Hospital, Gleneagles Hospital, East Shore Hospital as well as 40 medical suites in Mount Elizabeth Medical Centre and the Gleneagles Medical Centre.

‘With the Singapore hospital properties as the main contributor to the performance of PREIT, the long leases and annual rent review pegged to CPI+1 per cent ensure there is downside protection and that our unit holders continue to enjoy stable and sustainable returns,’ said Justine Wingrove, chief executive officer of Parkway Trust Management.

From Aug 23 last year, the day it was listed, to June 30 this year, total gross rental revenue from the Singapore hospital properties in its portfolio was $40.75 million.

Apart from the Singapore hospitals, Parkway Life Reit also owns nine nursing homes and a pharmaceutical products distributing and manufacturing facility, all in Japan. It continues to eye assets in China, India, Japan, Malaysia, Singapore, Australia and Thailand for acquisition.

On Sept 30, the Reit’s portfolio size stood at $1 billion. Shares of Parkway Life Reit ended down 2 cents at 90 cents yesterday.

Source : Business Times - 10 Oct 2008

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Q3 property investment sales plunge 79% to $1.1b

Q3 property investment sales plunge 79% to $1.1b

Activity set to stay low for rest of ‘08; asset pricing now more ‘realistic’: DTZ

By ARTHUR SIM

INVESTMENT sales in the third quarter totalled just $1.1 billion, a dizzy 79 per cent slide from the second quarter, according to DTZ. And most deals in Q3 were small, at less than $100 million each, due to ‘credit tightening’.

Investment activity is expected to stay low for at least the rest of this year. But DTZ senior director (investment advisory services and auction) Shaun Poh said: ‘Assets are now priced more realistically and there are funds looking for opportunistic purchases, in particular distress sales.’

Still, he said that deals are likely to be small, at less than $200 million, and mostly from private equity.

In Q3, Kuwait Finance House acquired 36 apartments at Goodwood Residences for about $2,800 per square foot.

The retail property market also slowed in Q3. ‘Gross fixed rents remained unchanged for three consecutive quarters, a sign of a peaking market,’ DTZ said.

Average prime first-storey monthly rents came to $42.40 psf in Orchard/ Scotts Road, $27.10 psf in other city areas and $33.70 psf in suburban areas.

DTZ associate director Anna Lee said that retail property prices and rents would come under pressure in 2009 when there is a spike in potential supply. ‘For the rest of 2008, rents are expected to hold firm with little new supply and Christmas around the corner.’

Separately, CB Richard Ellis (CBRE) said that rents for factories and warehouses edged up or stayed flat in Q3.

‘The bright spot was the high-tech sector, which showed a strong 9.5 per cent quarter-on-quarter increase in monthly rent,’ it said.

Monthly rent for high-tech space increased 9.5 per cent from Q2 to $3.45 psf in Q3, driven by rising numbers of qualifying office tenants.

‘An active pre-letting market for business park space was observed, especially among financial institutions,’ said CBRE.

The average monthly rent for factory space rose 3.2 per cent from Q2 to $1.60 psf for ground-floor units and 3.8 per cent to $1.35 psf for upper-floor units. The average monthly rent for warehouses stayed flat at $1.55 psf and $1.25 psf respectively for ground and upper-floor units.

The average capital value of 60-year leasehold strata-title factory units edged up about 2.3 per cent from Q2 to $309 psf and $225 psf respectively for ground and upper-floor units. The average capital value of freehold warehouses held firm during at $458 psf for ground-floor units and $401 psf for upper-floor units.

CBRE director for industrial and logistics services Bernard Goh said: ‘While rents for factories and warehouses are not expected to show significant movements, high-tech and business park space is expected to continue on a moderate upward trend.’

Source : Business Times - 10 Oct 2008

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Economists look into ‘09 and stare into more gloom

Economists look into ‘09 and stare into more gloom

SMEs warned of possible contraction; some predict easier monetary policy

By TEH SHI NING

(SINGAPORE) Expect the global downturn to hit Singapore hard, as GDP growth in Q4 and 2009 weakens, economists said at a Singapore Business Federation seminar yesterday.

They also warned SME managers of the worst-case possibility of a contraction next year.

Some predicted an easing of monetary policy allowing the Singapore dollar to depreciate. They were speaking ahead of two key announcements today - advance GDP data for the third quarter, and an exchange rate review from the Monetary Authority of Singapore (MAS).

‘This downturn is unlike previous ones,’ said CIMB-GK economist Song Seng Wun.

‘It shouldn’t be compared to the Asian financial crisis or the dotcom bubble, where there were still pockets of growth. What we now see is a synchronised slowdown across the world,’ he said.

His base case forecast for GDP growth is 2.5 per cent for this year, and 0 to 2 per cent for 2009.

Anticipating that accelerated fiscal spending takes time to work its way through the economy, whereas falling demand hits headline GDP rates far quicker, Mr Song’s worst case projection for 2009 is a negative 3 to 5 per cent in GDP growth.

Slowed growth and tapering inflation has led many to expect MAS to shift to at least a neutral stance, from the hawkish policy adopted in April to curb inflation.

OCBC economist Selena Ling said, ‘The SGD has been trading at the lower end of the band, so there’s actually room for the MAS to re-centre lower.’

This ‘double-edged sword’ though would lead to an interest rate rise. ‘There is no lack of liquidity yet, though I think MAS will likely inject cash to ensure the interest rate doesn’t surge excessively,’ she said.

Mr Song added that Singapore’s relatively strong corporate sector, the government’s fiscal surplus and consumers who are not heavily in debt are favourable silver linings in these ‘very trying times’.

Also, while job creation will slow, employment is unlikely to fall sharply with the integrated resorts contributing jobs, and the relative resilience of the construction sector serving to cushion, though not offset, recessionary effects.

Although most SMEs at yesterday’s seminar said banks’ tightened lending had not hit them yet, Singapore Manufacturers’ Federation president Renny Yeo said this will likely be more keenly felt when the renewal of leases for their facilities comes round.

Mr Song said the fundamental question of how to restore confidence remains. ‘We can cut interest rates to zero but if banks refuse to lend, it doesn’t solve the problem.’

Source : Business Times - 10 Oct 2008

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Shares rebound on Asian rate cuts

Shares rebound on Asian rate cuts

Interbank lending rates worldwide continue to climb

By CONRAD TAN

(SINGAPORE) Stocks in parts of Asia rebounded yesterday, after central banks in the region cut interest rates in a show of unity with their counterparts in the West.

Hong Kong, China, South Korea and Taiwan reduced official lending rates in a bid to bring down borrowing costs for banks and other businesses amid a darkening outlook for the global economy.

A report in The New York Times that the US government is planning to inject new capital directly into banks also raised hopes that the move would restore some trust between banks that have effectively stopped lending to one another for fear that the borrower might fail.

The Straits Times Index was the biggest gainer in the region, ending 3.4 per cent higher and recouping some of the losses suffered the previous day, when it plunged 6.6 per cent.

In Hong Kong, the Hang Seng Index rose 3.3 per cent after the city’s monetary authority cut the key lending rate by half a percentage point to 2 per cent - the second time this week it tried to lower borrowing costs. On Wednesday, the Hang Seng plummeted 8.2 per cent to its lowest level in more than two years.

China’s central bank cut interest rates by 0.27 percentage point late on Wednesday, and reduced the proportion of deposits that banks have to hold in reserve by half a percentage point, effectively making it easier for banks to lend money.

Share indices in China still ended about one per cent lower yesterday after giving up earlier gains.

In South Korea, the Kospi index finished 0.6 per cent higher, after the central bank reduced its benchmark interest rate to 5 per cent from 5.25 per cent - the first cut in four years.

The move by Asian central banks to lower interest rates followed coordinated rate cuts of half a percentage point on Wednesday by central banks in the United States, UK, euro zone, Canada, Switzerland and Sweden.

Japan’s central bank said it supported the move by its counterparts, but it did not cut its own key interest rate, which is already near zero at just 0.5 per cent. Yesterday, the Nikkei-225 index ended 0.5 per cent lower, after losing earlier gains. The stock benchmark dropped 9.4 per cent on Wednesday - its biggest one-day fall since the crash of October 1987.

In Indonesia, share trading remained suspended after Wednesday’s plunge of 10.4 per cent in the main stock index.

Other major indices in Asia ended mixed, with small gains or losses compared to the large swings earlier in the week.

Shares in the US seesawed wildly on Wednesday before ending lower for the fifth straight day, driving indices that track stock market volatility there to record highs.

Despite the central banks’ show of unity over the past two days, interbank lending rates worldwide remained stubbornly high yesterday, raising doubts about the short-term effectiveness of the official rate cuts in getting banks to resume lending to one another.

The three-month US-dollar London interbank offered rate or Libor, the global benchmark used to price vast amounts of bank loans and debt securities worldwide, rose to 4.75 per cent yesterday, its highest since last December.

The Libor for overnight US-dollar loans fell slightly to 5.09 per cent, still far above the US Federal Reserve’s latest official target of 1.5 per cent for interbank lending - suggesting that there remains deep mistrust between financial institutions.

Hong Kong’s three-month interbank offered rate rose to 4.4 per cent, the highest since last October.

Here, the overnight Singapore interbank offered rate or Sibor for US-dollar loans rose to 4.75 per cent from 4.36 per cent on Wednesday. The three-month US-dollar rate rose to 4.5 per cent, although the equivalent interbank rate for Sing dollar loans eased.

In the US, the market for commercial paper - a type of short-term debt issued by large companies there to fund their day-to-day operations - shrank for a fourth consecutive week for the week ended Wednesday, according to official data published yesterday, Reuters reported.

The global economy is headed for a ‘major downturn in the face of the most dangerous shock in mature financial markets since the 1930s’, the International Monetary Fund warned on Wednesday.

Source : Business Times - 10 Oct 2008

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US Treasury ready to invest in banks

US Treasury ready to invest in banks

Recapitalisation addresses major bottleneck, cheers markets; still, Morgan Stanley gets a drubbing

By ANDREW MARKS

NEW YORK CORRESPONDENT

A YEAR to the day that the US stock market hit its record high, the US government acknowledged that the financial bubble created by the risky lending strategies of its major financial institutions - which had propelled stocks to such lofty heights - has forced the Treasury Department to the unprecedented brink of directly investing in those very same banks.

Ticking financial time bomb: The US national debt is growing so large that the clock near Times Square in New York has run out of digits to show it. As a quick fix the clock’s minders have decided to drop the dollar sign from the figure, which showed that the national debt hit almost US$10.2 trillion on Wednesday.
This was to calm the global financial panic that has frozen credit markets throughout the world.

Despite the move, investors sold Morgan Stanley shares in mid-morning trading, sending it plunging as much as 25 per cent on the New York Stock Exchange (NYSE), amid escalating concerns that the company may be unable to weather the credit crisis. Reports attribute the drop also to short-sellers who returned to the market after the expiry of the ban yesterday.

The stock dropped US$3.97 to US$12.83 at 10:58am after falling as low as US$12.59 earlier. The New York-based company has lost 76 per cent of its value this year.

The government’s extraordinary measure, which would essentially mean at least a partial nationalisation of the country’s private banking system, comes as previous efforts to unlock the global credit markets have all but failed.

These include the US$700 billion rescue plan by the US to purchase non-performing loans, England’s US$500 billion plan to guarantee bank lending and help banks refinance their debt, and Wednesday’s unprecedented move by several of the world’s major central banks to coordinate interest rate cuts around the globe.

Treasury officials said that the just-passed US$700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take to take ownership positions in those banks.

Said Treasury Secretary Henry Paulson: ‘We will use all of the tools we’ve been given to maximum effectiveness, including strengthening the capitalisation of financial institutions of every size.’

The Federal Reserve also said it would grant insurance company AIG a loan of up to US$37.8 billion on top of the US$85 billion already lent out in September to keep the company from going bankrupt.

‘It’s an extraordinary idea that the greatest capitalist economy in the history of the world, which has survived the banking crisis of the Crash of 1929 and the Great Depression, must turn to the government to effectively take over one of the most basic functions of a private market - the banking system responsible for lending money to private businesses,’ said Joe Battipaglia, stockmarket strategist at Stifel Nicolaus.

‘But we are clearly in a crisis brought about by the illiquidity of hundreds of billions of dollars in assets held by so many banks that no one feels any one institution is immune from an outright failure - which means that there’s no one safe enough to do business with,’ Mr Battipaglia observed.

‘So if it takes the government directly investing in the banks to get the financial system unfrozen, I don’t see that there’s any other choice but to do it - and to do it fast,’ he added.

In the past month, the US government has already in effect nationalised three of the largest financial companies in the country, taking over the government- sponsored mortgage companies Fannie Mae and Freddie Mac, and lending insurer AIG US$85 billion in exchange for an ownership stake.

That there is overwhelming sentiment favouring this latest unprecedented measure by the government to prop up failing banks, reassure investors and avert an outright collapse of the financial system was evident on Wall Street yesterday.

Stocks opened higher on the NYSE on hopes that the government would take ownership stakes in many banks. The Dow Jones Industrials raced to a gain of more than 100 points within minutes of the opening bell and at 10am, the blue-chip index was still up by 50 points or 0.5 per cent, to 9,307.80. The broader S&P 500 index was up 3.4 points, or 0.35 per cent to 988.34, and the Nasdaq Composite index had gained 17 points or 0.99 per cent, to 1,757.50.

A report from IBM that it would meet its profit expectations for the third quarter was also serving as an early boost, but few traders expected to see the stock market move in a single, upwards direction yesterday, despite the renewed hopes that the Treasury Department’s direct investment plan seemed to have awakened amongst investors looking for an end to the massive sell-off.

‘Just look at what happened yesterday if you want an idea of what to expect today, and for the next several sessions, for that matter,’ said Phil LaPonte, an equity trader at Harrelson Capital Management, referring to the extreme volatility that marked Wednesday’s trading.

The Dow opened with a 150-point rally, then went on to see-saw between gains and declines until a 316-point slump in the final minutes of trading wiped out what had appeared to be a positive conclusion to the day.

Source : Straits Times - 10 Oct 2008

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Singapore Hotel site draws just one bidder

Singapore Hotel site draws just one bidder

By Joyce Teo

A TENDER for a hotel site on Kallang Road has attracted just one bidder, who has lodged the minimum price allowed under the process.
Tenders typically attract prices above the minimum bid but on this occasion Citywide Land’s $51 million offer was right at the limit for the plot next to Lavender MRT station.

‘It’s a reflection of the highly uncertain market environment,’ said Knight Frank’s director of research and consultancy, Mr Nicholas Mak. ‘And some developers may find it challenging to get funding for land purchases.’

The 99-year leasehold site is on the reserve list and was launched after an unnamed firm applied on Aug 1 for it to be put up for sale.

In the application, it had to commit to bid at a minimum price acceptable to the State, which was $51 million.

The bid from Citywide Land was right on the money at $249.6 per square foot per plot ratio for the 4,219 sq m site.

The Urban Redevelopment Authority said it will decide on the awarding of the tender after evaluating the bid.

When the application was made in August, Mr Mak had expected bids of between $400 to $450 psf, although he added that poor market sentiment or lower-than-expected visitor arrival numbers could bring bids down to $330 psf.

An unnamed consultant had reportedly expressed surprise that the site was even triggered given global economic concerns and soaring construction costs. Since then, the economic climate has worsened further.

The site has a maximum allowed gross floor area of 18,986 sq m, which could accommodate a hotel of up to 25 storeys. This means some of the rooms will have views of Kallang River, said Mr Mak. ‘This is a good hotel site. When the situation improves, the bidder will be seen as very lucky,’ he added.

Fellow consultant Ku Swee Yong, director of marketing and business development at Savills Singapore, said the low bid is not surprising as construction costs are still high.

‘To build a 3 1/2-star hotel, they have to bid low,’ he said.

Citywide Land is an unfamiliar name in the property market here.

SIGN OF THE TIMES
‘It’s a reflection of the highly uncertain market environment. And some developers may find it challenging to get funding for land purchases.’

Mr Nicholas Mak, Knight Frank’s director of research and consultancy, on the single, low bid for the Kallang Road site

Source : Straits Times - 10 Oct 2008

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Global crisis may hit Singapore economy hard

Global crisis may hit Singapore economy hard 

Lee Yi Shyan sees new opportunities as experts forecast tough times 

By Gabriel Chen 

ECONOMISTS have painted a grim picture of the economic outlook here, warning that Singapore will not be unscathed by the financial carnage sweeping rapidly across the United States and Europe.
‘This downturn will be unlike previous downturns,’ CIMB-GK economist Song Seng Wun told about 100 senior and middle-management staff of small businesses yesterday at a business outlook seminar organised by the Singapore Business Federation (SBF).

 
‘The private consumption slowdown in the US and Eurozone may have a significant knock-on impact on the rest of the world.’

Mr Song believes the expected sharp fall in global trade and financial flows could lead to Singapore’s worst economic performance ever.

He predicted that in the worst-case scenario, Singapore’s economic output could shrink between 3 per cent and 5 per cent next year from this year.

OCBC Bank economist Selena Ling was less pessimistic but maintained that the Government was likely to downgrade its official economic growth forecast of 4 per cent to 5 per cent for this year.

The Ministry of Trade and Industry releases its advance economic growth estimates for the third quarter today.

‘What we’re seeing now is that Asia is at an inflection point. Growth is slowing down,’ said Ms Ling, citing broad-based weakness in the manufacturing sector, weakness in electronics and lacklustre performances in the biomedical and pharmaceuticals segments.

In his speech yesterday, Mr Lee Yi Shyan, Minister of State for Trade and Industry, urged small businesses not to stop venturing abroad despite the economic slowdown.

‘These challenging economic times also provide new opportunities for Singapore companies to venture overseas to seek opportunities in emerging markets such as Latin America, the Middle East, Russia and Vietnam,’ Mr Lee said.

He added that there are still many areas where there are opportunities for collaboration, be it in agri-business, food and beverage, electronics, oil and gas, transport, logistics or infrastructure.

Yesterday’s event - the first of a series of quarterly SBF seminars on economic outlook and business sentiment - attracted representatives from diverse industries including travel, retail, logistics and engineering.

Among those present was PASR Technologies’ commercial director Max Collins, who said that the firm was more careful with expenses these days.

Previously, the firm would stock up on information technology equipment, but now it would just buy these gadgets to meet customer requirements.

‘I’ve a concern that the market will just…contract, and people will stop spending,’ he said solemnly.

Singapore Manufacturers’ Federation president Renny Yeo said that most of his 2,600 members do not have problems borrowing from banks now.

However, he hopes that come next year, when they need to renew their terms with the banks, the funding will not dry up.
REINING IN EXPENSES
‘I’ve a concern that the market will just… contract, and people will stop spending.’

PASR Technologies’ commercial director Max Collins, whose company is more careful with expenses these days

 
Source : Straits Times - 10 Oct 2008

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Mindy Yong

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