Money News

Source : The Straits Times, Dec 29, 2007
1 PROPERTY BOOM

THE property sector waited 10 long years for a proper recovery. This year, new all-time highs were set in so many categories, so often, that people lost count.
The year saw the sale of the most expensive apartment in Orchard Residences (both in absolute cost and per square foot terms), the priciest collective sale (Westwood Apartments in Orchard Boulevard) and the most expensive HDB flat and coffee shop (in Marine Parade and Jurong respectively).

The early boom in luxury properties filtered down to suburban condos and HDB flats. Latest figures show that nearly every single HDB flat sold these days goes at a price above market valuation.

The exuberance of the first six months has given way to a more cautious outlook since the Government stepped in to calibrate the market’s rise.
The removal of the deferred payment scheme, introduction of guidelines on transparency of transacted prices and the release of more land have all served to take the froth off what the Global Property Monitor has termed the world’s hottest property market in 2007.

Market watchers are already tipping 2008 to be a great year for mid-to-low priced homes, but the euphoria that marked most of 2007 will be hard to replicate for many years to come.


2 U.S. SUB-PRIME CRISIS
AT THE start of this year, no one really understood, or cared to understand, the obscure ’sub-prime’ mortgage market.

Now, the chiefs of some of the world’s largest banks - Citigroup, Merrill Lynch and UBS - have lost their jobs because of it.
And banks have been forced to write down a staggering US$50 billion (S$72.6 billion) in losses, with experts estimating another US$200 billion to come.
Economists have been fretting for some time now over when and how the next global financial crisis will occur, and signs of the current implosion emerged in the summer of this year.

Sub-prime lenders had been loaning billions of dollars at low rates to home buyers with dodgy credit histories in the United States and elsewhere.
Banks then repackaged these mortgages with sounder loans into complex securities called collateralised debt obligations (CDOs), selling them to other investors in the financial markets.

As property prices stopped rising and promotional low rates expired, these loans turned sour and CDOs backed by them became worthless.
No one knows how deep the troubles go, and experts warn that the world is only seeing the start of a full-fledged financial crisis.

3 SOVEREIGN WEATH FUNDS
GLOBAL consultancy McKinsey recently hailed them as one of the world’s new ‘power brokers’.

And indeed, the world’s sovereign wealth funds (SWFs) - investment companies and funds owned by governments - have in recent weeks been flexing their financial muscle on Wall Street.

Abu Dhabi Investment Company bought 4.9 per cent of Citigroup for US$7.5 billion and the China Investment Corporation has spent US$8 billion on sizeable stakes in Morgan Stanley and Blackstone Group.

The Government of Singapore Investment Corporation bought up to 9 per cent of UBS for S$14 billion and Temasek Holdings has invested up to US$5 billion in Merrill Lynch.

With Asian governments steadily running surpluses and chalking up reserves, and oil money pouring into Middle Eastern states, some estimate the total size of SWFs will reach US$12-15 trillion by the next decade.
This sort of power is making policymakers in the developed world nervous, and there have been calls for the World Bank and the International Monetary Fund to develop a set of guidelines for the world’s SWFs.

The outcome will be closely watched, not least by Singapore, which is home to two of the world’s ‘Super Seven’ SWFs and has been a prime beneficiary of free and open investment rules thus far.


4 FOREX LOSSES

IN A year that ought to have seen rig builder SembCorp Marine celebrate record high oil prices, the company hit the headlines for all the wrong reasons.
It shocked the corporate sector in October when it revealed that finance director Wee Sing Guan - a 33-year veteran of the company and described as ‘quiet and unassuming’ - was responsible for losses of $439 million following a series of disastrous foreign exchange trades.

The scandal underlined the dangers of companies dabbling in currency trading in a year that saw the US dollar tumble to record lows against major currencies like the euro.

SembCorp Marine was not alone. A week after its announcement, shipbuilder Labroy Marine said it had racked up $209 million in forex losses and was bought by Dubai Drydocks World for US$1.63 billion.