Source : The Business Times, August 13, 2008
ONE week may be a long time in politics, but on the economic front, a sea change in prospects in a matter of weeks is unusual. But we live in unusual times.
Less than a month ago, it seemed as though global inflation would be the issue of the year. While the surge in grain and food prices had abated, oil prices hit another new high in July (but have since backed down). The seemingly relentless spike in commodity prices earlier in the year looks to have ended, though prices are still at levels markedly higher than a year ago. Some of the inflationary effects may still be spiralling their way into consumer prices in many economies, but there is a sense that global inflation is peaking, if not past its peak.
At the same time, there is mounting evidence of economies heading toward recession, one after another. For some exporters and business people, the US economy is, for all intents and purposes, already in recession, even if this is not official. Singapore manufacturers and exporters suffered big falls in demand for their products from the American and European markets in the second quarter. And analysts see no quick turnaround in the big economies - which suggests that monetary policies will be increasingly oriented to battling a slowdown rather than curbing inflation. In Singapore too, there are calls to back off, if not reverse, the currency appreciation stance the government has adopted since October 2007. However, while a strong currency may be unwelcome to exporters in a downturn, it's far from clear that the inflation beast is even close to being snuffed out in Singapore. Targeted fiscal assistance for businesses, such as tax cuts or reliefs, is probably a more effective option than a change in monetary policy, which would have wide (and possibly adverse) effects across the economy.
For now, the global slowdown is reflected most starkly in Singapore's trade figures. The latest Q2 GDP growth number has tanked too, though not entirely from poor external demand. More interestingly, the fact that the low Q2 growth stemmed largely from a pharmaceutical slump - due not to demand woes but industry-peculiar features like product changes and production scheduling - suggests that Singapore's slowdown has been exaggerated by pharma volatility, even if the rest of the economy is still healthy.
Finally, what of the job market? While there may be a change in sentiment compared to a year ago, the jobs pipeline is still strong, with the two integrated resorts and other projects coming on-stream next year. A prolonged slowdown may lead to job cuts in some sectors - particularly manufacturing - but new jobs will still be created in other sectors. This points to a greater need for retraining and flexibility on the part of workers - as well as the need to expand workforce development programmes.
As to how long the global slowdown will last, and how deep it will be, it is still too early to foretell. However, for now, there is every indication that the Singapore economy can weather the storm, albeit at the cost of temporarily lower growth.
Wednesday, August 13, 2008
US Economic Slide To Continue Into Next Year: Survey
Source : The Business Times, August 13, 2008
(WASHINGTON) Economists have soured on the US economy's prospects for the second half of 2008 and have cut growth forecasts for next year as well, a closely watched survey released on Monday showed.
While government stimulus payments helped the economy expand at a reasonable annual rate of 1.9 per cent in the second quarter, economists polled by the Blue Chip Economic Indicators newsletter expect the air to go out of the economy as the temporary lift to consumer spending fades.
Economists expect US gross domestic product to grow at a 1.2 per cent annualised rate in the third quarter, down 0.1 percentage point from the consensus July forecast, it said.
In the fourth quarter, the economy is now seen expanding at a pace of just 0.3 per cent - a drop of 0.3 percentage point from July.
While the Blue Chip forecast for 2008 growth as a whole held at 1.6 per cent, the projection for 2009 dropped to 1.5 per cent from July's forecast of 1.7 per cent.
The cut in the growth forecasts follows data showing mounting job losses, a stalled factory sector and a housing market that has yet to reach bottom.
The panel of 50 economists polled during Aug 6-7 predicts the sluggish economy will push the jobless rate to 6 per cent in December and to 6.1 per cent by the end of next year. The last time the unemployment rate was as high as 6 per cent was in October 2003. In July, it stood at 5.7 per cent.
Of the panellists polled, 78.3 per cent expect the Federal Reserve to hold interest rates steady through the end of this year, while a strong majority - 88.6 per cent - see the next rate move as up.
Separate forecasts for Treasury bill rates suggest panellists expect no rate increases until the second quarter of 2009, the newsletter said.
At their last meeting on Aug 5, Fed policy-makers left the benchmark federal funds rate at 2 per cent, where it has been since the end of April.
The percentage of economists who believe the US economy is in, or will be in, a recession this year moved up to 55.8 per cent from 54.5 per cent in July, but was still below the May peak of 60 per cent. -- Reuters
(WASHINGTON) Economists have soured on the US economy's prospects for the second half of 2008 and have cut growth forecasts for next year as well, a closely watched survey released on Monday showed.
While government stimulus payments helped the economy expand at a reasonable annual rate of 1.9 per cent in the second quarter, economists polled by the Blue Chip Economic Indicators newsletter expect the air to go out of the economy as the temporary lift to consumer spending fades.
Economists expect US gross domestic product to grow at a 1.2 per cent annualised rate in the third quarter, down 0.1 percentage point from the consensus July forecast, it said.
In the fourth quarter, the economy is now seen expanding at a pace of just 0.3 per cent - a drop of 0.3 percentage point from July.
While the Blue Chip forecast for 2008 growth as a whole held at 1.6 per cent, the projection for 2009 dropped to 1.5 per cent from July's forecast of 1.7 per cent.
The cut in the growth forecasts follows data showing mounting job losses, a stalled factory sector and a housing market that has yet to reach bottom.
The panel of 50 economists polled during Aug 6-7 predicts the sluggish economy will push the jobless rate to 6 per cent in December and to 6.1 per cent by the end of next year. The last time the unemployment rate was as high as 6 per cent was in October 2003. In July, it stood at 5.7 per cent.
Of the panellists polled, 78.3 per cent expect the Federal Reserve to hold interest rates steady through the end of this year, while a strong majority - 88.6 per cent - see the next rate move as up.
Separate forecasts for Treasury bill rates suggest panellists expect no rate increases until the second quarter of 2009, the newsletter said.
At their last meeting on Aug 5, Fed policy-makers left the benchmark federal funds rate at 2 per cent, where it has been since the end of April.
The percentage of economists who believe the US economy is in, or will be in, a recession this year moved up to 55.8 per cent from 54.5 per cent in July, but was still below the May peak of 60 per cent. -- Reuters
US Banks Raising Loan Standards: Fed Survey
Source : The Business Times, August 13, 2008
Tight credit also driven by broader economic weakness
(WASHINGTON) Banks in the United States further tightened lending standards in all major categories, especially for consumer loans, in the past three months amid a weakening economic outlook, according to a Federal Reserve survey released on Monday.
The July survey of senior loan officers at 52 domestic banks and 21 branches and agencies of foreign banks also showed that demand for loans by both businesses and households had weakened since the last survey in April.
The survey added to evidence that a year-long credit crunch sparked initially by sub-prime mortgage defaults is far from easing as banks hoard capital and make it harder to borrow.
The tightness in credit is now being driven by broader weakness in the US economy and is defying efforts by the Fed to boost liquidity in the banking system and keep interest rates low.
Gary Thayer, senior economist at Wachovia Securities in St Louis said the tighter lending standards was typical in a weakening economy, and creates headwinds that will help delay recovery, along with a worsening housing slump and still-high fuel prices.
The tightening of credit was particularly pronounced in the consumer sector, where banks increased minimum credit scores required on credit cards and reduced card balance limits.
The survey found 65 per cent of US domestic banks tightened standards on credit cards and other consumer loans, considerably higher than the 30 per cent that tightened card standards in the previous survey.
On commercial and industrial loans, 60 per cent of domestic banks reported tightening credit standards and 80 per cent of banks noted they had increased the spreads of loan rates over their cost of funds on loans to large- and middle-market firms.
The housing sector got no relief in the past three months, as lenders further tightened standards for all mortgage categories.
The Fed said that about 75 per cent of US banks tightened lending standards on prime mortgages - those given to customers with better credit histories - versus about 60 per cent who said they tightened in April.
In a special question on larger so-called jumbo mortgages, the Fed said about 30 per cent of domestic banks said they had securitised or sold loans that meet new, higher conforming loan amounts to mortgage finance giants Fannie Mae and Freddie Mac.
However, 50 per cent of the respondents said there was a lack of demand for such loans and 40 per cent said there was a limited number of mortgage applicants at their bank who meet the Fannie Mae and Freddie Mac underwriting criteria for conforming jumbo loans, which require better credit scores and higher down payments.
The Fed survey also revealed that both domestic and foreign banks expected to continue tightening standards on most loans through the end of 2008 and into 2009. -- Reuters
Tight credit also driven by broader economic weakness
(WASHINGTON) Banks in the United States further tightened lending standards in all major categories, especially for consumer loans, in the past three months amid a weakening economic outlook, according to a Federal Reserve survey released on Monday.
The July survey of senior loan officers at 52 domestic banks and 21 branches and agencies of foreign banks also showed that demand for loans by both businesses and households had weakened since the last survey in April.
The survey added to evidence that a year-long credit crunch sparked initially by sub-prime mortgage defaults is far from easing as banks hoard capital and make it harder to borrow.
The tightness in credit is now being driven by broader weakness in the US economy and is defying efforts by the Fed to boost liquidity in the banking system and keep interest rates low.
Gary Thayer, senior economist at Wachovia Securities in St Louis said the tighter lending standards was typical in a weakening economy, and creates headwinds that will help delay recovery, along with a worsening housing slump and still-high fuel prices.
The tightening of credit was particularly pronounced in the consumer sector, where banks increased minimum credit scores required on credit cards and reduced card balance limits.
The survey found 65 per cent of US domestic banks tightened standards on credit cards and other consumer loans, considerably higher than the 30 per cent that tightened card standards in the previous survey.
On commercial and industrial loans, 60 per cent of domestic banks reported tightening credit standards and 80 per cent of banks noted they had increased the spreads of loan rates over their cost of funds on loans to large- and middle-market firms.
The housing sector got no relief in the past three months, as lenders further tightened standards for all mortgage categories.
The Fed said that about 75 per cent of US banks tightened lending standards on prime mortgages - those given to customers with better credit histories - versus about 60 per cent who said they tightened in April.
In a special question on larger so-called jumbo mortgages, the Fed said about 30 per cent of domestic banks said they had securitised or sold loans that meet new, higher conforming loan amounts to mortgage finance giants Fannie Mae and Freddie Mac.
However, 50 per cent of the respondents said there was a lack of demand for such loans and 40 per cent said there was a limited number of mortgage applicants at their bank who meet the Fannie Mae and Freddie Mac underwriting criteria for conforming jumbo loans, which require better credit scores and higher down payments.
The Fed survey also revealed that both domestic and foreign banks expected to continue tightening standards on most loans through the end of 2008 and into 2009. -- Reuters
UOL Q2 Profit Dives As Fair-Value Gains Fall
Source : The Business Times, August 13, 2008
Its listed subsidiary Hotel Plaza posts 5% rise in net profit to $16.3m
UOL Group's second-quarter net profit fell 49 per cent to $145 million, from $286.3 million a year ago, as the property group saw lower fair-value gains from its investment properties.
Selling well: Sales at UOL's projects, including Nassim Park Residences, launched in Q2 exceed expectations
Revenue for the three months ended June 30, 2008 rose 4 per cent to $209.3 million, from $201.6 million in Q2 2007.
The increase in revenue came largely from UOL's hotel operations, with hotels in Singapore, Australia and Vietnam performing better.
Revenue from property investments also improved due to higher average rental and occupancy rates in investment properties, UOL said.
Earnings per share for Q2 2008 fell to 18.21 cents, from 36.01 cents a year ago.
For the first half of 2008, UOL's net profit attributable to equity-holders fell 48 per cent to $187.8 million. Turnover for the six months rose 7 per cent to $371.1 million.
UOL's listed subsidiary Hotel Plaza posted a net profit of $16.3 million for the second quarter - 5 per cent up from the year-ago period's $15.5 million.
Revenue rose 16 per cent to $79.9 million, from $69.2 million a year ago, as the company's hotels did better.
Earnings per share fell to 2.71 cents, from 3.89 cents a year ago.
For H1 2008, Hotel Plaza's net profit rose 18 per cent to $30.8 million. Revenue for the six months rose 16 per cent to $156.6 million.
Commenting on its group's results, UOL observed that the sub-prime crisis, tight credit environment and global inflation had led to a slowdown in global economic growth.
UOL said the buying sentiment in the Singapore residential property market is likely to remain soft and cautious. It, however, said that it launched three projects in the second quarter and sales 'exceeded expectations'.
In Singapore, Nassim Park Residences is over 60 per cent sold with the latest median price at around $3,000 per square foot (psf).
Breeze by the East, a boutique 88-unit project along Upper East Coast, is 50 per cent sold with the latest median price at around $979 psf.
And in Malaysia, Panorama, a freehold 223-unit luxury condominium in Kuala Lumpur, is more than 90 per cent sold at an average price of about RM980 (S$414.8) psf.
Both UOL and Hotel Plaza are also cautiously optimistic that the demand for hotel rooms will remain fairly strong in Singapore and the Asia-Pacific region, even with the weaker economic outlook.
UOL gained five cents to close at $3.26 yesterday. Hotel Plaza lost three cents to close at a 52-week low of $1.49.
Its listed subsidiary Hotel Plaza posts 5% rise in net profit to $16.3m
UOL Group's second-quarter net profit fell 49 per cent to $145 million, from $286.3 million a year ago, as the property group saw lower fair-value gains from its investment properties.
Selling well: Sales at UOL's projects, including Nassim Park Residences, launched in Q2 exceed expectationsRevenue for the three months ended June 30, 2008 rose 4 per cent to $209.3 million, from $201.6 million in Q2 2007.
The increase in revenue came largely from UOL's hotel operations, with hotels in Singapore, Australia and Vietnam performing better.
Revenue from property investments also improved due to higher average rental and occupancy rates in investment properties, UOL said.
Earnings per share for Q2 2008 fell to 18.21 cents, from 36.01 cents a year ago.
For the first half of 2008, UOL's net profit attributable to equity-holders fell 48 per cent to $187.8 million. Turnover for the six months rose 7 per cent to $371.1 million.
UOL's listed subsidiary Hotel Plaza posted a net profit of $16.3 million for the second quarter - 5 per cent up from the year-ago period's $15.5 million.
Revenue rose 16 per cent to $79.9 million, from $69.2 million a year ago, as the company's hotels did better.
Earnings per share fell to 2.71 cents, from 3.89 cents a year ago.
For H1 2008, Hotel Plaza's net profit rose 18 per cent to $30.8 million. Revenue for the six months rose 16 per cent to $156.6 million.
Commenting on its group's results, UOL observed that the sub-prime crisis, tight credit environment and global inflation had led to a slowdown in global economic growth.
UOL said the buying sentiment in the Singapore residential property market is likely to remain soft and cautious. It, however, said that it launched three projects in the second quarter and sales 'exceeded expectations'.
In Singapore, Nassim Park Residences is over 60 per cent sold with the latest median price at around $3,000 per square foot (psf).
Breeze by the East, a boutique 88-unit project along Upper East Coast, is 50 per cent sold with the latest median price at around $979 psf.
And in Malaysia, Panorama, a freehold 223-unit luxury condominium in Kuala Lumpur, is more than 90 per cent sold at an average price of about RM980 (S$414.8) psf.
Both UOL and Hotel Plaza are also cautiously optimistic that the demand for hotel rooms will remain fairly strong in Singapore and the Asia-Pacific region, even with the weaker economic outlook.
UOL gained five cents to close at $3.26 yesterday. Hotel Plaza lost three cents to close at a 52-week low of $1.49.
Er...What Is A Reverse Mortgage?
Source : The Sunday Times, Aug 10, 2008
FINANCIAL QUOTIENT
Where do you see this?
In articles on property and retirement planning.
What does it mean?
A reverse mortgage is a financial scheme that allows a property owner to use his home to obtain a sum of cash. Like a line of credit, it provides a regular stream of income.
It is the opposite of a mortgage, in which the property owner pays a monthly instalment to the financial institution in return for a loan with which to buy his home.
With a reverse mortgage, the financial institution pays the borrower, referred to as the mortgagor. The latter is charged interest on the amount he receives.
Why is it important?
A reverse mortgage is an option for those who need additional income, in particular to meet retirement needs.
To qualify, the mortgagor must own a home and attain a certain age; usually, he has to be at least 60. In addition, his home must be fully paid up.
The reverse mortgage is granted based on the age of the borrower, the prevailing value of the property, the projected property appreciation rate and the interest rate. The loan is repayable only when the property is sold, usually upon the death of the borrower, or upon the expiry of the loan term.
In the event of death, the financial institution will sell the property for the estate of the deceased. However, it may allow the children to keep the house if they can repay the loan.
In Singapore, such services are offered by NTUC Income and OCBC Bank.
So you want to use the term. Just say...
My retired uncle, who has no children, has taken out a reverse mortgage on his flat so that he can have an additional stream of income.
FINANCIAL QUOTIENT
Where do you see this?
In articles on property and retirement planning.
What does it mean?
A reverse mortgage is a financial scheme that allows a property owner to use his home to obtain a sum of cash. Like a line of credit, it provides a regular stream of income.
It is the opposite of a mortgage, in which the property owner pays a monthly instalment to the financial institution in return for a loan with which to buy his home.
With a reverse mortgage, the financial institution pays the borrower, referred to as the mortgagor. The latter is charged interest on the amount he receives.
Why is it important?
A reverse mortgage is an option for those who need additional income, in particular to meet retirement needs.
To qualify, the mortgagor must own a home and attain a certain age; usually, he has to be at least 60. In addition, his home must be fully paid up.
The reverse mortgage is granted based on the age of the borrower, the prevailing value of the property, the projected property appreciation rate and the interest rate. The loan is repayable only when the property is sold, usually upon the death of the borrower, or upon the expiry of the loan term.
In the event of death, the financial institution will sell the property for the estate of the deceased. However, it may allow the children to keep the house if they can repay the loan.
In Singapore, such services are offered by NTUC Income and OCBC Bank.
So you want to use the term. Just say...
My retired uncle, who has no children, has taken out a reverse mortgage on his flat so that he can have an additional stream of income.
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