Tuesday, September 18, 2007

Explore Marina Bay

Source : Urban Redevelopment Authorty (URA)

Map Of Marina Bay

Garden By The Bay At Marina South

Marina Bay Sands Integrated Resort

New Bridge & Promenade @ Marina Bay

Singapore Flyer

Esplanade - Theatre On The Bay (Foreground), Marina Centre (Background)

The Fullerton Singapore & Merlion Pier (Foreground), Raffles Place (Background)

Coller Quay - Clifford Pier & Former Customs Harbour Branch

One Marina Boulevard

One Raffles Quay

The Sail @ Marina Bay

Busines and Financial Centre (BFC)

Sentosa Cove Launches Final Condominium Development Site

Source : Channel NewsAsia, 18 September 2007

SINGAPORE : Sentosa Cove is launching its final condominium development land parcel.

The Pinnacle Collection has a reserve price of S$964 million or S$1,600 per square foot per plot ratio.

The 230,000 square feet site has a maximum permissible gross floor area of over 600,000 square feet.

A condominium with about 360 luxury apartments can be built on the ocean-front site.

The 20-storey building will be the tallest at Sentosa Cove.

The site will be sold based on price as well as design concept.

CB Richard Ellis expects bids for the site to be above S$2,000 per square foot per plot ratio.

It estimates the breakeven cost to be between S$2,800 and S$3,000 per square foot.

This would translate to an estimated selling price of about S$3,200 to S$3,500 per square foot for homes in the development. - CNA/ms

Banking System Turmoil A Healthy Correction: ECB Governor

Source : Channel NewsAsia, 18 September 2007

FRANKFURT : Financial market turbulence in the wake of the US home loan crisis constitutes a healthy correction, European Central Bank governing council member Yves Mersch said Tuesday in an interview.

"We are going to reach a better reappreciation of risks" in the banking system, said Mersch, who is also governor of the Luxembourg central bank.

It would nonetheless take time before the full impact of massive investments in assets backed by high-risk US home loans on the so-called subprime market was fully known, he told the German banking daily Boersen-Zeitung.

The investments were made via what is known as conduits, or companies that banks did not include on their main balance sheets, and integrating the losses into the banks' accounts would require a few more months, he explained.

"I think we will only have a clearer idea in annual reports" that are due in early 2008, Mersch said.

The financial crisis sparked by the meltdown in the US subprime market, where mortgages were made available to people with questionable credit histories, has already affected several banks in the United States and Europe.

In Britain, anxious customers queued up again on Tuesday to withdraw their cash from the embattled bank Northern Rock despite a government pledge to protect savings. - AFP/ms

Better Marketing Of Longevity Insurance Scheme Needed: Dr Lily Neo

Source : Channel NewsAsia, 18 September 2007

SINGAPORE : There is a need for better communication of the CPF changes coming up, and better marketing of the Longevity Insurance Scheme as well.

MP for Jalan Besar Dr Lily Neo made this point when she spoke in Parliament in support of the Ministerial Statement on CPF Reforms on Tuesday.

Dr Neo noted that those who live beyond 85 will benefit from the annuity.

They will also get more than what they initially paid for.

Citing the estimates of some actuaries, Dr Neo said a sum of S$4,300 deducted at the age of 55 from the CPF Minimum Sum, when compounded at 5 percent for 30 years, would yield a payout of S$300 from the age of 85 to 100.

This means that at age 87, one would already have received more than what he or she had paid for.

And at the age of 100, one would expect to get S$54,000 or about 13.5 times of the initial outlay.

Dr Neo added, "It is thus imperative that the Manpower Ministry spares no effort in marketing these proposals well to the general public, to allay general concerns and correct misconceptions. It is crucial to the successful implementation of the policy that we market our diamonds as diamonds and not as graphite." - CNA/ms

Prices Of Entry-Level, Mid-Tier Homes Set To Go Up Further

Source : Channel NewsAsia, 18 September 2007

SINGAPORE: Despite signs that sentiment has been weighed down by global credit woes, property consultants are still keeping to a bullish outlook for the Singapore property market.

They are expecting to see further upside in prices of as much as 50 percent over the next 6 to 18 months.

This is despite the industry taking a slight breather and a general cautionary mood among investors due to the US sub-prime mortgage crisis.

Demand in the mid-tier and mass-market segment is seen as coming from those who need replacement units.

Nicholas Mak, director of Consultancy and Research, Knight Frank, said: "Some of the people whose project has gone en bloc successfully will be looking for replacement properties and as prices in the high-end market have skyrocketed, they will perhaps buy properties that are in the mid-tier or in the mass market."

Those investing in entry-level and mid-tier condominiums are mainly Singaporeans and permanent residents.

Prices for mid-tier condos have, so far this year, climbed some 15 percent - while those for entry-level properties have jumped by 12 percent.

A new development targeted at heartlanders has just been launched at Ang Mo Kio.

And consultants said they expect the units to be sold for S$1,100 to S$1,200 per square foot.

"Although it is in the HDB heartland, it's in a very good location – very close proximity to the Ang Mo Kio MRT station and the Ang Mo Kio hub which has a major retail mall," said Mr Mak.

Data out from the Urban Redevelopment Authority (URA) on Monday showed that almost 1,900 new residential units were launched last month.

The total number of new units for the whole of the third quarter is expected to be around 4,000. - CNA/so

URA Launches Tender Of Another Residential Site At Enggor Street

Source : Channel NewsAsia, 18 September 2007

The Urban Redevelopment Authority has launched a residential site at Enggor Street for sale by public tender.

This is the second residential site to be launched for tender at Enggor Street this month.

The 99-year leasehold site has an area of 2,800 square metres.

It can generate a maximum permissible gross floor area of about 23,500 square metres.

The first storey can be set aside as commercial space.

CB Richard Ellis expects the site to be able to attract bids of more than S$200 million or above S$800 per square foot per plot ratio.

At this price, the breakeven cost works out to S$1,350 per square foot.

Another property consultant, Knight Frank, is more conservative.

It expects the site to fetch prices from S$156 million to S$177 million.

This translates to between S$620 and S$702 per square foot per plot ratio.

The tender for the site, which was transferred from the reserve to confirmed list, will close in November. - CNA/so

CPF Changes Will Not Draw On Past Reserves: Tharman

Source : Channel NewsAsia, 18 September 2007

The proposed changes to the Central Provident Fund (CPF) to help Singaporeans meet their retirement needs are sustainable and will not draw on past reserves, said Second Finance Minister Tharman Shanmugaratnam.

Speaking in Parliament on Tuesday, Mr Tharman also explained the rationale of pegging the interest rate for the Special, Medisave and Retirement Accounts (SMRA) to long-term bond rates.

Tweaking the CPF scheme is aimed at helping Singaporeans save for old age.

One way is to pay 1 percentage point more in interest on the first S$60,000 of their CPF balances – a move that will cost the government S$700 million a year.

This has prompted many Members of Parliament to ask how this scheme would be funded and whether the government could give more or even co-share the cost of providing for retirement and old age.

Related Video Link - (Channel NewsAsia) http://tinyurl.com/2nur5v
CPF changes will not draw on past reserves: Tharman

Related Video Link - (Straits Times) http://tinyurl.com/2l2exn
CPF Reforms will not draw on Govt's reserves

Second Finance Minister Tharman Shanmugaratnam today assured Parliament that the CPF reforms are sustainable and will not draw on the Government's reserves.

He attempted to clear the air over issues on affordability and whether or not Singaporeans will be worst off with a fluctuating interest rate for the Special, Medisave, and Retirement Accounts (SMRA).

Over 15 MPs joined in the debate on CPF changes today.

Josephine Teo, MP of Bishan-Toa Payoh GRC, said: "With this generous interest rate hike, and considering all the other major investments in education and medical infrastructure, are we possibly setting ourselves up for higher GST or other taxes in the future?

"I would like the minister to please give the assurance that we have done the sums and are confident that the new interests in its current proposal are affordable before we consider the suggestions to do even more."

Replying, Mr Tharman said the CPF board would pay for this through the interest it receives on government bonds.

This will raise the government's debt-servicing cost, which will be financed by returns on investing CPF monies.

He said: "This is why we must avoid paying above market rates for CPF interest. Paying market rates will be the only way in which we ensure that the CPF is sustainable, not just for the next few years but for the very long term. It should never become a draw on past reserves."

Mr Tharman also noted MP Heng Chee How's suggestion to credit the earnings from the increase in the interest rate into a separate CPF account.

Mr Heng said the government could create a separate sub-account in the CPF and put this additional interest earning into that account.

The CPF member can use that money at age 55 to help pay the premium for his Long Life Annuity, fully or partially, and excess amounts can flow back into the Ordinary Account.

Mr Tharman said the CPF reform is reasonable and justified, including the pegging of the SMRA to the yield of 10-year Singapore Government Securities, plus one percentage point.

This, he said, should offer better returns, taking into account future market uncertainties.

The SMRA rate will be kept at 4 percent for the first two years when it is implemented next January.

Some MPs have asked for this to be extended, but Mr Tharman said this may be unsustainable in the long run and that the CPF should not be an interest rate subsidy scheme.

Mr Tharman said: "What is absolutely critical in all of this is the culture that underpins this economic strategy. A culture that comprises an ethic of self-reliance, where every Singaporean knows and understands that he has to save for his future needs. This is why the approach that we have taken through all our subsidies, is to use subsidies to give Singaporeans the incentive to work and save on their own. If you work and save, we will help you by topping up your savings."

Other measures to help Singaporeans include HDB housing grants and Workfare Income Supplements.

Day Two of the debate saw many MPs raising concerns about the CPF changes.

Michael Palmer, MP of Pasir Ris-Punggol GRC, said: "I would be interested to know what measures the minister has in mind which would educate and hopefully convince all Singaporeans that the changes to the CPF scheme and other changes to legislation are indeed necessary to provide for our fast ageing population."

Lily Neo, MP of Jalan Besar GRC, said: "How viable is it for CPF investments to be hedged with other vehicles which yield higher returns, and 100 percent capital preservation? Could the CPF board consider working with GIC and perhaps peg the interest rates at 2 percentage points below GIC's returns?"

Apart from CPF reforms, MPs also debated on issues such as helping Singaporeans work longer. - CNA/so

Aberdeen Asset Stake Just Over 5%, Says OCBC

Source : The Business Times, September 18, 2007

No major owner: Aberdeen's stake does not make it a substantial shareholder, says OCBC

Oversea-Chinese Banking Corp (OCBC), Singapore's smallest bank, said yesterday that fund manager Aberdeen Asset Management now held a stake of just over 5 per cent in the bank, but that did not make it a substantial shareholder.

The bank said in a statement that the Monetary Authority of Singapore had also allowed Aberdeen's Asian arm and its subsidiaries to hold up to 10 per cent of the bank's issued ordinary shares, provided that the shares on which they are able to exercise voting rights do not exceed 5 per cent.

OCBC said Aberdeen had a stake of 5.025 per cent. The price and timing of the acquisition were not released, but at current market levels the stake would be worth S$1.35 billion.

A separate statement from Aberdeen said the fund manager had voting rights on only 3.24 per cent of the shares. The share purchase does not make the fund manager a substantial shareholder in the bank, OCBC said.

Under Singapore banking rules, investors need to seek permission of the Monetary Authority of Singapore, the country's central bank, to buy 5 per cent or more of the shares in its three listed banks - DBS Group Holdings, United Overseas Bank and OCBC.

The rule is aimed at preventing a hostile takeover of Singapore's banking industry. Bank mergers in 2001 cut the number of lenders to three from five.

An analyst at a foreign brokerage house said the central bank may allow fund managers to take a stake of 5 per cent or more in the company, but was unlikely to allow a 'strategic investor' such as another banking group to buy shares of Singapore's three banks. -- Reuters

ADB Expects Bumper Year For Asia-Pac Economies In 2007

Source : The Business Times, September 18, 2007

8.3% growth seen but any severe US downturn could hit next year's performance

THE Asian Development Bank takes a bullish view of the region's economic prospects in its latest Asian Development Outlook published yesterday in which it suggests that growth in Asia and the Pacific (excluding Japan) will hit 8.3 per cent overall in 2007, making it 'another bumper year'.

But any severe downturn in the US economy could shave as much as 1-2 percentage points off the region's growth next year, the ADB admits.

China and India continue to be the main locomotives of growth in developing Asia and now account for 55.3 per cent of the region's total gross domestic product, the bi-annual Asian Development Outlook Update says. These two countries recorded their fastest growth in 13 years during the first half of the year, while accelerating economic expansion in the Philippines, Indonesia and Central Asia is helping to make regional growth more 'broad based'.

The ADB has updated its original growth forecast for the developing Asia-Pacific region from 7.6 per cent to 8.3 per cent in the light of these trends, and is provisionally forecasting 8.2 per cent growth in 2008. The report warns, however, that the economic outlook for next year is hazy as uncertainty prevails in global financial markets and worries about the health of the US economy mount.

Related link - http://tinyurl.com/2xcxnp
ADB Asian Development Outlook 2007

'If growth in the United States lurches down, developing Asia would not be immune. But the tremors from a downturn in the US are likely to be modest and short-lived even if it falls into recession,' according to the ADO. 'Available evidence suggests that, depending on timing, severity, and duration, a US recession could clip growth in developing Asia by 1-2 percentage points' in 2008 but the but the damage should be short-lived.

'If a synchronous steep downturn in the US, euro zone, and Japan were to occur - an event that currently seems improbable - growth in developing Asia would be at greater risk,' the ADO admits. But stout reserves, improved financial systems, and scope for policy adjustments put the region in a better position to weather any storm. Developing Asia's defences against external shocks are solid and it can weather a slowdown in the US, the report says, although it lists avian flu, geopolitical and security risks in some parts of the region and political uncertainty in a few countries as downside risks obscuring the outlook for a number of economies.

Within the overall region, East Asia is now expected to grow by 8.9 per cent in this year. The ADB lifts its growth forecast for China to 11.2 per cent this year and 10.8 per cent in 2008, citing brisk exports, strong investment and buoyant consumption.

South Asia, which continues to consolidate its progress in recent years, is expected to grow at 8.1 per cent in 2007. Potential growth rates in Bangladesh, India and Pakistan now appear to be on a more stable trajectory. The report projects India's economy to expand by 8.5 per cent in 2007 and 2008.

South-east Asia as a whole is now expected to grow at 6.1 per cent in 2007. Private sector dynamism will help Vietnam to post very strong growth of 8.3 per cent, while the Philippines' growth forecast is now upgraded to 6.6 per cent after the country registered its fastest first-half growth in almost 20 years. Growth in Indonesia continues to edge up and is now expected to reach 6.2 per cent. Growth in Thailand is expected to be close to the earlier estimate of 4 per cent for the year as political uncertainty continues to undermine consumer and private investment confidence.

Meanwhile, Central Asia's growth estimates for 2007 have been raised to 11.1 per cent as high oil prices and mineral exports continue to support economic expansion in the region.

The ADB downgrades the 2007 growth projection for Pacific Islands to 3.5 per cent from 4.5 per cent as an expected economic rebound in Timor-Leste has not been as strong as anticipated and the economic fallout in Fiji Islands has been more accentuated than expected. The ADO adds that while inflationary pressures emerged in some parts of the region in 2007, prospects for inflation in 2008 are difficult to predict as uncertainty shrouds the global economy. If growth turns out to be slower than anticipated, inflation could come down more quickly.

US Rate Cut Likely To Boost S'pore Growth

Source : The Business Times,September 18, 2007

GDP may rise 1.4% points with 75 basis point cut in Fed rate: Citigroup

SINGAPORE'S economic growth may jump by another 1.4 percentage points, if the key US interest rate is cut by 75 basis points, says Citigroup.

In a report, its economist Chua Hak Bin said he expects the Fed funds and discount rate to be slashed by 50 basis points (bps) to 4.75 per cent and 5.25 per cent respectively at the upcoming Federal Open Market Committee meeting.

Also, he sees another possible cut of some 25 bps before year-end, which will 'lift Singapore's gross domestic product growth by 1.4 per cent points'.

Based on Citigroup's analysis, this is almost double and far higher than the average of 0.8 per cent across Asian economies, because of Singapore's heavy dependence on external demand and sensitivity of domestic interest rates to US interest rates.

Expectations of rate cuts came after the recent financial market troubles, which have affected US consumption outlook.

For example, 'US housing prices have declined by an average of 8 per cent, but elevated levels of unsold homes suggest that further corrections are likely'.

Fed rate cuts will thus help cushion and reduce the potential negative impact from slower US growth.

The research house also thinks the Singapore economy is less sensitive to any US economic downturn, due to the diversification away from segments more sensitive to US business cycles, such as the electronics and pharmaceutical sectors.

In all, Citigroup says a one percentage point fall in US GDP growth cuts Singapore's GDP growth by about 1.7 per cent point.

Indeed, its projected cut in rates may possibly lift Singapore's GDP growth by more than necessary if US consumer spending does not slow as sharply as expected, aggravating the current pressures arising from supply bottlenecks.

Citigroup believes that the rate cut will strengthen the Sing dollar by 0.6 per cent, improve the current account surplus to GDP by 0.3 per cent point, and increase the fiscal balance to GDP by 0.2 per cent point.

However, the impact on local interest rates is likely to be modest, thus limiting the impact on mortgage rates and property market.

For example, the three-month Singapore Interbank offered rate is expected to shed only about 10 to 20 basis points to about 2.6 per cent in six months' time, if the US rate cut is realised.

'This is because short-term interest rates had already fallen sharply in the early part of the year and the ongoing upward adjustment since represents some normalisation.'

Stronger domestic investment growth may also start putting upward pressures on rates early next year.

Overall, Citigroup expects mortgage rates to fall by possibly 10 to 20 bps.

On the property front, Citigroup's analyst Wendy Koh sees a supply crunch amid strong employment growth and falling vacancy rates. She expects residential rental rates to rise by 20-30 per cent a year.

This came as a record 113,800 jobs were created in the first half of this year, and Citigroup sees residential occupancy rates rising higher next year to over 97 per cent.

Embrace Risk To Beat Inflation

Source : The Business Times, September 18, 2007

Better off CPF members should welcome volatile yields

IT should come as no surprise that the interest rate for long-term funds in the CPF scheme - specifically the Special, Medical and Retirement accounts (SMRA) - will be pegged to a long bond rate.

The government had hinted at this revision in 2002 in the peg for long-term CPF funds.

Now, finally, the full picture of the new 'risk-free' framework has emerged. The 10-year Singapore government bond will be the benchmark rate. Amounts in the SMRA will earn the 10-year yield plus one percentage point. The reason the 10-year bond was chosen is that it is widely traded and easily valued. The additional premium is a proxy for the extra yield that a longer-term bond, such as a 30-year issue, might typically command over shorter-term bonds.

In addition, the first $60,000 of funds to be ring-fenced for long-term needs will earn another one percentage point. This $60,000 in funds cannot be invested under the CPF Investment Scheme.

The big question is: Are members better off? On the face of it and in most but not all circumstances, yes. The government will grant a two-year transition period where the SMRA rate will be fixed at 4 per cent.

The new framework introduces significant changes. One is volatility. Yields on the 10-year Singapore government bond, which is widely traded among banks and other institutions, fluctuate more than those on the 15 or 20-year bonds.

Based on Bloomberg data, the highest yield since the first issue in 1998 is 5.51 per cent. The lowest point was 1.79 per cent in 2003. Today the yield is 2.72 per cent. This means there will be periods when funds in the SMRA may be worse off, earning less than the current fixed rate of 4 per cent. Calculations will be done quarterly. Still, the floor of the Ordinary Account rate of 2.5 per cent will hold. That is, if the 10-year bond rate were to fall below 1.5 per cent, the SMRA rate would be fixed at the minimum Ordinary Account rate of 2.5 per cent.

Based on Bloomberg data, the average Singapore bond yield since 1998 is 3.55 per cent, which suggests members should be better off if history is a guide.

Members who are accustomed to a non-volatile safety net may feel hard done by. But given today's relatively flat yield curves there is still an implicit subsidy. At present, 30-year US Treasuries yield 4.72 per cent, about 27 basis points more than the 10-year Treasury yield of 4.45 per cent. Singapore does not have 30-year bonds, but the spread between the 10 and 20-year securities is about 50 basis points.

Fear of volatility, however, should not distract CPF members from one of the biggest challenges facing long-term savers - inflation. Will the government's premium above the bond rate be enough to at least keep pace with inflation? This challenge is particularly gruelling for the $60,000 in funds that cannot be invested. Out of these funds, members will eventually draw a stream of income.

As a simple illustration, take $60,000 in the Retirement Account. If it compounds at 5 per cent per annum over 20 years it will grow to over $159,000. If inflation was 2.5 per cent, however, the purchasing power of the end-value of that pot would be reduced by as much as 38 per cent.

Still, the decision to protect the initial $60,000 in funds from any market exposure is prudent. Those with modest assets should not subject their funds to volatility. But those with funds in excess of the $60,000 should seek diversified investments that can beat inflation. And that means embracing a measure of risk.

Jones Lang Plans Mall Mgmt JV In China

Source : The Business Times, September 13, 2007

(BEIJING) Global real estate services company Jones Lang LaSalle (JLL) is in talks with a shopping centre management firm to establish a 50-50 joint venture in China, a senior company executive said yesterday.

Managing director David Hand said the company 'is looking at doing a merger - a joint venture with an overseas expert in shopping centre management' to strengthen its hand in a market where the world's top retail brands are swarming in.

If everything goes smoothly, 'by the end of the year, we will be able to announce it', he told reporters.

Mr Hand, who is also head of Jones Lang LaSalle's China retail division, did not name the prospective partner.

He said the deal would make JLL the largest shopping centre management company in China and in Asia as well.

JLL provides management and leasing services to many shopping malls in China, including new developments in downtown Beijing. Its rivals include DTZ Holdings and CB Richard Ellis.

Mr Hand added that JLL would move its regional headquarters to China from Singapore to capitalise on Bejing's drive to spur consumption in order to wean the economy off investment and exports.

He did not say when the move would occur. 'In the future, China will be our strongest growth engine,' he said.

Mr Hand said he expected Beijing to roll out more measures to rein in foreign investment in Chinese property.

China has ordered foreign investors to register onshore and put more of their own money into their China ventures.

Mr Hand said the process of investing in Chinese real estate had become more cumbersome, but added: 'It's not stopping money coming in and out.' - Reuters

Marina South Site

Source : Singapore Institute Of Architects

Marina South Site Information Plan

Source : Public Utilities Board

The Marina Barrage Visitor Centre

An Artist's Impression Of Marina Bay

Source : Urban Redevelopment Authority (URA)

Asia On Upswing

Source : TODAY, Tuesday, September 18, 2007

But oil prices, credit strains can cut growth

DEVELOPING Asia will likely grow this year at a faster rate than initially expected, as its main economic engines — China and India — continue to hum despite a slight uptick in inflation, the Asian Development Bank (ADB) said yesterday.

In its Asian Development Outlook 2007 Update, the Manila-based regional development bank raised this year’s growth forecast for Asia excluding Japan to 8.3 per cent from 7.6 per cent in the March outlook, and its forecast for next year to 8.2 per cent from 7.7 per cent.

But the improved prospects for developing Asia have pitfalls. The ADB said these include volatile oil prices and the impact of credit market strains on the United States economy.

“This reassessment stems from the exceptionally strong performance of Asia’s giants
— China and India,” said ADB chief economist Ifzal Ali in his foreword to the publication.

“The headline numbers for 2007 have also been lifted by faster-than-expected growth in Indonesia and the Philippines.”

If China and India are excluded, the other economies in developing Asia are expected to grow by a more modest 5.7 per cent this year and 5.6 per cent the next year.

“The baseline forecasts for 2007 anticipates some modest slowing in the global economy and a mild recovery in the US through to 2008. Stabilising monetary responses seem likely,” the ADB update said.

“But the downside risks to growth in 2008 are elevated and much will depend on whether distress in credit markets deepens and spills over into the wider financial system and real economy.”

Mr Ali said that as a deep downturn in the US with knockon effects in Japan and the Eurozone would mark a significant deterioration in the external environment, it would undoubtedly cut into the region’s growth going into 2008.

“At the same time however, developing Asia ... has stout financial defences and some scope for policy adjustments,” Mr Ali added. — DOW JONES

Oaktree Capital Will Buy Singapore Pangaea Capital

Source : TODAY, Tuesday, September 18, 2007

Los Angeles-based investment firm Oaktree Capital Management will buy Singapore-based Pangaea Capital Management to lead its real estate efforts in Asia.

Financial terms of the deal were not disclosed.

Pangaea has 25 employees and has been investing in Asia for over 20 years, Oaktree said.

Oaktree and its affiliates have about US$50 billion ($76 billion) in assets under management.

The acquisition is expected to close by the end of the month.— DOW JONES

No Sign Of Sub-Prime Crunch

Source : TODAY, Tuesday, September 18, 2007

SINGAPORE is not immune to a slowdown in major industrial economies, and while the risks from the United States sub-prime mortgage problems “have increased”, it is not clear that there has been significant spillover into the real economy, Minister of State for Trade and Industry S Iswaran said yesterday.

Speaking in Parliament, he said it was “too early to assess” the impact of the subprime crisis on the US and European economies, even as concerns grow that uncertain financial markets could lead to a loss of confidence and tight credit conditions.

“This will in turn hurt investment and consumption in the US and Europe. If growth slows in these major economies, Singapore will be affected,” he said, in response to queries by Jalan Besar GRC MP, Dr Lily Neo.

Singapore’s open economy may be subject to “significant impact” through a credit squeeze and other effects, but it is mitigated to some extent by the diversification of the economy, he said.

Problems with US sub-prime mortgages or housing loans to borrowers with poor credit history — which global investors have invested in — have roiled world financial markets in recent months. That has also led to a liquidity crunch in some countries, sparking concerns of a global economic slowdown.

Mr Iswaran said the Ministry of Trade and Industry’s forecast of 7- to 8-per-cent growth for the year remains unchanged.

Still, restoring confidence to financial markets is key, he said, adding the Monetary Authority of Singapore (MAS) has been closely monitoring the banking system and stands ready to inject liquidity if necessary.

Second Finance Minister Tharman Shanmugaratnam said the MAS would do so if there were a systemic shortage of liquidity in the market, or “systemic crunch” which has not been the case so far.

“In fact, MAS has not had to do anything extraordinary, beyond its normal money market operations,” he said.

Separately, Minister for National Development Mah Bow Tan said there has so far, been “no sign of a negative impact” from the sub-prime crisis on the property market, which is driven by economic fundamentals. As the Government funds public housing loans, its credit assessment and restriction for each household to own only one HDB flat also help provide stability in the public housing market, he said.

Economists mostly agree with the Government’s prognosis. CIMB-GK regional economist Song Seng Wun said chances of the sub-prime crisis leading to a systemic risk in our banking system is low, as banks here and in the region have been significantly strengthened after the Asian financial crisis.

A Net For The Housewife Too

Source : TODAY, Tuesday, September 18, 2007

An alternative to annuities, longer CPF payouts would mean she can get late husband’s share

Letter from GOH KIAN HUAT

INSTEAD of having Central Provident Fund members subscribe to the annuity plan, I suggest the Government explore other alternatives.

The current minimum sum that must be maintained in the CPF account until members reach the drawdown age of 67 will be gradually increased to $120,000. Members can expect to receive a monthly payout between the ages of 67 and 85.

As an alternative to compulsory annuity, I suggest the the monthly payouts be reduced but their duration be extended to age 90 or 95.

To increase the monthly payout, the minimum sum may also be increased to say, $150,000, progressively.

In this way, if CPF members die early, they can have their wish of passing the estate on to their beneficiaries.

Additionally, the proposed annuity plan does not address the financial needs of housewives with little or no CPF contribution.

They are unable to enjoy the monthly CPF payout during their old age and have no funds to purchase the compulsory annuity.

To make matters worse, women generally live longer than men. Thus, these women may face financial problems if their spouse or children do not support them.

Under the compulsory annuity plan, housewives would not be able to enjoy any benefits if their spouses, who are CPF annuitants, die early.

However, under my proposal, housewives could continue to receive the monthly payouts remaining in their spouses’ account even if they were to live till the age of 90 or 95.

Half Of En Bloc Sales Have Consent Level Of 90 Per Cent Or More

Source : TODAY, Tuesday, September 18, 2007

The average age of all developments that applied for an en bloc sale from January 2005 to August this year was 25.9 years.

The average percentage of owners who signed these sale agreements at the time of application was 89.2 per cent. About half of these developments received a consent level of 90 per cent or more.

Since January 2005, 3,700 private residential units have been issued Strata Titles Board orders for collective sale. After redevelopment, there will be 8,300 new units.

These figures were revealed yesterday in Parliament in written response to questions from Nominated Member of Parliament Siew Kum Hong.

The common reasons for objections by minority owners were that they would suffer a financial loss and that the transaction was not done in good faith.

Just last month, the Law Ministry tabled in Parliament a slew of changes to the rules governing en bloc sales to improve transparency and balance competing interests. The Land Titles (Strata) (Amendment) Bill will be debated this week.

Govt Should Top Up Annuities: MPs

Source : TODAY, Tuesday, September 18, 2007

THE Government should consider topping up the compulsory annuity scheme during the times when it is enjoying budget surpluses.

The suggestion, made by Nominated Member of Parliament Cham Hui Fong, was among several raised on the first day of debate on the slew of CPF changes in Parliament yesterday. Altogether, 14 MPs spoke yesterday.

“I think this will be a good demonstration of shared responsibility,” said Ms Cham, who is NTUC’s industrial relations director.

Her view was shared by East Coast GRC MP Jessica Tan and Jurong GRC MP Mdm Halimah Yacob.

Mdm Halimah said: “They (Singaporeans) feel it will be more palatable if the Government could contribute something by injecting some funds into the pool. With additional government funding, many Singaporeans feel the payouts after 85 could then be more meaningful, and also, the premium could be affordable.”

From her talks with residents, Mdm Halimah said some felt the compulsory annuity scheme will not benefit the poor and low-income groups as they believe the rich live longer.

West Coast GRC MP Mdm Ho Geok Choo suggested the Government work out a formula for an annuity scheme that will allow a higher rate for lower income groups. She believes this will be a “demonstration” of the Government’s responsibility in looking after the lower strata of society.

Apart from concerns over the annuity scheme, the MPs also touched on jobs for older workers.

Ms Cham felt that simply setting a national target of achieving 65-per-cent employment rate for those in the 55-to-64 age group over the next five to eight years is not enough.

For re-employment to work, checkpoints should be set every year to ensure the scheme is still working.

“If it is not progressing, then new strategies must be put in place when we review the target,” Ms Cham argued.

“It is crucial for us to see results in the next two years.”

The way forward, said Mdm Halimah, is not just with the public sector taking lead, but the government-linked firms, too.

She said: “If the public sector and GLCs do not set a good example, then we will have less moral authority to urge private companies to do so.”

Flexi-Approach Is What’s Needed

Source : TODAY, Tuesday, September 18, 2007

Public concerns noted, so committee to be set up to study longevity insurance

THE idea of a “longevity insurance” makes much sense for Singapore’s rapidly ageing society. But add an element of compulsion to it, and many start viewing the proposed annuity scheme in a less favourable light.

In a tacit acknowledgment of public concerns over the plan, the Government has given its strongest indication yet that it would adopt a flexible approach in implementing the National Longevity Insurance Scheme.

Manpower Minister Ng Eng Hen told Parliament yesterday that a new committee would be formed to study how best to roll out the scheme. Dr Ng said the Government recognises that each Central Provident Fund (CPF) member has different needs when it comes to saving for their old age.

“We should be flexible in accommodating the different circumstances of members, and offer different ways to provide for their full life expectancy.

“He can do this either by buying longevity insurance or by stretching out his RA (Retirement Account) money to last longer and so reduce the need for longevity insurance. So long as he has provided for his old age, and will not run out of savings prematurely, we should be satisfied,” said Dr Ng.

The Government, he said, had received feedback from many members of the public since the annuity scheme was first announced by Prime Minister Lee Hsien Loong during his National Day Rally speech last month.

Some younger Singaporeans say they want to come on board earlier because it is cheaper to do so. Others who are older want to be included because they have no dependants.

Then, there are those who do not want to be included because they have dependants who are able to take care of them or have other savings apart from their CPF.

“They want the balance of their RA to go to their dependants when they pass away,” Dr Ng said.

Under an annuity scheme, a person invests a lump sum with an insurer, which then pays out a monthly sum for life. In his Rally speech, PM Lee had said annuities would be compulsory for CPF members below 50.

The plan is to have a member buy an annuity when he turns 55, using a small portion of his Minimum Sum. This guarantees him a monthly payout of about $250 to $300 after his Minimum Sum is exhausted at age 85.

The scheme’s controversial element is that it forces a CPF member to lock up part of his CPF savings to buy the annuity — and his family will not get the money back even if he dies before 85.

Mr Leong Sze Hian, president of the Society of Financial Service Professionals, welcomed the Government’s signal that it would be open to all suggestions relating to the scheme. “I’m glad there is this flexibility. I also hope more emphasis will be placed on helping the lower-income.”

Heading the new annuities’ committee will be National Wages Council chairman Professor Lim Pin, who will work with experts from unions, the academia, and grassroots and non-government organisations.

Their report is expected to be ready within the next six months, said Dr Ng.

He also told Parliament that the Government is set to raise the drawdown age of the Minimum Sum — from 62 years now to 63 years in 2012; 64 in 2015; and 65 in 2018. It will eventually be raised to 67.

To help those affected by the later drawdown age, the Government will pay CPF members a one-off deferment bonus (D-Bonus) or voluntary bonus (V-Bonus). (See Table). These one-off bonuses will cost the Government $1.2 billion.

“We expend considerable resources every year to help Singaporeans work longer and improve their retirement savings,” said Dr Ng.

Bond Rates + 1% = ‘Risk-Free’ CPF Formula

Source : TODAY, Tuesday, September 18, 2007

(Picture) : Minister of Manpower, Dr Ng Eng Hen

WHEN it was revealed last month that interest rates for the Central Provident Fund (CPF) Special, Medisave and Retirement Accounts (SMRA) would be pegged to longterm bond rates, there was much concern that the new system would be subjected to the vagaries of often-volatile financial markets.

Many wondered what would happen to the rates during a severe downturn, while others fretted about fluctuations.

Yesterday, many of these worries were laid to rest, as Manpower Minister Ng Eng Hen spelt out details of the new interest rate system.

It would be “essentially risk free” — allowing a member to gain when rates move up, and yet, ensuring that whatever he has accumulated in his accounts is completely protected and guaranteed.

Speaking on the CPF reforms in Parliament, Dr Ng said that from Jan 1, the SMRA interest rates will be re-pegged to the yield of 10-year Singapore Government Securities (10Y SGS) and an extra 1 percentage point would be added to this rate.

Currently, the SMRA interest rate is fixed at 4 per cent — or 1.5 percentage points above the Ordinary Account interest rate of 2.5 per cent. But, as Dr Ng explained, had the new SMRA formula been in place since 10Y SGS were first issued in 1998, the
rate would have averaged 4.5 per cent.

As a guide, the average 10Y SGS yield for the 12 months ending Aug 31 was 3 per cent.

If this average is maintained for the rest of the year, the SMRA rate would be 4 per cent, after adding the extra 1 percentage point under the new formula.

What’s more, with a further 1 percentage point in interest set to be paid out to the first $60,000 of a member’s combined CPF balances, he can look forward to an average of 5-per-cent interest for his SMRA balances for the $60,000.

Many considerations were taken into account before deciding on the new formula, said Dr Ng.

“It should be based on market returns for the same risk and duration that the SMRA monies stay in their accounts. It should be simple to understand, widely quoted and have no currency risk,” said the Minister.

Ideally, the best peg would be a 30-year SGS as this would be the average length of time SMRA monies stay in these accounts, he explained.

But 30-year SGS do not exist, with the longest duration bonds set at 15 or 20 years. However, these two bonds, unlike the 10Y SGS, are not actively traded and hence not suitable as a peg.

As such, said Dr Ng, the extra 1 percentage point interest under the new formula, “will adequately provide for the difference that we would expect between the interest on the 10Y SGS … and the 30Y SGS if it existed”.

The SMRA rate will be set every quarter. To help members adjust to this floating rate, the Government will keep the 4 per cent base rate for the SMRA until the end of 2009. This floor will also apply to the extra interest tier for the first $60,000 in members’ accounts, said Dr Ng.

From 2010 onwards, the 2.5 per cent floor interest rate will apply to all accounts as stated in the CPF Act.

The new SMRA formula aside, Dr Ng said that seven in 10 CPF members — or 55 per cent of all active members — would receive the extra one percentage point interest on all their CPF monies.

Surprising Jump In New Home Sales Last Month

Source : The Straits Times, 18 Sep 2007

Private property sales up 25%; most were less pricey ones away from central area.

SALES of new private property homes made a surprising jump last month, despite August being a traditionally slow month for property deals.

Home buyers seemed to brush aside the usual worries over buying property during the Chinese Hungry Ghost month - considered unlucky - which falls in August this time around.

In fact, they bought 25 per cent more new homes last month than in July.

And in a departure from previous months, most of the homes sold last month were less pricey ones away from the prime central area.

Indeed, mid-tier and cheaper private properties in suburban districts are being touted as the next big thing in the market, said property consultants.

Last month’s sales were boosted by strong response to cheaper developments such as The Parc Condominium in West Coast Walk and Soleil@Sinaran in Novena. Together, these two projects sold 1,053 units, or 61 per cent of all new homes sold in the month.

In all, developers sold 1,720 new homes last month, according to the latest figures released by the Urban Redevelopment Authority (URA) yesterday.

This compares with 1,381 deals in July and 1,150 in June, when the URA began tracking such data.

Of the new homes sold last month, almost half went for $1,000 per sq ft (psf) or less. There were 820 units sold in this price range last month, double that of July.

The number of pricey homes that cost more than $2,000 psf also plunged. Only 86 of these homes were sold last month, compared to 370 in July.

In general, price growth of new units was ‘muted’ in August, said Ms Tay Huey Ying, director for research and consultancy at Colliers International.

She added that despite the rise in new home sales last month, overall home sales still fell compared to July.

This was mainly due to a decline in secondary market sales, or re-sales of existing homes, she said. All things considered, total home sales dropped 36 per cent last month from July.

Sub-sales - which are re-sales of uncompleted homes and used to gauge property speculation - also fell by about two-thirds, she said.

Ms Tay attributed the fall to the Hungry Ghost month as well as the US sub-prime mortgage crisis, and said that ongoing credit woes may slow home sales this month too.

But she and other property experts agreed that market activity might pick up again in the last three months of the year, with a number of new launches in the pipeline.

The recovery is likely to be led by a long-awaited upswing in suburban home sales, said Mr Ku Swee Yong, director of marketing and business development at Savills Singapore.

He noted that prices of entry-level condos have already risen and will set new benchmarks in the months to come.

‘Last year, the market was defining mass market condos as those below $600 psf,’ said Mr Ku. ‘But now, we are moving out of that. Already in August, only 5 per cent of condos cost less than $750 psf, and soon, most new launches will be above $800 psf.’

Property Investment Sales May Hit Record $50b This Year

Source : The Straits Times, 18 Sep 2007

MAJOR property deals in Singapore are set to reach an all-time high this year, according to property consultancy CB Richard Ellis (CBRE).

It predicted that a record $50 billion in investment property sales would be done by year-end. These are transactions above $5 million each.

CBRE said in a report yesterday that $37.91 billion worth of such sales have already been recorded since January, already surpassing last year’s total of $30.56 billion by 24 per cent.

CBRE’s prediction has been raised from an earlier forecast in June, when it said it expected $35 billion worth of investment deals.

The current pace of deals, however, has led it to raise its expectations by a substantial amount, Mr Jeremy Lake, CBRE’s executive director for investment properties, said.

Between June and September, $12.73 billion worth of investment transactions were carried out.

A quarter of these were in the public sector, where major deals included the $1.69 billion sale of a commercial site along Beach Road and the sale of two Anson Road office sites for $629.13 million in total.

Collective sales also remained strong for much of the third quarter, generating $1.74 billion in deals, said Mr Lake.

This helped the residential segment take the lion’s share of investment sales so far this year. Sales of residential properties accounted for 63 per cent of total sales, or $23.79 billion in all.

Offices made up 24 per cent, or $9.23 billion so far this year, while industrial properties contributed 4 per cent, or $1.51 billion.

Economy On Track Despite US Sub-Prime Woes

Source : The Straits Times, 18 Sep 2007

THE Singapore economy is still on track to meet the official 7 to 8 per cent growth forecast even as world financial markets grapple with a credit crunch sparked by a United States housing crisis.

Ministers told Parliament yesterday that financial and property markets here are still in good health and that there is plenty of cash in the system.

But they said the risk of the money market woes spilling over to the real economy has risen, adding that the central bank is ready to intervene if necessary.

‘It’s too early to assess how the sub-prime mortgage problem in the US housing market will affect credit and other financial markets,’ said Minister of State for Trade and Industry S. Iswaran. ‘At this stage, although the risks have increased, it’s not clear that there has been a significant spillover to the real economy.’

In recent weeks, rising numbers of defaults of US home loans to risky or sub-prime borrowers have triggered a tightening of liquidity in money markets.

Since global money markets are interconnected, this has caused a wider aversion to debt financing as investors prefer to hold on to cash in these uncertain times.

If this uncertainty drags on, borrowing costs may rise sufficiently to curtail investment and consumption, especially in the US and Europe.

For export-oriented Singapore, a slowdown in its two biggest export markets would inevitably take some wind out of the local economy, said Mr Iswaran.

Second Finance Minister Tharman Shanmugaratnam, who is also Education Minister, said financial institutions here have been prompt in disclosing their small exposure to US sub-prime mortgages.

He added that the benchmark interest rates at which banks lend money to each other are at pre-crisis levels. ‘That’s a good indication that the market has been stable and liquidity has been ample.’

Mr Tharman said Singapore’s central bank, the Monetary Authority of Singapore, has not had to ‘do anything extraordinary’. But it is ready to inject liquidity if there is a systemic shortage where ‘normal borrowing and lending between banks is not taking place’.

National Development Minister Mah Bow Tan said the local property market has so far been unaffected by the US sub-prime woes. ‘New developments are still unfolding every day.’

Wall Street Drops As Anxiety High Ahead Of Fed Meet

Source : Channel NewsAsia, 18 September 2007

NEW YORK : Wall Street stocks fell on Monday as anxiety ran high a day ahead of a crucial Federal Reserve meeting to decide the course of US interest rates.

The Dow Jones Industrial Average dropped 39.10 points (0.29 percent) to close at 13,403.42 and the tech-heavy Nasdaq shed 20.52 points (0.79 percent) to 2,581.66.

The broad-market Standard & Poor's 500 index declined 7.60 points (0.51 percent) to 1,476.65.

The market action came after gains of better than two percent for the broad market last week, with many investors banking on a rate cut at Tuesday's Federal Open Market Committee (FOMC) meeting to ease stress in the housing and credit markets.

Analysts are sharply divided on the Fed's course. Many say the Fed needs to cut its base rate of 5.25 percent by 25 or 50 basis points, but others say a reduction would fuel inflation and bring back easy money conditions that have led to the real estate boom-and-bust cycle.

"Expectations for a Fed bailout are running high," said Bernie Schaeffer at Schaeffer's Investment Research, who warns that the market may be disappointed by the announcement from the Fed, led by chairman Ben Bernanke.

"It is becoming increasingly clear to me that a minimum of a 50-point cut is needed and that Bernanke is not likely to deliver on it," he said.

Gregory Drahuschak at Janney Montgomery Scott urged caution ahead of the decision.

"Making major decisions before knowing what the Fed will do could be a mistake," he said.

"The evidence suggests that an interest-rate reduction cycle may not be the elixir that cures all ills, but it does make the market feel a lot better ... This week's big hope is that the Fed's prescription for the economy is not another dose of inflation fighting instead of lower credit costs."

Other factors affecting trade included another record for crude oil futures, which topped 80 dollars a barrel in New York, and the crisis at British mortgage lender Northern Rock, in which the Bank of England pledged to protect all savings as customers queued for a third straight day to withdraw cash.

Bonds were mixed. The yield on the 10-year US Treasury bond rose to 4.470 percent from 4.462 percent on Friday and that on the 30-year bond eased to 4.714 percent from 4.724 percent. Bond yields and prices move in opposite directions.

Among stocks being watched, Microsoft fell 1.08 percent to 28.73 dollars as the European Court of First Instance, the European Union's second-highest tribunal, upheld most of the European Commission's antitrust ruling against the US company.

The court affirmed the record 497-million-euro (690-million-dollar) fine on the world's biggest software firm and the order for Microsoft to sell a version of Windows PC without a media player already bundled in.

General Motors advanced 2.95 percent to 35.23 dollars as the market continued to bet on a cost-savings deal between the US auto giant and the United Auto Workers Union after the expiration of a contract at the weekend.

Shares in the Nasdaq Stock Market fell 1.43 percent to 34.41 on reports it was close to a deal to sell its nearly 30 percent stake in the London Stock Exchange to Qatar's investment arm. - AFP/de

Fed Faces Day Of Reckoning As Markets Clamour For Rate Cut

Source : Channel NewsAsia, 18 September 2007

WASHINGTON : Federal Reserve policymakers face a moment of truth Tuesday as they meet on interest rates amid a sputtering economy, but with some arguing against a return to easy-money conditions blamed for the problems.

The Federal Open Market Committee, set to announce a decision at 1815 GMT Tuesday, is widely expected to cut interest rates in a bid to ease stress in the housing and credit markets, and head off a potential recession.

Most analysts say they expect the FOMC, which has held its federal funds rate at 5.25 percent since June 2006, to cut the benchmark rate by 25 or 50 basis points, which could lead to lower borrowing costs for many consumers and businesses.

A rate cut "would reflect an effort to contain the downside risks to growth associated with the swift tightening in financial conditions this summer in an already subpar economy," said Citigroup economist Robert DiClemente, who predicts a half-point cut.

DiClemente says the current rate of 5.25 percent is "higher than neutral," or holding back economic growth, and that a failure to cut rates "could risk an undesirable breach in investor confidence and broader damage to the expansion."

"The sooner we get to 4.5 percent or thereabouts, the better the chances of stabilising the economic outlook and the financial system that supports it," DiClemente said.

Related Video Link - http://tinyurl.com/2cmwga
Fed faces day of reckoning as markets clamour for rate cut

Some analysts say that if the Fed fails to take bold action such as a half-point cut, it could trigger more turmoil in financial markets, causing more failures of home lenders and mortgage defaults and prompting a freezing up of broader credit markets.

"We strongly believe that if the Fed only cuts rates by 25 basis points even with a strongly worded FOMC statement to commit to more easing if need be, there could be a significant disappointment trade in the financial markets, especially in stocks," said Deutsche Bank economists Joseph LaVorgna and Carl Riccadonna in a note to clients.

"If policymakers move too slowly now, they run the risk that more considerable damage will be inflicted on the financial markets and the real economy, and resultantly they will have to cut rates more aggressively in the long run."

Others claim that economic conditions do not warrant a rate cut, and that such a move would simply be providing more of the easy money that fuelled the boom-and-bust cycle.

"The US economy is not booming...However, the economy is not collapsing either," argued Eugenio Aleman, senior economist at Wells Fargo, who says it would be wrong for the Fed to buckle to market pressure.

"A fed funds cut will not bring back the US housing market. A fed funds cut will not bring back the commercial paper market," he said.

Aleman said the Fed must consider what happens if it cuts rates and the housing market remains depressed:

"Then the markets will ask for another rate cut, and another, and another, and another - and then what?" he said.

"The fact of the matter is that the sub-prime mess was a bad investment decision from the very beginning and was brought about by having very low interest rates for a very long period of time. And the only way to go forward is to flush it out, take the loss and move forward, not bring it back."

Brian Wesbury at First Trust Portfolios agreed, saying: "We still hold out hope the Fed will do the right thing, which is not cut rates at all. Cutting rates, when they are already too low, will 'lock in' inflation, force more rate hikes later, and puts the Fed's credibility as an inflation fighter at risk."

The US economy expanded at a robust 4.0 percent pace in the second quarter, but many experts view that as a statistical fluke that belies soft conditions.

The loss of 4,000 jobs in August, say some, point to deep problems as the housing slump and credit problems drag on growth.

Of key importance is the message sent to financial markets.

Chairman Ben Bernanke wants to ease economic stress while avoiding the impression that he is bailing out speculators and hedge funds.

"The decision to cut interest rates by 25 or 50 basis points will not be nearly as important as the Fed's language," said Nick Raich, analyst at financial group National City.

"We believe market bulls will need a Fed that will show it is willing to do whatever it takes to prevent the economy from slipping into a recession." - AFP/ch

Govt : CPF Move Won't Hit Capital Market

Source : The Business Times,Tue, Sep 18, 2007

Even as he spelt out how all CPF members would enjoy higher interest rates on their contributions and have a more comfortable cushion for their retirement years, Manpower Minister Ng Eng Hen said that the restrictions put on investing in the CPF Investment Scheme would have 'no adverse impact' on the capital market.

Under the proposals first outlined by Prime Minister Lee Hsien Loong at the National Day Rally last month, CPF members would be paid an additional one percentage point interest on the first $60,000 in their accounts, which would go towards boosting their retirement savings.

The $60,000 may comprise up to $20,000 from the Ordinary Account (OA) and the rest from the Special, Medisave and Retirement Accounts (SMRA).

While all the OA monies can still be used for existing housing, CPF insurance and education plans, Dr Ng yesterday said the first $20,000 in both the OA and Special Account can no longer be used in the CPFIS. The extra interest aims to provide a risk-free nest- egg for Singaporeans who are living longer.

The restrictions will kick in from April 1 next year and money already invested in CPFIS will not be affected. But some have speculated on the impact of this move on the capital market.

'Even after these restrictions, $42 billion will still be available for use in the CPFIS,' Dr Ng told Parliament yesterday.

According to CPF figures in June, about $81 billion was available for the CPFIS.

But as the government moves to provide more support to Singaporeans who could be in danger of outliving their retirement savings, it has unveiled a series of reforms to the CPF scheme.

While the OA rate, which is pegged to banks' interest rates, has until now been 2.5 per cent, the SMRA rate has been 1.5 per cent higher at 4 per cent. The SMRA rate is now being re-pegged to the 10-year Singapore Government Security (SGS) rate plus one per cent.

The new SMRA rate pegged to the 10-year SGS will be set quarterly.

'A month before the next quarter, we will compute the new SMRA rate from the average daily yields of the 10-year SGS benchmark of the previous year,' Dr Ng said. 'The average 10-year SGS yield computed on this basis would now be 3 per cent.'

Based on the revised SMRA formula, the SMRA rate would be 3 plus one per cent, or 4 per cent - the same as what members currently earn.

But historically, this yield has been higher.

'Had the SMRA formula been in place since the first issue of the 10-year SGS (in 1998), the SMRA rate would have averaged 4.5 per cent,' Dr Ng said.

Of course, the ideal peg would have been a 30-year SGS because that is the average time that the members' SMRA monies stay in their accounts. Since Singapore does not have such 'long bonds', the 10-year SGS was picked as the peg for the SMRA rate because it is actively traded.

The additional one per cent would provide for the difference expected between the interest on the 10-year SGS and the 30-year SGS, if it had existed.

Dr Ng said the new interest rates will kick in on Jan 1 next year. To help CPF members adjust to the floating SMRA rate, CPF will keep the 4 per cent floor for the SMRA rate for the first two years.

'The 4 per cent floor will also apply to the extra interest tier, in the very unlikely event that the 10-year SGS rate falls below 2 per cent,' Dr Ng said. 'After two years, the 2.5 per cent floor rate will apply for all accounts as prescribed under the CPF Act.'

He said all CPF members will enjoy higher interest payments under the new system, which will cost the government at least $700 million more in the first year - and more in subsequent years.

But Dr Ng said the government is not giving handouts through the CPF system, which is not meant to be subsidised.

'We have put in place a long-term framework which provides a fair rate of return on CPF monies that compares well with any offer from private pension plans,' he said. 'Most importantly, our CPF system minimises the financial risk to members.'

But CPF members may still run out of savings if they live beyond 85 years. So the government is setting up a committee to look into starting a National Longevity Insurance Scheme, headed by Professor Lim Pin, currently chairman of the National Wages Council.

'The extra interest that members will get in the new CPF system will be more than enough to pay for this longevity insurance,' Dr Ng said.

He also said the government will be flexible in accommodating the different circumstances of CPF members and offer different ways to provide for their full-life expectancy.

Members of Parliament generally welcomed the CPF reforms, but some are concerned that yields from long-term bonds will fall, reducing the SMRA rate.

'Can the government instead guarantee a minimum 4 per cent interest rate, which is what Singaporeans are already enjoying regardless of the market performance?' said Lam Pin Min (Ang Mo Kio).

Forecast For Developing Asia's Growth Up At 8.3%

Source : The Straits Times, Tue, Sep 18, 2007

THE United States sub-prime mortgage crisis is unlikely to take the wind out of developing Asia's sails, according to the Asian Development Bank (ADB).

The bank expressed its confidence yesterday by raising its regional growth forecast.

Despite a slowing US economy, the ADB found reason to be more bullish about Asia's prospects in an update of its Asian Development Outlook yesterday.

It raised its 2007 economic growth forecast to 8.3 per cent, from 7.6 per cent previously.

It also predicts that economic expansion next year will remain high at 8.2 per cent, up from its last forecast of 7.7 per cent - while cautioning that next year's prospects are still mired in uncertainty.

The reasons behind this positive outlook are the blistering rates of expansion in China and India, while other Asian economies such as Vietnam are just as buoyant.

China and India are projected to grow by 11.2 per cent and 8.5 per cent this year, lifting the region's overall average. The ADB is pegging Singapore's growth rate this year at 7.5 per cent.

'But there is a general pattern of high, and in some countries, accelerating, growth,' noted the ADB in its latest report. In fact, the report said, the biggest worry for developing Asian economies is not slowing growth, but rather, inflation caused by overheating.

The Manila-based bank also decided on a 25 per cent chance of the US lapsing into recession, predicting a slowdown to be more likely.

But should a widely anticipated Federal funds rate cut today fail to steer the US away from recession, developing Asia could be hit with a double whammy - on the credit front and later, on the export front, said ADB assistant chief economist Frank Harrigan.

'We don't think the US will go into recession. But if it does, this will take 1 to 2 percentage points off next year's growth for the region.'

The first round of impact of US sub-prime troubles on Asia will be credit tightening, as investors demand higher returns on risky loans.

This will translate into higher borrowing costs for the governments and companies of some developing countries, Dr Harrigan explained.

Highly indebted Asian economies such as the Philippines, Indonesia and Pakistan will be hit hard by a rate hike.

Ironically, the Philippines, whose economy is in its best shape in nearly two decades, will be one of those most affected. This is because it has a high level of debt as a proportion of economic output.

'Six months down the road, demand for exports could be hurt, as Asia has yet to replace the US as the key source of final demand,' Dr Harrigan explained.

How Higher Interest Rates Will Benefit Members

Source : The Straits Times, Tue, Sep 18, 2007

IN 20 years, a Central Provident Fund member with $60,000 in his CPF savings will get $17,900 more.

Manpower Minister Ng Eng Hen cited this example yesterday to show just how much a member will benefit from higher CPF interest rates.

Indeed, seven in 10 of all CPF members and more than half of active CPF members will benefit fully from the higher rate, Dr Ng told Parliament yesterday.

From next January, the Government will pay out an additional percentage point on the first $60,000 on all CPF accounts, up to a cap of $20,000 in the Ordinary Account.

This change was announced by Prime Minister Lee Hsien Loong in his National Day Rally speech last month.

It is aimed at helping Singaporeans, especially low-income workers, build a bigger retirement nest egg.

Yesterday, Dr Ng fleshed out details of the CPF changes, revealing that the higher interest rate will cost the Government at least $700 million a year, equal to its annual grant to the HDB.

At the same time, the Government will float the interest rates of the Special, Medisave and Retirement Accounts (SMRA) and peg them to 10-year Singapore Government Securities (SGS) rates.

Under the current system, the SMRA rate is a guaranteed 4 per cent.

Under the new system, the SMRA rate is pegged to the previous year's 10-year SGS rate plus one percentage point.

The average SGS rate is now 3 per cent. Based on this peg, it means the SMRA interest rate will be 4 per cent - the SGS rate of 3 per cent plus 1 percentage point.

To help members adjust to the floating rate, the Government will still pay out a minimum of 4 per cent on the SMRA for the next two years, said Dr Ng.

This 4 per cent floor will also apply to the first $60,000 in the combined CPF accounts that enjoy a higher interest rate.

Since the 10-year SGS was launched in 1998, the highest daily rate it rose to was 5.69 per cent, while the lowest it hit was 1.79 per cent.

Dr Ng said the decision to peg rates to the 10-year SGS was based on several factors.

Among other considerations, the move had to be financially sound, easily understood and not exposed to fluctuations in currency exchange rates, he said.

The ideal peg, added Dr Ng, would have been a 30-year SGS because that would be the average time members' money stayed in their SMRA.

But there was no such bond and shorter bonds of 20 years were not actively traded, making them unsuitable as a peg.

Said Dr Ng: 'Why plus 1 per cent? Because this will adequately provide for the difference we would expect between the interest on the 10-year SGS, which we are using, and the 30-year SGS, if it existed.'

Addressing worries over fluctuating returns, Dr Ng said the new rates should be viewed from a long-term perspective.

'For members' information, had the new SMRA formula been in place since the first issue of the 10-year SGS in 1998, the SMRA rate would have averaged 4.5 per cent,' he noted.

Likewise, he dismissed fears that the CPF changes will deprive fund managers of investable CPF funds.

Under the new rules, from next April, a CPF member will not be allowed to invest the first $20,000 of his CPF Ordinary and Special accounts savings under the CPF Investment Scheme (CPFIS).

Said Dr Ng: 'Money already invested in CPFIS will not be affected. Even after these restrictions, $42 billion will still be available for use in CPFIS.'

A CPF member will still be able to use Ordinary Account funds for housing, CPF insurance and education schemes, said Dr Ng.

There will also be no change to the HDB concessionary loan rate, which is currently at 2.6 per cent, pegged 0.1 percentage point above the CPF interest rate.

Financial analysts like Mr Leong Sze Hian said the change will make people less negative about the floating SMRA rates.

'With the additional 1 percentage point in the formula, there is a good chance that the rates might exceed 4 per cent over the long term,' said Mr Leong, who is president of the Society of Financial Service Professionals.

Accountant Joe Lim, 28, agreed, saying the new formula struck a balance between risk and reward.

Said Mr Lim: 'There is a potential for slightly higher gains while the extra 1 percentage point acts as a buffer for my savings. Not too bad a deal.'

Singapore Says Local Financial Firms' Exposure To Risky US Mortgages Small, Contained

Source : AsiaOne News, Sep 17, 2007

SINGAPORE (AP) -- Singapore's exposure to U.S. subprime mortgage markets is small and contained, officials said Monday, but warned that a resulting slowdown in major economies will affect the city-state's growth.

Singapore's central bank is "closely monitoring our financial institutions' exposure to sub-prime and other structured credit markets, at both the domestic and global levels," S. Iswaran, minister of state for trade and industry, said in Parliament.

"Our exposure remains small and contained at this stage," Iswaran said, adding the central bank remained vigilant and was ready to inject liquidity into the banking system if needed.

Iswaran also said, however, that a loss of confidence and a general credit squeeze resulting from uncertainty in financial markets could impact the trade-dependent country.

"Strong growth in the region and the diversity of our export markets will provide us some buffer, but we are not immune to a slowdown in the major industrial economies," Iswaran said.

Iswaran said Singapore's economic growth forecast of 7-8 percent this year remained unchanged.

Singapore's local financial institutions do not offer mortgages to subprime customers, but have investments in collateralized debt obligations - complex bundles of debt repackaged as securities - 25 percent of which contain U.S. subprime mortgages, Second Minister for Finance Tharman Shanmugaratnam also told lawmakers.

The total investment in CDOs by local banks amount to 2.6 billion Singapore dollars (US$1.71 billion; €1.24 billion), making up just 1 percent of the banks' capital base, Tharman said.

The global credit crisis was sparked by a sharp rise in defaults on subprime loans, or loans given to people will poor credit. Many of those debts were repackaged as asset-backed securities like CDOS and sold to banks that did not know or understand the potential losses they were taking on.

Housing Still Available At Affordable Rentals

Source : The Straits Times, Forum, Sep 18, 2007

I REFER to the e-mail by Ms Stephanie Morgan-Russell (ST Insight, Sept 15) and the article, 'It's just insane' (The Sunday Times, Sept 16), regarding the paying of high rentals by expatriates in recent months.

There is a wide range of housing for rent in Singapore and the rentals are based on the type, location and size of accommodation.

One can rent a comfortable, spacious four-room HDB apartment in an easily accessible housing estate for about $1,000 a month. But if one prefers to live in a bungalow with sprawling grounds, then he has to be rich enough to do so.

Expatriates had been enjoying extremely low rentals since 2003. For example, a house in a less-popular area bought in 1996 for $1.8 million was rented out, fully furnished, to an expatriate family for only $1,400 a month in the past.

Even at a low fixed-deposit interest rate of 2.5 per cent per annum, putting that amount in a bank, instead of purchasing the property, would have fetched $3,750 per month.

In other words, owners were subsidising tenants before the increase in rentals.

The increase in rentals seems huge because houses were rented out much too cheaply earlier. It is not because there is a serious shortage of supply, especially as HDB flats can be rented out much more easily now.

I hope that the authorities will not misread the situation just because locals are less vocal than expatriates.

The renting of accommodation at affordable prices is not such a major issue that it warrants the Government looking into the matter.

Yeo Boon Eng (Mdm)

Wall St Ends Down As Credit Worries Spread

Source : The Straits Times, Sep 18, 2007

NEW YORK - US stocks dropped on Monday, led by financial shares, as a rush by savers to withdraw deposits at a large British mortgage lender fueled concerns that turmoil in the credit markets would spread.

Lines of angry customers outside branches of Britain's Northern Rock stirred fears that a crisis of confidence could befall other major banks around the world.

Shares of Citigroup, Bank of America and other leading banks and brokerages fell after shares of Northern Rock's shares plunged more than 35 per cent in London.

The Nasdaq suffered the biggest drop among the major US indexes after a decisive antitrust ruling against Microsoft in Europe. Microsoft dropped 1.1 per cent to US$28.72 (S$43.55).

For the Standard & Poor (S&P) 500, Monday was the first down day after last week's four-day streak of gains.

Oil prices rose to a record for a fourth session, fanning inflation concerns a day before the Federal Reserve is expected to cut interest rates. Higher prices could constrain the Fed as it works to cushion the US economy from the effects of the global credit squeeze.

The cautious mood was reinforced by comments by former Fed Chairman Alan Greenspan, who warned the risk of a recession had increased while inflationary forces loomed larger.

'The overall economy is doing OK, except if you think the credit market is going to get worse and worse. So that's the Sword of Damocles hanging over the market and the economy,' said Al Goldman, chief market strategist at A.G. Edwards in St. Louis.

The Dow Jones industrial average declined 39.10 points, or 0.29 per cent, to close at 13,403.42. The S&P's 500 Index slipped 7.60 points, or 0.51 per cent, to finish at 1,476.65. The Nasdaq Composite Index fell 20.52 points, or 0.79 per cent, to end at 2,581.66.

The US central bank is widely expected to lower rates on Tuesday to cushion the US economy from the financial turmoil. The Federal Reserve has not lowered rates by more than 25 basis points at a single meeting in almost five years, but this time, some analysts believe a deeper cut is needed.

Several big Wall Street companies will report earnings this week that investors fear could reveal a deeper impact from the credit rout.

Oil rose US$1.47 to settle at US$80.57 a barrel, and hit a fresh record intraday of US$80.70.

Trading was below average on the New York Stock Exchange (NYSE), with about 1.11 billion shares changing hands versus last year's estimated daily average of 1.84 billion, while on Nasdaq, about 1.44 billion shares traded, below last year's daily average of 2.02 billion.

Declining stocks outnumbered advancing ones by a ratio of about 2 to 1 on the NYSE and by 7 to 3 on Nasdaq. -- REUTERS

Credit Fears Keep Heat On Asian Stocks

Source : The Straits Times, Sep 18, 2007

HONG KONG - ASIAN stocks fell on Tuesday, with financial shares under pressure as investors fretted that the turmoil in credit markets would spread, while US crude hit an all-time high above US$81 (S$122) on supply worries.

Credit worries flared up after thousands of savers lined up on Monday to pull deposits from Britain's fifth-largest housing lender, Northern Rock, which fell victim to the sharp rise in borrowing costs between banks and had to be rescued by emergency Bank of England funding last week.

Japanese share prices slumped 1.77 per cent in morning trade on Tuesday as investors waited nervously for a key US interest rate decision, dealers said.

They said investors remained jittery about the fallout from problems in US mortgages, particularly in light of the financial woes of British bank Northern Rock whose customers have rushed to withdraw their cash.

The Tokyo Stock Exchange's benchmark Nikkei-225 index of leading shares fell 286.11 points to 15,841.31 by lunch, giving up most of Friday's gains.

The broader Topix index of all first-section shares dropped 27.80 points or 1.80 per cent to 1,516.91.

Chinese stocks were mixed on Tuesday as strength in many non-ferrous metals shares offset weakness in the banking sector.

The Shanghai Composite Index ended the morning up 0.12 per cent at 5,427.834 points, after earlier hitting a fresh all-time, intra-day high of 5,458.578. But losing Shanghai stocks outnumbered gainers by 443 to 402.

Turnover in Shanghai A shares rose to an active 92.6 billion yuan (S$18.6 billion) from Monday morning's 88.01 billion.

Hong Kong stocks fell 0.4 per cent on Tuesday, as weak global equity markets amid concern over a credit crunch led investors to lock in profits in recent gainers such as property plays.

At midday, the benchmark Hang Seng Index was down by 71 points or 0.29 per cent to 24,528.34.

Share prices on Bursa Malaysia were mixed in early trading as investors turned cautious ahead of the Federal Open Market Committee (FOMC) monetary policy meeting later today, a dealer said.

At 12.30pm, the Composite Index was down 6.63 points to 1,271.71 after opening at 1,277.85 compared with Monday's closing of 1,278.34. -- REUTERS, AFP, BERNAMA