Wednesday, September 19, 2007

US Rate Cut To Boost Asia's Strong Growth Prospects: ADB

Source : Channel NewsAsia, 19 September 2007

MANILA : Asia's economic growth prospects will get a strong boost from the US Federal Reserve's hefty cut in interest rates, Asian Development Bank president Haruhiko Kuroda said Wednesday.

"The latest decision by the US Federal Reserve would be welcomed by many in the region because that would first of all reduce the financial sector turmoil," he told a news conference on the sidelines of an aid conference in Manila.

"It would definitely improve the prospect of sustained strong economic growth in the US and would also be beneficial particularly for the emerging economies of Asia," he added.

"I would say that the decision would be greatly appreciated by many economies and the financial sector in the region."

The US central bank on Tuesday cut the federal funds rate, which banks charge each other for overnight loans, by a hefty half point to 4.75 percent, the first reduction in four years. The move was cheered by financial markets around the world.

Manila-based ADB, downplaying the chances of a US recession, on Monday raised its economic growth forecasts for developing Asia this year to 8.3 percent from 7.6 percent in March.

Next year's growth should be 8.2 percent, up from the earlier forecast of 7.7 percent, it said. - AFP/ch

StanChart Says Acquisition Of Amex Bank Will Fast-Track Private Banking Segment

Source : Channel NewsAsia, 19 September 2007

The private banking sector in Singapore is poised to get a boost from Standard Chartered Bank's acquisition of American Express Bank.

Under a deal announced on Tuesday, StanChart is buying Amex Bank for US$860 million in cash.

The tie-up will boost StanChart's private banking business in Asia, of which Singapore is a key part.

There has been growing competition in the private banking sector in Asia as banks eye the region's 2.6 million high net-worth individuals.

Major players include UBS, Citigroup and HSBC.

StanChart says its acquisition of Amex Bank will propel the lender into the top-ten list of Asia's high-net-worth wealth league - most likely in the seventh position.

Its assets-under-management globally will increase by about 73% to US$30 billion.

Out of that, up to US$20 billion will be based in Asia, where StanChart's private bank has its headquarters in Singapore.

Peter Flavel, a senior managing director at StanChart, said: "What it (the acquisition) adds is.....a larger number of relationship managers purely working onshore in Singapore. And this transaction adds 120 relationship managers to our 150 relationship managers globally. Around three quarters of those relationship managers are in our natural footprint in and around Singapore. So it's a good and very strong fast-tracking of our plans."

The acquisition will also double StanChart's US-dollar clearing business and provide a direct Euro and Yen clearing capability.

StanChart's Peter Flavel said: "For Singaporean companies wanting to trade out of Singapore and wanting to settle and buy in Euro and Yen and sell their products in Europe and Japan, we've now got a much greater in-house capacity."

StanChart will not be keeping the Amex Bank brand name but it plans to leverage on its other capabilities.

StanChart's Peter Flavel said: "They have two trust companies in Guernsey and the Cayman islands. They've got a number of Advisory Rep programs for unit trusts, which are very good. So we're pleased with those two capabilities and there's a Geneva booking centre as well." - CNA/ir

Marina View White Site Attracts Top Bid Of More Than S$2b

Source : Channel NewsAsia, 19 September 2007

The tender for the 110,400-square-feet white site at Marina View has attracted a top bid of nearly S$2.02 billion.

This works out to slightly more than S$1,400 per square foot per plot ratio.

The bid was made by MPG Berth, a joint venture between Macquarie Global Property Advisors and another developer, rumoured to be CapitaLand.

There were two other interested parties for the 99-year leasehold site.

Mapletree submitted a S$1.8 billion bid while IOI Consolidated offered S$1.6 billion.

At least 70 percent of the permissible gross floor area has to be set aside for office use.

This translates to an estimated net lettable area of at least 800,000 square feet of office space.

With the current shortage of grade A office space, property consultant CB Richard Ellis believes the developer may decide to convert the entire site into a mega office development.

This may yield more than 1.1 million square feet of net lettable office space and some ancillary retail space.

CBRE expects office rents of about S$11 to S$12 per square foot per month from the development.

Another white site at Marina View has also been placed for tender. - CNA/ir

CPF Reform Fundamental And Long-Term: Ng Eng Hen

Source : Channel NewsAsia, 19 September 2007

CPF changes are fundamental and long-term, and will better prepare Singapore to support its larger older population, said Manpower Minister Ng Eng Hen on Wednesday.

Wrapping up the three-day debate in Parliament on CPF reforms, Dr Ng also said all CPF members, especially the lower- and middle-income groups, will be better off with the higher CPF interest rates.

He stressed that in making the CPF changes, the government is not leaving Singaporeans to fend for themselves.

Singapore's ageing population has made it vital for Singaporeans to work longer and save for their old age.

With several government initiatives underway, Members of Parliament are asking whether re-employment will work.

Is the new interest rate structure for CPF fair? And why must the longevity insurance be compulsory?

Replying to the questions in Parliament, Dr Ng made it clear that the government is not moving from self-provision to shared responsibility.

He said that even the annuity scheme, alternatively known as longevity insurance (LI), is designed to strengthen this principle of providing for one's own needs.

"What is required, and has always been the case, is that each person must save enough to last his life span. Indeed this is the cardinal principle that we all accept for the individual accounts for CPF," Dr Ng said.

Related Video Link - http://tinyurl.com/2reee7
CPF reform fundamental and long-term: Ng Eng Hen


He continued: "We are strengthening our CPF system by putting into place a missing critical piece with LI. This system must be put into place for many generations after us.

"We should not begin with the philosophy that it should be subsidised. The CPF system works and is sustainable because it is based on savings, not tax. Each must save for himself for his own needs. We must not depart from this fundamental strength of the CPF system."

Under the new interest rate structure, the CPF Board is disbursing S$700 million more each year.

Dr Ng said: "All CPF members will get more, but those with small and middle sized balances will benefit the most. Even after the 4% floor is removed after two years, the interests paid will be better than the current system."

Dr Ng also addressed arguments that those who are unable to be re-employed be allowed to draw down their CPF savings earlier.

The Manpower Minister cautioned Singaporeans against going down that road. But he acknowledged that with rapid economic restructuring, some workers may lose their jobs at some point of their working life.

"If CPF savings, rather than other personal savings, were used to tide over such periods of unemployment, the end result is that the retirement adequacy of the worker is compromised," Dr Ng said.

"He would not be able to enjoy the higher interest that the CPF Board pays, had the money been left there until the DDA (draw-down age)."

He also warned that starting a nationalised pension scheme from Singapore's reserves would be a fundamental mistake.

He reasoned that such a move would take Singapore many steps backwards and bring about problems such as those faced by socialised pension schemes, which are now trying to find a way out.

He said: "Our CPF system is strong and fully funded because individuals save for their own needs and spend what they saved. Government can top up from time to time when it has budget surpluses.

"But that is radically different from saying that the government should now take on the responsibility of providing for the retirement needs of every Singaporean. It will slow us down, deplete our reserves and impoverish us. We would then have little resources to help anyone.

"Even longevity insurance is not asking others to shoulder your needs. You have to pay a premium first to share risks, so there is a cost to you that you are providing for yourself."

The Minister stressed that the changes to the CPF system are being made not because the government is running out of money, but the main aim of the reforms is to ensure Singaporeans have enough money for as long as they live.

Dr Ng said: "Our projections show that under the new system, 84% of new entrants to the workforce would have enough to meet the Minimum Sum for retirement, even for low-wage workers and even after buying their first home."

The government is spending some S$1.1 billion each year through Workfare and higher CPF disbursements. Another S$1.2 billion is being set aside for deferment bonuses.

So Dr Ng stressed that Singaporeans will see their CPF accounts grow faster.

The discussions on the CPF reforms do not end with the parliamentary debate. The Minister has urged MPs to continue engaging their constituents about the changes. - CNA/ir

US Growth To Pick Up, Sing Dollar Remains Resilient: Rabobank

Source : Channel NewsAsia, 19 September 2007

The US will see a rebound in economic growth from 2.1 per cent this year to 2.8 per cent in 2008, according to Rabobank.

In its Financial Markets Outlook for 2008 released on Wednesday, the Dutch bank also said it believes the Singapore economy can meet the government's growth target for this year.

Rabobank noted that Singapore is currently enjoying a ride on the global boom, and benefiting from a significant recovery in domestic demand.

The Dutch lender predicted that the Singapore economy will grow by seven per cent this year, and six per cent in 2008.

"We have to look, of course, at the impact from the US housing market recession, that will see a moderation in the US economy. And Singapore being an export-leveraged economy, there may be some impact there as well," said Jan Lambregts, head of Asia research at Rabobank International.

But overall, Rabobank is keeping positive. It said that although the US sub-prime woes may dent US growth this year, the global boom will remain intact.

And as Singapore diversifies from its electronic manufacturing focus towards tourism, education and healthcare, Rabobank said, the Singapore dollar will remain resilient.

"Singapore dollar is one of Asia's most liquid, freely traded currencies. It's a good proxy play for Chinese yuan and ringgit appreciation. And Singapore's economy is robust and we have a good positive outlook there for next year, with six per cent growth. Therefore, we expect (the Singapore dollar) to hit 1.48 (against the US dollar) by year-end and 1.44 by end of 2008," said Mr Lambregts.

Rabobank also predicted that investor confidence in the financial markets will be restored over the next few weeks, and the focus will then turn to long-term fundamentals. - CNA/ac

Japan's Kajima To Invest $297m ln S'pore property

Source : The Business Times, September 19, 2007

SINGAPORE - Japan's Kajima Corp said on Wednesday that it will invest $450 million (US$297 million) with Lehman Bros to build a Singapore office building.

The 15-storey project would be Lehman's first direct property investment in Singapore, said a senior executive at the bank's global real estate group.

Related link - http://tinyurl.com/ytao8m
Kajima's news release


'There is strong appetite for real estate in Asia,' said Blake Olafson, senior vice-president of Lehman's global real estate group.

'We're expecting to spend $450 million including land cost,' said Daisuke Tanaka, vice-general manager property development told reporters.

This is the first direct investment in Singapore's real estate market by Lehman Bros.

Kajima Corp, which has a market capitalisation of US$3.8 billion, earned a net profit of 29.5 billion yen in its financial year ended March 31, 2007. -- REUTERS

India's DLF Assets Plans S'pore Property Trust

Source : The Business Times, September 19, 2007

MUMBAI/HONG KONG - A sister firm of Indian developer DLF has hired bankers to arrange a property trust IPO in Singapore, a company official said on Wednesday, in a deal worth as much as US$2 billion.

The planned real estate investment trust (Reit) by DLF Assets would be the second such offering on the Singapore stock market from India's booming property market, following the popular July IPO by Ascendas India Trust.

A top DLF official, who asked not to be identified, said Goldman Sachs and Lehman Brothers were advising the company on the deal but declined to give further details.

The IPO would raise about US$2 billion, India's Business Standard newspaper reported on Wednesday.

A banking source said 'a lot of work' was being done on preparing the IPO, but it was too early to put a figure on the deal, which is unlikely to be launched until next year.

DLF Assets, founded by DLF chairman KP Singh, owns property in special economic zones and IT parks. -- REUTERS

DBS Says Launches $400m Share Buyback Plan

Source : The Buinsess Times, September 19, 2007

SINGAPORE - DBS Group Holdings, Southeast Asia's biggest lender by assets, said on Wednesday that it was launching a $400 million share (US$266 million) buyback programme

Related Link - http://tinyurl.com/yosxmj
DBS' news release


The bank's shareholders had approved a plan to buyback shares in April, DBS said in a statement. -- REUTERS

F&N Unit To Open 10 Properties In China

Source : The Business Times, September 19, 2007

SINGAPORE - Frasers Hospitality, the hospitality arm of Singapore conglomerate Fraser & Neave, said on Wednesday it would open 10 new properties in China by 2009.

Related Link - http://tinyurl.com/yprrug
Frasers Hospitality's news release


Frasers Hospitality said it would invest US$130 million in one of the properties in the business district in Beijing.

The other nine properties are owned by firms including Singapore-listed property developer Yanlord Land and private equity firm Carlyle. -- REUTERS

CPF Interest Rates Will Be Fair: Tharman

Source : The Business Times, September 19, 2007

New SMRA peg offers prospect of better returns over time, he says

Mr Tharman: rosy outlook for the 10-year SGS rate

INTEREST rates will be fair and reasonable for CPF members, and sustainable in the long haul, as a result of the latest changes, Second Minister for Finance Tharman Shanmugaratnam told Parliament yesterday.

Prime Minister Lee Hsien Loong first announced the coming CPF reforms in his National Day Rally speech, and this was followed up by Manpower Minister Ng Eng Hen's elaboration on these measures aimed at providing Singaporeans with better security in retirement and old age.

'The new SMRA peg offers the prospect of better returns over time but with slightly higher interest rate risk,' Mr Tharman said. 'Any scheme to provide higher returns must come with higher risk.'

But the extra one per cent interest that the majority of CPF members are getting will more than offset this increased interest rate risk, he said.

Mr Tharman noted that there was a rosy outlook for the 10-year SGS rate, with markets expecting it to be above 3 per cent on average over the next five to 10 years. This means the new SMRA rate would be above 4 per cent.

Mr Tharman said it would have been ideal to peg the SMRA rate to a 30-year SGS long rate - if there had been such a bond. The 10-year bond was chosen because of its liquidity, while the one per cent spread will more than make up for the spread between the 10-year and 30-year bond, he said.

'The new SMRA rate is a more rational scheme than the old one, which provided an arbitrary fixed premium of 1.5 per cent over a short-term interest rate peg,' Mr Tharman said. 'By any reasonable assessment, the new rate of 10-year SGS plus one per cent offers a very fair long-term return for deposits which have no risk of losing their value, no capital risk, no currency risk.'

He added that the President has been briefed on the CPF changes and is satisfied that the changes will not cause a draw on past reserves.

Denying suggestions from some Members of Parliament that the new interest rates will leave Singaporeans worse off, Mr Tharman said the new formula would mean that 80 per cent of members, who have balances of $60,000 or less, would immediately be earning 5 per cent on all their SMRA.

To keep this CPF formula self-sustaining, he noted that the government has to pay market rates for CPF interest, rather than above market rates, and not provide a 4 per cent floor for the SMRA rate indefinitely.

Earlier, Workers' Party MP Low Thia Khiang had urged the government to set up a 'longevity fund' and provide payouts to people who have lived beyond the age of 85 and who are in financial difficulties.

Mr Tharman said he was not in favour of this suggestion as pressures would inevitably build up over time for the government to spend more, to grant more and to subsidise more, which would bring a need to draw into past reserves.

US Home Foreclosures Jump 36% In Aug

Source : The Business Times, September 19, 2007

















(NEW YORK) The number of homes entering foreclosure, being auctioned and repossessed by banks jumped by 36 per cent in August from the month before, with cities in California, Florida and Nevada showing the biggest increases, according to a report scheduled to be released yesterday.

Going, going: Foreclosure filings rose the most in states that have struggled with job losses and in states where the property boom was most frenzied --
The report from RealtyTrac, a company that tracks public foreclosure filings nationally, attributes a big part of the rise to mortgage companies being forced to take ownership of homes because borrowers have fallen behind on payments and their properties were not sold at auction.

The sharp increases provide more evidence that the troubles in the housing and mortgage markets may prove long-lived, given that home prices are falling in many parts of the country, there is a large inventory of unsold homes and the job market is starting to weaken.

Housing specialists are also concerned about a big wave of adjustable-rate mortgages that will be reset to higher, variable interest rates in the coming months.

Nationally, there were 243,947 foreclosure filings in the month, accounting for one in every 510 households, according to the report. That is up 36 per cent from July and 115 per cent from August 2006.

Filings were up 48 per cent from July in California, 77 per cent in Florida and 21 per cent in Nevada, which has the highest foreclosure rates in the country at one in 165 households.

Foreclosure filings rose across most of the country, and the biggest increases were in Midwestern states that have struggled with job losses in manufacturing industries and in states where the real estate boom was most frenzied.

RealtyTrac's data is based on courthouse filings from 2,500 of the nation's more than 3,000 counties. Some mortgage industry officials caution that data based on those filings may be incomplete or may lead to double counting of some homes.

Meanwhile another survey showed that confidence among US chief executives fell this quarter to the lowest point in four years, causing more companies to scale back hiring plans.

According to the Business Roundtable in Washington, the group's economic outlook index fell to 77.4, the lowest since the third quarter of 2003, from 81.9 in the second quarter. Still, a reading greater than 50 signals expansion.

The decline in hiring plans raises the risk that employment won't pick up after payrolls fell in August for the first time in four years. -- Reuters, Bloomberg

Banks In Race For PUB $650m Bonds: Sources

Source : The Business Times, September 19, 2007

(SINGAPORE) Singapore's state-owned Public Utilities Board (PUB) has asked banks to pitch for S$650 million worth of bonds with maturities of seven and 20 years, sources said yesterday. The 20-year issue would be the first corporate long bond since 2003, when the Land Transport Authority (LTA) issued S$200 million worth of 20-year bonds.

Banking sources said Oversea-Chinese Banking Corp and HSBC are front-runners for PUB's seven-year S$350 million bonds while DBS is likely to get the mandate for the S$300 million 20-year issue. In March, the Singapore government issued a 20-year benchmark bond for the first time. It was unclear when the PUB's long bond will be launched, a banker pitching for the deal told Reuters.

PUB manages the nation's reservoirs, waterworks, rivers, drainage system, and sewerage system to optimise the island's limited water resources. Singapore, which is heavily dependent on water piped in from neighbouring Malaysia, is trying to diversify its water sources, to include rainfall catchment, water from Malaysia, recycled waste water and desalination.

Singapore's statutory boards such as PUB and the Housing and Development Board used to dominate the corporate bond market, but now banks and property companies such as Keppel Land and Hongkong Land have started tapping the domestic bond market.

But the secondary market for bond trading is lacklustre although debt issuance in Singapore rose by 37 per cent to S$157 billion last year, mainly due to the sale of corporate debt. Outstanding Singapore dollar debt issues increased by 11 per cent to S$67 billion, while debt issuance in other currencies climbed 17 per cent to S$90 billion, central bank data showed. -- Reuters

Bank Stocks Fall On Fears Of Sub-Prime Woes Slowing Growth

Source : The Business Times, September 19, 2007

SINGAPORE'S banking stocks fell yesterday, led by DBS Group Holdings, on concern a credit crisis stemming from the losses on US sub-prime mortgages will slow global economic growth.

'Markets look precarious,' said James Johnstone, who manages about US$100 million at Alcor Investment Management in Singapore. 'I'm avoiding all financial stocks.'

Keppel Corp, the world's largest rig builder, advanced on speculation that crude oil topping US$81 a barrel will spur exploration demand. Neptune Orient Lines, which operates Singapore's largest container shipping line, rose for the first time in six days as investors judged its recent declines excessive.

The Straits Times Index added 1.44 points, or less than 0.1 per cent, to 3,477.75 at the close. The measure had its biggest decline in four weeks on Monday, falling 1.7 per cent. Of the benchmark's 48 stocks, 19 declined and 17 climbed, with 12 closing unchanged. The September futures contract slid 0.5 per cent.

DBS, South-east Asia's largest bank by assets, slid 10 cents, or 0.5 per cent, to $19.30. United Overseas Bank declined 30 cents, or 1.4 per cent, to $20.50.

Oversea-Chinese Banking Corp, the smallest of the three local lenders, slipped 10 cents, or 1.2 per cent, to $8.60.

A gauge of financial stocks was the biggest decliner among nine industry groups on the Singapore All Equities Index.

Bank of America Corp, the second- biggest US bank, said the sub-prime credit crisis will have a 'meaningful impact' on third-quarter results and E*Trade Financial Corp, the New York-based online brokerage, cut its 2007 profit forecast by at least 25 per cent because of bad home loans and said it will quit the wholesale mortgage business.

In the US on Monday, the Standard & Poor's 500 Index fell 0.5 per cent, the Dow Jones Industrial Average decreased 0.3 per cent, while the Nasdaq Composite Index dropped 0.8 per cent.

US sub-prime mortgages account for about one per cent of Singapore banks' capital base, Second Finance Minister Tharman Shanmugaratnam told Parliament yesterday. The three local banks hold a combined $2.3 billion of collateralised debt obligations, of which 28 per cent contain some US sub-prime loans, the Monetary Authority of Singapore said.

Keppel gained 20 cents, or 1.5 per cent, to $13.40. Labroy Marine, a smaller rig-builder, rose five cents, or 2.3 per cent, to $2.24. Singapore Petroleum Co, an oil explorer and refiner, climbed 25 cents, or 4.1 per cent, to $6.30, the biggest percentage gain on the benchmark.

Singapore's key stock index had its biggest drop in four weeks on Monday as crude's slide from a record on Sept 14 dragged down shares of rig-builders.

'The most intuitive plays, on high crude prices, are oil and gas companies,' said Terence Wong, chief investment analyst at SIAS Research Pte in Singapore.

Crude oil rose above US$81 a barrel for the first time in after-hours electronic trading on the New York Mercantile Exchange. Oil for October delivery was recently at US$80.81.

Neptune Orient Lines climbed 10 cents, or 2.1 per cent, to $4.92, halting a 21 per cent drop over six days. It was the worst performer during that period among the 48 stocks that make up the Straits Times Index.

Chemoil Energy, a supplier of marine fuels, slumped 17 US cents, or 25 per cent, to 50.5 US cents, its biggest drop since it first sold shares in December 2006. The company incurred hedging losses on its fuel oil inventory, it said in a statement on Monday. -- Bloomberg

Stanchart In US$1.1b Deal To Buy American Express Bank

Source : The Business Times, September 19, 2007

Big boost to private and correspondent banking services

(SINGAPORE) Temasek Holdings' 17 per cent owned Standard Chartered has bought American Express Bank to boost its private banking and correspondent banking services.

American Express Co is selling its international banking subsidiary, the American Express Bank (AEB) which has a presence in 47 countries, in a deal worth US$1.1 billion.

The sale does not include any of American Express Co's card or travel businesses or its international financial services businesses that operate separately from AEB.

Statements last night from Stanchart and American Express Co said the total cash consideration is equal to the net asset value of AEB at completion plus US$300 million.

At June 30, 2007, this would have amounted to about US$860 million.

Stanchart said AEB will boost the group's transaction banking business and accelerate its recently launched private banking growth strategy by 'about three years'.

AEB has more than 10,000 private banking clients with total assets of about US$22.5 billion under management.

It has 120 relationship managers in locations that cover 60 per cent of Stanchart's existing footprint.

Stanchart has 150 relationship managers in eight markets including Hong Kong, Beijing, London, Dubai and Mumbai.

Stanchart said its network will be boosted by the acquisition, as AEB will bring with it valuable branch licences in India and Taiwan, subject to regulatory approval.

The group will also gain access to new growth markets such as Kazakhstan and Egypt where it currently has no presence.

In addition, Stanchart's financial institutions transaction banking business will get a major boost from the AEB purchase.

The acquisition will double Stanchart's US-dollar clearing business, reinforcing its position among leading global US dollar clearers and ranking the group sixth globally.

AEB will also provide Stanchart with direct euro and yen clearing capability and opportunities to cross-sell.

AEB has local and regional offices in Singapore, employing about 360 people.

A Stanchart spokeswoman told BT that integration of AEB into the group will take about six months and it will be business as usual until early next year.

'The people impact will be assessed over the next six months,' said an Amex source.

Founded in 1850, the American Express Co offered the world's first travellers cheques in 1891. Its card business only began in 1958.

Last year, the global payments, network and travel company sold US$19 billion of travellers cheques.

In Singapore, the company has 1,200 staff, including the 360 at AEB.

Fees Ease The Jams

Source : TODAY, Wednesday, September 19, 2007

Traffic volume at BTC has dipped by about 70 per cent

Letter from MICHAEL NG, Director,
Office of Estate and Development
National University of Singapore

I REFER to the letter, “Why should NUS impose its own ERP” (Sept 14). We thank Ms Tricia Tong for her feedback.

The National University of Singapore (NUS) implemented on Aug 20 a $1 peakhour charge on vehicles entering the Bukit Timah Campus (BTC) via Kheam Hock Road and exiting via Evans/Cluny Road during the peak hour from 8am to 9am on weekdays, to help moderate traffic flow and improve the safety of all users within the BTC and the Singapore Botanic Gardens.

Bona fide users of the park and visitors to NUS can leave the campus without being charged if they use the same gantry or travel in an opposite direction (entering via Evans Road and exiting at Kheam Hock Road).

Before NUS took over the BTC in July last year, the gate at Evans Road/Cluny Road was closed. Hence, motorists were not able to use the campus as a bypass to the city. The gate has since been opened to provide an alternative route for users and the community in the vicinity.

After monitoring the situation for a year, the evidence has shown that each day, about 300 cars use the campus as a bypass between 8am to 9am, resulting in traffic congestion within the BTC.

We have also received feedback from students and staff that bypassing traffic has caused inconvenience. Hence, we decided that implementing the peak hour charge was necessary.

Since the implementation of the peak hour charge on Aug 20, traffic volume at the BTC had decreased by about 70 per cent.

The money collected will be used to defray the operation and maintenance costs of
car parks in the BTC and the Singapore Botanic Gardens.

We will continue to review the situation regularly to ensure smooth traffic and road safety within the BTC and the Singapore Botanic Gardens.

That 1-Percentage Point Does The Trick

Source : TODAY, Wednesday, September 19, 2007

Analysts are satisfied no one will be worse off under new CPF formula

















It was a concern: Would a bond peg hurt Central Provident Fund (CPF) returns for some people, namely the older generation?

Now, economists and finance professionals have their answer, and they are satisfied that, at least, nobody will be worse off under the new CPF formula.

What did the trick was the extra 1-percentage point tacked on to the yields from the 10-year Singapore Government Securities bond, which will be used to determine returns for the Special, Medisave and Retirement Accounts (SMRA).

Citi economist Chua Hak Bin, who had previously calculated that the older generation, with more savings in their SMRA, could be hurt by the change, told Today the new formula was fair.

Indeed, in his speech in Parliament yesterday, Second Finance Minister Tharman Shanmugaratnam said the 1 percentage point built into the SMRA is "generous".

The total return is larger than what other countries such as the United States, Switzerland and Japan pay on their 30-year bonds, he said, and added that it would provide "adequate allowance" for future economic and market uncertainties.

To UOB economist Suan Teck Kin, though, the new CPF formula is a signal from the Government that those who are financially able should plan their own long-term financial needs instead of leaving it to the Government.

The removal of the 4-per-cent minimum rate of return in 2010 could catalyse CPF account holders to seek better returns instead of leaving it to the Government, especially given how bonds work.

Just as a government that issues more bonds in order to fund deficits will drive bond yields up, one that runs its finances properly can keep yields low. Overall, the less the risk attached to a bond issuer, the lower the yields.

In this way, the new CPF peg is more market-oriented than previously.

"If the Government were to keep paying you this fixed amount, this 4 per cent, and if you are expected to live longer, the Government's burden would be larger and larger down the road," said Mr Suan.

While CPF returns will fluctuate more in the future, Mr Shanmugaratnam informed MPs that the new SMRA rate has stayed above 4 per cent for 85 per cent of the time since the 10-year bond was issued in 1998. On average, he expects it to remain above this rate over the next five to 10 years.

Dr Chua concurred: "The older generation with large savings and those who have higher incomes may face higher risks from a shift to a 10-year bond but, at least in the near term, the downside risk is pretty much limited."

While noting that it is difficult to ensure that every individual benefits from a piece of legislation, senior vice-president Scott Mitchell of financial planner IPAC said the changes are a good start.

"As a complete package, with all the other benefits, it really starts to fill in all the gaps," he said.

MPs Suggest Ways To Make Annuity Scheme Attractive

Source : TODAY, Wednesday, September 19, 2007
















THERE will be no shortage of ideas for Professor Lim Pin to ponder when his new committee to design the national longevity insurance scheme meets.

The second day of debates in Parliament threw up many suggestions from 14 MPs on how to make the annuity scheme as attractive as possible to the masses.

The plan is to have Central Provident Fund (CPF) members purchase an annuity when they turn 55, using a small portion of their minimum sum. The annuity will begin paying out, at age 85 when the minimum sum is depleted, a monthly sum until they die.

Nominated MP Kalyani Mehta argued that it did not make sense to pay out only at age 85, when Singapore's average life expectancy was currently 80 years. She proposed paying out from age 80 so more could benefit.

Figures from the Department of Statistics show that half of Singaporeans currently aged 62 will live to 85.

She also had doubts about the usefulness of the monthly payout amount of $250 to $300.

"What use would such a paltry sum be to an 85-year-old? It cannot even cover his food and transport. Are we assuming his family is prepared to foot his bills?

"Not everyone at that age would have a family. Even if they did, their children would also be about 65 and require financial security themselves," she said.

Ms Josephine Teo (Bishan-Toa Payoh GRC) suggested paying for this longevity insurance directly using the Deferment and Voluntary Deferment Bonuses — a one-off amount to be given out in view of the upcoming delay in drawing down the minimum sum.

Madam Cynthia Phua (Jalan Besar GRC) proposed paying the lump sum over 10 years, so members pay less up front.

Prof Lim's committee will submit its report within six months.

Your Piggy Bank, You Chip In

Source : TODAY, Wednesday, September 19, 2007

Government's role is to ensure S'poreans save up enough funds for retirement: Minister

IT WILL help Singaporeans make sure they have enough in their retirement piggy bank, but filling it up must be the responsibility of every citizen — not the Government.

This was the underlying message from Second Finance Minister Tharman Shanmugaratnam yesterday, as he spoke for the first time in the ongoing parliamentary debate on changes to the Central Provident Fund (CPF) scheme.

Nearly 30 Members of Parliament (MPs) have spoken after hearing Manpower Minister Ng Eng Hen's ministerial statement on the issue on Monday. Some have asked the Government to top up the proposed compulsory annuity scheme in times of budget surpluses, for instance, while another called instead for a national pension plan that draws on the national reserves.

Such sentiments were met with a clear signal from Mr Shanmugaratnam: Should the Government take over the role of providing for everyone's retirement, "this would mean that regardless of how much you save, it would be there as a doorstop to ensure you have enough for old age".

He added: "If we do that, there will be less and less reason to save. Over time, people will save less, knowing that Government will pay."

This is how many countries have ended up with high taxes and unsustainable pension schemes, he pointed out.

"What is absolutely critical is that we preserve the ethic of self-reliance, where every Singaporean knows and understands he has to work and save for future needs," 2nd Finance Minister Shanmugaratnam stressed.

For the CPF scheme to be "fiscally sustainable" in the long run, it was important that it did not end up subsidising existing interest rates, or paying above market rates.

"Our fundamental principle must be to peg CPF interest rates to those in the financial markets, to instruments of comparable risk and duration. The ability to pay interest on CPF balances will also depend on financial market conditions," he said.

Several MPs queried the Government's ability to sustain the CPF changes, which would cost $700 million a year. Ms Josephine Teo (Bishan-Toa Payoh GRC) noted that this amount was equal to a 1-percentage-point increase in the Goods and Services Tax, and asked if this would open the door for future tax hikes.

Mr Shanmugaratnam assured the House that the CPF Board would foot the bill through the interest received on bonds purchased from the Government. This purchase would incur a cost, which will have to paid for using the investment returns on CPF monies.

To avoid adding to this cost burden on the scheme, the Government has to avoid paying above market rate for CPF interest.

"Paying market rates ... keeps the CPF a self-sustaining savings scheme that does not result in the Government running deficits," he said. "It should never become a draw on past reserves."

President S R Nathan has been briefed on the CPF changes and "is satisfied" that reserves will remain untouched, he added.

What the state will subsidise, however, is Workfare — which will add $80 million a year to take total spending on this scheme to more than $400 million.

Another $1.2 billion over ten years will also be spent on the one-off Deferment and Voluntary Deferment Bonuses, with the minimum sum draw-down age being pushed back – from 62 in 2012 to 65 in 2018.

"Our approach (is) to put any subsidies on the Government budget and make sure that we can afford them," said Mr Shanmugaratnam.

Mr Inderjit Singh (Ang Mo Kio GRC) had suggested using the national reserves to underwrite a national pension plan, arguing that this was affordable because Temasek Holdings had earned 18 per cent a year on its investments since its inception.

And on the controversial topic of annuities, Opposition MP Low Thia Khiang (Hougang) yesterday suggested creating a state-funded longevity fund, instead of making it compulsory for Singaporeans to pay premiums themselves.

Said Mr Shanmugaratnam: "It will not be wise for the Government to do this, or for Singaporeans to want the Government to do this. We know that these pressures will build up over time for us to spend more, grant more, subsidise more. It's in the nature of every society, especially when it gets older."

The Minister gave the assurance that any surpluses earned from investments would be channelled back to society — for example through CPF top-ups, housing, education and Workfare.

Long Life? I Won't Last That Long, Leh

Source : The New Paper, September 19, 2007

Our poll shows more than half don't believe they'll live till 85

ME? Live past 85? Such was the snorts and scoffs of Singaporeans polled when told they had a 50 per cent shot at fulfilling one of their biggest wishes - a long life.

Longevity, the ubiquitous greeting at birthdays, weddings, new year celebrations, the stuff of many a prayer, is now no longer wishful thinking.

According to the Department of Statistics, 1 in 2 Singaporeans alive at 62 in 2006 will go on to live beyond 85.

Statistics don't lie.

But disbelief was how the majority reacted in a poll of 50 done by The New Paper yesterday.

The question was: Do you think you will live till 85?

'Impossible!' was 36-year-old taxi-driver S T Toh's prompt response.

'Even young people running in marathons are dying,' pointed out 70-year-old retiree Tan Qiao Kuane.

'All my body parts have started to spoil. I think 70 will be enough for me,' lamented Mr H S Leow, a 53-year-old manager.

Madam Linda Wah, a 47-year-old kindergarten teacher, pointed to the obituaries.

'Many people say goodbye even before they hit 85 leh,' she said.

More than half - 54 per cent - of the respondents said they didn't believe they would make it to 85. Half of the people polled were aged 62 and above.

That's the golden number, the age when you will start reaping dividends from the compulsory annuities scheme that Singaporeans aged now 50 and below will have to take up.

Only 26 per cent said yes. The remaining 20 per cent said they didn't know.

You may be headed for the long life you always wished for.

But prosperity - longevity's twin wish - may take a bit more wishing, and working.

That's what the Government's recent initiatives are addressing.

Speaking in Parliament yesterday, Manpower Minister Ng Eng Hen pointed out: 'Some still do not believe that we are living so long.'

Ask them why, he said, and 'you get a potpourri of urban myths, some quite fascinating'.

He mentioned one of the best he has heard.

One group told him the present life expectancy of 80 years may be correct, but that's only because 'the elderly that we have now were born in China, India or wherever they came from.

'They were farm-folk. True Singaporeans, born and bred in modern Singapore, won't live as long!'

Belief, or the lack of it, stands at the centre of the debate over annuities.

Why? Because unless you believe you will live long, you'll think annuities are just 'a way for the Gahmen to take my money'.

But time waits for no man. By the time Singaporeans start believing they can live till 80, that might be only because there're too many 80-year-olds walking around already.

Dr Ng said: 'Longevity is a blessing, something that every one of us hopes for... we want to see our children graduate, get married and play with our grandchildren, and even see them graduate and get married.

'It is precisely because so many individuals do not anticipate how much longer they will live that we have to act now and ensure that all Singaporeans make provision for their old age.'

But belief isn't everything. You'll need the health to go along.

'Frankly, at 85,' said 61-year-old Du Bai Zhu, 'I doubt I'd have my marbles about me even if I did receive the money.'

--------------------------------------------------------------------------------

More CPF returns

1% EXTRA

* From 1 Jan 2008, earn extra 1% interest on first $60,000 in CPF accounts. Only up to $20,000 can come from Ordinary Account (OA), so at least $40,000 or all $60,000 can come from Special, Medisave and Retirement Accounts (SMRA).

Extra interest will go into Special or Retirement Accounts.

Now, OA earns minimum 2.5% interest yearly, while SMRA yields at least 4%.

With the extra interest, from 1 Apr 2008, the first $20,000 in CPF accounts will not be allowed for CPF investment schemes.

RE-PEG TO GOVT SECURITIES

* From 1 Jan 2008, SMRA interest rate will be re-pegged to 10-year Singapore Government Securities (10YSGS) yield, plus 1%.

New SMRA rate likely to be 4% (taking into account the extra 1%), since average 10YSGS rate for past 12 months is 3%.

To help CPF members adjust to floating rate, Government will keep 4% floor for SMRA rate for first two years.

Local Firm To Finish 2 Circle Line Stations

Source : The Strait Times, 19 September 07

A HOME-GROWN firm, Chye Joo Construction, has won the tender to finish building the MacPherson and Tai Seng MRT stations - a Circle Line job started by Sweden's NCC International five years ago.

NCC's progress faltered late last year and work ground to almost a halt when concrete prices soared earlier this year in the wake of an Indonesian sand ban.

This led the Land Transport Authority (LTA) to call for a fresh tender in July for 'major outstanding works' on the two stations.

Chye Joo, which is building part of the Kallang-Paya Lebar Expressway, clinched the job for $17.5 million. It beat fellow local firms Hock Lian Seng Infrastructure (which made a $17.9 million bid) and KTC Civil Engineering & Construction ($21 million bid).

The LTA has also invited bids for the building of an underpass on Upper Paya Lebar Road - a job which NCC was also supposed to do.

The underpass, to allow traffic to bypass the busy Bartley Road junction, had been bundled with the $340 million project to build the Tai Seng and MacPherson stations - two of 29 stops along the 33.5km Circle Line.

Meanwhile, Hong Kong- headquartered Gammon Construction has clinched a $130 million job to revamp what could be Singapore's most complex and congested road junction, located in a heavily built-up area.

Work on the Woodsville Interchange - which links Serangoon, Upper Serangoon, Bendemeer and MacPherson roads, as well as the Pan-Island Expressway - will start in the next couple of months.

The job calls for building three tunnels and a flyover - the most ambitious mix of tunnels and flyovers ever attempted here. At $130 million, it is also the costliest junction job to date.

The North-East MRT Line and the deep tunnel sewerage system are under the junction.

The intersection - built in 1982 and last upgraded in 1994 - has been a bugbear with motorists. During peak hours, it can take close to 10 minutes to clear it.

This new 'spaghetti junction' - a complicated and intertwined intersection - is expected to be finished by end-2011.

It will allow drivers to 'travel seamlessly from Upper Serangoon Road to Bendemeer Road, MacPherson Road to Bendemeer Road, Serangoon Road to Upper Serangoon Road, and from the Pan-Island Expressway to Kallang Way'', the LTA said.

Gammon is a veteran of road and MRT projects here.

Lawyer Jailed For Role In Cashback Scam

Source : The Straits Times, 19 Sep 2007

A VETERAN lawyer was sentenced to three months in jail yesterday for his role in a cashback property scam.

Bachoo Mohan Singh, a lawyer for more than 30 years, is appealing against the conviction and sentence and is out on bail of $125,000.

Singh, 59, had been convicted in a district court on June 30 for helping a Housing Board flat owner make a false declaration three years ago.

Although the agreed selling price for Mr Koh Sia Kang’s five-room Redhill flat was $390,000, it was inflated by $100,000 so as to secure a higher bank loan for the buyer.

In such scams, the cash difference between the actual and declared price is either kept by the buyer or split with the seller.

Singh was found out as a result of the sale falling through. He had acted for Mr Koh, 53, a taxi driver, who sued the buyers, claiming he was cheated of money in the transaction.

Mr Koh also sued property agent Kereen Teo Pei Pei, 28, who was fined $8,000 last year for trying to cheat DBS Bank by inflating the price.

Her manager was similarly fined.

Mr Koh has not been charged with any offence.

Singh did not display any emotion when sentence was passed. About 10 family members and friends were in court.

When convicting Singh in June, District Judge Bala Reddy had said that when Mr Koh proceeded to make the false $490,000 claim against the couple, Singh continued to act for him in the suit and thus abused the judicial process.

Lawyer Jailed For Cash-Back Role

Source : TODAY, Wednesday, September 19, 2007
















He is appealing against three-month term and conviction

Despite knowing it was illegal, veteran lawyer Bachoo Mohan Singh helped his client inflate the price of a Housing Board flat by a quarter of its value to secure a higher loan during a sale, with the difference to be kept by those involved in the scam.

But the con - known as a "cashback" deal - was discovered after it fell through, with the seller, taxi-driver Koh Sia Kang, claiming he was cheated and suing the buyers and property agent.

On Tuesday, Singh became the first lawyer to be convicted of such a scam, with a district court sentencing him to three months' imprisonment.

District Judge Bala Reddy did not elaborate on the sentence. Singh, who is appealing against both the conviction and sentence, is out on $20,000 bail.

The agent, Kereen Teo Pei Pei, 28, was fined $8,000 in January 2005 for her role - the first housing agent to be convicted in such a scam - while Mr Koh has yet to be charged. Teo's manager was also fined.

Singh's role in the scam which began in April 2004 was helping Mr Koh make a false declaration on the price of his five-room apartment in Redhill.

An investigation by the Corrupt Practices Investigation Bureau revealed that Teo, who worked for Pru Realty, tried to cheat DBS Bank by allegedly telling the bank that the sale price of Mr Koh's flat, which she represented, was worth $490,000, when the agreed selling price was only $390,000.

Before finding Singh guilty in July after a protracted trial, District Judge Reddy said he agreed with the prosecution that the lawyer knew about the cashback deal.

Cashback schemes were believed to be rampant two years back, with the Housing and Development Board (HDB), Central Provident Fund and the Monetary Authority of Singapore working on measures to clamp down on dishonest deals.

Minister for National Development Mah Bow Tan then announced that from April 2005, resale flat buyers would have to appoint HDB-assigned private valuers to stop people from inflating apartment prices.

Singh, who has been practising law for more than 30 years, could have been jailed up to two years or fined.

CPF Scheme Sustainable With Rates Pegged To 10-year S'pore Bond: Tharman

Source : Channel NewsAsia, 19 September 2007

The government is pegging the interest rate of CPF's Special, Medisave and Retirement accounts (SMRA) to the 10-year Singapore Government Securities (SGS) so that the CPF scheme can be sustainable in the long term.

This was according to Second Finance Minister Tharman Shanmugaratnam.

Speaking in Parliament on Tuesday, he also explained why the government would not underwrite a national pension plan based on its earnings through Temasek Holdings and the Government of Singapore Investment Corporation.

The government is making a key change by pegging the interest rates for SMRA to the yield of the 10-year Singapore Government Bond.

There have been concerns that by so doing SMRA interest rates would go below what is currently being paid out.

But Mr Tharman explained why it is important to take the step.

He said: "Our fundamental principle must be to peg CPF interest rates to those in the financial markets, to instruments of comparable risk and duration. This is because our ability to meet our CPF obligations will also depend on financial market conditions. For the CPF scheme to be sustainable, not just now, but in the decades to come, it should not become an interest rate subsidy scheme."

Under the changes, the new rate for SMRA will be one percentage point higher than the 10-year Singapore Government Securities.

With the 10-year SGS now standing at 3 percent, this matches the 4 percent that is being paid out for those accounts right now.

He said: "We look at what the markets are expecting for the future, and it is for the 10-year SGS rate to be above 3 per cent on average over the next 5 to 10 years and hence for the new SMRA to be above 4 per cent. Any scheme that provides higher returns must come with higher risk. The new SMRA offers the prospect of better returns over time but with slightly higher interest rate risk."

Some MPs have called on the government to use its reserves to underwrite a national pension plan, pointing out that Temasek Holdings achieved total shareholder returns of 18 per cent each year on average since its inception.

But the Minister said this would not be prudent: "It would be unwise to forecast future returns for either Temasek or GIC on the basis of past returns. This has to be a disciplined process of assessing the investment environment, looking forward to the next 5 to 10 years, and projecting what we can realistically expect in investment returns."

However the minister notes that if the government earns more on its investments, it will then decide on the most prudent use of the resources in its budget. - CNA/ch

Nobody Worse Off Under The New CPF Formula: Economists

Source : TODAY, Wednesday, September 19, 2007

It was a concern: Would a bond peg hurt Central Provident Fund (CPF) returns for some people, namely the older generation?

Now, economists and finance professionals have their answer, and they are satisfied that, at least, nobody will be worse off under the new CPF formula.

What did the trick was the extra 1-percentage point tacked on to the yields from the 10 year Singapore Government Securities bond, which will be used to determine returns for the Special, Medisave and Retirement Accounts (SMRA).

Citi economist Chua Hak Bin, who had previously calculated that the older generation, with more savings in their SMRA, could be hurt by the change, told TODAY the new formula was fair.

Indeed, in his speech in Parliament on 18th September, Second Finance Minister Tharman Shanmugaratnam said the 1 percentage point built into the SMRA is "generous".

The total return is larger than what other countries such as the United States, Switzerland and Japan pay on their 30-year bonds, he said, and added that it would provide "adequate allowance" for future economic and market uncertainties.

To UOB economist Suan Teck Kin, though, the new CPF formula is a signal from the Government that those who are financially able should plan their own long-term financial needs instead of leaving it to the Government.

The removal of the 4-per-cent minimum rate of return in 2010 could catalyse CPF account holders to seek better returns instead of leaving it to the Government, especially given how bonds work.

Just as a government that issues more bonds in order to fund deficits will drive bond yields up, one that runs its finances properly can keep yields low. Overall, the less the risk attached to a bond issuer, the lower the yields.

In this way, the new CPF peg is more market-oriented than previously.

"If the Government were to keep paying you this fixed amount, this 4 per cent, and if you are expected to live longer, the Government's burden would be larger and larger down the road," said Mr Suan.

While CPF returns will fluctuate more in the future, Mr Shanmugaratnam informed MPs that the new SMRA rate has stayed above 4 per cent for 85 per cent of the time since the 10-year bond was issued in 1998. On average, he expects it to remain above this rate over the next five to 10 years.

Dr Chua concurred: "The older generation with large savings and those who have higher incomes may face higher risks from a shift to a 10-year bond but, at least in the near term, the downside risk is pretty much limited."

While noting that it is difficult to ensure that every individual benefits from a piece of legislation, senior vice-president Scott Mitchell of financial planner IPAC said the changes are a good start.

"As a complete package, with all the other benefits, it really starts to fill in all the gaps," he said. - TODAY/ym

Fears Of US Recession Eased With Fed Rate Cut: Economists

Source : Channel NewsAsia, 19 September 2007

WASHINGTON : Stocks rallied on Tuesday after the Federal Reserve slashed US interest rates.

The cut in the federal funds rate by a half a percentage point to 4.75 percent ignited a powerful rally on Wall Street, with stock indexes surging by more than 2.5 percent.

The Federal Open Market Committee headed by Ben Bernanke, in a unanimous decision, also cut its discount rate for direct central bank loans by 50 basis points to 5.25 percent.

Related Video Link - http://tinyurl.com/ypktvk
Fears Of US Recession Eased With Fed Rate Cut: Economists


Economists say that fears of a recession in the United States may have receded with the decisive action by the central bankers.

The Fed has taken this dramatic step - more than most in Wall Street had expected - because it is worried about the effects of recent credit problems impacting the broader American economy.

Fred Bergsten, Director, Petersen Institute for International Economics, says it is good for the global economy: "Confidence has been shaken by what's going on in the housing market, and so the fact that the central banks are clearly on the case, and the Federal Reserve shows it can react swiftly and in a major way is nothing but good news for the world economy."

With inflation in check, the Fed still has room to manoeuvre in order to steer the US economy away from recession. - CNA/ch

Lehman Brothers, Kajima To Invest S$450m In Singapore Office Project

Source : Channel NewsAsia, 19 September 2007

Some 280,000 square feet of prime Grade A office space will be ready by mid-2009.

The S$450 million development, targeted at banks and financial institutions, will be located at 71 Robinson Road.

It is a partnership between property development firm Kajima, and investment bank Lehman Brothers.

Demolition works started in July.

Rents will be priced in line with market rates and already four financial institutions are looking at being anchor tenants for the development.

Currently, the vacancy rate for prime Grade A office space is less than 1.65 per cent.

Jones Lang LaSalle estimates demand at almost two million square feet of new space per year, with the expansion of multi-national companies - and a short term supply crunch - driving the market. - CNA/ch

Fed Cuts Base Rate Half Point To 4.75%

Source : Channel NewsAsia, 19 September 2007

WASHINGTON : The Federal Reserve on Tuesday slashed its base federal funds rate by a half point to 4.75 percent, in what analysts called a bold move to stimulate an economy imperiled by housing and credit market stress.

The Federal Open Market Committee, in a unanimous decision after a one-day meeting, also cut its discount rate for direct central bank loans by 50 basis points to 5.25 percent.

"Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time," the FOMC said in a statement.

The statement said that despite "moderate" economic growth in the first half, tighter credit conditions create a "potential to intensify the housing correction and to restrain economic growth more generally."

The cut in the federal funds rate is likely to lead to a lowering of borrowing costs across the economy, for consumers and businesses alike. The Fed, which has not cut rates since 2003, had held this rate at 5.25 percent since June 2006.

"I think the Fed delivered a healthy dose of monetary medicine to the economy and housing market," said Scott Anderson, senior economist at Wells Fargo.

"I think it will be viewed as an aggressive move by the Fed to avert an economic recession."

Related Video Link - http://tinyurl.com/298r4c
Fed cuts base rate half point to 4.75%


The policy-setting committee, which was forced to reconsider its tough monetary stand when financial markets were roiled by fears of a wider economic crisis, had been widely expected to cut interest rates.

But analysts had been divided on whether the central bank would move by a quarter point or a bolder 50 basis points. Some economists said a cut might fuel inflation or bring back the easy-money conditions that created the problems.

"Readings on core inflation have improved modestly this year," the FOMC said.

"However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully."

The panel said developments in financial markets since the last regular meeting "have increased the uncertainty surrounding the economic outlook" and that it would "continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth."

The wording suggests the central bank is not promising further rate cuts but would wait to see if economic and credit conditions return to normal, said analysts.

"It's a signal that they'll assess the economic risks as the data come in," said Craig Alexander, deputy chief economist at TD Bank Financial Group.

"It may be the Fed does not want the market to price in a major easing cycle."

Avery Shenfeld, economist at CIBC World Markets, said that although the Fed is trying to send a message not to count on any more reductions, "I doubt the Fed is done. I think they are right and that the economy is softening."

Andrew Busch, analyst at BMO Financial Markets, said however that the rate cut is a rescue for those who "made poor credit decisions without the consequences of market discipline."

"Like a teenager with a car and no curfew, we'll be having more problems down the road from these actions. But for now, who cares? Everyone's happy and it keeps the politicians at bay," Busch added.

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.

In August, the Fed announced a half-point cut in its discount rate in an effort to open credit markets and reduce the stigma associated with direct loans from the central bank. - AFP/de

Asian Stocks Surge After US Rate Cut

Source : Channel NewsAsia, 19 September 2007

TOKYO : Asian stocks surged while oil prices hit a record high Wednesday after the Federal Reserve slashed interest rates by a half point to shield the US economy from housing and credit market woes.

The deep rate cut sparked an exuberant rally on Wall Street where shares closed sharply higher Tuesday on hopes that the first cut in the Fed's benchmark rate in four years would ease tight credit and a housing slump.

Asian markets followed suit in early trade with major indices surging by as much as two to three percent as investors scrambled to jump onboard a global rally following the Fed's hefty dose of monetary medicine.

"Equity markets in Asia reacted positively to the Fed's message," said Fumiyuki Nakanishi, analyst at SMBC Friend Securities in Tokyo where the benchmark Nikkei-225 soared 3.36 percent by lunch.

"The party will continue around the world at least for today but it won't last forever," he added.

Hong Kong share prices jumped 3.8 percent at the open, smashing through the 25,000-point mark for the first time after the US rate cut.

Singapore rose 3.3 percent in early deals, Seoul jumped 2.9 percent, Sydney added 2.2 percent, Manila rose 2.7 percent, Kuala Lumpur gained 1.1 percent, Taipei firmed 1.1 percent, and Jakarta advanced 2.4 percent.

Shanghai slipped 0.37 percent in what dealers described as a technical correction.

Although many investors had been hoping for a half-point cut, there had been uncertainty about how the Fed would respond to recent credit market turmoil under chairman Ben Bernanke who took the helm of the central bank last year.

The Fed said its move "is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time."

While stocks reacted positively to the move, there was caution about whether it would resolve the credit market problems caused by rising defaults in the sub-prime mortgages to risky borrowers in the United States.

"The fundamental problems with the sub-prime loans and fears of credit crunch have yet to disappear," said Nakanishi.

"Equity markets in Asia are likely to continue to be vulnerable to moves on Wall Street and policy shifts by US authorities," he added.

Markets are now speculating about the chances of further US rate cuts.

"The Fed's rate cut will pacify credit tightening worries but the fundamental issue of the sub-prime prime trouble will persist. So the Fed is expected to continue lowering interest rates," said Toshihiko Matsuno, senior strategist at SMBC Friend Securities. - AFP/ch

Expats Should Not Confine Their Search To Only International Schools

Source : The Straits Times, Forum, Sep 19, 2007

IT AMAZES me how expats continue to look only at international schools when looking for options for their children, especially for preschool ages of two to six years, 'Expats hit by space crunch' (ST, Sept 17).

Local preschools are a definite option for them. Only 77 per cent of this country's preschool capacity is taken up (data from MCYS, March 2007).

So expats should cast their nets a little wider than just the usual international schools, and not have to wait for six months to enrol their child, feeling frustrated in between. Local preschools are already offering internationally-acclaimed curricula such as the Multiple Intelligences (MI) curriculum and Montessori, which expats would readily recognise.

In fact, our own heartland preschool here in Tampines already hosts nationalities of various backgrounds such as the UK, Japan and India. And with local preschool fees at a fraction of those of international schools, this will be one expense that expats will surely find welcoming, in the midst of ever-escalating rentals today. What's more, they will be giving their child the one advantage they will never get from any international school, that is, the chance to live, play and grow side by side with Singaporean children.

Now, wouldn't that be an education worth its weight in gold for any expat child, when he becomes an adult and starts reminiscing? As former expats ourselves, we actually sought local education for our children, rather than international schools for exactly the reasons above.

Nellie Tan Geok Lee (Ms)

George Lee

Carpe Diem Young Hearts Pte Ltd

Don't Ban En-Bloc Sales Of Newer Buildings, Let Market Forces Prevail

Source : The Straits Times, Forum, Sep 19, 2007

I REFER to the letter, 'Newer buildings: Ban en-bloc sales' (ST, Sept 16), by Mr John Lee Junshi.

I believe the property crunch could worsen and the price of private condos further escalate if we start fiddling with the system like prohibiting the collective sale of buildings less than 20 years old.

It would jack up unrealistically the development charge, et cetera. A successful collective sale, after all, is a matter of supply and demand between willing sellers and willing buyers.

It is obvious that with the booming economy, there are now more affluent Singaporeans aspiring for the condo lifestyle. Foreigners and expatriates alike are also buying into real estate as an expression of their confidence in Singapore's future. We should not deny them this.

En-bloc sales result in economic activities for Singapore in the construction and spin-off industries. It is also an opportune time to enable the more able Singaporeans to move into private housing or others to move out of subsidised HDB housing, thus lightening the load of the Government.

At 700 sq km, land in our city state is indeed a scarce commodity. Any measure, therefore, to contain the pent-up pressure could ultimately explode into even higher condo property prices, if not now, soon. Do we then not want to let market forces prevail?

With a possible population of 6.5 million in the future, we ought not to excessively and artificially curb market forces which are at work now since a collective sale would only materialise into a bigger-capacity building, say, three years later.

As the opportunity cost of releasing more and more land now for property development can only be at the expense of our future generation, we should take a closer look at how we can maximise our current supply side.

Are there plot ratios that are out of sync with the present time? Are there still substantial uneconomical six-storey and below buildings around, outside security and conservation areas, that can be renewed to house more on the same sites?

Chan Chun Wah

New Breed Of Genuinely International Schools

Source : The Straits Times, Forum, Sep 19, 2007

I READ the article relating to the 'space crunch at international schools' with great interest (ST, Sept 17).

I am the principal of SJI International, one of only three schools - all with links to eminent Singapore schools - that have the privilege of admitting both foreigners and Singaporeans.

We have a fine school for 12- to 18-year-olds, with outstanding teachers from the international sector.

The International Baccalaureate Diploma is being offered from January next year and having already awarded almost 40 scholarships for this course to Singaporean and regional students, we are currently extending the offer to outstanding expatriates.

People need not necessarily search outside Singapore. They need only look beyond the traditional market leaders in the foreign-school market to an exciting new breed of genuinely international schools that encourages links with the local community rather than expatriate isolation.

Having been head of United World College of South East Asia for 11 years, I am better placed than most to make such a judgment.

Andrew Bennett
Principal
St. Joseph's Institution International

Asian Shares Rally After Fed Cuts Rate

Source : The Straits Times, Sep 19, 2007

HONG KONG - ASIAN stocks rallied on Wednesday as investors cheered the US Federal Reserve's bold move to slash interest rates by 50 basis points.

The Fed lowered its benchmark fed funds rate to 4.75 per cent and said the move was 'intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time'.

SINGAPORE
Shares rose sharply higher on Wednesday, with the key Straits Times Index (STI) rising more than 3 per cent after US shares jumped overnight.

The US Federal Reserve slashed interest rates, raising hopes that Singapore's largest export market could rised out a turmoil in the credit market.

The STI rose 106.80 points or 3.07 per cent to 3,584.55, climbing the most in a month. Stocks like city Development, United Overseas Bank, Keppel Corp, Singapore Airlines and DBSBank led the market higher.

In the broader market, gainers beat losers 620 to 152 in a turnover of 1.45 billion shares.

KUALA LUMPUR
Share prices on Bursa Malaysia ended the morning higher on bargain hunting spurred by a surprise 50 basis points cut in US interest rate by the Federal Reserve, a dealer said.

At 12.30pm, the Kuala Lumpur Composite Index gained 19.63 points to 1,296.96.

In the broader market, gainers outperformed losers 566 to 187 while 222 counters were unchanged. Turnover amounted to 632.9 million shares worth RM957.2 million (S$412 million).

SEOUL
South Korean shares surged after US stocks jumped following a larger-than-expected interest rate cut by the Federal Reserve.

The Korea Composite Stock Price Index rose 57.75 points, or 3.1 per cent, to 1,896.36 in afternoon trading after rising as much as 3.5 per cent earlier.

Investors were heartened by the US central bank's move on Tuesday to cut its benchmark fed funds rate, aiming to keep a credit crunch from triggering a recession in the US economy, a key export market for South Korea.

'They did the right thing,' Joseph Han, a strategist at Daewoo Securities Co. in Seoul, said of the Fed's aggressive cut.

CHINA
Chinese share prices fell 1.09 per cent in Wednesday morning trade on a technical correction, dealers said.

They said the market was likely to fluctuate around 5,400 points after the main index hit a new intraday high of 5,458.58 on Tuesday.

Dealers also noted that investors chose to set aside their money for Shenhua Energy's upcoming 1.8 billion A-share subscription, which weighed down the market.

The benchmark Shanghai Composite Index, which covers both A and B shares listed on the Shanghai Stock Exchange, ended the morning down 58.91 points to 5,366.29.

The Shanghai A-share Index lost 62.38 points or 1.10 per cent to 5,631.93 and the Shenzhen A-share Index fell 16.83 points or 1.06 per cent to 1,567.55.

HONG KONG
The benchmark Hang Seng Index was up 934.51 points or 3.8 per cent at 25,511.36, smashing through the 25,000-point mark for the first time, dealers said. The Hong Kong Monetary Authority (HKMA) on Wednesday lowered the base rate charged through its overnight discount window by 50 basis points to 6.25 per cent.

The HKMA's move came after the US Federal Reserve cut benchmark interest rates by half a percentage point to 4.75 per cent to protect the economy from a housing downturn and jittery credit markets.

Hong Kong tends to track US rate moves because its currency is pegged to the US dollar.

JAPAN
Japanese stocks surged 3.36 per cent in morning trade on Wednesday after the Federal Reserve slashed interest rates by a bold half-point to try to calm recent financial market turmoil, dealers said.

The Tokyo Stock Exchange's benchmark Nikkei-225 index of leading shares jumped 531.49 points to 16,333.29 by the lunch break.

The broader Topix index of all first-section shares gained 53.13 points or 3.52 per cent to 1,564.08. -- REUTERS, AFP, BERNAMA

Fed Brightens Bank Picture, May Help Deal Makers

Source : The Straits Times, Sep 19, 2007

NEW YORK - The Federal Reserve came to the aid of US banks on Tuesday when it cut rates in a move that should improve their lending margins and give them breathing space to deal with the fallout from the subprime mortgage crisis.

The Fed's half percentage point cut in the federal funds rate to 4.75 per cent cuts the short-term cost of money that banks lend for longer periods, boosting their bottom line.

Lower rates could also revive some of the mergers and acquisitions idled by a global credit squeeze if investor confidence gets a sufficient boost.

'It's an old adage, that when the Fed start cutting, it's good for banks. Their cost of funds goes down, and their net interest margin usually rises,' said Ralph Cole, portfolio manager at Ferguson Wellman Capital Management in Portland, Oregon.

Bank stocks surged on the rate cut, with Bank of America Corp and Citigroup closing up 3.5 per cent and 5.2 per cent, respectively. Mortgage lenders and home builders also got a boost. Shares of No 1 US mortgage lender Countrywide Financial Corp rose 3 per cent and luxury home builder Toll Brothers climbed 8.7 per cent.

But Toll Brothers Chief Executive Robert Toll said he does not believe it is time to call the bottom of the housing market and worried about the magnitude of the cut.

'I would have done a quarter instead of a half because it signals we're in deep doodoo,' said Mr Toll, speaking at the Credit Suisse Homebuilder Conference.

Private equity firms and investment bankers who handle their deals were keeping a close eye on the Fed's decision. The credit squeeze has left investment banks with more than US$300 billion (S$459 billion) of leveraged buyout debt stuck on their balance sheets, as debt investors have largely steered clear of the loans.

The debt load has caused some banks to take losses on the loans and kept them from earning lucrative fees through lending to corporate and private equity deal makers.

The Fed rate cut could help entice hedge funds and other debt investors to take some, or a large chunk, of that debt off the banks' balance sheets. The rate cut, if nothing else, may help restore confidence in the leveraged loan market that banks have been hoping for.

'Lowering rates for someone like Lehman Brothers , I would imagine they can be more aggressive at funding some deals they were looking at,' said Jim Huguet, co-chief executive of Great Companies LLC, which has US$400 million in assets under management.

But the rate cut won't ease all of the pain being felt in the US housing market. And it won't bail out borrowers who stretched to buy homes they thought would skyrocket in value over the short term, analysts said.

'Banks are on the hook, too, if they lent money to people with poor credit,' said Ken Crawford, a portfolio manager at Argent Capital in St. Louis.

Mr Huguet was also concerned by the steepness of the rate cut.

'It makes me concerned about how bad things could get,' he said. 'There is a lot of risk lurking under the surface, or they would not have made that kind of move.' An escalating number of families are losing their homes because their mortgages are resetting at higher interest rates.

In August, there were nearly a quarter of a million foreclosure filings, according to data research firm RealtyTrac.

That is nearly one foreclosure filing for every 500 US households. In California, the rate was one per 224 households.

Meg McMullen, president of Boston's New England Research & Management, said the Fed move bails out bad behaviour by Wall Street, which funded many subprime lenders.

'Main Street needs the help, not Wall Street,' she said. -- REUTERS

Another Enggor St Plot Up For Tender

Source : The Straits Times, Sep 19, 2007

















ANOTHER residential skyscraper of up to 60 storeys high could be built in Tanjong Pagar after a site was put up for sale yesterday, which is set to fetch more than $200 million.

The 99-year leasehold, 0.28ha site on Enggor Street went on sale just two weeks after an adjoining plot also hit the market.

The plot has a maximum gross floor area of 23,420 sq m, which property consultants estimate could hold 235 to 250 apartments. Commercial space can be located on the first storey.

The site is one of 10 plots transferred from the reserve list to the confirmed list for the July to December period.

That means the site was put up for tender on a specific date, whereas on the reserve list a tender is triggered only when an acceptable expression of interest is lodged.

The Urban Redevelopment Authority, which launched the tender yesterday, said the site caters to demand for inner-city living. Upcoming projects nearby include Icon by Far East Organization and the Housing Board's 50-storey Pinnacle@Duxton.

The tender for the latest site closes at noon on Nov 15.

Mr Li Hiaw Ho, an executive director of CB Richard Ellis Research, expects the site to attract bids above $800 per sq ft per plot ratio (psf ppr), or $200 million.

The regional director and head of investments at Jones Lang LaSalle, Mr Lui Seng Fatt, was more bullish, estimating at least $1,200 psf ppr, or above $300 million.

The site, said Mr Lui, could house 'branded' residences managed by reputable global managers. Existing branded homes in Singapore include upcoming St Regis Residences and Four Seasons Park.

Earlier this month, an adjoining 0.3ha residential site in Enggor Street was put up for tender.

CPF Changes 'Must Not Erode Self-Reliance Ethic'

Source : The Straits Times, Wed, Sep 19, 2007

If people work and save on their own, Govt will help top up savings: Tharman

AMID calls to spend more on people's retirement needs, the Government yesterday reminded Singaporeans of a long-standing ethic - self-reliance.

It is the principle at the heart of the system here, where everyone knows and understands he must save for his future needs, said Second Finance Minister Tharman Shanmugaratnam.

'That's why the approach that we have taken is to give Singaporeans incentives to work and save on their own,' he told Parliament.

'If you work and save, we will help top up your savings.'

Related Link - http://tinyurl.com/2whrc4
Second Finance Minister Tharman's speech


Related Video Link - 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.


This principle guides the reform of the CPF. The changes, which include giving workers higher interest to build up retirement savings, will cost the Government $700 million a year.

He said: 'This approach of helping Singaporeans to save for retirement is quite different from the Government taking over and providing for everyone's retirement...

'If we do that, there will be less and less reason for people to save. This is what has happened in many countries, where people save less, knowing that the Government will pay.'

His comments came on the second day of the debate on the CPF changes, announced by the Prime Minister in his National Day Rally last month.

Manpower Minister Ng Eng Hen spelt out the details on Monday, and MPs, even those from the ruling People's Action Party, clamoured for the Government to pour more money into an ageing society's needs.

Among them was Ang Mo Kio GRC MP Inderjit Singh. He said the Government could afford to give higher interest on all CPF savings as Temasek Holdings earns 18 per cent returns annually.

Mr Tharman stressed that changes must be fiscally sustainable - not just for now, but for the long term.

The Finance Ministry, he said, is satisfied that they will keep the CPF a 'self-sustaining savings scheme that does not result in the Government running deficits'.

'It should never become a draw on past reserves,' he took pains to stress.

The Government has briefed the Elected President, and he is satisfied the changes will not dip into past reserves, he said.

On the specifics, he set out the thinking behind floating the guaranteed 4 per cent to a rate pegged to 10-year Singapore Government Securities plus one percentage point. This new rate is for the Special, Medisave and Retirement Accounts (SMRA).

Assuaging MPs' doubts, he said that, 'by any reasonable assessment, it offers a good long- term return', with no risk of capital loss.

In the short term, members with $60,000 or less - more than 80 per cent of them - would immediately earn 5 per cent on their SMRA.

Over the long term, he expects the yield to be above the current 4 per cent. It was a 'fair and reasonable' rate, he said. If the Government paid above market rates, the CPF would become an 'interest rate subsidy scheme'.

But this hardly meant the Government was loathe to subsidise anything. What it does subsidise: the Workfare income top-ups for low-wage workers; special bonuses to those affected by the delay in the Minimum Sum draw-down; as well as education, housing and health. It does so by funding from the Budget.

'That's our approach - put any subsidies on the Government Budget, and make sure we can afford them,' he said.

He rejected calls from the likes of opposition MP Low Thia Khiang, Nominated MP Siew Kum Hong and Mr Singh for the Government to be more generous, such as by underwriting a longevity insurance fund or a national pension plan.

'It will not be wise for the Government to do this, or for Singaporeans to want their Government to do this,' he said.

'We know that these pressures will build up over time, for Government to spend more, grant more, to subsidise more.'

That was why, he explained, the Elected Presidency was created to guard the reserves and ensure that the Government did not chalk up debts for future generations to pay.

'This is the way we must run Government. There is no easy way out,' he said.

'Ours is a disciplined and sustainable approach which will ensure that whatever we do now will last, not just for a few years, but for generations to come.'

The debate continues today.

The Shape Of Retirement

Source : The Straits Times, Wed, Sep 19, 2007

THE changes proposed to the Central Provident Fund will determine the shape of individuals' retirement planning for years to come. That absolves no one, including younger people still riding the career curve, of the need to study the implications and offer their perspectives. Some provisions are controversial in the risk-sharing asked of CPF contributors, notably with the longevity annuity plan. Not all of the features of the various refinements will be universally popular. The Government should be ready to reconsider alternatives if it is persuaded by the logic of public opinion.

The delayed withdrawal of the Minimum Sum is the most 'tactile' of the proposals as its impact will be felt shortly. Conceptually the deferred enjoyment is tied to the need for Singaporeans to work longer so as to save more. But the law mandating continued employment after the present retirement age of 62 is targeted for enactment in 2012. People will feel better, seeing proof of policy intent, if the employment law is brought forward, say two years before the first deferred withdrawal takes effect in 2012. Employers will have time to adjust to workplace management, and older workers due for the extension will get a measure of how it will affect them. They would want a sense of security, an assurance of the law's workings. This is because economic conditions alone will determine the extent of gainful re-employment, not so much what the law says. In a recession, must a company lay off younger workers to accommodate the over-62s?

Of a different nature is the change in the interest rate regime. Pegging the bulk of one's CPF balance, beyond the Ordinary Account, to the 10-year government bond yield, plus one percentage point, is a variable many people may be uncomfortable with. This is in spite of the extra one percentage point that will be paid on the first $60,000. Fluctuating yields make one feel powerless, unsure if the accumulated assets may not be eroded over time. Members, for sure, prefer to have greater certainty over how their own money is managed and the appreciation it would enjoy over the years.

But the most controversial is the compulsory annuity scheme. It has been suggested that the Government contribute to the pool so as to lower the cost of premiums. Second Finance Minister Tharman Shanmugaratnam yesterday gave a robust response why this wasn't a fiscally responsible idea. The scheme has been referred to a committee to take public soundings. It should consult widely as the notion is revolutionary, quite alien to a good many people.