Tuesday, February 26, 2008

Singapore's Inflation Hits 25-Year High Of 6.6%

Source : Channel NewsAsia, 25 February 2008

Singapore's annual inflation rate hit a 25-year high of 6.6 percent in January, according to Department of Statistics (DOS) data released on Monday.

The inflation rate, as indicated by the consumer price index (CPI), was the highest since the 7.5 percent hit in March 1982.

From a month earlier, consumer prices in January rose 1.5 percent on a seasonally adjusted basis, the DOS said.

The Ministry of Trade and Industry (MTI) issued a statement along with the DOS data, saying the year-on-year jump in inflation in January was due to one-off factors such as a housing value revision and that it was in line with the official inflation forecast of 4.5-5.5 percent for 2008.

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The MTI said inflation would start to ease in the second half of the year. In December, the annual rate was 4.4 percent.

"The 6.6 percent year-on-year increase in the CPI in January 2008 was consistent with the official inflation forecast of 4.5 to 5.5 percent for 2008 as a whole," the MTI said.

The DOS said the jump in inflation was due largely to an 11.1 percent spike in housing costs recorded after a revision to values of public housing.

Housing costs, which account for 21 percent of the consumer price index, have the third-largest weighting after food and transport/communication.

Food prices, which carry the largest weighting in the CPI, rose 5.8 percent in January from a year earlier.

Transport and communication costs rose 6.9 percent between January 2007 and January 2008, driven by soaring global fuel prices and higher taxi fares.

Higher petrol prices also contributed to a rise in transport costs for food. This, coupled with higher global food prices, means more expensive grocery bills.

However, one local supermarket chain has extended a discount scheme to help shoppers cope with rising costs. NTUC FairPrice has given customers 5 per cent off prices of 500 of its housebrand products since mid-December 2007.

The discounts, originally due to finish at the end of February, has now been extended until the end of April. The extension is costing FairPrice S$1 million and is part of the company's "Stretch Your Dollar" programme.

In the heart of Singapore's financial district, many were not surprised to hear the latest inflation figure. Many have already tightened their belts.

"I have a family, so I have to plan our expenses and cut out unnecessary spending and then maybe make some investment to cover the shortfall," said a member of the public.

"Shop around a bit more, do a bit of homework (before buying anything). It's a bit tedious, but at the end of the day it's your pocket," said another. - CNA/ac/ir

Call To Up $8,000 Income Ceiling For 1st-Time Home Buyers

Source : The Straits Times, Feb 26, 2008

THE $8,000 income ceiling for first-time buyers of public housing should be raised to help middle-income households.

That is because of rising resale and private property prices, and the growing number of households which earn $8,000 or more per month.

These points were raised by MP Christopher de Souza (Holland-Bukit Timah GRC) during yesterday's Budget debate.

He said raising the income ceiling was one of three ways which the Budget could 'achieve a better and more equitable distribution of our nation's wealth without discarding the tenets of workfare and meritocracy'.

The other two ways were investing resources into beautifying Singapore's common spaces, and making the Workfare Income Supplement scheme more sensitive to inflation.

Mr de Souza noted that it has been 14 years since the HDB last raised the income ceiling, from $7,000 to $8,000.

He added: 'The trailblazing prices of 2007 have scorched young first-time buying couples enough to jolt an increase in the income ceiling.'

The General Household Survey, he added, also shows that the proportion of resident households earning $8,000 and above a month has nearly doubled, from 10.85 per cent in 1995 to 19.9 per cent in 2005.

He said: 'Granted, these statistics do not show the age of residents in each household at the time their income exceeds $8,000.

'Nonetheless, the figures do show that a household income of $8,000 per month is becoming less exclusive.'

Rising Inflation, Not Recession Fears, Is Investors' Key Worry

Source : The Straits Times, Feb 25, 2008

Soaring prices darken horizon, but savvy investors can still spot opportunities

INVESTORS have been bombarded with talks of a looming United States recession for months now.

The real worry they face, however, is much closer to home - rising levels of inflation in Singapore and the rest of Asia.

After all, rising inflation breeds deadly uncertainties for business - and, often, that is bad news for stock prices.

Walk into any coffee shop, and the buzz is about the price hike in festive goodies and higher fuel prices during the recent Chinese New Year celebrations.

The mood contrasts starkly with that a few years ago, when Singaporeans were preoccupied with the lack of work in a sluggish economy - sob stories of professionals being forced to become taxi drivers after losing their jobs.

Now, there are jobs aplenty, but the consumer price index - the main measure of inflation - has jumped sharply, from 1.3 per cent in June to 4.4 per cent in December, after staying well under the radar at a benign 1 per cent or less in the past five years.

Crude oil prices are bubbling past US$100 a barrel, and gold is making swift strides towards US$1,000 an ounce. The record high prices of an assortment of soft commodities, from wheat to coffee, are sparking fresh fears that rising food prices will drive up inflation sharply worldwide.

Historically, inflation has been the great enemy of equity investors.

Older investors will recall the bogeyman of stagflation - low growth, rising unemployment and high inflation - hitting the world in the 1970s.

As crude oil quadrupled in price, the stocks of OCBC Bank, for instance, plunged to just a fraction of the $50 a share they had reached in 1972.

Still, inflationary pressures today are nowhere as dire as they were in the 1970s.

Experts believe things will sort themselves out a lot sooner this time.

China might grow at a slower but more sustainable pace after the Summer Olympics in August, as its frenzied construction programme winds down. This should put a cap on soaring raw material prices caused by the insatiable demands being made by a booming Chinese economy.

In the West, central banks might clamp down on the loose credit unleashed by falling interest rates, as the sub-prime mess gets sorted out.

Property plays

UNTIL these problems are sorted out, however, investors should be aware that financial assets, such as equities, provide little hedge against inflation.

As costs escalate, investors demand a lower price for shares to compensate for the higher risk in holding them in uncertain, economic times.

In extreme cases, this has resulted in a longish bear market, such as in the 1970s.

It would be wrong for investors to assume that any slowdown in the US can be tackled by a few interest rate cuts by the Federal Reserve, given complications created by rising inflation worldwide.

It would, however, be foolish for investors to allow the doomsday headlines to numb them into inaction.

Already, some Singaporeans are making a smart move by snapping up HDB flats - the best hedge against inflation available to investors in the mass market.

Recently, a stunning 9,900 applications were recorded for the 278 flats that the HDB had offered during its February bi-monthly sales.

A successful application might be likened to winning a 4-D lottery. The value of the flat is likely to spike up, while inflation erodes the value of the loan used to pay for the flat.

For investors who do not qualify for an HDB flat, investing in a private property makes good sense for the same reasons, as the bubble in the residential market deflates.

But there is no need to despair, if they do not have the financial means to do so.

Seizing chances

EVEN though inflation can be a stock killer, equity investments still make solid sense, if an investor looks to the long term.

For the first time in years, there seem to be a lot of genuine bargains in beaten-down sectors, such as real estate and financials, where stocks have lost 30 per cent to 40 per cent of their value in the past six months.

Investors will simply have to keep their cool, keep plenty of cash on hand, ignore the incessant market noise about a recession and inflation, and get ready to pounce on any opportunities that come along.

Stick to the bluest of the blue chips, which will survive and remain in far better shape than other counters, as the stock market continues its bumpy roller-coaster ride in an inflationary and recession-hit environment.

Just bear in mind that big sell-offs present rare and not-to-be-missed opportunities to buy into big dividend-paying banks or cash cows like SingTel.

This will give investors a once-in-a-generation opportunity to make big returns when inflation is successfully nailed down again.

The local stock market has weathered numerous crises - the 1973 oil crisis after the Arab-Israeli war, the 1987 Wall Street meltdown, the 1997 Asian financial crisis and, more recently, the collapse of the dot.com bubble in 2000.

Staying nimble

THOSE with the perseverance to ride out the current credit crunch and accompanying inflation problem will certainly be richer for it.

They might not make it to the league of the Li Ka Shings or Kwek Hong Pngs who rode through the 1970s stagflation crisis to become billionaires with their shrewd investments - but they will at least build up a nest egg for a comfortable retirement.

Take advantage of the bear market while it lasts. It is a great boon for nimble and courageous investors.

Temple's Acquisition Appeal Dismissed

Source : The Business Times, February 26, 2008

THE High Court has dismissed an application by three devotees of the Jin Long Si Temple, off Bartley Road, to declare that the acquisition of the temple site violates the Constitution.

The government will now go ahead with the redevelopment of the land unless an appeal is lodged. Temporary and permanent sites have been offered to the temple trustees and committee members, as well as compensation. They will have to move out within two months.

Dismissing the application, the court said the applicants had no standing to make it, and that even if they did, there was no merit in their argument that the government had breached the Constitution. The case was heard in chambers on Jan 29.

The 60-year-old temple in Lorong How Sun was acquired in January 2003 for redevelopment in conjunction with the Circle Line MRT system.

The government gave the temple trustees five years - up to Jan 31 this year - to relocate from the site. Repeated appeals to the government to rethink the acquisition were rejected after due consideration.

The site, with adjoining state land that was formerly the Millenia Institute site, is slated for redevelopment to high-density residential use. The combined plot is scheduled for sale under the Government Land Sales programme in the second half of the year.

The acquisition has generated some controversy. A 100-year-old Bodhi tree, which is important to Buddhists, stands in the grounds and many have called for the tree to be preserved.

It is feared that redevelopment of the temple site, which sits on 1,840 sq metres of land, may damage the tree.

But the government has said measures will be taken to help preserve the Bodhi tree, which is more than 30 metres high.

The tender conditions for the redevelopment of the site will require the developer to retain the tree, the government has said.

S'pore Icreases Efforts To Position Itself As Islamic Banking Hub

Source : Channel NewsAsia, 25 February 2008

Singapore is stepping up efforts to position itself as a hub for Islamic banking.

In the recent Budget, a 5 percent concessionary tax rate was announced for income derived from qualifying Shariah-compliant products. Industry watchers said this would help to draw in key global players.

The global Islamic banking sector is estimated to be worth around US$500 billion. And Singapore is making yet another push for a piece of the fast-growing pie, with a 5 percent concessionary tax on Shariah-compliant products.

Shariah refers to guidelines and principles which are followed in accordance with Islamic law, such as prohibiting the collection and payment of interest.

Industry players said it is a good time to tap into opportunities here.

Arfat Selvam, Arfat Selvam Alliance LLC, said: "The government now has set the right regulatory environment; what's now needed is for the private sector to come in and to activate this, and to take advantage of all these tax concessions that are being offered.

"And it is hoped that these changes will now lead to... the growth of the Islamic finance industry from here. What we need is more Islamic banks here - Islamic finance houses to create the depth in the market, and to complement the wealth management industry that is already here in Singapore.

"And we need more professionals involved in the field who understand Islamic products and who can effectively market these products."

Industry players said that Singapore's multi-cultural society, in which Islamic holidays are celebrated, is also seen as a plus when attracting Islamic investors.

However, they stressed that there is competition from other countries which are seeking to build up their Islamic banking sector.

Raj Maiden, CEO, Five Pillars Associates, said: "What will happen is - it definitely will create some interest. Is the 5 percent attractive enough? You have to look at it in relative to the other players in the market, the other countries, in the similar space and what they are offering. So that will be crucial in getting the necessary players to jump onboard and take advantage of it.

"I think if you scour the scenario, some of them are very competitive, some are even giving tax holidays for a substantial period of time, and I think that is something Singapore needs to be wary of. I think we are taking baby steps in terms of introducing Islamic finance."

Industry experts said Singapore could further attract key global players with grants or subsidiaries to help product innovation for Shariah-compliant products.

They added that Singapore could build on its strengths, such as in fund management, to draw in high net worth individuals. - CNA/ms

S'pore REITs Still Dominant In Asia Despite Current Market Conditions

Source : Channel NewsAsia, 25 February 2008

Singapore's real estate investment trust (REIT) market is holding up, despite the current weak market conditions, according to the Asian Public Real Estate Association.

It said that Singapore REITs are attractive to investors because of their well-diversified and cross-border assets as well as the good regulatory framework here.

Singapore is a key player in Asia's REIT space. Together with Japan and Hong Kong, it accounts for over 90 percent of the REIT market in the region.

Singapore ranks Number 2 next to Japan, and has a market capitalisation of US$21.6 billion as at January 2008.

According to the Asian Public Real Estate Association, there are good reasons why Singapore REITs are attractive.

Peter Mitchell, CEO, Asian Public Real Estate Association, said: "The fact that there is no restriction on investing on offshore assets; that the withholding tax for corporate non-resident investors is 10 percent, which is very competitive; that the REIT is not taxed at the REIT level so the income flows down on a gross basis to investors... so it's a very attractive proposition."

The Association also noted that as a group, Singapore REITs are well-diversified, with interests in the retail, industrial and the office sectors, as well as hospitality and healthcare.

And apart from Hong Kong REITs which invest in China, Singapore REITs are the only Asian property trusts with assets offshore. They have interests in more than 10 countries.

Mr Mitchell said: "Singapore has done a great job in establishing itself as a cross-border REIT centre in Asia. I think (it's a) combination of favourable tax legislation, good regulation and the way in which these regulations are managed by the authorities."

Amid the current market volatility, the Association said there are opportunities for REITs with excess capital.

Mr Mitchell said: "What that means is that some players may not have excess capital as a result. Others that are well cashed up or modestly geared will have capital supply lines and will be able to compete on a cost of capital basis. And because those fundamentals are good, they stand to see some wonderful opportunities in front of them in 2008.

"Because the real estate fundamentals generally in the region are good, it's very hard in the Singapore context to identify any one sector (which) is presenting more opportunities in the listed space than the other."

There are 20 listed REITs in Singapore and according to some estimates, this may hit 30 by the end of the year. - CNA/ms

CapitaLand Gains Control Of 96.7% Of Ascott Group

Source : Channel NewsAsia, 25 February 2008

Property developer CapitaLand has gained control of 96.7 per cent of the Ascott Group.

With this level of acceptance, CapitaLand can now compulsorily acquire the remaining shares of Ascott that it does not own.

The move will allow CapitaLand to delist Ascott and take it private.

But Ascott shareholders, who have yet to accept the offer, can still do so before the closing date of 11 March 2008.

CapitaLand had offered to buy all remaining shares of Ascott that it does not own at S$1.73 each.

Ascott shares have been suspended after its free float fell below 10 per cent last Thursday. - CNA/vm

More Premium Bus Services For Suburban Housing Estates

Source : Channel NewsAsia, 26 February 2008

ComfortDelGro has introduced eight more premium bus services, providing direct and faster connection from suburban housing estates to city areas in Robinson Road and Shenton Way.

From February 25, the buses will service estates in Ang Mo Kio, Bukit Panjang, Choa Chu Kang, Punggol and Sengkang.

Thereafter, the services will be extended to Bukit Batok in the coming weeks.

Residents need only pay a flat fare of $3.60 for a one-way trip.

There will be no concessionary travel but standard transfer rebates apply for commuters using ez-link cards.

The bus services will only operate during the morning peak hours from Mondays to Fridays, excluding public holidays, and is scheduled to arrive in the Central Business District (CBD) before 9am.

ComfortDelGro now runs 33 premium services. - CNA/de

Top Economists See Growing Signs Of Recession In US

Source : The Business Times, February 26, 2008

Plenty of bad news since last fall has led to more pessimism, finds NABE survey

(WASHINGTON) Job growth is faltering, consumer confidence plunging. The fallout from the worst housing slump in a quarter century grows. Wherever one looks, the signs are unmistakable that the US economy is in trouble.

The panel of 47 top forecasters thinks any recession, if it occurs, will be short and shallow.

Because of all the bad news, more and more economists foresee the United States falling into a recession, according to the latest survey by the National Association for Business Economics (NABE).

The group said in a report released yesterday that 45 per cent of the economists on its forecasting panel expect a recession this year. In September, only one in four economists was pessimistic enough to put the chance of a recession at 35 per cent or higher.

The drumbeat of bad news since last fall has caused many analysts to consider a recession more likely now, said Ellen Hughes-Cromwick, chief economist at Ford Motor Co and NABE's current president.

The survey shows that 55 per cent still believe the country will be able to skate by without falling into an actual downturn, typically defined as two consecutive quarters of declines in the gross domestic output, the broadest measure of economic health. All the analysts, however, expect growth to slow considerably this year.

The forecasters believe GDP will expand by 1.8 per cent this year, which would be the weakest growth in five years. That compares with an estimate of 2.5 per cent growth for 2008 made in the previous survey, in November.

The new estimate is in line with a downgraded forecast from the Federal Reserve this past week.

The NABE forecast reflects the expectation the economy will grow only sluggishly or actually contract from January through June. Then it is seen starting to expand more strongly in the second half of the year. Helping accomplish that is a US$168 billion federal aid plan, with its rebate checks for millions of families, and aggressive interest rate cuts from the Fed, which is the US central bank.

The panel of 47 top forecasters thinks 'any recession, if it occurs, will be short and shallow', Ms Hughes-Cromwick said.

The biggest change in the new survey involves the outlook for interest rates.

In November, economists expected the Fed would keep a key rate, the federal funds rate, at 4.5 per cent through all of 2008. That rate, the target for overnight bank loans, already is at 3 per cent, after significant cuts by the Fed in January. Fed chairman Ben Bernanke has indicated that further rate cuts will be coming if the economy fails to rebound.

So the NABE experts now predict the funds rate will end this year at 2.5 per cent.

Inflation is expected to moderate greatly this year as the weak economy cools price pressures. Inflation shot up by 4.1 per cent in 2007, the biggest jump in 17 years.

The Consumer Price Index is forecast to rise by 2.5 per cent. That is based in part on the NABE panel's view that demand will weaken for oil and the barrel price will drop to about US$84 by December. The current trend, however, is up; crude oil jumped to all-time highs above US$100 per barrel over the last week.

The weaker growth will mean higher unemployment, according to the forecasters. They predict that the jobless rate for 2008 will average 5.2 per cent, compared with 4.6 per cent last year.

Mark Zandi, chief economist at Moody's Economy.com and a NABE panelist, said he believed the economy entered into a recession in December and it will pull out of the downturn in June, aided by the rebate checks that begin going out in May.

If problems worsen for the financial industry, hard hit by the housing downturn, then Mr Zandi said Washington will rush through a second rescue measure because nervous politicians will not want to be seen as dawdling before the November elections.

'A recession in an election year represents a problem for incumbents,' Mr Zandi said. 'That is why the first stimulus package got passed so quickly and that is why I expect more of a policy response before this is all over.'

A second panel member, David Wyss, chief economist at Standard & Poor's in New York, also believes the country is now in a recession.

While he believes the economic aid plan signed by US President George W Bush should make the downturn a mild one, he worries the economy could falter again next year. 'There is a danger that this could turn into a double-dip recession,' he said. 'Once the rebate checks are spent, we could go back down again.'

The latest NABE forecast, however, shows the economy continuing to grow in 2009. It predicts a modest GDP increase of 2.7 per cent for the whole year, compared with the 1.8 per cent expected this year and the 2.2 per cent actual GDP growth in 2007. -- AP

US Economy At Standstill: Greenspan

Source : The Business Times, February 26, 2008

(JEDDAH) US economic growth has stalled and the longer it stays at zero, the more likely the world's largest economy will start to contract, former US Federal Reserve chief Alan Greenspan said yesterday.

'As of right now, US economic growth is at zero,' Mr Greenspan said at an investment conference in Jeddah, Saudi Arabia's second-largest city. 'We are at stall speed.'

In updated economic forecasts released last week, the US central bank lowered its outlook for 2008 growth by a half point to between 1.3 per cent and 2 per cent, citing the prolonged housing slump and bottlenecks in credit markets. The oil boom will 'go on forever', Mr Greenspan said. -- Reuters