Friday, April 11, 2008

Risk Mgt Failures Major Cause Of Crisis: IMF

Source : The Business Times, April 11, 2008

WASHINGTON - Risk management at large Western banks was deficient and 'a major cause' of the current financial crisis, the International Monetary Fund (IMF) said on Thursday.

The shortcomings showed a lack of 'judgement and governance' by the banks, the IMF said in a document prepared for finance ministers and central bank chiefs before weekend IMF and World Bank meetings in Washington.

Problems were complicated by weaknesses in accounting and regulatory standards, the fund said.

'Both managers and supervisors need to play a more active role in scrutinising these practices, especially with regard to liquidity management, off-balance-sheet entities and structured products, and to pursue more active stress testing,' the IMF said.

The IMF said that credit-rating agencies also failed to capture risks posed by structured investment vehicles.

It said investors relied too heavily on the ratings.

Looking ahead, it said that there may be merit in a broader approach to revamp the role and use of credit rating agencies.

'This suggests the need to improve methodologies and to adopt a differential rating system for structured instruments, taking better account of their different risk profile, and to review how prudential norms would then need to be modified,' it said.

The IMF said that weaknesses in applying accounting standards and gaps related to the valuation and financial reporting of structured investment vehicles added to the crisis.

It suggested further guidance was needed on how to apply so-called fair-value accounting, particularly when markets face a credit squeeze.

The challenge will be for national authorities and international institutions to coordinate better on cross-border accounting and regulatory standards and disclosure practices, the IMF said.

The fund said that the crisis revealed a need to adapt tools and practices to manage liquidity and cross-country differences in emergency liquidity frameworks.

'Central banks may need to broaden the range of collateral and counterparties that they can deal with and, given the level of cross-border finance, work to avoid significant differences in practice,' it said.

More supervision and better crisis management was needed, especially when it came to new financial instruments, the IMF said. -- REUTERS

M&C In Venture To Invest US$46m In 2 Indian Hotels

The Chennai and Bangalore hotels will target business travellers

MILLENNIUM and Copthorne Hotels plc (M&C), a subsidiary of City Developments Limited, has announced a joint venture company in India with Rakindo Developers Pvt Ltd - M&C Rakindo Hospitality - to invest US$46 million in developing two hotels in the south of the country.

Rakindo Developers is a 50-50 joint venture between Chennai-based Trimex Group and United Arab Emirates-based Rakeen Pvt Ltd.

Mr Kwek: Hopes to build business hotels in major growth cities in India over the next five years

'The group's foray into India is to take advantage of the rapid growth of the Indian economy. We hope to focus on markets with high investment potential and build new business hotels in major growth cities in India over the next five years,' said M&C chairman Kwek Leng Beng.

The hotels, currently under construction in Chennai and Bangalore, will be managed under a new brand that will target business travellers. Described as contemporary and affordable, the hotels will offer, among other things, wireless connection and private booths to conduct business meetings.

The 120-room hotel in Chennai is slated for completion in the third quarter of 2009, while the 300-room hotel in Bangalore will come onstream in the first quarter of 2010.

Rooms are expected to cost between US$100 and US$120.

Data from the 2007 Jones Lang LaSalle Hotels India Digest reports strong growth in RevPAR (revenue per available room) in three major Indian cities - Delhi, Bangalore and Mumbai - as a result of inadequate supply to meet the robust demand over the last five financial years.

In Bangalore, for instance, most hotels cater to the premium and budget segments, rendering the 3-4 star segments largely unserved.

Hyderabad, Mumbai and Delhi are being considered as possible sites for additional hotels in the future. The joint venture partnership will inject equity investments of up to US$100 million.

Separately, M&C also announced the launch of its newest hotel, the Grand Millennium Beijing, which opens its doors for business today. The hotel is expected to anchor the group's presence in China and facilitate expansion in Asia.

双月组屋销售计划终止 改为每季或半年推出更多单位

《联合早报》Apr 11, 2008


三房式优质组屋(3-Room Premuim)、四房或更大组屋的销售计划改为每半年推出,原有的“北区/西区”、“东北区”和“已发展组屋区”(established towns)三个组别将合并,首个计划今年10月10日推出。三房式优质组屋是指铺好地砖和卫生设施的三房式组屋。


为协助新婚夫妇尽早置屋,每个销售计划将预留九成单位给首次组屋申请者。除申请小型公寓(studio apart- ment)外,首次申请者抽签时也享有双倍机会。以往的双月组屋销售计划并未给首次组屋申请者这个优待。


双月组屋销售计划的取消意味着预购组屋项目(Build-to- Order,BTO)将成为新建组屋的主要供应来源。建屋局计划在9月前推出5000个预购组屋单位,分散在榜鹅、盛港、兀兰和武吉班让。



由于空地有限,建屋局建议希望住进成熟组屋区(mature estate)的购屋者选择购买转售组屋,不要期望建屋局会在成熟组屋区推出更多销售计划。政府给予首次购买转售组屋者3万元公积金购屋津贴,住靠近父母者另加1万元。










Economy Surprises With Robust 7.2% Q1 Growth

Source : The Business Times, April 11, 2008

But MAS says growth is likely to ease in next few quarters as global outlook dims

Inflationary concerns outweigh downside growth risks - for now anyway - as the economy rebounded strongly in the first quarter. But GDP growth is expected to ease in the months ahead.

The 7.2 per cent flash estimate of Q1 growth - against sub-6 per cent consensus forecasts, and up from the preceding Q4’s 5.4 per cent pace - mostly surprised on the upside. In annualised, adjusted terms, the economy - far from slipping into a technical recession, after a Q4 contraction - grew almost 17 per cent in Q1, according to the advance figures based only on January and February data.

Notably, the manufacturing sector roared back after the previous quarter’s flat performance. According to the Ministry of Trade and Industry, the sector’s 13.2 per cent recovery was due to a surge in the biomedical cluster and a better showing by mainly the electronics and chemicals industries.

Growth was fairly broad-based across the economy, with the services sector maintaining pace at 7.6 per cent, led by the financial services. Construction growth slowed, but to a still robust 14.6 per cent.

The Monetary Authority of Singapore - which unexpectedly tightened monetary policy yesterday - had rather a lot more to say about the growth outlook.

Singapore’s economic growth is likely to ease in the next few quarters, says the central bank in its monetary policy statement.

Global growth prospects have worsened significantly of late, but regional resilience should continue to support Singapore’s growth, MAS says.

And while maintaining the official forecast of 4-6 per cent growth for 2008, it adds: ‘A more severe global downturn cannot be ruled out if there is a further escalation of the financial crisis in the US. If this occurs, Singapore’s growth will be adversely affected.’

Meanwhile, global inflationary pressures remain high, and Singapore’s consumer price inflation is expected to remain elevated in the first half of 2008, MAS says.

It now projects Singapore’s 2008 inflation rate to come in at the upper half of the 4.5-5.5 per cent forecast range.

‘Against this backdrop of continuing external and domestic cost pressures, an upward shift of the policy band at this point will help to moderate inflation going forward,’ it says.

While surprised by the Q1 GDP figures, economists are a little divided about how much the economy will be hit by the US recession that will likely show its hand in Asia later in the year.

Standard Chartered Bank’s forecasts for Singapore see GDP growth slowing sharply to just 2.8 per cent by Q4, averaging 4.5 per cent for the year.

On the other hand, HSBC economist Robert Prior-Wandesforde maintains that ‘domestic fundamentals remain highly supportive of growth’ and is sticking to his forecast of 6 per cent growth for 2008. He also expects no reversal of the monetary tightening at the next review in October - and sees the inflation rate easing to about 3 per cent in Q1 2009.

For at least one economist, though, the Q1 7.2 per cent GDP growth is simply ‘not high enough’.

Given the robust flash estimates for manufacturing, services and construction, the numbers just do not ‘add up’, says Daiwa Institute of Research’s P K Basu, who had forecast 8.4 per cent GDP growth for the quarter.

Could there have been a “computation error” somewhere, he wondered. Asked about this, an MTI officer ran through the data, and found nothing amiss.

The full details of Q1 economic performance, including March figures, will be released next month.

HDB Gets 1,752 Applications For 490 Flats

Source : The Business Times, April 11, 2008

Board will restructure, re-time sale launches

THE Housing and Development Board (HDB) launched 490 flats for sale in the North and West Zones through the bi-monthly sales exercise yesterday, receiving 1,752 applications on the same day.

HDB has also reviewed the bi-monthly and monthly sales exercises and said that the supply of unsold four-room and bigger flats, currently grouped under three sections, will be consolidated under a single launch.

The launches will also be restructured and re-timed to once every three months for the sale of three-room and smaller unsold flats, and once every six months for the sale of three-room premium, four-room and bigger flats.

On the first day of the February bi-monthly sales exercise, almost 10,000 people applied for just 278 flats in sought-after mature estates such as Toa Payoh, Tampines and Bedok.

Of the 490 flats offered for sale yesterday in the North and West Zones through the bi-monthly sales exercise, 1,752 applications were received on the same day.

Compared with February’s bi-monthly sales exercise, yesterday’s response - the first day of April’s bi-monthly sales exercise - was somewhat lukewarm. This could be because 377 units out of the 490 units offered are in Jurong West, an area that is not considered popular.

Of the flats in Jurong West, 333 units are five-room flats. A check with HDB’s website revealed that a 110 square metre unit on the second floor of Block 676B, Jurong West Street 64, costs $248,800 while a similar unit on the 16th floor of the same block costs $280,000.

PropNex CEO Mohamed Ismail said that he expects the current bi-monthly sales exercise to see at least a fivefold over-subscription eventually. ‘Especially because of the recent announcement of rejuvenating the area,’ he added.

For more demanding buyers, HDB had this to say: ‘Flat buyers who prefer to live in mature estates are also advised to consider resale flats. They should not rely on HDB’s sale exercises as there is limited land to build new HDB flats in these locations.’

From April to September, HDB will be offering 5,000 new Build-To-Order (BTO) flats in towns such as Punggol, Sengkang, Woodlands and Bukit Panjang. This will bring the total planned BTO supply for January-September to 6,100 units, updated from the earlier H1′08 estimate of 4,500 units.

However, HDB said: ‘To avoid over-building new HDB flats, the construction of BTO projects will only commence when a majority of the units have been booked.’

HDB also advised those who need flats urgently to consider resale flats on the open market.

Said ERA Singapore assistant vice-president Eugene Lim: ‘The resale market is still very active.’ This is despite the HDB resale price index rising 3.4 per cent in Q1′08 over Q4′07.

Mr Lim added: “HDB has indicated that most of the new flats will not be in mature estates due to limited land available. So those who want to live in mature estates will have to look at the resale market.”

MAS Signals It Will Allow Stronger Sing Dollar To Fight Inflation

Source : The Business Times, April 11, 2008

Strong Q1 GDP numbers seen giving MAS more room to tackle price rises

The Monetary Authority of Singapore (MAS) yesterday effectively gave a one-time boost to the Singapore dollar to fight inflation, surprising analysts who had expected the central bank to leave its stance on the currency unchanged.

The MAS said that it would re-centre its undisclosed policy band for the trade-weighted Sing dollar, or S$NEER, at the prevailing level of the S$NEER - widely believed to be near the top of the previous tolerated range - while leaving the slope and width of the band unchanged.

The shift would help to moderate inflation ‘while providing support for sustainable growth in the economy’, the MAS said in its closely watched twice-yearly monetary policy statement.

Currency strategists suggested that the government’s better-than-expected advance estimate of 7.2 per cent gross domestic product growth in the first quarter - also released yesterday - had temporarily relieved fears that a stronger currency would stifle economic growth and gave the MAS room to tackle rising inflation by nudging the Sing dollar higher.

Unlike the US Federal Reserve, which sets interest rate targets, the MAS implements its monetary policy by steering the exchange rate of the Sing dollar against the currencies of Singapore’s major trading partners.

Raising the policy band by setting its new mid-point at the prevailing level of the S$NEER is more abrupt than making the slope of the band steeper - as the MAS did last October - which would encourage a faster but gradual pace of currency appreciation.

The last time the central bank re-centred the policy band without changing its slope was in July 2003. In April 2004, it shifted from a neutral policy stance to the ‘gradual and modest’ appreciation stance that it has used since.

Analysts suggested that the MAS’s latest move - besides mitigating current inflation by lowering the price of imports - is also intended to arrest expectations of future inflation. If such expectations become entrenched, they could fuel a vicious cycle of wage and price increases that could spin out of control.

‘Immediate Sing dollar strengthening is the only possible intention,’ said HSBC economist Robert Prior-Wandesforde. The move ‘will serve to reinforce the bank’s anti-inflationary credibility’, he added.

Analysts at Goldman Sachs, HSBC and Standard Chartered Bank estimate that the move has lifted the policy band for the S$NEER by 1.5 per cent, consistent with an exchange rate of about S$1.35 to the US dollar.

But rising prices will remain a worry despite a stronger Sing dollar, which will not ease inflation pressure from domestic sources such as higher housing costs, analysts said. Most expect the S$NEER to trade near the top of the new policy band until the MAS issues its next monetary policy statement in October.

The MAS expects inflation this year - as measured by the consumer price index - to be in the upper half of its 4.5-5.5 per cent forecast range. But OCBC Bank analysts expect inflation to reach 6 per cent.

‘Given fresh record highs in many commodity prices, especially with food inflation which will hit developing countries more than the developed countries, we see little near-term relief on inflation,’ said OCBC analysts Selena Ling and Emmanuel Ng in a report.

Yesterday, the Sing dollar strengthened 1.8 per cent to a high of S$1.3567 in afternoon trading, before easing slightly to S$1.3572 at 7pm, according to Bloomberg data. Since the MAS’s statement on Oct 10, the Sing dollar has gained 7.4 per cent.

Goldman’s revised one-year forecast for the Sing dollar/US dollar exchange rate is S$1.32, while OCBC and Stanchart are forecasting an exchange rate of S$1.325 and S$1.35 at this year-end.

Tackling Inflation Needs Multiple Measures

Source : The Business Times, April 11, 2008

STRONGER-THAN-EXPECTED economic growth has given more room for the Monetary Authority of Singapore (MAS) to tighten monetary policy to fight inflation, but that luxury may not be afforded by the central bank going into the second half of the year.

Singapore’s economy grew 7.2 per cent in the first quarter, beating economists’ expectations. In its monetary policy statement announced alongside the flash growth estimates, the MAS said that it has decided on an ‘upward shift’ in the range in which it manages the Singapore currency. ‘An upward shift of the policy band will help to moderate inflation going forward while providing for sustainable growth in the economy,’ the central bank said in its twice-yearly review.

‘Inflation is expected to remain high until the middle of the year before easing in the second half,’ it added. The move, unexpected by the market, sent the Singapore dollar to a record high against the US currency. The MAS uses the Singapore dollar exchange rate as its main inflation management tool. A stronger currency helps reduce the surging cost of imported food, which Singapore is dependent on.

According to official estimates, inflation is set to hit 4.5-5.5 per cent this year, but many private sector forecasts exceed this. That said, the Singapore dollar exchange rate remains a blunt tool to control inflation. Allowing the currency to appreciate, while cheapening imports, also has the effect of making exports less competitive. This may not be an issue when economic growth comes in as strong as the first-quarter numbers, but could pose a policy challenge should growth taper off going forward.

The key question remains the extent, and the intensity, of the expected US slowdown in the wake of the sub-prime crisis, and the impact this will have on the Singapore economy. Economic growth in Singapore could be as little as 3 per cent this year if the US economy tanks, according to an earlier forecast from economists at the Nanyang Technological University (NTU), although growth is expected to stay at a decent 5.5 per cent should the US escape a full-blown recession - within the official 4-6 per cent forecast range. Giving its assessment yesterday, the MAS said that the economy is likely to grow at a ‘more moderate pace’ while inflationary pressures remain high.

For the moment, the MAS should have enough flexibility to target inflation without worrying about growth. This might change, however, should growth come under greater threat in the later part of the year. In this context, more direct ways to tackle inflation - or at least, its impact - are needed.

The recent move to set aside $1 million to help needy Singaporeans cope with the rising cost of living is welcome, as is the indication that increases in government charges would be postponed. More of such measures will probably be needed to complement the use of the exchange rate in the fight against inflation.

Construction Cools Unexpectedly On Higher Costs

Source : The Straits Times, Apr 11, 2008

GROWTH in the booming construction industry slowed unexpectedly in the first quarter, after racing along at a frenetic pace for much of last year.

The sector, tipped as one of the economy’s key growth drivers this year, grew by just 14.6 per cent in the first two months, down from more than 20 per cent for most of last year.

Economists were surprised by what they said amounted to a contraction in the industry, but they remained confident that growth was still healthy and in line with their forecasts for the year, which ranged from 10 per cent to 25 per cent.

Most suggested that profits in the construction sector could have been hit by higher raw material and labour costs. Construction costs have risen 40 per cent in the past two years and are expected to jump by another 15 per cent to 20 per cent this year.

United Overseas Bank economist Ho Woei Chen also said that after several successive quarters of strong growth, a slowdown in one quarter ‘is to be expected’.

She and other experts, however, are still positive over the sector because of major projects in the pipeline, such as the Sports Hub in Kallang, as well as the integrated resorts.

CIMB-GK economist Song Seng Wun expects the first-quarter figure released by the Government yesterday to be revised up when fuller data comes out next month.

He noted that the estimates covered only January and February, which included a break for the Chinese New Year holiday.

With last month included, the growth figure should go up, he said, adding that better performances should also come in for the later quarters this year.

‘The intention is to get everyone up and running as quickly as possible in an environment where cost continues to be an issue, so we should see accelerated activity in the sector as developers try to finish projects,’ said Mr Song.

Construction firms also expressed surprise at the figures.

‘Everyone’s still very busy, so right now, we should be at the peak for the sector,’ said Mr Goh Yeow Lian, the executive chairman and managing director of building contractor Wee Hur.

S’pore Economy Grows 7.2% On Strong Showing In Manufacturing

Source : The Straits Times, Apr 11, 2008

Initial estimates for first quarter better than expected despite slowdown in buoyant construction sector

SINGAPORE’S economy turned out to be surprisingly resilient in the first quarter, easily beating market expectations with strong growth of 7.2 per cent.

The advance estimates issued by the Ministry of Trade and Industry (MTI) reported yesterday were a marked improvement over the 5.4 per cent posted in the final quarter of last year.

Earlier reports had suggested market expectations of 5.9 per cent growth.

On a seasonally adjusted annualised basis, the economy grew at a breakneck rate of 16.9 per cent quarter-on-quarter. It shrank 4.8 per cent in the final three months of last year.

However, economists do not believe the strong performance signifies an uptrend for the rest of the year. They point to a potential recession in the United States and rising global inflation.

The advance estimates are based largely on data from the first two months of the quarter and are intended as an early indication of growth. They are subject to revision when more comprehensive data is available, MTI said.

It said manufacturing and services were contributors to the better-than-expected first quarter growth.

Manufacturing is estimated to have expanded by 13.2 per cent in the first quarter, compared to a mere 0.2 per cent rise in the previous three months.

It was also considerably higher than the 3.9 per cent registered in the first three months of last year.

‘This was largely due to a surge in the output of the biomedical manufacturing cluster, following its contraction in the previous quarter,’ MTI said.

‘The rest of the manufacturing clusters also enjoyed better performances …with the exception of the transport engineering and precision engineering clusters, whose growth moderated.’

Another highlight was the services- producing industries which held steady at 7.6 per cent, similar to the 7.7 per cent in the previous quarter as well as in the corresponding period last year.

‘Financial services continued to be the fastest-growing among the services sectors,’ MTI said.

However, the figure for the slowing construction sector was less rosy with growth slipping to 14.6 per cent from 24.3 per cent in the preceding quarter.

United Overseas Bank economist Ho Woei Chen said this was disappointing, given the sector’s strong run of late. ‘It was a bit of a disappointment after three quarters of growth above 20 per cent.’

But she still expected the sector to contribute to growth this year, on the back of infrastructure projects such as the integrated resorts and the proposed Sports Hub in Kallang.

Citigroup economist Chua Hak Bin said the overall growth figure for the first quarter was slightly below the bank’s expectations of 7.8 per cent, but he was surprised at the strength of the services sector. ‘I thought services might have softened but it is holding up fairly well.’

He was less positive about the rest of this year, saying that the first-quarter figures were unlikely to provide a telling picture of what lies ahead. ‘A US recession is in the works and chances are it could be a prolonged one.

‘This will affect exports and add to the credit stress facing Singapore companies, which are already finding it harder to secure financing from banks, which are more careful with lending in the wake of the global credit crunch.’

CIMB-GK economist Song Seng Wun said that rising inflation, especially for food prices, will be a major concern.

‘People are focusing on issues such as the rising price of rice and this is something that could persist for the rest of the year.’

None of the economists interviewed was inspired to revise full-year growth forecasts, which range from 4.7 per cent to 5.5 per cent. MTI has forecast a range of 4 per cent to 6 per cent for the year.

MAS Makes Drastic Move To Fight Inflation

Source : The Straits Times, Apr 11, 2008

This comes as world oil prices hit a new record high of US$112 a barrel

SINGAPORE has trained its sights squarely on inflation, as the Government moves with unprecedented aggression to curb escalating costs faced by households and businesses.

The Monetary Authority of Singapore (MAS) said yesterday it would allow an immediate jump in the value of the Singapore dollar by moving up the range in which it allowed the local currency to fluctuate.

Heightened inflation fears seemed to be in view, as the central bank narrowed its forecast for consumer price inflation - already at 26-year highs - to the ‘upper half’ of its 4.5 per cent to 5.5 per cent range.

The currency move, which came amid a new surge in oil and commodity prices, surprised most economists, who expected the MAS to stick with the status quo, given the uncertain economic outlook.

Economists also said the MAS had already made provisions for a stronger Singdollar, albeit less drastic ones, at its last review in October.

‘The manner in which they opted to tighten is aggressive. They do this sort of thing only in a crisis,’ said Fortis Bank senior strategist Joseph Tan, one of the few analysts expecting monetary tightening. ‘In my memory, there are only two other episodes when the MAS re-centred its policy band. On both occasions, they were downward moves.’

The MAS manages the value of the Singdollar against an undisclosed trade-weighted basket of currencies. The currency is allowed to trade freely, as long as its trade-weighted value remains within limits prescribed by the central bank’s ‘policy band’. This is Singapore’s main weapon for fighting inflation, as a stronger Singdollar helps offset costlier imported goods.

The last two band re-centrings occurred when Singapore’s economy faced severe downturns - during the 2003 Sars epidemic and after the bust in early 2002.

Both were downward moves to guide a Singdollar depreciation to make local exports more competitive.

‘A band re-centring is the most hawkish and least ambiguous of the likely possible policy moves. An immediate Singdollar strengthening is the only possible intention of this choice of policy,’ said HSBC economist Robert Prior-Wandesforde.

Indeed, the local currency rose 1.8 per cent to $1.3572 against the greenback yesterday. Experts now reckon that the Singdollar could reach $1.32 by year-end.

The move came as oil prices hit a new high of US$112 a barrel yesterday, and as commodities like soybeans, corn and copper traded just below their peaks. ‘The tipping point is likely to have been the spike in food prices in recent weeks, particularly rice prices,’ said Barclays Capital economist Leong Wai Ho.

OCBC Bank economist Selena Ling said the economy’s surprisingly strong growth of 7.2 per cent in the first quarter probably gave the MAS ‘comfort’ to prioritise inflation over growth concerns.

The MAS said in a statement that oil and food prices were likely to stay high for some time. ‘Domestic cost pressures will persist due to short-term capacity constraints in certain segments of the economy,’ it added.

Inflation is expected to moderate in the latter half of the year, but experts believe policymakers should consider moves beyond currency strengthening.

‘A stronger Singdollar cannot mitigate domestic sources of inflation like higher housing costs, wage costs and road usage costs,’ said Standard Chartered Bank economist Alvin Liew.

The US$1 Trillion Crisis

Source : The Straits Times, Apr 11, 2008

THE United States sub-prime credit crisis could end up costing the world an astronomical US$945 billion (S$1.3 trillion), the International Monetary Fund (IMF) said in a report this week. That figure does not represent actual losses but is the IMF’s estimate of potential losses in the market prices of assets held by banks and other financial institutions.

The US$945 billion in losses breaks down into:

- US$565 billion for US residential loans and securities;

- US$240 billion for commercial real estate securities;

- US$120 billion for corporate loans; and,

- US$20 billion for consumer loans.

Other key points in the IMF report:

Banks are likely to shoulder about half the losses - at US$440 billion to US$510 billion.

Insurance companies, pension funds, money market funds, hedge funds and other institutional investors will account for the balance.

The US$945 billion adds up to 4 per cent of the US$23.21 trillion credit market.

Today’s credit crisis could end up being similar in dollar magnitude to the Japanese banking crisis of the 1990s, which racked up losses of US$750 billion. - AGENCE FRANCE-PRESSE

S’pore Economy Bounces Back - For Now

Source : TODAY, Friday, April 11, 2008

Singapore’s economy has not only averted a technical recession but bounced back with a vengeance in the first quarter of this year.

Flash estimates show GDP grew 7.2 per cent year-on-year, thanks largely to a big swing in pharmaceutical exports.

On a quarter-on-quarter basis, the economy grew a surprising 16.9 per cent.

However, experts warn about getting too excited. This flash estimate may not give a true picture of Singapore’s current economic health in the face of a possible United States recession.

“A protracted US recession and an expected slowdown in the other major economies, as well as those in Asia, will likely pose greater headwinds for Singapore’s exports in the coming quarters,” said Citigroup economist Kit Wei Zheng.

The pharmaceutical sector is notoriously volatile, regularly distorting Singapore’s manufacturing numbers. This sector was largely to blame for the 4.8-per-cent GDP contraction in the last quarter of 2007.

But in the first couple of months this year, big drugmakers such as Merck and Company produced more pharmaceuticals, offsetting an easing in Singapore’s larger electronics output.

“The economy is gradually diversifying and that is making it more resilient,” said Nicole Sze, an investment analyst at Bank Julius Baer.

HSBC economist Robert Prior-Wandesforde estimates that the real underlying growth rate of the economy was 6 per cent quarter on quarter, based on the average of the first and last quarters.

“That’s not too shabby for an economy potentially highly vulnerable to global developments,” he said. “The de-coupling thesis is alive and well.”

Even so, Finance Minister Tharman Shanmugaratnam warned last week that some slowdown is expected in the second quarter and beyond.

Singapore Dollar Hits Record High

Source : TODAY, Friday, April 11, 2008

Monetary authority acts to curb inflation

The Singapore dollar climbed to a record high yesterday after a surprise tightening in monetary policy aimed at combating inflation.

The currency jumped 1.7 per cent in Asian trade to touch a high of $1.3567 in afternoon trade - its largest single-day gain since October 1998.

While a rising Singapore dollar can provide consumers some respite from spiralling global commodity prices, it also means exporters have to bear the brunt of an eroding competitiveness with their products.

Citigroup economist Kit Wei Zheng called the move “drastic”.

Mr Joseph Tan, a strategist at Fortis Bank, told Bloomberg: “The way they opted to tighten was aggressive as they typically don’t muck around with the centre of the band unless there is a crisis. It tells me we are behind the curve on inflation, and we are playing catch up.”

In its semi-annual policy review, the Monetary Authority of Singapore (MAS) said: “Even as the downside risks to economic growth have increased, global inflationary pressures remain high.”

“Against the backdrop of continuing external and domestic cost pressures, an upward shift of the policy band at this point will help to moderate inflation going forward, while providing support for sustainable growth in the economy,” its statement said.

As is its practice, the MAS did not specify what the Singapore dollar’s new permissible band would be, leaving traders to test the waters themselves. There were rumours the MAS did intervene yesterday to prevent the currency rising too much.

Mr Nizam Idris, the director of fixed income, rates and currencies at UBS, said: “If there’s a need for intervention, it’s probably to slow down the knee-jerk reaction. We don’t like volatility and I don’t think the MAS likes volatility.”

The MAS manages the currency against an unspecified basket of currencies, comprising Singapore’s largest trading partners.

It has twice revised its 2008 inflation forecast upwards, most recently to 4.5-5.5 per cent. Inflation hit a 26-year high of 6.6 per cent in January and remains worrying.

The policy surprise move left research houses scrambling to raise their Singapore dollar forecasts. UBS now has a one-month forecast of $1.35 for the Singapore dollar.

Standard Chartered Bank economist Alvin Liew said exporters of mass market electronics will be especially hit as margins get squeezed. “Rental rebates would be one way to help these manufacturers,” he said. “Although, in terms of the products themselves, I don’t think there’s much the Government can do.”

5,000 More BTO Flats In Pipeline

Source : TODAY, Friday, April 11, 2008

Three-year wait likely, so couples in a hurry will have to resort to resale market

AS MORE flats come on stream under the Housing and Development Board’s (HDB) build-to-order (BTO) scheme, the board says such units will be its main source of supply in future, and would-be home buyers would have to factor in a three-year wait.

This is because construction work on a project under the scheme will only start when a majority of the flats have been booked, so to as to avoid over-building, said the board in a statement yesterday.

What this means is that those getting married will now have to start planning early for their housing needs, said property experts. Couples in a hurry will have to buy their flats in the resale market, where sellers have been demanding a higher cash-over-valuation (COV) for their units, leading to a spike in the prices of such units.

The HDB said it plans to offer 5,000 new BTO flats in towns such as Punggol, Sengkang, Woodlands and Bukit Panjang between now and September.

This brings the total planned BTO supply for the first nine month of the year to 6,100 units, surpassing the number of such flats launched in the whole of last year and in 2006.

It will also refine its combined balloting/walk-in system from July. The supply of unsold four-room-and-bigger flats, currently grouped under three sectors - North and West, Northeast and established towns - will be consolidated under a single launch.

The sales exercises will also be re-structured. The sale of unsold three-room-and-smaller flats will be conducted once every three months, starting from July.

For three-room premium, four-room and bigger units, the sales exercise will be conducted once every six months from October.

With the changes, a larger supply of unsold flats will be offered for sale under each launch.

And in response to public feedback, the HDB will extend first-timers priority at these sales exercises, with 90 per cent of the flats being set aside for these applicants. They will also enjoy double chances over regular applicants under the ballot to determine their queue positions.

PropNex director Joseph Lee welcomed the refinements, saying it favoured first-time buyers.

“I think a three-year wait is a relatively good time for couples to plan their finances, as well as determine issues like job security,” he said. “I don’t think this ruling will deter young couples from marrying - my own clients tell me that they would either stay with their parents, or go into the resale market.”

Ms Shirley Loke Lai Teng, 29, a procurement executive, who will be getting married next March, shared the sentiment: “I don’t mind the waiting, even for three years, as long as I can get a flat. At most, I will stay with my in-laws first.”

Mr Eugene Lim, ERA Singapore’s assistant vice-president, agreed that the BTO policy was “pro-first timers” because the HDB’s existing unsold stock of about 1,000 flats was depleting fast.

However, those in urgent need would have “no choice but get into the HDB resale market, making it more expensive, especially for flats in the mature estates”, he added.

HDB To Sell Unsold Flats On A Less Frequent Basis

Source : The Straits Times, Apr 11, 2008

HDB is streamlining the system for launching batches of unsold flats in view of flats shortage.

NOT so long ago, unsold Housing Board flats were so plentiful that home buyers could simply walk in and buy a completed unit.

But with fast dwindling stocks, the HDB is streamlining the system for launching batches of unsold flats.

Starting July 1, it will hold fewer launches - but each launch will boast more flats.

It will sell three-room and smaller unsold flats once every three months, instead of once a month. And the bigger flats - three-room premium and above - will be sold half-yearly starting Oct 10, instead of every two months.

Property market observers say this will make life easier for urgent home buyers.

PropNex chief executive Mohamed Ismail said it will help unsuccessful buyers avoid the anxiety of having to re-apply for a dwindling pool of unsold flats every month or two.

An economic downturn in the late 1990s resulted in the excess stock of unsold flats.

'With the progressive clearance of these unsold flats, the number of ready-built flats available for sale will decline and the sales launches for unsold flats will become less frequent over time,' said the HDB in a statement yesterday.

HDB launched the final bi-monthly sales exercise yesterday.

Already, demand is strong. As at 5pm, 1,752 applications had been made for 490 four-room and bigger flats in the north and west zones. The 76 four-room flats, 371 five-room flats and 43 executive flats are in various towns such as Bukit Batok, Jurong East and Yishun.

From now on, the board will also be consolidating the supply of unsold four-room and bigger flats in a single launch. They were previously grouped under three sectors - north and west, north-east and established towns.

There is also good news for first-time buyers. Responding to public feedback, the HDB will now set aside 90 per cent of the flat supply in these exercises for first-timer applicants, similar to its practice for the build-to-order (BTO) scheme.

They will also enjoy double the number of chances compared to regular applicants under the ballot to determine their queue position.

Still, HDB encourages those needing a flat urgently or wishing to live in mature estates to con- sider a resale flat.

But not all home-hunters can afford a resale flat as they cost more and typically, require a fairly large cash-over-valuation sum, agents said.

Serious buyers should look to the BTO system, where projects are built only when a majority of units are booked, as this will be the main way the HDB will sell new flats from now on.

The catch is that buyers have to wait about three years for their flats to be built.

Goldman CEO Says Credit Crisis In Later Stages

Source : The Straits Times, Apr 11, 2008

NEW YORK - GOLDMAN Sachs Group Chief Executive Lloyd Blankfein said on Thursday markets are probably in the late stages of the global credit crisis that began last summer, but he would not predict when it will end.

Mr Blankfein estimated the markets are more than half way to recovery, but declined to forecast how long the crisis would persist

'We're closer to the end than the beginning,' Mr Blankfein said at the bank's annual shareholder meeting. 'I think we're getting to that point where people are seeing the light at the end of the tunnel.' He estimated the markets are more than half way to recovery, but declined to forecast how long the crisis would persist.

'Maybe we're at the end of the third quarter, beginning of the fourth quarter,' he said, though he cautioned that a recovery may still take a long time.

'If you watch sports, sometimes there's a lot of timeouts in the fourth quarter. It takes longer to play than any of the other quarters, and sometimes it ends in a tie and goes into overtime.' That said, Mr Blankfein told shareholders that Goldman always prepares for the worst as it weighs potential risks in its dealings.

'The world is nervous, and so are we,' Mr Blankfein said, adding that attitude always embodies the bank's approach to markets. 'Our natural state of rest, even in good times, is to be very nervous,' he said wryly.

Constant anxiety helped Goldman pull off one of the all-time great trades last year, when it bet securities tied to subprime mortgages would fall in value.

The bank's strategy generated billions of dollars in gains when the rest of the industry has been forced to write down nearly US$250 billion (S$342.5 billion) of mortgages, corporate loans and other assets now difficult to trade.

Goldman's traders and bankers prepare for any number of events they can imagine, even if they are highly unlikely, he said: 'It's not that anything can happen, it's everything will happen.' Blankfein's views carry a lot of weight in the market, as Goldman navigated last year's choppy waters and delivered record results.

Goldman shares, though well below their peak before the credit crisis, rose 12 per cent last year and outperformed rival banks.

Earlier this week Morgan Stanley CEO John Mack, using a baseball analogy, also predicted the end of the credit crunch was in view.

The subprime mortgage crisis, he said, was in the 'bottom of the eighth inning or top of the ninth,' with the broader crisis gripping markets for 'a couple of quarters' more. -- REUTERS

Goldman CEO says 'say on pay' a bad idea

NEW YORK - GOLDMAN Sachs Group Chief Executive Lloyd Blankfein, who received about US$70 million of compensation last year by some counts, said on Thursday that shareholder votes on executive pay would constrain the board and hurt the investment bank's ability to attract the best employees.

So-called 'say on pay' initiatives, which allow shareholders to provide a nonbinding approval or rejection of a board's proposed pay package for senior executives, have become a hot topic among shareholder groups, pensions and other large investors focused on corporate governance issues.

In a spirited annual meeting held in a downtown Manhattan, a number of Goldman shareholders urged the board and investors to adopt an advisory vote as a tool to keep a lid on excessive pay. Advocates also argued the proposal would give shareholders a greater voice on an important matter, without binding directors.

The board, he said, needs to have the flexibility to weigh compensation packages and the market environment. He also expressed concern that decisions by board member could be judged by uninformed investors.

'Our compensation has been very well-correlated to performance,' he said.

Goldman's shareholders apparently agreed, as the say on pay proposal was rejected, receiving approval by 43 per cent of shares voted and 30 percent of shares outstanding.

Some speakers argued Goldman's compensation was enormously high. According to the proxy statement, Goldman's top five senior executives received roughly US$250 million last year in salary, cash bonuses, stock awards and other compensation, excluding stock options.

For context, that haul was greater than JPMorgan Chase & Co's initial fire-sale takeover bid of US$236 million for Bear Stearns Cos.

Shareholder advocates upset about excessive CEO pay argue that advisory votes would let US shareholders, like their European counterparts, ratify or express disapproval of pay packages.

Still, most shareholders, including Timothy Smith of proposal sponsor Walden Asset Management, noted that Goldman has performed well.

In the end, Goldman shareholders showed themselves to be largely satisfied with the company's management following a year when Goldman stock rose 12 per cent, outperforming rivals, and when it generated record revenue and profit. All 12 directors won reelection, with 97 per cent of votes

Mei Chin Rd Market Cum Hawker Centre Due For Facelift

Source : The Straits Times, Apr 11, 2008

THE market cum hawker centre at Blk 159 Mei Chin Road will be given a facelift from May 1, 2008 till the second quarter of 2009 under the National Environment Agency's Hawker Centres Upgrading Programme (HUP).

The Mei Chin Road centre will have more elderly friendly facilities like lifts, ramps and wider circulation space. The toilets of the centre will also be landscaped and naturally ventilated for a pleasant washroom environment. The centre will also have increased seating capacity and better ventilation.

Meanwhile, most stallholders have chosen to take a break during the upgrading period, and less than 10% of the 106 resuming stallholders are operating at alternative stalls provided by NEA at other hawker centres.

The Agency manages 112 markets/food centres. To date, 62 markets/food centres have been upgraded. Two centres currently undergoing upgrading are located at Blk 335 of Smith Street and Geylang Serai Marke

Sales Process Will Be Tweaked

Source : TODAY, Wednesday, April 9, 2008

HDB is studying refinements to weed out non-serious applicants

Letter from Kee Lay Cheng
Deputy Director (Marketing and Projects) for Director (Estate Administration and Property)
Housing and Development Board

I refer to the letters from Samuel Lee, “Oh, that elusive HDB flat” (March 28), and from Kalista Nisha, “Different families, different needs” (March 31).

We would like to clarify that the $10 fee payable for HDB sales exercises is to cover part of the Housing and Development Board’s (HDB) administrative cost in processing the applications. We agree with Kalista Nisha that the fee should be kept affordable.

While HDB has no intention of raising the fee, it is currently studying refinements to the sales process to weed out non-serious applicants or what Samuel Lee described as “people who apply just for fun”.

Samuel Lee suggested that HDB implement pricing guidelines for future Design, Build and Sell Scheme (DBSS) and Executive Condominium (EC) projects to ensure that the units are affordable. We would like to point out that in pricing DBSS and EC flats, the private developers would have taken the income ceiling criteria into account.

Only households earning up to $8,000 and $10,000 respectively are eligible to purchase new DBSS and EC units. Therefore, if private developers were to price their DBSS and EC units beyond the affordability of the target buyers, they risk not being able to sell these units.

HDB remains committed to keep public housing affordable to the vast majority of Singaporeans. Build-To-Order (BTO) flats sold by HDB will continue to be the mainstay of new flat supply. The DBSS was introduced as a niche scheme to cater to flat buyers who are prepared to pay more for a wider choice of flat features.

We would also like to clarify that DBSS flats are part of the overall public housing programme. Unlike ECs, DBSS developments will not be privatised after 10 years.

With regard to the Simei site for DBSS development, we are pleased to inform Samuel Lee that it has been released for tender on April 8. The tender launch was slightly delayed as more time than anticipated was needed to complete the necessary preparations.

Greenspan: US Home Prices May Stabilise This Year

Source : TODAY, Wednesday, April 9, 2008

Former US Federal Reserve Chairman Alan Greenspan said the drop in American home prices will probably end “well before” early next year as the number of houses on the market diminishes, aiding an economic rebound.

“It will not be until early 2009 that we will be close to having eliminated most of this home inventory,” Mr Greenspan said yesterday. “But it is very likely that home prices will stabilise well before that.”

Mr Greenspan said the health of the United States housing market is tied to broader financial markets that rely on bundling mortgages to sell as securities.

His successor, Mr Ben Bernanke, and other Fed officials highlighted declining home prices as a major economic risk that may hurt household wealth and consumer spending.

“Once the markets start to stabilise, especially if the real economies don’t go into a severe recession we can expect a recovery to begin to take place,” Mr Greenspan, 82, said.

Mr Greenspan described the current credit crisis as the worst in at least 50 years, adding that the extent of damage stemming from the collapse of the sub-prime market would not be known for months.

“Have we reached a point where prices are stable? We cannot know that for a couple of months,” he said. “It looks as though we’re going to get a very large rate of liquidation, but not until the second half of this year.”

S’pore Likely To Escape Technical Recession

Source : TODAY, Wednesday, April 9, 2008

The Singapore economy probably rebounded in the first quarter, escaping a technical recession.

A Today strawpoll of seven private sector economists shows all those surveyed expect the Government to announce positive GDP growth, when it unveils flash GDP estimates for the first quarter tomorrow.

“But the question is: is there a sustainable demand in the pipeline?” said Mr Vishnu Varathan, an economist at research house Forecast. “There is no compelling reason to suggest that we are on a roll and it is going to get better as we go.”

Their median forecast for quarter-on-quarter growth came in at 11.7 per cent. This, thanks to a sharp swing in biomedical and electronics exports.

However, forecasts vary considerably - from a low of 5 per cent from OCBC Bank to a bullish 19 per cent by Citigroup.

If the first quarter figure had been negative, Singapore would technically be in recession having suffered two successive periods of quarter-on-quarter contractions.

On a year-on-year basis, economists surveyed had a median forecast of 6.3 per cent growth, with forecasts of 5.2 to 7.8 per cent.

However, many warn the worse is yet to come.

OCBC economist Selena Ling said: “We will feel the effects of recent developments in the second quarter. It all depends on how the US economy ends up, how much the credit fallout affects the financial services here.”

Despite the sub-prime crisis hitting financial markets worldwide, Ms Ling said there were no signs of bank loans growth and tourism slowing for now.

Economists were caught off guard in the final quarter of 2007, when the Government announced a surprise 4.8 per cent decline in GDP, due mainly to volatile pharmaceutical exports.

The Monetary Authority of Singapore will also be holding its twice-yearly policy review tomorrow.

Economists widely expect it to retain its current policy stance of allowing modest appreciation in the Singapore dollar, having slightly steepened its trading band since last October.

The currency has risen 4.2 per cent this year against the US dollar, the third best performer in Asia outside Japan during the period. This effectively lowers the cost of imports, but erodes the cost competitiveness of exports. - Cheow Xin Yi

Cutback In Bank Lending Puts US Economy At Risk

Source : The Business Times, April 9 2008

Minimum capital ratio requirements limit banks’ ability to dish out loans

(NEW YORK) Bank holding companies including Citigroup and Bank of America have the thinnest safety cushion against losses in seven years.

The margin may erode further in coming weeks. Credit ratings on US$704 billion of bonds have been cut this year following the collapse of the US housing market.

Sheila Bair, chairman of the Federal Deposit Insurance Corp, said last week that the downgrades may compromise bank capital ratios enough that some of the largest institutions will no longer be considered well capitalised.

Falling below a regulatory benchmark that is intended to maintain a minimum level of capital to protect depositors against losses would subject banks to more scrutiny from regulators than they have ever experienced.

‘This is a nightmare for the country,’ said William Isaac, who was chairman of the FDIC from 1981 to 1985.

Banks will ‘raise what capital they can, then they’ll slow down their growth and stop lending, and what should be a mild recession becomes a much more serious one.’

The biggest danger to the economy is that to preserve their ratios, banks will cut off the flow of credit, causing a decline in loans to companies and consumers.

Banks have already raised US$136 billion in capital and cut dividends. More stock sales and payout reductions are likely to follow, says analyst Meredith Whitney at Oppenheimer & Co.

The credit crunch has already cost the world’s biggest financial companies about US$232 billion.

‘Banks have to maintain their ratios,’ said Dennis Santiago, chief executive officer of Institutional Risk Analytics, a Californian research firm that monitors banking statistics. ‘This is an institutional panic. At what point will consumers feel the panic? I don’t know.’

The banks need to shore up the ratio of the value of their common stock, preferred shares, retained earnings and loss reserves to the total of risk-adjusted assets, which are affected by credit ratings.

To be considered a ‘well capitalised bank’ by US regulators, an institution cannot have more than 10 times its capital in risk-weighted assets. More than 99 per cent of American banks qualify as well capitalised.

As a group, regulated banks had a total risk-based capital ratio of 12.79 per cent at the end of last year. The figure was the lowest since 2000, before the last US recession.

The holding companies for Citigroup, Bank of America and Wells Fargo have the lowest ratios in at least the five years that the Federal Reserve has been tracking the data.

Citigroup had stock, retained earnings and preferred shares in 2007 equal to 10.7 per cent of its risk- weighted assets. That’s down from 12.02 per cent in 2005.

Wells Fargo was at 10.68 per cent, down from 11.76 per cent, and Bank of America, 11.02 per cent, down from 11.08.

By contrast, the average ratio for the nation’s 66 biggest bank-holding companies was 11.63 per cent. JPMorgan Chase had a ratio of 12.57 per cent, up from 12.04 per cent.

Fed chairman Ben Bernanke described bank capital requirements in congressional testimony April 2 as ‘the nub of the problem’ and said US institutions had ‘hunkered down’ and were lending less.

‘The important thing to remember about capital ratios is that they are minimums,’ said Ralph Sharpe, a lawyer at Venable LLP in Washington, who was director of the Office of the Comptroller of the Currency’s enforcement and compliance division from 1984 to 1994.

‘In good times everybody looks good, but when the tide goes out, you see who is not wearing their bathing suit.’ - Bloomberg