Wednesday, May 7, 2008

Govt Has Arsenal To Counter US-Driven Slowdown: PM Lee

Source : The Business Times, May 7, 2008

In a crunch, it can pump-prime the economy and give targeted assistance

Singapore is prepared to face any economic scenario that emerges from the current uncertain climate, including a prolonged downturn in the United States, said Prime Minister Lee Hsien Loong yesterday.

PM Lee: Singapore is prepared to face any economic scenario that emerges from today's uncertain climate

One option to fall back on would be to boost economic growth through government spending, including resuming construction projects that were earlier put on hold, he said.

'If things do get bad, which cannot be ruled out - although it does not appear to be on the cards - we are not without recourse,' he told a group of some 100 guests including chief executives, senior bankers and economists at a discussion hosted by Thomson Reuters.

'If we need to move on fiscal policy to stimulate the economy, we can do that. If we have to have directed assistance to help the lower-income because unemployment has gone up - right now it's at a very low level, but if that happens - we can do that.

'And if I have to stimulate the economy or some sector of the economy, I can do that too.' In the construction sector, for example, the government could restart projects that it had put on hold, he said.He also said that he wished that the government had 'moved earlier' to ease the office space crunch in the financial sector, which has grown so rapidly that prime office space rents have soared, prompting banks to move some of their staff and operations to out-of-town locations.

'I wish we had moved our banking and financial centre six months earlier than we actually did. But at that time, the market looked cold and nobody was interested and we were unable to generate the interest for it to take off.'

But the government has since taken steps to build more office space, housing and schools to ease some of the capacity constraints, he said.

HSBC economist Robert Prior-Wandesforde asked Mr Lee if he thought that Singapore could be in danger of losing its lead over other countries in export competitiveness, especially given the recent disappointing growth figures for electronics exports.

Singapore's non-oil domestic exports fell by 5.9 per cent in March, the steepest decline since February last year. Electronic exports shrank for the 14th month in a row.

Mr Lee said that the falling dollar value of electronics exports was likely to be an 'inevitable trend' - partly because 'prices have been crashing' even though the volume had risen - but that other sectors of manufacturing such as pharmaceuticals would provide support. 'Our overall export numbers are not bad - could be better, but they're not bad. I don't think it is a sign of our losing export competitiveness.'

David Conner, chief executive of OCBC Bank, asked Mr Lee what he thought the reaction of other governments in the region to rising food prices and overall inflation was likely to be.

Mr Lee said that 'it would be a pity' if countries closed up their markets 'because it's really the markets that are going to make sure that the food goes where it's needed and there's enough for everybody to eat'.

He said that cooperation among the Asean countries was necessary 'to make sure that we coordinate among ourselves and do not work against one another'.

Long-term problems affecting food supply such as under-investment in research and development would take time to solve, he said. 'We must be prepared to see food prices up for some time.'

Separately, he told Reuters in an interview before the discussion that the Government of Singapore Investment Corp (GIC) would not disclose as much detail about its investment portfolio as Singapore's other state-owned fund, Temasek Holdings, despite pressure from foreign governments.

'GIC and Temasek are different,' he said. 'We do not want to tell people exactly how much we have so it's easier for them to make a run on the Singapore dollar.'

GIC, which invests Singapore's foreign reserves overseas, is believed to be the world's third largest sovereign wealth fund, with an estimated US$330 billion in assets under management, according to Morgan Stanley in February. Unlike Temasek, which began publishing an annual review of its portfolio in 2004 containing consolidated financial statements and its investment returns, GIC reveals only that it manages funds 'in excess of US$100 billion' on behalf of the government and the Monetary Authority of Singapore.

Paulson Says Markets Emerging From Crunch

Source : The Business Times, May 7, 2008

NEW YORK - US Treasury Secretary Henry Paulson said US financial markets are emerging from the credit crunch that many economists believe has pushed the country to the brink of recession, according to The Wall Street Journal.

Mr Paulson predicted there would be further 'bumps along the road', and that it would take 'some months longer' for the market distress to fully dissipate

'I do believe that the worst is likely to be behind us,' Mr Paulson told the newspaper in an interview.

The Journal said his comments appear to be the Bush administration's most optimistic assessment yet about the financial turmoil that began last year with defaults on sub-prime home loans and spread through financial institutions that owned tens of billions of dollars in mortgage-backed securities.

In the interview, however, the Treasury Secretary predicted there would be further 'bumps along the road', and that it would take 'some months longer' for the market distress to fully dissipate. Some financial markets, he said, still aren't fully functioning.

The Journal said Mr Paulson pointed to the Federal Reserve's decision to help prevent the collapse of Bear Stearns and to provide liquidity to other investment banks as 'an inflection point' in the crisis.

The newspaper said Mr Paulson also believes Congress will soon pass two measures he considers critical: one to improve the regulation of Fannie Mae and Freddie Mac, the government-chartered mortgage companies, and another to overhaul the Federal Housing Administration. -- REUTERS

OCBC Q1 Profit Falls 4%, Sees Growth Opportunities

Source : The Business Times, May 7, 2008

Singapore's Oversea-Chinese Banking Corp (OCBC), Southeast Asia's third-largest lender, posted a lower-than-expected 4 per cent fall in first-quarter profit and said it saw growth opportunities in its core markets.

OCBC's earnings reflected strong loan growth in Singapore during the first three months of 2008 thanks to a construction boom in the republic. But its profit was down from a year ago due to sharply lower earnings at its insurance arm.

Core earnings, which exclude one-time gains from the divestment of assets and tax refunds, fell 10 per cent to $460 million

'Our first quarter core earnings showed resilience in spite of volatile global financial markets. We continue to see growth opportunities in our major markets for the remainder of 2008,' chief executive David Conner said in a statement.

OCBC, whose main operations are in Singapore and Malaysia, earned $622 million (US$458 million) in the three months ended March, compared with $647 million a year earlier.

Its net profit beat the $456 million average estimate of six analysts polled by Reuters as it booked a gain of $156 million from the sale of shares in commodities and property firm Straits Trading .

Core earnings, which exclude one-time gains from the divestment of non-core assets and tax refunds, fell 10 per cent to $460 million from $510 million in January-March 2007.

The bank's net interest income rose 26 per cent from a year ago to $638 million, while its loan margin increased to 2.17 per cent from 2.14 per cent at the end of December.

But non-interest income, which includes commissions and fees, fell 26 per cent to $377 million, the bank said.

'Strong growth in net interest income, fee income and foreign exchange income were offset by a significant decline in life assurance profits from Great Eastern Holdings,' OCBC said.

Great Eastern - the largest life insurer in Singapore and Malaysia - reported on Tuesday a 67 per cent fall in net profit to $45 million partly due to marked-to-market losses on its investments. OCBC owns around 87 per cent of Great Eastern.

OCBC's first quarter 2007 net profit was partly boosted by a divestment gain of $90 million from the sale of an office property, and a tax refund of $47 million.

OCBC shares fell 3.1 per cent in morning trade ahead of its results, which were released during the midday market break.

The broader market was off 1.2 per cent.

OCBC shares fell 2.3 per cent in the first quarter this year, compared with a 3.8 per cent decline for larger rivals UOB and a 13 per cent drop for DBS, Singapore's biggest bank by assets. -- REUTERS

Allco Reit To Sell Australia Properties

Source : The Business Times, May 7, 2008

Singapore-listed Allco Commercial Real Estate Investment Trust said on Wednesday that it has appointed sales agents to sell its 50 per cent interests in two Australian properties.

The company said in a statement that it had acquired the two properties for $371.1 million (US$272.4 million). -- REUTERS

Merrill CEO Is 'Bullish On The World'

Source : The Business Times, May 7, 2008

JOHN Thain, the chief executive officer of brokerage and investment banking giant Merrill Lynch, talks to BT's associate editor Vikram Khanna about the crisis on Wall Street, the changes at Merrill and its prospects looking forward.

Mr Thain: Is very optimistic about growth prospects in the region and in particular, in Singapore. Merrill is looking at expanding its wealth management business as new wealth is being created in Asia.

Q: Warren Buffett says the worst of the crisis on Wall Street is over. Do you agree?

A: First, let me say I wouldn't disagree with Warren on anything!

We're through with the sub-prime-related credit problems for the most part. But I still believe the US economy is going to go through a difficult period as a combination of falling home prices, rising food prices, rising energy prices and rising unemployment impacts the consumer and that will impact the real economy. So I still believe we're going to go through at least a couple of difficult quarters, more related to a slowdown driven by the consumer rather than the sub-prime related problems.

Q: How will this slowdown impact financial institutions, particularly Merrill?

A: It won't impact Merrill so much. The next problem area will be those financial institutions which have large exposures to consumer-related debt - home equity loans, auto-loan receivables, credit-card receivables. And those would be primarily the regional banks.

Q: Looking ahead, do you foresee further restructuring of US financial institutions?

A: We've been seeing that. Huge amounts of capital have been raised, and particularly, in the case of investment banks, leverage has been reduced. I think both of those are likely to continue.

Q: Do you foresee Merrill having to raise still more capital?

A: No, I don't. We've raised US$12.8 billion of common and mandatory convertible at the beginning of the year. That was about US$4 billion more than we lost in 2007. And we raised another US$2.7 billion of perpetual preferred. So, right now, our equity capital is US$44 billion, which is just a little under its record high.

Q: You are the first CEO of Merrill who has not been from within Merrill. What are the advantages and disadvantages of being an outsider?

A: I think you have to look at why I decided to come to Merrill and why they offered me the job. It's first the business mix, the strategy of Merrill. It has an excellent strategy - a combination of the world's best wealth management business and a world class investment bank and sales and trading organisation. That strategy is very powerful and makes a lot of sense.

There are great synergies between the wealth management business and the investment banking business. You take a company public, you sell it, the wealth management side can manage the wealth, the wealth management side also has great contacts who can provide new IPO opportunities, new M&A opportunities.

Merrill also has a very strong brand and a very strong culture. And it's a global business; we have a global footprint. The investment banking, sales and trading parts of the business are 60 per cent outside the United States.

So the combination of a very good set of businesses, a global footprint, a very strong brand and a very strong culture was what was attractive to me.

Q: How do you plan to change the corporate culture at Merrill in any way, if at all?

A: The culture is strong and it's a very good culture. The one place where we want to change that is inside some of the sales and trading businesses. There were too many silos where each of the trading desks were focused only on their own P&L and in many cases, were paid only on the basis of their own P&L. We're going to move towards a more company-wide focus. And so, compensation will be based on how well the company does as a whole does. We will also change the risk management culture. I brought in a new person, Noel Donahue, to co-head risk, and risk now reports directly to me. And so, the risk management functions and the focus on risk controls is also a change.

Q: You've worked at Goldman Sachs, where risk management was part of your job as CFO. Goldman has emerged from the credit crisis relatively unscathed. What did it do right that some other investment banks did not do?

A: One of the things Goldman did right was that it made risk management a very senior-level focus. The risk management functions were just as important as the trading functions. So there was a good balance between the two.

Second, the senior management, right up to the CEO, were very hands-on in understanding the business and understanding the risks of the business.

Third, Goldman's compensation philosophy has always been oriented towards the firm as a whole. Those three things enabled them to weather this difficult environment.

Q: How do you respond to the public outcry against the compensation policies of financial institutions, which many people say reward excessive risk taking on the upside, without imposing commensurate penalties on the downside?

A: You have to look at how compensation is done and what form it takes. I believe in employees getting a significant part of compensation in the form of equity. Actually, that's one of the other things we've changed at Merrill; we've increased the proportion of equity in people's compensation. When you give them stock, they participate on both the upside and the downside. And I think that's a very important element in aligning the interests of management with that of shareholders.

Q: Merrill has significant operations across several Asian countries. How do you see the prospects for your Asian operations?

A: The Asian part of our business is the fastest growing and has some of the best opportunities in the world. The wealth that's being created in Asia and the growth in Asian economies fits our business mix perfectly. As new wealth is being created, we want to expand our wealth management business. As economies grow, companies need access to capital, countries have infrastructure needs which need to be addressed, and that creates a lot of investment banking opportunities and sales and trading opportunities. So I am very optimistic about the growth prospects in Asia and in particular, here in Singapore.

Q: Which Asian countries are you especially focusing on at this time?

A: Certainly, Singapore is one. India is second and China is third. Singapore is one of our major hubs in the region. We also have a very strong presence in India. And China is a big focus because of its growth. We have strong presence there in terms of bringing Chinese companies to the international markets. But we don't have the licences we need to operate in the domestic market in China, so that's an important focus - that we get those licences.

Q: Merrill's advertising slogan is 'Bullish on America'. Are you bullish on America?

A: We're bullish on the world, and on the opportunities for both our wealth management business and our investment banking business. We are a global company, not just a US company, and I think there are great opportunities around the world.

Coping In An Age Of Uncertainty

Source : The Business Times, May 7, 2008

SO even accountants and auditors in Singapore are bearish about the economic outlook, joining a list that includes manufacturers and those in the services sector - just about most in the business community, it's safe to say. As number-crunchers with typically the early eye on the quarter's figures, accountants and auditors get a snapshot of the business climate, even if it's just within the microcosm of a company or two (their own or their clients). And a recent poll by the profession has found Certified Public Accountants (CPAs) to be less than upbeat about the economy and business in the quarters ahead; fairly anxious, in fact, about the US downturn and all the attendant uncertainty. That seems to be the prevailing sentiment all round.

Uncertainty is indeed the order of the day, even in today's relative calm and stability. The global financial markets are thankfully free of mayhem for now, but turmoil and upheaval - as the last several bouts in recent years remind - are always a trigger event away. The worst appears to be over in the prolonged credit crisis but already the doomsayers point to the flipside, saying that a restoration of order in the credit markets could also spell the premature end of reform efforts. For now, however, greater uncertainty lurks in the real economy, where fears and worries about a global downturn, led by a US recession, have been feeding pessimism in the business world and among consumers, even before the first negative numbers appear in the latest US statistics. That is not to dismiss the very real concerns about a US downturn, with resulting decreases in American consumption and investment, and knock-on effects on Asian exports; but economic uncertainty tends to breed bearishness (rather than bullishness, for one) and sentiment and expectations guide many a business investment (or consumer spending) decision. That leads, in turn, to a further decline in business and economic activity - in the US and in the Asian economies. And then there's the inflationary cost spiral and the surge in commodity and food prices in recent months. But while the external climate has been cloudy and choppy, things on the domestic front in Singapore have seemed healthy enough, with robust economic figures in the first quarter amid rising inflation. With such mixed signals, little wonder that the man in the street, including business folks, is left feeling even more uncertain about the economic outlook.

The policymakers here have spelt out the best and worst-case scenarios - all of which hinge heavily on the severity of the US downturn - and the prognosis is good. Brace for a rough ride, to be sure, but barring a full-blown economic storm, domestic fundamentals and regional support will prevent the Singapore economy from crashing this year, the central bank says. And a downturn that stretches into 2009 likely still means, in Singapore's context, growth at the lower end of the trend 4-6 per cent range. Awareness of the risks ahead is good planning, but excessive pessimism could sometimes just become self-fulfilling.

Here Comes The Sun

Source : TODAY, Wednesday, May 7, 2008

40 per cent funding for solar technologies

EVEN as solar energy has been identified as the main focus of Singapore's clean energy industry, there were no incentives dedicated to enticing businesses to hop onto the solar power bandwagon – until now, that is.

The Economic Development Board (EDB) yesterday unveiled the details of the Solar Capability Scheme (SCS), about two months after Senior Minister of State for Trade and Industry Mr S Iswaran first mentioned it in Parliament.

Owners of new private buildings — commercial, industrial and residential — will now be able to tap into the $20 million carrot, the latest programme introduced by the Clean Energy Programme Office (Cepo), to offset up to 40 per cent or $1 million of solar technologies installation works. But to qualify, these buildings will have to achieve the Building and Construction Authority's Green Mark Gold standard. Existing buildings undergoing major retrofitting will be also considered on a case-by-case basis.

Seventy per cent of the grant will be reimbursed from the start of the project. The rest will be disbursed two years after the solar energy system becomes operational, provided it meets minimum electricity output requirements.

Before the SCS, only public sector buildings and facilities here enjoyed incentives to develop and test clean energy solutions under Cepo's $17-million Clean Energy Research and Test-bedding programme.

Speaking at the Semicon Singapore conference, EDB managing director Ko Kheng Hwa described the scheme as "very attractive", saying he hoped it would support about 100 projects "within the next few years". As awareness of solar energy technology seeps into the industry, interest and adoption rate should grow, he added.

The long-term goal, however, is to "enlarge the 'practice field'" so as to build up industry expertise in incorporating solar energy technology into design and engineering, noted Mr Ko, who is Cepo's executive director.

More importantly, the skills set will be "exportable" as demand for eco-friendly developments grow globally. "We believe that this scheme will go a long way in building up critical capabilities among various players in the solar energy ecosystem, including system integrators, architects, engineers and developers," he added.

Asked why a scheme to urge the adoption of solar energy technology emerged only now although the Government had announced a $350-million fund for clean energy research and development last March, Mr Ko explained that the clean energy initiative is only about a year old and at this early stage, it was already a "significant step".

But with solar-derived electricity costing two to three times more than normal electricity now, would the scheme entice businesses to make the switch?

Mr Christophe Inglin, managing director of Phoenix Solar, said the financial support will "make a big difference" when companies consider adopting green technologies. It will also complement the Green Mark Incentive Scheme — where building owners are rewarded for environmentally friendly practices — nicely, he added.

Meanwhile, the Clean Energy International Advisory Panel will sit for its first meeting here in June, said EDB. It was formed to advise Cepo on the overall development of the clean energy industry in Singapore.

If The Economy Turns Sour ...

Source : TODAY, Wednesday, May 7, 2008

PM: We are ready and able to provide aid, stimulus

What if the world economy nosedives and has trouble getting back on its feet? What if companies slash jobs across the board? What if Singapore takes a hard hit?

For every worst-case "what if" on the economic radar, the Government assures it is on guard with a full arsenal.

"We are watching and waiting. And I think we are in a position to deal with anything which comes along," Prime Minister Lee Hsien Loong said yesterday at a dialogue session attended by some 120 top executives from the financial industry, which has become a major employer in Singapore and is gripped by a global credit crisis.

He was the first Singapore leader to raise the possibility of providing aid and economic injections should a downturn occur. Just last week, he had warned of a slowdown that could "last until next year", depending on whether the United States downturn is shaped like a "V", "U" or, the most dire scenario, an "L".

Now, it seems the giant economy's downturn could even come in the form of a "W", where new problems arise just as things looked like they were improving, Mr Lee said yesterday evening.

Come what may, his Government will be ready. "If things do get bad, we are not without recourse because we have the resources, we have the wherewithal," he said in his opening remarks on the topic, "Turbulent times: How will Singapore cope?", a dialogue organised by company Thomson Reuters.

Sketching broad strokes of the possible courses of action, the PM said if the economy needed a leg-up from the fiscal policy side, which includes cutting taxes and boosting public spending, the Government could do that.

If directed assistance is needed to help the low-income because unemployment shoots up, "we have the means to do that", he assured. "And if I have to stimulate the economy or some sector of the economy, I can do that too."

For instance, he said, if the domestic construction industry slackens, the Government can bring on projects, which it had temporarily suspended to prevent red-hot demand from further inflating prices of raw materials.

On the fight against rising inflation, he said policy-makers were doing two things: Giving "targeted assistance" to low-income groups and adopting an "appropriate" monetary policy to allow the Singapore dollar to strengthen.

Aside from immediate measures, however, Mr Lee said the nation had to continue with longer-term initiatives such as education, developing new capabilities and attracting mega projects like the Formula One race, which create economic spinoffs.

The range of measures gives Mr Lee cause for confidence — "because it's not just the economics of it, but also the social cohesion, also the political will and the resilience of the people."

It was precisely on socio-political issues, besides those related to the economy, that many in the high-level audience were raring to ask. Topics ranged from political renewal to why the Olympic torch did not pass through Singapore and the US elections.

One question touched on the possibility of foreigners making up 40 to 50 per cent of the Singapore population, based on the planning projection that there may be as many as 6.5 million people on the island in 40 to 50 years. How does the Government intend to manage such a situation?

Mr Lee replied that this "difficult issue", which countries such as America and those in Europe have had trouble tackling, requires "delicate handling".

In Singapore, the No 1 priority is: "Let's get more Singaporean babies". To do that, policymakers are "actively studying what more we need to do".

It is also necessary to remain open to foreigners, particularly those with skills, he said, while persuading Singaporeans to understand that the foreign presence is for the nation's long-term survival.

Asked why there is urgency to groom a new generation of political leaders, Mr Lee said developing a "deep bench" way in advance ensures that when it is time for a change of guard, the transition "appears natural" when in fact a significant transformation had taken place.

This "uniquely Singaporean approach" is due to the small, local population, he explained.

In an earlier interview with Reuters, Mr Lee was asked about letting foreigners buy major stakes in Singapore banks. He said he welcomed foreign investment as long as the banks remained under local control, because the lenders are a "substantial part of our financial system".

Mr Lee also said the Government of Singapore Investment Corp (GIC) would not be as open as Temasek Holdings in disclosing details about its portfolio. "GIC and Temasek are different," he said. "We do not want to tell people exactly how much we have so it's easier for them to make a run on the Singapore dollar."

Merrill CEO Worried About US Banks' Next Problem Area

Source : The Business Times, May 06, 2008

The sub- prime mortgage-related problems that have roiled the credit markets for several months are mostly over, according to Merrill Lynch CEO John Thain, but US financial institutions with large consumer-related exposures will be 'the next problem area' as the US economy weakens.

In an interview with BT, Mr Thain pointed out that Merrill Lynch - the world's largest brokerage firm and a major investment bank - would not need to raise any additional capital and is in the process of revamping its risk management and employee compensation systems.

And with 60 per cent of its investment banking and sales and trading business outside the US, Merrill remains bullish, particularly on Asia, which 'has some of the best opportunities in the world'.

Mr Thain, formerly the head of the New York Stock Exchange, who took over as CEO of Merrill Lynch last November, said that although the sub-prime-related credit woes had largely passed, the US economy 'will go through a difficult period' because of falling home prices, rising food and energy prices, and rising unemployment.

'We're going to go through at least a couple of difficult quarters, more related to a slowdown driven by the consumer rather than the sub-prime-related problems,' he said.

This slowdown 'won't impact Merrill so much', he added. 'The next problem area will be those financial institutions who have large exposures to consumer-related debt - home equity loans, auto-loan receivables, credit-card receivables. And they would be primarily regional US banks.'

Merrill Lynch, which was badly hit by the US sub-prime crisis in the second half of 2007, has raised a total of US$15.5 billion in new capital since the beginning of this year. Singapore's Temasek Holdings was among the investors in Merrill, and holds a 9.4 per cent stake.

Mr Thain said he did not foresee Merrill having to raise any further capital. 'Right now, our equity capital is US$44 billion, which is just a little under its record high,' he said.

Merrill's stock price - which had been pummelled down from US$94 on May 18 last year to a low of just under US$40 on March 28 this year - has since recovered to US$52.71 at the close of trading last Friday.

Mr Thain indicated that among the changes he is making at Merrill since taking over the helm is a revamp of both the risk management and compensation systems. 'We will change the risk management culture,' he said. 'Risk now reports directly to me.'

In the area of compensation, he pointed out: 'There were too many silos, where each of the trading desks was focused only on their own P&L (profit and loss) and in many cases were paid only on the basis of their own P&L. We're going to move towards a more company-wide focus. And so compensation will be based on how well the company as a whole does.'

Equity will also make up a higher proportion of employee compensation, he said. 'When you give people stock, they participate on both the upside and the downside. And that's a very important element in aligning the interests of management and shareholders.'

Mr Thain, who is in Singapore en route to India, was bullish on Merrill's Asian business. 'The Asian part of our business is the fastest growing and has some of the best opportunities in the world,' he said.

He cited Singapore, India and China as the three Asian countries on which Merrill is most focused.

UOB's Profit Up 2%, But It Warns Loans Growth Could Slow

Source : The Straits Times, May 07, 2008

UNITED Overseas Bank (UOB) has put United States sub-prime fears to rest, but warned of 'challenging times' ahead as the demand for loans slows.

The bank, which reported a moderate rise in first-quarter profits yesterday, said 'market volatilities' were having an effect on its business.

But chief executive Wee Ee Cheong said there are 'always opportunities' for sustainable growth.

The bank enjoyed double-digit loans growth in the three months ended March 31, but warned that loan expansion could be dampened this year.

Its 2.1 per cent rise in first-quarter net profit to $529 million was close to the average forecast of $522 million from six analysts polled by Reuters.

Earnings per share at the end of the first quarter were $1.38, up from $1.31 three months ago. Net asset value per share was $10.73, a 1.6 per cent drop from $10.91 at the end of December last year.

The bank also appeared to have put US sub-prime related issues behind it. It took $43 million of fresh provisions for credit instruments, in view of the 'continued weakness' in the market for investments linked to dodgy mortgages in the US.

This provision, together with others UOB made earlier, would provide fully for its exposure to such investments, known as collateralised debt obligations (CDOs).

Some of UOB's CDO investments have matured, so its total investment in such debt has been pared to $268 million.

The bank's net interest income continued to grow strongly, rising 11.8 per cent to $852 million from a year earlier, and up 14.6 per cent from the fourth quarter.

UOB posted a 19.4 per cent expansion in loans to $94.4 billion from a year ago. This lagged behind the local bank industry's average loans growth of 24 per cent in the first quarter.

But analysts said the 19 per cent loans growth showed that UOB was still benefiting from its strong market position in lending to small and medium-sized enterprises, construction and infrastructure firms.

Banks in Singapore have been raising interest rates in response to the continuing tightening of liquidity and conditions in credit markets.

UOB pushed up its interest margin by 0.26 of a percentage point to 2.2 per cent, from 1.94 per cent in the fourth quarter.

Its fee income dropped amid volatile market conditions, which analysts expect to continue into the second half of this year.

This partly accounted for non-interest income, which includes commissions and fees, dropping 4.1 per cent to $414 million.

UOB blamed the decline mainly on losses on the market value of its investment portfolio, as well as lower fee income from fund management and investment-related activities. This was partially offset by higher fees from loan-related activities, 'reflecting the strong performance of the regional economies'.

UOB shares yesterday closed four cents higher at $21.40. It has gained 39 per cent since hitting a low of $15.38 on Jan 22.

DBS Q1 Net Down 2%, Less-Than-Feared

Source : Reuters, May 07, 2008

DBS Group Holdings, Singapore's biggest bank by assets, posted a less-than-feared 2 per cent drop in quarterly profit, as strong loan growth partially offset the impact of lower fees and credit-related writedowns.

The bank on Wednesday reported January-March net profit of $603 million from $617 million a year ago.

Analysts had predicted net profit of $566 million, according to an average forecast from six analysts polled.

Former Citibanker Richard Stanley, who took charge as DBS's new chief executive last week, will brief the media and analysts for the first time on Wednesday during the lunch hour.

The results came after United Overseas Bank, Singapore's second-biggest bank, posted a 2.1 per cent rise in quarterly profit, broadly in line with market forecasts, but warned that loan growth could slow this year.

The Singapore-based lender, in which state investor Temasek Holdings has a 28 per cent stake, derives about 90 per cent of its profit from Singapore and Hong Kong.

DBS shares dropped 13 per cent in the first quarter, underperforming rivals UOB, whose shares dropped 3.8 per cent in the same period, and third-ranked OCBC, which saw a 2.3 per cent fall in its share price.

$20m Carrot For Building Owners To Go Solar

Source : The Straits Times, May 07, 2008

TAPPING the sun's energy has just been made easier for building owners.

The Government yesterday announced details of a $20 million scheme that could see as many as 100 solar projects sprout around Singapore in the next two years.

The carrot being dangled in front of private developers and building owners is a subsidy that trims the cost of a solar project by 30 per cent to 40 per cent.

The grant is capped at $1 million for each project.

Solar projects usually cost from $100,000 to a few million dollars, depending on the scale and technology used.

'This is a very attractive offer... We expect keen interest from the industry,' said Economic Development Board (EDB) managing director Ko Kheng Hwa, who unveiled the initiative yesterday at the annual Semicon Singapore conference at Suntec City.

The top priority of the Solar Capability Scheme, said Mr Ko, is to build up a critical mass of projects so as to develop manpower capabilities in Singapore's fledgling solar industry.

'We are focusing on boosting the demand the local professionals will learn how to design good solar systems.'

The scheme, first mooted by Senior Minister of State for Trade and Industry S. Iswaran in Parliament in March, is the Government's latest answer to increasing calls for incentives to kick-start the solar industry.

The sector has attracted headline investments in the last year, including a $6.3 billion giant solar manufacturing plant that Norwegian firm Renewable Energy Corp is building.

'This scheme will go a long way in building up critical capabilities among various players in the solar energy ecosystem,' said Mr Ko.

It starts with immediate effect and applies to new private buildings that meet a minimum Green Mark Gold standard, according to the EDB.

The Green Mark is a rating system developed by the Building and Construction Authority that rates buildings for their environmental impact and performance.

Developers like City Developments have already incorporated solar systems into new condos, which have been given the Green Mark stamp of approval.

Some factors that will determine the grant size include innovation, design, effectiveness and skills development, said Mr Ko.

The EDB also announced yesterday a new international advisory panel for clean energy that will hold its first meeting next month.

Industry players like Mr Christophe Inglin, the managing director of solar firm Phoenix Solar, hailed the new scheme, saying: 'It's the best news the industry has received for some time.

'We've seen an increase in interest in solar systems. Hopefully, this boost will convince clients that solar is the way to go.'


'This scheme will go a long way in building up critical capabilities among various players in the solar energy ecosystem.'

MR KO KHENG HWA, EDB's managing director, on the scheme

Jurong Lake Plans For Public Viewing

Source : My Paper, Wed, May 07, 2008

WE REFER to Ms He Xiao Lu's letter 'Use existing resources to create Jurong character' (my paper, April 25) on how the draft plans for the Jurong Lake District can tap on the existing attributes in the area.

We agree with Ms He that planning for the Jurong Lake District presents opportunities for planners to capitalise on the assets in the area.

The draft plans for the Jurong Lake District have, in fact, incorporated the education- based concept that Ms He has suggested, such as the proposal to have four or five new edutainment or nature-based attractions around Jurong Lake, targeted at families with young children.

The lake is also currently being improved to allow water- based activities.

In addition, the new Science Centre, which will be located next to the Chinese Garden MRT station and the lake, will be able to take advantage of the lake and the surrounding green spaces to extend learning experiences beyond the physical confines of the building.

The plans for the Jurong Lake District will be exhibited at the URA Centre in late May 2008 as part of the Draft Master Plan 2008 exhibition.

We welcome the public to visit the exhibition to view the plans and give us their feedback and suggestions.

We thank Ms He for her feedback.

Mr Lim Eng Hwee
Director (Physical Planning)
Urban Redevelopment Authority

Time To Tweak En Bloc Rules

Source : My Paper, Wed, May 07, 2008

IT IS interesting to read about the recent en bloc unhappiness despite the new rulings implemented in 2007. Maybe it is time for the guidelines to be enhanced further.

Before the en bloc committee is formed, a poll should be conducted on each registered resident. If less than 100 per cent is obtained, the exercise should be scrapped for the next three to five years.

Mr David Soh Poh Huat

DBS Q1 Profit Slips, Outlook Murky

Source : The Business Times, May 7, 2008

DBS Group, South-east Asia's biggest bank by assets, posted a smaller-than-expected two per cent drop in quarterly profit after strong loan growth helped to ease credit-related writedowns.

Analysts warned that more difficulties lie ahead in the second half when a looming United States recession catches up with Asia's robust economies, putting a brake on earnings momentum.

DBS took a previously announced $86 million (US$63.33 million) of writedowns in the first quarter on complex derivatives exposed to risky debt, which pushed its trading income into the red

'It's all driven by the macro environment for DBS,' said Mr Matthew Wilson, an analyst at Morgan Stanley. 'I'm cautious on the United States because a recession there will affect Singapore.' Mr Wilson warned the booming Singapore property market, which had boosted loan growth for the lender, was also peaking.

Most analysts expect Singapore's loan growth to slow to 12 to 13 per cent this year after it expanded by 20 per cent in 2007.

DBS earned January-March net profit of $603 million, down from $617 million a year ago. Analysts had predicted net profit of $566 million, according to an average forecast from six analysts polled by Reuters.

DBS shares were almost flat at $20.50 at 9.25am Singapore time after rising to a 2008 high of $20.80.

The result on Wednesday came after United Overseas Bank, Singapore's second-biggest bank, posted a 2.1 per cent rise in quarterly profit, broadly in line with market forecasts, but warned that loan growth could slow this year. Smaller rival Oversea-Chinese Banking Corp (OCBC) reports later on Wednesday.

Writedown, Visa gain
DBS, in which state investor Temasek has a 28 per cent stake, took a previously announced $86 million of writedowns in the first quarter on complex derivatives exposed to risky debt, which pushed its trading income into the red.

But the writedown was much lower than last year when it wrote down $270 million on structured instruments, the bulk in the fourth quarter, including debt exposed to the collapsing US sub-prime mortgage market.

Asian banks, including DBS, have been spared from the worst of the sub-prime-related losses that have hit global peers such as UBS, Bear Stearns and Merrill Lynch.

However a nine per cent rise in interest income, boosted by 21 per cent growth in loans, and an unexpected $53 million gain from its investment in Visa's initial public offering, limited the losses.

January-March fee income rose 14 per cent from a year earlier, but fell seven per cent from the previous quarter.

Stockbroking fees dropped six per cent amid volatile markets, while wealth management services fees declined 15 per cent.

Former Citibanker Richard Stanley, who took charge as DBS's new chief executive last week, will brief the media and analysts for the first time later on Wednesday.

Analysts are looking for hints on how Mr Stanley plans to grow the bank's Asian business beyond its core markets of Singapore and Hong Kong, from where it derives about 90 per cent of its earnings.

Chairman Koh Boon Hwee said DBS would continue to grow its customer franchise and increase business volumes as it seeks expansion in Vietnam, India and Taiwan.

DBS shares dropped 13 per cent in the first quarter, underperforming its rivals. UOB dropped 3.8 per cent and third-ranked OCBC fell 2.3 per cent.

DBS declared a dividend of $0.20 per share, similar to the previous quarter. -- REUTERS

Parkway Life REIT Beats Forecasts With Gross Revenue Of S$11.9m

Source : Channel NewsAsia, 06 May 2008

Mainboard-listed Parkway Life REIT has booked a distributable income of S$9.8 million for the first quarter.

That works out to a distribution per unit (DPU) of 1.62 cents.

All in, gross revenue hit S$11.9m on the back of sustained demand for private healthcare.

The REIT's portfolio includes Mount Elizabeth Hospital, Gleneagles Hospital and East Shore Hospital. - CNA/ir

Accountants Not Confident About Economic Outlook For 2008

Source : Channel NewsAsia, 06 May 2008

Accountants think that Singapore is up for challenges this year, according to a survey by the Institute of Certified Public Accountants of Singapore (ICPAS).

64 percent of the respondents said their outlook for the economy ranged from neutral to pessimistic.

Inflationary pressure was one of the top reasons for the dim economic outlook among Singapore accountants, with 90 percent of the respondents placing it as their most worrying factor.

Other factors included the credit market turmoil and the cost of labour. But not all were negative.

ICPAS said with the upcoming Formula One, integrated resorts and Youth Olympic Games, there are certain sectors which would remain strong.

Ernest Kan Yaw Kiong, Vice President of ICPAS, said: "There are areas that we believe will grow - such as construction, restaurants, business services as well as the hospitality industry.

"So if you look at all this in a proper context, you can see that while we have some economic turbulence going forward, (we can afford to be) optimistic because we have all these economic activities coming up."

On the other hand, the outlook for manufacturing, wholesale, retail, transport and storage is slipping. Employment is also not expected to grow.

Nonetheless, ICPAS said Singapore's fundamentals remain solid.

Mr Kan said: "I believe we have very strong fundamentals. Even with the inflationary pressure, steps that the government has taken are very, very positive. As we go through this economic turbulence, things will work out better in time to come."

More than 200 respondents took part in the ICPAS Business Confidence Survey 2008. - CNA/so

Developers May Get Grants Of Up To S$1m When Installing Panels

Source : Channel NewsAsia, 06 May 2008

The Economic Development Board (EDB) has unveiled more details of the Solar Capability Scheme, aimed at spurring demand for clean technology and building up expertise in the new industry.

The S$20 million scheme was first announced in Parliament in April by Senior Minister of State for Trade and Industry, S Iswaran.

The EDB said it expects to fund up to 100 projects.

Under the scheme, new buildings need a minimum Green Mark Gold standard to qualify for a 30 to 40 per cent grant, while existing buildings will be assessed on a case by case basis.

Ko Kheng Hwa, Managing Director, Economic Development Board, said: "We expect interest, and this interest should grow as greater awareness seeps into the industry. Today, the very early adopters are already implementing some form of solar energy systems.

"So with this scheme, we are partially offsetting their initial capital investment, so we should expect that this will be welcomed by the developers and building owners."

Besides meeting the required standard, other criteria include the innovative application of solar technologies and the aesthetics of the panels as part of the buildings and solar system design.

A seven-member Clean Energy International Advisory Panel has also been formed to help spur industries towards clean energy.

Led by EDB's Chairman Lim Siong Guan, the panel will meet for the first time in June. It is tasked to give advice on the overall development of the clean energy industry in Singapore. - CNA/vm

UOB's Q1 Net Profit Up 2.1% To S$529m

Source : Channel NewsAsia, 06 May 2008

Singapore's United Overseas Bank Group (UOB) said Tuesday its net profit in the first quarter rose an annual 2.1 percent, boosted by loan growth.

Net profit rose to S$529 million from S$518 million in the first quarter of last year, it said.

"The Group's core banking business remained strong," UOB said in a statement.

Net interest income grew 11.8 percent to S$852 million as loan growth helped to offset a 4.1 percent drop in non-interest income, which fell to S$414 million, the bank said.

Analysts expect this to continue into the coming quarters, and they also expect other weaknesses to reveal themselves on the balance sheet making for a tougher time ahead.

Ritesh Maheshwari, Senior Director, Asia, Standard & Poor's Ratings Services, said: "The same trend of trading income decline, wealth management will continue. Maybe in second quarter we'll a see more pronounced effect. Also expecting pressure on interest margin, more visible in second quarter in line with decline in SIBOR. That should exert some pressure."

Lower trading and investment income was partially offset by higher fee and commission income, reflecting strong performance of the regional economies, it said.

Investment in collateralised debt obligations (CDOs) declined further to S$268 million, including S$82 million in asset-backed securities.

CDOs are securities backed by a range of assets including bonds, loans and their derivatives, including corporate loans, high-grade mortgages, sub-prime mortgages, car loans and credit card debt.

World financial markets have been battered since last August by fallout from a crisis in the US sub-prime, or high-risk, loan sector which forced commercial banks to tighten lending criteria leading to a credit crunch which spread to threaten the global economy.

Banks around the world suffered multi-billion-dollar losses linked to sub-prime loans given to US homebuyers with risky credit histories.

UOB said impairment charges increased by 1.8 percent to S$89 million, largely attributed to provision for CDOs. It said it has fully provided for its asset-backed securities and CDOs.

"Amidst current market volatilities, we expect loans growth to moderate this year. But there are always opportunities during challenging times," said Wee Ee Cheong, UOB Group's deputy chairman and chief executive officer.

According to some analysts, UOB's focus on loans may pose some limitations to earnings growth.

Mr Ritesh Maheswari continued: "The difference is that UOB, unlike DBS doesn't have that high low-cost deposits. And as compared to OCBC, it doesn't have non-banking business as much as OCBC has in terms of insurance. This will limit options that UOB has and it will have only strength as loan-related business."

UOB subsidiaries operate in Singapore, Malaysia, Indonesia, Thailand and China. - AFP/CNA/ir/vm

PM Lee Says Singapore Will Continue To Develop Financial Sector

Source : Channel NewsAsia, 06 May 2008

Prime Minister Lee Hsien Loong said Singapore will continue to develop the financial sector as more activities are being moved to the city-state.

Mr Lee, who was speaking to 120 bankers at the hour-long Thomson Reuters Dialogue on Tuesday, added that more would be done to ease capacity constraints, such as the crunch in office space and accommodation.

The financial sector in Singapore grew by some 17.5 percent last year. But the prime minister said Singapore needs to level up to cope with this upsurge in activities.

He said: "We are running up against constraints because we don't have enough office space, we don't have enough accommodation and rentals have gone up.

"We don't have enough schools for the expatriates' children. (But) we are addressing this – we are helping the United World College to build a new school in Tampines, and they told me that places are already fully taken."

Mr Lee added that rentals are likely to come down, with more offices and apartments coming on stream in the next few years.

On the whole, he is optimistic that Singapore will be able to weather the economic slowdown in the US.

Responding to a question, Mr Lee said while the value of export in the electronics sector is down, the volume has increased and there are other sectors that are doing well within the manufacturing sector, such as the pharmaceutical and petrochemical businesses.

On the issue of inflation, the prime minister said food prices will continue to rise for some time as consumption continues to increase.

Another reason for the price hike is an under-investment in the agricultural sector previously. This shortage in food supply has resulted in hoarding and some countries have limited the export of rice.

Mr Lee said he hopes ASEAN member countries can coordinate efforts and not work against one another so as to ensure that rice gets to the people.

The topic of foreign talent was also raised at the dialogue session. Mr Lee said that like London and New York, Singapore needs to tap on a range of expertise from all over the world.

"We are not only a city, we are a country. We have to have a hard core of Singaporeans so that the character of the place remains Singaporean, while being cosmopolitan," he said.

As for leadership renewal, Mr Lee said Singapore needs to keep it contestable while focusing on building a good team that can meet future challenges and find new ways of engaging the population. - CNA/so

Beach Rd Building Sold For $70m

Source : The Business Times, May 7, 2008

Hirsch Bedner and Irish private equity firm turning asset into boutique offices

AN Irish private equity firm and renowned international interior design firm Hirsch Bedner Associates have bought 700 Beach Road, currently a small office, home office development named In-City Lofts, for a total $70 million.

The duo will pump in a further $3.5 million to upgrade the eight-storey building and reposition it as a boutique office block.

700 Beach: The total investment of $73.5m works out to $1,097 psf of the enlarged total net lettable area

The building has 8,500 to 12,000 sq ft floor plates, 4.5-metre ceiling heights and a roof terrace with a full-sized lap pool and gym facilities. When the refurbishment is completed in August this year, the property - located between Golden Mile Tower and Golden Mile Complex - will be renamed 700 Beach.

The spruce-up will increase the building's existing net lettable area by about 5,000 sq ft to 67,000 sq ft - of which 12,000 sq ft will be owned by Hirsch Bedner and 55,000 sq ft by Fine Grain Property Consortium (Singapore) Pte Ltd.

The all-in investment of $73.5 million by the two parties works out to $1,097 per square foot of the enlarged total net lettable area. Hirsch Bedner has taken about one-and-a-half floors while Fine Grain has bought the remaining six-and-a-half levels.

The site's lease was extended to 99 years starting April 2004, after the building was completed.

The interior design process of the refurbishment for the entire building is being handled by Hirsch Bedner, which will also move into the space it has bought. This will be the Los Angeles-based firm's regional office, housing its 80-strong design team.

Fine Grain has appointed Jones Lang LaSalle to lease its space in the building. 'The gross monthly per square foot asking rent is in the high single-digit range and we're targeting MNCs who're sensitive to high office rents in the CBD,' says JLL regional director and head of markets Chris Archibold. JLL is in talks with three potential tenants for areas of various sizes, Mr Archibold added.

Assuming an average rent in the high-single digit range, the net property yield would be about 8 per cent, analysts say.

Fine Grain is 65 per cent controlled by Ireland-based investors led by Ronald Bolger, Singapore's Honorary Consul General in Ireland and former managing partner of KPMG Ireland.

The other 35 per cent is controlled by Singapore- based investors led by Colin MacDonald and Wan Fook Kong. (Mr MacDonald is also managing director of McCraic Holdings, owner of Molly Malone's Irish pub and BQ Bar). Mr MacDonald, his brother Alastair (a chartered accountant), Mr Bolger and Mr Wan are directors of Fine Grain.

700 Beach Road is Fine Grain's first property acquisition in Singapore and the firm has allocated about $70-80 million more for further property purchases here in the next six months or so. 'We're targeting undervalued assets, overlooked by investors perhaps because of the properties' current use or the way they're being managed. We can refurbish and reposition such assets and seek to add value to existing buildings rather than build something from scratch,' says Mr MacDonald, who is also Fine Grain's CEO.

Fine Grain's portion of the acquisition will be funded by 70 per cent debt, provided by Munich-based Hypo Real Estate Group.

700 Beach Road was sold by In-Space Pte Ltd, whose shareholders include Wee Chwee Heng of Kumpulan Akitek.

S'pore Ousting HK As Top Millionaire Hub

Source : The Business Times, May 7, 2008

China seen to be 3rd richest country by 2017: study

Singapore is expected to pull ahead of Hong Kong as home to the highest concentration of millionaires over the next decade, sealing its reputation as a wealth centre not just in Asia but worldwide.

And while the US and Japan should remain the top two largest global economies, emerging markets such as China, India, Russia and Brazil will make their presence felt more strongly.

Now ranked seventh in terms of total net worth, China will grab third place by 2017, bypassing several G7 countries to become the third-richest country, while India is expected to make its debut in the top 10 list at No 8. Russia and Brazil will also display significant growth, moving up from 19th to 11th place and 15th to 12th place respectively.

With the Economist Intelligence Unit, Barclays Wealth released a report yesterday that forecasts the evolution of the level and distribution of household wealth in 50 countries between 2007 and 2017. Household wealth was measured using three components - financial holdings such as cash and other liquid assets, non-financial holdings such as property, and an aggregate measure that combined the two.

Last year, Singapore trailed Hong Kong in highest wealth density, with 23.3 per cent of residents having wealth of more than US$1 million. But by 2017, Singapore is expected to see this figure grow to 40.7 per cent - some 436,000 households - in comparison to Hong Kong's predicted 39.4 per cent.

According to the report, countries with the highest percentage of dollar millionaires tend to be small, densely populated financial centres such as Singapore and Switzerland.

In addition, the study revealed that the disproportionate distribution of wealth is expected to narrow as the concentration of wealthy households in Singapore, with US$3 million and US$5 million, is on an upward trend. Households with wealth of US$3 million will more than double from the current 5.1 per cent to 12.5 per cent, while those with US$5 million will almost triple from 2.1 per cent to 6 per cent.

Barclays Wealth chief executive for Asia-Pacific, Didier von Daeniken, pointed to Singapore's recent efforts to shift its focus from manufacturing towards technology and financial services. In addition, the opening up of previously protected sectors, like financial services, and bilateral trade agreements serve as an impetus to garner foreign direct investment.

For China, wealth creation has stemmed largely from the stock market and real estate. Citing figures from Ernst & Young, the report said 464 IPOs were launched in China over the past three years, raising US$134 billion. As the country's economy continues to expand, the average net worth per household is expected to quadruple, from US$18,000 in 2007 to US$74,000 10 years later.

'Asia now represents 25 per cent of HNWI individual wealth globally but only about 10 per cent of the income of the major private banks,' said Mr Daeniken. 'Growth for private banks can come from two areas - more penetration of existing wealth and more wealth being created.'

In Asia, Barclays clients are typically entrepreneurs, a trend that is expected to remain in the future.