Foreign banks cutting jobs here

Foreign banks in Singapore may be reluctant to disclose numbers but industry observers note that jobs are being cut at these lenders.

Mr Gary Lai, managing director of recruitment consultancy Charterhouse, said most of the banks that had reduced staffing here had done so to consolidate operations in countries like the Philippines or India. 

"So while you may have one person that they let go here, they might be hiring one more in a lower-cost country," he said.

Foreign banks and financial institutions like Credit Suisse, Macquarie Group, Bank of America Nomura Holdings and Daiwa Securities are some of those that have retrenched staff in Asia recently. 

Reuters also reported last week that South Africa's Standard Bank had cut three jobs at its oil trading desk in Singapore.

Still, Mr Lai said that the job losses in Singapore were not significant compared to 2008 and 2009, when markets were hit by the collapse of Lehman Brothers.

Still, with no quick solution to the euro zone debt crisis, banks are likely to scale back operations - and job cuts are likely to be in the investment banking sector.

Mr Lai pointed out that companies like Daiwa have big trading arms as "they've been trying to beef up their investment portfolio". 

The job outlook at Singapore banks appears to be more secure.

Mr Leng Seng Choon, co-head of research at DMG, said the bulk of the earnings for local banks came from interest income. 

"For that reason, I think the (Singapore) banks will continue to keep the headcount at a level that is suitable for their operations," he said.

Source: Today – 9 November 2011

Singapore’s economy likely to be buoyed by global recovery in 2010

Source : Channel NewsAsia – 21 Dec 2009

Singapore’s economy is expected to revert to positive growth next year, thanks to the global recovery.

According to some economists, growth could even surpass the government’s estimates for 2010. They are looking at GDP growth of more than 5 per cent, compared to the government’s current forecast of a 3 to 5 per cent growth.

This follows 2009’s roller coaster ride, where the economy took a beating in the early part of the year before recovering in the second half.

Export-dependent Singapore was among the first in Asia to fall into recession towards the end of 2008. The economy contracted by 14.6 per cent on-quarter in the first quarter of 2009, following a decline of 16.4 per cent in the previous three months. Then it took a sharp turn upwards, catching the markets by surprise.

David Cohen, director of Asian economic forecasting, Action Economics, said: “The rebound has been better than expected. The strong growth in the second and third quarter GDP in Singapore was better, at a double-digit quarter-on-quarter annualised rate.

“It was a reflection of the turnaround. It was more or less in line with the pattern around the region where many of the Asian exporting economies, after the sharp fall-off in their production and exports in the beginning of the year, rebounded as global demand started to recover.”

Song Seng Wun, CEO & regional economist, CIMB-GK Research, said: “After a fairly weak start to the year in the aftermath of the collapse of global demand, we saw things improving in subsequent quarters…

“Aggressive intervention by the Singapore government and others around the world stabilised an uncertain environment. When you have heavy government intervention in the economy, it gives confidence back to businesses and consumers as well.”

While the outlook for 2010 appears to be brightening, some said much depends on the United States and when global central banks will cut liquidity.

“Which is why there is much debate on whether governments should withdraw liquidity, withdraw from the economy. It’s probably a bit premature. The risk really is that the number one engine, the US, continues to see patchy recovery,” said Mr Song.

Sector-wise, manufacturing was the worst hit by the downturn in 2009, but it is looking up.

The manufacturing sector, which accounts for about a quarter of the country’s GDP, is expected to grow by about 8 per cent in the fourth quarter this year, after a surprise rebound in the third quarter. This performance is expected to continue into 2010.

Mr Cohen said: “Assuming the global economy remains on recovery trajectory, that should support continued recovery in manufacturing sector and this, including the electronics sector globally, should turn around.

“Perhaps Singapore will still be feeling some drag from the closing of some disk drive production sites, but that should be balanced by the continued uptrend in the pharmaceutical area, where Singapore continues to enjoy an expansion in the global industry that is expected to continue into next year.”

Meanwhile, all eyes will also be on the much-anticipated opening of Singapore’s two integrated resorts. They are expected to add about 0.5 per cent to GDP growth next year, through a boost to tourist arrivals and retail sales.

Surge in asset prices to fuel inflation: HSBC

 INFLATION could hit a high of 4 per cent in the next six months on account of the surge in asset prices here, according to a new report by HSBC.

It said investors feeling rich from the stock market rally are likely to spend more, raising demand – and prices – for goods and services.

At the same time, a continued increase in property prices will also lead directly to a rise in inflation.

This will help boost the consumer price index – the key indicator of inflation here – next year, said HSBC economist Robert Prior-Wandesforde.

He has raised his inflation forecast for next year to 2.9 per cent from 2.5 per cent previously, with inflation expected to peak at about 4 per cent probably in the second quarter of next year.

Investors who have made money from shares will naturally spend more, helping fuel inflation, but even people who do not buy shares will feel the ‘confidence effects’, said Mr Prior-Wandesforde.

‘It is easy to believe that hearing about rapidly rising stock markets will lead people to believe that things are getting better, and vice versa if stock prices are falling.’

He said the Straits Times Index is on course to rise by 6 per cent in the fourth quarter from the third. This suggests that consumer spending will rise by more than 2 per cent in the same period, he said, just in time for a nice Christmas boost for retailers.

HSBC also expects the property market to continue to strengthen. Interest rates are still low, banks are still prepared to lend and households are not saddled with a lot of debt, which means borrowing to buy a home should be relatively cheap and easy.

Also, the huge number of property deals between March and September this year augurs well for prices, said Mr Prior- Wandesforde. According to his data, a jump in transactions often leads to a surge in housing prices.

The price gap between HDB flats and private homes is also close to the narrowest it has been since the 1990s, before which data is not available.

A narrow price gap usually means that more HDB dwellers will upgrade to private housing, Mr Prior-Wandesforde said.

He believes concerns of an oversupply are overblown. The 34,100 figure of unsold units in the third quarter of this year is much lower than the 43,400 in the fourth quarter of last year, and not far from the all-time low of 30,300 in 2007, he said.

All this means that Mr Prior-Wandesforde expects private home prices to rise an average of 2 per cent to 3 per cent for each quarter next year.

This will undoubtedly feed into higher inflation, although private home prices do not have as big an impact on inflation as HDB prices do.

According to HSBC’s model, a 1 per cent rise in private home prices leads to a 0.03 per cent rise in consumer price inflation. But the same increase in HDB flat prices adds 0.13 per cent to inflation.

Indeed, the recent revision in annual values for HDB properties has already caused a spike in next year’s official inflation forecast. The Government is now predicting that inflation will come in at 2.5 per cent to 3.5 per cent next year, from its previous tip of 1 per cent to 2 per cent.

Source : Straits Times – 12 Dec 2009

MAS poll points to 5.5% growth in 2010

Estimate of this year’s contraction falls to 2% from 3.6% a quarter ago

THE economy is likely to grow 4.7 per cent in the current quarter before picking up pace in the first half of next year, with growth averaging 5.5 per cent in 2010, according to a poll of market economists.

The Monetary Authority of Singapore’s latest survey of professional forecasters – conducted the day the third-quarter economic results were released last month – has the median estimate of the current Q4 growth at 4.7 per cent, within a wide 1.2 to 7.5 per cent range.

The 20 economists who responded to the survey also now see the economy contracting 2 per cent in 2009. This compares with a median forecast of a 3.6 per cent decline from the previous poll a quarter earlier.

The official forecast for 2009 has now been narrowed to a half-point range – contraction of between 2 and 2.5 per cent. But some economists reckon that there’s a good chance – close to 50 per cent probability – that the GDP decline this year could be smaller than 2 per cent.

In any case, the focus would have moved on to 2010, where the first quarter is expected to gain from a low-base effect – the economists’ forecasts range from 5 to 11.4 per cent, with a 9.6 per cent median.

Q1 2009 was the weakest quarter during the recent downturn: GDP shrank 9.5 per cent year-on-year, though in momentum terms, the pace of the decline was easing. It was the fourth and final negative quarter in sequential terms.

The economists’ forecasts see GDP growth easing to 6 and 3.7 per cent over the next quarters, before picking up again to 5 per cent in Q4 2010.

Full-year growth is now projected at 5.5 per cent for 2010, one point higher than the median forecast from the September survey.

Meanwhile, the consumer price inflation rate is expected to jump sharply from an estimated 0.3 per cent in 2009 to 1.5 per cent next year.

The economists also now expect the 2009 unemployment rate to be 3.4 per cent by year-end – lower than the 3.8 per cent forecast from the earlier poll. The jobless figure is also expected to further ease to 3 per cent by the end of 2010.

Source : Business Times – 10 Dec 2009

Economists upgrade outlook on Singapore’s economy

Private sector economists have further upgraded their outlook on the Singapore economy, and now expect GDP to contract by 2 per cent this year.

In the previous survey of professional forecasters conducted by the Monetary Authority of Singapore (MAS) in September, economists had a median forecast of a 3.6 per cent decline in GDP for the whole of 2009.

For the fourth quarter, the 20 economists who responded to the latest survey expect most sectors to continue posting improved numbers.

They expect financial services to return to positive growth of about 9.9 per cent in the last three months of the year, after declining 0.2 per cent in the previous quarter.

They also projected positive numbers for non-oil domestic exports, giving a median forecast of 3 per cent growth, following last quarter’s 7.8 per cent decline in exports.

Manufacturing is expected to grow at a median rate of 8 per cent, after posting a surprise 6.6 per cent growth in the third quarter.

However, director of Asian economic forecasting at Action Economics, David Cohen, cautioned on Wednesday that manufacturing could also surprise on the downside.

“I guess the uncertainty surrounds the manufacturing sector, where we saw a strong bounce in the prior quarters after the weakness at the beginning of the year,” he said.

“But perhaps it was exaggerated by the pharmaceuticals sector, which can be volatile month-to-month, and it could be pulling back in the fourth quarter.”

The 20 economists who responded to the latest survey have also upgraded their forecast for fourth quarter growth.

They now have a median forecast of a 4.7 per cent expansion in the fourth quarter, up from 1.9 per cent in the previous survey. For 2010, the analysts have projected the economy to grow by 5.5 per cent.

Source : Channel NewsAsia – 9 Dec 2009

Rich getting richer, but spending less

Affluent S’poreans have cut down on consumption: survey

Affluent Singaporeans are the biggest savers in Asia despite being wealthier than they were six months ago, a survey has found.

They save 33 per cent of their monthly income, up 5 per cent from six months ago, while cutting back on consumption and daily expenses, an HSBC Affluent Asian Tracker survey found.

Compared to the first survey done in April, Singaporeans have cut their consumption by 4 per cent to 21 per cent and trimmed their daily expenses by 3 per cent to 45 per cent. Consumption refers to spending on dining, entertainment, clothing, travel and electronics.

Yet more than half of those surveyed reported a rise in net worth compared to only 23 per cent six months ago. Those who save the least, at 17 per cent, are the Indonesians and Australians.

The survey of more than 1,700 affluent individuals aged 30-55 took place in eight markets with 200 polled in Singapore. The survey gauges the views of people in the top 10 percentile of the population by income or liquid assets. Affluent in Singapore is defined as having a monthly income of at least $6,000 and $200,000 of liquid assets.

On preferred financial investments over the next six months, 68 per cent of Singaporeans surveyed voted for the stock market, followed by local or foreign currency deposits, unit trusts and life insurance.

Asked about the next big splurge, 56 per cent mentioned travel and 30 per cent said property. Buying a car was the least favoured, with only 10 per cent inclined to do so.

Indonesians were the biggest property fans at 56 per cent.

As for the sources of financial information, 47 per cent of Singaporeans said they relied on independent financial advisers, followed by the financial media (39 per cent), banks (32 per cent) and family/relatives (27 per cent).

Taiwanese relied most on the financial media (44 per cent) for financial information but only 8 per cent of Indonesians found it reliable. Indonesians prefer getting financial advice from family/relatives.

A third of affluent Singaporeans have family living abroad and close to half plan to live abroad in the next 10 years, with Australia/New Zealand as the most favoured destination.

About half of respondents in Malaysia and India feel the same way and 62 per cent of mainland Chinese – the highest proportion in the survey – plan to live abroad in the next 10 years.

Sebastian Arcuri, HSBC Singapore head of personal financial services, said the Asian diaspora will evolve into a new movement, led by the affluent who not only work and study abroad, but who now explore new wealth opportunities.

‘We are seeing this with our HSBC Premier clients as we help them to purchase a second home abroad, expand their businesses internationally or invest globally in multiple locations.’

Source : Business Times – 8 Dec 2009

Asia is poised for V-shaped recovery next year

Source : Business Times – 3 Dec 2009

ASIA is poised for a sharp economic recovery next year, even as developed economies in the West continue to struggle, according to Standard Chartered’s chief economist.

‘Our forecasts suggest the recovery will take the shape of an L or a U in the West and a V in the East,’ Gerard Lyons, who is also the group’s head of global research, says in a report published yesterday.

But open and export-dependent economies – Singapore, Hong Kong and Taiwan – are likely to grow below trend, due to sluggish exports to major markets in the West, the report says.

In Asia, growth will be centred on China, India and Indonesia, which have large domestic markets and relatively closed economies that cushion them from external shocks.

Overall, ‘2010 is likely to be the year of global recovery’, Mr Lyons says. ‘A double-dip recession would require either an external shock – most likely an event that drove oil prices sharply higher, such as an escalation of tension with Iran – or a policy-induced shock triggered by premature policy tightening in the West.

‘We are not predicting a double-dip, although we would not be surprised if a number of economies witnessed a negative quarter of growth at some stage.’

But even as Asia leads the global recovery, ‘we continue to stress the need to focus on levels’ – the dollar value of goods and services produced – rather than just growth rates, Mr Lyons says.

In 2008, the world’s economic output, measured by gross domestic product, was US$60.9 trillion, with advanced economies including the US, Japan, Germany, France and the UK accounting for more than half of global output, according to International Monetary Fund data.

‘If the West is not booming, the world will not boom. And the West is not going to boom,’ Mr Lyons says. ‘The US consumer, the key driver of the global economy for some time, faces a difficult outlook.’

He expects the world economy to grow 2.7 per cent next year, after shrinking an estimated 1.9 per cent this year.

Asia’s economic output is projected to expand 7 per cent in 2010, faster than this year’s estimated growth of 4.5 per cent.

Its biggest economic growth engines, China and India, are expected to expand 10 per cent and 7.5 per cent, respectively, compared with 8.5 per cent and 6.8 per cent in 2009.

Singapore’s growth momentum to be sustained for 2010, say economists

Source : Channel NewsAsia – 1 Dec 2009

Economists from OCBC Bank expect Singapore’s economic growth momentum to be sustained for 2010.

OCBC said the economy is expected to grow 4 per cent in 2010 – at the mid point of the government’s official forecast of 3-5 per cent expansion.

However, concerns are mounting about asset bubbles and rising inflation.

The problems currently facing Dubai World have been isolated so far. But observers expect similar “speed bumps” to show up over the next few years, suggesting that the global economy is just slowly recovering.

For Singapore, OCBC said the economy is expected to grow on-year in the fourth quarter and at least in the first half of 2010, barring unforeseen events.

Economists said there is lingering policy concern on potential asset bubbles, including the property market. And they expect the opening of the two integrated resorts next year to generate more demand for homes from foreign workers and investors.

Selena Ling, Head, Treasury Research & Strategy, OCBC said: “Mainly because of the record low interest rates we are seeing in the G3 economies, a lot of money has been sitting on the side lines in the wake of Lehman Brothers.

“Obviously with the pick up in economic numbers, the risk appetite is coming back. They are all searching for yield and emerging markets like Asia, because we have been relatively less impacted by financial deleveraging process (and it) does look relatively attractive from a medium term point of view.”

OCBC said investors will continue to buy into the commodities and China growth stories. It said the key concern now is not a double dip but rising inflation and slow expansion, as energy prices and wages rise.

OCBC also expects the Singapore dollar to appreciate, if recovery in the economy and export stays on track.

“The countries that are highly exposed to the global export cycles, the Taiwan dollar, Singapore dollar, the Malaysian ringgit… (they) are expected to play some catch up in 2010, to other currencies that have strong domestic growth dynamics,” said Emmanuel Ng, Currency Economist, OCBC.

“So we do expect some catch up by the Singapore dollar next year, especially if the MAS tightens policy,” he added.

The Monetary Authority of Singapore is due to review its Singapore dollar policy in April 2010.

Singapore most integrated of the 21 APEC economies

Source : Channel NewsAsia – 11 Nov 2009

Singapore is the most integrated of the 21 economies which make up the Asia Pacific Economic Cooperation (APEC), according to an index released by the Pacific Economic Cooperation Council (PECC) on Wednesday as part of its annual State of the Region report.

In fact, the Asia Pacific region, as a whole, has become more integrated since APEC was founded 20 years ago.

The PECC index of economic integration tracks the extent to which the APEC economies are becoming more alike in their economic characteristics.

It also looks at the relative importance of regional trade, investment and human flows compared to economic relations with the rest of the world.

Said Woo Yuen Pau, coordinator of the report: “The path of integration has been rising pretty much through the entire two decade period, and we think that APEC can take some credit in enhancing the deepening of regional integration which surely is one of the fundamental goals of the APEC forum.”

Mr Woo said the index made use of 2006 data, and the integration levels now would be even deeper than the report.

“Integration will continue to have deepened through the 2006 to 2009 period, simply because the share of inter-regional trade and investment and human flows would have increased through this period because of the downturn in the United States and the European Union, he explained. “So, I’m fully expecting that when we produce our index next year, and the year after, we will find that integration will continue to be on the rise.”

PECC said it believes the findings to be significant as a measure of APEC’s success and a factor in assessing its progress towards the 2010 Bogor target.

The Bogor Goals, adopted at the 1994 APEC summit, calls for industrialised members to achieve free trade and investment targets by 2010.

Developing member economies have until 2020.

S’pore household net wealth hits $1 trillion

Source : Straits Times – 11 Nov 2009

HOUSEHOLDS have generally weathered the financial crisis well with net wealth rising to an all-time high of

$1 trillion as of Sept 30, after slumping to $895 billion in the first quarter this year.

The record numbers – released in the Monetary Authority of Singapore’s (MAS) annual Financial Stability Review on Monday – go a long way towards explaining why the recession that has just ended seemed less painful than previous downturns.

The recovery in the stock and property markets since the first quarter is one reason, but Singaporeans are also richer as they saved, invested and paid down their debt.

The global economic recovery has meant a strong rebound in net wealth – assets minus liabilities.

Take property assets, for instance. The MAS data showed that real estate holdings have turned around – they were up by an estimated 9 per cent to $537 billion in the three months to Sept 30, from the low of $491 billion in the second quarter.

The central bank noted that household assets remain more than six times the value of household liabilities, while aggregate household net wealth is about four times the value of gross domestic product, up from about 3.6 times in the first quarter.

Singaporeans refused to splurge on credit, keeping debt at roughly the same level during the economic downturn, the data showed.

Total liabilities increased by just 4 per cent year-on-year in the third quarter – much lower than the long- term average growth rate of about 13 per cent, the MAS said.

Most of the increase came from mortgages, which account for the bulk of household borrowing. This was mainly due to the increased activity in the property market.

‘In short, households have generally weathered the crisis relatively well on the back of their strong balance sheets,’ said the MAS.

Economists say MM Lee’s 3% growth forecast for 2010 is cautious

Source : Channel NewsAsia – 9 Nov 2009

Singapore’s economic growth for next year could be as high as six per cent, say some industry experts.

They say the three per cent outlook given by Minister Mentor Lee Kuan Yew on Sunday may be on the cautious side, but it is still news they welcome as this means better times are ahead – more so in industries such as the finance sector.

“There will be a pay revision. Estimates in general range from about two per cent to about 4.5 per cent,” said Gary Lai Wai Keat, manager of Financial Services at Robert Walters. “If you look at the front line business, you talk about bonuses being restored.

“I think most of the bonuses that were cut is probably in the range of 60 per cent to 80 per cent. This year, you will get at least half of that coming back into the picture.”

Halimah Yacob, deputy secretary-general of NTUC, said: “With economy on the growth, it means workers can expect at least some bonuses and wage increases, compared to this year where many did not have wage increases, and many did not get their mid-year bonuses.

“We really do hope that with the three per cent projected growth, that would actually bring benefits to workers in terms of more job openings and some wage adjustments and bonuses that they can expect.”

However, analysts expect employers to remain cautious and adopt a wait-and-see approach when it comes to pay increments and bonuses for certain sectors such as manufacturing

“It will still be riddled with uncertainties, one of which, whether there will be an overhang in capacity,” explained Vishnu Varathan, a regional economist. “And to that extent we will not probably see a very broadbased upside to salaries and it may be better for the medium term if there’s a period of stabalisation and gestation, just simply due to the amount of uncertainty that is out there.”

But as the recovery takes shape, there are still traps lurking, which policy makers need to pay attention to.

Varathan said: “Over the next few months, there will be talk about exit strategies, to what extent and what pace will some of these policies begin to unwind. This is one of the risks that someone moves too fast or too slow and that’s going to cause de-stabalisation.

“You also see huge flows coming into this region and propping up the asset markets and partly due to dollar debasement fears as well. That, of course, is a very unsettling thing when the fundamental economies are at a very nascent stage of the recovery.”

Lai said: “Credit card debt is also being considered as the next big thing, whether the banks will have a much higher NPL (non-performing loans) going forward. Whether banks have accepted TARP (Troubled Asset Relief Programme) money and, if they can recruit talented people to join. These are things which going forward probably affect trade.”

Besides economists looking to a better year ahead, global leaders at the APEC Forum will also be looking at better understanding what the new world-economic order means for the region.

MM Lee says Singapore’s economy may grow 3% next year

Source : Channel NewsAsia – 8 Nov 2009

Singapore Minister Mentor Lee Kuan Yew on Sunday said the country’s economy may grow by three per cent next year, and added that this year’s fourth quarter looks healthy after Singapore’s economy bounced back in the second and third quarters.

Speaking at the annual tree planting ceremony at his constituency of Tanjong Pagar, Mr Lee said Singapore has emerged out of the recession with minimum damage.

He said the first quarter was the country’s worst period with a sudden drop in exports, and at that point of time, Singapore had expected growth to shrink by up to nine per cent.

However, the country’s economy has bounced back in the second and third quarters this year.

Mr Lee added that Singaporeans must be prepared for slower economic growth, but said that slower growth in the nation and other countries in Asia will still be higher than other regions of the world.

“We have a small population, and we must find ways and means to fill up the drop in our exports,” Mr Lee explained. “Fortunately, we have gone into industries like pharmaceuticals that have not been so badly affected by the slowdown.

“We are placed at the junction of three big economies that are not export-dependent, in other words, exports are not a high proportion of their GDP. They have huge domestic markets: China with 1.3 billion people; India 1.1 billion; Indonesia 250 million. Their domestic consumption and investments have enabled their economies to continue achieving positive growth despite a slowdown in exports.

“The rest of East and Southeast Asia have the benefit of the overflow effect from China, India and, to a lesser extent, Indonesia. Furthermore, we have free trade agreements with China and India that will give us an advantage over other regions.

However, Mr Lee added that there are bigger issues at stake.

The Prime Minister said: “If every time we run into a problem and the younger generation has grown up for the last 20, 30 years knowing only improvements in life, more income, better surroundings, better everything… that’s a problem.

“They have not understood how difficult life was when we started and how easy it is to go back to that situation if we do not work together and strive and make this place successful.”

Mr Lee also said to ensure that Singapore remains as one of the best liveable cities in the world, the country needs an honest and capable government which can think and plan long term.

One of the challenges now is to find the next generation of Members of Parliament (MP) and leaders who can continue with what the present government is doing.

Mr Lee added that it is important to choose the right leaders and not just listen to what the opposition says.

“Come election time, they talk a lot of things, which is rubbish,” said Mr Lee. “This is a government which chooses its MPs very carefully, test them out before they become Ministers, that’s why it is working. The present Ministers can last ten years…”

Mr Lee added that by the next general election due by February 2012, Singapore will see the nucleus of a new generation of leaders who are as able, determined and committed.

In that way, Singapore will remain healthy, strong and at peace.

S’pore leapfrogs in global financial league

Source : Business Times – 10 Oct 2009

It soars to fourth spot from last year’s tenth in WEF’s latest Financial Development Report

SINGAPORE has jumped to fourth place from 10th in a list of global financial centres ranked in this year’s Financial Development Report from the World Economic Forum.

The island’s rise came as the large industrialised countries fell out of favour following the financial meltdown.

Countries such as Germany and France lost heavily in terms of absolute scores – down 0.74 points and 0.68 points respectively – and crashed out of the top 10 list.

The US dropped from pole position in 2008 to third place this year. Last year’s runner-up, the UK, claimed top spot this year. And Australia took second place, leaping from 11th position in 2008.

‘While the UK came in first and the US came in third, both experienced a sharp drop in their overall scores that significantly decreased the margin by which they lead other countries in the index,’ the report said. ‘Financial instability weighed heavily on both, a factor that was offset by strength in some measures of financial intermediation.’

The report – by economist Nouriel Roubini and the head of emerging markets finance at World Economic Forum USA, James Bilodeau – ranked 55 of the world’s leading financial systems and capital markets.

The rankings were based on seven factors including institutional and business environment, financial stability and banking services.

Singapore and Hong Kong – which came in number five – were praised for consistent strength across their institutional and business environments, and scored highly for financial stability.

‘Within the banking pillar, both economies show room for improvement with respect to financial information disclosure. However, this is offset by the efficiency of their banks,’ the report noted.

‘Although they both exhibit healthy equity and foreign exchange markets, bond market development is an area for improvement in both economies, particularly Hong Kong.’

On financial stability alone, the US was ranked 38th, the UK 37th and Japan 34th. Norway came in tops, Switzerland was second and Singapore fifth.

Some developing countries performed well in the financial stability section of the index, Chile coming in third and Malaysia, Mexico and Brazil making the top 15.

‘Developing countries exhibited a relatively strong showing in the financial stability pillar of the index,’ Mr Roubini said.

‘For some, this is the result of learning from the mistakes of past financial crises, while for others it may reflect the relative lack of complexity and global integration of their financial systems.’

CPI creeps up 1.1% in July on housing costs

Source : Business Times – 25 Aug 2009

SINGAPORE’S consumer price index (CPI) rose 1.1 per cent in July from June but fell 0.5 per cent year on year, the Department of Statistics (DOS) said yesterday.

The year-on-year decline was led by lower costs of transport and communications, housing and recreation and other items.

Transport and communication costs dipped 3 per cent on lower petrol prices. Housing costs eased 1.3 per cent on lower electricity tariffs. Recreation and other items fell 0.9 per cent thanks to lower holiday travel costs.

On a seasonally adjusted basis, the CPI rose 0.3 per cent from June, after June’s 0.2 per cent rise from May. For the January-July period, the CPI was 0.6 per cent higher than it was a year back.

The month-on-month increase in July was largely due to higher housing and transport and communications costs. Housing costs were up 3.4 per cent in July, while transport and communication costs rose 1.1 per cent.

DOS said the CPI for general households rose 0.8 per cent in the first half of this year compared with the same period in 2008. This compared with a 7.1 per cent year-on-year rise in H1 2008 and a 6 per cent increase in H2 2008.

The increase in CPI for all income groups in H1 2009 was due to higher food and accommodation costs, though these price increases were partly offset by lower petrol and car prices and cheaper electricity tariffs.

For H1 2009, the inflation rate for households in the lowest 20 per cent income bracket was 1.6 per cent, compared with 0.7 per cent for households in the middle 60 per cent and 0.9 per cent for those in the top 20 per cent.

This is because the lowest 20 per cent income group has higher weights of food and accommodation in its CPI basket. Lower prices of petrol and cars – which have higher weights in the CPI baskets for the middle 60 per cent and top 20 per cent income groups – accounted for more moderate inflation rates for these groups.

Swings in liquidity flows set to continue

Source : Straits Times – 10 Aug 2009

IN THE face of the continuing economic slowdown affecting developed economies such as the United States and Japan, the soaring financial markets around the globe present a big puzzle.

Stock prices across the region have hit 12-month highs, clawing back the losses sustained in the fallout from the collapse of US investment bank Lehman Brothers. The property market has turned sizzling hot as well.

Yet, this financial mini-boom sits oddly, with tell-tale signs of the recession that still ravages Asian economies.

Last week, disk-drive maker Seagate said it is axing 2,000 workers from its Ang Mo Kio plant as it relocates some of its operations to other countries.

But try telling house-hunters that Singapore is still mired in recession. They were more worried about a further surge in prices as they rushed head-long into the Optima condo project next to Tanah Merah MRT station, snapping up all its 297 units within three days last week.

Some suburban condo projects such as the Centro Residences in Ang Mo Kio have also been commanding prices of more than $1,100 per sq ft – a price which is usually associated with the prime Orchard Road area.

But the exuberance is not confined to Singapore. Other Asian financial centres such as Hong Kong, Seoul and Shanghai are experiencing similar surges in asset prices – both in terms of stock and real estate.

Much has been written in the Western media about the rising jobless rates in the US, despite last Friday’s report of a slight fall in numbers, and in Europe. The theory is that this is dampening consumers’ demand there as they tighten their belts to save more and become more frugal in their spending habits.

Since Asian countries rely on exports for their growth, the argument goes that unless the US and Europe start to grow again, Asian economies are unlikely to experience a turnaround as well.

But this fails to explain the surge in stock prices, suggesting, at face value, the emergence of a robust V-shaped recovery for the region as it puts the global financial crisis firmly behind it.

The usual line of explanation from analysts is that Asian economies, led by China, have successfully de-coupled from the West.

A growing appetite for more of everything – from commodities to financial services – from China would take up the slack caused by falling demand in the West, so the argument goes.

Then there is the theory that as the financial markets emerge from the biggest credit crunch in decades, the higher prices simply reflect a return to normal, after being beaten down to bargain-basement levels at the start of the year.

Still, the most plausible explanation for the recent surge in asset prices is the sloshing around of ‘excess money’ created by central banks in their zest to unclog the global financial system and arrest any further economic decline.

Since March, the US central bank has been on a programme to buy US$300 billion (S$430 billion) worth of US government bonds and US$1.25 billion of mortgage-backed debts.

Last week, the Bank of England upped the ante by announcing it would be buying a further &pound50 billion (S$122 billion) in gilts, or British government bonds, after exhausting its original budgeted purchase of &pound125 billion.

While the original intention of the two central banks was to bring down borrowing costs and ramp up spending in their respective battered economies, it hardly comes as a surprise that some of this money is finding its way to Asia, where it is fuelling a stock market boom.

The problem is exacerbated by the ability of traders at investment banks to get access to cheap US dollar funding, as the Fed has slashed interest rates to almost zero to fight deflationary pressure caused by the fall in consumer spending.

With the greenback weakening against Asian currencies, traders also stand to make a bundle from foreign exchange gains as well, with their huge positions in regional equities.

This has produced a situation similar to that seen 10 years ago when speculators borrowed heavily in Japanese yen to make huge bets in emerging markets after Tokyo cut its interest rates to zero to fight economic stagnation.

The picture becomes still murkier when you consider the flood of money pouring out of China from the liquidity generated by the lending made by Chinese banks to jump-start the economy.

As Morgan Stanley recently noted, Hong Kong equities – and, by extension, those in the rest of the region – could be ’squeezed up’ by mainland players and global investors all making a beeline for them at the same time.

So what can investors in small, open economies such as Singapore do as the collision of vast streams of liquidity cause wild swings in asset prices?

It is not surprising to find some ordinary investors throwing caution to the wind by snapping up newly launched condos or by diving deep into the stock market, even though the outlook for most businesses may still look murky.

But with global demand still weak, unemployment rising and MNCs still experiencing over-capacity in production, the likelihood is that consumer price inflation might stay low for now.

This may, in turn, mean that major central banks like the Fed and the Bank of England will not raise interest rates any time soon, or reverse course in their efforts at printing money.

For the stock market, there will be no respite from the dramatic price swings that have bedevilled equities since the US sub-prime mortgage crisis erupted two years ago.

After rising almost non-stop for three weeks, the benchmark Straits Times Index fell four days in a row last week.

Traders will have no choice but to learn to ride the wild swings produced by the ebb and flow of money as it washes through the region. Vast fortunes will be made – and lost – before the global economy begins to regain its poise.

Corporate governance: In Asia, S’pore is #1

Source : Straits Times – 22 Jul 2009

SINGAPORE has been ranked No.1 in Asia in terms of corporate governance in a new research report just when the issue is front and centre for global investors.

The report, by Swiss banking giant UBS and global corporate research firm GovernanceMetrics International (GMI), heaps praise on the way the Republic oversees the corporate and financial sector.

But there is some criticism, too – with suggestions that disclosure and shareholder rights could be improved here.

The research report, the first of its kind by UBS and GMI, comes after the global financial crisis and various corporate scandals helped bring sharp focus to issues of corporate governance.

A handful of Singapore-listed China companies have been rocked by scandal in recent months – though none on the scale of IT giant Satyam, which is at the centre of India’s biggest ever fraud case.

The new report cited various factors for Singapore’s strength in corporate governance, such as a strong centralised leadership and government oversight via its investment arm Temasek Holdings.

Corporate governance can affect the share price, growth strategies and shareholder returns, said UBS managing director of investment research Bill Sohn.

‘A lot of the fundamentals of companies such as earnings and cash flow, in essence, are driven by the way companies are managed,’ said Mr Sohn.

For investors looking at the longer term, good corporate governance lifts shareholder returns, the report found. Firms with high governance ratings tend to outperform low-rated ones in periods over a year but no such link emerged over three to six months.

The study analysed nearly 700 companies in 10 Asian markets, taking into account factors such as board accountability, financial disclosure, internal controls, shareholder rights and directors’ pay.

It also considered broader socio-economic factors such as the business environment and regulatory developments.

The Republic’s banking and finance sector was the best governed of those surveyed due to tight regulations imposed by the Monetary Authority of Singapore. These include a 12 per cent capital adequacy ratio imposed on banks.

‘The strong regulatory framework, especially in banking and finance, puts Singapore in good stead,’ said GMI research director John Jarrett.

Singapore also scored well on disclosure of directors’ pay and board accountability but some areas needed improving.

For example, the nation still lags behind other developed markets such as Hong Kong in terms of shareholder rights and financial disclosure.

‘Singapore’s corporate ownership is characterised by a pyramid structure where one single entity holds the controlling interest in a chain of companies,’ said the report. This means power being exercised by one block of shareholders at the expense of other shareholders, it said.

Disclosure and enforcement of accounting standards still lag behind those in developed economies such as the United States, partly as the professional accounting body here does not face scrutiny the way its US counterpart does.

Unexpectedly, financial centre rival Hong Kong came in No. 6 in the ranking.

It lost out because of several factors, including strong family-ownership control within companies and its board of directors. Earnings are disclosed twice a year, as opposed to quarterly here.

The focus on corporate governance and fundamentals will grow more vital as an investment consideration as the world emerges from recession, said Mr Sohn.

Mr David Gerald, president of Securities Investors Association of Singapore said more has to be done to put the Republic on par with world’s best practice.

‘Corporate governance standards in Asia are pathetic. We’ve come a long way from 10 years ago but is still far from the developed markets such as US and Europe.’

The bleeding stops, a pale recovery on its way

Source : Business Times – 15 Jul 2009

GDP contraction may be just 4-6% for the year after Q2 turnaround, but outlook is subdued

The first positive GDP numbers in five quarters are in, and the full-year contraction will now likely be less severe than earlier thought. Going forward, the big question is: will the budding recovery be sustained?

After three previous downgrades, the Ministry of Trade and Industry (MTI) yesterday bumped up its 2009 GDP forecast. It now expects the full-year contraction to be a smaller 4-6 per cent, compared with an April estimate of 6-9 per cent. But a 4-6 per cent decline would still be the sharpest on record.

While private sector economists are caught up with the strong – and widely anticipated – Q2 turnaround, with many prematurely declaring an end to the recession, MTI says the upgrade to its 2009 forecast stems from a less severe contraction in the first six months, and that the outlook for the rest of the year ‘remains subdued’.

Flash estimates based on just April and May data have the economy growing 20.4 per cent in Q2 from Q1 in seasonally-adjusted, annualised terms. This is the first expansion in five quarters – and the strongest quarter-on-quarter (qoq) pace since Q3 2003.

Year-on-year (yoy), the economy was still down 3.7 per cent in Q2 – the third consecutive negative quarter.

The latest figures also show a significant upward revision in the Q1 data. It turns out that the economy shrank a smaller 12.7 per cent qoq (rather than 14.6 per cent as estimated in May) and 9.6 per cent yoy (rather than 10.1 per cent).

In other words, the contraction in the first half of 2009 – 6-7 per cent – was not as bad as earlier thought, although MTI says ‘underlying economic conditions remain weak’.

Notably, the improved manufacturing performance in Q2 (the key driver of the GDP turnaround) came from a spike in pharmaceutical output and electronics inventory restocking – both of which may not be sustained, MTI points out.

The services industries were still weak in Q2, with most still in decline, it says, and the overall outlook for the rest of the year remains largely unchanged – ‘weak recovery susceptible to downside risks’.

Advanced economies such as the US and Europe are still seeing rising unemployment and reduced household spending, MTI notes. ‘Housing markets in many leading economies have yet to bottom out, while financial institutions are still in the process of deleveraging,’ it says. ‘At this juncture, there is no evidence yet of a decisive improvement in final demand.’

Several economists took a cue from the new figures to bring their full-year forecasts in line with the official view. While the more bullish ones think MTI’s revised forecast and cautious stance seem to underestimate some domestic resilience and strength ‘which could yet produce more upside surprises’, others note that the volatile biomedical cluster possibly added 3 points to Q2 yoy growth.

And outside biomed, ‘we are seeing only modest improvements in the demand for Singapore’s exports’, says CIMB’s Song Seng Wun.

The pick-up in manufacturing and exports will likely be ’slow and patchy, with some months of improvements set back by months of decline’, he adds. ‘Until consumers in the US and EU start spending again, which might not happen until late 2010, the recovery in Singapore’s external demand sector is inconclusive. We may still be a year or so away from a real broad-based recovery, when overall labour market conditions improve.’

Other economists, such as Morgan Stanley’s, also reckon that recovery – even if U-shaped – will likely be subdued and uneven, with job losses catching up soon.

Still, the Q2 GDP report is ‘an encouraging sign that the economy is emerging from recession’, says David Cohen of Action Economics.

He sees modest qoq growth in the second half, noting that a potential red flag on the ongoing uncertainty has been raised by visitor arrivals, ‘which, like in Hong Kong, have shown something of a slowdown recently, suggesting a potential drag from the H1N1 flu scare’.

A whiff of growth after four quarters of contraction

Source : Business Times – 14 Jul 2009

Q2 flash estimates today may finally buck the trend in on-quarter terms

After months in the red, economies across Asia are expected to report positive GDP numbers for the April-June quarter, starting with Singapore today.

Singapore’s Ministry of Trade and Industry is due to release early this morning flash estimates of the economy’s Q2 gross domestic product (GDP) growth, which economists widely expect to be not just positive but in double digits. But only in the seasonally adjusted, annualised on-quarter terms, which have so far seen four negative quarters since Q2 2008.

The year-on-year (y-o-y) pace will probably still, for the third straight quarter, spell contraction.

The advance estimates to be unveiled this morning are based on only two months’ data, not the full quarter. But seemingly strong April and May industrial output figures have spurred economists to put out fairly bullish Q2 forecasts in recent weeks, even revise up their full-year projections in some cases.

Apart from a lone negative forecast from Standard Chartered Bank, most of the Q2 quarter-on-quarter (q-o-q) estimates are in the double-digit teens, with Citigroup’s near-23 per cent pace about the most upbeat – until Daiwa Institute of Research’s forecasts came along over the weekend.

Daiwa’s Asia chief economist P K Basu’s ‘conservative’ Q2 estimate is 35 per cent q-o-q (adjusted) growth, which translates to minus 1.5 per cent y-o-y.

‘In fact, even minus 1.5 per cent maybe a little bit too low, because financial services and business services would both have grown at a fairly decent clip, construction would have grown a little over 10 per cent, and manufacturing actually grew in the first two months of the year,’ he told BT.

‘So I find it pretty difficult to see real GDP contracting at all in Q2. But, conservatively, I’d say minus 1.5 per cent because otherwise, the q-o-q would be something quite spectacular.’

Stock-market turnover rose 2.3 per cent y-o-y in Q2 after sharp declines in the previous two quarters, and bank credit continued to grow, he noted. And business services would also have been buoyed by the turnaround in real estate. Plus, a ‘better’ set of June manufacturing data would mean a GDP surge of 40 per cent q-o-q, he added.

‘Our top-of-the-street forecast for 2009 real GDP may need to be raised further!’ he said. Months ago, Mr Basu already forecast minus 3.3 per cent for 2009 GDP – against official projections of 6 to 9 per cent contraction – though Citigroup has recently upped its forecast to minus 2.7 per cent.

Macquarie Securities economist Rajeev Malik also just raised his full-year forecast by one point to minus 5 per cent. He sees the economy rebounding by 16.5 per cent in adjusted q-o-q terms in Q2, or minus 5 per cent y-o-y.

‘On our revised trajectory, y-o-y GDP growth will continue to improve, and is expected to return to the black in Q4 2009,’ says Mr Malik.

Also highly bullish – not just about Singapore but the region, particularly China – is DBS Bank’s David Carbon, who wrote in a report published yesterday: ‘It’s payback time. The V-shaped recovery in industrial production and exports in Asia over the past few months will show up in double-digit GDP growth in most of Asia in Q2 2009, starting this week with China and Singapore.’

He expects Singapore to report sequential GDP growth of 15-16 per cent for Q2, and China, 16-17 per cent. South Korea, Taiwan and Thailand are expected to follow in the weeks ahead.

But Stanchart, which is sticking to its off-trend bearish forecast for Q2, notes that both external and domestic demand remain weak.

‘We expect the services sector to be the main drag on economic growth in Q2 2009 while construction growth should slow in Q2 . . . the surprise on the upside could come from manufacturing,’ the bank said in a recent report.

In any case, it remains to be seen if an end to negative q-o-q numbers translates eventually to full economic recovery.

Recession over, strong V-shaped recovery seen

Source : Business Times – 14 Jul 2009

THERE are tentative signs that Singapore’s worst ever recession is over and a strong V-shaped recovery is to follow over the rest of this year, according to HSBC’s Asian Economics report for the third quarter.

‘Unemployment is expected to peak at the end of this year at 4.2 per cent and then come down to 3.4 per cent at the end of 2010,’ said Robert Prior-Wandesforde, HSBC senior Asian economist, at a media briefing for Asian Outlook 2009.

‘For Singapore, we’re looking at negative 6 per cent GDP growth this year, towards the better end of the government’s forecast range. For 2010, we’re looking at positive 5.3 per cent growth.’

For Asia ex-Japan, GDP growth is expected to 4.2 per cent this year, and 6.9 per cent in 2010.

‘We are optimistic about the recovery and we see increased evidence that recovery has begun,’ Mr Prior-Wandesforde said.

In the Asian Economics report for Q3, three overlapping stages of the recovery process which underpin HSBC’s belief in a sustained pick-up in growth are discussed – initial post-crisis relief bounce, effects of various policy stimulus packages across Asia, and the self-sustaining phase of growth.

‘Since the collapse of Lehman Brothers, there was a feeling that we were heading into a second great depression, the end of the financial world as we know it,’ said Mr Prior-Wandesforde.

‘But thanks to the very aggressive policy action that is being taken by governments and central banks around the world, particularly the US, it seems to us that scenario is pretty much gone.’

Asia ex-Japan will see quarter-on-quarter annualised GDP growth of more than 8 per cent in the second quarter, the report says. ‘Omens are looking even better for the third quarter, with double-digit quarter-on-quarter annualised GDP growth.’

The HSBC coincident indicator includes Chinese and South Korean composite lead indicators, the Commodity Research Bureau index, German IFO business expectations and the S&P 500 equity market index.

This means that ‘we can rule out an L-shaped kind of recovery, and also an U-shaped one’, explained Mr Prior-Wandesforde.

The second phase relates to various policy stimulus packages put in place across Asia – the biggest and most synchronised easing of fiscal policy and monetary policy ever.

It is estimated that these will add ‘at least one per cent of GDP growth in the region this year and another 2 per cent in 2010′.

‘This reflects the length of time it often takes in Asia to get these infrastructural projects in place, and also the fact that monetary policy works with a significant lag in Asia – with 12 to 24 months’ lag being typical,’ noted Mr Prior-Wandesforde.

With all these policy effects stimulating domestic demands within Asia, it is expected to ‘at least create a regional trade recovery before world recovery’.

Tracking the level of Asia ex-Japan private consumption and investment as a proportion of the equivalent series for the US, the latter was actually 20 per cent higher than its American counterpart last year.

Asian private consumption came to just 40 per cent of the US level in 2008 but it has grown more in absolute terms in each of the last two years.

‘Our Asia ex-Japan and China export lead indicator points to a pick-up in year-on-year real export growth Q309,’ Mr Prior-Wandesforde said.

‘It’s typically the most open economies, like Singapore and Malaysia that crashed the most, which we think will see the greatest trade recovery kicking in.’

Strong growth suggests Singapore emerging from recession

Source : Channel NewsAsia – 14 Jul 2009

Singapore said Tuesday its economy grew for the first time in a year in the second quarter, led by biomedicals and electronics, suggesting the city was emerging from its worst ever recession.

The economy soared 20.4 per cent in the three months to June compared with the first quarter on a seasonally adjusted annualised basis, the Ministry of Trade and Industry said, while raising its forecast for 2009.

A Dow Jones Newswires poll of 10 analysts had tipped an average 14.1 per cent economic expansion.

Gross domestic product (GDP) was now expected to contract 4-6 per cent for the year from an earlier projection of 6-9 per cent, the ministry said, while warning that any recovery would be weak due to the fragile global economy.

It was the first quarter-on-quarter growth in five quarters.

Trade-driven Singapore became the first Asian economy to slip into a recession in the second half of last year after a financial and economic crisis that started in the United States hit demand for its exports.

Tuesday’s data means Singapore is the first of the Asian countries hit by recession to release statistics pointing to a recovery.

Compared with the previous year, however, output in the June quarter was down 3.7 per cent, indicating that the economy remained weak.

“I guess technically the recession would have ended, the economy is growing again,” said David Cohen, an economist with research house Action Economics.

“Growth won’t be very strong but it should remain in an upward trajectory,” he told AFP.

“The Singapore economy registered a stunning turnaround in the second quarter, much in line with our expectation,” DBS Group said in a research note.

Despite the quarter-on-quarter growth, the trade ministry cautioned that “the outlook for the rest of the year remains largely unchanged: of a weak recovery susceptible to downside risks.”

“At this juncture, there is no evidence yet of a decisive improvement in final demand,” the ministry said in a statement, adding the second quarter surge “may not be sustained.”

The services sector, which accounts for two-thirds of the economy, continued to shrink with a decline of 5.1 per cent in the June quarter from a year ago, the ministry said.

It noted that rising unemployment and reduced consumer spending in Singapore’s major export markets like the United States and Europe reflected the continued weakness in the global economy.

Action Economics’ Cohen said however he was cheered by the second quarter numbers.

“I think this will be the first in a series of upbeat GDP reports for the second quarter from Asian economies,” he said, noting that China and South Korea would also be announcing their growth data in the next two weeks.

“Maybe this will provide some reassurance to the markets which have been jittery in the last few weeks about the sustainability of the recovery. It shows that Asian economies have turned the corner in the second quarter.”

Dariusz Kowalczyk, chief investment strategist with SJS Markets trading house, said the June quarter data suggested Singapore may not have been as hit hard by the global recession as initially thought.

“Production and exports account for such a large proportion of the Singapore economy that global trends will determine whether it grows or contracts but I am upbeat on the global economy so this bodes well for Singapore,” he said.

He added that he has revised the city-state’s 2009 growth outlook to a contraction of 4.3 per cent from 5.9 per cent previously forecast.

The June quarter figures are computed mainly from the April-May period and the ministry is expected to release a more detailed picture in the next few weeks.