Remind yrself, not us PM

(Or “Is PM on the same channel as S’poreans?”)

“Prime Minister Lee Hsien Loong has said the Hougang by-election should not distract the country from focusing on national priorities and building an inclusive Singapore,” CNA reports.

Either this is the latest of PM’s tasteless jokes in his attempt to outdo Tharman as the cabinet’s and PAP’s mgt committee’s stand-up comic, or it shows us that he doesn’t even bother to glance thru the nation-building constructive local media.

Because if he does, he would realise that “national priorities and building an inclusive Singapore” are at the top of most voters’ concerns: the state of the economy and public transport infrastructure, and of family finances. Examples:

– a MRT system that does not breakdown almost every other day,

– less crowded trains and buses,

– lower inflation (even the crown prince of jokers says the latest inflation number is ”a high figure” though he quickly quipped that it didn’t affect most of us “lesser mortals” (my words not his),

– how to earn more money,

– how to afford to own a HDB flat on $2,000 a month,

– how to buy a van (what with escalating COE prices), or

– worrying that ”Our system of integration doesn’t work. Why? Because before we were able to integrate those who were received on our territory, others arrived. Having taken in too many people, we paralysed our system of integration.”

A worrying tot has juz struck me. What if his (and the PAP’s) ”national priorities and building an inclusive Singapore” are different from us “lesser mortals”? He wants faster economic growth via becoming a low-cost producer as “national priorities”, while “building an inclusive Singapore” means treating FTs better than locals?

Corporate governance: Better value elsewhere in region?

Chart shows that the authorities are pricing S’pore out of fees to themselves, and to the accountants, lawyers etc based here by making S’pore more expensive than HK when it comes to charging cos fees to set-up and maintain here. HK is the leading Asian centre for registrating and maintaining offshore companies outside of the “Sunny places for shady people” to misquote Somerset Maugham.

And S’pore non-executive directors are well paid and do less work vis-a-vis our neighbours.

Non-executive directors (NEDs) in Singapore got the second-highest pay when compared with directors in Malaysia, Indonesia and Thailand, a report by Hay Group showed yesterday. Those in Indonesia were better than S’porean NEDs.

But boards in Singapore also meet the least often, and hold the least number of committee meetings compared with their regional peers.

The management consultancy analysed data collected from 200 large companies in the four countries from 2008 to 2010.

The results showed that at the median level, NEDs from large companies in Singapore were paid US$75,300 in 2010, second to those in Indonesia, who took home US$178,600.

By comparison, NEDs in Thailand and Malaysia received US$46,600 and US$46,300 respectively.

In Indonesia, NEDs take home a substantially higher pay because state-owned companies and some private companies stipulate their pay to NEDs as a percentage of the president-director’s compensation for both the salary and bonus portions. These which are supposedly linked to performance – already made up about four-fifths of NEDs’ pay.

Most of the remuneration for NEDs in Singapore, Thailand and Malaysia is made up of a flat fee, not performance-linked.

The salary of NEDs in the region have been heading higher over the past few years.

In Singapore, the increase was 9% in both 2009 and 2010, while in Malaysia, the NED pay rose 17% in 2009 and 3% in 2010.

In Indonesia, the increase was% 13% and 10% respectively in 2009 and 2010. In Thailand, the NED pay rose 14% in both years.

Thai companies held the most number of board meetings between 2008 and 2010, on a median level. In 2010, an average of nine board meetings were called by the 48 Thai companies reviewed.

Singapore fared the worst, with the 50 companies calling just five board meetings each in 2010. Malaysia’s top companies held six meetings, while those in Indonesia conducted seven.

Indonesian companies also had their audit committees meet more than 10 times a year between 2008 and 2010, which is significantly more often than in Singapore – at four times a year – and Malaysia, at five times a year.

As audit committees have a heavier responsibility than other committees, in Singapore, the chairman and members of the audit committee get higher annual retainers than those in other committees. Thai cos also do something similar

The median tenure of independent directors is the highest in Singapore, which stands at seven years. Malaysia follows with six years, Indonesia is at four-and-a-half years and Thailand has a median tenure of three years.

Proposed revisions to Singapore’s Code of Corporate Governance note that companies must explain the reasons that a director who has served more than nine years on the board is still deemed independent.

Hay Group’s review showed that 62% of the top companies in Singapore have at least one independent director who has served more than nine years on their board.

Analysing Ngiam Tong Dow’s March 2012 speech (Part I)

Given that Professor Lim Chong Yah’s “shock therapy” proposal is a variation of what was implemented the early 1980s (until the 1985 recession: neutral article on the recession and one blaming it on the original “shock therapy”), when one Ngiam Tong Dow* was Permanent Secretary in the Ministry of Trade and Industry, I thought it would be interesting to reread a speech Ngiam made in March because MTI had once upon a time analysed the problem of severe manpower shortages and the economy’s increasing reliance on lowly paid foreign workers. Its solution was to restructure the economy by raising wages substantially to dampen employers’ demand for lowly paid workers, what Professor Lim is recommending.)  

Rereading Ngiam’s speech, I don’t think he would agree with Dr Lim’s proposal because Ngiam says, “Rising productivity enables workers to be paid more. Inflation sets in only when wages are raised without any increase in productivity.” So productivity comes first, then wages rise as a consequence. Dr Lim would go back to the 1980s plan of raising wages to force up productivity.

(BTW, the government, especially Tharman, keeps “talking the talk” of raising productivity, despite not walking the walk. I’m sceptical of its announced plans to cut the “FTs are betterest” policy until I see how it is being implemented.)

The speech is long and can be divided into an economic analysis of S’pore and a sociopolitical analysis of S’pore,

In this post (Part I), I report and comment on the economic part of the speech**. In Part II (later this week), I will report and comment on the sociopolitical aspects of his speech.

——————————————–

Evolution of the policy of importing cheap foreign labour

“Singaporeans of my generation remember vividly the slums, joblessness, dirt and disease of the 1950s. Through dint of hard work and discipline, we moved rapidly from a labour to a skill-intensive economy. By the early 1970s, we achieved full employment with an unemployment rate of 3 per cent.

‘In the early 1970s when we achieved full employment, some of us in the EDB began to ask the question about the critical size of populations. We did some desktop research and found that there were several industrialised European countries with population size of around 5-6 million. These were Israel, Norway, Sweden and Finland. Our town planners went to work and concluded that Singapore with a land area of 670 square kilometres can comfortably accommodate a population of 5-6 million … we allowed in one million foreigners in the last decade.”

He went on, to give another reason for the FT policy, “As our births fell below replacement levels, we resorted to immigration as an instrument to top up the babies that young Singaporean couples are not having. There are also elements of political re-engineering. Submerged in our immigration policies is the belief that to maintain racial harmony, we need to keep the current population balance constant.”

He challenged the premise that S’pore needs a bigger population pointing out that

– “Singapore is already straining at the seams with a current resident population of five million … The economic assumption is that we can increase our GDP if we can accommodate more people … even doubling our population to 10 million people will not make things better. More likely, a larger population can only make matters worse.”

– “[C]omputer technology has made many manual operations in production obsolete. The key is to produce more with less manpower.”

Knowledge-based economy

“The great challenge … is that we have reached the limits of our skill-based model of growth. Singapore has to move from a skill to a knowledge-based economy. The products and services … are characterised by high technological content. To position ourselves for such an economy, Singapore devotes the greater part of our national budget to education and training.”

“When I was in school in the 1950s, only three out my O level class of 40 went on to university. Today, 30 per cent of a primary school cohort enrol in tertiary education. Raising our average educational level from primary to post-secondary should make a world of difference for our international competitiveness.”

“Our higher education levels and superior infrastructure enable us to compete in knowledge-based industries and services.”

Productivity

“I observe with some dismay that the manufacturing share of our GDP dropped from a high of 30 per cent in the 1980s to 20 per cent currently.”

“Our total factor productivity should be rising not stagnating. In my view, productivity and real wages of the bottom 20 per cent of our work force have not risen because our labour policies allow employers easy access to low wage foreign labour.”

He explains that for S’pore as a whole, there are costs to this easy access to cheap foreign labour, “If we add the cost of housing, transportation, health and other social services which employers have to provide for their foreign work force, they may be better off training and equipping their Singaporean employees to raise their productivity. Rising productivity enables workers to be paid more. Inflation sets in only when wages are raised without any increase in productivity.”

“Productivity can only be raised when CEOs … take direct charge of the production process. They have to be hands on, not resorting to outsourcing. Productivity should be the key KPI (key performance indicator) for the award of bonuses to CEOs and management.”

“Like any other country in the world, Singapore now competes in a global economy. In such an economy, importing cheap foreign labour is no longer a viable strategy. It is a dead end.”

“We have to grow through raising productivity, not higher headcount. We need to be smart enough to produce more with less. Our higher education levels and superior infrastructure enable us to compete in knowledge-based industries and services. We transformed ourselves in the 1970s from a labour to a skill-intensive economy.”

But he accepted that “raising total factor productivity .. is not easy. A Japanese scholar pointed out … that the optimum rate of productivity increase achieved by [Japan] averaged 4 per cent annually … Japanese are one of the most diligent people in the world.”

Why importing cheap labour is not the solution – it’s a race to the bottom

“Singapore now competes in a global economy. In such an economy, importing cheap foreign labour is no longer a viable strategy.  It is a dead end.”

“In a global economy, you will be competing not only with friends and classmates but with the best and brightest of your generation in India, China, Brazil, Russia and Eastern Europe. University graduates in China and India are willing to work for a tenth of what our young engineers and scientists expect. If we fail to raise our total factor productivity, Singapore would just be an also-ran in the race to be a knowledge-based economy. The window to raise total factor productivity through application of knowledge and training is fast closing with the opening up of India, China and Indonesia. Singapore has lost two decades relying on low-wage, low-skilled foreign labour to drive economic growth.”

What can help

– “Our managers and administrators are among the best paid in the world. They will have to get off their high horse and personally lead the drive for higher productivity. Outsourcing is a bad word in my vocabulary. Companies and government ministries should figure out how to train their staff and redesign jobs and processes to achieve more with less.”

– “[I]nterest free loans should be given to enterprises with clear roadmaps to re-equip and raise the productivity of their workers.

What he is against

“Grants should not be given to management (consultants) to do a job they are already paid to do.”

‘I am against job credits in any form because they are simply wage subsidies which do not raise productivity in any way. My personal observation is that job credits simply add to the bottom line for payment of bonuses to management who do not have to lift a finger to raise the productivity of their enterprises.” Based on this, I suspect he would also be against having a minimum-wage.

“The 2012 budget is politically adroit, replete with spending proposals which basically are income transfers from the taxpayer to the poorly paid, the disadvantaged and the aged. Income transfers are palliatives, temporary reliefs to abate rising social discontent. They do not help to raise productivity.”

Final warning

“We failed to bite the bullet in the 1980s to restructure our economy. There may be no second chance the next time around.”

————————-

*Ngiam was in the 1980s one of Lee Kuan Yew’s and Goh Keng Swee’s most trusted civil servants and if anyone, could be called a co-driver of S’pore’s drive from third world to first world, it would be he.

**The quotes are taken from a transcription published in BT.

S’pore’s average wage relative to other countries

S’pore’s average wage is juz behind Germany’s and juz ahead of Australia. HK is a long way below us. So Gordon Lee and David See (TOC contributors) stop talking BS when comparing S’pore to HK. Lots of things wrong with S’pore but there is a difference between facts and rubbish. (Funny that TOC use their stuff when TOC has contributors of the quality of Ghui and Uncle Leong.)

 http://www.bbc.co.uk/news/magazine-17543356

Funny also the our mainstream constructive, nation-building doesn’t report how well S’pore ranks globally. Cock-up or subversion by friends of Gordon and David in the newsrooms of our constructive, nation-building media? ISD should investigate.

Rising electricity prices: Tell us the truth

Article 14 has got it absolutely right last week  http://article14.blogspot.com/2012/04/electricity-prices-go-up-because-of.html. He is right to point out that SP Services explanation of why electricity prices have to rise (that the price of natural gas is going up) is absolutely rubbish. World prices of natural gas have collapsed as Article 14 pointed out.

The explanation is simple, but I suspect it is an explanation that SP Services and the government want to “hide” from ordinary S’poreans who don’t follow energy prices and trends, or the evolution of the energy industry over the decades. The sad but funny reason is that there is no selfish or self-serving reason to “hide” anything.

Here’s an opportunity for the PM (“working together”) or Tharman (“I think it’s important for us to retain a relationship of trust between whoever is the elected government and the people”) to show that they are “walking the walk’ of “engaging” us.

As it’s the economics and evolution of the natural gas market that make us pay more for natural gas while prices keep going down, this should not affect perceptions of the government by reasonable (the majority) of S’poreans.

Over a week ago, the NYT reported,  the price of one million Btu of natural gas fell below US$2.20 for the first time since 2002, while oil prices slipped a little but remained above US$100 a barrel. The last time natural gas was this inexpensive, oil cost about US$20 a barrel.

Unlike the oil market*, the natural gas market, is not a global, nor an efficient one (outside of the US). (I’ll explain this in detail later using S’pore and Qatar as examples).There is only a limited global trade in gas (the S’pore government is trying to encourage such trade with the building of a gas terminal), which can be transported in tankers, but mostly gas must move in pipelines over land in Europe and North America, the biggest users of energy. Example: natural gas prices have been rising in Britain this year even as they have been falling in the US.

Supply has soared in the US because of increased production from hydraulic fracturing (a newish technology), but demand in the US cannot change rapidly. Power plants that can burn gas or oil were shifted to gas long ago. And a relatively mild winter in the US has reduced demand. There is now a glut there.

S’pore, as readers, will know gets its supply of gas from gas fields in Indonesia and Malaysia. The energy MNCs who developed these kind of fields did not develop these fields until they were assured that there were assured long-term buyers of the gas (This is still true today). There are a lot of upfront costs and the lead period from the time the fields are being developed to the first shipment of gas to the customer are measured in decades. Example: gas was discovered in Qatar in large quantities in the 1980s. It became a major exporter only in the early to mid-noughties. It took that long to build the facilities to ship the gas to places like Japan and South Korea, taking into account the time to negotiate the contracts.

Then there is the issue of pricing. Until very recently, natural gas contracts were priced off the price of oil because they were often found together, and both were scarce.

When the gas contracts for S’pore were negotiated all those many years, the price of the gas that S’pore pays was priced off the price of oil. Hence one reason of the paradox of us paying higher prices for gas when the price of gas is at a 10-year low. Another reason is that S’pore is locked into long-term contracts, and another is that until the gas terminal is operational  in the second quarter of 2013, we can’t get gas from another source. BTW, the plans for a gas terminal show that the government can get things right.

Now S’poreans are not the only people who got “screwed” by the breakdown between the price of gas and oil. KKR and TPG, giant and successful US private equity investors invested billions of their investors’ funds in TXU. One of the things they were betting on was that gas prices would be priced-off oil prices for the foreeable future. Err now even Buffett has lost money buying TXU bonds.

So why don’t we get told the truth of why we are paying higher prices when the price of natural gas has collapsed, when the answer has nothing to do with government or its agencies incompetency?

One reason could be that the PR people in these organisations are still stuck in the pre-internet model of news management. They believe and advise that “news” can be manipulated to fool the people all of the time.

More seriously, the government and its agencies may want us to think that their value (and high salaries of the senior staff) lie in making the right long-term decisions all of the time.

They should realise that S’poreans are no longer dependent on the government, its agencies and the constructive, nation-building local media for facts and analysis.

And that S’poreans have realised that long-term decisions don’t always result in benefits for S’poreans. We know that already because of the FTs, and public housing and transport problems, the result of long-term planning and decisions.

In the case of gas, it was (and still is outside the US) a rational decision to buy on long-term contracts gas that is priced off oil. It’s not a balls-up on the lines of the FT, and public housing and transport policies which has the government throwing money at the public housing and transport systems, and telling us that it’s changing its “FTs are betterest” policy.

Finally, market expectations are that this time next year, oil prices are expected to be almost where they are now, while natural gas prices are forecast to have risen more than 50%. What a great time then to shout about the competency of the government, when telling us that electricity prices are relatively stable? 

My point is that facts are changing, what may look bad for the government one day, may look good another day, depending on the facts. It shouldn’t “hide” the truth (especially when the truth doesn’t discredit the government) if it wants S’poreans to regain trust in the government.

————–

*Oil moves around the world in tankers that can be diverted from one destination to another in response to shifts in demand. A sharp change in demand or supply in any place is likely to show up in prices everywhere. Oil prices can also be affected by geopolitical concerns. Example: oil prices have risen on worries that Israel might attack Iran, leading to a drastic reduction in Iranian oil exports.

S’pore is tops, but MSM does not report it

Analysts Maplecroft rates five countries at the “extreme” level of risk for the pandemic spread of influenza, with Singapore top, followed by the UK, South Korea, the Netherlands and Germany.

Singapore is rated the highest for the speed at which influenza could spread, because of its dense population (all those FTs?) and its status as a global travel hub.

BBC article.

Wilmar: Beneficiary of China slow-down?

One reason why Wilmar had such a bad set of results was because it’s Jing Long YU (China’s biigest cooking oil brand) could not raise prices because of administrative measures imposed by the government to control inflation. Pre-tax margins in this segment more than halved.

Now that Chinese inflation has fallen to a 20-month low in February, Wilmar should be able to raise prices for this brand?

Casinos: Good for our banks

No, not profits from lending to gamblers and loan sharks but from raising money for Sands.

Las Vegas Sands, controlled by Sheldon Anderson, hired DBS Bank, OCBC Bank and UOB to coordinate a S$4.6bn loan for Marina Bay Sands, Bloomberg News reports. The loan may be split into a S$4.1 billion term facility and a S$500 million revolving credit facility.

A reason not to help SMEs

Well when PAP and WP MPs. SDP activits and Tan Jee Say are worried about the fate of SMEs,all saying shumthing must be done to help the SMEs, then something must be done to help them?

Maybe not: Where small firms are most common, as around Europe’s southern periphery, their prevalence is sign of uncompetitive markets and low productivity … examines the problem of the stunted European business http://www.economist.com/blogs/freeexchange/2012/03/productivity

Ah, what about the German SMEs? Well the Germans are different. They stated two world wars in the 20th century, lost both of them but 67 years after failing to create a Third Reich is now the dominant European power; restructured their economy when Eurozone interest rates were too high for Germany (they cut real wages and welfare payments, and raised productivity, unlike the lazy, lying, thieving Greeks who only know to riot, lie and steal); and sell to China the machinery to make goods that China exports.

S’poreans are not Germans. For starters, the German government, like the Germans, doesn’t believe in FTs to solve Germany’s vanishing workforce problem: 20% over the coming decades. The Germans believe in robots and moving manufacturing to eastern Europe (their M’sias and Indonesias).

Also unlike our SMEs, the most succesful German SMEs are global leaders in their very specialised fields. Finally most of our SMEs would not fit the German definition of SMEs. Ours would be classified as micro enterprises

Global & ASEAN perspective on S’pore’s vanishing workforce

“Singapore labour force to start shrinking: DPM Teo” was the healine in Friday’s Today. The next decade will see the Singaporean workforce start shrinking, while more go into retirement, such that come 2030, there will be only six citizens starting their working lives for every 10 going into retirement. And beyond that, the Republic’s population will start to “decline sharply”. Article

 

The chart here shows that the following nations are all set to see declines of more than 10% in the expected change in working age population between 2010 and 2035. ; Switzerland, the Netherlands, Austria, Hungary, Italy, Portugal, Poland, South Korea, Russia, Japan and Germany. In the last two cases, the decline is set to be 20%. Despite the comments of one LKY, the Japanese are happy and properous, happily ignoring his advice on demographics.

Well I don’t see waz wrong being in the company of  Switzerland, the Netherlands, Austria, South Korea, Japan and Germany. S’pore’s decline is much less than 10%, and it has the company of HK, Thailand, Denmark, Finland and China.

But maybe the government is worried about Indonesia, Malaysia and the Philippines? Don’t want them to be more successful than S’pore?

Whatever it is, maybe it’s about a variation of the theme behind this poem by Bertold Brecht, a famous playwright and Marxist activist (he was even a Hollywood screenwriter in the golden years of Hollywood in the 1930s):

After the uprising of the 17th of June

The Secretary of the Writers Union

Had leaflets distributed …

Stating that the people

Had thrown away the confidence of the government

And could win it back only

By redoubled efforts. Would it not be easier

In that case for the government

To dissolve the people

And elect another?

Beware of distorted markets

Investors now live in a sort of fairground hall of distorting monetary mirrors. Their perception and motions are twisted by negative real policy interest rates, by topsy-turvy government bond markets, by fiscal deficits which range from large to enormous and by a financial system still considered so fragile that it needs extensive official support. Until the mirrors are straightened – a process that will take years – it would be dangerous to feel too happy about rallying markets.

http://blogs.reuters.com/breakingviews/2012/02/24/beware-of-distorted-markets/

Another great insight an the Economist blogger

a big enough rise in oil prices that translates into a big enough decline in expected growth and inflation may nudge the Fed from the rates-will-be-low-because-we-want-catch-up-growth interpretation toward the rates-will-be-low-because-the-economy-will-be-weak interpretation.

S’pore: Despite FTs, an expensive place to make pancakes

According to the chart in this link, only Japan, HK, Switzerland and Norway are more expensive places to make 12 -15 pancakes using 110g of sifted flour, 2 eggs, 200ml of milk and 50g of butter. And this was when we had FTs making the pancakes! Soon we will overtake Switzerland.

When Goh Chok Tong talked of a  Swiss standard of living for S’poreans, he must have meant cost-wise. SIGH. Zurich is the most expensive city in the world, and S’pore is eight places behind. http://atans1.wordpress.com/2012/02/15/spore-9th-most-expensive-city-in-the-world-up-88-places-in-10-yrs/

One reason why equity mkts are bullish

BUSINESSPEOPLE around the world are still gloomy about the outlook for the global economy, but they are a bit less gloomy than they were last October, according to The Economist/FT survey of over 1,500 senior executives, conducted by the Economist Intelligence Unit.

http://www.economist.com/blogs/graphicdetail/2012/02/daily-chart-10

S’pore: 9th most expensive city in the world

(Update at 9.00am on 15 Frbruary 2011: Headline rewritten, and changes made in text. “kbs” pointed out (see comments) that I misread the 2001 figures. Apologies for being daft. Will try not to be daft again.)

In 2001, it was ranked 97th. The survey uses prices of goods and services such as food, transportation, housing, utilities, private schools and domestic help to calculate scores for each city, using New York as its base with a score of 100. To be fair, most S’poreans do not rent homes in prime districts or send their children to private schools.

And the strength of S$ in 2011 can distort figures. A kilo of bread would have cost US$2.86 in 2010, according to the Economist’s data, but last year cost US$3.19 – an 11% increase. But, 6% of this is due to weakening US$. In S$, the price of bread would have gone up 5%.

http://www.economist.com/blogs/graphicdetail/2012/02/daily-chart-7

Still 88 places in 10 years being number 9 is not shumething to crow about because

If we look at the data for the last 10 years, for example, the income of Singapore citizens at the 20^th percentile level, grew by only 25%, from $1,200 in 2001 to $1,500 in 2011 (excluding employer CPF contributions).

In real terms, I estimate the annualized growth to be about 0.2%.

This is a far cry from the 2.2% real annualized growth for the last five years (including employer CPF contributions).

(Full article)

And the “new poor” continue to face the triple whammy of high living costs, low wages & purchasing power.

A worrying economic signal?

Investors are in the mood to take more risk in return for higher rewards. They are in “risk on” mode.

Recently, the Baltic Dry Index has fallen to a 25-year-low (since then it has risen by 1.9%) prompting concern that history is about to repeat itself. In the past, say 2008, a weak index foretold a recession, or at least an economic slowdown.But this time there been some special factors at play, according to conventional wisdom. The boom in the Baltic Dry seen before the financial crash and recession was in large part the result of a shortage of ships, which pushed up the cost of carrying freight. There are now far more ships with greater capacity and, because it has taken time for the vessels to be built, the extra capacity has become available when ship owners least want it. A, short-term factor, has been that the Chinese New Year holidays fell early this year, depressing trade in Asia.

Still a 2.9% fall in German industrial production in December suggests that the index might have collapsed due to both increased supply of shipping and weak demand. Germany is the world’s biggest exporter and the hefty slump in output at the tail end of 2011 coincided with the intensification of the crisis in the euro zone. Remember, too, that Germany exports machines to make goods to China.

Update on !0 februart 2012 at 7.05am:

Imports into China fell by 15.3% In January, and this cannot be all due to the Chinese New Year holiday factor. Exports dipped 0.5% from a year earlier hurt by sluggish demand and factories being shut during the Lunar New Year.

This resulted in a trade surplus of $27.3bn which was a six-month high.

More

Rolls-Royce’s S’pore workers more productive than UK workers

Bang balls, SDP, NSP, KennethJ and TJS. Hey not all the govmin’s initiatives fail. Witness this new aero engine plant.  And S’pore-based workers can be more productive than British ones: by six days.

http://www.bbc.co.uk/news/business-16789111

What the report does not tell us is that SIA’s (along with Qantas’ ) Airbus 380s use RR engines. RR only has a 9% share of the Western-made aircraft engine market share.  This again shows that there are benefits to Singapore in SIA being owned by the state. Bang yr balls harder SDP, NSP, KennethJ and TJS.

Joker in the World Economy

If the US is Superman and Batman is China, and both want a growing world economy, their enemy is the Joker super-enhanced with kryptonite, or otherwise known as “Iranian oil”.

Extract from BBC Economics blogger, Stephanie Flanders:  

Iranian oil

All the mainstream forecasts for global growth in 2012 assume a flat or falling price of oil. Last year’s updated IMF forecasts, for example, assume the average price of oil falls from around $105 per barrel last year to $100 in 2012 and $95 in 2013.

For the UK, you’ll remember the likely fall in inflation (helped by stable or falling oil prices) was one of my biggest “reasons to be cheerful” in 2012.

US and EU sanctions on Iran could well mess with these hopes, especially if Iran decides to cut oil shipments well before the EU sanctions formally come into force. In the past few weeks, Iran’s leaders – and its parliament – have been talking about doing precisely that.

Iran exported roughly 2.2 million barrels of crude per day in 2010, equivalent to around 2.5% of global demand. A good chunk of that oil went to Europe, unfortunately quite a lot of it to the countries in crisis. Around 15% of the oil imported by Spain, Greece and Italy comes from Iran.

The oil price has crept up in recent weeks, but if you want to insure yourself against a major price spike later in 2012, you can do it very cheaply. The market just doesn’t think it’s very likely.

There are lots of sensible reasons for traders to be relaxed. Saudi Arabia has pledged to increase its production, if necessary, to keep the oil price stable; the US financial sanctions, which would make it very difficult for Iran to get paid for its oil, have quite a lot of flexibility built into them; and the EU sanctions are likely to be phased in.

And yet, this is the oil market we are talking about. And Iran. Neither exactly has a reputation for stability, or predictability.

Senior Israeli politicians at Davos were suggesting privately that there was a one in three chance of some form of violent confrontation with Iran this year.

Of course, Israel has an interest in talking up the threat posed by Iran. But the noises coming out of Tehran are not exactly reassuring. You have to wonder whether the rest of the world – including traders in oil futures – is taking it seriously enough.

S’pore Property: But would banks be allowed to?

Mortgage rates make the difference

So what contributed to the recent decoupling of Singapore and Hong Kong home prices?

The simple answer is mortgage rates.

Driven by strong loan growth and rising loan-to-deposit ratios, Hong Kong banks have raised their mortgage rate spreads since early this year [2011]. This has resulted in higher mortgage rates and reduced demand for residential properties, which in turn led to the slide in private home prices since September.

On the other hand, the Government’s property cooling efforts have so far been thwarted by very low mortgage rates. With base interest rates remaining near record lows and Singapore banks charging very low mortgage spreads, affordability remains high.

However, there is a risk that Singapore mortgage rates would rise next year from their current low levels. Like their Hong Kong peers, Singapore banks have also experienced strong loan growth over the past year, which in turn has pushed up their loan-to-deposit ratios – although it must be said that ratios in Singapore dollars are generally still low.

Moreover, with the debt crisis that is plaguing the European Union, there has been anecdotal evidence that some European banks are pulling back their credit lines in Singapore to help boost capital ratios as required by the EU debt plan. If these banks continue to deleverage, it could result in less competition in the lending market for Singapore banks, which may then feel comfortable enough to raise their lending spreads, including mortgage spreads.

In fact, during the 2008/2009 global financial crisis, local banks such as UOB and OCBC were able to increase their net interest margins as foreign banks reduced their lending activities in Singapore.

Thus, while the recent decoupling in Singapore and Hong Kong residential property prices may make for an interesting read, we do not expect it to last for long, especially with the latest round of cooling measures introduced in Singapore.

http://www.todayonline.com/Commentary/EDC111223-0000039/A-tale-of-two-cities

Should happen as this UBS analyst postulated in late Dec 2011. But if the government thinks property prices will tank, not juz fall a little, the local banks will “do the right thing” by home owners, but not investors. It has happened before. In the crisis in the mid 80s, when many home owners had negative equity, the banks “did the right thing” and did not ask for more equity. Home owners had gd reason to vote PAP.  

 

 

“Well-off bear biggest brunt of the price increases”

Taz part of a headline in today’s ST.

In the text of the story, it said “the top 20 per cent … were hit by … rate of 5.7 per cent — much higher than the 4.7 per cent for the bottom 20 per cent”.

(ST’s Breaking News reported, “The lowest 20 per cent income group experienced a lower increase in consumer prices at 4.7 per cent, compared to the middle 60 per cent and highest 20 per cent income groups, which experienced CPI inflation of 5.1 per cent and 5.7 per cent respectively.”)

The editors and the two reporters Aaron Low (Econs correspondent) and Melissa Tan obviously don’t know their maths.

Say a poor S’porean is earning $12,000 a year: a 4.7%  inflation rate means he had $564 less to spend in the year on other things. For a rich S’porean earning $600,000, he has $34,200 less to spend.

Whose standard of living or savings rate is affected more? Obviously the poor S’porean, yet ST blithely writes, “Well-off bear biggest brunt of the price increases”.

What can I say?

Liberal immigration policies leads to higher property prices

No not PAP propoganda but a sober analysis by Deutsche Bank that looked at the relationship between demographics and house prices in Western economies.

An analysis by Ajay Kapur of Deutsche Bank shows this relationship is pretty robust. He finds a positive relationship between changes in the working age population ratio (15-64 year olds relative to the rest of the population) and residential property prices, real prices almost always rise when the working age ratio is improving. In contrast, real property prices fell in one in three years when the working age proportion was falling. This ratio is declining in many countries; indeed in some the absolute number of workers is set to fall.

http://www.economist.com/blogs/buttonwood/2012/01/housing-markets

An annoying ministerial boilerplate remark

It was reported by CNA that DPM Teo Chee Hean (one of the better ministers in my view) “said the government’s focus is on ensuring that Singapore remains the best home for all Singaporeans.

‘Beyond developing an attractive living environment and a thriving economy which sustains good jobs for its citizens, Singapore also needs to strengthen the bonds that Singaporeans have with one another and with the country.”

My bitch is about “good jobs for its citizens”. If anything the government has attempted to “developing an attractive living environment and a thriving economy” by making it difficult for the wages of citizens to rise despite rising housing prices and cost of living expenses. It does this via its “FTs are most welcomed” policy, which keeps wage costs down. To be fair, the FT policy also helps keep property prices up. See next posting.

It is a fact that FT HR employees aggressively pitch to the employers, the merits of their compatriots. I know a manager in an MNC wanting to employ a S’pore-trained lawyer, being sent nothing but the CVs of Filipino-trained  lawyers by his, you guessed it, Filipino FT HR manager.

Even though it has now promised to moderate this policy, it has not changed its views on the importance of this policy. Hence its constant ministerial refrain that less FTs means less GDP growth and less jobs for S’poreans. And the constructive, nation building media and academics from SMU keep on harping on the unhappiness of employers who want cheap FTs, and the costs to the economy (including less full time jobs for ploy grads).

UBS: View of 2012

With equity markets likely to be trading sideways albeit in a high volatility range, investors should continue to invest in defensive, high-dividend stocks and complement that with exposure to the fixed income space.

The stock dividends and bond coupon payments will provide a valuable income stream for investors as we expect the current environment of almost zero deposit rates, relatively high inflation to persist amidst slowing economic growth.

http://www.bbc.co.uk/news/business-16381119

My tots exactly: Go buy stocks that pay good, sustainable dividends http://atans1.wordpress.com/2011/08/12/a-broker-who-almost-got-it-right

 

2012: Not so bad leh?

The outlook for 2012 is neither promising nor hopeless. Collapse of the global financial system, a return to the 1930s, a new depression, deflation – each threat to the world economy since 2008 has been real and has so far been averted. Euro collapse is the next threat. Policymakers will have to be resourceful again. That the world is still just about recovering shows that unlike in the 1930s they haven’t got everything wrong.

http://www.breakingviews.com/2012-another-year-of-living-euro-dangerously/1621498.article

S’poreans got money meh?

The SDP, KennethJ, Lina Chiam and many regular contributors to TOC and TR are forever harping that standards of living for the majority of S’poreans have dropped since the 1990s. I take these comments with a large pinch of salt, even though I am an agnostic when it came to the claims of the PAP and government that living standards had improved throughout the noughties. (What am I supposed to think when the CEO of HDB tells me that shrinking flats means a higher standard of living for occupants? Yes I am misquoting but not that blatant leh.) 

They would say that wouldn’t they?

Still I was surprised yesterday evening when catching up with the local propoganda sheets, I read, While Singapore has 900,000 HDB flats and 557,000 car park lots  [or 619 for every 1000 flats by my calculations], Mr Khaw noted the problem of car park shortages was mostly felt in older HDB estates, which were built under old car park provision norms. In estates with four-room flats for example, 560 car park lots were planned for every 1,000 flats.

“This was adequate in the past but not any more. More Singaporeans now own cars and some own more than one car,” said Mr Khaw, who noted that 5 per cent of HDB households own two or more cars. The equivalent norm now is 710 car park lots for every 1,000 flats. With these new norms, Mr Khaw assured that new HDB flats would come with adequate car parks. Today on 24 December.

This means that despite rising public housing prices and COE prices, more HDB dwellers (remember over 80% of S’poreans live in HDB flats) are owning cars than ever before.

Of course, this could be another Khawism like his S$8 heart operation.

Assuming, Khaw was not fibbing about the numbers, will the SDP, KennethJ, Lina Chiam or the many regular contributors to TOC and TR Emeritus who are forever harping that standards of living for the majority of S’poreans have fallen, explain how come so many ordinary S’poreans are rich enough to own cars (some even two) despite rising COE and HDB prices?

Does this have anything to do with the easy availability of credit? And if so, is it good or bad for S’pore?

Maybe the 60% of voters who voted PAP are not deft? And one LKY is right to wonder why 40% of the voters are not gtrateful to him and the PAP.

Come on PAP critics. The silence is deafening.

“LIES, damn lies and statistics” and two local examples?

Example 1?

So a reasonable interpretation of the minister’s comments below are that the inflation numbers as far as they affect HDB residents and non-car owners are a lot of rubbish because they are not affected. So why not construct an additional index that excludes these costs? The reason that this is not done could be that then other costs have to be included, such as a great weightage for public transport costs, and the cost of public housing. And this could outweigh the costs of rentals and car ownership? Better to talk in general terms, than create a rod to break the PAPpies back?

While Singapore’s economy is headed for a slowdown, Mr Lim noted that inflation is somewhat “persistent” due to factors such as global commodity prices, “particularly fuel and oil prices”. Other causes include the Government’s domestic policies on housing and car ownership, he added.

Reiterating that core inflation is “not unusually high”, Mr Lim said: “So if you are an owner of a HDB flat, the housing prices don’t affect you, and if you are not buying a car, the car prices also don’t affect you.”

Example 2?

http://theonlinecitizen.com/2012/01/misleading-electricity-tariff-chart/

 The chart is misleading because the tariff axis is over-extended … the fluctuations in the electricity tariffs are not clearly depicted and it gives a misperception that the electricity tariffs are not rising as much or as fast a rate as the fuel oil price.

To show a better comparison between the electricity tariff and the fuel oil price, I suggest the tariff axis to range up to 35, to just cover the maximum tariff (30.45 in Oct 08).  This will show the fluctuations of the electricity tariff vis-a-vis those of the fuel oil price better, graphically.

Must read: The ugly reality is that anyone in the know can present statistics so as to create the desired impression, rather than the truth. As usual, you need to know whether the source is credible and honest or not. Recommendations, double checking, second opinions and if necessary, hiring an expert, can all be helpful. One is never totally safe from this kind of falsification, but viable controls are possible. And the more you learn and are aware of the dangers, the safer you are. http://www.investopedia.com/articles/financial-theory/11/lie-with-financial-statistics.asp?partner=ntu11#axzz1fElSc8tZ

 Update at 7.20 pm on 3 January 2011: http://theonlinecitizen.com/2012/01/confused-over-u-save-rebates/ gives many more examples of possible misuse of stats.

“F” word banned by PUB?

Trust a former President’s Scholar to come up with the solution to prevent floods in Singapore. VivianB got PUB to rename “flooding” as ”ponding”. Why didn’t Yaacob do this instead of calling a flood a 50-yr event. Well there were two 50-year events in less than two months last year.

Seriously, I don’t think it was VivianB’s idea. Likely to be the new CEO of PUB that is behind the renaming. He after all blames us for the floods, saying S’poreans took things for granted*. I say to him, “Don’t try to deflect blame like SMRT’s CEO who told us to guard the trains when there was a security break-in. PUB did not do it’s job.

Ain’t this renaming juz daft and misleading? PUB said of the heavy rain last Friday ”there was no flooding at Orchard Road … However, water ponded at the open area of Liat Towers, the underpass between Lucky Plaza and Ngee Ann City, and the basement of Lucky Plaza due to the sustained heavy downpour”.

Sorry PUB, these places were flooded. The ponds were at least ankle deep, at Starbucks, customers walked on chairs to get out, and shops had to close**.

I’m glad that MediaCorp didn’t buy into this euphemism. They called these “flash floods”, as they used to. As to ST, they tried to be truthful, while keeping VivianB and PUB onside. No wonder SPH is such a good dividend payer, while unlisted MediaCorp continues to struggle financially.

If VivianB and PUB were doing their very best to ensure that tourists are not scared off (Remember that the retail trade is tourist dependent to keep profitable and that the overall economy is heading for a slowdown, if not a recession), they failed as far as Malaysia is concerned.  Bernama reported:

Flash Floods In Several Parts Of Singapore Including Orchard Road

Flash floods hits several areas of Singapore including the republic’s most famous shopping alley, Orchard Road, following prolonged heavy rain in the southern and central parts of the city state Friday …

Nice try guys. But better for the economy, retailers and S’pore’s image if the PUB improved its “ponding” prevention measures, not try to play word games.

—-

*”But maybe we have also become victims of own success. Because we have been so successful, alleviating floods, that we have not seen a flood situation for a long time. So when it came, it did catch Singaporeans by surprise.”  Channel News Asia

**How Today reported the situation

The underpass between Lucky Plaza and Ngee Ann City remained closed yesterday evening. Some shop owners at the ground floor of Lucky Plaza said that water levels were ankle-high, but the situation this time was better than during previous floods.

At retail store Giordano, store in-charge Lyn Molino estimated losses of up to S$7,000 and said that customers were not only deterred by the wet floors but also by the stench from yesterday’s floodwaters. “This is supposed to be a good opportunity for us to have extra earnings but it has all been affected,” she said.

The floodwaters also washed out business at Starbucks and fast-food restaurant Wendy’s, among other establishments, at Liat Towers. Wendy’s manager (marketing and branding) Seng Woon Fa estimated losses of about 60 per cent of the day’s earnings. “We are now just busy cleaning up and hope to resume business as soon as possible … we are still checking if any equipment is spoiled,” he said.

Importance of EU economies and banks to S’pore

This table from BT shows how important the EU economies are to S’pore. (NODX- Non oil domestic exports)

Err here’s hoping SPH not upset with me. Remember SPH, it’s Christmas.

And why Asia needs European banks: they were big US$ lenders to Asian banks. http://www.breakingviews.com/asian-banks-cant-fill-gap-as-europeans-retreat/1620073.article

Equities: Sluggish Recovery?

Jeremy Grantham, chief investment strategist of GMO, writes in his latest quarterly letter that the bursting of the two most recent equity bubbles was historically unusual in that stock prices soon recovered to their trend. The next bust, he writes, may not be as forgiving.

http://www.gmo.com/websitecontent/JGLetter_ShortestLetterEver_3Q11.pdf

Another way of looking at the situation is that these two recoveries were bear traps.

Note he called the 2008 crisis before it was fashionable, and he was never someone who was forever and a day prophesying the end is nigh.

PM should read this report

PM should look this up given his recent call for more R&D spending by the private sector.  One lesson: home grown cos needed, not MNCs. UK is nowhere to be seen because like S’pore most of its manufacturing is done by MNCs HQed abroad.

http://www.economist.com/blogs/dailychart/2011/11/innovation

EuroLand Trojan Horse in US financial system?

Or how the Germans can force the US to bailout the Eurozone by allowing Deutsche Bank to  “fail”. Taunus Corp is the U.S.’s eighth-largest bank holding company. Taunus is the North American subsidiary of Germany’s Deutsche Bank.

http://www.bloomberg.com/news/2011-11-21/johnson-deutsche-bank-could-transfer-contagion.html

Think I’m looney?. The Germans are already playing one big game of “chicken” with investors and the people of  PIIGS (Not that these investors and people deserve our sympathy.) Waz another bloodless variation of this game to the nation whose leaders in the 20th century started two world wars in the hope of global domination, or at least European domination.

And the IMF has in what appeared to be an attempt to help countries such as France and Spain stave off the crisis, the IMF said that member countries with a track record of implementing “sound policies” could access up to 10 times their contributions to the fund. It did not say which countries it meant but said it was establishing a flexible liquidity line which would act as “insurance against future shocks and as a short-term liquidity window to address the needs of crisis bystanders”.

Why moving ministers around or out is gd for everyone cont’d

(This piece is a continuation of http://atans1.wordpress.com/2011/11/22/why-moving-ministers-around-or-out-is-gd-for-everyone/ Let me be clear: My analysis of the u/m minister’s performance is based on publicly available data. I am drawing reasonable inferences by connecting the dots. Nothing personal against the minister. In fact, the minister is a better example than Tan Jee Say, of a poor boy made gd under the system in place in the 70s and 80s. BTW, he and TJS were both born in 1954 and were in RI. )

There is still one cabinet minister who underperformed twice, possibly thrice and who is still in the cabinet. 

Lim Hng Kiang was HDB minister from 1994 to 1999, and has to take part of the blame that there was oversupply in the early noughties, something that Mah is blamed for. Mah took the lesson to heart and proceeded to build too few flats resulting in a world first: public housing prices rising in a recession.

He then became Health minister and told us complacently that we had to accept that people had to die in the SARS epidemic. Rumour is that one LKY did not buy into this when his wife fell ill and it was feared she might have contracted SARS. In August 2003 (after the worst of the epidemic had passed), Khaw became health minister and started reforming the public health system.

Lim Hng Kiang has been the Trade & Industry minister since 2004. S’pore is once again facing an economic slowdown , the second in three years because two of our main drivers of growth are not diversified. The exports of pills and electronics tend to move in the same direction.

Is the failure to develop new and diversified drivers of growth partly his fault? We had a recession in 2008- 2009 and a looming slowdown today because the main drivers were correlated. Whatever happened to the plans articulated by then DPM Lee Hsien Loong in the early noughties to have less correlated drivers of growth?

As he has been in the ministry for about seven years, how come we are seeing no changes in the drivers of growth?

And remember the wikileak cable from the US embassy here,  ”The MPs, who were all members of the ruling People’s Action Party (PAP), indicated that Island could not rely on MTI (and EMA) to stand up to Temasek because MTI Minister LIM Hng Kiang is “weak” and not part of the PAP “inner circle,” Reading claimed.”

So why is he still in the cabinet? PM should follow his dad’s policy of ruthless execution of underperformers, not his successor’s and his (pre May 2011) tolerance of underperformers.  His dad must be aware of what  Bertolt Brecht, the famous Marxist and German playwright, meant when he wrote, “The finest plans have always been spoiled by the littleness of them that should carry them out. Even emperors can’t do it all by themselves.”

If you are reading this M John, please realise that the best RI boys are not necessarily those with high academic credentials like yrself, Goh Chok Tong, Hng Kiang, Raymond Lim or Tan Jee Say, who then become highly paid ministers like Goh and the Lims. Think rather of self-made billionaires like Peter Lim and A Hussain. One juz has an ordinary degree and the other never went to university. They are the people who do RI proud, not the scholars turned civil servants/ soldiers turned ministers who one can reasonably (but nastily) argue are effectively on state welfare from age 18 until they die.

It is sad that according to a junior minister 60% of the poor who need help don’t want welfare. Yet there are underperforming millionaires, living off the state.

2008 all over again?

Business sentiment is worse now than on the eve of the financial crisis in 2008, according to The Economist/FT survey of over 1,500 senior executives conducted by the Economist Intelligence Unit.

http://www.economist.com/blogs/dailychart/2011/11/global-business-barometer

And in the UK last week, sterling London Interbank  Rates (LIBOR) reached their 2009 levels.

Why stock markets are 10% higher

You will not have noticed, but global equity markets have risen well over 10% in general over the past four or five weeks – and are significantly higher even on European markets.

There has been some good news. Recent statistics show that the US is further from recession than was widely feared it would be although growth is sluggish and unemployment stubbornly high. Capital spending of American companies hit a high in the third quarter not seen since 2008. Expenditures rose 24% to US$43.3 billion in the third quarter for 140 non-financial companies in the Standard & Poor’s 500 that had released such data as at Nov 4. And leading US industrial and consumer companies are still posting better than expected profits.

As for China, the economy is slowing, but not yet in trouble . Jim O’Neill of Goldman Sachs (a bull on China), wrote over the weekend that if Chinese CPI inflation drops to 5.5/5.6% or so, that would be “comforting to those expecting a ‘soft landing’” even though China’s critics see evidence of a coming Chinese property crash and banking crisis.

Blame the Greeks and Italians for all the jitteriness. The Germans should send their panzer divisions and occupy these countries, loot them of their portable treasures, sell off the Greek and Italian islands to the rich Chinese and Indians, then bail the Greeks and Italians out.

But it may be wrong to read too much into this bounce because trading has been relatively thin.

S’poreans are rich

Wonder why http://www.facebook.com/#!/FabricationsAboutThePAP or YPAP or SDP don’t tell us things like these? Don’t know economics or money not enough?

F1: Does the government know?

Earlier this year News Corporation, a media group, and Exor, the family investment firm of the Agnelli family, which also owns Ferrari, announced their interest in making a joint bid for Formula One. (News Corp is no longer interested given its problems in the UK.)

They briefed that the sport was losing its ground. Viewership is falling, though the business rakes in ever-growing piles of cash from doing deals with governments to host Grand Prix races. Mr Ecclestone (the current supremo) has no successor trained to take on the difficult task of balancing the competing needs of teams, sponsors, broadcasters and circuits.

If viewership is falling, and if there are succession problems, waz the point of staging rsace, unless the cost of staging one comes down?

What if there is stagnation?

A few days ago, I blogged that were three scenarios for the developed world. Growth — buy equities; inflation — buy property and commodities; and recession — buy government bonds.

Thinking about it again, there is a  fourth scenario: stagnation. There will be shallow recoveries and recessions in quick succession.

In that scenario, one should be looking at buying equities for their dividend yields, and the corporate bonds of super blue chips.

Where be the next winner?

Depending on where the developed world heads, equities, commodities and property, or government bonds could be the investment.

There are three scenarios for the developed world (remember the BRIC and Indonesia etc still are dependent on the developed world to drive their economies). It can

– grow out of its debt burden,

–  inflate the debt away, or

–  fall back into recession, marked by the occasional default.

Each of those outcomes leads to a different portfolio.

Renewed growth would favour equities, but at the moment, this looks too hard to achieve. An attempt to inflate would be good for commodities and property but would be disastrous for government bonds. Selected equities might do well: those that can pass on the cost rises to customers. Those bonds would do best if the developed world goes into a  recession.

Hope this explains the extreme volatility of markets.

Mortgagors may get double whammy?

Looks like MAS is right to focus on weakening S$ Double dip here we come.

So morgagors may face rising interest rates (interbank rates rise to attract S$ deposits) and a recession (no jobs). True rate rises may be moderate but it all depends on how prudent “homeowners” have been in their budgeting.

I hear that advertising and marketing people are being axed as of this morning.

Mortgagors: No gd scenarios

Commentators like Tan Kin Lian have been saying for ages that interest rates cannot remain at so low levels here and that they must rise one day. Then those homeowners who overleveraged by not anticipating having more in interest would face problems servicing their loans.

Well it seems that higher interest rates are occurring finally because the central bank no longer wants an appreciating S$. It now seems to want the S$ to weaken.

The central bank is forcing the value of the S$ down, making it unattractive to hold S$ deposits. It has reversed its policy of allowing the S$ to strengthen against the US$ because it is afraid that a stronger S$ will lead to weaker exports, slower growth and a recession. It allowed the S$ to strengthen because it wanted to fight inflation, a fight that has yet to be won.

If the central bank continues to allow the S$ to depreciate, then S$ interbank rates will have to rise to attract S$ funds. However analysts are divided on how much further the central bank will force down the S$. Those with property mortgages may hope that MAS reverts to a stronger S$ policy. But then the problem is whether they then still have the jobs to service the loans. A stronger S$ could hasten the recession.

Snigger, snigger.

Update on 29 September 2011 at 2.05am

Mortgagors: Double whammy?

F1: S’pore will not rush into contract decision: Iswaran

Mr Iswaran, junior trade minister said: “We have engaged independent consultants, because we want to make sure that going forward, we have a clear idea of what is the value proposition of the F1 for Singapore…from the tourism point of view, from an economic spin-off point of view and a social point of view.

‘My own sense is that we need to have some kind of closure on this, certainly before next year’s race. But I’m hoping we can find a mutually beneficial agreement sooner rather than later.”

This was only reported in ST Online. ST carried an article on its front page praising the economics and other aspects of the race. Headline read,  ”Stunning S’pore race a big winner” .

Is F1 worth it? Updated with 2011 estimate of additional tourism revenue

Year	Cost (SGD M)	Additional TourismRevenue(SGD M)	Profit/ Loss(SGD M)	Margin over Costs (%)
2008	150	168	18	12
2009	150	93	-57	-38
2010	150	160	10	6.67
2011	150	100 (Estimate)	-50	- 33.33

Totals                      600                     521                      -79                             -52.67

(Click the headline to see full table if you are reading from the Home page.)

Doesn’t look gd does it? Looks bad if you ask me. Revenue (estimated albeit) drastically down this year.

[Update on 26 September 2011 7.15am: ST headline "Stunning S'pore race a big winner" and reporting that "race has retained its lustre and won over new fans", is at variance with the estimated drop in revenue (see table) that SunT reported yesterday.]

Note: As much as 60% of the S$150m a year is being invested by the Singapore government through the Singapore Tourism Board (STB) in a bid to attract more visitors here,

Any wonder why “intangible rewards” matter. http://www.bbc.co.uk/news/business-15015158 

But shouldn’t intagible costs be taken into consideration, which makes things worse. Danny the SDP Bear’s pals may not be wrong.

(Cost and revenue numbers taken from BBC link above, except for 2011 revenue, taken from ST. Note ST quotes a revenue figure of S$98m for 2009.)

Is F1 worth it?

Year	Cost (SGD M)	Additional TourismRevenue(SGD M)	Profit/ Loss(SGD M)	Margin over Costs (%)
2008	150	168	18	12
2009	150	93	-57	-38.00%
2010	150	160	10	6.67
Totals	450	421	-29	-19.33

(Click the headline to see full table if you are reading from the Home page.) (Cost and revenue numbers taken from BBC link below.) 

Note: As much as 60% of the S$150m a year is being invested by the Singapore government through the Singapore Tourism Board (STB) in a bid to attract more visitors here,

Any wonder why “intangible rewards” matter. http://www.bbc.co.uk/news/business-15015158 

But shouldn’t intagible costs be taken into consideration.

Buying property stocks: What can go wrong?

Maybe as part of a campaign to make us “feel good”, the constructive, nation-building local media are highlighting that stockbrokers are telling their clients that property stocks are trading at a discount to their net asset valuation (where once they traded at premiums)  or way below  their usual discount net asset valuation.

Hence there are gd buys around.

But there is the fine print that the MSM don’t report or don’t highlight. The brokers point out that they are assuming a slowdown in the economy, not a global recession. Neither they nor MSM highlight that investors are assuming the worst, a global recession, and hence are pricing the stocks at recession values i.e. investors do not believe the values brokers are pricing the assets at because they think the brokers are optimistic.

So if you believe that the world economy is only experiencing a slow-down, go ahead and buy the recommended property stocks. But if you are afraid of a recession, sit tight. The discounts will bet bigger

The problem with being a safe haven

Proud and happy that S’pore is a safe haven in this crisis?

Think again. The Swiss experience. http://www.bbc.co.uk/news/business-14813825

For S’pore the choice is deflation as strong currency stifles economic activity especially exports in gds and services.

Or if the currency is kept artifically low, asset inflation.

Whatever the case, MAS can continue losing serious money (S$10bn last yr).

Only SDP will be happy, saying, “We told you so”.

The new normal in mkts

Investors want governments to spend, spend to avoid a double dip recession. http://www.bbc.co.uk/news/business-14823501

Up to August, they were worried that governments were profigate. They are still afraid of excessive debt longer term, but they are terrified of a recession in the shorter term.

And we rely on markets to help allocate capital efficiently? Sigh

Markets are fickle and neurotic.

DBS bullish on KepLand and UOL

We believe stocks are currently priced for a slowdown but not a recession. Our strategy would be to adopt a stock picking strategy in the property sector. Within the office segment, office landlords are trading in excess of -1 standard deviation to historical RNAV discount while S-Reits are trading at less than 1 SD to the long-term yield.

We believe office stocks have more than priced in the muted outlook and valuations appear attractive currently. While we have widened target price (TP) discounts and lowered TP for landlords given the higher risks going forward, upside to our TP remains significant.

Our top picks remains Keppel Land and UOL. Keppel Land is currently trading at 46 per cent discount to RNAV of $5.57 and offers 40 per cent upside to our lowered TP of $4.18.

We remain positive on UOL, thanks to its multiple growth engines that spans commercial, residential as well as hospitality. Our TP of $4.96, based on a wider 20 per cent discount, offers 9 per cent upside. We have lowered our call on Singland to Hold due to its large 75 to 80 per cent exposure to the office sector.

Load up on S$ assets

If this blogger is correct. Bubble developing here.

http://seekingalpha.com/article/290977-is-the-singapore-dollar-becoming-a-bubble

China: Not immune to Western slowdown?

China, the world’s biggest exporter and second biggest economy, is still booming. Its GDP is expanding at about 9% a year and since the 2008 financial crisis, China has helped keep the global economyfrom falling in a recession. But, as the BBC’s  Damian Grammaticas reports, China may not be immune if there is a new slowdown in the US and Europe.

http://www.bbc.co.uk/news/world-asia-pacific-14578083

S’poreans have two reasons to be interest in the issue. We depend on global growth and Temasek itself, TLCs, other GLCs (like Ascendas) and GIC have big bets on China.

S’pore is Second

S’pore is second to HK in a list of most popular business hubs. London is third. As the people of both these cities have rioted against their living conditions, will S’poreans riot? Nope, they will elect Tony Tan as president.

http://www.cnbc.com/id/44084372?slide=11

A broker who almost got it right

In late January 2011, I posted this giving the views of UOB Kay Hian. It argued investors will be best served by having a balanced portfolio comprising firstly of counters that promise high and sustainable dividend yields.

S’pore equities: Can’t argue with this safety first approach

In Economy, Investments on 20/01/2011 at 5:31 am

UOB Kay Hian says that with the prospect of slowing economic growth and reasonable stock market valuations in 2011, investors should balance their portfolio with a combination of high-yielding large-cap and mid-cap counters that offer a higher margin for growth.

Despite the moderate earnings [8%} outlook for Singapore compared with its regional peers, we think Singapore’s safe haven status will continue to attract selective investor interest amid the uncertain external outlook.

Investors will be best served by having a balanced portfolio comprising firstly of counters that promise high and sustainable dividend yields.

These would be local telcos StarHub and M1, along with real-estate investment trusts K-Reit, Sabana Reit and CapitaCommercial Trust.

And’laggard’ large-cap stocks that offer good growth prospects eg. the banks. Its top pick in this segment is OCBC, followed by DBS. (I prefer Haw Par because of its stake in UOB).

Investors should also be on the lookout for the so-called Garp (growth at a reasonable price) stocks in both the mid-cap, like  Ezra and Ezion, CDL Hospitality Trusts, First Resources and Super Group, and large-cap space.

Its ‘sell’ calls include Keppel Corporation, SingTel, Tiger Airways and CapitaLand. Surprised abt Keppel call because the offshore marine sector is looking gd, what with firm oil prices and offshore projects in Brazilian waters.