2008 Dec29 No351 Bumperposter Theedgespore
1
Published by The Edge Publishing Pte Ltd 150 Cecil Street, #13-00 Singapore 069543 Phone: (65) 6232 8622 Fax: (65) 6232 8620 Copyright ©2008, The Edge Publishing Pte Ltd. All rights reserved. Editor: Tan Boon Kean Research: Rahayu Mohamad Design: Sharon Khoh, Jamy Gan Printed by KHL Printing Co Pte Ltd 57 Loyang Drive, Singapore 508968 Phone: (65) 6543 2222 Fax: (65) 6545 3333 Events 2008 The price of gas is displayed on a board at a Shell gas station in Singapore, on April 20. Sin- gapore’s economy expanded less than initially estimated in 1Q, adding to concerns growth may ease in the coming months as global demand weakens and inflation accelerates. Tony Tan, deputy chairman and executive director of the GIC, speaks during GIC’s staff conference on April 21. GIC says the world economy may be facing its worst recession in three decades. Dec 31, 2007 JANUARY 2 The year starts with news that Singapore’s economy in the previous quarter shrank for the first time in more than four years by 3.2% as weak- ness in manufacturing overtook the growth from a construction boom. But inflation continues as US crude oil breaks the US$100 per barrel barrier for the first time. 9 Singapore opens its new state-of-the-art Changi Airport Terminal 3 in a bid to strengthen its regional air hub status. Built at a cost of nearly $2 billion, Terminal 3 expands the airport’s annual capacity by 22 million to 70 million passengers a year. 25 Singapore will spend about $20 billion to upgrade the MRT rail network to cater for a growing population and reduce congestion. Two new rail lines are expected to be completed by 2018 and 2020. 31 Budget airlines begin flying the Singapore-Kuala Lumpur route, ending 30 years of dominance by na- tional carriers Singapore Airlines and Malaysia Airlines. AirAsia Bhd, the region’s largest budget carrier, is the first to enter the sector, with a morning departure from Kuala Lumpur. Singapore-based Tiger Airways and Jetstar will have one daily flight each on the route. FEBRUARY 15Finance Minister Tharman Shanmugaratnam presents the 2008 Budget, which will incur a deficit of $800 million as it seeks to enhance tax incentives for businesses and help the lower income and elderly consumers cope with rising inflation. The govern- ment will distribute $1.8 billion in tax rebates and other cash to lower income groups and the elderly. 20The US Treasury agrees with Singapore and Abu Dhabi on a set of principles on sovereign wealth fund (SWF) investing and receiving SWF investments and say the principles emphasise transparency, non-politicisation and avoidance of protectionism. The agreement comes a day before the International Monetary Fund board is scheduled to meet on the formation of a set of international best practices standards for SWFs. 21 Singapore beats Moscow in a vote of the International Olympic Committee to host the Youth Olympic Games 2010. APRIL 21The government assures the public there is sufficient rice as prices jump and stocks deplete. Singapore’s consumer price index in March rose at an annualised rate of 6.7%, the highest in 26 years as food, housing and energy costs surged. 22The Singapore dollar rises to a record high of $1.3476 against the US dollar ahead of the release of the March inflation data. On April 10, the central bank had allowed the Singapore dollar NEER to ap- preciate at a faster rate to combat soaring inflation. Economists say the Singapore dollar could rise to $1.33 per US dollar by year-end. 29 The Monetary Authority of Singapore (MAS) cautions the economy may not reach its 4% to 6% GDP growth target this year if the US downturn is severe and results in a worldwide slowdown — a first sign that earlier forecasts for a mild reces- sion may not pan out. MAY 15The US tops world competitiveness rankings for the 15th straight year, but Singapore and Hong Kong are ranked just behind it, same as last year, according to Switzerland-based IMD business school, publisher of the World Competitive- ness Yearbook. JULY 1Singapore private home prices grew the slowest in almost four years in 2Q, showing the property boom is ending. Prices increased only 0.4% after rising 3.7% in 1Q, URA says. Home prices jumped 31% in 2007, an 11-year high. 11Oil peaks at US$147.50 per barrel for North Sea Brent and US$147.27 for US crude. But on July 15, a sell-off begins after US Federal Reserve chairman Ben Bernanke says consumer demand is falling. By the middle of September, prices would go below US$100 and continue falling. 31The Singapore unemployment rate rises to a one-year high as firms slow hiring amid choppy financial markets and a weakening global economy, and analysts warn that unemployment may climb in the coming months. AUGUST 10 The Singapore economy shrank at an an- nualised rate of 6% in 2Q after seasonal adjust- ments. The balance of risk is shifting away from inflation towards growth, market economists note. The Singapore dollar also drops. 18 China beats Singapore for the women’s team gold medal in table tennis at the Beijing Olympics but the consolation is, this is Singapore’s first Olympic medal in 48 years. TOP 10 GAINERS FTSE ST CHINA TOP 1 People's Food Holdings Ltd 2 Hyflux Ltd 3 China Aviation Oil (S) Corp Ltd 4 Li Heng Chemical Fibre Tech Ltd 5 Delong Holdings Ltd 6 Midas Holdings Ltd 7 China XLX Fertiliser Ltd 8 Epure International Ltd 9 Ferrochina Ltd 10 Pacific Andes (Holdings) Ltd * For the period of Dec 31, 2007 to Dec 12, 2008 NAME YEAR-TO-DATE % CHANGE -80 -70 -60 -50 -40 -30 -20 -10 0 -45.50 -47.02 -61.69 -61.84 -63.24 -66.12 -66.97 -70.00 -70.38 -73.02 TOP 10 LOSERS FTSE STI 1 Cosco Corp (S) Ltd 2 Keppel Land Ltd 3 Golden Agri-Resources Ltd 4 Yanlord Land Group Ltd 5 Neptune Orient Lines Ltd 6 Keppel Corp Ltd 7 Singapore Exchange Ltd 8 Sembcorp Industries Ltd 9 Olam International 10 Sembcorp Marine Ltd * For the period of Dec 31, 2007 to Dec 12, 2008 NAME YEAR-TO-DATE % CHANGE -100 -80 -60 -40 -20 0 -82.53 -79.82 -79.72 -77.11 -69.57 -66.37 -62.22 -61.72 -59.02 -58.66 TOP 10 LOSERS FTSE ST CHINA TOP 1 China Sky Chemical Fibre Co Ltd 2 China Energy Ltd 3 Synear Food Holdings Ltd 4 Hong Leong Asia Ltd 5 Cosco Corp (S) Ltd 6 FibreChem Technologies Ltd 7 China Hongxing Sports Ltd 8 CapitaRetail China Trust 9 Yanlord Land Group Ltd 10 Yangzijiang Shipbuilding Holdings Ltd * For the period of Dec 31, 2007 to Dec 12, 2008 NAME YEAR-TO-DATE % CHANGE -100 -80 -60 -40 -20 0 -87.16 -87.10 -84.32 -83.47 -82.53 -82.50 -78.13 -77.21 -77.11 -75.00 TOP 10 gainers & losers DOW JONES 8,761.42 7000 8000 9000 10000 11000 12000 13000 Dec 10, 2008 Dec 28, 2007 Dec 10, 2008 Dec 28, 2007 GOLD SPOT PRICE (US$) 783.50 680 730 780 830 880 930 980 Bloomberg Global Spot Price Commodity Index (US$) 140 160 180 200 220 240 260 137.87 Dec 10, 2008 Dec 28, 2007 CRUDE OIL (US$ PER BARREL) 43.52 30 50 70 90 110 130 Dec 10, 2008 Dec 28, 2007 MAJOR CURRENCIES GAIN AGAINST US DOLLAR 1.2 1.25 1.3 1.35 1.4 1.45 1.5 1.55 90 95 100 105 110 JPY SGD EURO Dec 10, 2008 Dec 28, 2007 NASDAQ 1,565.48 1300 1500 1700 1900 2100 2300 2500 Dec 10, 2008 Dec 28, 2007 Stock-market indices TOP 10 GAINERS FTSE STI NAME YEAR-TO-DATE % CHANGE -50 -40 -30 -20 -10 0 -27.49 -34.75 -35.58 -36.48 -36.65 -37.15 -37.37 -37.96 -39.86 -42.87 1 Singapore Press Holdings Ltd 2 Singapore Telecommunications Ltd 3 United Overseas Bank Ltd 4 Singapore Airlines Ltd 5 Singapore Tech Engineering Ltd 6 Oversea-Chinese Banking Corp 7 StarHub Ltd 8 Genting Int'l Public Ltd Co 9 Jardine Matheson Holdings Ltd 10 Jardine Strategic Holdings Ltd * For the period of Dec 31, 2007 to Dec 12, 2008 AIA policyholders throng its Singapore office in September on news of parent company AIG’s financial distress SEPTEMBER 15Lehman Brothers, with assets of US$639 billion ($908.7 billion) at end-May, but failing to find funds to continue operating, files for bankruptcy to become the biggest casualty of the global credit crisis. The 158-year-old institution is the biggest investment bank to collapse. Merrill Lynch, also stung by the credit crunch, accepts a takeover by Bank of America. The Dow Jones Industrial Average ends more than 504 points lower today, making its biggest fall since the Sept 11 terror attacks. OCTOBER 3 The US House of Representatives passes a revised US$700 billion bailout plan, which will take toxic mortgage assets off financial companies. 8The US Federal Reserve leads a coordinated, global round of emergency interest rate cuts to stem a credit and lending crunch. 13 The UK puts up £37 billion ($82.25 billion) to bail out three major banks — Royal Bank of Scotland, HBOS and Lloyds TSB. NOVEMBER 4Democratic candidate Barack Obama wins the US presidential election, becoming the first Afri- can American to be elected to the highest office in the biggest economy in the world. 9 China announces an estimated US$586 billion stimulus package to help the slowing economy, boosting domestic investment and propping up the hard-hit export sector. 15World leaders pledge rapid action at a G20 summit in Washington DC to rescue a weaken- ing global economy, setting out plans to toughen oversight of major global banks and to try for a breakthrough in trade talks by year-end. 19Singapore’s budget deficit could be three times larger than initially estimated this year partly because of the global economic turmoil, Finance Minister Tharman Shanmugaratnam says. 25The US unveils a US$800 billion plan to buy mortgage-related debt and back consumer loans. Of this, US$600 billion is to buy mortgage-related debt and securities. The remainder is to support consumer debt securities. 26European Commission chief Jose Manuel Barroso proposes a €200 billion ($384.64 billion) fiscal stimulus package to revive the group’s struggling economies. DECEMBER 5Prime Minister Lee Hsien Loong says the country’s economy, which is already in recession, may face years of slow growth. “I think that the recession — to the best of the experts’ judgment — may last a year. Maybe if we are lucky, three quarters,” Lee tells members of Singapore’s Foreign Correspondents Association at a lunch. “But the recovery from the recession is likely to be weaker than from previous recessions and we must be prepared for several years of slow growth,” he adds. 10Steep falls in global commodity prices drive China’s producer-price inflation down to 2% in November from 6.6% in October, the lowest level since April 2006. On current trends, headline inflation indicators could turn negative in early 2009, economists say, showing deflation could hit China. In Singapore, the MAS survey of economists’ forecasts show the economy will likely to contract 1% in 2009 compared with the 4.6% expansion expected in the September survey. More than half say growth would be zero or negative next year, with a few even predicting that the economy will contract by more than 2%. Manufacturing will continue to contract while the financial services, wholesale and retail trade sec- tors would grow marginally. Construction activity is to expand relatively stronger, but at around half the rate. 12 The Civil Aviation Authority of Singapore extends and increases its Air Hub Development Fund to Dec 31, 2009, with an expanded budget of $130 million. A 25% landing fee rebate will be given to airlines operating flights at Singapore Changi Airport and Seletar Airport, 10% higher than the existing 15% rebate as a one-time economic relief measure for 2009. There will also be rental rebates as Singapore fights to retain customers amidst a global recession. | BY SIMON TAN | T he great bear market of 2008 will be remembered not only for its ferocity and devastating effect on financial markets and asset values but also for the speed of its onslaught. No other year in recent times has seen such a contrast between the first six months and the second half, in particular the last three months. In January, forecasters were optimis- tic although mildly cautious, and the year had started bullishly with the oil price barrelling past US$100. e biggest headache worldwide, including in Sin- gapore, was record inflation and prices. While the US subprime crisis was already an issue, having its roots in 2007, the rest of the world, especially Asia, fretted more about high salaries, full employment, and commodity shortages. By April, however, the headwinds of the US slowdown started to be felt. Asia, Europe, the “BRIC” economies of Bra- zil, Russia, India and China were not as “decoupled” from the US as thought, as US import slowdowns started to bite into shippers, container traffic and exporters. After oil reached its record US$147 in July, the market tipped over as the un- sustainability of world trade and growth became clearer. The world’s biggest consumer had stopped consuming because it could not keep up with its mortgage payments, and foreclosures led to further property value declines. Defaults started and that popped the structured product and deriv- atives boom that Wall Street had built on since 2002. Soon, a housing credit crunch exploded into a global credit squeeze and panic that froze business activity, caused commodity prices to collapse by more than 50%, sucked down emerging mar- kets’ current account surpluses by the bil- lions, and exposed the fraudulent as well as the under-performing, over-leveraged, and over-paid salesmen and saleswomen of below-the-line and off-balance sheet financial products. Sovereign wealth funds, the much- touted new players in the global fi- nancial system with their billions of taxpayer and pensioner savings or al- located foreign reserves found their investment skills sorely tested as they continued to pump in more good mon- ey after failed money. By Dec 12, the Standard & Poor’s 500 index had lost US$6.17 trillion ($8.77 tril- lion) since hitting record highs in Octo- ber 2007, the Bloomberg news agency noted. That reduction in global stock wealth was far worse than the last bear dotcom crash of 2000-02 when the S&P 500 lost US$5.76 trillion. e year 2008 may mark the worst performance since 1931. To make matters worse, this one still has room to run. e MSCI World Index has tumbled 44% this year, and is set for the biggest annual decline in its four-decade history. In Singapore, the Straits Times Index was down nearly 50% by mid-December, with every blue chip down for the year. e STI’s two top performers, SPH and Sing- Tel, were both still down nearly 30%. If you were born during the Great De- pression of 1929 and lived till today, you would have seen the market capitalisation of General Motors fall lower than it was in 1927. e grand names of Bear Stearns and Lehman Brothers have ceased to ex- ist. Investment banks like Goldman Sachs and Morgan Stanley have converted into bank holding companies in order to ob- tain capital security. Singapore also made the news for being the first in Asia to slip into a “tech- nical recession” . Morgan Stanley econo- mists’ outlook for the world is a low 0.9% in 2009 and 3.3% in 2010, said to be the second-weakest two-years of economic forecasts since World War II. e best of times For value and buy-and-hold investors, it is opportunistically, the “best of times” . Warren Buffett wrote to e New York Times an opinion piece entitled “Buy American. I am.” He said, “I don’t like to opine on the stock market, and again I emphasise that I have no idea what the market will do in the short term. Never- theless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: ‘Put your mouth where your money was.’ Today my mon- ey and my mouth both say equities.” e bargains are not just in the US, but everywhere, including Singapore. While sky-high valuations deserve to be brought down to match a slow-growth world, the market panic inevitably means many cash-rich, wide economic moat, and well managed companies have also been oversold. Still, to cite another vin- tage Buffett quote: “It’s only when the tide goes out that you learn who’s been swimming naked.” New investors and others with cash are finding great op- portunities to buy into Singaporean and other world companies priced to earn- ings that are giddily cheap. ere is no rush though, as no doubt the pain will continue, if not deepen, into 2009, as the market crisis unfolds into the economic recession that is inevitable. e return of the State One change will be the return of the State which, after bailing out companies, has become the owner of more banks and financial institutions in US and European history since WW II and the Bretton Woods monetary system was introduced. “Letting Lehman fail was supposed to restore market discipline by showing that not all large firms would be saved,” said Dino Kos, a former senior US Fed- eral Reserve official and now a manag- ing director at Portales Partners in New York, to Bloomberg. “Paradoxically, since Lehman, everybody has been bailed out, everybody has been saved or merged out of existence with the taxpayer’s help.” e ignominious ending of the neo- liberal and unfettered market globalisa- tion policies of the past three decades since Reagan- ism and atch- erism is captured in former US Fed- eral Reserve chair- man Alan Greenspan’s dazed testimony before US Congress, that “those of us who have looked to the self-interest of lending institu- tions to protect shareholders’ equity [myself especially] are in a state of shocked disbelief ” . In his triumphal exit book e Age of Turbulence, Green- span had questioned those who wished to regulate hedge funds, saying it is “a vibrant trillion-dollar industry dominated by US firms. ey are essentially free of government regulation, and I hope they will remain so. Why do we wish to inhibit the pollinating bees of Wall Street?” Apparently there are killer bees as well as honey-making ones. When called to testify later and asked if his free-mar- ket ideas were wrong, Greenspan said: “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very consider- able evidence that it was working excep- tionally well.” Can Capitalism be saved from the capitalists? By reducing interest rates to near zero, is the US sliding into Japan’s failed no-growth high-debt economy of the past two decades from which there has been no significant recovery? Much will depend therefore not only on the US with newly-elected President Barack Obama but the next-generation Chinese leaders in the world’s most popu- lous and fastest growing economic giant. Together, both economies are more cou- pled in their trade, investments and assets than realised, and whether the recovery will be next year or take a decade may well depend on a tired and over-borrowed American and a budding but savings-fix- ated Chinese consumer. FTSE STI 3,465.63 FTSE ST CHINA 766.97 UOB CATALIST 215.85 FTSE STI 1,779.29 UOB CATALIST 75.56 FTSE ST CHINA 186.67 Dec 17, 2008 WORST of times, BEST of times JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC
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Transcript of 2008 Dec29 No351 Bumperposter Theedgespore
Published byThe Edge Publishing Pte Ltd 150 Cecil Street, #13-00Singapore 069543Phone: (65) 6232 8622Fax: (65) 6232 8620
Copyright © 2007, The Edge Publishing Pte Ltd. All rights reserved.
Editor: Tan Boon KeanResearch: Rahayu Mohamad Design: Sharon Khoh, Jamy Gan
Printed byKHL Printing Co Pte Ltd57 Loyang Drive, Singapore 508968Phone: (65) 6543 2222 Fax: (65) 6545 3333
Published byThe Edge Publishing Pte Ltd 150 Cecil Street, #13-00Singapore 069543Phone: (65) 6232 8622Fax: (65) 6232 8620
Copyright © 2008, The Edge Publishing Pte Ltd. All rights reserved.
Editor: Tan Boon KeanResearch: Rahayu Mohamad Design: Sharon Khoh, Jamy Gan
Printed byKHL Printing Co Pte Ltd57 Loyang Drive, Singapore 508968Phone: (65) 6543 2222 Fax: (65) 6545 3333
Events 2008
The price of gas is displayed on a board at a Shell gas station in Singapore, on April 20. Sin-gapore’s economy expanded less than initially estimated in 1Q, adding to concerns growth may ease in the coming months as global demand weakens and infl ation accelerates.
Tony Tan, deputy chairman and executive director of the GIC, speaks during GIC’s staff conference on April 21. GIC says the world economy may be facing its worst recession in three decades.
Dec 31, 2007 JANUARY2 The year starts with news that Singapore’s economy in the previous quarter shrank for the first time in more than four years by 3.2% as weak-ness in manufacturing overtook the growth from a construction boom. But inflation continues as US crude oil breaks the US$100 per barrel barrier for the first time.
9 Singapore opens its new state-of-the-art Changi Airport Terminal 3 in a bid to strengthen its regional air hub status. Built at a cost of nearly $2 billion, Terminal 3 expands the airport’s annual capacity by 22 million to 70 million passengers a year.25 Singapore will spend about $20 billion to upgrade the MRT rail network to cater for a growing population and reduce congestion. Two
new rail lines are expected to be completed by 2018 and 2020.31 Budget airlines begin flying the Singapore-Kuala Lumpur route, ending 30 years of dominance by na-tional carriers Singapore Airlines and Malaysia Airlines. AirAsia Bhd, the region’s largest budget carrier, is the first to enter the sector, with a morning departure from Kuala Lumpur. Singapore-based Tiger Airways and Jetstar will have one daily flight each on the route.
FEBRUARY15 Finance Minister Tharman Shanmugaratnam presents the 2008 Budget, which will incur a deficit of $800 million as it seeks to enhance tax incentives for businesses and help the lower income and elderly consumers cope with rising inflation. The govern-ment will distribute $1.8 billion in tax rebates and other cash to lower income groups and the elderly.20 The US Treasury agrees with Singapore and Abu Dhabi on a set of principles on sovereign wealth fund (SWF) investing and receiving SWF investments
and say the principles emphasise transparency, non-politicisation and avoidance of protectionism. The agreement comes a day before the International Monetary Fund board is scheduled to meet on the formation of a set of international best practices standards for SWFs.21 Singapore beats Moscow in a vote of the International Olympic Committee to host the Youth Olympic Games 2010.
APRIL21 The government assures the public there is sufficient rice as prices jump and stocks deplete. Singapore’s consumer price index in March rose at an annualised rate of 6.7%, the highest in 26 years as food, housing and energy costs surged.22 The Singapore dollar rises to a record high of $1.3476 against the US dollar ahead of the release of the March inflation data. On April 10, the central bank had allowed the Singapore dollar NEER to ap-preciate at a faster rate to combat soaring inflation.
Economists say the Singapore dollar could rise to $1.33 per US dollar by year-end.29 The Monetary Authority of Singapore (MAS) cautions the economy may not reach its 4% to 6% GDP growth target this year if the US downturn is severe and results in a worldwide slowdown — a first sign that earlier forecasts for a mild reces-sion may not pan out.
MAY 15 The US tops world competitiveness rankings for the 15th straight year, but Singapore and Hong Kong are ranked just behind it, same as last year, according to Switzerland-based IMD business school, publisher of the World Competitive-ness Yearbook.
JULY 1 Singapore private home prices grew the slowest in almost four years in 2Q, showing the property boom is ending. Prices increased only 0.4% after rising 3.7% in 1Q, URA says. Home prices jumped 31% in 2007, an 11-year high.11 Oil peaks at US$147.50 per barrel for North Sea Brent and US$147.27 for US crude. But on July 15, a sell-off begins after US Federal Reserve chairman Ben Bernanke says consumer demand is falling. By the middle of September, prices would go below US$100 and continue falling.31 The Singapore unemployment rate rises to a one-year high as firms slow hiring amid choppy financial markets and a weakening global economy, and analysts warn that unemployment may climb in the coming months.
AUGUST 10 The Singapore economy shrank at an an-nualised rate of 6% in 2Q after seasonal adjust-ments. The balance of risk is shifting away from inflation towards growth, market economists note. The Singapore dollar also drops.
18 China beats Singapore for the women’s team gold medal in table tennis at the Beijing Olympics but the consolation is, this is Singapore’s first Olympic medal in 48 years.
TOP 10 GAINERS FTSE ST CHINA TOP
1 People's Food Holdings Ltd2 Hyflux Ltd3 China Aviation Oil (S) Corp Ltd4 Li Heng Chemical Fibre Tech Ltd5 Delong Holdings Ltd6 Midas Holdings Ltd7 China XLX Fertiliser Ltd8 Epure International Ltd9 Ferrochina Ltd
10 Pacific Andes (Holdings) Ltd* For the period of Dec 31, 2007 to Dec 12, 2008
NAME YEAR-TO-DATE % CHANGE
-80 -70 -60 -50 -40 -30 -20 -10 0
-45.50
-47.02-61.69
-61.84
-63.24
-66.12
-66.97
-70.00
-70.38-73.02
TOP 10 LOSERS FTSE STI
1 Cosco Corp (S) Ltd 2 Keppel Land Ltd 3 Golden Agri-Resources Ltd 4 Yanlord Land Group Ltd 5 Neptune Orient Lines Ltd 6 Keppel Corp Ltd 7 Singapore Exchange Ltd 8 Sembcorp Industries Ltd 9 Olam International 10 Sembcorp Marine Ltd* For the period of Dec 31, 2007 to Dec 12, 2008
NAME YEAR-TO-DATE % CHANGE
-100 -80 -60 -40 -20 0
-82.53
-79.82-79.72
-77.11
-69.57
-66.37
-62.22
-61.72
-59.02-58.66
TOP 10 LOSERS FTSE ST CHINA TOP
1 China Sky Chemical Fibre Co Ltd2 China Energy Ltd3 Synear Food Holdings Ltd4 Hong Leong Asia Ltd5 Cosco Corp (S) Ltd6 FibreChem Technologies Ltd7 China Hongxing Sports Ltd8 CapitaRetail China Trust9 Yanlord Land Group Ltd
10 Yangzijiang Shipbuilding Holdings Ltd* For the period of Dec 31, 2007 to Dec 12, 2008
NAME YEAR-TO-DATE % CHANGE
-100 -80 -60 -40 -20 0
-87.16
-87.10-84.32
-83.47
-82.53
-82.50
-78.13
-77.21
-77.11-75.00
TOP 10 gainers & losers
DOW JONES
8,761.42
7000
8000
9000
10000
11000
12000
13000
Dec 10, 2008Dec 28, 2007
Dec 10, 2008Dec 28, 2007
GOLD SPOT PRICE (US$)
783.50
680
730
780
830
880
930
980
Bloomberg Global Spot Price Commodity Index (US$)
137.87
120
140
160
180
200
220
240
260
137.87
Dec 10, 2008Dec 28, 2007
CRUDE OIL (US$ PER BARREL)
43.5230
50
70
90
110
130
Dec 10, 2008Dec 28, 2007
MAJOR CURRENCIESGAIN AGAINST US DOLLAR
1.2
1.25
1.3
1.35
1.4
1.45
1.5
1.55
90
95
100
105
110
JPYSGDEURO
Dec 10, 2008Dec 28, 2007
NASDAQ
1,565.48
1300
1500
1700
1900
2100
2300
2500
Dec 10, 2008Dec 28, 2007
Stock-market indices
TOP 10 GAINERS FTSE STI NAME YEAR-TO-DATE % CHANGE
-50 -40 -30 -20 -10 0
-27.49
-34.75-35.58
-36.48
-36.65
-37.15
-37.37
-37.96
-39.86-42.87
1 Singapore Press Holdings Ltd 2 Singapore Telecommunications Ltd 3 United Overseas Bank Ltd 4 Singapore Airlines Ltd 5 Singapore Tech Engineering Ltd 6 Oversea-Chinese Banking Corp 7 StarHub Ltd 8 Genting Int'l Public Ltd Co 9 Jardine Matheson Holdings Ltd 10 Jardine Strategic Holdings Ltd* For the period of Dec 31, 2007 to Dec 12, 2008
AIA policyholders throng its Singapore offi ce in September on news of parent company AIG’s fi nancial distress
SEPTEMBER 15 Lehman Brothers, with assets of US$639 billion ($908.7 billion) at end-May, but failing to find funds to continue operating, files for bankruptcy to become the biggest casualty of the global credit crisis. The 158-year-old institution is the biggest investment bank to collapse. Merrill Lynch, also stung by the credit crunch, accepts a takeover by Bank of America. The Dow Jones Industrial Average ends more than 504 points lower today, making its biggest fall since the Sept 11 terror attacks.
OCTOBER 3 The US House of Representatives passes a revised US$700 billion bailout plan, which will take toxic mortgage assets off financial companies.8 The US Federal Reserve leads a coordinated, global round of emergency interest rate cuts to stem a credit and lending crunch.13 The UK puts up £37 billion ($82.25 billion) to bail out three major banks — Royal Bank of Scotland, HBOS and Lloyds TSB.
NOVEMBER 4 Democratic candidate Barack Obama wins the US presidential election, becoming the first Afri-can American to be elected to the highest office in the biggest economy in the world.9 China announces an estimated US$586 billion stimulus package to help the slowing economy, boosting domestic investment and propping up the hard-hit export sector.15 World leaders pledge rapid action at a G20 summit in Washington DC to rescue a weaken-ing global economy, setting out plans to toughen oversight of major global banks and to try for a breakthrough in trade talks by year-end.19 Singapore’s budget deficit could be three times larger than initially estimated this year partly because of the global economic turmoil, Finance Minister Tharman Shanmugaratnam says.25 The US unveils a US$800 billion plan to buy mortgage-related debt and back consumer loans. Of this, US$600 billion is to buy mortgage-related debt and securities. The remainder is to support consumer debt securities.26 European Commission chief Jose Manuel Barroso proposes a €200 billion ($384.64 billion) fiscal stimulus package to revive the group’s struggling economies.
DECEMBER 5 Prime Minister Lee Hsien Loong says the country’s economy, which is already in recession, may face years of slow growth. “I think that the recession — to the best of the experts’ judgment — may last a year. Maybe if we are lucky, three quarters,” Lee tells members of Singapore’s Foreign Correspondents Association at a lunch. “But the recovery from the recession is likely to be weaker than from previous recessions and we must be prepared for several years of slow growth,” he adds. 10 Steep falls in global commodity prices drive China’s producer-price inflation down to 2% in November from 6.6% in October, the lowest level since April 2006. On current trends, headline inflation indicators could turn negative in early 2009, economists say, showing deflation could hit China. In Singapore, the MAS survey of economists’ forecasts show the economy will likely to contract 1% in 2009 compared with the 4.6% expansion expected in the September survey. More than half say growth would be zero or negative next year, with a few even predicting that the economy will contract by more than 2%. Manufacturing will continue to contract while the financial services, wholesale and retail trade sec-tors would grow marginally. Construction activity is to expand relatively stronger, but at around half the rate. 12 The Civil Aviation Authority of Singapore extends and increases its Air Hub Development Fund to Dec 31, 2009, with an expanded budget of $130 million. A 25% landing fee rebate will be given to airlines operating flights at Singapore Changi Airport and Seletar Airport, 10% higher than the existing 15% rebate as a one-time economic relief measure for 2009. There will also be rental rebates as Singapore fights to retain customers amidst a global recession.
| BY SIMON TAN |
The great bear market of 2008 will be remembered not only for its ferocity and devastating eff ect on fi nancial markets and asset values but also for the speed
of its onslaught. No other year in recent times has seen such a contrast between the fi rst six months and the second half, in particular the last three months.
In January, forecasters were optimis-tic although mildly cautious, and the year had started bullishly with the oil price barrelling past US$100. Th e biggest headache worldwide, including in Sin-gapore, was record infl ation and prices. While the US subprime crisis was already an issue, having its roots in 2007, the rest of the world, especially Asia, fretted more about high salaries, full employment, and commodity shortages.
By April, however, the headwinds of the US slowdown started to be felt. Asia, Europe, the “BRIC” economies of Bra-zil, Russia, India and China were not as “decoupled” from the US as thought, as US import slowdowns started to bite into shippers, container traffi c and exporters. After oil reached its record US$147 in
July, the market tipped over as the un-sustainability of world trade and growth became clearer.
The world’s biggest consumer had stopped consuming because it could not keep up with its mortgage payments, and foreclosures led to further property value declines. Defaults started and that popped the structured product and deriv-atives boom that Wall Street had built on since 2002. Soon, a housing credit crunch exploded into a global credit squeeze and panic that froze business activity, caused commodity prices to collapse by more than 50%, sucked down emerging mar-kets’ current account surpluses by the bil-lions, and exposed the fraudulent as well as the under-performing, over-leveraged, and over-paid salesmen and saleswomen of below-the-line and off -balance sheet fi nancial products.
Sovereign wealth funds, the much-touted new players in the global fi-nancial system with their billions of taxpayer and pensioner savings or al-located foreign reserves found their investment skills sorely tested as they continued to pump in more good mon-ey after failed money.
By Dec 12, the Standard & Poor’s 500
index had lost US$6.17 trillion ($8.77 tril-lion) since hitting record highs in Octo-ber 2007, the Bloomberg news agency noted. That reduction in global stock wealth was far worse than the last bear dotcom crash of 2000-02 when the S&P 500 lost US$5.76 trillion. Th e year 2008 may mark the worst performance since 1931. To make matters worse, this one still has room to run.
Th e MSCI World Index has tumbled 44% this year, and is set for the biggest annual decline in its four-decade history. In Singapore, the Straits Times Index was down nearly 50% by mid-December, with every blue chip down for the year. Th e STI’s two top performers, SPH and Sing-Tel, were both still down nearly 30%.
If you were born during the Great De-pression of 1929 and lived till today, you would have seen the market capitalisation of General Motors fall lower than it was in 1927. Th e grand names of Bear Stearns and Lehman Brothers have ceased to ex-ist. Investment banks like Goldman Sachs and Morgan Stanley have converted into bank holding companies in order to ob-tain capital security.
Singapore also made the news for being the fi rst in Asia to slip into a “tech-
nical recession”. Morgan Stanley econo-mists’ outlook for the world is a low 0.9% in 2009 and 3.3% in 2010, said to be the second-weakest two-years of economic forecasts since World War II.
Th e best of timesFor value and buy-and-hold investors, it is opportunistically, the “best of times”. Warren Buff ett wrote to Th e New York Times an opinion piece entitled “Buy American. I am.” He said, “I don’t like to opine on the stock market, and again I emphasise that I have no idea what the market will do in the short term. Never-theless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: ‘Put your mouth where your money was.’ Today my mon-ey and my mouth both say equities.”
Th e bargains are not just in the US, but everywhere, including Singapore. While sky-high valuations deserve to be brought down to match a slow-growth world, the market panic inevitably means many cash-rich, wide economic moat, and well managed companies have also been oversold. Still, to cite another vin-tage Buff ett quote: “It’s only when the tide goes out that you learn who’s been
swimming naked.” New investors and others with cash are fi nding great op-portunities to buy into Singaporean and other world companies priced to earn-ings that are giddily cheap. Th ere is no rush though, as no doubt the pain will continue, if not deepen, into 2009, as the market crisis unfolds into the economic recession that is inevitable.
Th e return of the StateOne change will be the return of the State which, after bailing out companies, has become the owner of more banks and fi nancial institutions in US and European history since WW II and the Bretton Woods monetary system was introduced.
“Letting Lehman fail was supposed to restore market discipline by showing that not all large fi rms would be saved,” said Dino Kos, a former senior US Fed-eral Reserve offi cial and now a manag-ing director at Portales Partners in New York, to Bloomberg. “Paradoxically, since Lehman, everybody has been bailed out, everybody has been saved or merged out of existence with the taxpayer’s help.”
Th e ignominious ending of the neo-liberal and unfettered market globalisa-tion policies of the past three decades
since Reagan-ism and Th atch-erism is captured in former US Fed-eral Reserve chair-man Alan Greenspan’s dazed testimony before US Congress, that “those of us who have looked to the self-interest of lending institu-tions to protect shareholders’ equity [myself especially] are in a state of shocked disbelief”. In his triumphal exit book Th e Age of Turbulence, Green-span had questioned those who wished to regulate hedge funds, saying it is “a vibrant trillion-dollar industry dominated by US fi rms. Th ey are essentially free of government regulation, and I hope they will remain so. Why do we wish to inhibit the pollinating bees of Wall Street?”
Apparently there are killer bees as well as honey-making ones. When called to testify later and asked if his free-mar-ket ideas were wrong, Greenspan said: “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very consider-able evidence that it was working excep-tionally well.”
Can Capitalism be saved from the capitalists? By reducing interest rates to near zero, is the US sliding into Japan’s failed no-growth high-debt economy of the past two decades from which there has been no signifi cant recovery?
Much will depend therefore not only on the US with newly-elected President Barack Obama but the next-generation Chinese leaders in the world’s most popu-lous and fastest growing economic giant. Together, both economies are more cou-pled in their trade, investments and assets than realised, and whether the recovery will be next year or take a decade may well depend on a tired and over-borrowed American and a budding but savings-fi x-ated Chinese consumer.
FTSE STI 3,465.63
FTSE ST CHINA 766.97
UOB CATALIST 215.85
FTSE STI 1,779.29
UOB CATALIST 75.56
FTSE ST CHINA 186.67
Dec 17, 2008
WORST of times, BEST of times
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