Crashing US dollar plumbs new depths

Crashing US dollar plumbs new depths

 

Greenback hits all-time low against S$ and falls against yen, euro as further rate cuts loom

 

By LARRY WEE

 

(SINGAPORE) An overnight relapse on Wall Street dealt the besieged US dollar another deadly blow yesterday, forcing it to a fresh all-time low of S$1.3791 and 1.0047 Swiss francs in Asian trading yesterday, while lifting the euro to another fresh peak of US$1.5624.

 

And by yesterday afternoon, the greenback had recorded its worst showing of the day versus the Japanese yen, tumbling more than 3 per cent to a session low of 99.77 yen – its weakest showing in more than a dozen years.

 

Traders reportedly gave the US dollar the thumbs down yesterday after Tuesday’s impressive relief rally on Wall Street – after the US central bank’s latest US$200 billion liquidity assistance – proved to be very short-lived.

 

Philip Wee, senior currency economist at DBS, who expects the US dollar to finish 2008 closer to S$1.35, explained yesterday: ‘The message provided by the coordinated G-10 central bank liquidity injection this week is clear; problems in the US sub-prime sector have now spread into other areas of the US economy as well as overseas.’

 

JP Morgan currency strategist Ho Yen Ping explained the still-grim outlook for the US dollar from another (related) perspective: ‘While MAS (the Monetary Authority of Singapore) has been sighted in the market to prevent excess volatility, what’s clear in the bigger picture is that the US dollar can’t enjoy much of a turnaround if US interest rates are expected to fall further.’

 

Although JP Morgan is reviewing the Federal Reserve’s expected 0.75 per cent interest rate cut (to 2.25 per cent) next Tuesday, their house view is that short-term US rates are likely to end 2008 still further down at 1.75 per cent. Their year-end target of S$1.36 for the US dollar is also under review for a possible downward adjustment. Both DBS and JP Morgan do not expect MAS to change its currency policy stance for a modest and gradual appreciation of the trade-weighted Singapore dollar or S$NEER when they issue their semi-annual monetary policy statement next month.

 

In practical terms, they suggest that this should translate into trend appreciation of 2.5 to 2.75 per cent per annum for the S$NEER, which has been the main monetary policy tool of Singapore‘s central bank since the 1980s.

 

Elsewhere in Asia yesterday, the US dollar also skidded to new lows of 7.0895 yuan and RM3.1560 – levels not traded since it was de-pegged from both currencies in late July 2005.

 

And with such top gainers – especially the euro, yen, ringgit and yuan – known to contribute some of the heaviest weightings to the S$NEER’s value, it was no surprise that the US currency was also forced to fresh lows versus the local unit yesterday, Sing-watchers explained. Prior to yesterday, Reuters data shows that the US dollar’s low point was S$1.3830 on May 26, 1995.

 

Notably, however, other Asian units known to be vulnerable to risk aversion and high oil prices lost ground yesterday – even against the fast-falling US dollar.

 

News that US light crude had scaled fresh peaks of US$110 a barrel in overnight trading saw the currencies of heavy oil importers like Indonesia, India and the Philippines suffer a relapse in Asia yesterday and, against the Korean won, the US dollar recorded a fresh two-year high.

 

DBS’s Mr Wee suggested that weaker Asian units are starting to feel the fallout from America‘s problems.

 

‘Asian emerging market spreads have exploded this year, and Asian stock markets are falling sharply in tandem with Wall Street too,’ he explained.

 

Such contagion effects may indeed see the US dollar stage some form of recovery in the second quarter, he suggested, before falling back by the end of this year – perhaps rebounding towards S$1.42 before falling back to S$1.35 by December.

 

This assumes that a key S$NEER basket component like the euro will top out at around US$1.5750, said Mr Wee, although others see more upside for the European common currency.

 

Updating their currency forecast yesterday, UK currency research firm 4cast warned: ‘We do not believe that unilateral intervention becomes a serious risk this side of US$1.60 and it could well be US$1.65 before the guns are wheeled in.’

 

And in a client note from New York, RBS Greenwich Capital’s Alan Ruskin predicted: ‘The first half of 2008 will continue to favour selling the currencies that are being forced to give precedence to asset deflation over commodities and goods inflation, (notably the US dollar), and buying the currencies fighting commodities inflation (possibly an Asian basket comprising the Singapore dollar, NT$, ringgit and rupiah) whose asset cycles have not turned.’

 

Source: Business Times

US going for tougher regulation of mortgage lenders: Paulson

US going for tougher regulation of mortgage lenders: Paulson

 

Rules must catch up with innovation to restore confidence

 

(WASHINGTON) Treasury Secretary Henry Paulson said yesterday that a presidential working group wants stronger regulatory oversight of mortgage lenders to avert the kind of credit crisis that is dragging the US economy down.

 

The group, set up in the wake of the 1987 stock market crash calls for a series of actions designed to avert the kind of dual housing and credit slumps that are threatening to throw the US into recession – if it is not there already.

 

‘The objective here is to get the balance right – regulation needs to catch up with innovation and help restore investors’ confidence but not go so far as to create new problems, make our markets less efficient or cut off credit to those who need it,’ said Mr Paulson, who heads the working group.

 

One recommendation calls for federal and state regulators to strengthen oversight of mortgage lenders and another urges state financial regulators to implement strong nationwide licensing standards for mortgage brokers, Mr Paulson said.

 

He also said that there is a call for improvements by credit rating agencies that have been criticised for not accurately assessing risk on complex mortgage investments. These kinds of business transactions eventually soured, driving markets into chaos. Mr Paulson also said that the working group is calling for better disclosure and assessment of risks.

 

The recommendations come as the meltdown in the housing and credit markets unhinged Wall Street, catapulted home foreclosures to record highs and forced financial companies to rack up multibillion losses on bad investments in mortgage-backed securities.

 

The mess threatens to plunge the US into its first recession since 2001.

 

The president’s working group on financial markets was formed after the 1987 stock market crash to monitor markets. It includes Federal Reserve chairman Ben Bernanke and the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission.

 

More recently, the group has been looking into the causes of the current credit crisis and searching for ways to prevent a recurrence.

 

In a speech to the National Press Club, Mr Paulson said: ‘This effort is not about finding excuses and scapegoats. Those who committed fraud or wrongdoing have contributed to the current problems; authorities need to, and are prosecuting them. But poor judgment and poor market practices led to mistakes by all participants.’

 

The next step, Mr Paulson said, is to push for implementation of the recommendations. He said that the working group will continue to assess the situation and consider whether further steps are needed.

 

The working group also recommended that credit-rating agencies differentiate between ratings on complex investment products and conventional bonds, Mr Paulson said. The ratings agencies also should disclose conflicts of interest, he said.

 

The group also called on issuers of mortgage-backed securities to provide more information about their products, Mr Paulson said. The group urged investors to conduct more independent analysis of investments and be less reliant on ratings agencies, he said.

 

‘There is no single, simple solution to the problems that have emerged . . . yet we have determined that market participants’ behaviour must change,’ Mr Paulson added. — AP

 

Source: Business Times

The real problem isn’t sub-prime: Watson Wyatt

The real problem isn’t sub-prime: Watson Wyatt

 

By ANNA TEO

 

(SINGAPORE) For all the doomsday musings about the US economic and financial woes, things aren’t quite as bad from the human resources standpoint, says the global head of Watson Wyatt’s human capital group.

 

The labour market remains tight, there’s no decrease in attrition ‘and business seems to be doing okay’, says Paul Platten, VP and global practice director at the human capital consulting firm, citing feedback from clients worldwide.

 

‘What I’m hearing is that things at the moment are not as bad as everybody makes them out to be,’ he told BT during a recent visit. ‘They’re not seeing at the moment any tightening (of business conditions), they’re not seeing any loosening of the job market. They’re still waiting, if you will, for something to happen.’

 

Dr Platten, who is based in Boston and who met clients from the US, Europe and Asia in recent months, added: ‘I’m not saying there’s not going to be a slowdown. I’m just saying that I think it’s overdone.’

 

He explains: ‘If I were an HR person and have spent a lot of time and money and energy over the past 4-5 years recruiting, building an employment brand, making sure I retain my people and engage them, to now listen to the press and say, ‘it’s all going away, I’ve got to get rid of people and everything’, I would be very nervous.

 

‘So I’m advising HR people to make plans but don’t do anything yet. I’m not sure that it’s going to be as bad as they say it will be.’

 

That said, there are a number of things HR folks should be thinking about for the mid-term, he reckons. ‘Again, they’ve made all these investments in their employment brand, putting mechanisms and networks in place to attract people. They’re going to need those in the mid-term; don’t abandon those. Pay attention to them.’

 

In his view, some of the sub-prime recession concerns and employment issues are masking a far bigger problem that will loom over the next 5-10 years.

 

‘I think this recession, if it happens, will be fairly short-term,’ he says. ‘The real issue is going to be inflation, and the answer to inflation is going to be productivity.’ Hence, HR managers should ‘prepare for a downturn’ – by not overhiring, by reviewing their severance policy, for instance – ‘but don’t overly expect one’.

 

Have plans, says Dr Platten, ‘but don’t get obsessed with it, because the real issue is going to be wage and commodity inflation, and the real challenge that HR managers will face in the future is going to be productivity’.

 

But while companies refrain from overhiring, seeking talent and key skills remains among CEOs’ top concerns at the moment, he concedes.

 

‘There’s still a lot of turnover,’ he says. Regional banking clients he met in Singapore cited a shortage of people with key skills. And while some employers use sophisticated retention techniques – a mix of compensation and talent management, for instance – ‘others just use money as a blunt instrument’.

 

And CEOs in Asia, particularly, are grappling with the challenge of just keeping up the growth pace.

 

‘I think people will tell you that a lot of growth can hide a lot of sins,’ says Dr Platten. ‘If you’re growing very fast, trying to fulfil orders, trying to keep up, you don’t always have time to build up good solid systems.’

 

Managing talent is as critical in a downturn as in boom time, the human capital consultant says.

 

‘The better companies that you think of, the ones that have the best employment brands – the Microsofts, IBMs, GE – they’ve always had an employment deal based on talent management,’ says Dr Platten. ‘You always knew, even in a downturn, what your career path was, what your earnings potential was, what skills you should have. They are always sending people for training.

 

‘Now, in bad times, sometimes there’s not a lot of money to expand the programmes or try new things. I remember a time when bad times come and you cut training. I don’t see that attitude as much any more.’

 

Says Rajan Srikanth, Mercer’s head of human capital, Asia Pacific: ‘Talent management is critical whenever capability gaps are either present or anticipated.’

 

In a boom time, the risk is that the company’s needs are evolving so rapidly that supply cannot keep up. The focus of talent management then becomes one of developing capability, and matching it against need effectively and efficiently, he tells BT.

 

‘In a downturn, on the other hand, the risk is that actions driven by short- term business considerations end up destroying capability that is needed long term.’

 

The focus, then, must be to preserve and rebuild capability for long-term needs, Mr Srikanth says.

 

‘So, in a nutshell, talent management is critical in both boom time and downturn – but the emphasis of what you must do shifts.’

 

Source: Business Times

Private fund buys remaining 53 Grange Infinite units

Private fund buys remaining 53 Grange Infinite units

 

Average price for the units, bought for $400m, is said to be $2,600-$2,700 psf

 

By KALPANA RASHIWALA

 

A PRIVATE fund managed by ARA Asset Management group is believed to have bought the remaining 53 units at Chip Eng Seng’s and Citadel’s Grange Infinite freehold condo project for almost $400 million.

 

Savills Singapore is believed to have brokered the latest bulk deal. The 68-unit condo is now fully sold.

 

The average price for typical three and four-bedroom units in the transaction is believed to be about $2,900 per square foot (psf).

 

However, for all 53 units sold under the deal, the average price is said to be slightly lower, at $2,600-$2,700 psf, as the three penthouses and other larger units included in the transaction were priced lower.

 

This marks a reversal of the previous trend, which set in around late-2006, of bigger units fetching higher psf prices than smaller ones.

 

‘Now people are more wary and start to get concerned if the overall purchase quantum reaches a very high level, so the tendency is to pay lower psf prices for bigger units,’ a property consultant said.

 

Another interesting feature of the bulk sale at Grange Infinite is that it is priced lower than individual units sold earlier in the project.

 

The initial 15 units in the condo fetched a median price of $3,201 psf in September, according to Urban Redevelopment Authority data.

 

The 15 apartments were sold at prices ranging from $3,025 to $3,299 psf.

 

This too marks a reversal of what was happening in December, when a Kuwait Finance House (KFH) unit bought 97 apartments at Guocoland’s Goodwood Residence in the Bukit Timah/Scotts Road area for a median price of $3,200 psf – about 25-30 per cent above the $2,500 psf average price that Sui Generis was fetching at nearby Balmoral Crescent at the time.

 

GuocoLand said this week that KFH is letting the options on that purchase lapse, but added that the two sides are in talks with ‘a view to a grant of fresh options for units in the development’.

 

A seasoned market watcher said overseas funds, particularly from Europe and Asia, remain interested in bulk purchases in Singapore condo projects – but only at fair valuations, that is, at a discount to the prices at which the units would be sold to individual investors.

 

‘Right now, such investors are looking for mid to long-term plays. The mood for short-term play is not so positive,’ said the market watcher.

 

‘Of course, some developers may not want to sell units at a discount, unless sentiment in the market weakens, like now.’

 

The 36-storey Grange Infinite condo will come up on the former Grange Tower site next to the Indian High Commission.

 

The property launch scene has generally been quiet lately, as buyers adopt a wait-and-see approach amid US sub-prime jitters in the stock market.

 

However, some developers have been quietly releasing projects.

 

Frasers Centrepoint has sold 30 units at its freehold Martin Place Residences in the Kim Yam Road area since mid-January through private previews.

 

The 30 units were sold at an average price of about $1,800 psf after discounts.

 

Source: Business Times

Swiss Life sets up office here, targets wealthy

Swiss Life sets up office here, targets wealthy

 

By SIOW LI SEN

 

SWISS Life will open an office here next month to sell its life insurance products aimed at the wealthy.

 

The Singapore office of Switzerland‘s market leader for pension and life insurance products is not just its first in Asia, but also outside Europe.

 

The branch office, Swiss Life (Liechtenstein), is part of the group’s international strategy to tap into burgeoning Asian markets.

 

‘We see the potential for Asia, and Singapore is a great hub to tap into this Asian market,’ said company spokeswoman Irene Fischbach.

 

Swiss Life’s main markets are Switzerland, Germany and France.

 

The product to be sold in Asia is structured for international high net worth individuals and called private placement life insurance. Created since 2004, it is sold through the group’s Luxembourg and Liechtenstein offices, said Ms Fischbach.

 

‘It’s a structured life insurance product that combines individual asset management with retirement planning,’ she said.

 

Clients must have a minimum of 200,000 Swiss francs (S$270,059).

 

Private placement life insurance is currently sold to customers in Sweden, Italy and the US. It has attracted assets under management of nine billion Swiss francs.

 

The Singapore office will be headed by Thomas Vonrueti, who will lead a team of seven.

 

Swiss Life cooperates with leading private banks and independent asset managers to sell its products.

 

Swiss Life Group’s chief executive, international, Bruno Pfister said: ‘The Asian market offers great growth potential in this attractive segment. In Singapore we are ideally positioned to expand into further markets in the region. The new location represents an important addition, enabling us to serve our customers from three competency centres in the future.’

 

According to Forbes magazine’s 2008 billionaires report, the number of Asian billionaires increased a third to 211 with a total net worth of US$804 billion, up from US$554 billion.

 

The number of millionaires in Singapore shot up 11,000 people or 21.2 per cent last year – the fastest growth rate in the Asia-Pacific and one of the fastest in the world, said a 2007 Merrill Lynch-Capgemini report.

 

Source: Business Times

Some Gillman Heights owners fight on for their homes

Some Gillman Heights owners fight on for their homes

 

22 minority owners in bid to overturn sale; they simply don’t want to move

 

By Joyce Teo

 

A GROUP of owners at Gillman Heights Condominium is fighting hard to stop the $548 million sale of the property, despite reports that hint at a market slowdown.

 

The deal was struck when the market was in full flight in February last year – but now, such deals to sell en bloc have dried up.

 

The group’s stated reason for opposing the sale? They love their homes.

 

The owners opposing the sale of the Alexandra Road estate turned up on day one of a High Court appeal yesterday wearing specially-made T-shirts with the condo’s name emblazoned on them.

 

Said one: ‘We made it for the appeal to show our unity and our love for our home.’

 

The 22 minority owners are trying to overturn the collective sale of their estate to CapitaLand, Hotel Properties (HPL) and two private funds.

 

They are appealing on various grounds, including the way the sale process was conducted, how the former HUDC estate’s age was calculated and how the price was achieved.

 

Three other groups, representing 18 owners, are also in court. One is made up of eight owners from four units who want to know if a supplementary deal to extend the original collective sale agreement is valid. They face legal action from the buyers for alleged breach of contract.

 

The Strata Titles Board (STB) approved the sale of the 607-unit, 99-year leasehold estate late last year. The sale was inked in February last year at $363 per sq ft (psf) of potential gross floor area.

 

Owners stand to reap $870,000 to $950,000 per unit – then 40 to 55 per cent above the levels they would have got in an individual sale.

 

Still, some never wanted to sell. ‘We had no intention to sell,’ said one of the 22 minority owners. ‘The price was never our problem… You can’t find another place like this in Singapore.’

 

The 46-year-old, who declined to give his name, lives in a 1,880 sq ft unit with his family.

 

Mr Pang Tee Lian, one of eight owners to sign the first agreement, but not the supplementary one, said: ‘A collective sale means you can get decent proceeds. But it appears to us we would have no choice but to downgrade. And that means moving to a smaller place farther away.’

 

The 59-year-old did not agree to the supplementary deal as he felt the sale process had not been done properly.

 

‘The market has quietened down but we don’t just swing with the tide,’ said the general manager of a building facade firm, who also declined to be named. ‘It’s not so much about the money anymore. After this experience, I just want to stay away from collective sales.’

 

To minority owners, a collective sale is akin to a compulsory acquisition, said Senior Counsel Michael Hwang yesterday. He has been engaged by Tan Chin Hoe & Co to act for the 22 owners.

 

He argued that before amendments last year to laws governing collective sales, former HUDC estates had not been intended by Parliament to be covered by these laws.

 

Outside court, a property consultant said the owners may have trouble finding comparable replacement homes, even with the weaker market.

 

‘Demand for land has weakened, but if you look at individual deals, prices have yet to fall. Owners would be looking at the price they can get and not the price of the land their estate sits on.’

 

If they sold individually, they would still ‘be able to get the same price or more’.

 

The hearing continues today.

 

Source: Straits Times