Will Singapore survive a suffering export market?



Singapore's industrial production unexpectedly declined in April, the biggest drop in 10 months, as drug companies and electronic manufacturers reduced output.

Manufacturing, which accounts for a quarter of Singapore's economy, fell 5.7 percent from a year earlier, following a revised 18.1 percent gain in March, the Economic Development Board said today. Analysts predicted a 6 percent increase. Economists have warned that manufacturers in Singapore and across Asia face easing demand amid signs of a slowdown in the U.S., the region's largest export market. Singapore's trade promotion agency last week lowered its forecast for export growth this year to between 2 percent and 4 percent, from an earlier range of 4 percent to 6 percent.

"External demand is still weak and that doesn't bode well for Singapore's production in coming months,'' said Alvin Liew, an economist at Standard Chartered Plc in Singapore. "Manufacturing is likely to be badly hit.''

Industrial production fell a seasonally adjusted 16.2 percent in April from the previous month, after a revised 0.4 percent gain in March, today's report said. Economists were expecting a 5.5 percent decline. Pharmaceutical output fell 27.9 percent in April from a year earlier, after more than doubling the month before. Drugs make up around 22 percent of Singapore's manufacturing and electronics account for about 30 percent. Singapore's industrial output tends to fluctuate from month to month because of swings in production by drug companies which shut plants for cleaning before making different products.

Electronics production dropped 5.1 percent last month from a year earlier, following a revised 3.4 percent decline in March. The island's electronic exports have declined for 15 months.
Computer chip production in Singapore fell 7.4 percent in April from a year ago, from a revised decline of 6.7 percent the month before. Transport engineering output, which makes up more than a 10th of total manufacturing, gained 7.7 percent in April from a year earlier after advancing a revised 7.3 percent in March. Singapore's marine engineering companies such as Keppel Corp. and smaller rival SembCorp Marine Ltd. have won contracts worth billions of dollars for ships and oil rigs as record crude prices encourage companies to increase exploration. Oil prices reached $135.09 a barrel this month, and prices have doubled in the past year.
Production at marine and offshore engineering companies rose 15.1 percent, while aerospace-related output gained 1.7 percent last month.
Should Singaporean exporters already consider downsizing as foreign markets dwindle?

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High Inflation, High Cost of Operations, High Prices. Is There A Way To Fight This Vicious Cycle?

Singapore's consumer price inflation likely hit a new 26-year high in April as food and energy prices showed no signs of cooling.

A poll of economists forecasts the consumer price index to have risen 7.0% from a year earlier. In March, the CPI rose 6.7%.

Forecasts for the data, due Friday at 0500 GMT, ranged from 6.7% to 7.3%.

Economists said rising energy prices led to higher pump and utilities prices, while a global rice shortage caused the price of the grain to surge.

"Petrol companies raised pump prices by three and five cents a liter for petrol and diesel respectively," said Leon Hiew, an economist at Citigroup in Singapore.

Global rice costs have risen by 80% over the past three months, added Hiew. World Bank Managing Director Juan Jose Daboub said recently that prices are unlikely to fall soon unless an additional million tons of rice is released into the global market in the near term.

According to Hiew, inflation is unlikely to cool until the second half of the year.

"We expect CPI to stay within the 6.5% to 7% range in the second quarter before moderating to average around 4.5% in the second half," Hiew said.

The poll also forecasts the CPI to have risen 0.6% from March in seasonally adjusted terms, after rising 0.3% the previous month.


Will the Singapore Government Step And Introduce Policies to Combat the Inflation?

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Are the Record Oil Prices the Sole Reason for SIA’s Dip in Profits?


Singapore Airlines Ltd., the world's second-largest airline by market value, dropped to the lowest in two weeks on the city's stock exchange amid concerns that record oil prices will damp profit.

The carrier fell 1.7 percent to S$15.52 in Singapore trading, closing at its lowest since April 24.

Singapore Airlines, Cathay Pacific Airways and other Asian carriers face shrinking margins as an economic slowdown crimps demand and jet-fuel costs surge in line with rising oil prices. Crude oil climbed 1.4 percent to $123.53 a barrel in New York yesterday, the highest close since trading began in 1983.

“Jet-fuel costs may get the better of Singapore Airlines in the coming financial year,” Citigroup analyst Robert Kong said in a note. This is especially likely ‘if softer traffic growth and lower load factors later in the year weigh on passenger yields.’

The Singaporean carrier yesterday said that it will raise surcharges as much as $20 a flight next week in bid to offset surging fuel costs. Jet fuel accounted for almost 37 percent of its costs in the quarter ended Dec. 31.

Cathay Pacific, Hong Kong's biggest airline, yesterday said it may raise its ticket levies further. Cathay Pacific rose 0.1 percent to HK$16.24 in Hong Kong after falling as much as 1.4 percent earlier.

Air China Ltd., the world's biggest carrier by market value, dropped 2.2 percent to HK$5.72 in Hong Kong trading. China Southern Airlines Co., the country's biggest airline by sales, slipped 2 percent to HK$4.97 in the city.


Will Raising Surcharges Indeed Help Offset the Cost of Operations, or Will it Cause Air Travellers to Switch to other Airlines?

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How Long Will Emerging Markets Be Able to Contribute to ST Engineering’s Bottomline?


Singapore Technologies Engineering, Asia's biggest aircraft maintenance company, said first- quarter profit rose 13 percent as it serviced more planes and increased sales of defense and specialty vehicles.

Net income increased to S$122.5 million ($90 million), or 4.10 Singapore cents a share, from S$108.8 million, or 3.68 cents, a year earlier, the company said in a statement to Singapore's stock exchange. Sales climbed 8 percent to S$1.32 billion.

Economic growth in China and India is making air transport more affordable for passengers, prompting airlines such as AirAsia and Singapore Airlines to add flights and aircraft. Orders at Singapore Technologies' aerospace division, its biggest business, rose as carriers farmed out maintenance services to cut costs and converted passenger aircraft to cargo planes.

“We have the order book to help us grow our business,” Chief Executive Officer Tan Pheng Hock said. “We want to rationalize our business so we'll come out stronger next year.”

ST Engineering's orders reached S$9.19 billion at the end of March, according to the company. The company adjusted its order book to eliminate a contract received from Skybus Airlines after the U.S. low-fare carrier filed for bankruptcy in April, Tan said. Orders were S$9.49 billion at the end of 2007.

The company expects a “modest growth in turnover and profit before tax this year,” Tan said.

Pretax profit at the aerospace division rose 4 percent to S$82.6 million in the first quarter, while the land systems business gained more than a third to S$32.9 million.

ST Electronics had a pretax profit of S$20.1 million, 9 percent less than a year earlier. ST Marine, which counts the U.S. Navy and the U.S. Coast Guard among its customers, posted a 10 percent decline in pretax profit to S$17.4 million.

ST Engineering closed unchanged at S$3.21 before the earnings announcement. The stock has fallen 14 percent this year, compared with a 6.3 percent decline in the Singapore benchmark Straits Times Index.


Will the price of ST Engineering’s share bounce off and increase in light of the positive news?

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Catalist: Too little, too late?




Apparently timing is not everything. Despite the turmoil in the financial markets, the Singapore Exchange has pressed ahead with Catalist, the new board that now replaces SGX’s junior board SESDAQ. Emulating the flexible regulatory system of London’s Alternative Investment Market (AIM), Catalist is part of SGX’s strategy to provide growing firms with a viable Asian listing and an alternative to the AIM.

The big question though is, how attractive will Catalist ultimately be? Will the looser regulatory standards put off firms and investors? Catalist’s forerunner, AIM had been criticized for its lax regulation and advisor conflicts of interest, the very freedom that attracted companies to it in the first place. Notably, US securities regulator Roel Campos said that “I’m concerned that 30% of issuers that list on AIM are gone in a year. That feels like a casino to me and I believe that investors will treat it as such.”

According to corporate finance lawyer Robson Lee, “At the start, Catalist aspirants may be confused by the different standards imposed by different houses, and this could pose challenges to the integrity of Catalist when listing candidates may flock towards houses which are more lax in their requirements.”

Good Signs

There are reasons to look on the bright side though. Initial response, according to Mr Lawrence Wong, Executive Vice President and Head of Listings SGX, has been good, “we have received numerous enquires from potential listed companies about Catalist”.

In London, AIM has raised more than 35 billion pounds for the 2500 companies that have listed there since 1995, and has attracted strong institutional interest- 56% of all investors in 2007 were institutional investors. The AIM market appears to be sustainable too, with more than 40% of the money that has ever been raised coming through further issues.

Catalist has the tools to compete with, not merely emulate, AIM. Besides the lighter regulatory touch that means an easier listing process and lower compliance costs for the companies, Catalist offers listing fees that are at least 33% lower than AIM, starting at $15,000 and capped at $50,000. Also, a Catalist company has the market facility to raise more funds than in AIM—up to 100% of its original share capital on a rights basis. Catalist’s biggest advantage, however, is that most trading interest in Asian stocks has stayed in Asia, and Singapore is in the same time zone as most investors, unlike AIM in London. The faster listing time in Catalist (6 weeks) compared to 17 weeks previously on SESDAQ can only be a further plus.

And going back to the issue of regulatory standards, SGX seems confident of maintaining market quality, with SGX chief Hsieh Fu Hua emphasizing that companies on the new board would be held to the same standards as those on the main board and that SGX “retains the power to discipline and ultimate accountability”. As Mr Lee commented, “There’s no water tight regulatory system” but “in Singapore, you have a balance; regulation with a lighter touch but strict enforcement.”

Will Catalist strike the right balance?

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Will BMW overcome its CleanEnergy hurdle?




BMW recently flexed its ‘renewable muscle’ by bringing in five Hydrogen 7 cars into Singapore as part of an ongoing world tour. The cars, endorsed by celebrities like Madonna and Arnold Schwarzenegger, rely on liquid hydrogen as fuel, which BMW contends is the only way of achieving mobility ideally free of carbon dioxide emissions.

“We want to share this technology with Singapore because the country has a very clear vision of the central importance of clean energy in the overall national development plan,” said Roland Krueger, Managing Director of BMW Asia.

Performance wise, the cars boast an acceleration from zero to 100 kilometres in ten seconds, with a top speed limited to 230 kilometres, but not everyone is impressed.

Are these cars viable?

Ron Tan, Global Marketing Director at Infernofuel Global bristles when asked if these alternative forms of transport will help Singapore realise its dreams of zero carbon emissions by 2020.

“What is the point of having a hydrogen-powered car when the infrastructure is not in place,” he retorts. For the launch, BMW brought in a mobile refuelling station, complete with support crews as there is only one hydrogen fuelling station in Singapore supporting BMW’s technology. Tan also questions their affordability.

“How many Singaporeans can buy a BMW 7 Series car running on hydrogen?” Instead, he believes motorists need to address fuel efficiency by using good air filters and low resistance tyres. “Those measures will allow cars to get more mileage out of every litre of fuel used.”

Michael Meurer, who heads BMW’s CleanEnergy Programme admits that a complete change from a fossil fuel infrastructure to a hydrogen economy will take time, but points out that the advantages cannot be ignored.

“The BMW Hydrogen 7 emits nothing but vapour, which allows the cycle to repeat itself. This means that sustainable mobility without using fossil fuel resources can become a reality,” he said.

And according to Meurer, unlike fossil fuels, hydrogen is readily available. “It can be obtained from water and renewable energy such as the sun, wind or hydropower.”

Temperatures are rising
Tan believes that BMW’s intentions are admirable but unrealistic. He points to a recent report by the Intergovernmental Panel on Climate Change (IPCC), which states that global temperatures will increase by almost two degrees by 2020. “At best, people can only contain the problem, not solve it,” said Tan.

Sticking to its guns

Understandably, Tan’s views are not shared by BMW, which continues to remain passionate about its CleanEnergy programme, believing that it will open up a new era for automobiles with alternative drive technologies.

“Broad market penetration will require many more years of commitment from all partners in business, politics and industry. It’s a marathon, not a sprint,” said Krueger.

Will broad market penetration eventually become a realistic goal?

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Why is Wyeth bucking the trend of manufacturing leaving Singapore?




Wyeth will spend $96 million to expand a factory in Singapore for producing infant formula and milk powder, completing a $500 million capital improvement program in Asia.

The expansion will increase capacity at Madison, New Jersey-based Wyeth's Singapore plant by 50 percent, the company said in a statement distributed by PRNewswire. The factory will make the Progress and Promise brands of infant formula and milk products for sale in Singapore and the Asia-Pacific region, where sales climbed 20 percent last year, said Tom Mulqueen, vice president of global operations for Wyeth's nutrition unit.

“The demand is being driven by the economic emergence of developing nations that we're dealing with,” Mulqueen said by phone. Sales in China climbed 38 percent last year, he said.

The sale of fake milk formula in some of China's poor areas, combined with the increasing affluence of the world's most populous nation, has contributed to a surge in China's milk formula market, which may almost double in the five years through 2009, according to a report published by Euromonitor International in 2005.

Wyeth is also spending $280 million building a factory in China to make its infant formula, milk powder and nutritional products, it said in a March 10 statement. It's spending about $120 million more on a factory in the Philippines, Mulqueen said.

Mulqueen said he expects to increase staff at the Singapore plant by about 40 percent, adding about 100 more employees. The factory will start full commercial production by November next year, he said.

Sales outside the US and UK, including Asia, increased to $9.68 billion last year, representing 43 percent of Wyeth's revenue.

With a US recession looming, will Asia sales help Wyeth to pull through?

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Will CapitaLand’s focus on China work?




CapitaLand Chief Executive Officer Liew Mun Leong will take a more direct role in the company's China and residential units as Southeast Asia's largest developer focuses on those markets to bolster growth.

Lim Ming Yan, CEO of the company's China business, and Patricia Chia, head of its Singapore residential unit, will report directly to Liew from April 1, CapitaLand said in a statement to the Singapore stock exchange. Lui Chong Chee, to whom Lim and Chia had reported, will become head of financial services. Lui's former position as CEO of residential is no longer needed with the “flattened organizational structure.”

CapitaLand's fourth-quarter earnings jumped 49 percent as it sold more homes in its three biggest markets -- China, Singapore and Australia. The developer, which has properties in more than 90 cities worldwide, is turning to faster-growing markets outside Singapore, where home prices may struggle to match last year's 31 percent increase.

“It's a reflection of how quickly the business of China and Singapore homes have grown and how important they have become,” Vikrant Pandey, an analyst with UOB Kay Hian in Singapore.

“I view this as a positive signal in the sense that they are putting the emphasis on fast-growing segments.”

Pua Seck Guan, CEO of the company's retail unit, will relinquish his role as co-chief of the financial services unit and focus on expanding the group's mall business in Singapore and abroad, CapitaLand said. The company expects to open 20 shopping malls in China this year and build as many as three properties in the country under its Raffles City brand.

How will the current credit crunch affect Capitaland’s plans?

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Is Creative in big trouble?




Creative Technology, which makes accessories for Apple's iPod, forecast the lowest sales in almost five years and said it will lose money on operations in the current third quarter.

Revenue may drop 18 percent to $150 million in the three months ending March 31, lower than an unspecified target, the Singapore-based company said in a statement. Creative said it expects to have an operating loss, or sales minus the cost of goods sold and administrative expenses, because currency exchange rates resulted in higher-than-expected expenses.

Chief Executive Officer Sim Wong Hoo, 52, has cut prices of the Zen digital music players by as much as half to revive sales amid waning consumer demand. Creative said it's also selling its headquarters in Singapore for S$250 million ($179 million) and other investments in a bid to boost profit.

“It's not surprising that the quarter is weak but it's even weaker than expected,” said Tan Ai Teng, a Singapore-based analyst at DBS Group Research, who has a “hold” rating on Creative. “It doesn't look particularly hopeful going forward and it's still going to be challenging.”

Creative reiterated it expects to be profitable in the third quarter. The maker of Muvo digital music players posted a net loss of $23.6 million on sales of $183.8 million a year earlier.

The company expects the sale of the headquarters to result in a S$200 million gain, which will be amortized and recognized over five years. Creative said it will rent the property from the unidentified buyer.

Will this one-off gain really help Creative in the long run?

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Will the offer keep on going up?




The Al-Futtaim Group raised its offer for Robinson by 12 percent as it seeks to expand its Middle East franchise of Marks & Spencer stores to Singapore.

ALF Global Private, a unit of Al-Futtaim, raised its bid to S$7 a share from the January offer of S$6.25, it said in a statement to the Singapore exchange. The price, which values Robinson at S$601.6 million ($434 million), is 3.1 percent higher than the last traded price of S$6.79 before the midday break.

Al-Futtaim, which operates nine Marks & Spencer stores in the Middle East, hopes to gain control of Robinson's seven clothing stores operating under the brand in Singapore as well as its department-store chains.

“This revision represents a full price for the business and a compelling opportunity for shareholders to realize value,” James Gillespie McCallum, director of ALF Global, said in the statement.

Al-Futtaim said it has secured acceptances for 26.7 percent of Robinson's stock, compared with 23.2 percent when it first made the offer. The bid is conditional upon ALF receiving acceptances for 50 percent of the stock, it said in January. The buyer also reiterated the April 3 deadline for the bid to close.

Indonesia's Lippo Group owns 29.9 percent of Robinson after paying S$203 million for the stake from Oversea-Chinese Banking and Great Eastern Holdings in 2006. Oversea-Chinese still owns 6.05 percent, according to Robinson's annual report

Standard Chartered Plc is advising ALF Global in its bid for Singapore's oldest retailer.

Eventually, will Al-Futtaim secure the required number of acceptances?

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Is this a sign that Singapore’s biomedical sciences push is paying off?



British pharmaceutical giant GSK opened its first and only pilot plant in Singapore.

With the opening of this 82-million-U.S. dollar pilot plant, GSK's operations in Singapore has spanned the entire value chain of activities, including drug discovery, clinical research, manufacturing and regional headquarters, S. Iswaran, Singapore's Minister of State for Trade and Industry, said at the opening ceremony.

"The pilot plant will facilitate the design of manufacturing processes, to bring the latest drugs discovered at GSK into commercial production for the first time," said the minister.

It will involve new process development, process scale-up to handle large-scale drug production.
"Hence, this pilot plant is an important addition to GSK's manufacturing capabilities here, enabling it to transcend traditional manufacturing excellence into the realm of manufacturing innovation," he added.

Many pharmaceutical companies in Singapore are increasingly placing greater emphasis on manufacturing innovation by establishing pilot plants here to complement their commercial-scale manufacturing facilities.

Last year, biomedical sciences (BMS) manufacturing output reached a high of 24 billion Singapore dollars, with a value add of 13.4 billion Singapore dollars. This amounts to almost a quarter of the country's total manufacturing value added.

Will this innovation push spread to other industries too?

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Will City Developments continue exceeding expectations?




City Developments, Singapore's second-largest developer, said 2007 profit more than doubled after home prices rose to an 11-year high in the city state.

Net income climbed to S$725 million ($519 million), or 76 cents a share, from S$351.7 million, or 36.6 cents, in 2006, the company said in a statement to the Singapore stock exchange.

That's higher than the average estimate of S$616.6 million complied by Bloomberg from eight analysts. Sales rose 22 percent to S$3.11 billion from S$2.55 billion.

City Developments and rivals CapitaLand and Keppel Land may face declining demand in Singapore this year amid concerns the economy could fall into a recession. Singapore property prices may climb 8 percent to 10 percent this year, after surging 31 percent last year, London-based real estate consultant Savills said.

“Moving forward, the performance of the property market will largely depend on how the sub-prime crisis pans out and its impact on global economies,” the company said in the statement.

“Transaction volume and rental increase have slowed down in the fourth quarter.”

City Developments last year sold 1,655 homes worth S$3.38 billion, with 95 percent of these sold in the first nine months.

In 2006, it sold 1,337 units worth S$2.77 billion. The company may offer 427 homes for sale in the first half of this year.

“Compared to Keppel Land and CapitaLand, they have a larger exposure to Singapore,” Fera Wirawan, an analyst with ABN Amro NV in Singapore, said of City Developments. “They have traditionally held a pretty big land bank in the city.”

ABN Amro expects the luxury segment of the market to decline 10 percent to 20 percent by the end of the year. The lower end and mass-market will climb 10 percent, Wirawan said.

Developers have announced plans or are already building 65,400 private homes as of the third quarter, with about 41,600 units scheduled for completion by 2010, the Urban Redevelopment Authority, the government agency in charge of real estate, said Jan 2. About 58 percent of those projects, or 38,000 homes, haven't been sold, the authority said.

City Developments is also benefiting from a pickup in the global travel industry. The company controls about 53 percent of Millennium & Copthorne Hotels, the Horley, England-based chain that owns 110 hotels worldwide, including the Biltmore in Los Angeles.

The hotel operator said that fourth-quarter profit rose 36 percent as customers paid more for rooms in New York and Singapore. It also made a gain from selling three properties to a real estate trust in Singapore.

So will the property market optimism in Singapore hold up?

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Capitaland expanding in Vietnam?



CapitaLand, Southeast Asia's biggest developer by sales, said it will form a $300 million fund to invest in Vietnam property and plans an alliance with Nam Thang Long Investment Joint-Stock to expand in the nation.

CapitaLand plans to take a 30 percent stake in the fund, its first in the Southeast Asian nation, and has signed a preliminary agreement with Citi Private Bank for the fund, it said in a statement to the Singapore stock exchange.

“We see vast opportunities in the Vietnam real estate market, driven by the country's strong macro-economic growth and rapid urbanization,” Chief Executive Officer Liew Mun Leong said in the statement. “Our aim is to deepen CapitaLand's presence in Vietnam to become a significant long-term real estate player.”

Vietnam's economy expanded 8.5 percent in 2007, the fastest pace since 1996, after the country joined the World Trade Organization last year. CapitaLand is turning to Vietnam, Liew said in a interview with Bloomberg Television, as growth slows in its home market of Singapore,

The Singapore-based developer also signed an agreement with Nam Thang Long to jointly develop residential and so-called mixed- used properties in Vietnam, the statement said.

Will these plans enable Capitaland to grow in the long term?

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Will optimism of Indian property developers continue?



The Indian developer DLF is still working on listing a $1.5 billion property trust in Singapore and expects the initial public offering to be made in the second quarter of 2008, despite bruising market conditions.

DLF, India's most valuable property firm, had hoped for an offering for its real estate investment trust, or REIT, in the first three months of this year, bankers have said, although volatile markets led some to predict a delay.

Investor nerves have derailed two planned IPOs in India in the past week: a $1.64 billion deal by the developer Emaar MGF and an offering by Wockhardt Hospitals. According to Thomson Financial, 21 offerings worth a total $6.3 billion were pulled in January worldwide.

Singapore's property trust market, whose share prices slid last year amid global credit problems, appears equally hostile. But DLF's chief financial officer, Ramesh Sanka, said his firm expected a go- ahead for the offering from market regulators within a month.

“The process of creating a REIT is going on, but we haven't got all the approvals in place,” Sanka said from New Delhi. “We should be getting approvals in a month, then we will have to take the next step.”

When asked if the initial public offering would be made in the second quarter of this year, he said: “I think so.”

Indian developers are eager to raise funds for expansion by selling buildings into property trusts, in which they would retain a controlling stake. The trusts, which pay most of their rent as dividends, should then become willing buyers of buildings as the developers roll out new projects.

The Indians have been watching the success of Singapore's REIT market, which has grown to almost $19 billion.

India does not yet allow such a security, although regulators issued draft guidelines in December. Analysts expect next month's budget to give some indication of when India will get its own REIT market.

Although REITs are usually regarded as defensive investments, trusts across the world suffered in the second half of 2007 as the U.S. subprime crisis unfolded and hit commercial property markets in the United States and Europe. Singapore's REIT index has fallen 16 percent already this year.



Will the prospects for the Singapore property market improve?

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China Eastern retries the Singapore Airlines' bid, will they eventually succeed?




China Eastern Airlines said on Jan 28 that the company is striving to hold another shareholder meeting with the purpose of gaining shareholders’ support for the tie-up with Singapore Airlines, according to the company's chairman Li Fenghua.

There is no detailed meeting schedule yet, as it is still in a preliminary stage. Last year, Singapore Airlines and parent Temasek Holdings offered to buy 24% of China Eastern Airlines at a price of HK$3.8 per share, totalling HK$7.16 billion in order to expand their businesses in China's booming aviation market.

However, the bid was rejected earlier by China Eastern's shareholders while China National Aviation Corporation (Group) Limited (CNACG), the parent group of Air China offered to take the bid at a higher price and establish strategic partnership with China Eastern. China Eastern later refused to respond to CNACG's proposal, saying the offering was incomplete, insincere and lacked legal validity.

Singapore Airlines and its parent Temasek Holdings refused to raise the bid as they found "nothing is a must to get".

So what does the future bode for these companies?

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Will the governments “hands off” approach benefit GIC and Temasek Holdings?



Tharman Shanmugaratnam, Singapore's minister of finance, said the government will take a "hands off" approach to the investments of its sovereign wealth funds Temasek Holdings and Government of Singapore Investment. He made these comments to lawmakers in Parliament.


Temasek and GIC have invested about $23 billion in UBS AG, Citigroup and Merrill Lynch since mid-December as the banks turned to investors after record write downs and losses.



“Let me first state that GIC and Temasek make their investment decisions independent of each other, and of the government. They make these decisions for commercial reasons, based on their own calculations, free of any influence from government.”



GIC has explained the reasons why it made a major investment in UBS, and more recently in Citigroup. Likewise, Temasek has stated why it invested in Merrill Lynch. The U.S. subprime crisis has resulted in several global financial institutions facing large write downs of their assets, and requiring fresh capital. This presents opportunities for investors that are liquid, and able to take a long-term view. GIC and Temasek were among those approached.

“They assessed the proposals rigorously. In each instance, GIC and Temasek concluded that these were good, long-term investments and valuable additions to their overall portfolios. They considered each of the banks as having a strong business franchise and good long-term growth potential, across multiple businesses and multiple locations. Hence they negotiated terms which protected their interests and made financial sense, and entered into the deals.”

When asked to comment on the risks involved, they referred to the large investments as with all commercial investments, there will be some downside risk. It is up to GIC and Temasek to assess this risk, and decide if it is acceptable. Their responsibility is to accept prudent risks in order to earn good returns on their overall portfolios.

“It is not the government's role to comment on or second guess whether it was timely for GIC and Temasek to have made these two investments. It does not judge the performance of GIC and Temasek by their individual deals. Nevertheless the government is assured that both GIC and Temasek had thoroughly assessed the risks of each of these investments, and had made hard-headed commercial decisions after careful assessment of the risks and the prospects for returns over the long term.”

Albeit the government is assured, will GIC and Temasek actually manage to live up to what their expected of?

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What are some of the main factors for Singapore’s economic freedoms?


Singapore is catching up to Hong Kong in terms of economic freedom and could soon surpass the SAR. That was the message delivered at the Washington-based Heritage Foundation's 2008 Index of Economic Freedom. It shows Hong Kong's freedom decreasing and Singapore's increasing compared to last year's scores.

"The gap between Hong Kong and Singapore is shrinking," Heritage Foundation vice president Kim Holmes said. If the Singapore government lowers its amount of intervention in the banking industry, it "could very well end up giving Hong Kong a real competition," Holmes said.

Bank of East Asia chief economist Paul Tang Sai-on called the report "a wake-up call for Hong Kong."He added: "I think, for regulators as well as the SAR government, they should look into the report and see what areas we can further strengthen our lead."

Hong Kong was ranked first in the American think tank's ranking of economic freedom for the 14th year in a row. Singapore was second again. In its report, the Heritage Foundation criticized the Hong Kong government for the Scheme of Control regulation of electricity prices as well as the regulation of prices for public transport and some residential rents.

A government spokesperson explained the transportation price controls seek to "balance the interests of the public and the operators" and said affordable electricity is "vital." Singapore is already ranked higher than Hong Kong in terms of business, monetary and labor freedoms.

"We are determined to uphold Hong Kong's position as the freest economy in the world," said Financial Secretary John Tsang Chun-wah. "We see the role of the government as that of a facilitator."

Points were taken off Hong Kong's trade freedom score because of "restrictive" pharmaceuticals regulation, market access restrictions for legal services, limited import licensing, and issues involving intellectual property rights that add to the cost of trade.

Do differences in economic freedoms result in large differences in economic growth and prosperity, and why?

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Is it rivalry that made Singapore Airlines fail to investment in China Eastern Airlines?






Singapore Airlines (SIA) quickly expressed its disappointment over the shareholders' rejection of its investment in China Eastern Airlines (CEA). The Singapore flag carrier said in a statement that “Singapore Airlines is disappointed that the proposed transaction involving an equity stake in China Eastern Airlines did not receive the required level of support from independent shareholders EGM (extraordinary general meeting)."

CEA's minority shareholders voted against selling 24 percent stake for 7.2 billion Hong Kong dollars (about 923 million U.S. dollars) at 3.8 Hong Kong dollars per share to SIA and Temasek Holdings, Singapore's government-related investment firm. The China Eastern-SIA deal has been baffled by another Chinese airline giant Air China. Its parent company China National Aviation Holding Company, announced before the shareholders' meeting that it will make a counter-offer at least 32 percent higher than that of SIA's.

SIA maintained in the statement that its offer represents a “full and fair value for the equity injection to recapitalize the airline", and noted that the transaction “has also been approved in accordance with relevant laws and regulations." It reiterated, "The proposal is for a long-term strategic relationship with a willing partner." And its proposal would have brought international expertise from SIA's board and management to China Eastern, which, SIA said, would have helped CEA meet future challenges in a competitive aviation environment in China.

However, SIA said it respected the shareholders' vote and will continue to support the building of a relationship with China Eastern. On its part, Temasek Holdings said it remains open to future opportunities which make commercial sense, and that fall within Temasek's overall investment framework.

What are the future plans that Singapore Airlines look forward to?

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How long will Singapore take to recover from it’s slowing economy performance?




Singapore's economy unexpectedly contracted last quarter as factory output slowed, suggesting Asia's export-dependent markets may face increased risks from slower global growth. Gross domestic product shrank an annualized 3.2 percent after adjusting for inflation, the first decline in 18 quarters, and followed a revised 4.4 percent expansion in the third quarter, the trade ministry said. Economists were expecting a 3.1 percent gain. Singapore's figures give economists an insight into how turmoil in global markets and the subprime-mortgage crisis in the U.S., the region's biggest export destination, may affect Asia's expansion.

“We definitely should expect to see more softness in exports in the next couple of quarters, and that's bad news for electronics-heavy Asian economies,'' said Kit Wei Zheng, an economist at Citigroup in Singapore. “That means slower growth for Singapore and the rest of Asia.''

The Singapore dollar rose 0.1 percent to S$1.4406 per U.S. dollar as of 1 p.m. in Singapore. The benchmark Straits Times Index fell 0.8 percent to 3,453.15. China, South Korea and the Philippines are due to report fourth-quarter GDP numbers later this month, while Japan, Taiwan and Malaysia are scheduled to release theirs in February.

Manufacturing climbed 0.5 percent in the last three months of 2007 from a year earlier, the smallest increase in 4 1/2 years. Output growth slowed from a revised 10.3 percent in the July-September period as pharmaceutical plants produced fewer drugs, the trade ministry said.

The Asian Development Bank last month said growth in emerging East Asia in 2008 will be 8 percent, half a percentage point lower than last year. The region is twice as reliant on exports as the rest of the world, with 60 percent of overseas sales ultimately destined for the U.S., Europe and Japan.

From a year earlier, Singapore's $132 billion economy grew 6 percent in the fourth quarter after gaining a revised 9 percent in the previous three months. Economists were expecting 7.7 percent growth.

“There's no imminent turnaround in electronics and we're unlikely to see a recovery in the next six months,'' said Irvin Seah, an economist at DBS Group Holdings in Singapore. “Pharmaceuticals, a key support for manufacturing, has been losing steam.''

Singapore's electronic exports have dropped each month since February, mired in the worst slump in five years. South Korea yesterday lowered its growth forecast for 2008, pointing to the likelihood of slowing exports. Taiwan is also predicting an easing in overseas shipments this year which it said will make its growth target “highly challenging.''

Singapore's services industry climbed 8.3 percent from a year earlier, matching the growth rate in the previous three- month period. Economists said demand for financial services probably eased as the rout in global credit markets increased risk aversion and the city-state's government implemented measures to cool the property market.

Global stock markets have lost $1.6 trillion in value since October and the collapse of the subprime-mortgage market in the U.S. triggered more than $80 billion in writedowns among the world's largest banks.

“Singapore's financial services industry has been affected by the shadow of the subprime problem,'' Seah said. “Investors are more cautious and that has slowed down activity.''

The island's burgeoning construction industry prevented a wider contraction in the economy last quarter as companies such as Exxon Mobil set up new plants and property developers build new office towers and condominiums. Southeast Asia's fourth-largest economy reported a record S$16 billion ($11 billion) in fixed-asset investments last year. Construction surged 24.4 percent from a year earlier, after a revised 19.2 percent gain in the three months ended September.

The economy advanced 7.5 percent in 2007, easing from a 7.9 percent rate of expansion the year before. The government expects growth to be between 4.5 percent and 6.5 percent in 2008.

Singapore's growth had raised concern the economy is overheating, with consumer prices rising at the fastest pace in more than 25 years. Policy makers expect inflation to be between 3.5 percent and 4.5 percent this year, accelerating from a forecast average of 2 percent in 2007.

Will Singapore government implement strategies to overcome the slow growing economy?

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