DAILY MARKET UPDATES 15th October 2008

Stocks rally again as disaster scenario fades
Stocks in Asia and Europe surged yesterday, extending a worldwide share rally into a second day on hopes that financial disaster had been averted. But economists here warned that while governments in the US and Europe may have stopped a collapse of the global financial system by taking control of large parts of the financial sector, the outlook for the broader economy remains bleak. The Straits Times Index (STI) ended 2.5 per cent higher. In Asia and Europe, interbank lending rates fell for a second day, a sign that some trust may finally be returning to money markets that are crucial to the normal functioning of the banking system.
- The Business Times, P4
US buys stakes in 9 banks, stems panic
The United States Treasury Department, in its boldest move yet to shore up embattled banks, and prevent the collapse of the credit markets and the US economy, is set to undertake steps to invest up to US$250 billion in 9 banks, and to guarantee new debt issued by banks for the next three years. The nine banks are: Citigroup, JPMorgan Chase and Wells Fargo - US$25 billion apiece; Bank of America and Merrill Lynch - US$12.5 billion each; Goldman Sachs and Morgan Stanley - US$10 billion apiece; and Bank of New York and State Street Bank each received US$2-3 billion. This is the US government's latest effort to stabilise the financial system, ensure the solvency of major US banks and get them lending to one another and businesses again.
- The Business Times, P1
MAS move to secure deposits could be on the cards
The Monetary Authority of Singapore (MAS) said that it will ensure local banks are 'not disadvantaged', adding that it is studying measures other countries have taken to shore up confidence in their financial systems. Its statement came after Hong Kong guaranteed all bank deposits until 2010, a move that has put pressure on Singapore's authorities to follow suit. All savings in a full bank in Singapore are insured for up to $20,000 under the Deposit Insurance Scheme of the Singapore Deposit Insurance Corporation.
- The Straits Times, A1
S'pore tops Asian assignment poll
Singapore is the top choice in Asia for companies which are considering sending employees on overseas assignments. These are among the findings of PricewaterhouseCoopers (PwC) International Assignment Services, in its first survey focused on understanding international mobility trends and challenges of Singapore-based companies. Singapore was the choice of 70 per cent of those surveyed, when asked to indicate their top three host assignment locations in Asia. The finding was testament to Singapore's strong drive in this area, through the use of government initiatives such as the Personal Employment Pass, and competitive personal tax rates.
- The Straits Times, B18
Singapore firms ahead in keeping foreign talent on local terms: PwC
Singapore-based firms find it easiest to keep foreign talent here on local terms compared with other Asian countries, a survey by PricewaterhouseCoopers (PwC) showed. With the expected economic slowdown, many companies also anticipate that foreign talents are now likely to take up 'local- plus' terms - which are less attractive than expatriate terms - as the job market could come under threat. PwC interviewed human resource professionals of 105 Singapore-based companies between March and July this year. Some 79 per cent of these firms said they considered Singapore the easiest place to localise foreign talent. PwC defined localisation as changing an expatriate remuneration package to one that is similar for a local hire. This is known sometimes as 'local-plus' terms and could mean removing benefits for education and housing that expatriates receive.
- The Business Times, P11
Only one bid received for transitional office site
The tender for a transitional office site in Mohamed Sultan Road has closed with only one bid of $4.65 million, from RSP Architects Planners and Engineers. Based on the 66,482 sq ft site and maximum permissible gross floor area (GFA) of 99,727.5 sq ft, the bid equates to a unit land price of $46.67 psf ppr. Knight Frank said this is the second-lowest bid received for such a site. Cushman & Wakefield expected bids to be at least half of those for two transitional office sites around Newton MRT, which were awarded at $242.50 and $226 psf ppr. RSP's present office is in Scotts Road. It would likely build an office for its own use on the Mohamed Sultan site, said Knight Frank.
- The Business Times, P11
Good news for consumers: Food prices dropping
Global prices of wheat, oil, sugar and other essentials started falling in June; their trickle-down effects will be felt by shoppers in the next few weeks. Importers and analysts say the prices are off their peaks for good and stability has returned to the market. Prices are slated to fall further before levelling out, though they are unlikely to be as low as a year or two ago. The devaluation of the Singapore dollar against the US dollar also means prices may not fall by that much or rapidly.
- The Straits Times, B1
Brokers’ Take: Office Sector – DBS Group Research
Prospects for the office market have turned more cautious, due to the global financial turmoil and weakening economic outlook. While current rents are holding up amid tight physical supply and low locked-in leases provide room for positive rental reversion over the next 12 months, slowing demand and increasing supply are likely to drag on occupancies, putting downward pressure on topline growth. DBS’s call on the sector remains 'cautious'.
- The Business Times, P6
Seletar air hub to be developed as planned
The development of Seletar Aerospace Park will proceed as planned despite the challenges facing the aviation industry. This is because Singapore is confident of the long-term prospects of the aerospace sector. Work has already started on Phase I of the project to transform Seletar Airport and its surroundings into a 300-ha aerospace hub. The development will be completed by 2018.
- The Straits Times, B19
More S'pore firms default on payments
Singapore firms are increasingly defaulting on payments - including bank loans - making them seem high-risk to lenders tight on credit. Credit rating agency Dun and Bradstreet (Singapore) said more businesses are falling behind in making payments. Apart from construction, more local businesses in other sectors will fall into the high-risk pocket this year and next. Based on monthly payment data collected from an average of 4,000 to 5,000 firms based here, D&B says 22.2 per cent of them have a high risk of not meeting payments this year, up from 19.77 per cent last year. The riskiest industry appears to be retail, where D&B predicts that more than half of retail firms here may not meet their payments come 2009. Banks and analysts confirmed that borrowing costs for companies have gone up in recent weeks.
- The Straits Times, A7
Investor sentiment falls in Q3 over credit crisis: ING
Investor sentiment in Singapore has taken a hit following the crisis in the credit markets, says ING. ING’s quarterly Investor Dashboard Sentiment Index shows that for Singapore, the third-quarter indicator slumped 21 per cent quarter-on-quarter to 71 points - a sign of poorer investor confidence here. On a year-on-year basis, the Q3 drop was more pronounced - a fall of 49.6 per cent to 71 points. Some 40 per cent of Asian investors say that their personal financial status deteriorated in Q3 - up from 28 per cent in Q2. About 35 per cent of the respondents expect the situation in US to worsen this quarter, while 72 per cent believe that they will continue to be affected by the slowing economy in Q4. Investors in China, Hong Kong, Korea and Singapore appear to be most sensitive to the global impact of the credit crunch, compared with the rest of Asia. 87 per cent of Singapore investors believe that they will continue to be impacted by the sub-prime crisis in Q4 2008. 48 per cent of Asian investors (ex-Japan) view low-risk investments as favourable compared with 30 per cent for medium-risk investments and 24 per cent for high-risk investments. Investors are also continuing to hold on to cash while moving away from investments in local stocks and global resources.
- The Business Times, P9
Citigroup sees 1.2% economic contraction for next year
Citigroup expects the Singapore economy to contract 1.2 per cent next year - the only key Asian economy it sees shrinking in 2009. Expectations of a more severe recession in the US prompted the bank to make further cuts to its Asian GDP forecasts for 2009. Citigroup's chief Asia economist in Hong Kong, cut Singapore's 2009 GDP growth forecast from plus-2.5 per cent to minus-1.2 per cent. Citigroup has kept its 2009 CPI growth forecast for Singapore at 2 per cent. Citigroup now expects the Asia-Pacific region as a whole to grow 6.3 per cent next year, down from its previous estimate of 7.2 per cent. Citigroup also reckons Asian currencies are likely to remain weak in the near term.
- The Business Times, P10
OCBC banks on continued China growth
OCBC Bank will continue to invest in China, despite the current financial market turmoil. The bank now has a presence in seven cities. It plans to expand its current 10 outlets - including sub-branches - to 12 to 15 over the next few years. It aims to focus on two main areas - expanding its retail banking segment aimed at the mass affluent, as well as growing its corporate banking business, which is targeting mid-size as well as larger Chinese companies.
- The Business Times, P8
DBS venture in India to shut branches, slash jobs
DBS Group's joint venture in India, Cholamandalam DBS Finance, will close more than a quarter of its branches because of a sharp slowdown in demand. Chola DBS would shut 75 of its 260 branches and lay off up to 200 of its 1,800 staff. The company would try to offer jobs elsewhere in the group to the 200 staff at the branches to be shut. DBS bought a 37.48 per cent stake in Chola DBS in 2005. DBS plans to have 10 branches and some 500 staff in India by year-end as India remains an important market in DBS's regional expansion strategy.
- The Business Times, P8
Mapletree invests in Viet business park
Mapletree Investments has inked an agreement to develop a US$400 million integrated business park in Vietnam's Binh Duong province. Construction of the 75-hectare Mapletree Business City is expected to start next year and development will take place in phases. The real estate group is also the developer of the Mapletree Logistics Park in Binh Duong, a US$110 million 68-hectare park within the Vietnam Singapore Industrial Park II (VSIP II).
- The Business Times, P9
China's forex reserves rise to US$1.9 trillion: highest in the world
China's foreign-exchange reserves rose to a world record US$1.906 trillion, helping to strengthen the nation's finances. Currency holdings rose 32.9 per cent at the end of September from a year earlier. The increase of about US$97 billion over the quarter was down from a US$126.6 billion gain in the previous three months. China has cut interest rates twice in the past month to stimulate growth. China’s economy can still expand 10 per cent this year and 9 per cent in 2009, central bank deputy governor said.
- The Business Times, P16
India helps mutual funds with liquidity injection
India pumped liquidity into the markets and announced measures aimed at helping the country's US$106 billion mutual funds industry. In addition to injecting 628 billion rupees (S$19.1 billion) through its daily overnight money market operations, the central bank conducted a special 15-day repo auction to meet the liquidity needs of mutual funds.
- The Business Times, P16
China's interbank funding rates fall
China's shortest-term interbank funding rates fell and smaller banks and foreign institutions found it easier to borrow money yesterday as jitters over the global financial crisis eased. The weighted average seven-day bond repurchase rate, a key funding rate, fell sharply to 3.1536 per cent, its lowest level since late September.
- The Business Times, P16