Girl, 5, was sexually assaulted for more than a year. - TNP
Jan 13, 2008 The New Paper
THE Indonesian maid in Hong Kong would take the two children in her care to a play centre.
But she allowed a teenager working there to molest the elder of the two girls, who was 5 years old.
The maid, Sujianah, 33, was paid between HK$200 ($37) and HK$500 for this.
She faced five charges of aiding and abetting the commission of an indecent assault on the girl, and was sentenced to 32 months in jail, The Standard newspaper reported.
Four days had been set aside for the trial, and the Indonesian consulate hired a lawyer to defend Sujianah, as it feared the case could spark a backlash against other Indonesians working in Hong Kong.
But before the trial started, the maid pleaded guilty.
The teen suspected of molesting the girl has not been charged because of a lack of evidence.
The offences occurred between March 2006 and July last year.
On each occasion, the maid would take the girl and her three-year-old sister to a play centre in Whampoa Garden, Hung Hom, where a 19-year-old man working at the centre would assault her.
The shocking story came to light on 26 Jul last year when the girl’s mother noticed that she had a look of fear.
The girl then told her mother she had been taken by a young man into a dark room and sexually molested on several occasions.
The mother told the police and a medical examination confirmed the girl had been abused.
On one occasion, the maid was said to have washed the child’s underwear because it showed evidence of abuse.
POVERTY DROVE HER TO CRIME
In mitigation, the defence lawyer said the maid came from a poor family and was in Hong Kong on a salary of HK$3,800 a month.
She became the family’s sole bread winner in 2006 when her elder brother died.
The lawyer said: ‘The defendant became greedy.
‘She thought it was all right as long as she did not see what was going on inside the room where the child was molested.
‘The defendant also told herself she was not the one who directly hurt thechild.
‘But now she feels remorseful and shameful about what she has done.’
In passing sentence, the judge said the defendant had acted ‘out of greed’ and was guilty of a ‘severe breach of trust’.
CULPRIT MAY NOT BE CHARGED
Mr Stephen Hung Wan Shun, chairman of the Hong Kong Law Society’s criminal law and procedure committee, said the principal suspect could get away with an offence if there was not sufficient evidence to substantiate charges - even if other defendants were convicted.
‘For example, if the child fails to identify the person and there is no strong evidence to prove he has committed the offence,’ he said.
Prosecutors could still press charges against the suspect.
They could turn to the maid who may be more willing to assist the police if her sentence could be reduced, Mr Hung said.
There are more than 114,000 Indonesian domestic workers in Hong Kong, the second largest population of foreign helpers after Filipinos.
There are currently 123,520 Filipino helpers in the city.
Full calendar includes CPI, industrial output, starts and more from Bernanke
13 January 2008
WASHINGTON (MarketWatch) -- With the resilient American consumer the only thing keeping the economy from sliding into recession, the December retail-sales report figures to be the biggest economic event in a week full of big events.
December’s retail sales are expected to be very weak following a blow-out month in November.
Aside from the retail data on Tuesday, the calendar features another appearance by Federal Reserve Chairman Ben Bernanke, the Fed’s Beige Book, the December reports on inflation, housing, and output, and the first January readings on the manufacturing sector and consumer sentiment. See the Economic Calendar.
Oh, and corporate America will be coming to the confessional with fourth-quarter earnings reports.
Even with all that, the retail sales report will be the one that "may tell whether consumer spending has the legs to keep the expansion on track," said Patrick Newport, an economist for Global Insight.
"The remarkable resilience of the U.S. consumer has been the biggest economic surprise of the last few quarters," said Meny Grauman, an economist for CIBC World Markets. Consumers have been able to maintain their spending because job and wage growth have been OK, but the "disappointing nonfarm payroll report raises the risk that we are in store for a letdown."
Retail sales were surprisingly strong in November, growing 1.2% and 1.8% excluding autos. But for December, economists surveyed by MarketWatch figure sales were flat and fell 0.2% excluding autos.
"As we begin 2008, significant headwinds are ever present for the consumer," said economists for Wachovia in their weekly outlook. "The weight of falling home prices, higher energy prices and slowing job growth will limit consumer spending growth in the months ahead."
Inflation and output
Energy prices may have ticked higher since then, but they were relatively stable in December, limiting their impact on the consumer price index and the producer price index.
Economists expect the PPI to settle down after the 3.2% jump in November, which was the biggest one-month gain in more than 30 years. For December, the PPI is expected to rise just 0.1%.
The CPI won’t be quite so favourable, with an expected 0.3% rise after November’s 0.8% gain. The CPI could end the year up more than 4% for the first time since 1990. Core prices, however, have been better behaved, with an expected 0.2% gain in December leaving the yearly increase at 2.3%.
There’s a chance that the core CPI increased 0.3% again in December, said Global Insight’s Newport. "In that event, the wave of enthusiasm for slashing the target federal funds rate a full 50 basis points would lose momentum, in favour of a 25-basis-point reduction."
No one is happy about the inflation numbers, but the Fed has much bigger fish to fry coping with the economic slump, which has now spread to the manufacturing sector.
Industrial production likely fell 0.2% in December, economists say. Citigroup economists estimate that industrial output fell at a 2% annual rate in the quarter, a rare down move in a key indicator that the business cycle dating committee uses to judge whether a recession has begun.
Housing starts are expected to sink again in December, falling about 5% to a seasonally adjusted annual rate of 1.13 million from 1.19 million, down 51% from the peak two years ago.
Inventories of unsold new homes are high (even more so once cancelled sales are included), so further declines are probable. Morgan Stanley economists expect starts to fall another 25% to 850,000 or 900,000 annualized late in the year.
The Fed
Bernanke will testify on Capitol Hill on Thursday. Analysts expect him to repeat his message from this past Thursday, when he said in blunt language that the Fed is ready to cut rates again aggressively to stimulate spending and growth.
His appearance at the House Budget Committee will likely focus on efforts Congress and the White House might make to support the economy, such as a tax cut or targeted spending program. Bernanke has vowed in the past to stay out of politics, but may be drawn in anyway to a discussion about the merits of fiscal stimulus.
The Fed’s Beige Book, released on Wednesday, will be combed over for any up-to-date information on the strength of the labour market, the consumer, and the banking system.
BEIJING: Prime Minister Manmohan Singh of India will arrive in Beijing on Sunday for a three-day visit to China, with each country eager to increase bilateral trade, promote mutual friendship and offer reassurances that Asia is big enough to accommodate the ambitions of both rising powers.
Singh is visiting China for the first time as prime minister, when his government also has drawn closer to Japan and the United States. But Indian officials insist that India is not a proxy for American interests and is not plotting to form alliances to counter China’s rise. India also wants Chinese cooperation on nuclear issues and managing the unrest in Pakistan.
“I have made it clear to the Chinese leadership that India is not part of any so-called contain China effort,” Singh said last week, the Press Trust of India news agency reported.
China sees the trip as the latest proof of its maturing relationship with India after decades of hostility and mistrust rooted in a brief border war in 1962. Neither side is expecting significant progress on lingering disputes, especially over their contested Himalayan border. But Chinese leaders consider warmer relations critical for avoiding the kind of regional instability that could threaten economic growth.
“The most important thing for the two countries is to create a favorable environment, a peaceful environment for development in the long term,” said Sun Shihai, a South Asia specialist at the Chinese Academy of Social Sciences. “So both sides are trying to make their policies more pragmatic toward each other.”
China and India are the world’s fastest-growing major economies, though China is easily the more dominant. Its annual trade with India remains only fraction of its trade with Europe, Japan and the United States. But China-India trade is growing rapidly. When President Hu Jintao of China visited India in 2006, the countries pledged to double trade to $40 billion by 2010 — a goal they nearly reached last year and are likely to surpass this year.
Both sides are expected to continue the trade push this week. Singh is bringing a large business delegation and is keen to correct a trade imbalance tipping in China’s favor.
Singh will spend his entire trip in Beijing and is scheduled to address China’s leading government research institute. He will be honored at a private dinner given by Prime Minister Wen Jiabao and will meet with Hu.
“China attaches great importance to Prime Minister Singh’s visit and hopes to deepen the traditional friendship between the two countries,” said Jiang Yu, a spokeswoman for the Chinese Foreign Ministry.
In New Delhi, senior Indian officials lowered expectations for any breakthroughs. They said the agenda was loaded with items based on old grievances and new challenges.
The border dispute includes competing land claims over the Indian state of Arunachal Pradesh. But a senior Indian official said Singh expected little progress because China is never inclined to use high-level visits to negotiate details. Officials in New Delhi offered a measured response to reports that China was rapidly building infrastructure near the disputed border.
“As of now, we are comfortable with our relations with China,” Shiv Shankar Menon, the Indian foreign secretary, said Friday. “We are both successful in maintaining peace and tranquillity along the border.”
Water is a growing bilateral concern, and the countries have established a joint committee to study the flow of rivers that originate in Tibet and flow into the Indian hills and plains. On issues of energy security, terrorism and climate change, the Indians see a confluence of interests, if not identical objectives.
Pakistan, India’s old rival and China’s equally old ally, is also on the agenda because both sides are concerned about political turmoil across that country.
“Both of us want this entire area to be peaceful and stable so we can get on with our lives, whether it’s China’s periphery or our periphery,” a senior Indian official who was not authorized to speak on matters of strategic delicacy said last week,
One of India’s biggest concerns is whether China will, even reluctantly, support India’s bid to buy nuclear technology. The Bush administration has opened that door, but the request is subject to approval by the International Atomic Energy Agency and the Nuclear Suppliers Group. The Indian official said he did not expect China to actively block India’s ambitions. “I’m not saying they’re happy with it, not at all,” the official said. “They won’t be the ones to stand up.”
Meanwhile, China is expected to push India to further open itself to Chinese investment and business interests. China’s telecommunications giant, Huawei, has hit snags in India, while China has complained about Indian laws devised to protect domestic industries from competition.
Economic competition is inevitable as India is rapidly expanding its manufacturing base — China’s strength — while China is trying to move its economy toward the service and high-tech industries at the center of India’s economic expansion. China’s rising military capacity has alarmed Washington, which entered into a strategic dialogue with Japan and Australia in 2002. Proposals that India join that group of Pacific Rim democracies instantly attracted concern in Beijing.
Last week, Singh told reporters in New Delhi that those proposals “never got going.” Last year, India and China had joint military exercises for the first time. Michael Green, former director of Asian affairs at the National Security Council, said the United States was not discouraging warmer relations between India and China, but noted that tensions remained. He said China was quietly trying to oppose the United States-India nuclear deal and objected to including India on the United Nations Security Council. “Beneath the surface, the Indians are very strategically wary of China,” said Green, who teaches at Georgetown University.
China and India are increasingly playing roles in what have been each other’s backyards. New Delhi has been courting Southeast Asian countries like Vietnam and Singapore, just as China’s role is growing in Bangladesh and Sri Lanka.
Han Hua, an associate professor of international studies at Tsinghua University in Beijing, said those underlying tensions were why China and India wanted to establish a broader spirit of cooperation to carry the relationship beyond specific grievances. She said the countries want to defy an old Chinese proverb, which holds that two tigers cannot share the same mountain.
“The two countries want to show the world that they can get along,” she said.
BEIJING (Reuters) - Chinese policy makers will have a tough time in 2008 battling inflation, excess liquidity and rapid investment, Vice Finance Minister Li Yong said on Sunday.
China has taken a series of measures such as cutting export tax rebates and tightening investment criteria to cool an economy that expanded 11.5 percent in the first nine months of 2007 compared with a year earlier.
The central bank also raised interest rates six times last year and ordered banks on 10 occasions to set aside more deposits in reserve.
“Although these policies are working well, there is still a shortfall from the desired and expected effects,” Li told a forum.
Consumer prices rose 6.9 percent in the year to November, the fastest pace in a decade, setting alarm bells ringing in the halls of power.
Chen Jiagui, vice head of the Chinese Academy of Social Sciences, said the State Council, or cabinet, held an emergency price meeting last Friday and would hold another one on Monday.
The State Council said after yet another conclave devoted to inflation last Wednesday that it would keep a freeze on energy prices and would temporarily intervene directly in the market to hold down prices of daily necessities.
With climbing global grain and raw material prices adding to domestic price pressures, China’s year-average inflation could be as high as 4.6 percent in 2008, Xu Lin, a senior official from the National Development and Reform Commission, said on the sidelines of the forum.
That would match the rate for the first 11 months of 2007.
HANDS TIED
Li said inflationary pressure was still mounting, but China now had less room for maneuver even though it shifted its monetary stance in early December to “tight” from “prudent”.
Banks’ reserve requirements were already at a historical high of 14.5 percent, while it was difficult to raise interest rates further given that rates are falling in countries such as the United States, Li said.
Even without an attractive interest rate differential, the U.S. credit crisis could trigger unwanted speculative capital flows into China, especially at a time when global investors view emerging markets as a relatively safe haven, he said.
Li said China’s trade surplus, which rose 48 percent last year to a record $262.2 billion, was likely to remain elevated in the first half of 2008, adding to liquidity in the banking system.
With the yuan also on an appreciating track, the problem of excess liquidity was unlikely to fundamentally ease any time soon, the official warned.
Li said the impetus behind fixed-asset investment remained strong as the large number of projects launched in 2007 would require continued capital spending this year.
Closer coordination of fiscal and monetary policy was needed to tackle the array of problems, Li said.
The Finance Ministry is considering issuing more types of treasury bonds so that the central bank has a broader range of paper with which it can conduct open market operations, Li said.
Speaking at the same forum, newly promoted deputy central bank governor Yi Gang said the People’s Bank of China would fight inflation by further tightening monetary policy, but it would do so cautiously to ensure stable economic growth.
“We will unwaveringly fight against inflation and implement a tightening policy. But we will make sound arrangements to ensure fairly stable economic growth,” Yi told reporters.
Chinese property and share prices, though very high in some cases, were close to their equilibrium levels, he added.
The stock and bond markets moved higher during a rocky 2007. But things are off to a tough start so far in 2008, amid growing indications of an economic downturn.
The Dow Jones Industrial Average is down 5% so far this year and the Nasdaq Composite Index is down 8%, after losses last week of 1.5% and 2.6%, respectively.
Most strategists predict the stock market will have problems in the first half of the year, as housing troubles and slowing consumer spending weigh on corporate profits. Things could improve later in 2008, thanks to expected interest-rate cuts by the Federal Reserve. Most experts anticipate a strong year for foreign stocks, as growth abroad powers ahead.
A year ago, when we speculated on developments that could take the market by surprise in 2007, our story accurately anticipated deep troubles in the subprime mortgage business and robust foreign growth, though it incorrectly anticipated a spate of energy acquisitions and higher price-earnings ratios.
What might catch investors by surprise this year? Below are some unorthodox predictions:
Dollar Rebound
The dollar has slumped in recent years, in part because U.S. growth has been meek compared with foreign economies, especially those of emerging-market nations. Most investors expect the trend to continue, as the U.S. tries to skirt a recession.
But the greenback could be stronger by year’s end. While expectations of a U.S. slowdown are widespread and some investors have already sold dollars, most haven’t worried enough about the impact abroad, argues Richard Berner, a Morgan Stanley economist.
If U.S. consumer spending weakens, it will impact foreign economies, especially big exporters, putting pressure on their currencies. Pressure also will build on foreign central banks to cut rates to stimulate their economies, which could also push foreign currencies lower. And if the U.S. can put the credit crunch behind it later this year, or the downturn is not as bad as feared, the dollar could recover nicely.
The implication: Go easy on foreign stock and bond investments.
Oil Weakness
Oil prices recently touched $100 a barrel and remain above $90, amid rising global demand and supply pressures. But as the U.S. economy slows, it will impact global growth, crimping energy demand. At the same time, there’s growing investment in alternative energy sources, which could boost supply.
Over the long term, oil should stay strong, because it is becoming harder to tap new major energy sources. But in 2008, the direction of crude could be lower.
Duncan Richardson, chief equity investment officer at mutual-fund company Eaton Vance even predicts “oil back under $70 [a] barrel,” amid “a global economic slowdown.”
Global economic weakness also could push all kinds of commodities, from copper to grains, lower, especially if China slows. That would put pressure on a range of U.S. commodity producers and emerging-market stocks. At the same time, the Chinese stock market could tumble “as pressures grow to rein in inflation, pollution [and] misallocation of resources,” says Citigroup strategist Tobias Levkovich.
On the bright side, commodity weakness could make U.S. consumer spending stronger than most expect.
Debt Headaches
The subprime mortgage crisis could spread in 2008 to areas like credit cards and auto loans. If more consumers are unable to pay their debt bills, that will cause more losses for financial companies and potentially weigh on broad markets.
There are growing indications of problems. On Thursday, American Express warned that slower consumer spending and more credit-card delinquencies will hurt profit this year. Capital One Financial set aside $650 million to prepare for unpaid credit-card bills.
The problems could spread from consumers to companies in 2008, as capital spending slips and debt defaults, which have been running at very low levels, jump. That likely will hurt some junk bonds.
There’s also anxiety about the growing credit-default-swap market, where insurance against debt defaults is bought and sold. The cost to buy insurance to protect against default on debt issued by big financial companies is rising, signaling rising worries about some big banks and insurers.
Banks and bond insurers have written billions of dollars of the credit protection traded in this market. If defaults materialize, they will be on the hook. Some say losses on these instruments could amount to $250 billion or more.
“We remain concerned that the amount of losses generated due to writing of insurance on mortgage-backed securities in the form of credit default swaps is relatively unknown, which could test the solvency of a major bank,” says Charles Gradante, managing principal of Hennessee Group, a hedge-fund investment firm.
Tech Turnaround
Technology shares have been the worst performers lately, amid the slowdown fears and because the troubled financial sector represents as much as 18% of U.S. and global tech spending.
But some stocks now look cheap, argues James Paulsen, chief investment officer at Wells Capital Management.
If global growth resumes apace, tech shares should lead the market higher. Semiconductor stocks now trade at close to five-year lows, based on trailing sales and projected earnings.
Multinational companies like Microsoft, Oracle and Cisco Systems are favorites of cautious tech investors.
New York -- Import prices rose at their fastest pace in at least 25 years in 2007, underlining the threat of stagflation as the US enters a period of slower economic growth, according to figures from the commerce department.
The data come as other figures showed the US trade deficit widening in November, suggesting even weaker growth in the final quarter of the year.
Import prices rose 10.9 per cent last year, the fastest yearly increase since records began in 1982. The price of petroleum imports rose by 50 per cent over the year. Excluding energy, import prices rose by 3 per cent.
Prices in December grew at a slower pace than in the month before, but since then oil prices have risen further.
Rising energy and commodity prices are combining with higher food costs to pose an increasing inflationary threat. Meanwhile, the credit crisis and housing slump are threatening to pull back US economic growth to less than 2 per cent in the final three months of 2007, after a 4.9 per cent jump in the third quarter.
A growing number of economists are warning that the US will slip into recession this year.
On Thursday, Ben Bernanke, chairman of the Federal Reserve, raised hopes of rate cuts when he said the US central bank planned to act aggressively to offset the risks to growth.
Drew Matus, an economist at Lehman Brothers, said the trade and price figures highlighted the tight situation the Fed found itself in.
"It shows you can get slower growth and higher inflation," he said. "This is stagflation-lite."
The higher import prices data came after the US trade deficit widened in November to its highest level in 14 months as oil prices soared.
Total exports in November rose at a slower pace than imports, leaving the deficit up by $63.1bn, much larger than the $60bn that economists had expected.
By PETER S. GOODMAN and FLOYD NORRIS January 13, 2008
As leaders in Washington turn their attention to efforts to avert a looming downturn, many economists suggest that it may already be too late to change the course of the economy over the first half of the year, if not longer.
With a wave of negative signs gathering force, economists, policy makers and investors are debating just how much the economy could be damaged in 2008. Huge and complex, the American economy has in recent years been aided by a global web of finance so elaborate that no one seems capable of fully comprehending it. That makes it all but impossible to predict how much the economy can be expected to fall before it stabilizes.
The answer could be a defining factor in the outcome of the fiercely contested presidential election. Not long ago, the race centered on the war in Iraq.
But now, as candidates fan out across the country, visiting places as varied as the factory towns of Michigan and streets lined with unsold condominiums in Las Vegas, voters are increasingly demanding that they focus on the best way to keep the economy from slipping off the tracks.
The measures now being debated in Washington and on the campaign trail — tax rebates, added help for the unemployed and those facing sharply higher heating bills and, most immediately, a move by the Federal Reserve to further cut interest rates — could certainly moderate the severity of a downturn. Democrats and the Bush administration are considering a package of such measures that could reach $100 billion.
But the forces menacing the economy, like the unraveling of the real estate market and high oil prices, are too entrenched to be swiftly dispatched by government largess or cheaper credit, some economists say.
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.”
In the view of many analysts, the economy is now in a downward spiral, with each piece of negative news setting off the next. Falling housing prices have eroded the ability of homeowners to borrow against their property, threatening their ability to spend freely. Concerns about tightening consumer spending have prompted businesses to slow hiring, limiting wage increases and in turn applying the brakes anew to consumer spending.
Not everyone is convinced that the American economy is headed for a recession, defined as six months of economic contraction. The economy often serves up indications of distress that later turn out to be false warnings.
But some economists think a recession may have begun in December. In the last two weeks, there have been signs that a substantial downturn may already be unfolding. The Labor Department reported a sharp slowdown in job creation in December. Retailers said that sales last month were extremely disappointing, capping the worst gain for a holiday season in five years. A widely watched index showed manufacturing slowing, despite a weak American dollar that has encouraged growth in exports.
The construction of new homes has already fallen by some 40 percent since the peak in 2006. The sales of new homes have fallen even faster, suggesting that a large oversupply of places to live will continue to drag down prices.
Home prices have dropped by about 7 percent since the peak in 2006, but some experts suggest they could fall by another 15 to 20 percent before hitting bottom.
“There is still a long way to go,” said Nouriel Roubini, an economist at the Stern School of Business at New York University and chairman of the research firm RGE Monitor.
Mr. Roubini has long predicted the real estate downturn would cause a severe recession. He envisions foreclosures accelerating this year, and banks counting fresh losses. That could make them less able to lend and further slow economic activity, not just in the United States but around the world.
“We’re facing the risk of a systemic financial crisis,” Mr. Roubini said. “It’s not just subprime mortgages. The same kind of reckless lending has been occurring throughout the financial system. And it’s not only mortgages: Now it’s credit cards and auto loans, where we see problems increasing. The toxic junk is popping up everywhere.”
Banks, including commercial banks and investment banks, have so far acknowledged losses of some $100 billion, yet anxiety persists that more large write-offs are coming.
“Firms will go to great lengths to hide or delay reporting losses,” said Paul Ashworth of Capital Economics. “What we know now therefore might only be the tip of the iceberg.”
In a speech on Thursday, the Federal Reserve chairman, Ben S. Bernanke , zeroed in on the nervousness of bankers as a prime factor slowing the economy, even as the Fed tries to stimulate it with cheaper credit.
“Developments have prompted banks to become protective of their liquidity and balance sheet capacity and thus to become less willing to provide funding to other market participants,” he said. His comments were widely construed as an assurance that the Fed would soon cut rates again. The Fed already dropped rates three times during the last four months of 2007.
Wall Street has clamored for the Fed to keep lowering rates, cognizant that cheaper credit is generally good not just for encouraging borrowing and spending but also for corporate profits.
But some economists fear that lower rates will simply provide a short-lived boost at the expense of the economy’s longer-term health: Cheap money encourages foolish investments, they say, which is precisely how Americans came to experience the evaporation of wealth in the Internet era, followed by housing prices rising beyond any reasonable connection to incomes.
“This appears to be a panic on the part of the Fed,” said Michael T. Darda, chief economist at MKM Partners, a research and trading firm. “The housing bubble was a reaction from the effort to protect us from the collapse of the tech bubble. What’s the next bubble going to be as a consequence of trying to protect us against this?”
Mr. Darda asserts that the economy would be fine if left to its own devices, maintaining that the job market is healthier than most economists think. He contends that the December jobs report is likely to be revised to show that far more jobs were created than the 18,000 reported by the Labor Department.
“That could be important in terms of reversing the direction,” Mr. Darda said. “We need to see evidence that the labor market isn’t falling apart. That’s critical.”
But most economists seem convinced that the economy has slowed significantly, and say it is the severity of a downturn that is in doubt, not the existence of one.
“If we have a recession with a modest consumer retrenchment, and the rest of the world holds up, this could be three quarters of disappointment,” said Robert Barbera, the chief economist of ITG. “The risk is a more dramatic decline for the consumer.”
There is little doubt that the Fed will lower its benchmark rate later this month, making it cheaper for banks to lend money to one another. But there is more doubt whether Washington can quickly agree on fiscal policy moves — that is, raising spending or cutting taxes — in an election year in which the White House and Congress are controlled by different parties.
A recession could pack enormous political consequences. Over the last century, the economy has been in a recession four times in the early part of a presidential election year, according to the National Bureau of Economic Research. In each of those years — 1920, 1932, 1960 and 1980 — the party of the incumbent president lost the election.
Much discussed now in Washington and on the campaign trail is a potential rebate for taxpayers, similar to one that seemed to lubricate spending during the last recession six years ago. But worries remain over whether such a move could exacerbate inflation, and some doubt that the benefits would be felt rapidly enough to justify the risks.
While tax rebates can encourage spending and generate jobs, Mr. Roubini said, the government cannot afford to unleash the significant amounts — $300 billion or $400 billion — that he believes would be required to ensure a substantial rebound in economic growth.
“Whatever they’re going to do,” he said, “it’s going to be cosmetic.”
And most economists concur that even meaningful policies will probably take several months to filter through such an enormous economy. By the time they take effect, the country could already be in a recession.
Australia Corporate Bond Risk Rises to Record on Countrywide
By Laura Cochrane and Denise Kee
Jan. 10 (Bloomberg) -- The risk of Australian companies defaulting on their debt rose to a record for a fifth day following a report the nation's four largest banks invested in U.S. mortgage lender Countrywide Financial Corp.
The Markit iTraxx Australia Series 8 Index, which includes credit-default swaps tied to 25 borrowers including the biggest banks, increased as much as 3 basis points to a record 80 basis points in Sydney, according to Citigroup Inc.
Credit-default swaps on Australia and New Zealand Banking Group Ltd., Westpac Banking Corp., National Australia Bank Ltd. and Commonwealth Bank of Australia rose to a six-week high after the Australian newspaper said the companies invested A$850 million ($750 million) last year in Countrywide, which has denied it will file for bankruptcy.
The U.S. subprime mortgage-market collapse has forced all of the banks, except Westpac, to increase mortgage rates and Centro Properties Group in Melbourne to put itself up for sale. The U.S. economy may already be in recession and the Federal Reserve will respond by slashing interest rates, economists at Goldman Sachs Group Inc. said.
``I can't think of anything that will turn the sentiment around,'' said Mark McCarthy, a credit-default-swaps trader in Sydney at ABN Amro Holding NV. ``American banks are reporting their results next week and the market is expecting bad news.''
Centro, which is seeking to refinance A$3.9 billion of debt by a Feb. 15 deadline, fell the most in three weeks in Sydney trading after the Australian newspaper said regulators questioned the company about accounting for its debt. Centro slid 25 Australian cents, or 23 percent, to 86 cents at the 4:10 p.m. close on the Australian Stock Exchange.
Credit-default swaps on other Australian property trusts including Sydney-based companies GPT Group, Lend Lease Corp. and Westfield Group rose about 10 basis points.
Bank Debt
Credit-default swaps on the subordinated debt of ANZ, Westpac, National Australia and Commonwealth Bank, increased 3 basis points to 71.5 basis points, the highest since Nov. 27.
Each basis point, or 0.01 percentage point, on a contract protecting $10 million of debt from default for five years adds $1,000 to the annual cost.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
The cost to protect the senior debt of the banks from default increased 2 basis points to 42 basis points, according to data compiled by Bloomberg.
All the four Australian banks, except Westpac, have raised their variable interest rate on mortgages to recoup higher funding costs in the past week. It's the first time in more than a decade most of the nation's biggest lenders made a change in home loan rates that didn't follow the Reserve Bank of Australia.
Countrywide
Australia's biggest lenders were part of a syndicate of 40 banks that invested $11.5 billion in Countrywide, the biggest U.S. mortgage lender, last year, according to the Australian newspaper, citing confirmation from the banks.
Countrywide shares have slumped in New York as foreclosures and late payments rose to the most in five years. The company, which tapped emergency credit lines and got a bailout from Bank of America Corp., denied speculation it will file for bankruptcy.
``All these negatives add up,'' said Damian Rowe, a credit- default-swaps trader with Citigroup Inc. in Sydney.
Credit-default swaps tied to the debt of Macquarie Group Ltd., Australia's biggest investment bank, increased to almost a five-month high. The cost to protect its senior debt from default rose 10 basis points to 95 basis points and 145 basis points on its subordinated bonds.
Contracts on the benchmark iTraxx Asia Ex-Japan Series 8 Index of 70 borrowers, including the Thai government and Mumbai- based Tata Motors Ltd., increased by 2 basis points to 180 basis points at 10:47 a.m. in Hong Kong, according to BNP Paribas SA.
The Markit iTraxx Japan index edged up 0.25 basis point to 44.75 basis points, according to JPMorgan.
Jan. 9 (Bloomberg) -- The risk of property developers in China defaulting on their debt rose to a record, according to traders of credit-default swaps.
The cost to protect bonds sold by Agile Property Holdings Ltd., Shimao Property Holdings Ltd. and Hopson Development Holdings Ltd. rose by as much as 80 basis points, the most on record, outpacing a 18 basis point increase in the Markit iTraxx Asia Ex-Japan Series 8 Index of 20 high-risk, high-yield borrowers, according to BNP Paribas SA.
Intensifying efforts by the government to cool the property market and aggressive borrowings by Chinese builders to fund their expansion sent the risk they may default on their debt to record highs, according to Mark Lo, a Hong Kong-based credit analyst with BNP Paribas.
``I am bearish on this sector,'' said Lo in a telephone interview. ``There is downside risk and limited upside for bond investors.''
Shimao and Agile, contributing to a 29 percent surge in property investments in the 12 months ended August, may deplete cash reserves and depend more on sales to service debt, analysts at Moody's Investors Service said in a Nov. 6 report.
The contracts tied to the debt of Shimao, Hopson and Agile traded at 560 basis points, 680 basis points, and 650 basis points respectively at 5:13 p.m. in Hong Kong. A basis point is 0.01 percentage point.
Government Restrictions
Credit-default swaps on Shanghai-based Greentown China Holdings Ltd. debt rose 80 basis points to a record 800 basis points, according to BNP Paribas.
The government increased minimum down payments on apartments to 40 percent from 30 percent in September and ordered banks to raise reserves by the most in four years on Dec. 8. Lenders must put aside 14.5 percent of deposits as reserves, starting Dec. 25, up from 13.5 percent.
Credit-default swaps are financial instruments based on bonds or loans that are used to speculate on a company's ability to repay debt. They were conceived to protect bondholders by paying the buyer face value in exchange for the underlying securities should the borrower default.
Potential issuance from Chinese real-estate companies with at least a BB rating may be $15 billion, more than the current outstanding market of less than $4 billion, said Todd Schubert, a credit analyst with Deutsche Bank AG in a Dec. 7 report.
The rising borrowing costs prompted Country Garden Holdings Co., China's most profitable developer, to shelve its $1.5 billion bond sale. Investors snubbed yields of up to 10 percent offered by the Foshan, Guangdong-based company in November. Shimao, listed in Hong Kong, said in November it will not issue debt for a year.
Shimao is rated Baa3 by Moody's and BB+ by Standard & Poor's. Guangdong-based Agile is rated Ba3 by Moody's and BB by S&P, while Hopson is rated Ba2 by Moody's and BB by S&P. Greentown is rated Ba3 by Moody's and BB- by S&P. Debt rated below Baa3 by Moody's and BBB- by S&P is considered high-yield, high-risk, or junk. Hopson is based in Guangzhou.
Li Ka-Shing Rushes Into China Where Bond Angels Fear
By Denise Kee (Update2)
Jan. 9 (Bloomberg) -- The bond market is telling Li Ka-shing, Asia's richest man, he's sitting on a Chinese property bubble that's bigger than the one deflating in the U.S.
Bonds of China's Agile Property Holdings Ltd. yield 7.17 percentage points more than U.S. Treasuries, double the premium in July and 1.79 percentage points more than the debt of Los Angeles-based KB Home, which has the same credit ratings. Agile, a housing developer in the southern province of Guangdong, and Country Garden Holdings Co., China's most-profitable builder, canceled debt sales in November when borrowing costs climbed.
As China's government attempts to cool property prices with limits on lending, developers are in a land grab. Li, who made his fortune in Hong Kong real estate, Chinese billionaire Xu Rongmao, who owns Shimao Property Holdings Ltd., and hundreds of local developers boosted investment 29 percent in the first eight months of 2007, the National Bureau of Statistics said.
``If the government decides to impose further restrictions, most if not all of the developers will go bankrupt, depending on the severity of the restrictions,'' said Eugene Kim, chief investment officer of Hong Kong-based Tribridge Investment Partners Ltd., a $200 million hedge fund. ``That makes us very selective in terms of which bonds we buy and the spreads we require to compensate for risk.''
Kim said he has trades set up that would profit from a decline in prices. New York-based Merrill Lynch & Co., the world's biggest brokerage, rates China property companies ``underweight,'' meaning investors should own a smaller percentage of the debt than contained in benchmark indexes.
Home Prices
Home prices in Shenzhen, a city north of Hong Kong, were 18.6 percent higher in November than a year earlier, according to a National Development and Reform Commission survey. They rose 14.9 percent in the capital city of Beijing and 16.4 percent in Beihai, in Guangxi province.
The People's Bank of China last month raised its benchmark one-year lending rate to a nine-year high and increased reserve requirements to the most since at least 1998. The government increased the minimum down payments on apartments to 40 percent from 30 percent in September.
Signs of a shift are already emerging. The nation's largest publicly traded developer, Shenzhen-based China Vanke Co., sold property worth 4.23 billion yuan ($582 million) in November, 18 percent less than in October.
Most Vulnerable
Chinese developers are among the most vulnerable of any group in Asia to downgrades because a slowdown in home sales would deplete cash, said Clara Lau, an analyst at Moody's Investors Service in Hong Kong.
``They have been growing aggressively, with the view that if they don't buy now, it will be more expensive for them later'' to acquire land, Lau said.
Standard & Poor's cut the credit ratings of Greentown China Holdings Ltd., the largest builder in Zhejiang province, one level to BB- on Dec. 3 due to ``increasingly aggressive land acquisitions.'' Its $400 million of 9 percent bonds yield 11.2 percent, up from 9.6 percent in November.
The risk of Shimao and Agile defaulting on their debt rose to a record today, credit-default swaps show. The cost of protecting the bonds of Shimao and Agile against default increased by as much as 80 basis points, the contracts' biggest rise, to 560 basis points and 650 basis points, respectively, at 5:13 p.m. in Hong Kong, according to BNP Paribas SA.
Higher Cost
Each basis point, or 0.01 percentage point, on a contract protecting $10 million of debt from default for five years adds $1,000 to the annual cost.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
Bond sales by developers rated at least BB, or one to three levels below investment grade, may rise 10-fold to more than $15 billion, Todd Schubert, a Singapore-based credit analyst at Deutsche Bank AG, said in a Dec. 7 report. Developers issued $1.4 billion of dollar-denominated debt in 2007, compared with about $5.5 billion from their U.S. counterparts, according to data compiled by Bloomberg.
`Window of Opportunity'
``Each company knows that the window of opportunity is small and they want to be the one to fit through the window,'' Schubert said in the report.
Agile pulled a $400 million debt sale in November after its borrowing costs surged to a record. The spread on the company's $400 million of 9 percent debentures due September 2013 widened to 7.17 percentage points from 3.23 percentage points on July 2. That caused the value of the bonds to fall 10 percent.
The premium on $250 million of 5.75 percent notes maturing February 2014 by KB Home, the fifth-largest U.S. homebuilder, rose to 5.38 percentage points from 2.41 percentage points, representing a loss of 5.9 percent. Agile and KB are rated BB by S&P.
After reaching a peak of 1.389 million in July 2005, sales of new homes in the U.S. fell to an annual pace of 647,000 in November, a 12-year low, as discounts failed to lure buyers and mounting foreclosures swelled the glut of unsold properties, according to the Commerce Department.
Higher borrowing costs haven't stopped developers betting China's economy, which expanded 11.5 percent in the quarter ended September from a year earlier, will continue to support the housing market.
`Huge' Demand
``Demand in China is huge,'' said Met Luk, a deputy general manager of Agile. ``Together with improvement in the economy, a lot of people are looking for a better living environment.''
Agile said it will add at least 2 million square meters (21.5 million square feet) of land this year. Country Garden Holdings Co., based in Foshan, Guangdong, tripled its land for development to 51.9 million square meters between April and August, according to an Oct. 29 Moody's report.
Cheung Kong Holdings Ltd., the property company controlled by Li, added at least 3 million square meters in the first half of last year, more than triple the acquisitions in all of 2006, its annual report shows. Li hasn't relied on debt to fund purchases in China.
`Good Year'
``2008 will be a good year for investing in the property market in China,'' Justin Chiu, executive director of Cheung Kong, Hong Kong's second-biggest developer by market value, said in an e-mail.
China real estate investments by Cheung Kong and Hutchison Whampoa Ltd., Li's largest company, were at a ``historic high'' of more than HK$10 billion ($1.3 billion), and ``would rise,'' Li said in 2006. His net worth is estimated at $23 billion by Forbes magazine.
The 79-year-old has a history of overcoming long odds to succeed. Li closed an unprofitable U.K. mobile phone operator called Rabbit in 1993. He returned a year later to start Orange Plc, which he sold in 1999 at a $15 billion profit.
Developers such as Cheung Kong and Sun Hung Kai Properties Ltd., Hong Kong's biggest, ``have been relatively prudent,'' said Hugh Young, a managing director at Aberdeen Asset Management Asia Ltd. in Singapore who oversees $50 billion. ``I don't think they just close their eyes and plunge all their money in China.''
Too Optimistic
Bondholders, wary that developers are too optimistic, say what happened in the U.S. last year and Japan in the 1990s may be repeated in China.
More than 100 U.S. mortgage lenders were shuttered, scaled back or sold in 2007 as the rate of foreclosures rose to the highest on record and home sales tumbled, according to data compiled by Bloomberg. In 1998, the Japanese government had to put 13.4 trillion yen ($122 billion) into public works as the fallout from a real estate slump lingered.
In China, a housing slump may trigger more defaults because banking laws are still being written and a consumer credit rating system doesn't exist, said Yi Xianrong, a finance specialist at the government-backed Chinese Academy of Social Sciences research institute in Beijing.
China's National Audit Office said in June it uncovered irregularities involving 15.6 billion yuan of loans in the 2005 results of three of the nation's largest banks.
``We will not know how big this problem is as long as property prices continue to rise,'' Yi said.
HOUSE prices in Beijing dropped 19.67 percent in December from the previous month, China's Central TV reported.
The average residency price dropped to 12,180 yuan (US$1,676) per square meter from 15,162 yuan. Prices in Dongcheng, Xicheng, Chongwen and Xuanwu, the districts with the highest house prices, slumped to 18,401 yuan per square meter from 23,467 yuan, the CCTV report said yesterday, quoting SouFun Holdings Limited.
Many local property companies had to sell homes with free decorations and appliances due to the slump in sales, according to a Beijing property company, which sold only 10 percent of its new houses in Zhaoyang District since October.
Transactions in Beijing's secondhand house market shrunk 8.2 percent in December, Beijing's official online real estate trading Website said, which described the slump as abnormal.
House prices in Shenzhen and Guangzhou began to drop in October. Transactions shrank more than half in October, the biggest drop in three years. The average price in Guangzhou plunged 20 percent in December.
BEIJING -- Three Chinese securities firms have acquired the status of qualified domestic institutional investors (QDII) this week, becoming the fresh force that analysts say might rekindle local residents' enthusiasm for investing abroad.
The license from the China Securities Regulatory Commission for Everbright, Orient and Huatai has given rise to a new contingent of seven securities firms which are yet to design and release their products targeting overseas capital markets.
The other four are CIC, CITIC, Guotai Junan and China Merchants Securities firms.
CIC Securities, which took the lead when receiving a quota of five billion US dollars last December, is expected to release its first overseas investment product in spring.
Previous overseas exploration by the country's first contingent of QDIIs, mostly funds and banks, were not successful due to the outburst of the subprime mortgage crisis in the United States and the constant depreciation of the US dollar against the yuan.
The first four funds with the QDII licence, namely Southern Assets Management, Huaxia, Harvest and the China International Fund Management all embarked on a roller-coaster trip last September, with their net value lingering below or around 0.9 yuan (less than 12 cents) at the moment.
As local stock markets begin to rally after a brief downward adjustment, the year's first QDII fund released by ICBC Credit Suisse, worth 22 billion yuan (about 3.03 billion US dollars), met only a nonchalant response from institutions and individuals.
On Wednesday, the benchmark Shanghai Composite Index edged up 49.28 points, or 0.91 percent, to close at 5,435.81.
Industry analysts attributed the QDII's fading appeal to "bad timing" as stock markets in most regions of the world have been slapped by the US subprime crisis. Fears over exchange rate risks are also a major hindrance, they say.
Given the yuan has gained 27 percent against the euro compared to its loss of nearly seven percent against the US dollar last year, fund manager Cao Guanye, with the ICBC Credit Suisse, dangled the European market as a juicy bait in a pitch sale, saying that investors could enjoy both the profits of European enterprises and the extra gains from a rising euro.
"Unlike funds, securities companies are more experienced with overseas investment as many of them have subsidiaries in Hong Kong," analyst Xie Yan with Haitong Securities said.
As Hong Kong and the Golden Brick nations, including Brazil, Russia and India, have been widely viewed as good options, analysts still foresee a rosy picture in the long term for the QDII program which was initiated in April 2006 to ease excess liquidity.
A latest move made by Chinese supervisors to buoy market confidence was to allow QDIIs to invest in the domestic A-share market.
The restrictions on bank QDIIs were also gradually phased out as they may invest in Hong Kong stocks instead of being confined to fixed-income products.
By early last December, the foreign exchange market regulator had verified a total of 23 billion US dollars as QDII quotas for funds according to Sun Lujun, deputy head of the capital project department under the State Administration of Foreign Exchange.
Sun said that by the end of October, 16 QDIIs had put on the market 154 QDII products. Sun added that 28.6 billion US dollars was actually remitted abroad for QDII operation by the end of the month. The total indicates that capital flows accelerated sharply over the past few months as from April 2006 to March 2007, funds remitted abroad only totaled around 4 billion US dollars.
Trust companies and insurers are also expected to get the QDII license and put their overseas investment products on the market this year.
China Life Applies for More Quotas to Invest in Overseas Shares
By Josephine Lau
Jan. 12 (Bloomberg) -- China Life Insurance Co., the country's biggest insurer, said it has applied for regulators to raise the amount of money available to invest in overseas securities.
``China Life and other insurers have applied to increase our overseas investment quota,'' said Chen Dong, who oversees international operations at the insurer's asset-management arm, on the sidelines of a conference in Beijing today. ``The Chinese market still needs to learn how to diversify risk by investing more abroad.''
China Life and its smaller rival Ping An Insurance (Group) Co. are currently allowed to invest up to 5 percent of their assets in Hong Kong-listed ``red chip'' companies under the so- called qualified domestic institutional investor, or QDII, program, Chen said.
The Beijing-based firm and other domestic insurers still await regulatory approval to lift that investment cap to 15 percent, he said.
Returns from China Life's QDII investments rank among the highest in the industry, Chen said, without providing an exact figure.
Twenty insurers, including China Life Insurance Co., Ping An Insurance (Group) Co., PICC Property & Casualty Co. and China Reinsurance Co., have received QDII licenses, according to the China Insurance Regulatory Commission.
WASHINGTON - WALL Street folklore has it that wealthy financiers prefer a Republican president, but some of America's top bankers are backing Democratic contenders in the 2008 presidential election. Financial advisors say many Wall Street money managers are still hedging their bets on this year's presidential race, partly because the front-runners remain unclear for the Nov 4 poll.
'This may potentially result in a more volatile marketplace as investors weigh the 'fear of the unknown,'' Mike Schwager, a market strategist at Claymore Securities, wrote in a note to clients this week.
Republicans are generally typecast as being more friendly to business while Democrats are stereotyped as more likely to raise taxes, but financial professionals say Wall Street can live with either party running the White House as long as the economy is in good shape.
The US economy, however, is sailing into choppy waters stirred up by a persistent housing slump, a credit squeeze, soaring energy costs, and slowing job growth.
The stock markets have plummeted amid the uncertainty and Goldman Sachs economists warned this week that the world's biggest economy appears to be 'falling into a recession.' The ongoing political contest, as a result, has Wall Street on tenterhooks.
'In general Wall Street going into an election tends to want to see a Republican, but in the long term, they live with Democrats very, very easily if the Democrats deliver the goods,' said Joel Naroff, president of Naroff Economic Advisors.
Mr Naroff, who advises companies on economic risk and consults for Commerce Bank and Cumberland Advisors, said the stock markets might display a 'knee-jerk' reaction to a particular candidate, but he said Wall Street is waiting to find out who the top candidates will be.
Despite increased economic angst, the leading Democratic contenders are bucking the notion that Republicans are more favoured on Wall Street.
Democrat Hillary Clinton reaped the most donations from the securities and investment industry in the first nine months of 2007, netting 4.74 million dollars, according to the Centre for Responsive Politics (CRP).
The wife of former US president Bill Clinton has also won backing from the heads of two of America's largest investment banks.
The chief executive officer of Morgan Stanley, John Mack, and Goldman Sachs CEO Lloyd Blankfein have both written checks for her campaign.
Mrs Clinton's Wall Street campaign haul was followed closely by Republican candidate Rudolph Giuliani and Democrat Barack Obama, who each raked in around US$4.51 million (S$6.48 million) during the same period of 2007, according to the CRP.
Republican Mitt Romney raised US$3.56 million from securities and investment firms.
Democrat John Edwards, who has criticised corporate interests, gained US$773,600. Republican hopeful Mike Huckabee had garnered just US$77,727 during the first nine months of last year.
US investment kingpin Warren Buffett has yet to make a definite bet, although he has voiced support for both Mrs Clinton and Senator Obama.
Former New York mayor Giuliani has also won backing from powerful financial hitters such as Paul Singer, the founder of the US$9-billion hedge fund Elliot Associates.
Pledges by Mrs Clinton and Senator Obama to let tax cuts enacted by the administration of US President George W. Bush expire do not seem to have harmed their support on Wall Street.
Some financiers fear expiration or a rollback of the tax cuts would mean higher taxes on dividends and capital gains.
Mr Romney, who made millions in the business world as a co-founder of Bain Capital, like the other candidates is touting his economic credentials and appealing to Wall Street.
Raising the question of what the government could do to stop a recession from occurring, Mr Romney said in a debate Thursday: 'We're going to have to reduce taxes on middle-income Americans immediately.' -- AFP
Straits Trading aims to redevelop Specialists' Centre, Hotel Phoenix
Its 'advanced talks' with OCBC may see new complex taking shape come year-end
By Joyce Teo, Property Correspondent January 11 2008, The Straits Times
THERE seems to be some progress at last in the much-anticipated redevelopment of the Specialists' Shopping Centre and Hotel Phoenix complex in Orchard Road.
The Straits Trading Company - which is the object of a buyout offer - announced yesterday that it is in 'advanced negotiations' with site owner OCBC Bank regarding redevelopment and management plans.
Construction of a 21-storey complex with shops and a 580-room hotel will begin in the second half of this year, according to OCBC.
The complex will be linked to Far East Organization's upcoming Orchard Central mall and Lend Lease's upcoming Somerset Central mall, both nearby.
The announcement yesterday was as much about the complex ownership and development structure put in place in response to amended restrictions that prevent banks from getting involved in property development.
Straits Trading is a holding company with businesses that range from smelting and mining to hotel investment and property development.
As it is the subject of a buyout offer by The Cairns, a privately held investment firm that is part of the Tecity group, it had to inform shareholders of its advanced talks with OCBC.
Tecity is controlled by the family of the late Dr Tan Chin Tuan, a past chairman of OCBC. Dr Tan set up Tecity, which has held a stake in Straits Trading since the 1950s.
The OCBC group also holds a stake, directly and indirectly, amounting to 26.1 per cent.
Dr Tan also started the old 392-room Hotel Phoenix, which closed in August after 35 years.
In yesterday's statement, Straits Trading said OCBC will appoint a Straits Trading special-purpose vehicle to undertake the construction of the complex.
The proposed arrangements include funding for the vehicle and the construction based on a maximum development cost to be agreed on between Straits Trading and OCBC.
Once the complex has been completed, Straits Trading will sell it to OCBC and then lease it back for three years, with an option to renew the lease for a further three years.
OCBC said it had opted for a sale and leaseback plan because it sees the property investment as one that will bring 'long-term financial returns'.
Design details for the new complex, which will have a total gross floor area of 50,079.07 sq m and a net retail lettable area of 14,014 sq m, are still being finalised.
Sixty per cent of the gross floor area will be taken up by the hotel, and the remainder by retail shops and a carpark that will accommodate 262 vehicles.
Tange Associates is the architect for the project.
Insight Down South By SEAH CHIANG NEE Saturday January 12, 2008
New public housing will be luxurious and high-tech, rather than the bland first-generation flats churned out in the past.
AFTER building nearly one million flats, Singapore’s public housing builder is faced with a new historical role that could be more daunting than when it started out 47 years ago.
The Housing Development Board (HDB) will have a pivotal part in meeting the goal of becoming a global city of 6.5 million people.
The new apartments will have to be top-class, matching the private sector's in style but cheaper in cost. In recent weeks it launched the future home for Singapore’s heartlanders.
The Board has had a formidable history that started in 1960 with the building of cheap housing for the masses, but as society has become affluent, its work has become more creative.
The result today: More than 982,000 flats, for about 80% of the 4.68 million population. The future will be tougher for several reasons.
First, it may have to build at least 400,000 new units (a 40% increase) to cope with the expanded population, and there is less land to work on than five decades ago.
Second, the new flats will have to be luxurious and high-tech, rather than the bland first-generation lot that it churned out in the past.
This is to meet the rising demands of a more affluent and sophisticated middle-class, and the talented foreigners that it wants to attract.
The third is to keep costs significantly lower than the private sector's to reflect its social role, a tall order given Singapore’s new era of high cost, especially in land prices.
The New Order took another crucial step last week when the HDB launched its third condo-like project with luxurious fittings that included timber flooring, large bay windows and built-in wardrobes.
The prices, too, are also close to private condos. The top range of a new three-bedroom apartment will go for S$727,000 (RM1.6mil), or about S$520 (RM1,186) per sq ft – a far cry from 1985 when a simple no-frills flat would fetch no more than S$79,000 (RM180,200).
These top-end public flats are still cheaper than private suburban condos but are fast catching up. “The higher quality is what many young Singaporeans want,” an official explained.
The changing aspirations are reflected in the statistics.
At its height in 1990, HDB flats housed 87% of Singaporeans, but this figure has steadily fallen to 81% by March last year, mainly due to a shift to private housing.
With more money, professionals and businessmen prefer to own private apartments for the luxury and the prestige. Besides, public flats cannot be freely bought and sold.
New HDB units at subsidised rates are only available to citizens whose family earns less than S$8,000 (RM18,200) a month. Better-off Singaporeans and permanent residents (including Malaysians) often buy them in the more expensive resale market.
Mah Bow Tan, Minister for National Development, said: “Within the next 10 years, more of our flats will be 40 to 50 years old.
“This provides us with an excellent opportunity to explore new ideas for our next generation of public housing that will bring HDB living to a higher plane.”
Pushed by rising demand and a strong market (as well as inflation), HDB prices rose by a strong 17.4%.
Despite their higher earnings, most young aspirant homeowners who are starting off in life find the higher prices in the past three years too overwhelming to overcome.
Their best hope is to buy a new government flat – for which there is a shortage, and a long queue.
The HDB is not only about cheaper housing, but a whole way of life. It decides how well Singaporeans live and whether – or when – they can get married or have children.
A shortage is already forcing some Singaporeans who can’t afford a resale flat to postpone marriage.
Since its inception, prices of public housing have been steadily rising to keep pace with economic growth. This has enabled some shrewd Hong Kongers to come and make a neat profit.
For the People’s Action Party (PAP) public housing is also about survival.
If the HDB succeeds in providing cheap, happy homes for the middle class, the votes will flow towards the ruling party; if not, the opposite will happen.
It is a political weapon like in few – if at all – other countries.
This is the why any mass drift towards private housing will be considered as weakening the PAP’s control machinery.
For example, it has used government subsidies (up to 80% of the cost) for HDB owners to refurbish their old flats as an election weapon.
Constituencies that have opposition MPs (only two out of 84) are given the lowest priority. In practice, none has been selected for upgrading all these years.
In the last two general elections, upgrading was offered to secure votes for the government. Constituencies with strong opposition support were promised S$2bil (RM4.5bil) in such financing.
The rising prices are, however, not a general complaint here. Actually you won’t find many Singaporeans cursing it.
It is not hard to understand why. With four out of five people owning HDB flats, the rising values are largely welcome.
With inflation at a 25-year record and people’s money losing value by the month, public housing – despite the higher costs – still makes a good long-term asset.
Citizens Willing to Trade Civil Liberties for a Cleaner, Safer, Efficient Society
By BILL WEIR SINGAPORE, Jan. 9, 2008
If you set out across the globe and talk to a few of the 6.5 billion people who live here, you will be amazed by the pockets of joy you'll find in the most unlikely places. You'll find happy mothers in the dusty villages of Africa, happy Tibetans toiling under Chinese oppression and happy families in the slums of Bombay.
To understand this sort of human contentment, Dan Buettner founded a global project called Blue Zones. He found that a liberal, tolerant, democratic society helps make Denmark the happiest country in the world.
But is there a similar level of contentment in a place with one political party, a censored press and nonjury trials? Welcome to Singapore, the happiest country in Asia.
"Ninety-five percent of the people around us say they're either somewhat happy or very happy," Buettner said of Singapore. "That's a very high proportion for Asia."
Safety and Success
This high proportion of satisfied citizens wasn't the case 40 years ago, when a man named Lee Kwan Yew took power in Singapore, and laid down the law. He made the Chinese and Malaysian locals learn English, banned spitting, chewing gum and long hair, and even paid educated people to have children.
With his draconian laws he transformed Singapore from a smelly, chaotic seaport into one of the richest, cleanest, safest and most efficient big cities in the world. But woe unto those who break the rules and litter or forget to flush. "[Singapore] is based on the rules," one local said. "[With] rules and very systematic country."
There are fines for the smallest infractions, and more serious criminals are strapped to a rack and beaten with a bamboo cane.
We met one man in Singapore who has seen and felt Singaporean justice firsthand. After serving 15 years for gang-related crimes, Neville Tan is now a pastor with a prison ministry. He says he was caned many times and describes it as a "horrible, painful experience." But he doesn't mind it one bit. "We feel safe. If we don't break the law, we don't have to worry about the law."
Mark Zee is an actor who moved to Singapore from Apple Valley, Minn., and he says he had no problem giving up civil liberty in exchange for a clean, safe city. Singapore, he says, has some of the "highest paid civil servants in the world, and so you get some very smart people running the country, and that's something that, you can't say in all Western countries," said Zee. "Hint, hint."
So on a scale of one to 10 as the happiest, how do citizens rank themselves? "Probably an eight," one man said. Another responded to the question "What would make you happier?" with "more money."
Many people agree; some of the other pillars of Singapore society are built around wealth. They're known as the five C's: cash, credit cards, condominium, cars and country club.
Celina Lin, a self-made millionaire and one of the nation's best-known bachelorette socialites, can tell you all about the five C's. Despite her apartment full of art, her snazzy Porsche and 300 pairs of shoes, she was the least happy person we met.
"Sometimes I get unhappy if I compare," she said. "Of course someone … wealthier, having a more luxurious life, driving a bigger car, having a bigger house, having a wonderful husband who provides for her. And when I think of that, I feel, I mean honestly, I feel a tinge of jealousy."
Keeping up with the Joneses is an obsession in this culture.
In Singapore, kids spend their vacations participating in time management seminars. While this kind of competition is often the source of unhappiness, the drive to succeed is tempered by Confucian values — the family ALWAYS comes first.
Striking a Balance
Jennie Chua, the former CEO of the famous Raffles Hotel, says she is often happiest when having breakfast with her grandchildren, and her contentment comes knowing that they will have a secure future. Douglas Foo, one of the most successful restaurateurs in Asia, says that his goal is to create a chain as big as Starbucks or McDonalds … as soon as he's done playing with his kids.
"All of us have one thing that's limited in supply, that's time," he said. "So we should do some planning, right? How much time do you want to spend with the family, your career, or some hobby? I think there's a balance."
But can you have both? "Well, I'm not going to do that single-handedly," said Foo. "There are a lot of things I want to do in my life; I want to make sure by the time I leave, when he calls up and says 'Now is the time to go,' I will leave smiling, and saying that I lived a very fulfilling, meaningful life."
But all this talk about happiness raises a question: Where is the happiest place in America? In his new book, "The Geography of Bliss," Eric Weiner also explored the happiest spots on the globe and using the lessons learned, set out to find the happiest place in America.
He settled on Asheville, N.C. "You've got mountains, beautiful mountains all around," he explained. "You have a tremendous, thriving, artistic community. You have cafes everywhere, every other shop is a coffee shop or a bookstore."
But more importantly, he said, "You have a really strong sense of community here. And if I've learned anything from researching this book, it's that other people matter. There's no such thing as personal happiness, your happiness is part and parcel of those around you."
Community — that's the key. Community is why happiness can be found along with the high taxes in Denmark, the harsh rules in Singapore and the crushing poverty in India. One study found that the people living on the streets of Calcutta are happier that those in California. The homeless in Fresno may have more access to food and shelter, but what have the "houseless" in Bombay got? They have each other.
New Research Shows That Humans Have More Control Over Their Happiness Than Previously Thought
By MICHAEL MENDELSOHN Jan. 11, 2008
What exactly is happening inside the brains of people experiencing joy and happiness?
"It's a very complicated chemical soup," explained Dr. Richard Davidson, who has made a life's work out of studying "happy brains." His lab at the University of Wisconsin is devoted to understanding how much of our joy level is set at birth, and how much we can control.
With a skull cap containing 128 sensors, Davidson's team can watch a subject's brain respond to a series of photographs, some pleasant, some distressing.
"We can challenge the brain by presenting these emotional images and look to see how you respond to them," Davidson said.
ABC News' Bill Weir underwent the test, and by studying the activity in his left prefrontal cortex, Davidson discovered that Weir's brain was "more positive than not."
"Now, it doesn't mean that you don't have episodes of negative emotion," he explained. "But those negative emotions don't linger."
People with happy brains have their parents to thank, to a certain extent, not only for happy genes, but also for loving childhoods. Studies have shown that angry or critical parents can actually alter a child's happiness level until it's set around age 16. But can adults adjust their own feelings of happiness?
Happiness Interventions
Until recently, most research psychologists were more interested in what made people depressed than what made them happy, and pharmaceutical companies have played a crucial role in promoting happiness by developing very successful anti-depressants. But evolving research in a field known as positive psychology is getting people to ask themselves how they can become happier, not through drugs, but by making changes in how they act and think.
"Antidepressants don't make people happier, they just decrease negative emotions," says University of California-Riverside psychology professor Dr. Sonja Lyubomirsky. In her new book, "The How of Happiness," Lyubomirksy argues that as much as 40 percent of our happiness "is left for the intentional activities that we can choose to engage in -- the things that we do and think every day of our lives."
What are these "intentional activities"? Scientists know that happy people practice, among other things, more acts of kindness, are able to lose themselves in whatever they enjoy doing, and avoid dwelling on their problems.
Lyubomirsky has had lab subjects actually engage in some of these activities, and found that people can indeed force themselves to truly become happier. Not surprisingly, such happiness interventions take work, because people easily fall back to their genetically-determined happiness set points. Scientists have known for decades that a large part of our temperament is genetically pre-determined; by studying the personalities of identical twins they've found that about 50 percent of our happiness -- or unhappiness -- can be traced to our genes. Adding the 40 percent that we can control with our daily thoughts and actions still leaves about 10 percent unaccounted for. This remaining 10 percent is related to our life circumstances, such as where we live, how much money we have, our marital status, and how we look.
Hedonic Adaptation
Surprised that your life circumstances have such little influence on your happiness? Researchers have found that people eventually return to their genetically-determined happiness set points after big changes in life, as seen in lottery winners and newlyweds.
Four years ago, Caroline Johnson volunteered for the ABC show "Extreme Makeover," and received everything from a new nose to new teeth and the requisite breast implants. Did these physical improvements make her happier?
"I think about a year it made a difference," she said. "People are seeing you for the first time and they compliment you all the time. And then once it wears off, it's just normal life again."
"It's a phenomenon called hedonic adaptation," explained Lyubomirsky. "We tend to adapt to any kind of positive change …once you make $100,000, now you sort of change your goals. Now your goal is to make even more."
Identical twins reared in the same household who do not share the same levels of happiness can also provide clues about what it is in our lives that make us happy -- the 40 percent of happiness within our control. Johnson is the perfect test case for the 40 percent theory, because she herself has an identical twin, Cat Bunnell.
After Lyubomirsky gave the sisters a battery of questionnaires she "was stunned [by] how different their scores were. Caroline got a 5.5 out of 7 … pretty happy," she said. "Cat scored a 3.25 … below the midpoint on happiness."
"They have the same DNA," explained Lyubomirsky, "and so to try to explain why one is happier than the other you have to kind of look at other factors."
One reason for the happiness difference between the twins is their outlook on life. Johnson is a self-employed dog groomer whose business hit a rough patch recently, yet she remains upbeat and committed to success. "I'm very optimistic … I know where I want to be," she said. "By next summer I have definite goals that I expect to meet."
Her sister has a very different outlook on life. Regarding her future, Bunnell said, "I don't feel like I'm progressing as much as I want to in my job or just the financial situation … It just feels like it just weighs on me too much and I just feel like I'm not going to get out of it."
"We really see major differences between the level of optimism that they have," said Lyubomirsky. "(We see) Caroline being more optimistic, Cat kind of ruminating and dwelling more on sort of bad things."
'Happiness Is Really Within Us'
Perhaps another reason why Johnson is happier than her sister is her ability to nurture relationships. Johnson is married with three children, while Bunnell is a divorced single mom, struggling with the dating scene at age 37.
"I don't have somebody that can just hold me because I'm having a hard time," said Bunnell.
Regarding her prospects for finding another husband, she said, "I feel like I'm really giving up on all that."
Besides the optimism, commitment to goals, and ability to nurture relationships that might make Johnson happier than her twin, there are many more ways to affect the 40 percent of happiness in your control.
"The happiness activities are not going to surprise anyone," Lyubomirsky said. "I mean, they're things like gratitude, forgiveness, relationships, savoring the present moment, meditation. I try to sort of determine to what extent those things are supported by research."
Davidson would agree. He has studied the brains of Buddhist monks, men who spend their lives deliberately forcing positive emotions, and their happiness is off the charts. His new data claims that if a person sits quietly for a half-hour a day just thinking about kindness and compassion, their brain will show noticeable changes in just two weeks.
"In many ways, this is the most important idea in neuroscience in the last decade," he said. "Our brains are just waiting to be transformed, and they're always being transformed. But we can take responsibility and change the brain in more positive ways."
"Research is showing pretty convincingly now that happiness is really within us, it's not outside of us," said Lyubomirsky. "It's in what we do. It's sort of how we act, how we think every day of our lives."
It was time for Father John's Saturday night bath and young Sister Magdalene Edwards had prepared the bath water and towels just the way the old nun had instructed. Sister Magdalene Edwards was also instructed not to look at Fr. John's nakedness if she could help it, to do whatever he told her to do, and to pray.
The next morning the old nun asked Sister Magdalene how the bath had gone. "Oh, sister," said the young nun dreamily. "I've been saved."
"Saved? And how did that fine thing come about?" asked the old nun.
"Well, when Fr. John was soaking in the tub, he asked me to wash him, and while I was washing him he guided my hand down between his legs where he said the Lord keeps the Key to Heaven."
"Did he now?" said the old nun evenly.
Sister Magdalene continued: "And Fr. John said that if the Key to Heaven fit my lock, the portals of Heaven would be opened to me and I would be assured of salvation and eternal peace. And then Father John guided his Key to Heaven into my lock."
"Is that a fact?" said the old nun even more evenly.
"At first it hurt terribly, but Fr. John said the pathway to salvation was often painful and that the glory of God would soon swell my heart with ecstasy. And it did, it felt so good being saved."
"That wicked old Devil," said the old nun. "He told me it was Gabriel's Horn, and I've been blowing it for 40 years!"
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Indon maid lets teen molest her HK ward
Girl, 5, was sexually assaulted for more than a year. - TNP
Jan 13, 2008
The New Paper
THE Indonesian maid in Hong Kong would take the two children in her care to a play centre.
But she allowed a teenager working there to molest the elder of the two girls, who was 5 years old.
The maid, Sujianah, 33, was paid between HK$200 ($37) and HK$500 for this.
She faced five charges of aiding and abetting the commission of an indecent assault on the girl, and was sentenced to 32 months in jail, The Standard newspaper reported.
Four days had been set aside for the trial, and the Indonesian consulate hired a lawyer to defend Sujianah, as it feared the case could spark a backlash against other Indonesians working in Hong Kong.
But before the trial started, the maid pleaded guilty.
The teen suspected of molesting the girl has not been charged because of a lack of evidence.
The offences occurred between March 2006 and July last year.
On each occasion, the maid would take the girl and her three-year-old sister to a play centre in Whampoa Garden, Hung Hom, where a 19-year-old man working at the centre would assault her.
The shocking story came to light on 26 Jul last year when the girl’s mother noticed that she had a look of fear.
The girl then told her mother she had been taken by a young man into a dark room and sexually molested on several occasions.
The mother told the police and a medical examination confirmed the girl had been abused.
On one occasion, the maid was said to have washed the child’s underwear because it showed evidence of abuse.
POVERTY DROVE HER TO CRIME
In mitigation, the defence lawyer said the maid came from a poor family and was in Hong Kong on a salary of HK$3,800 a month.
She became the family’s sole bread winner in 2006 when her elder brother died.
The lawyer said: ‘The defendant became greedy.
‘She thought it was all right as long as she did not see what was going on inside the room where the child was molested.
‘The defendant also told herself she was not the one who directly hurt thechild.
‘But now she feels remorseful and shameful about what she has done.’
In passing sentence, the judge said the defendant had acted ‘out of greed’ and was guilty of a ‘severe breach of trust’.
CULPRIT MAY NOT BE CHARGED
Mr Stephen Hung Wan Shun, chairman of the Hong Kong Law Society’s criminal law and procedure committee, said the principal suspect could get away with an offence if there was not sufficient evidence to substantiate charges - even if other defendants were convicted.
‘For example, if the child fails to identify the person and there is no strong evidence to prove he has committed the offence,’ he said.
Prosecutors could still press charges against the suspect.
They could turn to the maid who may be more willing to assist the police if her sentence could be reduced, Mr Hung said.
There are more than 114,000 Indonesian domestic workers in Hong Kong, the second largest population of foreign helpers after Filipinos.
There are currently 123,520 Filipino helpers in the city.
Retail sales expected to be very weak
Full calendar includes CPI, industrial output, starts and more from Bernanke
13 January 2008
WASHINGTON (MarketWatch) -- With the resilient American consumer the only thing keeping the economy from sliding into recession, the December retail-sales report figures to be the biggest economic event in a week full of big events.
December’s retail sales are expected to be very weak following a blow-out month in November.
Aside from the retail data on Tuesday, the calendar features another appearance by Federal Reserve Chairman Ben Bernanke, the Fed’s Beige Book, the December reports on inflation, housing, and output, and the first January readings on the manufacturing sector and consumer sentiment. See the Economic Calendar.
Oh, and corporate America will be coming to the confessional with fourth-quarter earnings reports.
Even with all that, the retail sales report will be the one that "may tell whether consumer spending has the legs to keep the expansion on track," said Patrick Newport, an economist for Global Insight.
"The remarkable resilience of the U.S. consumer has been the biggest economic surprise of the last few quarters," said Meny Grauman, an economist for CIBC World Markets. Consumers have been able to maintain their spending because job and wage growth have been OK, but the "disappointing nonfarm payroll report raises the risk that we are in store for a letdown."
Retail sales were surprisingly strong in November, growing 1.2% and 1.8% excluding autos. But for December, economists surveyed by MarketWatch figure sales were flat and fell 0.2% excluding autos.
"As we begin 2008, significant headwinds are ever present for the consumer," said economists for Wachovia in their weekly outlook. "The weight of falling home prices, higher energy prices and slowing job growth will limit consumer spending growth in the months ahead."
Inflation and output
Energy prices may have ticked higher since then, but they were relatively stable in December, limiting their impact on the consumer price index and the producer price index.
Economists expect the PPI to settle down after the 3.2% jump in November, which was the biggest one-month gain in more than 30 years. For December, the PPI is expected to rise just 0.1%.
The CPI won’t be quite so favourable, with an expected 0.3% rise after November’s 0.8% gain. The CPI could end the year up more than 4% for the first time since 1990. Core prices, however, have been better behaved, with an expected 0.2% gain in December leaving the yearly increase at 2.3%.
There’s a chance that the core CPI increased 0.3% again in December, said Global Insight’s Newport. "In that event, the wave of enthusiasm for slashing the target federal funds rate a full 50 basis points would lose momentum, in favour of a 25-basis-point reduction."
No one is happy about the inflation numbers, but the Fed has much bigger fish to fry coping with the economic slump, which has now spread to the manufacturing sector.
Industrial production likely fell 0.2% in December, economists say. Citigroup economists estimate that industrial output fell at a 2% annual rate in the quarter, a rare down move in a key indicator that the business cycle dating committee uses to judge whether a recession has begun.
Housing starts are expected to sink again in December, falling about 5% to a seasonally adjusted annual rate of 1.13 million from 1.19 million, down 51% from the peak two years ago.
Inventories of unsold new homes are high (even more so once cancelled sales are included), so further declines are probable. Morgan Stanley economists expect starts to fall another 25% to 850,000 or 900,000 annualized late in the year.
The Fed
Bernanke will testify on Capitol Hill on Thursday. Analysts expect him to repeat his message from this past Thursday, when he said in blunt language that the Fed is ready to cut rates again aggressively to stimulate spending and growth.
His appearance at the House Budget Committee will likely focus on efforts Congress and the White House might make to support the economy, such as a tax cut or targeted spending program. Bernanke has vowed in the past to stay out of politics, but may be drawn in anyway to a discussion about the merits of fiscal stimulus.
The Fed’s Beige Book, released on Wednesday, will be combed over for any up-to-date information on the strength of the labour market, the consumer, and the banking system.
Two giants try to learn to share Asia
By Jim Yardley and Somini Sengupta
January 13, 2008
BEIJING: Prime Minister Manmohan Singh of India will arrive in Beijing on Sunday for a three-day visit to China, with each country eager to increase bilateral trade, promote mutual friendship and offer reassurances that Asia is big enough to accommodate the ambitions of both rising powers.
Singh is visiting China for the first time as prime minister, when his government also has drawn closer to Japan and the United States. But Indian officials insist that India is not a proxy for American interests and is not plotting to form alliances to counter China’s rise. India also wants Chinese cooperation on nuclear issues and managing the unrest in Pakistan.
“I have made it clear to the Chinese leadership that India is not part of any so-called contain China effort,” Singh said last week, the Press Trust of India news agency reported.
China sees the trip as the latest proof of its maturing relationship with India after decades of hostility and mistrust rooted in a brief border war in 1962. Neither side is expecting significant progress on lingering disputes, especially over their contested Himalayan border. But Chinese leaders consider warmer relations critical for avoiding the kind of regional instability that could threaten economic growth.
“The most important thing for the two countries is to create a favorable environment, a peaceful environment for development in the long term,” said Sun Shihai, a South Asia specialist at the Chinese Academy of Social Sciences. “So both sides are trying to make their policies more pragmatic toward each other.”
China and India are the world’s fastest-growing major economies, though China is easily the more dominant. Its annual trade with India remains only fraction of its trade with Europe, Japan and the United States. But China-India trade is growing rapidly. When President Hu Jintao of China visited India in 2006, the countries pledged to double trade to $40 billion by 2010 — a goal they nearly reached last year and are likely to surpass this year.
Both sides are expected to continue the trade push this week. Singh is bringing a large business delegation and is keen to correct a trade imbalance tipping in China’s favor.
Singh will spend his entire trip in Beijing and is scheduled to address China’s leading government research institute. He will be honored at a private dinner given by Prime Minister Wen Jiabao and will meet with Hu.
“China attaches great importance to Prime Minister Singh’s visit and hopes to deepen the traditional friendship between the two countries,” said Jiang Yu, a spokeswoman for the Chinese Foreign Ministry.
In New Delhi, senior Indian officials lowered expectations for any breakthroughs. They said the agenda was loaded with items based on old grievances and new challenges.
The border dispute includes competing land claims over the Indian state of Arunachal Pradesh. But a senior Indian official said Singh expected little progress because China is never inclined to use high-level visits to negotiate details. Officials in New Delhi offered a measured response to reports that China was rapidly building infrastructure near the disputed border.
“As of now, we are comfortable with our relations with China,” Shiv Shankar Menon, the Indian foreign secretary, said Friday. “We are both successful in maintaining peace and tranquillity along the border.”
Water is a growing bilateral concern, and the countries have established a joint committee to study the flow of rivers that originate in Tibet and flow into the Indian hills and plains. On issues of energy security, terrorism and climate change, the Indians see a confluence of interests, if not identical objectives.
Pakistan, India’s old rival and China’s equally old ally, is also on the agenda because both sides are concerned about political turmoil across that country.
“Both of us want this entire area to be peaceful and stable so we can get on with our lives, whether it’s China’s periphery or our periphery,” a senior Indian official who was not authorized to speak on matters of strategic delicacy said last week,
One of India’s biggest concerns is whether China will, even reluctantly, support India’s bid to buy nuclear technology. The Bush administration has opened that door, but the request is subject to approval by the International Atomic Energy Agency and the Nuclear Suppliers Group. The Indian official said he did not expect China to actively block India’s ambitions. “I’m not saying they’re happy with it, not at all,” the official said. “They won’t be the ones to stand up.”
Meanwhile, China is expected to push India to further open itself to Chinese investment and business interests. China’s telecommunications giant, Huawei, has hit snags in India, while China has complained about Indian laws devised to protect domestic industries from competition.
Economic competition is inevitable as India is rapidly expanding its manufacturing base — China’s strength — while China is trying to move its economy toward the service and high-tech industries at the center of India’s economic expansion. China’s rising military capacity has alarmed Washington, which entered into a strategic dialogue with Japan and Australia in 2002. Proposals that India join that group of Pacific Rim democracies instantly attracted concern in Beijing.
Last week, Singh told reporters in New Delhi that those proposals “never got going.” Last year, India and China had joint military exercises for the first time. Michael Green, former director of Asian affairs at the National Security Council, said the United States was not discouraging warmer relations between India and China, but noted that tensions remained. He said China was quietly trying to oppose the United States-India nuclear deal and objected to including India on the United Nations Security Council. “Beneath the surface, the Indians are very strategically wary of China,” said Green, who teaches at Georgetown University.
China and India are increasingly playing roles in what have been each other’s backyards. New Delhi has been courting Southeast Asian countries like Vietnam and Singapore, just as China’s role is growing in Bangladesh and Sri Lanka.
Han Hua, an associate professor of international studies at Tsinghua University in Beijing, said those underlying tensions were why China and India wanted to establish a broader spirit of cooperation to carry the relationship beyond specific grievances. She said the countries want to defy an old Chinese proverb, which holds that two tigers cannot share the same mountain.
“The two countries want to show the world that they can get along,” she said.
China’s nerves on edge over inflation
Jan 13, 2008
BEIJING (Reuters) - Chinese policy makers will have a tough time in 2008 battling inflation, excess liquidity and rapid investment, Vice Finance Minister Li Yong said on Sunday.
China has taken a series of measures such as cutting export tax rebates and tightening investment criteria to cool an economy that expanded 11.5 percent in the first nine months of 2007 compared with a year earlier.
The central bank also raised interest rates six times last year and ordered banks on 10 occasions to set aside more deposits in reserve.
“Although these policies are working well, there is still a shortfall from the desired and expected effects,” Li told a forum.
Consumer prices rose 6.9 percent in the year to November, the fastest pace in a decade, setting alarm bells ringing in the halls of power.
Chen Jiagui, vice head of the Chinese Academy of Social Sciences, said the State Council, or cabinet, held an emergency price meeting last Friday and would hold another one on Monday.
The State Council said after yet another conclave devoted to inflation last Wednesday that it would keep a freeze on energy prices and would temporarily intervene directly in the market to hold down prices of daily necessities.
With climbing global grain and raw material prices adding to domestic price pressures, China’s year-average inflation could be as high as 4.6 percent in 2008, Xu Lin, a senior official from the National Development and Reform Commission, said on the sidelines of the forum.
That would match the rate for the first 11 months of 2007.
HANDS TIED
Li said inflationary pressure was still mounting, but China now had less room for maneuver even though it shifted its monetary stance in early December to “tight” from “prudent”.
Banks’ reserve requirements were already at a historical high of 14.5 percent, while it was difficult to raise interest rates further given that rates are falling in countries such as the United States, Li said.
Even without an attractive interest rate differential, the U.S. credit crisis could trigger unwanted speculative capital flows into China, especially at a time when global investors view emerging markets as a relatively safe haven, he said.
Li said China’s trade surplus, which rose 48 percent last year to a record $262.2 billion, was likely to remain elevated in the first half of 2008, adding to liquidity in the banking system.
With the yuan also on an appreciating track, the problem of excess liquidity was unlikely to fundamentally ease any time soon, the official warned.
Li said the impetus behind fixed-asset investment remained strong as the large number of projects launched in 2007 would require continued capital spending this year.
Closer coordination of fiscal and monetary policy was needed to tackle the array of problems, Li said.
The Finance Ministry is considering issuing more types of treasury bonds so that the central bank has a broader range of paper with which it can conduct open market operations, Li said.
Speaking at the same forum, newly promoted deputy central bank governor Yi Gang said the People’s Bank of China would fight inflation by further tightening monetary policy, but it would do so cautiously to ensure stable economic growth.
“We will unwaveringly fight against inflation and implement a tightening policy. But we will make sound arrangements to ensure fairly stable economic growth,” Yi told reporters.
Chinese property and share prices, though very high in some cases, were close to their equilibrium levels, he added.
Where Market Surprises Lurk in 2008
By GREGORY ZUCKERMAN
January 13, 2008
The stock and bond markets moved higher during a rocky 2007. But things are off to a tough start so far in 2008, amid growing indications of an economic downturn.
The Dow Jones Industrial Average is down 5% so far this year and the Nasdaq Composite Index is down 8%, after losses last week of 1.5% and 2.6%, respectively.
Most strategists predict the stock market will have problems in the first half of the year, as housing troubles and slowing consumer spending weigh on corporate profits. Things could improve later in 2008, thanks to expected interest-rate cuts by the Federal Reserve. Most experts anticipate a strong year for foreign stocks, as growth abroad powers ahead.
A year ago, when we speculated on developments that could take the market by surprise in 2007, our story accurately anticipated deep troubles in the subprime mortgage business and robust foreign growth, though it incorrectly anticipated a spate of energy acquisitions and higher price-earnings ratios.
What might catch investors by surprise this year? Below are some unorthodox predictions:
Dollar Rebound
The dollar has slumped in recent years, in part because U.S. growth has been meek compared with foreign economies, especially those of emerging-market nations. Most investors expect the trend to continue, as the U.S. tries to skirt a recession.
But the greenback could be stronger by year’s end. While expectations of a U.S. slowdown are widespread and some investors have already sold dollars, most haven’t worried enough about the impact abroad, argues Richard Berner, a Morgan Stanley economist.
If U.S. consumer spending weakens, it will impact foreign economies, especially big exporters, putting pressure on their currencies. Pressure also will build on foreign central banks to cut rates to stimulate their economies, which could also push foreign currencies lower. And if the U.S. can put the credit crunch behind it later this year, or the downturn is not as bad as feared, the dollar could recover nicely.
The implication: Go easy on foreign stock and bond investments.
Oil Weakness
Oil prices recently touched $100 a barrel and remain above $90, amid rising global demand and supply pressures. But as the U.S. economy slows, it will impact global growth, crimping energy demand. At the same time, there’s growing investment in alternative energy sources, which could boost supply.
Over the long term, oil should stay strong, because it is becoming harder to tap new major energy sources. But in 2008, the direction of crude could be lower.
Duncan Richardson, chief equity investment officer at mutual-fund company Eaton Vance even predicts “oil back under $70 [a] barrel,” amid “a global economic slowdown.”
Global economic weakness also could push all kinds of commodities, from copper to grains, lower, especially if China slows. That would put pressure on a range of U.S. commodity producers and emerging-market stocks. At the same time, the Chinese stock market could tumble “as pressures grow to rein in inflation, pollution [and] misallocation of resources,” says Citigroup strategist Tobias Levkovich.
On the bright side, commodity weakness could make U.S. consumer spending stronger than most expect.
Debt Headaches
The subprime mortgage crisis could spread in 2008 to areas like credit cards and auto loans. If more consumers are unable to pay their debt bills, that will cause more losses for financial companies and potentially weigh on broad markets.
There are growing indications of problems. On Thursday, American Express warned that slower consumer spending and more credit-card delinquencies will hurt profit this year. Capital One Financial set aside $650 million to prepare for unpaid credit-card bills.
The problems could spread from consumers to companies in 2008, as capital spending slips and debt defaults, which have been running at very low levels, jump. That likely will hurt some junk bonds.
There’s also anxiety about the growing credit-default-swap market, where insurance against debt defaults is bought and sold. The cost to buy insurance to protect against default on debt issued by big financial companies is rising, signaling rising worries about some big banks and insurers.
Banks and bond insurers have written billions of dollars of the credit protection traded in this market. If defaults materialize, they will be on the hook. Some say losses on these instruments could amount to $250 billion or more.
“We remain concerned that the amount of losses generated due to writing of insurance on mortgage-backed securities in the form of credit default swaps is relatively unknown, which could test the solvency of a major bank,” says Charles Gradante, managing principal of Hennessee Group, a hedge-fund investment firm.
Tech Turnaround
Technology shares have been the worst performers lately, amid the slowdown fears and because the troubled financial sector represents as much as 18% of U.S. and global tech spending.
But some stocks now look cheap, argues James Paulsen, chief investment officer at Wells Capital Management.
If global growth resumes apace, tech shares should lead the market higher. Semiconductor stocks now trade at close to five-year lows, based on trailing sales and projected earnings.
Multinational companies like Microsoft, Oracle and Cisco Systems are favorites of cautious tech investors.
Import prices spur US stagflation fear
12 January 2008
New York -- Import prices rose at their fastest pace in at least 25 years in 2007, underlining the threat of stagflation as the US enters a period of slower economic growth, according to figures from the commerce department.
The data come as other figures showed the US trade deficit widening in November, suggesting even weaker growth in the final quarter of the year.
Import prices rose 10.9 per cent last year, the fastest yearly increase since records began in 1982. The price of petroleum imports rose by 50 per cent over the year. Excluding energy, import prices rose by 3 per cent.
Prices in December grew at a slower pace than in the month before, but since then oil prices have risen further.
Rising energy and commodity prices are combining with higher food costs to pose an increasing inflationary threat. Meanwhile, the credit crisis and housing slump are threatening to pull back US economic growth to less than 2 per cent in the final three months of 2007, after a 4.9 per cent jump in the third quarter.
A growing number of economists are warning that the US will slip into recession this year.
On Thursday, Ben Bernanke, chairman of the Federal Reserve, raised hopes of rate cuts when he said the US central bank planned to act aggressively to offset the risks to growth.
Drew Matus, an economist at Lehman Brothers, said the trade and price figures highlighted the tight situation the Fed found itself in.
"It shows you can get slower growth and higher inflation," he said. "This is stagflation-lite."
The higher import prices data came after the US trade deficit widened in November to its highest level in 14 months as oil prices soared.
Total exports in November rose at a slower pace than imports, leaving the deficit up by $63.1bn, much larger than the $60bn that economists had expected.
Some Fear Economic Stimulus Is Already Too Late
By PETER S. GOODMAN and FLOYD NORRIS
January 13, 2008
As leaders in Washington turn their attention to efforts to avert a looming downturn, many economists suggest that it may already be too late to change the course of the economy over the first half of the year, if not longer.
With a wave of negative signs gathering force, economists, policy makers and investors are debating just how much the economy could be damaged in 2008. Huge and complex, the American economy has in recent years been aided by a global web of finance so elaborate that no one seems capable of fully comprehending it. That makes it all but impossible to predict how much the economy can be expected to fall before it stabilizes.
The answer could be a defining factor in the outcome of the fiercely contested presidential election. Not long ago, the race centered on the war in Iraq.
But now, as candidates fan out across the country, visiting places as varied as the factory towns of Michigan and streets lined with unsold condominiums in Las Vegas, voters are increasingly demanding that they focus on the best way to keep the economy from slipping off the tracks.
The measures now being debated in Washington and on the campaign trail — tax rebates, added help for the unemployed and those facing sharply higher heating bills and, most immediately, a move by the Federal Reserve to further cut interest rates — could certainly moderate the severity of a downturn. Democrats and the Bush administration are considering a package of such measures that could reach $100 billion.
But the forces menacing the economy, like the unraveling of the real estate market and high oil prices, are too entrenched to be swiftly dispatched by government largess or cheaper credit, some economists say.
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.”
In the view of many analysts, the economy is now in a downward spiral, with each piece of negative news setting off the next. Falling housing prices have eroded the ability of homeowners to borrow against their property, threatening their ability to spend freely. Concerns about tightening consumer spending have prompted businesses to slow hiring, limiting wage increases and in turn applying the brakes anew to consumer spending.
Not everyone is convinced that the American economy is headed for a recession, defined as six months of economic contraction. The economy often serves up indications of distress that later turn out to be false warnings.
But some economists think a recession may have begun in December. In the last two weeks, there have been signs that a substantial downturn may already be unfolding. The Labor Department reported a sharp slowdown in job creation in December. Retailers said that sales last month were extremely disappointing, capping the worst gain for a holiday season in five years. A widely watched index showed manufacturing slowing, despite a weak American dollar that has encouraged growth in exports.
The construction of new homes has already fallen by some 40 percent since the peak in 2006. The sales of new homes have fallen even faster, suggesting that a large oversupply of places to live will continue to drag down prices.
Home prices have dropped by about 7 percent since the peak in 2006, but some experts suggest they could fall by another 15 to 20 percent before hitting bottom.
“There is still a long way to go,” said Nouriel Roubini, an economist at the Stern School of Business at New York University and chairman of the research firm RGE Monitor.
Mr. Roubini has long predicted the real estate downturn would cause a severe recession. He envisions foreclosures accelerating this year, and banks counting fresh losses. That could make them less able to lend and further slow economic activity, not just in the United States but around the world.
“We’re facing the risk of a systemic financial crisis,” Mr. Roubini said. “It’s not just subprime mortgages. The same kind of reckless lending has been occurring throughout the financial system. And it’s not only mortgages: Now it’s credit cards and auto loans, where we see problems increasing. The toxic junk is popping up everywhere.”
Banks, including commercial banks and investment banks, have so far acknowledged losses of some $100 billion, yet anxiety persists that more large write-offs are coming.
“Firms will go to great lengths to hide or delay reporting losses,” said Paul Ashworth of Capital Economics. “What we know now therefore might only be the tip of the iceberg.”
In a speech on Thursday, the Federal Reserve chairman, Ben S. Bernanke , zeroed in on the nervousness of bankers as a prime factor slowing the economy, even as the Fed tries to stimulate it with cheaper credit.
“Developments have prompted banks to become protective of their liquidity and balance sheet capacity and thus to become less willing to provide funding to other market participants,” he said. His comments were widely construed as an assurance that the Fed would soon cut rates again. The Fed already dropped rates three times during the last four months of 2007.
Wall Street has clamored for the Fed to keep lowering rates, cognizant that cheaper credit is generally good not just for encouraging borrowing and spending but also for corporate profits.
But some economists fear that lower rates will simply provide a short-lived boost at the expense of the economy’s longer-term health: Cheap money encourages foolish investments, they say, which is precisely how Americans came to experience the evaporation of wealth in the Internet era, followed by housing prices rising beyond any reasonable connection to incomes.
“This appears to be a panic on the part of the Fed,” said Michael T. Darda, chief economist at MKM Partners, a research and trading firm. “The housing bubble was a reaction from the effort to protect us from the collapse of the tech bubble. What’s the next bubble going to be as a consequence of trying to protect us against this?”
Mr. Darda asserts that the economy would be fine if left to its own devices, maintaining that the job market is healthier than most economists think. He contends that the December jobs report is likely to be revised to show that far more jobs were created than the 18,000 reported by the Labor Department.
“That could be important in terms of reversing the direction,” Mr. Darda said. “We need to see evidence that the labor market isn’t falling apart. That’s critical.”
But most economists seem convinced that the economy has slowed significantly, and say it is the severity of a downturn that is in doubt, not the existence of one.
“If we have a recession with a modest consumer retrenchment, and the rest of the world holds up, this could be three quarters of disappointment,” said Robert Barbera, the chief economist of ITG. “The risk is a more dramatic decline for the consumer.”
There is little doubt that the Fed will lower its benchmark rate later this month, making it cheaper for banks to lend money to one another. But there is more doubt whether Washington can quickly agree on fiscal policy moves — that is, raising spending or cutting taxes — in an election year in which the White House and Congress are controlled by different parties.
A recession could pack enormous political consequences. Over the last century, the economy has been in a recession four times in the early part of a presidential election year, according to the National Bureau of Economic Research. In each of those years — 1920, 1932, 1960 and 1980 — the party of the incumbent president lost the election.
Much discussed now in Washington and on the campaign trail is a potential rebate for taxpayers, similar to one that seemed to lubricate spending during the last recession six years ago. But worries remain over whether such a move could exacerbate inflation, and some doubt that the benefits would be felt rapidly enough to justify the risks.
While tax rebates can encourage spending and generate jobs, Mr. Roubini said, the government cannot afford to unleash the significant amounts — $300 billion or $400 billion — that he believes would be required to ensure a substantial rebound in economic growth.
“Whatever they’re going to do,” he said, “it’s going to be cosmetic.”
And most economists concur that even meaningful policies will probably take several months to filter through such an enormous economy. By the time they take effect, the country could already be in a recession.
Australia Corporate Bond Risk Rises to Record on Countrywide
By Laura Cochrane and Denise Kee
Jan. 10 (Bloomberg) -- The risk of Australian companies defaulting on their debt rose to a record for a fifth day following a report the nation's four largest banks invested in U.S. mortgage lender Countrywide Financial Corp.
The Markit iTraxx Australia Series 8 Index, which includes credit-default swaps tied to 25 borrowers including the biggest banks, increased as much as 3 basis points to a record 80 basis points in Sydney, according to Citigroup Inc.
Credit-default swaps on Australia and New Zealand Banking Group Ltd., Westpac Banking Corp., National Australia Bank Ltd. and Commonwealth Bank of Australia rose to a six-week high after the Australian newspaper said the companies invested A$850 million ($750 million) last year in Countrywide, which has denied it will file for bankruptcy.
The U.S. subprime mortgage-market collapse has forced all of the banks, except Westpac, to increase mortgage rates and Centro Properties Group in Melbourne to put itself up for sale. The U.S. economy may already be in recession and the Federal Reserve will respond by slashing interest rates, economists at Goldman Sachs Group Inc. said.
``I can't think of anything that will turn the sentiment around,'' said Mark McCarthy, a credit-default-swaps trader in Sydney at ABN Amro Holding NV. ``American banks are reporting their results next week and the market is expecting bad news.''
Centro, which is seeking to refinance A$3.9 billion of debt by a Feb. 15 deadline, fell the most in three weeks in Sydney trading after the Australian newspaper said regulators questioned the company about accounting for its debt. Centro slid 25 Australian cents, or 23 percent, to 86 cents at the 4:10 p.m. close on the Australian Stock Exchange.
Credit-default swaps on other Australian property trusts including Sydney-based companies GPT Group, Lend Lease Corp. and Westfield Group rose about 10 basis points.
Bank Debt
Credit-default swaps on the subordinated debt of ANZ, Westpac, National Australia and Commonwealth Bank, increased 3 basis points to 71.5 basis points, the highest since Nov. 27.
Each basis point, or 0.01 percentage point, on a contract protecting $10 million of debt from default for five years adds $1,000 to the annual cost.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
The cost to protect the senior debt of the banks from default increased 2 basis points to 42 basis points, according to data compiled by Bloomberg.
All the four Australian banks, except Westpac, have raised their variable interest rate on mortgages to recoup higher funding costs in the past week. It's the first time in more than a decade most of the nation's biggest lenders made a change in home loan rates that didn't follow the Reserve Bank of Australia.
Countrywide
Australia's biggest lenders were part of a syndicate of 40 banks that invested $11.5 billion in Countrywide, the biggest U.S. mortgage lender, last year, according to the Australian newspaper, citing confirmation from the banks.
Countrywide shares have slumped in New York as foreclosures and late payments rose to the most in five years. The company, which tapped emergency credit lines and got a bailout from Bank of America Corp., denied speculation it will file for bankruptcy.
``All these negatives add up,'' said Damian Rowe, a credit- default-swaps trader with Citigroup Inc. in Sydney.
Credit-default swaps tied to the debt of Macquarie Group Ltd., Australia's biggest investment bank, increased to almost a five-month high. The cost to protect its senior debt from default rose 10 basis points to 95 basis points and 145 basis points on its subordinated bonds.
Contracts on the benchmark iTraxx Asia Ex-Japan Series 8 Index of 70 borrowers, including the Thai government and Mumbai- based Tata Motors Ltd., increased by 2 basis points to 180 basis points at 10:47 a.m. in Hong Kong, according to BNP Paribas SA.
The Markit iTraxx Japan index edged up 0.25 basis point to 44.75 basis points, according to JPMorgan.
China Property Bond Risk Rises to Record on Curbs
By Denise Kee
Jan. 9 (Bloomberg) -- The risk of property developers in China defaulting on their debt rose to a record, according to traders of credit-default swaps.
The cost to protect bonds sold by Agile Property Holdings Ltd., Shimao Property Holdings Ltd. and Hopson Development Holdings Ltd. rose by as much as 80 basis points, the most on record, outpacing a 18 basis point increase in the Markit iTraxx Asia Ex-Japan Series 8 Index of 20 high-risk, high-yield borrowers, according to BNP Paribas SA.
Intensifying efforts by the government to cool the property market and aggressive borrowings by Chinese builders to fund their expansion sent the risk they may default on their debt to record highs, according to Mark Lo, a Hong Kong-based credit analyst with BNP Paribas.
``I am bearish on this sector,'' said Lo in a telephone interview. ``There is downside risk and limited upside for bond investors.''
Shimao and Agile, contributing to a 29 percent surge in property investments in the 12 months ended August, may deplete cash reserves and depend more on sales to service debt, analysts at Moody's Investors Service said in a Nov. 6 report.
The contracts tied to the debt of Shimao, Hopson and Agile traded at 560 basis points, 680 basis points, and 650 basis points respectively at 5:13 p.m. in Hong Kong. A basis point is 0.01 percentage point.
Government Restrictions
Credit-default swaps on Shanghai-based Greentown China Holdings Ltd. debt rose 80 basis points to a record 800 basis points, according to BNP Paribas.
The government increased minimum down payments on apartments to 40 percent from 30 percent in September and ordered banks to raise reserves by the most in four years on Dec. 8. Lenders must put aside 14.5 percent of deposits as reserves, starting Dec. 25, up from 13.5 percent.
Credit-default swaps are financial instruments based on bonds or loans that are used to speculate on a company's ability to repay debt. They were conceived to protect bondholders by paying the buyer face value in exchange for the underlying securities should the borrower default.
Potential issuance from Chinese real-estate companies with at least a BB rating may be $15 billion, more than the current outstanding market of less than $4 billion, said Todd Schubert, a credit analyst with Deutsche Bank AG in a Dec. 7 report.
The rising borrowing costs prompted Country Garden Holdings Co., China's most profitable developer, to shelve its $1.5 billion bond sale. Investors snubbed yields of up to 10 percent offered by the Foshan, Guangdong-based company in November. Shimao, listed in Hong Kong, said in November it will not issue debt for a year.
Shimao is rated Baa3 by Moody's and BB+ by Standard & Poor's. Guangdong-based Agile is rated Ba3 by Moody's and BB by S&P, while Hopson is rated Ba2 by Moody's and BB by S&P. Greentown is rated Ba3 by Moody's and BB- by S&P. Debt rated below Baa3 by Moody's and BBB- by S&P is considered high-yield, high-risk, or junk. Hopson is based in Guangzhou.
Li Ka-Shing Rushes Into China Where Bond Angels Fear
By Denise Kee (Update2)
Jan. 9 (Bloomberg) -- The bond market is telling Li Ka-shing, Asia's richest man, he's sitting on a Chinese property bubble that's bigger than the one deflating in the U.S.
Bonds of China's Agile Property Holdings Ltd. yield 7.17 percentage points more than U.S. Treasuries, double the premium in July and 1.79 percentage points more than the debt of Los Angeles-based KB Home, which has the same credit ratings. Agile, a housing developer in the southern province of Guangdong, and Country Garden Holdings Co., China's most-profitable builder, canceled debt sales in November when borrowing costs climbed.
As China's government attempts to cool property prices with limits on lending, developers are in a land grab. Li, who made his fortune in Hong Kong real estate, Chinese billionaire Xu Rongmao, who owns Shimao Property Holdings Ltd., and hundreds of local developers boosted investment 29 percent in the first eight months of 2007, the National Bureau of Statistics said.
``If the government decides to impose further restrictions, most if not all of the developers will go bankrupt, depending on the severity of the restrictions,'' said Eugene Kim, chief investment officer of Hong Kong-based Tribridge Investment Partners Ltd., a $200 million hedge fund. ``That makes us very selective in terms of which bonds we buy and the spreads we require to compensate for risk.''
Kim said he has trades set up that would profit from a decline in prices. New York-based Merrill Lynch & Co., the world's biggest brokerage, rates China property companies ``underweight,'' meaning investors should own a smaller percentage of the debt than contained in benchmark indexes.
Home Prices
Home prices in Shenzhen, a city north of Hong Kong, were 18.6 percent higher in November than a year earlier, according to a National Development and Reform Commission survey. They rose 14.9 percent in the capital city of Beijing and 16.4 percent in Beihai, in Guangxi province.
The People's Bank of China last month raised its benchmark one-year lending rate to a nine-year high and increased reserve requirements to the most since at least 1998. The government increased the minimum down payments on apartments to 40 percent from 30 percent in September.
Signs of a shift are already emerging. The nation's largest publicly traded developer, Shenzhen-based China Vanke Co., sold property worth 4.23 billion yuan ($582 million) in November, 18 percent less than in October.
Most Vulnerable
Chinese developers are among the most vulnerable of any group in Asia to downgrades because a slowdown in home sales would deplete cash, said Clara Lau, an analyst at Moody's Investors Service in Hong Kong.
``They have been growing aggressively, with the view that if they don't buy now, it will be more expensive for them later'' to acquire land, Lau said.
Standard & Poor's cut the credit ratings of Greentown China Holdings Ltd., the largest builder in Zhejiang province, one level to BB- on Dec. 3 due to ``increasingly aggressive land acquisitions.'' Its $400 million of 9 percent bonds yield 11.2 percent, up from 9.6 percent in November.
The risk of Shimao and Agile defaulting on their debt rose to a record today, credit-default swaps show. The cost of protecting the bonds of Shimao and Agile against default increased by as much as 80 basis points, the contracts' biggest rise, to 560 basis points and 650 basis points, respectively, at 5:13 p.m. in Hong Kong, according to BNP Paribas SA.
Higher Cost
Each basis point, or 0.01 percentage point, on a contract protecting $10 million of debt from default for five years adds $1,000 to the annual cost.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
Bond sales by developers rated at least BB, or one to three levels below investment grade, may rise 10-fold to more than $15 billion, Todd Schubert, a Singapore-based credit analyst at Deutsche Bank AG, said in a Dec. 7 report. Developers issued $1.4 billion of dollar-denominated debt in 2007, compared with about $5.5 billion from their U.S. counterparts, according to data compiled by Bloomberg.
`Window of Opportunity'
``Each company knows that the window of opportunity is small and they want to be the one to fit through the window,'' Schubert said in the report.
Agile pulled a $400 million debt sale in November after its borrowing costs surged to a record. The spread on the company's $400 million of 9 percent debentures due September 2013 widened to 7.17 percentage points from 3.23 percentage points on July 2. That caused the value of the bonds to fall 10 percent.
The premium on $250 million of 5.75 percent notes maturing February 2014 by KB Home, the fifth-largest U.S. homebuilder, rose to 5.38 percentage points from 2.41 percentage points, representing a loss of 5.9 percent. Agile and KB are rated BB by S&P.
After reaching a peak of 1.389 million in July 2005, sales of new homes in the U.S. fell to an annual pace of 647,000 in November, a 12-year low, as discounts failed to lure buyers and mounting foreclosures swelled the glut of unsold properties, according to the Commerce Department.
Higher borrowing costs haven't stopped developers betting China's economy, which expanded 11.5 percent in the quarter ended September from a year earlier, will continue to support the housing market.
`Huge' Demand
``Demand in China is huge,'' said Met Luk, a deputy general manager of Agile. ``Together with improvement in the economy, a lot of people are looking for a better living environment.''
Agile said it will add at least 2 million square meters (21.5 million square feet) of land this year. Country Garden Holdings Co., based in Foshan, Guangdong, tripled its land for development to 51.9 million square meters between April and August, according to an Oct. 29 Moody's report.
Cheung Kong Holdings Ltd., the property company controlled by Li, added at least 3 million square meters in the first half of last year, more than triple the acquisitions in all of 2006, its annual report shows. Li hasn't relied on debt to fund purchases in China.
`Good Year'
``2008 will be a good year for investing in the property market in China,'' Justin Chiu, executive director of Cheung Kong, Hong Kong's second-biggest developer by market value, said in an e-mail.
China real estate investments by Cheung Kong and Hutchison Whampoa Ltd., Li's largest company, were at a ``historic high'' of more than HK$10 billion ($1.3 billion), and ``would rise,'' Li said in 2006. His net worth is estimated at $23 billion by Forbes magazine.
The 79-year-old has a history of overcoming long odds to succeed. Li closed an unprofitable U.K. mobile phone operator called Rabbit in 1993. He returned a year later to start Orange Plc, which he sold in 1999 at a $15 billion profit.
Developers such as Cheung Kong and Sun Hung Kai Properties Ltd., Hong Kong's biggest, ``have been relatively prudent,'' said Hugh Young, a managing director at Aberdeen Asset Management Asia Ltd. in Singapore who oversees $50 billion. ``I don't think they just close their eyes and plunge all their money in China.''
Too Optimistic
Bondholders, wary that developers are too optimistic, say what happened in the U.S. last year and Japan in the 1990s may be repeated in China.
More than 100 U.S. mortgage lenders were shuttered, scaled back or sold in 2007 as the rate of foreclosures rose to the highest on record and home sales tumbled, according to data compiled by Bloomberg. In 1998, the Japanese government had to put 13.4 trillion yen ($122 billion) into public works as the fallout from a real estate slump lingered.
In China, a housing slump may trigger more defaults because banking laws are still being written and a consumer credit rating system doesn't exist, said Yi Xianrong, a finance specialist at the government-backed Chinese Academy of Social Sciences research institute in Beijing.
China's National Audit Office said in June it uncovered irregularities involving 15.6 billion yuan of loans in the 2005 results of three of the nation's largest banks.
``We will not know how big this problem is as long as property prices continue to rise,'' Yi said.
House prices plunge in Beijing
By Yang Jian
2008-1-11
HOUSE prices in Beijing dropped 19.67 percent in December from the previous month, China's Central TV reported.
The average residency price dropped to 12,180 yuan (US$1,676) per square meter from 15,162 yuan. Prices in Dongcheng, Xicheng, Chongwen and Xuanwu, the districts with the highest house prices, slumped to 18,401 yuan per square meter from 23,467 yuan, the CCTV report said yesterday, quoting SouFun Holdings Limited.
Many local property companies had to sell homes with free decorations and appliances due to the slump in sales, according to a Beijing property company, which sold only 10 percent of its new houses in Zhaoyang District since October.
Transactions in Beijing's secondhand house market shrunk 8.2 percent in December, Beijing's official online real estate trading Website said, which described the slump as abnormal.
House prices in Shenzhen and Guangzhou began to drop in October. Transactions shrank more than half in October, the biggest drop in three years. The average price in Guangzhou plunged 20 percent in December.
货币市场基金一周缩水171亿美元
何海红／中国证券报 2008-01-12
美国基金研究机构iMoneyNet公司上周公布的货币基金报告，截至1月2日的前一周时间内，美国货币市场基金的净资产总额为3.088万亿美元，比前一周下跌了171.3亿美元。其中，金融机构投资者的投资额下降了184亿美元，而个人投资者则增加了12.6亿美元的投资。应税货币基金资产下跌了105.1亿美元，从而达到2.618万亿美元。
据悉，应税基金平均七天的收益率持平于3.99%。平均七天的复合收益率。30天收益率从4.09%下降到4.06%，而30天的复合收益率则从4.18%下滑至4.15%。
iMoneyNet公司称，大约有66.1亿美元从免税基金中撤出，从而使免税资产总额达到4697.2亿美元。非应税基金平均七天的收益率由2.70%上升至2.88%。平均七天的复合收益率，假设是用于股息的再投资，从2.73%上升至2.92%。平均30天的收益率从2.85%下降至2.81%，平均30天的复合收益率从2.89%下降至2.85%。
中国铝业：真正的有色蓝筹 持续的稳定增长
2008-1-11
中国铝业是全球第二大氧化铝、第四大电解铝生产商，是中国最大的氧化铝和电解铝生产商。06 年氧化铝产量952.4 万吨，占国内氧化铝产量的72％，电解铝产量193 万吨，国内市场占有率21％。
中国铝业在高瞻远瞩、积极进取的下，通过超前的经营战略和高超的并购策略，不断扩大产业规模、完善产品结构和一体化产业链，获得了持续稳定的高速增长。公司在氧化铝、电解铝和铝加工产品方面巨大的发展空间和进一步的结构优化使得公司未来依然是一家具有持续稳定增长的成长股。
中国铝业对国内铝土矿资源的控制和对海外铝土矿项目的投资为公司在未来的发展奠定了坚实的资源基础。
目前铝价受次贷危机影响出现回落，但以中国未代表的金砖四国需求依然旺盛、中国基于节能环保政策的长期性对电解铝行业严格的宏观调控、全球铝土矿资源的日益紧张造成的生产成本的上升等因素，使中投证券有理由对铝价比市场预期的更加乐观。氧化铝价格将会由于中国氧化铝产能的大规模释放出现回落，但成本的不断上升也使价格难以出现大幅下跌。
随着中国从2008 年1 月1 日起取消电解铝行业差别电价和优惠电价以及取消大部分铝产品出口退税政策。中投证券认为，电解铝行业的经营成本将进一步上升，行业将进入新一轮整合，优势资源将向优势企业集中，中国铝业有望在这种整合中变得更加强大。
中国铝业氧化铝的自用率将会显着提高，这不仅使公司的产品结构进一步优化，而且能够充分分享电解铝价格上涨的收益，规避氧化铝价格下降的损失。中投证券的敏感性分析也证明了公司目前利润对铝价的敏感程度远高于氧化铝的价格。
中铝公司铝加工业务的资产将随后注入，这不仅进一步完善了公司的产业链和产品结构，而且将会成为大幅提升公司业绩和估值水平。中投证券预测公司07-09 年的EPS 为0.86、1.02、1.36 元，基于公司超群的行业地位、难以复制的核心竞争力、完整的一体化产业链和持续稳定的增长速度，中投证券认为公司应该获得有色金属行业的最高端估值水平，给予公司未来6-12 月的目标价格为38-42 元，由于公司股价已经接近中投证券的目标价格，中投证券将公司的投资评级从强烈推荐调为推荐。
公司07 年三季度业绩低于市场预期，一方面是由于铝土矿、电力等成本上升以及部分费用集中计提、另一方面也受电解铝价格下跌影响。中投证券认为，07 年四季度以及08 年上半年电解铝价格仍将保持在相对较低的位置，08 年下半年铝价有望回升。因此，中投证券认为中国铝业下一次大的投资机会应该会在年中或下半年。
首只券商QDII将于16日发行 初始募集40亿美元
金大中华股票配置初始募集40亿美元
2008-1-12
首只券商QDII产品——中金大中华股票配置资产管理计划定于1月16日正式对外发行，初始募集规模40亿美元，约300亿份。
中金公司资产管理部总经理朱勇介绍，与目前基金系QDII相比，该产品设计采用更为灵活的投资比例。在市场风险较大时，股票配置的比例可低至25%，其余可配置债券；而市场较好的时候，股票投资比例可高达95%，其中港股可以达到85%。此外，还可投资韩国、印度等亚太市场，配置比例在30%以内。灵活的股票配置，保证该产品既能充分分享牛市行情，又提高了对抗市场下跌风险的能力。这与目前基金系QDII产品股票投资比例一般都在50%以上的设计相比，在市场处于相对高位时明显更具有抗风险性。在投资市场的选择上，中金公司重点选择了最熟悉的香港市场和亚洲市场。
目前已有7家国内券商获得QDII资格，中金是第一家推出QDII产品的券商。
Securities firms set sail for overseas investment
2008-01-10
BEIJING -- Three Chinese securities firms have acquired the status of qualified domestic institutional investors (QDII) this week, becoming the fresh force that analysts say might rekindle local residents' enthusiasm for investing abroad.
The license from the China Securities Regulatory Commission for Everbright, Orient and Huatai has given rise to a new contingent of seven securities firms which are yet to design and release their products targeting overseas capital markets.
The other four are CIC, CITIC, Guotai Junan and China Merchants Securities firms.
CIC Securities, which took the lead when receiving a quota of five billion US dollars last December, is expected to release its first overseas investment product in spring.
Previous overseas exploration by the country's first contingent of QDIIs, mostly funds and banks, were not successful due to the outburst of the subprime mortgage crisis in the United States and the constant depreciation of the US dollar against the yuan.
The first four funds with the QDII licence, namely Southern Assets Management, Huaxia, Harvest and the China International Fund Management all embarked on a roller-coaster trip last September, with their net value lingering below or around 0.9 yuan (less than 12 cents) at the moment.
As local stock markets begin to rally after a brief downward adjustment, the year's first QDII fund released by ICBC Credit Suisse, worth 22 billion yuan (about 3.03 billion US dollars), met only a nonchalant response from institutions and individuals.
On Wednesday, the benchmark Shanghai Composite Index edged up 49.28 points, or 0.91 percent, to close at 5,435.81.
Industry analysts attributed the QDII's fading appeal to "bad timing" as stock markets in most regions of the world have been slapped by the US subprime crisis. Fears over exchange rate risks are also a major hindrance, they say.
Given the yuan has gained 27 percent against the euro compared to its loss of nearly seven percent against the US dollar last year, fund manager Cao Guanye, with the ICBC Credit Suisse, dangled the European market as a juicy bait in a pitch sale, saying that investors could enjoy both the profits of European enterprises and the extra gains from a rising euro.
"Unlike funds, securities companies are more experienced with overseas investment as many of them have subsidiaries in Hong Kong," analyst Xie Yan with Haitong Securities said.
As Hong Kong and the Golden Brick nations, including Brazil, Russia and India, have been widely viewed as good options, analysts still foresee a rosy picture in the long term for the QDII program which was initiated in April 2006 to ease excess liquidity.
A latest move made by Chinese supervisors to buoy market confidence was to allow QDIIs to invest in the domestic A-share market.
The restrictions on bank QDIIs were also gradually phased out as they may invest in Hong Kong stocks instead of being confined to fixed-income products.
By early last December, the foreign exchange market regulator had verified a total of 23 billion US dollars as QDII quotas for funds according to Sun Lujun, deputy head of the capital project department under the State Administration of Foreign Exchange.
Sun said that by the end of October, 16 QDIIs had put on the market 154 QDII products. Sun added that 28.6 billion US dollars was actually remitted abroad for QDII operation by the end of the month. The total indicates that capital flows accelerated sharply over the past few months as from April 2006 to March 2007, funds remitted abroad only totaled around 4 billion US dollars.
Trust companies and insurers are also expected to get the QDII license and put their overseas investment products on the market this year.
China Life Applies for More Quotas to Invest in Overseas Shares
By Josephine Lau
Jan. 12 (Bloomberg) -- China Life Insurance Co., the country's biggest insurer, said it has applied for regulators to raise the amount of money available to invest in overseas securities.
``China Life and other insurers have applied to increase our overseas investment quota,'' said Chen Dong, who oversees international operations at the insurer's asset-management arm, on the sidelines of a conference in Beijing today. ``The Chinese market still needs to learn how to diversify risk by investing more abroad.''
China Life and its smaller rival Ping An Insurance (Group) Co. are currently allowed to invest up to 5 percent of their assets in Hong Kong-listed ``red chip'' companies under the so- called qualified domestic institutional investor, or QDII, program, Chen said.
The Beijing-based firm and other domestic insurers still await regulatory approval to lift that investment cap to 15 percent, he said.
Returns from China Life's QDII investments rank among the highest in the industry, Chen said, without providing an exact figure.
Twenty insurers, including China Life Insurance Co., Ping An Insurance (Group) Co., PICC Property & Casualty Co. and China Reinsurance Co., have received QDII licenses, according to the China Insurance Regulatory Commission.
Wall St hedges bets on presidential hopefuls
Jan 13, 2008
WASHINGTON - WALL Street folklore has it that wealthy financiers prefer a Republican president, but some of America's top bankers are backing Democratic contenders in the 2008 presidential election.
Financial advisors say many Wall Street money managers are still hedging their bets on this year's presidential race, partly because the front-runners remain unclear for the Nov 4 poll.
'This may potentially result in a more volatile marketplace as investors weigh the 'fear of the unknown,'' Mike Schwager, a market strategist at Claymore Securities, wrote in a note to clients this week.
Republicans are generally typecast as being more friendly to business while Democrats are stereotyped as more likely to raise taxes, but financial professionals say Wall Street can live with either party running the White House as long as the economy is in good shape.
The US economy, however, is sailing into choppy waters stirred up by a persistent housing slump, a credit squeeze, soaring energy costs, and slowing job growth.
The stock markets have plummeted amid the uncertainty and Goldman Sachs economists warned this week that the world's biggest economy appears to be 'falling into a recession.' The ongoing political contest, as a result, has Wall Street on tenterhooks.
'In general Wall Street going into an election tends to want to see a Republican, but in the long term, they live with Democrats very, very easily if the Democrats deliver the goods,' said Joel Naroff, president of Naroff Economic Advisors.
Mr Naroff, who advises companies on economic risk and consults for Commerce Bank and Cumberland Advisors, said the stock markets might display a 'knee-jerk' reaction to a particular candidate, but he said Wall Street is waiting to find out who the top candidates will be.
Despite increased economic angst, the leading Democratic contenders are bucking the notion that Republicans are more favoured on Wall Street.
Democrat Hillary Clinton reaped the most donations from the securities and investment industry in the first nine months of 2007, netting 4.74 million dollars, according to the Centre for Responsive Politics (CRP).
The wife of former US president Bill Clinton has also won backing from the heads of two of America's largest investment banks.
The chief executive officer of Morgan Stanley, John Mack, and Goldman Sachs CEO Lloyd Blankfein have both written checks for her campaign.
Mrs Clinton's Wall Street campaign haul was followed closely by Republican candidate Rudolph Giuliani and Democrat Barack Obama, who each raked in around US$4.51 million (S$6.48 million) during the same period of 2007, according to the CRP.
Republican Mitt Romney raised US$3.56 million from securities and investment firms.
Democrat John Edwards, who has criticised corporate interests, gained US$773,600. Republican hopeful Mike Huckabee had garnered just US$77,727 during the first nine months of last year.
US investment kingpin Warren Buffett has yet to make a definite bet, although he has voiced support for both Mrs Clinton and Senator Obama.
Former New York mayor Giuliani has also won backing from powerful financial hitters such as Paul Singer, the founder of the US$9-billion hedge fund Elliot Associates.
Pledges by Mrs Clinton and Senator Obama to let tax cuts enacted by the administration of US President George W. Bush expire do not seem to have harmed their support on Wall Street.
Some financiers fear expiration or a rollback of the tax cuts would mean higher taxes on dividends and capital gains.
Mr Romney, who made millions in the business world as a co-founder of Bain Capital, like the other candidates is touting his economic credentials and appealing to Wall Street.
Raising the question of what the government could do to stop a recession from occurring, Mr Romney said in a debate Thursday: 'We're going to have to reduce taxes on middle-income Americans immediately.' -- AFP
Straits Trading aims to redevelop Specialists' Centre, Hotel Phoenix
Its 'advanced talks' with OCBC may see new complex taking shape come year-end
By Joyce Teo, Property Correspondent
January 11 2008,
The Straits Times
THERE seems to be some progress at last in the much-anticipated redevelopment of the Specialists' Shopping Centre and Hotel Phoenix complex in Orchard Road.
The Straits Trading Company - which is the object of a buyout offer - announced yesterday that it is in 'advanced negotiations' with site owner OCBC Bank regarding redevelopment and management plans.
Construction of a 21-storey complex with shops and a 580-room hotel will begin in the second half of this year, according to OCBC.
The complex will be linked to Far East Organization's upcoming Orchard Central mall and Lend Lease's upcoming Somerset Central mall, both nearby.
The announcement yesterday was as much about the complex ownership and development structure put in place in response to amended restrictions that prevent banks from getting involved in property development.
Straits Trading is a holding company with businesses that range from smelting and mining to hotel investment and property development.
As it is the subject of a buyout offer by The Cairns, a privately held investment firm that is part of the Tecity group, it had to inform shareholders of its advanced talks with OCBC.
Tecity is controlled by the family of the late Dr Tan Chin Tuan, a past chairman of OCBC. Dr Tan set up Tecity, which has held a stake in Straits Trading since the 1950s.
The OCBC group also holds a stake, directly and indirectly, amounting to 26.1 per cent.
Dr Tan also started the old 392-room Hotel Phoenix, which closed in August after 35 years.
In yesterday's statement, Straits Trading said OCBC will appoint a Straits Trading special-purpose vehicle to undertake the construction of the complex.
The proposed arrangements include funding for the vehicle and the construction based on a maximum development cost to be agreed on between Straits Trading and OCBC.
Once the complex has been completed, Straits Trading will sell it to OCBC and then lease it back for three years, with an option to renew the lease for a further three years.
OCBC said it had opted for a sale and leaseback plan because it sees the property investment as one that will bring 'long-term financial returns'.
Design details for the new complex, which will have a total gross floor area of 50,079.07 sq m and a net retail lettable area of 14,014 sq m, are still being finalised.
Sixty per cent of the gross floor area will be taken up by the hotel, and the remainder by retail shops and a carpark that will accommodate 262 vehicles.
Tange Associates is the architect for the project.
Taking HDB living to a higher plane
Insight Down South
By SEAH CHIANG NEE
Saturday January 12, 2008
New public housing will be luxurious and high-tech, rather than the bland first-generation flats churned out in the past.
AFTER building nearly one million flats, Singapore’s public housing builder is faced with a new historical role that could be more daunting than when it started out 47 years ago.
The Housing Development Board (HDB) will have a pivotal part in meeting the goal of becoming a global city of 6.5 million people.
The new apartments will have to be top-class, matching the private sector's in style but cheaper in cost. In recent weeks it launched the future home for Singapore’s heartlanders.
The Board has had a formidable history that started in 1960 with the building of cheap housing for the masses, but as society has become affluent, its work has become more creative.
The result today: More than 982,000 flats, for about 80% of the 4.68 million population. The future will be tougher for several reasons.
First, it may have to build at least 400,000 new units (a 40% increase) to cope with the expanded population, and there is less land to work on than five decades ago.
Second, the new flats will have to be luxurious and high-tech, rather than the bland first-generation lot that it churned out in the past.
This is to meet the rising demands of a more affluent and sophisticated middle-class, and the talented foreigners that it wants to attract.
The third is to keep costs significantly lower than the private sector's to reflect its social role, a tall order given Singapore’s new era of high cost, especially in land prices.
The New Order took another crucial step last week when the HDB launched its third condo-like project with luxurious fittings that included timber flooring, large bay windows and built-in wardrobes.
The prices, too, are also close to private condos. The top range of a new three-bedroom apartment will go for S$727,000 (RM1.6mil), or about S$520 (RM1,186) per sq ft – a far cry from 1985 when a simple no-frills flat would fetch no more than S$79,000 (RM180,200).
These top-end public flats are still cheaper than private suburban condos but are fast catching up. “The higher quality is what many young Singaporeans want,” an official explained.
The changing aspirations are reflected in the statistics.
At its height in 1990, HDB flats housed 87% of Singaporeans, but this figure has steadily fallen to 81% by March last year, mainly due to a shift to private housing.
With more money, professionals and businessmen prefer to own private apartments for the luxury and the prestige. Besides, public flats cannot be freely bought and sold.
New HDB units at subsidised rates are only available to citizens whose family earns less than S$8,000 (RM18,200) a month. Better-off Singaporeans and permanent residents (including Malaysians) often buy them in the more expensive resale market.
Mah Bow Tan, Minister for National Development, said: “Within the next 10 years, more of our flats will be 40 to 50 years old.
“This provides us with an excellent opportunity to explore new ideas for our next generation of public housing that will bring HDB living to a higher plane.”
Pushed by rising demand and a strong market (as well as inflation), HDB prices rose by a strong 17.4%.
Despite their higher earnings, most young aspirant homeowners who are starting off in life find the higher prices in the past three years too overwhelming to overcome.
Their best hope is to buy a new government flat – for which there is a shortage, and a long queue.
The HDB is not only about cheaper housing, but a whole way of life. It decides how well Singaporeans live and whether – or when – they can get married or have children.
A shortage is already forcing some Singaporeans who can’t afford a resale flat to postpone marriage.
Since its inception, prices of public housing have been steadily rising to keep pace with economic growth. This has enabled some shrewd Hong Kongers to come and make a neat profit.
For the People’s Action Party (PAP) public housing is also about survival.
If the HDB succeeds in providing cheap, happy homes for the middle class, the votes will flow towards the ruling party; if not, the opposite will happen.
It is a political weapon like in few – if at all – other countries.
This is the why any mass drift towards private housing will be considered as weakening the PAP’s control machinery.
For example, it has used government subsidies (up to 80% of the cost) for HDB owners to refurbish their old flats as an election weapon.
Constituencies that have opposition MPs (only two out of 84) are given the lowest priority. In practice, none has been selected for upgrading all these years.
In the last two general elections, upgrading was offered to secure votes for the government. Constituencies with strong opposition support were promised S$2bil (RM4.5bil) in such financing.
The rising prices are, however, not a general complaint here. Actually you won’t find many Singaporeans cursing it.
It is not hard to understand why. With four out of five people owning HDB flats, the rising values are largely welcome.
With inflation at a 25-year record and people’s money losing value by the month, public housing – despite the higher costs – still makes a good long-term asset.
Has Singapore Found the Secret to Satisfaction?
Citizens Willing to Trade Civil Liberties for a Cleaner, Safer, Efficient Society
By BILL WEIR
SINGAPORE, Jan. 9, 2008
If you set out across the globe and talk to a few of the 6.5 billion people who live here, you will be amazed by the pockets of joy you'll find in the most unlikely places. You'll find happy mothers in the dusty villages of Africa, happy Tibetans toiling under Chinese oppression and happy families in the slums of Bombay.
To understand this sort of human contentment, Dan Buettner founded a global project called Blue Zones. He found that a liberal, tolerant, democratic society helps make Denmark the happiest country in the world.
But is there a similar level of contentment in a place with one political party, a censored press and nonjury trials? Welcome to Singapore, the happiest country in Asia.
"Ninety-five percent of the people around us say they're either somewhat happy or very happy," Buettner said of Singapore. "That's a very high proportion for Asia."
Safety and Success
This high proportion of satisfied citizens wasn't the case 40 years ago, when a man named Lee Kwan Yew took power in Singapore, and laid down the law. He made the Chinese and Malaysian locals learn English, banned spitting, chewing gum and long hair, and even paid educated people to have children.
With his draconian laws he transformed Singapore from a smelly, chaotic seaport into one of the richest, cleanest, safest and most efficient big cities in the world. But woe unto those who break the rules and litter or forget to flush. "[Singapore] is based on the rules," one local said. "[With] rules and very systematic country."
There are fines for the smallest infractions, and more serious criminals are strapped to a rack and beaten with a bamboo cane.
We met one man in Singapore who has seen and felt Singaporean justice firsthand. After serving 15 years for gang-related crimes, Neville Tan is now a pastor with a prison ministry. He says he was caned many times and describes it as a "horrible, painful experience." But he doesn't mind it one bit. "We feel safe. If we don't break the law, we don't have to worry about the law."
Mark Zee is an actor who moved to Singapore from Apple Valley, Minn., and he says he had no problem giving up civil liberty in exchange for a clean, safe city. Singapore, he says, has some of the "highest paid civil servants in the world, and so you get some very smart people running the country, and that's something that, you can't say in all Western countries," said Zee. "Hint, hint."
So on a scale of one to 10 as the happiest, how do citizens rank themselves? "Probably an eight," one man said. Another responded to the question "What would make you happier?" with "more money."
Many people agree; some of the other pillars of Singapore society are built around wealth. They're known as the five C's: cash, credit cards, condominium, cars and country club.
Celina Lin, a self-made millionaire and one of the nation's best-known bachelorette socialites, can tell you all about the five C's. Despite her apartment full of art, her snazzy Porsche and 300 pairs of shoes, she was the least happy person we met.
"Sometimes I get unhappy if I compare," she said. "Of course someone … wealthier, having a more luxurious life, driving a bigger car, having a bigger house, having a wonderful husband who provides for her. And when I think of that, I feel, I mean honestly, I feel a tinge of jealousy."
Keeping up with the Joneses is an obsession in this culture.
In Singapore, kids spend their vacations participating in time management seminars. While this kind of competition is often the source of unhappiness, the drive to succeed is tempered by Confucian values — the family ALWAYS comes first.
Striking a Balance
Jennie Chua, the former CEO of the famous Raffles Hotel, says she is often happiest when having breakfast with her grandchildren, and her contentment comes knowing that they will have a secure future. Douglas Foo, one of the most successful restaurateurs in Asia, says that his goal is to create a chain as big as Starbucks or McDonalds … as soon as he's done playing with his kids.
"All of us have one thing that's limited in supply, that's time," he said. "So we should do some planning, right? How much time do you want to spend with the family, your career, or some hobby? I think there's a balance."
But can you have both? "Well, I'm not going to do that single-handedly," said Foo. "There are a lot of things I want to do in my life; I want to make sure by the time I leave, when he calls up and says 'Now is the time to go,' I will leave smiling, and saying that I lived a very fulfilling, meaningful life."
But all this talk about happiness raises a question: Where is the happiest place in America? In his new book, "The Geography of Bliss," Eric Weiner also explored the happiest spots on the globe and using the lessons learned, set out to find the happiest place in America.
He settled on Asheville, N.C. "You've got mountains, beautiful mountains all around," he explained. "You have a tremendous, thriving, artistic community. You have cafes everywhere, every other shop is a coffee shop or a bookstore."
But more importantly, he said, "You have a really strong sense of community here. And if I've learned anything from researching this book, it's that other people matter. There's no such thing as personal happiness, your happiness is part and parcel of those around you."
Community — that's the key. Community is why happiness can be found along with the high taxes in Denmark, the harsh rules in Singapore and the crushing poverty in India. One study found that the people living on the streets of Calcutta are happier that those in California. The homeless in Fresno may have more access to food and shelter, but what have the "houseless" in Bombay got? They have each other.
Positive Psychology: The Science of Happiness
New Research Shows That Humans Have More Control Over Their Happiness Than Previously Thought
By MICHAEL MENDELSOHN
Jan. 11, 2008
What exactly is happening inside the brains of people experiencing joy and happiness?
"It's a very complicated chemical soup," explained Dr. Richard Davidson, who has made a life's work out of studying "happy brains." His lab at the University of Wisconsin is devoted to understanding how much of our joy level is set at birth, and how much we can control.
With a skull cap containing 128 sensors, Davidson's team can watch a subject's brain respond to a series of photographs, some pleasant, some distressing.
"We can challenge the brain by presenting these emotional images and look to see how you respond to them," Davidson said.
ABC News' Bill Weir underwent the test, and by studying the activity in his left prefrontal cortex, Davidson discovered that Weir's brain was "more positive than not."
"Now, it doesn't mean that you don't have episodes of negative emotion," he explained. "But those negative emotions don't linger."
People with happy brains have their parents to thank, to a certain extent, not only for happy genes, but also for loving childhoods. Studies have shown that angry or critical parents can actually alter a child's happiness level until it's set around age 16. But can adults adjust their own feelings of happiness?
Happiness Interventions
Until recently, most research psychologists were more interested in what made people depressed than what made them happy, and pharmaceutical companies have played a crucial role in promoting happiness by developing very successful anti-depressants. But evolving research in a field known as positive psychology is getting people to ask themselves how they can become happier, not through drugs, but by making changes in how they act and think.
"Antidepressants don't make people happier, they just decrease negative emotions," says University of California-Riverside psychology professor Dr. Sonja Lyubomirsky. In her new book, "The How of Happiness," Lyubomirksy argues that as much as 40 percent of our happiness "is left for the intentional activities that we can choose to engage in -- the things that we do and think every day of our lives."
What are these "intentional activities"? Scientists know that happy people practice, among other things, more acts of kindness, are able to lose themselves in whatever they enjoy doing, and avoid dwelling on their problems.
Lyubomirsky has had lab subjects actually engage in some of these activities, and found that people can indeed force themselves to truly become happier. Not surprisingly, such happiness interventions take work, because people easily fall back to their genetically-determined happiness set points. Scientists have known for decades that a large part of our temperament is genetically pre-determined; by studying the personalities of identical twins they've found that about 50 percent of our happiness -- or unhappiness -- can be traced to our genes. Adding the 40 percent that we can control with our daily thoughts and actions still leaves about 10 percent unaccounted for. This remaining 10 percent is related to our life circumstances, such as where we live, how much money we have, our marital status, and how we look.
Hedonic Adaptation
Surprised that your life circumstances have such little influence on your happiness? Researchers have found that people eventually return to their genetically-determined happiness set points after big changes in life, as seen in lottery winners and newlyweds.
Four years ago, Caroline Johnson volunteered for the ABC show "Extreme Makeover," and received everything from a new nose to new teeth and the requisite breast implants. Did these physical improvements make her happier?
"I think about a year it made a difference," she said. "People are seeing you for the first time and they compliment you all the time. And then once it wears off, it's just normal life again."
"It's a phenomenon called hedonic adaptation," explained Lyubomirsky. "We tend to adapt to any kind of positive change …once you make $100,000, now you sort of change your goals. Now your goal is to make even more."
Identical twins reared in the same household who do not share the same levels of happiness can also provide clues about what it is in our lives that make us happy -- the 40 percent of happiness within our control. Johnson is the perfect test case for the 40 percent theory, because she herself has an identical twin, Cat Bunnell.
After Lyubomirsky gave the sisters a battery of questionnaires she "was stunned [by] how different their scores were. Caroline got a 5.5 out of 7 … pretty happy," she said. "Cat scored a 3.25 … below the midpoint on happiness."
"They have the same DNA," explained Lyubomirsky, "and so to try to explain why one is happier than the other you have to kind of look at other factors."
One reason for the happiness difference between the twins is their outlook on life. Johnson is a self-employed dog groomer whose business hit a rough patch recently, yet she remains upbeat and committed to success. "I'm very optimistic … I know where I want to be," she said. "By next summer I have definite goals that I expect to meet."
Her sister has a very different outlook on life. Regarding her future, Bunnell said, "I don't feel like I'm progressing as much as I want to in my job or just the financial situation … It just feels like it just weighs on me too much and I just feel like I'm not going to get out of it."
"We really see major differences between the level of optimism that they have," said Lyubomirsky. "(We see) Caroline being more optimistic, Cat kind of ruminating and dwelling more on sort of bad things."
'Happiness Is Really Within Us'
Perhaps another reason why Johnson is happier than her sister is her ability to nurture relationships. Johnson is married with three children, while Bunnell is a divorced single mom, struggling with the dating scene at age 37.
"I don't have somebody that can just hold me because I'm having a hard time," said Bunnell.
Regarding her prospects for finding another husband, she said, "I feel like I'm really giving up on all that."
Besides the optimism, commitment to goals, and ability to nurture relationships that might make Johnson happier than her twin, there are many more ways to affect the 40 percent of happiness in your control.
"The happiness activities are not going to surprise anyone," Lyubomirsky said. "I mean, they're things like gratitude, forgiveness, relationships, savoring the present moment, meditation. I try to sort of determine to what extent those things are supported by research."
Davidson would agree. He has studied the brains of Buddhist monks, men who spend their lives deliberately forcing positive emotions, and their happiness is off the charts. His new data claims that if a person sits quietly for a half-hour a day just thinking about kindness and compassion, their brain will show noticeable changes in just two weeks.
"In many ways, this is the most important idea in neuroscience in the last decade," he said. "Our brains are just waiting to be transformed, and they're always being transformed. But we can take responsibility and change the brain in more positive ways."
"Research is showing pretty convincingly now that happiness is really within us, it's not outside of us," said Lyubomirsky. "It's in what we do. It's sort of how we act, how we think every day of our lives."
Jokes:
It was time for Father John's Saturday night bath and young Sister Magdalene Edwards had prepared the bath water and towels just the way the old nun had instructed. Sister Magdalene Edwards was also instructed not to look at Fr. John's nakedness if she could help it, to do whatever he told her to do, and to pray.
The next morning the old nun asked Sister Magdalene how the bath had gone. "Oh, sister," said the young nun dreamily. "I've been saved."
"Saved? And how did that fine thing come about?" asked the old nun.
"Well, when Fr. John was soaking in the tub, he asked me to wash him, and while I was washing him he guided my hand down between his legs where he said the Lord keeps the Key to Heaven."
"Did he now?" said the old nun evenly.
Sister Magdalene continued: "And Fr. John said that if the Key to Heaven fit my lock, the portals of Heaven would be opened to me and I would be assured of salvation and eternal peace. And then Father John guided his Key to Heaven into my lock."
"Is that a fact?" said the old nun even more evenly.
"At first it hurt terribly, but Fr. John said the pathway to salvation was often painful and that the glory of God would soon swell my heart with ecstasy. And it did, it felt so good being saved."
"That wicked old Devil," said the old nun. "He told me it was Gabriel's Horn, and I've been blowing it for 40 years!"
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