They are cleaned and spiritually cleansed, then sealed...for a time
By Debbie Yong 15 March 2009
What happens to a hotel room after someone has died in it?
This issue surfaced after 64-year-old Japanese retiree Takamasa Koto was discovered dead in the Ritz-Carlton Millenia Singapore last Monday morning.
Hotel staff found the Singapore permanent resident’s body, with a single stab wound to his chest, in the bathtub of his room on the 31st floor.
Preliminary police investigations indicate that foul play was unlikely. They have classified the case as unnatural death.
In previous reports, a Japanese Embassy official said that Mr. Koto had also left behind a letter. His family members have declined media interviews. Little else is known about the man other than that he is said to have been an avid golfer and is believed to have been living in a Club Street condominium unit with his daughter.
His cremation last Friday morning was attended by six people, some of whom were family members who flew in from Japan.
Although his death caused little commotion in the hotel when it happened, Mr. Peter Mainguy, general manager of the Ritz-Carlton, said the hotel is taking all steps to assuage any apprehensions that future guests may have.
These include getting heads of various religious groups, including Catholic priests, Buddhist monks and Muslim clerics, to conduct cleansing rituals in the room before sealing it off for a period of time starting this week.
‘We won’t put a big sign on the door. It will just be locked and seem like any other room from the outside,’ said Mr. Mainguy. He declined to say how long the room will be kept out of service.
‘It’s the right thing to do for the moment. Some may feel these measures are unnecessary, but we will take all cultures and all feelings into consideration and make sure we do the best we can for those who feel these steps are important,’ he said.
Though most hotels contacted were unwilling to say if they had such practices, industry insiders said these procedures are common when a death, either natural or unnatural, occurs.
According to Mr. Kellvin Ong, general manager of Rendezvous Hotel, the period that the room will be kept unused will depend on how much cleaning is required and also the demand for rooms.
Religious cleansing rites are carried out ‘to give our staff peace of mind’, he said. The rites, coupled with room cleaning, could last from a few days to a week.
There are currently no sealed rooms in the hotel and there have been no cases of suicide or murder in the hotel’s history, he added.
In Geylang’s budget Diamond Hotel, where the naked, bloodied body of a murdered Indian woman was found under the queen-size bed of a fourth-floor room last September, it is also business as usual.
‘We will try to assign other rooms before that one, unless the hotel is fully booked,’ said an employee who declined to give her name. She recalled that a Taoist priest was called in immediately after the murder and all the room’s furniture was replaced.
She added: ‘Some customers who remember the news specifically ask not to have that room, and we will accommodate such requests. But we’ve had no complaints from those who have stayed there so far.’
Diamond Hotel is not the only hotel that has a room with a history.
In 1995, Briton John Martin, a former convict trained in butchery, bludgeoned South African tourist Gerard George Lowe to death with a hammer in a River View Hotel room and dissected the body in the bathtub.
Martin then scattered the body parts, sealed in black plastic bags, into the Singapore River. Mr. Lowe’s head and arms were never found.
In 1994, Japanese tourist Fujii Isae died in her ninth-floor room at the Oriental Hotel, now known as the Mandarin Oriental Hotel, in Marina Bay.
Two Singaporean men had tailed her and her companion to their room with the intention of robbing them, but Madam Isae choked to death during the attack.
Both hotels did not respond to queries from The Sunday Times.
At the Hilton Singapore hotel in 1974, Mrs Linda Culley was famously killed and chopped up into 13 parts by her husband, Michael Charles Culley, who then sealed her severed body up in a trunk and transferred it to a Cairnhill flat.
The hotel’s rooms have undergone revamps twice since the incident, said its spokesman.
A staff member in a five-star hotel chain here revealed that most hotels have a Chinese altar in their basement carparks or in a discreet room in the hotel.
During the seventh lunar month every year, when spirits are free to roam the earth according to traditional Chinese belief, it is common practice for hotels to conduct prayers to ‘cleanse’ their rooms.
Prayers and cleansing rituals are also held in new hotels before their rooms are opened for occupancy.
Mr. Robin Goh, assistant vice-president of communications of Resorts World at Sentosa, said: ‘All reputable hotel chains should have such plans in place for all sorts of accidents, from drownings to murders, robberies, assaults and fires.’
He declined to comment on what the integrated resort - which will open early next year - plans to do in the case of such events, as plans are still being firmed up.
As most hotels claim to adopt the ‘honesty is the best policy’ mantra when it comes to hotel rooms with a history, you can ask before checking yourself into any.
‘I believe in being upfront with our guests and letting them be the judge. No point in hiding facts from them as that will only fuel unnecessary speculation,’ said Rendezvous Hotel’s Mr. Ong.
Nobody Says Mark to Market Doesn’t Matter as GE Falls
By Michael Tsang and Rachel Layne
March 10 (Bloomberg) -- For more than a decade General Electric Co. could easily avoid disclosing the value of its real estate and business loans. Not any more.
Since Jan. 2, GE has lost 45 percent on the New York Stock Exchange, mostly because shareholders are no longer willing to accept whatever the Fairfield, Connecticut-based company tells them about its finance subsidiary unless it’s based on so-called mark-to-market accounting rules.
The world’s biggest maker of jet engines and power turbines told shareholders last week that 2 percent of GE Capital Corp.’s assets are being valued based on market prices. The remaining $624 billion is being carried at levels that GE, the last original member of the Dow Jones Industrial Average, established in many cases years ago, according to CreditSights Inc.
“The notion of having 98 percent opaque and 2 percent valued with clarity is something that by its very nature would make investors nervous,” said Robert Arnott, founder of Research Affiliates LLC, which oversees $30 billion in Newport Beach, California and owned 481,201 GE shares as of Dec. 31. “Having some clarity on what the other 98 percent is worth is valuable.”
Federal Reserve Chairman Ben S. Bernanke said today that he wouldn’t support any suspension of mark-to-market accounting.
Once the world’s largest company, with a market value of almost $600 billion, GE has plummeted to $93.7 billion in New York Stock Exchange trading. The shares posted two of the three worst weekly declines since 1980 during the past month as investors speculate the deepest financial crisis since the Great Depression will cause more writedowns and losses at its finance division than the $10 billion the company anticipates.
GAAP Accounting
Last week, the stock fell below $6, the price of some GE light bulbs, for the first time since 1991. Today, GE jumped 20 percent to $8.87 after its finance unit sold $8 billion of government-backed debt.
“We have significantly increased transparency and disclosure,” GE spokesman Russell Wilkerson said in an e-mailed response to questions, pointing to a two-hour meeting the company had with analysts and investors in December to review GE Capital’s business. Still, “we recognize there is a need and an opportunity to do more.”
GE, which will hold a five-hour meeting with investors and analysts on March 19 to discuss the finance unit’s business, follows generally accepted accounting principles, which don’t require it to mark all assets to market, according to Wilkerson. In fact, the rules in many cases forbid it, he said.
GE Capital Forecast
GE predicts the finance unit will earn $5 billion this year, more than forecasts by analysts surveyed by Bloomberg. Goldman Sachs Group Inc. analyst Terry Darling in New York expects the finance unit to break even this year as losses from loan losses swell in commercial real estate and in Eastern Europe.
GE’s forecast reserves relative to loans of 2.5 percent this year are still “thin” relative to banks, which means raising more capital is “inevitable,” according to Darling.
The gap between GE and the analysts reflects differing valuations for assets in the finance division.
The unit is similar in size to the sixth-biggest U.S. bank, according to an estimate by CreditSights, an independent bond research firm based in New York. Most of its loans are senior secured debt tied to assets such as aircraft.
GE Capital generated 48 percent of the parent company’s $18.1 billion in profit last year. That compares with about 20 percent in the late 1980s, according to Nicholas P. Heymann, an analyst at Sterne Agee, a Birmingham, Alabama-based brokerage.
Differing Realities
He estimated in a note on March 3 that GE may need more money to cover losses of between $21 billion to $54 billion in the next several years. That would be almost as much as Merrill Lynch & Co. wrote down, according to data compiled by Bloomberg. New York-based Merrill was acquired by Bank of America Corp. of Charlotte, North Carolina.
Heymann’s “analysis is flawed and produces misleading estimates,” GE’s Wilkerson said. Heymann applies a historical loss rate of 2.5 percent for banks to GE’s real-estate equity holdings as well as its loans, leading to loss estimates that are twice as large as they should be, according to GE’s Wilkerson.
“The transparency is what you want,” said Barry James, chief executive officer of James Investment Research Inc. in Xenia, Ohio, which oversees $1.3 billion. “I don’t think anybody knows what they’re worth.”
‘Needlessly Destructive’
The debate over the fair-value rule, which requires companies to assess assets every quarter to reflect a market price, divides finance industry executives.
Banks say the rule, also known as mark to market, requires them to report losses from falling values even if they don’t expect to incur penalties because the assets aren’t for sale. The lower valuations can force companies to raise capital to comply with federal regulations.
Blackstone Group LP Chairman Stephen Schwarzman, the American Bankers Association and 65 lawmakers in the House of Representatives urged that fair-value accounting, mandated by the Financial Accounting Standards Board, be suspended last September. William Isaac, chairman of the Federal Deposit Insurance Corp. from 1981 to 1985, has called fair value “extremely and needlessly destructive” and “a major cause” of the credit crisis. Robert Rubin, the former Citigroup Inc. senior counselor and Treasury secretary, said Jan. 27 the rule has done “a great deal of damage.”
Blaming the Doctor
Goldman Sachs Chief Executive Officer Lloyd Blankfein, Lazard Ltd. Chairman Bruce Wasserstein and Treasury Secretary Timothy Geithner support fair-value accounting.
Fed Chairman Bernanke told Congress Feb. 25 that fair value is a “good principle in general” even if accounting rulemakers have to “figure out how to deal with some of these assets” that aren’t actively traded.
Today, the central bank chief in remarks prepared for an address to the Council on Foreign Relations in Washington added that he wouldn’t support suspending fair value accounting, saying “I strongly endorse the basic proposition of mark-to-market.”
Securities and Exchange Commission Chairman Mary Schapiro has said mark to market wasn’t a significant factor in the current crisis.
Blaming the rule “is a lot like going to a doctor for a diagnosis and then blaming him for telling you that you are sick,” Dane Mott, an analyst at JPMorgan Chase & Co., wrote in a September report.
GE, which may lose its AAA ratings from Moody’s Investors Service and Standard & Poor’s, will meet with analysts this month to make good on Chief Financial Officer Keith Sherin’s promise of a “deep dive” explanation of the finance unit. The company cut its dividend for the first time since 1938 last month to preserve $9 billion in cash.
“Investors need the assets broken down so they can see what’s really there,” said Craig Hester, president of Hester Capital Management, which oversees about $1.1 billion in Austin, Texas. “The market cares about whether GE is being honest. In the case of GE, there is fear.”
March 14 (Bloomberg) -- Fair-value accounting rules don’t make sense when there’s no market to accurately price securities, Wells Fargo & Co. Chairman Richard Kovacevich said.
“Mark-to-market is fundamentally not about a quote on a screen,” Kovacevich said yesterday in a speech at Stanford University in California. “It should always be about expected cash flows.”
Mark-to-market accounting requires companies to set a value on most securities every quarter, based on market prices. Banks including Citigroup Inc. have said the rule doesn’t work when trading freezes because banks must write down the assets to pennies on the dollar. The rules were designed to enhance transparency in bank balance sheets and indicate true financial health, according to investor groups and the accounting industry.
Robert Herz, chairman of the Financial Accounting Standards Board, may encourage bank executives to be flexible in valuing their assets, he said in an interview yesterday after testifying at a House subcommittee hearing. Banks and securities firms worldwide have racked up more than $1.2 trillion in losses and credit writedowns amid the worst financial crisis since the Great Depression.
Kovacevich, 65, said that 90 percent of the assets that led to those losses are from loans that were originated between 2005 and 2007 when credit was cheap and banks ignored underwriting standards.
‘Total Disregard’
“This was caused by a total disregard by financial institutions’ management of basic risk,” Kovacevich said. “It should not have ever happened: It was caused by human error and human malfeasance.”
Wells Fargo, the second-biggest U.S. home lender, reported its first loss since 2001 in the fourth quarter after accounting for the acquisition of troubled home lender Wachovia Corp. On March 6, the San Francisco-based bank slashed its dividend 85 percent to 5 cents a share to preserve capital.
Wells Fargo shares fell 1 cent yesterday to $13.94 on the New York Stock Exchange. It has dropped 53 percent in the past year, compared with a 68 percent drop in the 24-stock KBW Bank Index.
HONG KONG - Chinese Premier Wen Jiabao, faced with growing concern that United States efforts to stem the financial crisis will hit the value of China's vast holdings of US debt, used the world's press on Friday to demand that the US honor its promises.
Wen told a press conference after the conclusion of a two-week meeting of the country's legislators that he was "a little bit worried" about the safety of Chinese assets in the US, and called on the US "to maintain its good credit, to honor its promises and to guarantee the safety of China's assets." He also reiterated that other countries had no right to push China into appreciating its currency, the yuan.
Various efforts by the US to resolve the country's financial crisis by selling ever more debt to pump money into the financial system are raising concern that this will drive up inflation and pull down the value of the US dollar, which would cut the value of debt held by China, the largest creditor of the US.
"We are very concerned about the economic developments in the US economy," Wen said. "The US administration of President Barack Obama has taken a series of measures to counter the financial crisis. We look forward to the effectiveness of those measures."
Wen called on the US government to ensure that the value of Chinese assets in the US is maintained amid the crisis.
"We have lent a huge amount of money to the United States and of course we're concerned about the security of our assets and, to be honest, I am a little bit worried," Wen said in Beijing after conclusion of the second session of the 11th National People's Congress (NPC). "That's why here I would like to urge the US to keep its commitment and promise to ensure the safety of Chinese assets."
About US$1 trillion of China's foreign exchange reserves, which increased 27% last year to $1.95 trillion, is invested in US government bonds and other securities. China held $696.2 billion in US government bonds as of December, up from $681.9 billion a month earlier, according to the US Treasury international capital flow report released on February 18.
China has accelerated its purchases of Treasury debt since August 2008, when holdings grew by $23.7 billion month-on-month to US$541.4 billion. By September, it had holdings of Treasury debt worth $585 billion, more than Japan, previously the top holder of US Treasuries. In August 2008, Japan cut its holdings to $573 billion from $586 billion.
As the global financial crisis sends asset values plunging, mainland leaders are under growing pressure at home to diversify the country's foreign exchange reserves.
In December at the fifth Sino-US Strategic Economic Dialogue in Beijing, Vice Premier Wang Qishan urged the US to adopt every measure necessary to stabilize its economy and ensure the safety of China's assets and investments in the United States.
Pauline Loong, senior vice president in charge of China policy and risk research at CIMB-GK Securities (HK) Ltd, said she did not think China would dump its dollar holdings .
"I cannot see Beijing dumping its dollar holdings," she said. "If the market thought there was anything to the talk, there would be a scramble to dump. The result would be exactly what Beijing would not want to see: a massive fall in the value of its dollar holdings. Also, Beijing has few alternatives. What is it going to switch into? There are few markets that are as deep and liquid as the dollar - and to park $2 trillion in exchange reserves, you can't be dabbling about.
"The fact that Premier Wen talks about being worried about the value of the country's dollar holdings is a good sign. If he is going to dump the dollar, he is not going to talk about it," she said.
Even so, a two-day gain in Treasuries juddered to a hold on Friday, with the yield on the benchmark 10-year note rising six basis points to 2.91% as the price of the 2.75% security due in February 2019 fell $4.69 per $1,000 face amount, to 98 19/32 in early London trade, according to Bloomberg.
Wen reiterated China's principle of guaranteeing the "safety, liquidity and good value" of its foreign exchange reserves and diversifying the investment of the reserves.
"On the foreign reserves issue, the first consideration is our national interest ... But we also have to consider the stability of the overall international financial system, as the two factors are interlinked," Wen said. "Currently, our reserves are generally safe."
Wen also ruled out any further strengthening of the Chinese currency in the intermediate future. He said no country had the right to press for either the devaluation or appreciation of the yuan. A stronger yuan would drive up the price of exports to the US while making it cheaper for US goods to be imported to China.
The yuan "has appreciated since the European and Asian currencies have dropped in recent year, in addition to the yuan's 21% appreciation against the dollar since July 2007", he said.
Loong, however, said there was a risk of incorrectly interpreting such comments as indicating policy was set in stone.
Governments everywhere, "not just in China, are devising strategies and coming up with policies on the run. If economic data in the coming months surprise on the upside or downside, then Beijing will need to revise policy," she said.
China, whose currency is not at present fully convertible into other currencies, is moving to make it more fully used in international trade. Wen said that a plan for the settlement of trade in yuan had been formulated and would be carried out as quickly as possible once it was approved by the State Council, or cabinet.
A pilot project involving yuan-denominated settlement of trade deals would start from Hong Kong, Guo Qingping, assistant governor of the People's Bank of China, or the central bank, said on Wednesday in Beijing.
Referring to China's ability to survive in the global downturn, Wen said the country was fully prepared for even worse conditions and had long-term preparations "with plenty of ammunition" to cope.
"We are ready to roll out new stimulus policies at any time," Wen said, without giving details. China last November announced a 4 trillion yuan (US$585 billion) stimulus package to help boost the domestic economy as exports slumped.
Loong said the Chinese government would do whatever it took to support economic growth, but timing remained a question.
"The 4 trillion yuan fiscal spending needs time to kick in and work its way through to the economy. Beijing, we believe, will not fire until it can see the white of the enemy's eyes. Why waste bullets?" she said.
"Any announcement of new stimulus money in the coming weeks as the market awaits news of the first quarter of 2009 gross domestic product [GDP] numbers is both good and bad news - good because it gives the government breathing space to tackle the basic problems of the economy; bad because the government clearly sees a need to prevent a seriously hard landing," Loong said.
Details of the package, including how much is actually new spending, are not yet clear. Wen conceded that some projects in the stimulus package, such as roads and railways, were included in the country's 11th five-year plan. Global stock markets declined sharply at the start of the NPC meeting when Wen, contrary to expectations, declined to announce any new stimulus funding.
China's stimulus package plan was not fully understood by the world, he said. "Rumors and misunderstanding set the world stock market on a roller coaster ride," he said.
Wen emphasized that although China would have difficulty in achieving its goal of 8% economic growth this year, it would be possible with "considerable efforts", given the advantages of a huge domestic market, a large amount of labor and a sound and stable financial sector.
"With a 1.3 billion population ... China has a bigger market than those of the Europe and the United States," Wen said.
Even so, confidence is what China needs most to carry out its all-around economic stimulus package, he said.
"We have proposed a stimulus package only less than half a year after the financial crisis began. To implement the plan, I still believe confidence is still the first and foremost thing," Wen said.
SINGAPORE, March 16 (Reuters) - Singapore port terminals handled 19.8 percent less containers in February from a year earlier and containers' throughput dropped 6.3 percent from January, according to data from the Maritime and Port Authority of Singapore.
The figures signal continued weakness in trade and come after Singapore's key non-oil exports slumped in January at a record 34.8 percent pace from a year earlier as a deteriorating global economy hits demand for Asian goods.
Total container throughput in February dropped to 1.85 million twenty-foot equivalent (TEUs), a standard industry measure, compared with 2.31 million TEUs a year earlier.
In January, Singapore moved 1.97 million containers.
State-owned PSA International handled 3.72 million TEUs at its Singapore terminals in the first two months of 2009, down 19.7 percent from a year earlier.
BACK in December 2007 when the US's house of cards was just starting to crumble, Morgan Stanley Asia's chairman Stephen Roach wrote about an impending debilitating recession, criticised the US Federal Reserve for mismanaging the biggest risk of our times by cutting interest rates whenever the market called for it and said that the Fed needed to 'rethink its reckless, bubble-prone policy' because the only hope of breaking the endless but lethal chain of inflating bubbles is by raising, not lowering, interest rates.
The Fed, of course, did not - and still hasn't - listened, slashing rates to zero and is now printing billions of dollars to bail out 'zombie' banks, insurance companies and carmakers. The logic employed is the same as in the previous downturn - throw money at the problem and hope that liquidity can lubricate the wheels of the economy.
Speaking of wheels, propping up zombie car firms is surely the biggest mistake of the lot. Nobody wanted to buy sub-standard American cars in the first place and even fewer will buy in a recession. So their survival will depend on a stream of cash injections from the government that may never end. But we digress.
In his latest thoughts, Mr Roach in a March 5 report wrote: 'As in the case of Humpty Dumpty, they (governments) will not be able to put the pieces back together again.'
The reason is that the game is now over. 'With the US consumer likely in the early stages of a multi-year contraction, the post-bubble world is likely to face stiff headwinds for years to come in large part because there is no other consumer to fill the void.'
The longer-term problem is that governments have all focused on quick-fixes to try and restore the world to the way it was as quickly as possible without considering the strategic implications.
'Such actions suggest a world that has learned little from a wrenching global rebalancing - a world that believes the answer to a recession is a return to the very same strain of unbalanced economic growth that got us into this mess in the first place,' said Mr Roach. The US does not need to perpetuate its unsustainable consumption binge, he adds; it needs to save and recycle its savings into investments. 'China does not need more hyper-growth led by investment and exports; it needs to shift the mix of its economy towards private consumption,' he said.
Herein lies the crux of the problem - everyone wants to get things back to what they were as quickly as possible, a desire that we see every day in the stock market.
For example, many traders use the Straits Times Index's October 2007 all-time high of around 3,800 as a benchmark for their decisions, believing that at 1,500, the index's 60 per cent loss makes buying attractive now because there's so much upside.
What people fail to realise is that the STI at 3,800 was hugely over-inflated, based on unrealistic earnings expectations and massively dependent on an over-leveraged world driven by the big US investment banks.
It was also premised on the US continuing its unsustainably high levels of domestic consumption, which we now know is not possible and will not be likely for years to come.
Moreover, US and European banks now no longer exist in their previous forms - all have been cut down to size - and their over-hyped model of investing has been shown to be badly flawed.
A quick return to those bubble levels thus is well-nigh impossible because not only have economies, banks and the world at large changed, so have stock markets.
A much more likely scenario is for stocks to drift within narrow bands, punctuated by the occasional bear rally (as is the case now) brought on by large doses of short-covering and a reduction in negative news flows.
The trillions of dollars the US is pumping into its system will probably lead to a temporary boost in its economic numbers down the road - perhaps in six months' time - and no doubt brokers will latch on to this to declare the end of the bear market.
The smart money, however, will know that this time, throwing money at the problem will not work and that a Japan-style 'lost decade' of recession is very possible.
The upshot of all this is, of course, to lower one's returns expectations when playing the market and take every opportunity to sell into strength because this time, there isn't any quick-fix possible.
Labour market grew by 8.1% in 2008 due to strong gains in first half
16 March 2009
SINGAPORE: The Labour Market in 2008 presented a picture of employment growth that started robustly but faltered at the end when global markets hit the world's economies.
Last year, total employment actually grew by 221,600 or 8.1 per cent. That was lower than the 234,900 or 9.4 per cent increase in 2007.
This was driven largely by strong gains in the first half before employment growth slowed significantly to 21,300 in the fourth quarter of 2008.
As of December, there were 1,057,700 foreigners forming 36 per cent of the 2.95 million people employed in Singapore.
The Manpower Ministry said that the slowdown was led by manufacturing, which shed 7,000 jobs in the fourth quarter, its first contraction since the third quarter of 2003.
Job losses occurred in electronic products and transport equipment while petrochemicals and pharmaceutical products still added workers.
Jobs in services grew by 136,400 in 2008, slightly lower than the 143,100 the year before.
Still, growth slowed considerably in the last quarter with losses in sectors like administrative and support services and financial services.
Construction grew strongly by a record 64,000, up from gains of 40,400 in 2007.
With a weakening economy, the seasonally adjusted overall unemployment rate rose to 2.5 per cent last December, from 2.2 per cent last September and a decade-low 1.7 per cent a year before.
The unemployment figure was higher for the resident labour force at 3.7 per cent in December from 3.3 per cent in September 2008 and 2.4 per cent in December 2007.
The share of degree-holders among these unemployed residents rose sharply from 6,200 or 14 per cent in December 2007 to 14,800 or 21 per cent last December.
On the other end of the spectrum, those with below-secondary education, many 40 years or older, made up 15,400 or 22 per cent.
Long term unemployment, defined as those looking for work for at least 25 weeks, doubled for these two groups.
Redundancies nearly tripled from 3,180 in the third quarter of last year to a record quarterly high of 9,410 workers in the fourth quarter.
For 2008, there were 16,880 workers made redundant - 13,920 retrenched and 2,970 whose contracts were prematurely terminated.
PMETs (Professionals, Managers, Executives and Technicians) formed the largest numbers - from 950 in the third quarter to 3,790 in the fourth quarter.
There were 26,100 job vacancies in December last year, down by 27 per cent from September and 30 per cent from a year ago.
Many industries reported fewer vacancies, except for community, social and personal services, supported by public sector hiring.
Growth in earnings stood at 5.4 per cent, lower than 6.2 per cent in 2007 but after discounting for inflation, real earnings actually declined by 1.1 per cent last year, after rising by 4.0 per cent in 2007. - CNA/vm
THE authorities recently rejected the request of some real estate investment trust (Reit) managers to reduce the minimum payout ratio to unitholders while still being allowed to enjoy tax concessions.
Spelling out the government's stand a few weeks ago, Senior Minister of State for Finance and Transport Lim Hwee Hua said: 'The key characteristics of Reits as a stable, high-payout, pass-through vehicle are important considerations for investors and, hence, must be preserved.'
'Ministry of Finance and Monetary Authority of Singapore have deliberated this issue and have decided that the minimum payout ratio would not be changed,' she added.
Under current guidelines, Reits have to distribute to unitholders at least 90 per cent of their distributable income, in order to enjoy tax transparency, which means exemption from paying corporate tax at the Reit/vehicle, on the portion of income they distribute.
Reit managers have urged the government for a rule change as they deemed it conservative to retain cash in view of the very difficult credit market conditions. The worry is that they may not be able to get refinancing, and even if they could the costs may be exorbitant.
'While we appreciate the refinancing difficulties faced by Reits, there are, at present, no strong grounds to justify a special tax treatment for Reits that is not made available to other entities,' said Mrs Lim.
She noted that a few Singapore Reits have already managed to secure refinancing either through bank loans, loans from sponsors or recapitalisation, albeit at a higher cost. 'It is unrealistic for S-Reits to expect to have continued access to cheap and easy credit during this recession,' Mrs Lim commented.
While the authorities have made their stand clear on the minimum 'payout', the fact is there is another way within the confines of existing rules for Reits to conserve cash and yet still be entitled to the tax concessions: distribute scrip dividend instead of cash dividend.
By distributing scrip-only dividend, that is investors get additional units in the Reits instead of cash, these trusts are able to retain cash without altering their payout policies. Hence they are not in breach of their 90 per cent payout rule in order to be entitled to the tax concessions. Indeed, one Reit has already proposed doing that, and it is said that others are considering it as well.
Saizen Reit announced earlier this year that its board has proposed the adoption of a scrip-only dividend scheme. 'Such scheme, if adopted, provides flexibility for Saizen Reit to pay out dividends in the form of units in future,' it said. But it added that the payment of dividends in the form of units will be a temporary measure to conserve cash during this uncertain period. 'Saizen Reit will resume its dividend payment in the form of cash once the loan refinancing issues are resolved,' it assured unitholders.
Of course, distribution of scrip-only dividend is tantamount to a Reit not distributing its income at all. Hence, if adopted by many, it would mean that Reits' key characteristics of being 'a stable, high-payout, pass-through vehicle' may no longer be met.
From the standpoint of unitholders, yes, they can sell the additional units received in the market to raise cash. But they will have to incur transaction costs. Furthermore, there is no telling what the market price will be in today's environment. On the flip side, unitholders also don't want to see the Reits collapse because of their inability to refinance their loans. That would not be in their interest at all.
In any case, the proposal of the scrip-dividend payout is still subject to approval by the Singapore Exchange (SGX). Given its inconsistency with the Ministry of Finance's stand on preserving the key characteristics of Reits, it would be surprising if indeed SGX gives the go-ahead for the proposal to be implemented.
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What happens to hotel rooms with gory past?
They are cleaned and spiritually cleansed, then sealed...for a time
By Debbie Yong
15 March 2009
What happens to a hotel room after someone has died in it?
This issue surfaced after 64-year-old Japanese retiree Takamasa Koto was discovered dead in the Ritz-Carlton Millenia Singapore last Monday morning.
Hotel staff found the Singapore permanent resident’s body, with a single stab wound to his chest, in the bathtub of his room on the 31st floor.
Preliminary police investigations indicate that foul play was unlikely. They have classified the case as unnatural death.
In previous reports, a Japanese Embassy official said that Mr. Koto had also left behind a letter. His family members have declined media interviews. Little else is known about the man other than that he is said to have been an avid golfer and is believed to have been living in a Club Street condominium unit with his daughter.
His cremation last Friday morning was attended by six people, some of whom were family members who flew in from Japan.
Although his death caused little commotion in the hotel when it happened, Mr. Peter Mainguy, general manager of the Ritz-Carlton, said the hotel is taking all steps to assuage any apprehensions that future guests may have.
These include getting heads of various religious groups, including Catholic priests, Buddhist monks and Muslim clerics, to conduct cleansing rituals in the room before sealing it off for a period of time starting this week.
‘We won’t put a big sign on the door. It will just be locked and seem like any other room from the outside,’ said Mr. Mainguy. He declined to say how long the room will be kept out of service.
‘It’s the right thing to do for the moment. Some may feel these measures are unnecessary, but we will take all cultures and all feelings into consideration and make sure we do the best we can for those who feel these steps are important,’ he said.
Though most hotels contacted were unwilling to say if they had such practices, industry insiders said these procedures are common when a death, either natural or unnatural, occurs.
According to Mr. Kellvin Ong, general manager of Rendezvous Hotel, the period that the room will be kept unused will depend on how much cleaning is required and also the demand for rooms.
Religious cleansing rites are carried out ‘to give our staff peace of mind’, he said. The rites, coupled with room cleaning, could last from a few days to a week.
There are currently no sealed rooms in the hotel and there have been no cases of suicide or murder in the hotel’s history, he added.
In Geylang’s budget Diamond Hotel, where the naked, bloodied body of a murdered Indian woman was found under the queen-size bed of a fourth-floor room last September, it is also business as usual.
‘We will try to assign other rooms before that one, unless the hotel is fully booked,’ said an employee who declined to give her name. She recalled that a Taoist priest was called in immediately after the murder and all the room’s furniture was replaced.
She added: ‘Some customers who remember the news specifically ask not to have that room, and we will accommodate such requests. But we’ve had no complaints from those who have stayed there so far.’
Diamond Hotel is not the only hotel that has a room with a history.
In 1995, Briton John Martin, a former convict trained in butchery, bludgeoned South African tourist Gerard George Lowe to death with a hammer in a River View Hotel room and dissected the body in the bathtub.
Martin then scattered the body parts, sealed in black plastic bags, into the Singapore River. Mr. Lowe’s head and arms were never found.
In 1994, Japanese tourist Fujii Isae died in her ninth-floor room at the Oriental Hotel, now known as the Mandarin Oriental Hotel, in Marina Bay.
Two Singaporean men had tailed her and her companion to their room with the intention of robbing them, but Madam Isae choked to death during the attack.
Both hotels did not respond to queries from The Sunday Times.
At the Hilton Singapore hotel in 1974, Mrs Linda Culley was famously killed and chopped up into 13 parts by her husband, Michael Charles Culley, who then sealed her severed body up in a trunk and transferred it to a Cairnhill flat.
The hotel’s rooms have undergone revamps twice since the incident, said its spokesman.
A staff member in a five-star hotel chain here revealed that most hotels have a Chinese altar in their basement carparks or in a discreet room in the hotel.
During the seventh lunar month every year, when spirits are free to roam the earth according to traditional Chinese belief, it is common practice for hotels to conduct prayers to ‘cleanse’ their rooms.
Prayers and cleansing rituals are also held in new hotels before their rooms are opened for occupancy.
Mr. Robin Goh, assistant vice-president of communications of Resorts World at Sentosa, said: ‘All reputable hotel chains should have such plans in place for all sorts of accidents, from drownings to murders, robberies, assaults and fires.’
He declined to comment on what the integrated resort - which will open early next year - plans to do in the case of such events, as plans are still being firmed up.
As most hotels claim to adopt the ‘honesty is the best policy’ mantra when it comes to hotel rooms with a history, you can ask before checking yourself into any.
‘I believe in being upfront with our guests and letting them be the judge. No point in hiding facts from them as that will only fuel unnecessary speculation,’ said Rendezvous Hotel’s Mr. Ong.
Nobody Says Mark to Market Doesn’t Matter as GE Falls
By Michael Tsang and Rachel Layne
March 10 (Bloomberg) -- For more than a decade General Electric Co. could easily avoid disclosing the value of its real estate and business loans. Not any more.
Since Jan. 2, GE has lost 45 percent on the New York Stock Exchange, mostly because shareholders are no longer willing to accept whatever the Fairfield, Connecticut-based company tells them about its finance subsidiary unless it’s based on so-called mark-to-market accounting rules.
The world’s biggest maker of jet engines and power turbines told shareholders last week that 2 percent of GE Capital Corp.’s assets are being valued based on market prices. The remaining $624 billion is being carried at levels that GE, the last original member of the Dow Jones Industrial Average, established in many cases years ago, according to CreditSights Inc.
“The notion of having 98 percent opaque and 2 percent valued with clarity is something that by its very nature would make investors nervous,” said Robert Arnott, founder of Research Affiliates LLC, which oversees $30 billion in Newport Beach, California and owned 481,201 GE shares as of Dec. 31. “Having some clarity on what the other 98 percent is worth is valuable.”
Federal Reserve Chairman Ben S. Bernanke said today that he wouldn’t support any suspension of mark-to-market accounting.
Once the world’s largest company, with a market value of almost $600 billion, GE has plummeted to $93.7 billion in New York Stock Exchange trading. The shares posted two of the three worst weekly declines since 1980 during the past month as investors speculate the deepest financial crisis since the Great Depression will cause more writedowns and losses at its finance division than the $10 billion the company anticipates.
GAAP Accounting
Last week, the stock fell below $6, the price of some GE light bulbs, for the first time since 1991. Today, GE jumped 20 percent to $8.87 after its finance unit sold $8 billion of government-backed debt.
“We have significantly increased transparency and disclosure,” GE spokesman Russell Wilkerson said in an e-mailed response to questions, pointing to a two-hour meeting the company had with analysts and investors in December to review GE Capital’s business. Still, “we recognize there is a need and an opportunity to do more.”
GE, which will hold a five-hour meeting with investors and analysts on March 19 to discuss the finance unit’s business, follows generally accepted accounting principles, which don’t require it to mark all assets to market, according to Wilkerson. In fact, the rules in many cases forbid it, he said.
GE Capital Forecast
GE predicts the finance unit will earn $5 billion this year, more than forecasts by analysts surveyed by Bloomberg. Goldman Sachs Group Inc. analyst Terry Darling in New York expects the finance unit to break even this year as losses from loan losses swell in commercial real estate and in Eastern Europe.
GE’s forecast reserves relative to loans of 2.5 percent this year are still “thin” relative to banks, which means raising more capital is “inevitable,” according to Darling.
The gap between GE and the analysts reflects differing valuations for assets in the finance division.
The unit is similar in size to the sixth-biggest U.S. bank, according to an estimate by CreditSights, an independent bond research firm based in New York. Most of its loans are senior secured debt tied to assets such as aircraft.
GE Capital generated 48 percent of the parent company’s $18.1 billion in profit last year. That compares with about 20 percent in the late 1980s, according to Nicholas P. Heymann, an analyst at Sterne Agee, a Birmingham, Alabama-based brokerage.
Differing Realities
He estimated in a note on March 3 that GE may need more money to cover losses of between $21 billion to $54 billion in the next several years. That would be almost as much as Merrill Lynch & Co. wrote down, according to data compiled by Bloomberg. New York-based Merrill was acquired by Bank of America Corp. of Charlotte, North Carolina.
Heymann’s “analysis is flawed and produces misleading estimates,” GE’s Wilkerson said. Heymann applies a historical loss rate of 2.5 percent for banks to GE’s real-estate equity holdings as well as its loans, leading to loss estimates that are twice as large as they should be, according to GE’s Wilkerson.
“The transparency is what you want,” said Barry James, chief executive officer of James Investment Research Inc. in Xenia, Ohio, which oversees $1.3 billion. “I don’t think anybody knows what they’re worth.”
‘Needlessly Destructive’
The debate over the fair-value rule, which requires companies to assess assets every quarter to reflect a market price, divides finance industry executives.
Banks say the rule, also known as mark to market, requires them to report losses from falling values even if they don’t expect to incur penalties because the assets aren’t for sale. The lower valuations can force companies to raise capital to comply with federal regulations.
Blackstone Group LP Chairman Stephen Schwarzman, the American Bankers Association and 65 lawmakers in the House of Representatives urged that fair-value accounting, mandated by the Financial Accounting Standards Board, be suspended last September. William Isaac, chairman of the Federal Deposit Insurance Corp. from 1981 to 1985, has called fair value “extremely and needlessly destructive” and “a major cause” of the credit crisis. Robert Rubin, the former Citigroup Inc. senior counselor and Treasury secretary, said Jan. 27 the rule has done “a great deal of damage.”
Blaming the Doctor
Goldman Sachs Chief Executive Officer Lloyd Blankfein, Lazard Ltd. Chairman Bruce Wasserstein and Treasury Secretary Timothy Geithner support fair-value accounting.
Fed Chairman Bernanke told Congress Feb. 25 that fair value is a “good principle in general” even if accounting rulemakers have to “figure out how to deal with some of these assets” that aren’t actively traded.
Today, the central bank chief in remarks prepared for an address to the Council on Foreign Relations in Washington added that he wouldn’t support suspending fair value accounting, saying “I strongly endorse the basic proposition of mark-to-market.”
Securities and Exchange Commission Chairman Mary Schapiro has said mark to market wasn’t a significant factor in the current crisis.
Blaming the rule “is a lot like going to a doctor for a diagnosis and then blaming him for telling you that you are sick,” Dane Mott, an analyst at JPMorgan Chase & Co., wrote in a September report.
GE, which may lose its AAA ratings from Moody’s Investors Service and Standard & Poor’s, will meet with analysts this month to make good on Chief Financial Officer Keith Sherin’s promise of a “deep dive” explanation of the finance unit. The company cut its dividend for the first time since 1938 last month to preserve $9 billion in cash.
“Investors need the assets broken down so they can see what’s really there,” said Craig Hester, president of Hester Capital Management, which oversees about $1.1 billion in Austin, Texas. “The market cares about whether GE is being honest. In the case of GE, there is fear.”
Fair-Value Accounting Isn’t Working, Wells Fargo Chairman Says
By Ari Levy and Vivien Lou Chen
March 14 (Bloomberg) -- Fair-value accounting rules don’t make sense when there’s no market to accurately price securities, Wells Fargo & Co. Chairman Richard Kovacevich said.
“Mark-to-market is fundamentally not about a quote on a screen,” Kovacevich said yesterday in a speech at Stanford University in California. “It should always be about expected cash flows.”
Mark-to-market accounting requires companies to set a value on most securities every quarter, based on market prices. Banks including Citigroup Inc. have said the rule doesn’t work when trading freezes because banks must write down the assets to pennies on the dollar. The rules were designed to enhance transparency in bank balance sheets and indicate true financial health, according to investor groups and the accounting industry.
Robert Herz, chairman of the Financial Accounting Standards Board, may encourage bank executives to be flexible in valuing their assets, he said in an interview yesterday after testifying at a House subcommittee hearing. Banks and securities firms worldwide have racked up more than $1.2 trillion in losses and credit writedowns amid the worst financial crisis since the Great Depression.
Kovacevich, 65, said that 90 percent of the assets that led to those losses are from loans that were originated between 2005 and 2007 when credit was cheap and banks ignored underwriting standards.
‘Total Disregard’
“This was caused by a total disregard by financial institutions’ management of basic risk,” Kovacevich said. “It should not have ever happened: It was caused by human error and human malfeasance.”
Wells Fargo, the second-biggest U.S. home lender, reported its first loss since 2001 in the fourth quarter after accounting for the acquisition of troubled home lender Wachovia Corp. On March 6, the San Francisco-based bank slashed its dividend 85 percent to 5 cents a share to preserve capital.
Wells Fargo shares fell 1 cent yesterday to $13.94 on the New York Stock Exchange. It has dropped 53 percent in the past year, compared with a 68 percent drop in the 24-stock KBW Bank Index.
Wen puts US honor on the debt line
By Olivia Chung
Mar 14, 2009
HONG KONG - Chinese Premier Wen Jiabao, faced with growing concern that United States efforts to stem the financial crisis will hit the value of China's vast holdings of US debt, used the world's press on Friday to demand that the US honor its promises.
Wen told a press conference after the conclusion of a two-week meeting of the country's legislators that he was "a little bit worried" about the safety of Chinese assets in the US, and called on the US "to maintain its good credit, to honor its promises and to guarantee the safety of China's assets." He also reiterated that other countries had no right to push China into appreciating its currency, the yuan.
Various efforts by the US to resolve the country's financial crisis by selling ever more debt to pump money into the financial system are raising concern that this will drive up inflation and pull down the value of the US dollar, which would cut the value of debt held by China, the largest creditor of the US.
"We are very concerned about the economic developments in the US economy," Wen said. "The US administration of President Barack Obama has taken a series of measures to counter the financial crisis. We look forward to the effectiveness of those measures."
Wen called on the US government to ensure that the value of Chinese assets in the US is maintained amid the crisis.
"We have lent a huge amount of money to the United States and of course we're concerned about the security of our assets and, to be honest, I am a little bit worried," Wen said in Beijing after conclusion of the second session of the 11th National People's Congress (NPC). "That's why here I would like to urge the US to keep its commitment and promise to ensure the safety of Chinese assets."
About US$1 trillion of China's foreign exchange reserves, which increased 27% last year to $1.95 trillion, is invested in US government bonds and other securities. China held $696.2 billion in US government bonds as of December, up from $681.9 billion a month earlier, according to the US Treasury international capital flow report released on February 18.
China has accelerated its purchases of Treasury debt since August 2008, when holdings grew by $23.7 billion month-on-month to US$541.4 billion. By September, it had holdings of Treasury debt worth $585 billion, more than Japan, previously the top holder of US Treasuries. In August 2008, Japan cut its holdings to $573 billion from $586 billion.
As the global financial crisis sends asset values plunging, mainland leaders are under growing pressure at home to diversify the country's foreign exchange reserves.
In December at the fifth Sino-US Strategic Economic Dialogue in Beijing, Vice Premier Wang Qishan urged the US to adopt every measure necessary to stabilize its economy and ensure the safety of China's assets and investments in the United States.
Pauline Loong, senior vice president in charge of China policy and risk research at CIMB-GK Securities (HK) Ltd, said she did not think China would dump its dollar holdings .
"I cannot see Beijing dumping its dollar holdings," she said. "If the market thought there was anything to the talk, there would be a scramble to dump. The result would be exactly what Beijing would not want to see: a massive fall in the value of its dollar holdings. Also, Beijing has few alternatives. What is it going to switch into? There are few markets that are as deep and liquid as the dollar - and to park $2 trillion in exchange reserves, you can't be dabbling about.
"The fact that Premier Wen talks about being worried about the value of the country's dollar holdings is a good sign. If he is going to dump the dollar, he is not going to talk about it," she said.
Even so, a two-day gain in Treasuries juddered to a hold on Friday, with the yield on the benchmark 10-year note rising six basis points to 2.91% as the price of the 2.75% security due in February 2019 fell $4.69 per $1,000 face amount, to 98 19/32 in early London trade, according to Bloomberg.
Wen reiterated China's principle of guaranteeing the "safety, liquidity and good value" of its foreign exchange reserves and diversifying the investment of the reserves.
"On the foreign reserves issue, the first consideration is our national interest ... But we also have to consider the stability of the overall international financial system, as the two factors are interlinked," Wen said. "Currently, our reserves are generally safe."
Wen also ruled out any further strengthening of the Chinese currency in the intermediate future. He said no country had the right to press for either the devaluation or appreciation of the yuan. A stronger yuan would drive up the price of exports to the US while making it cheaper for US goods to be imported to China.
The yuan "has appreciated since the European and Asian currencies have dropped in recent year, in addition to the yuan's 21% appreciation against the dollar since July 2007", he said.
Loong, however, said there was a risk of incorrectly interpreting such comments as indicating policy was set in stone.
Governments everywhere, "not just in China, are devising strategies and coming up with policies on the run. If economic data in the coming months surprise on the upside or downside, then Beijing will need to revise policy," she said.
China, whose currency is not at present fully convertible into other currencies, is moving to make it more fully used in international trade. Wen said that a plan for the settlement of trade in yuan had been formulated and would be carried out as quickly as possible once it was approved by the State Council, or cabinet.
A pilot project involving yuan-denominated settlement of trade deals would start from Hong Kong, Guo Qingping, assistant governor of the People's Bank of China, or the central bank, said on Wednesday in Beijing.
Referring to China's ability to survive in the global downturn, Wen said the country was fully prepared for even worse conditions and had long-term preparations "with plenty of ammunition" to cope.
"We are ready to roll out new stimulus policies at any time," Wen said, without giving details. China last November announced a 4 trillion yuan (US$585 billion) stimulus package to help boost the domestic economy as exports slumped.
Loong said the Chinese government would do whatever it took to support economic growth, but timing remained a question.
"The 4 trillion yuan fiscal spending needs time to kick in and work its way through to the economy. Beijing, we believe, will not fire until it can see the white of the enemy's eyes. Why waste bullets?" she said.
"Any announcement of new stimulus money in the coming weeks as the market awaits news of the first quarter of 2009 gross domestic product [GDP] numbers is both good and bad news - good because it gives the government breathing space to tackle the basic problems of the economy; bad because the government clearly sees a need to prevent a seriously hard landing," Loong said.
Details of the package, including how much is actually new spending, are not yet clear. Wen conceded that some projects in the stimulus package, such as roads and railways, were included in the country's 11th five-year plan. Global stock markets declined sharply at the start of the NPC meeting when Wen, contrary to expectations, declined to announce any new stimulus funding.
China's stimulus package plan was not fully understood by the world, he said. "Rumors and misunderstanding set the world stock market on a roller coaster ride," he said.
Wen emphasized that although China would have difficulty in achieving its goal of 8% economic growth this year, it would be possible with "considerable efforts", given the advantages of a huge domestic market, a large amount of labor and a sound and stable financial sector.
"With a 1.3 billion population ... China has a bigger market than those of the Europe and the United States," Wen said.
Even so, confidence is what China needs most to carry out its all-around economic stimulus package, he said.
"We have proposed a stimulus package only less than half a year after the financial crisis began. To implement the plan, I still believe confidence is still the first and foremost thing," Wen said.
Singapore Feb container traffic down 19.8 pct y/y
by Saeed Azhar
SINGAPORE, March 16 (Reuters) - Singapore port terminals handled 19.8 percent less containers in February from a year earlier and containers' throughput dropped 6.3 percent from January, according to data from the Maritime and Port Authority of Singapore.
The figures signal continued weakness in trade and come after Singapore's key non-oil exports slumped in January at a record 34.8 percent pace from a year earlier as a deteriorating global economy hits demand for Asian goods.
Total container throughput in February dropped to 1.85 million twenty-foot equivalent (TEUs), a standard industry measure, compared with 2.31 million TEUs a year earlier.
In January, Singapore moved 1.97 million containers.
State-owned PSA International handled 3.72 million TEUs at its Singapore terminals in the first two months of 2009, down 19.7 percent from a year earlier.
No quick-fixes possible this time round
By R SIVANITHY
16 March 2009
BACK in December 2007 when the US's house of cards was just starting to crumble, Morgan Stanley Asia's chairman Stephen Roach wrote about an impending debilitating recession, criticised the US Federal Reserve for mismanaging the biggest risk of our times by cutting interest rates whenever the market called for it and said that the Fed needed to 'rethink its reckless, bubble-prone policy' because the only hope of breaking the endless but lethal chain of inflating bubbles is by raising, not lowering, interest rates.
The Fed, of course, did not - and still hasn't - listened, slashing rates to zero and is now printing billions of dollars to bail out 'zombie' banks, insurance companies and carmakers. The logic employed is the same as in the previous downturn - throw money at the problem and hope that liquidity can lubricate the wheels of the economy.
Speaking of wheels, propping up zombie car firms is surely the biggest mistake of the lot. Nobody wanted to buy sub-standard American cars in the first place and even fewer will buy in a recession. So their survival will depend on a stream of cash injections from the government that may never end. But we digress.
In his latest thoughts, Mr Roach in a March 5 report wrote: 'As in the case of Humpty Dumpty, they (governments) will not be able to put the pieces back together again.'
The reason is that the game is now over. 'With the US consumer likely in the early stages of a multi-year contraction, the post-bubble world is likely to face stiff headwinds for years to come in large part because there is no other consumer to fill the void.'
The longer-term problem is that governments have all focused on quick-fixes to try and restore the world to the way it was as quickly as possible without considering the strategic implications.
'Such actions suggest a world that has learned little from a wrenching global rebalancing - a world that believes the answer to a recession is a return to the very same strain of unbalanced economic growth that got us into this mess in the first place,' said Mr Roach. The US does not need to perpetuate its unsustainable consumption binge, he adds; it needs to save and recycle its savings into investments. 'China does not need more hyper-growth led by investment and exports; it needs to shift the mix of its economy towards private consumption,' he said.
Herein lies the crux of the problem - everyone wants to get things back to what they were as quickly as possible, a desire that we see every day in the stock market.
For example, many traders use the Straits Times Index's October 2007 all-time high of around 3,800 as a benchmark for their decisions, believing that at 1,500, the index's 60 per cent loss makes buying attractive now because there's so much upside.
What people fail to realise is that the STI at 3,800 was hugely over-inflated, based on unrealistic earnings expectations and massively dependent on an over-leveraged world driven by the big US investment banks.
It was also premised on the US continuing its unsustainably high levels of domestic consumption, which we now know is not possible and will not be likely for years to come.
Moreover, US and European banks now no longer exist in their previous forms - all have been cut down to size - and their over-hyped model of investing has been shown to be badly flawed.
A quick return to those bubble levels thus is well-nigh impossible because not only have economies, banks and the world at large changed, so have stock markets.
A much more likely scenario is for stocks to drift within narrow bands, punctuated by the occasional bear rally (as is the case now) brought on by large doses of short-covering and a reduction in negative news flows.
The trillions of dollars the US is pumping into its system will probably lead to a temporary boost in its economic numbers down the road - perhaps in six months' time - and no doubt brokers will latch on to this to declare the end of the bear market.
The smart money, however, will know that this time, throwing money at the problem will not work and that a Japan-style 'lost decade' of recession is very possible.
The upshot of all this is, of course, to lower one's returns expectations when playing the market and take every opportunity to sell into strength because this time, there isn't any quick-fix possible.
Labour market grew by 8.1% in 2008 due to strong gains in first half
16 March 2009
SINGAPORE: The Labour Market in 2008 presented a picture of employment growth that started robustly but faltered at the end when global markets hit the world's economies.
Last year, total employment actually grew by 221,600 or 8.1 per cent. That was lower than the 234,900 or 9.4 per cent increase in 2007.
This was driven largely by strong gains in the first half before employment growth slowed significantly to 21,300 in the fourth quarter of 2008.
As of December, there were 1,057,700 foreigners forming 36 per cent of the 2.95 million people employed in Singapore.
The Manpower Ministry said that the slowdown was led by manufacturing, which shed 7,000 jobs in the fourth quarter, its first contraction since the third quarter of 2003.
Job losses occurred in electronic products and transport equipment while petrochemicals and pharmaceutical products still added workers.
Jobs in services grew by 136,400 in 2008, slightly lower than the 143,100 the year before.
Still, growth slowed considerably in the last quarter with losses in sectors like administrative and support services and financial services.
Construction grew strongly by a record 64,000, up from gains of 40,400 in 2007.
With a weakening economy, the seasonally adjusted overall unemployment rate rose to 2.5 per cent last December, from 2.2 per cent last September and a decade-low 1.7 per cent a year before.
The unemployment figure was higher for the resident labour force at 3.7 per cent in December from 3.3 per cent in September 2008 and 2.4 per cent in December 2007.
The share of degree-holders among these unemployed residents rose sharply from 6,200 or 14 per cent in December 2007 to 14,800 or 21 per cent last December.
On the other end of the spectrum, those with below-secondary education, many 40 years or older, made up 15,400 or 22 per cent.
Long term unemployment, defined as those looking for work for at least 25 weeks, doubled for these two groups.
Redundancies nearly tripled from 3,180 in the third quarter of last year to a record quarterly high of 9,410 workers in the fourth quarter.
For 2008, there were 16,880 workers made redundant - 13,920 retrenched and 2,970 whose contracts were prematurely terminated.
PMETs (Professionals, Managers, Executives and Technicians) formed the largest numbers - from 950 in the third quarter to 3,790 in the fourth quarter.
There were 26,100 job vacancies in December last year, down by 27 per cent from September and 30 per cent from a year ago.
Many industries reported fewer vacancies, except for community, social and personal services, supported by public sector hiring.
Growth in earnings stood at 5.4 per cent, lower than 6.2 per cent in 2007 but after discounting for inflation, real earnings actually declined by 1.1 per cent last year, after rising by 4.0 per cent in 2007. - CNA/vm
Scrip dividends violate Reits' basic characteristics
Teh Hooi Ling
Mar 16, 2009
THE authorities recently rejected the request of some real estate investment trust (Reit) managers to reduce the minimum payout ratio to unitholders while still being allowed to enjoy tax concessions.
Spelling out the government's stand a few weeks ago, Senior Minister of State for Finance and Transport Lim Hwee Hua said: 'The key characteristics of Reits as a stable, high-payout, pass-through vehicle are important considerations for investors and, hence, must be preserved.'
'Ministry of Finance and Monetary Authority of Singapore have deliberated this issue and have decided that the minimum payout ratio would not be changed,' she added.
Under current guidelines, Reits have to distribute to unitholders at least 90 per cent of their distributable income, in order to enjoy tax transparency, which means exemption from paying corporate tax at the Reit/vehicle, on the portion of income they distribute.
Reit managers have urged the government for a rule change as they deemed it conservative to retain cash in view of the very difficult credit market conditions. The worry is that they may not be able to get refinancing, and even if they could the costs may be exorbitant.
'While we appreciate the refinancing difficulties faced by Reits, there are, at present, no strong grounds to justify a special tax treatment for Reits that is not made available to other entities,' said Mrs Lim.
She noted that a few Singapore Reits have already managed to secure refinancing either through bank loans, loans from sponsors or recapitalisation, albeit at a higher cost. 'It is unrealistic for S-Reits to expect to have continued access to cheap and easy credit during this recession,' Mrs Lim commented.
While the authorities have made their stand clear on the minimum 'payout', the fact is there is another way within the confines of existing rules for Reits to conserve cash and yet still be entitled to the tax concessions: distribute scrip dividend instead of cash dividend.
By distributing scrip-only dividend, that is investors get additional units in the Reits instead of cash, these trusts are able to retain cash without altering their payout policies. Hence they are not in breach of their 90 per cent payout rule in order to be entitled to the tax concessions. Indeed, one Reit has already proposed doing that, and it is said that others are considering it as well.
Saizen Reit announced earlier this year that its board has proposed the adoption of a scrip-only dividend scheme. 'Such scheme, if adopted, provides flexibility for Saizen Reit to pay out dividends in the form of units in future,' it said. But it added that the payment of dividends in the form of units will be a temporary measure to conserve cash during this uncertain period. 'Saizen Reit will resume its dividend payment in the form of cash once the loan refinancing issues are resolved,' it assured unitholders.
Of course, distribution of scrip-only dividend is tantamount to a Reit not distributing its income at all. Hence, if adopted by many, it would mean that Reits' key characteristics of being 'a stable, high-payout, pass-through vehicle' may no longer be met.
From the standpoint of unitholders, yes, they can sell the additional units received in the market to raise cash. But they will have to incur transaction costs. Furthermore, there is no telling what the market price will be in today's environment. On the flip side, unitholders also don't want to see the Reits collapse because of their inability to refinance their loans. That would not be in their interest at all.
In any case, the proposal of the scrip-dividend payout is still subject to approval by the Singapore Exchange (SGX). Given its inconsistency with the Ministry of Finance's stand on preserving the key characteristics of Reits, it would be surprising if indeed SGX gives the go-ahead for the proposal to be implemented.
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