TEMASEK REVIEW
I think the MIW must be having election nightmares of
desperation. Economy recovery? I think they are desperate for the
status quo of benign stability to hold between now and September.
Europe is still wobbly. The financial rescue of Greece merely
stalled a sudden collapse right on its edge. Anyone read a Spanish
bank collapse last week – long after the 2008/2009. What does that
mean? The smouldering flame of meltdown has NOT been extinguished
yet and this is not just in EU as also reported a regional
California bank collapsed in the same week. What does these tell
me? THE SLOW DECAYING DEATH HAS NOT ENDED.
A lot of banks and business are still in
the dying throes, many surviving till today because of the stimulus
life support which cannot continues indefinitely. As these life
support increasingly weans off, the financial collapse might
escalate and Europe might implode again. The budgetary and fiscal
indiscipline CONTINUES TO WREAK HAVOUC. Within euro currency
jurisdiction, only Germany and to some extent France is stable BUT
ALL THE PIIGS ( Portugal, Italy, Ireland, Greece and Spain) are
still deeply mired in national debt way exceeding their GDP – in
practical terms – financially bankrupt and struggling with fiscal
budget to service borrowing costs and keeps the economic fire
smouldering. Spain’s economic problems are BIGGER than Greece
simply by reasons of its economic base is much larger. Germany is
like one breadwinner supporting the rest of euro currency economies
– PIIGS and Eastern European economies all underwater. Britain,
though not part of Euro currency, could barely survive its own. PRC
of course said it support the euro – it was a political and
economic imperative. Any disintegration of euro will decimated the
Chinese manufacturing sector as EU is a major export market for
Chinese made goods. But if Spain wobbles followed by Portugal and
Italy, the risks is that German voters will force Merkel to walk
out and abandon the euro currency regime. TOO COSTLY FOR GERMANY
AND TOO FEW BENEFITS.
Euro currency, I believe, was born out of political imperatives
than economics. Why? Because its diverse membership had different
economic maturity of industrialisation and decay and also
difference of reliance on specific economic sector. One currency
fitting all imposed too much constraints. Greece has no
manufacturing of any significance and mostly dependent on tourism.
Portugal is mainly agricultural. Italy’s industrial base is eroded
and a cheaper euro does not benefit its export market but
beneficial to Greek tourism. The stretch and strain are too much to
bear of diversity. It could break and all hell break lose. European
central banker has warned of a second wave of loan losses spreading
through PIIGS countries.
http://www.theaustralian.com.au/business/industry-sectors/euro-zone-banks-face-a-second-wave-of-loan-losses-warns-the-ecb/story-e6frg96f-1225873858977
The next few months could be very critical if the US recovery
does not take hold to give some support to global demand. EU is
Asean major market and Singapore component of that trade-dependency
is almost 1/3 of Asean exposure. Any violent shakedown of EU in the
next three months will have major impact on our economy and
negative impact on PAP’s electoral fortune.
As for the US economy, pending home sales though registering
increase in recent months and better than expected in April BUT THE
RATE OF INCREASED HAS DECLINED.Pending home sales was 6% in April
compared to gains of 7.1 percent in March and 8.3 percent in
February.
http://sg.news.yahoo.com/afp/20100602/tts-us-economy-property-sales-c1b2fc3.html
That indicated softness. Improved US economic data for housing
is due exclusively to financial incentives in the Obama
Admininistration stimulus package which has ended in April – all
contract must be completed by end June. Car sales were also up BUT
THIS IS ALSO DUE TO CASH FOR CLUNKER DEAL from the stimulus
package. The critical figures are what the May and June statistic
to come in on major consumer ticket items like cars and housing to
really assess the strength of US recovery.
Over in China, manufacturing output has fallen due to tightening
monetary policy at work.
http://www.theaustralian.com.au/business/markets/chinas-manufacturing-growth-slows-official-report/story-e6frg926-1225873953545
The result of slower manufacturing output has negative impact on
commodities demand.
http://www.theaustralian.com.au/business/news/china-taps-commodities-stockpile-in-bearish-signal/story-e6frg90x-1225873940964
This is yet another bearish signal.
The collapse in the commodity index is telling us that the peak
in global industrial growth is imminent, it’s here right now. One
market commentator warned. “Markets are going to have to deal with
the reality of a slowdown.”
We are seeing now the biggest slump in commodities since Lehman
Brothers Holdings collapsed is undermining Wall Street forecasts
for accelerating economic growth and higher prices for everything
from copper to crude oil.
http://www.theage.com.au/business/world-business/bear-signals-commodities-mark-biggest-drop-since-lehman-20100602-wvti.html
The biggest danger yet is burst property bubble in China. THIS
ONE IS SAID TO BE BIGGER AND WORST THAN THAT EXPERIENCE IN USA. At
minimum it won’t be much smaller of impact if it burst. PRC
speculators are buying 2nd and 3rd property for speculation on
pyramid mortgaging and the Government is well aware of this
trend.
http://edition.cnn.com/2010/BUSINESS/05/31/china.property.worse.us.ft/index.html
The Aussie currency had a meltdown last month – another bearish
signal. If raw material demand falls, it signals a downturn in
manufacturing and construction. Manufacturing is meeting consumer
demand which must be weakening. Construction is mainly urbanisation
and infrastructural and if that slows down it also means a
slackening in consumer demand and public spending – again economic
slow-down is near the horizon or already in the works.
THE REASON WHY FINANCIAL MARKETS ARE SO GLOOMY IS BECAUSE
EVERYONE REALISES THAT ALL EUROPEAN AND US GOVERNMENT WERE ALREADY
IN BUDGET AND FISCAL NEGATIVE IMBALANCE BEFORE THE GFC AND THAT
IMBALANCE HAS WORSEN SINCE 2008/2009 because private sector debt
had been temporary warehoused in the Government’s sector. THAT
MEANS THAT GOVERNMENT SECTOR IS NOW LESS AND LESS ABLE TO ENGAGE IN
STIMULUS SPENDING WHEN THE NEXT CRASH COMES. AND THAT COULD BE ON
THE HORIZON.
Copper – used in all construction – is down on demand and so is
oil.
I believe the MIW knows the dark clouds are gathering very fast
on the horizon. THEY ARE DESPERATE TO HOLD THE ELECTION POST THE
YOUTH OLYMPIC BEFORE THE NEXT CRASH COMES.
THAT IS WHY WE SEE
- restoration of pay and bonus for civil servant – double barrel
and extended over time months for reminder impact from June to
July
- GST credit in july
- restructuring hot sensitive TH’s top management structure to
look good that something serious is being done to improve its
performance and strategic direction etc in August.
- all the good news vibes to hide all the negatives
- sudden die-off of talk on migration influx and housing
inflation.
THE SIGNS ARE NOT GOOD FOR SINGAPOREANS AHEAD. THE MIW IS
PANICKING.
ANYONE DISAGREEING???
Jane Doe
