US
storm
Slams into Singapore
Force bigger than most other countries because of city's premier
status as a world financial centre; citizens
hardest hit. By Seah Chiang Nee.
Sep 20, 2008
"MY
PARENTS have been affected by my failure - my heavy losses in the
stock market during the past year. Every night I am having
nightmares,” one trader recently wrote.
His
S$30,000 savings meant to be a deposit for a flat evaporated during
the downturn, particularly in recent weeks when shares went into a
tailspin.
“My loss
is beyond my means, it is very painful and I don’t know what my
future is,” said the lower-middle-class bachelor.
“I had to
strive to rebuild my life or else I would have committed
suicide.”
He is one
of a growing number of people here who are hard hit by the current
US banking meltdown, which has reached Singapore.
At the
same time, hundreds of anxious insurance holders have been flocking
to the head-office of AIA branch in Singapore to check on their
policies after hearing news that its US parent company, AIG was
facing bankruptcy.
They
wanted to cancel their policies, even if it meant losing in
investment and coverage. That the US government is providing
US$85bil bailout to AIG did not stop the crowd.
The
Monetary Authority of Singapore has appealed for calm among holders
of its two million policies.
It also
acted to protect customers of another US institution, Lehman
Brothers, which declared bankruptcy by curtailing its operations
here. It cannot remit funds to third parties without
approval.
These days
being a world banking hub is beginning to look like a great idea
turned sour for Singapore, particularly its investment in foreign
banks, as the citizens are finding out.
The US
meltdown is hitting this financial centre like a tonne of bricks at
a time when it is already in the midst of an economic slowdown and
super-high inflation.
To be
sure, the years of excesses of Wall Street have not been allowed to
intrude into the financial district in Shenton Way, which remains
tightly-regulated. The impact, however, is touching the lives of
many people.
“The
trouble is it’s all imported; no Singaporean bank is a casualty,”
said an official.
Some
Singaporeans are, of course, hit worse than others, but
collectively the damage is far more serious here than in other
cities in the region.
Ironically, it is due
to success in becoming a wealthy financial centre.
The
world’s top banks and brokerages have set up their regional offices
here. Now their future remains under a cloud.
And when
world banking is in turmoil, Singapore’s economy is shaken
up.
This
sector will go through a general lull, if not decline, which will
result in an exodus of foreign executives.
Lehman
Brothers’ operations in Singapore came to a halt on Monday, a day
after it went into bankruptcy. The jobs of its 270 staff members
may disappear.
This, and
the bailout of AIG and other large US corporations, are sending
shock waves throughout the financial industry.
The many
professionals in Singapore - foreigners and Singaporeans - are
deeply concerned about their jobs.
“It’s
quite worrying,” one executive told a TV reporter. “We don’t know
who will be the next target.”
Any exodus
of these highly-paid executives will aggravate an already poor
property market, especially in office and residential
rentals.
It may
retard Singapore’s growth as a banking hub, at least until
stability returns.
During the
past 10 years, it has made financial services one of its four
strategic pillars for growth.
Many of
its global investments are in Western and Asian banks, which have
set up operations here.
In
addition, tens of billions of Temasek Holdings and GIC (Government
Investment Corporation) money have gone into these
investments.
They
couldn’t have been worse timed. Their values have been
decimated.
For Mr and
Mrs Singapore, these are worrying times as the economic downturn
begins to bite.
The worst
appears to be the stock market, where many Singaporeans are
invested. The index shares have fallen by 30% in the past year, but
many other shares are down by as much as 50% to 60%.
Some life
savings have been wiped out. Tens of thousands are groaning under
the weight of large losses.
Other
recent headlines, which are dealing fresh blows to Singaporeans,
included the following:
He is one of a growing number of people here who are hard hit by
the current US banking meltdown, which has reached Singapore.
At the
same time, hundreds of anxious insurance holders have been flocking
to the head-office of AIA branch in Singapore to check on their
policies after hearing news that its US parent company, AIG was
facing bankruptcy.
* Government data confirms that high inflation is
eating into wage gains; average real earnings have fallen by 4%
between April and June;
* Private
home sales slumped 81% in August compared to a year ago, dropping
from 1,723 to 320 units (partly affected by the Chinese Hungry
Ghost Festival);
* Retail
sales fell for the first time in four months as car sales slumped
(by 8%) and consumers bought fewer luxury goods, mobile phones and
computers; and
* Despite
the price of oil falling by a third, the government controversially
raised buses and train fares by four cents (10 sen), adding to the
high inflation.
The US
crisis may trigger off a global recession, including
Singapore.
However,
the city has a protective shield: its large reserves of US$300bil
built up over the years and sound economic
fundamentals.
If not for
these, Singapore could be overwhelmed.
But the
ordinary people are a different story. With their real salaries
down, they are vulnerable to any sustained unemployment and the
relentless price increases.
With half
an eye on the 2011 election, the government is taking precautions.
It will change the laws to allow it to dip into investment returns
of the country’s reserves to offset rising costs of public
services.
It’s seen
as a positive move, but also one that serves as a warning that life
can get worse for the people.
(This
was published in The Star on Sept. 20,
2008)
http://littlespeck.com/content/econo...omy-080920.htm
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