Singapore dollar hits high against USD

For some it could mean cheaper raw materials, products

Jo-ann Huang

joannhuang@mediacorp.com.sg

SINGAPORE

On Friday, the Monetary Authority of Singapore (MAS) found the Singapore dollar trading at an all-time high against the United States dollar and at a level many analysts expected to trigger an intervention

by the central bank.

Traders said the SGD traded to as high as $1.3419 against the greenback before retracing to $1.347 later in line with strong rallies by other Asian currencies.

Journal

But it’s not all bad news.

Analysts say a weaker US dollar may signal investors are no longer fleeing to the US currency as a safe haven seen during the global economic crisis. For some Singapore firms and consumers, it could mean cheaper raw materials and products.

“We view this as a full retracement of the losses that we incurred during the global crisis, so in some sense you can view it as some form of closure,” Mr Philip Wee, currency research analyst at DBS, told MediaCorp.

But companies such as those from shipbuilding, oil and gas and technology which earn in US dollars may see their profits reduced by the falling US dollar.

Chief executive of the Singapore International Chamber of Commerce Phillip Overmyer said Singapore companies may move manufacturing operations to cheaper locations to mitigate the negative effects on export pricing.

“If the company employs a lot of labour, it costs more to retain labour in countries with stronger currencies,” said Mr Overmyer.

The export of newer products with higher value-add will remain in Singapore to realise higher profits from a stronger SGD, he said.

But CIMB Research economist Song Seng Wun said most companies would have hedged against currency movements. “With globalisation, more companies deal in a range of different currencies, so the impact of a higher SGD is quite marginal,” he said.

Mr Song pointed out that transportation companies such as SMRT, may find lower costs of fuel used to power their vehicles.

And with US planning to boost exports amid the falling US dollar, consumers here may see more American products on their supermarket shelves.

Analysts are divided on the direction of the US currency.

Some reckoned economic uncertainties in the US, such as unemployment and high structural debt levels should fuel further depreciation.

They added that Asia’s trade decoupling away from the US and Europe should drive the Singapore dollar.

Mr Song, however, is positive that the greenback could still hold its ground on the assumption that US economy is not about to tank but stabilising on the lower end of growth.

But for now, with the stronger currency, Ms Cecilia Jeyaram is looking forward to an enjoyable trip in the US during the year end.

“I should get more bang for my buck now that the Sing dollar has risen. I will definitely visit the money changer soon, in case rates start falling.” the college admissions officer said.— Four months ago, the Singapore central bank was signalling its willingness to let the Singapore dollar rise in a pre-emptive attempt to curb inflation here.The Wall Streetreported that the MAS intervened for the first time since it formally targeted a gradual rise in its currency in April but several analysts quoted by other news agencies reported they didn’t detect any intervention.

THAI  GOVERNMENT   VERY  DEMOCRATIC  ? ? ? ?

THAI  DEMOCRACY ? ? ? ?

Thaksin, who lives abroad to escape a jail term for corruption but remains an influential and divisive figure back home, sued the pair via lawyers in Thailand. He appeared to be in Africa last week, where he said he was dealing in diamonds and visiting Nobel Peace Prize laureate Nelson Mandela.— A Thai court convicted two prominent members of the royalist Yellow Shirt protest movement yesterday of defaming fugitive former Premier Thaksin Shinawatra by accusing him of insulting the monarchy.

S’pore population grew 1.8% to 5.08 million

Singapore’s total population grew 1.8 per cent to 5.08 million as at end June, the Department of Statistics said in its first release from the 2010 Population Census.

According to the department, Singapore registered a lower population growth due to the slower growth in the number of permanent residents and non-residents.

The number of permanent residents grew by 1.5 per cent, down from at least 6 per cent growth annually between 2005 and last year.

Growth in the number of non-residents slowed to 4.1 per cent, down from the peak of 19 per cent in 2008. The number of citizens increased by 0.9 per cent  between last year and this year.

The Chinese formed 74 per cent of the population, while the Malays and Indians took up 13 per cent and 9.2 per cent.

Doublle-barrell stIImulus for Japan

Government announces $14.7 billion fiscal package while central bank expands loan programme

TOKYO

The stimulus package will be financed by reserve funds, Prime Minister Naoto Kan said, but he added that the government would consider compiling an additional budget if necessary. Final approval is expected on Sept 10, with implementation later in the month.

“We decided on the basic plan comprising employment, investment, education and regulatory reform ...

[#### every presIdent / PM is dOIng the SAME  thIng ? 

gOIng  One  rOund the wOrld  lIke  musIcal chaIr  aLL are back tO SAME  SQUARE  ONE ? ? ? ? ####] 

We decided on the swift stimulus, using ¥920 billion of reserve funds,” Mr Kan said.

The announcement followed the Bank of Japan’s (BoJ) move earlier in the day to expand a multi-billion-dollar loan programme in a bid to spur lending. The central bank unveiled a new six-month low interest scheme worth ¥10 trillion to financial institutions.

Combined with an existing three-month scheme worth ¥20 trillion, banks will now have access to a total of ¥30 trillion. The BoJ also kept its key interest rate at a super-low 0.1 per cent at the emergency meeting yesterday.

The BoJ stood ready to take more actIIon if necessary, governor Masaaki Shirakawa said.

Japan remains under pressure to safeguard its fragile recovery, with weak gross domestic product growth of an annualised 0.4 per cent in the second quarter pointing to a slowdown.

Dreary consumer price data last Friday cast a darker shadow over the government’s goal of ending deflation in the fiscal year starting April 2011. Core consumer prices eased 1.1 per cent in July, the 17th consecutive monthly fall.

The yen last week surged to a 15-year high of 83.60 against the US dollar, hammering the export sector that is driving Japan’s recovery from recession.

Late yesterday in Tokyo, the greenback was at 85.12.

The Nikkei 225 Stock Average rose 1.8 per cent yesterday to 9,149.26, following the 1.7 per cent rise in the Dow Jones Industrial Average on Friday.— Japan yesterday announced plans for a “swift” fiscal stimulus package worth ¥920 billion ($14.7 billion) to safeguard a fragile recovery and curb the impact of a strong yen.

AGENCIES

Mr Wen met the Japanese delegation yesterday. AP

Mr Kan also renewed pressure on the central bank to take additional monetary easing  measures. AFP

Whether PAP stays in power depends on talent pool: Dr Balakrishnan

Whether PAP stays in power depends on talent pool: Dr Balakrishnan

 

Dr Vivian Balakrishnan

SINGAPORE : Community Development, Youth and Sports Minister Vivian Balakrishnan has said whether the ruling People’s Action Party (PAP) stays in power depends on which party can attract, nurture and grow its talent pool.

This was one key point Dr Balakrishnan highlighted at a dialogue session with students.

About 250 students attended the inaugural Singaporeans in Conversation 2010. The theme was

"The Singaporean Dream versus The Singapore Reality".

Some shared their concerns about the education system, such as the chase for top grades. But issues on the political arena dominated the two—hour session.

One student said: "Many people think the civil service is not independent of the governing party which should not be the case, because in the future, should the PAP no longer be in power, what is going to happen to the civil service?"

Others also wanted to know if the government has monopolised talent.

Dr Balakrishnan said he does not believe that the future of Singapore purely depends on political leaders, but the talented people from the different components of society.

He said: "I make no apology for trying to grab all talent available. Ultimately, whether the PAP stays in power or not depends on which party can attract, nurture and grow that talent pool, and offer that talent pool to the people of Singapore to decide.

"We are trying to run an honest political system that is based on integrity and talent and that will reflect the will of the people and that will do long—term good for the people."

Prior to the event, the organising committee set up a Facebook page. And discussion boards there also sparked lively debates over issues like whether the job expectations of youths today are reasonable and how Singapore preserves her heritage.

The topic of voicing opinions and criticisms through online platforms was also raised.

A participant said: "The Internet has started to be dominated by one kind of very vocal minority, but is increasingly very influential."

Dr Balakrishnan said the approach is to encourage more genuine participation.

He said: "It is not which channels — it is what is your motivation. Motivation is so important. When I listen to someone, it is not just what he or she says, but at the back of my mind, I am always asking why is he or she saying that or why is he or she so angry or so happy.

"That is the more important question and I always try to operate with that question at the back of my mind."

Dr Balakrishnan said what is important are sensible, logical and reasonable discussions of the issues and points of disagreement.

Dr Balakrishnan also shared with the students that after nine years as a politician, he feels that politics is not about a debating society, but one where the livelihood, security and long—term future of its people remain key fundamentals of any political system.

He said: "We are not perfect and we are still evolving, but understand that we are now at the point of actually considerable success, and it would be silly of us to dismiss all that, and to ignore all the considerable achievements we Singaporeans have made as a democratic society, as encapsulated in our pledge.

"So I do not say that as a matter of arrogance but as a plea for a realistic assessment of what we are at." — CNA/ms

Thai economy grows 9.1%

BANGKOK

Gross domestic product (GDP) expanded for a third straight quarter compared with a year earlier, but at a slower pace than the breakneck growth of 12 per cent seen in January to March, the government said.

On a seasonally adjusted basis, GDP expanded 0.2 per cent in April to June from the previous quarter, after a 3.3-per-cent rise in January to March, according to the National Economic and Social Development Board.

The better-than-expected second-quarter result was largely thanks to overseas demand for Thai-made goods, such as cars.

The country is striving to become a regional hub for automobile production, with foreign makers such as Toyota operating factories in the kingdom.

Exports soared 41.8 per cent in the second quarter of 2010 in US dollar terms, on the back of a global economic recovery, while household spending expanded by a robust 6.5 per cent as consumers splurged on cars and electrical goods.

Speculation is now growing that the Bank of Thailand may lift official borrowing costs for a second straight month when policymakers meet tomorrow. — The Thai economy grew 9.1 per cent year-on-year in the second quarter of 2010 as strong exports cushioned the blow from violent street protests that hit the key tourism sector, data showed yesterday.AFP

Japan PM, BOJ governor discuss yen strength but not intervention — Prime Minister Naoto Kan and Bank of Japan governor Masaaki Shirakawa spoke by phone yesterday to discuss the economic impact of a strong yen, officials said, but they did not discuss possible intervention.AFP

TOKYO

Markets had anticipated stronger government pressure on the central bank to do more to lift the economy, such as further monetary easing, but no proposals were announced following the conversation.

Instead the yen rose, with the conversation taken as a signal that Tokyo would refrain from monetary easing for the time being. The US dollar stood at ¥85.32 during Tokyo afternoon trade, falling from ¥85.63 in New York last Friday.

The Nikkei Stock Index fell 0.68 per cent to 9,116.69, its lowest close since Nov 27.

Speculation had mounted over the past week that the pair would meet to discuss the recent strength of the yen, as government officials attempted to talk the currency's strength down through so-called “verbal” intervention.

However, Mr Kan and Mr Shirakawa yesterday “exchanged views on the economic and financial situation including foreign exchange moves”,

Chief Cabinet Secretary Yoshito Sengoku told reporters.

The safe-haven yen has strengthened beyond levels assumed earlier by many exporters, who stand to lose from its rise.

For every one-yen rise in the currency's value against the US dollar, companies can lose tens of billions of yen earned overseas when repatriated, threatening a sector that Japan depends on to offset its weak domestic picture.

Mr Sengoku said the government had not yet seen any reason to comment on recent foreign exchange rates, while hinting that Mr Kan was ready to hold a meeting with Mr Shirakawa again if necessary.

However, some players question what Japanese authorities can achieve at current exchange levels given the unlikelihood of approval from trade partners such as the United States and recent pressure on China to let its currency float freely.

Watch what they do,

not what they say

It was not suicide, she says

Thai expert convinced political aide did not jump but does not assert it is homicide

KUALA LUMPUR

Dr Porntip testified at an inquest into Teoh’s death that the absence of fractures to both wrists and one ankle, which would indicate an attempt to break the fall, suggested Mr Teoh may not have been conscious when he plunged from the building.

There were also injuries to the neck that she believed could not have been caused by a fall and which suggested that the flow of oxygen to his brain was interrupted for several minutes before his death.

Dr Porntip declined, however, to repeat her previous assertion that Mr Teoh’s death was 80 per cent a homicide.

Mr Teoh’s body was found in July last year beneath the Malaysian Anti-Corruption Commission (MACC) tower, where he had been questioned into the early hours as part of a probe into the opposition-led government of Selangor state.

Dr Porntip faced relentless questioning about her qualifications by lawyers from the MACC following her testimony.

When lawyer Razak Musa raised questions about her credibility, the pathologist replied: “You have to understand. I work for the rights of the dead, not the Selangor government.”

The same lawyer also suggested she was attacking the MACC with her testimony, which led her to tell the court that her university was among the top five in Asia.

Dr Porntip’s testimony came just days after a purported “suicide note” came to light more than a year after Mr Teoh’s demise.

The Attorney General’s office said the police investigating officer who found the note explained he did not realise at first its significance because it was partly written in Chinese characters.

The Bar Council has called for a Royal Commission of Enquiry into the death, saying that “the suppression of evidence, particularly in such a high-profile matter, is disturbing, regardless of the reason”.

AGENCIES— Renowned Thai pathologist Porntip Rojanasunan told the Coroner’s Court yesterday she was sure that Malaysian political aide Teoh Beng Hock, who plunged to his death from the offices of the anti-corruption watchdog, did not commit suicide.

China swallows Obama’s stimulus for the US 

The global economy is like Fried ice- cream:BLOOMBERG

The writer is an independent economist based in Shanghai and was formerly Morgan Stanley’s chief economist for the Asia-Pacific region. The opinions expressed are his own.

If you don’t act FAST, it turns into a mess.

American pundits, Nobel laureates included, are predicting Japan-style deflation for the United States and Europe. They are urging the Federal Reserve to pursue another round of quantitative easing to stop the onset of an Ice Age for Western economies. The Fed didn’t oblige at its last meeting but it threw a bone to the deflation crowd by promising not to pull money out of its previous round of asset purchases to stimulate a recovery.

On the other side of the world, consumer prices are surging. Emerging markets as a whole now have an inflation rate of more than 5 per cent. India is registering price increases of more than 13 per cent. China’s are more than 3 per cent. But it surely feels a lot higher for average Chinese.

Much of the “heat” comes from the property market in emerging markets. Million-dollar flats in Mumbai have panoramic views of the city’s slums. Hong Kong’s real estate prices have almost reclaimed their 1997 peak, though the economy has barely grown since then in per-capita terms. Overpaid bankers who pay 15 per cent income tax in Hong Kong are stretched to buy Beijing or Shanghai properties.

The emerging markets are on FIRE.

Deflation prophets in the West are in for a rude awakening. Eastern fire will turn Western ice into a mess, and 2012 looks like it will be the year of melting. The fuel for the fire is coming from deflation-fighting stimulus programmes, such as that of US President Barack Obama.

Stimulus is prescribed as a panacea for recession. In today’s global economy, it isn’t effective in the best of circumstances and is outright wrong for what ails the West now.

Trade and foreign direct investment total half of global GDP. Multinational corporations drive both. They shop around the world for the lowest-cost production centres and ship goods to wherever the demand is.

Demand and supply are dislocated.

So when a government introduces stimulus, the initial increase in demand doesn’t necessarily boost local supply. More importantly, if multinationals decide to invest somewhere else, there wouldn’t be an increase in jobs to sustain the growth in demand beyond the stimulus.

Just as water flows down, stimulus affects low-cost economies more, wherever it is initiated. As the West pours money into the global economy through large fiscal deficits or central banks expanding balance sheets, the emerging economies are drowning in excess liquidity. Everything is turning red-hot.

How will this all end?

Ideally, before inflation takes hold in the US and Europe, the costs in emerging economies will rise high enough for multinationals to invest and hire in the West again. I wouldn’t count on that.

The average wage in the developed economies is 10 times that in emerging markets.

There are five people in the latter for one in the former.

A more likely scenario is that the West will have to stop stimulus programmes when inflation spreads to it from the emerging economies. The most immediate channel is through rising commodity prices. It’s a tax on the West to benefit emerging economies that produce raw materials. That’s the irony:

The stimulus in the West can immediately bring harm to itself. It’s also the magic of globalisation.

The prices of imported consumer goods will rise with increasing labour costs in emerging economies. China’s nominal GDP is growing at about 20 per cent per year. The odds are that its labour costs will surge as its worker shortage bites.

Lastly, labour in the West will demand wage increases to compensate for current and future inflation. One may argue that high unemployment rates will keep wages in check. THINK agaIn. In the 1970s, the US suffered a wage-price surge even with high unemployment because workers saw through the Fed’s “growth first and inflation be damned” intention.

In 2012, the Fed will run out of excuses not to raise interest rates.

As the excess liquidity in the global economy will be gigantic by then, the tightening will probably trigger a global crisis as asset bubbles burst.

What really ails the West is declining competitiveness.

Globalisation is pitting the Wangs in China or Gandhis in India against the Smiths in the US or Gonzalezes in Spain.

Multinationals decide on whom to hire.

The Wangs and the Gandhis offer productivity but have little money. So they are willing to accept low wages to accumulate wealth.

The Smiths and the Gonzalezes have wealth and won’t accept Third World wages. When their governments give them money to spend, their demand just makes the Wangs and the Gandhis richer and themselves poorer with rising national debt.

The West must wait for the Wangs and the Gandhis to become rich enough so that they demand Western wages and spend like the Smiths and Gonzalezes. It is a long and painful process for the West. And there is no way around it.

Beijing cuts holdings of US Treasuries by $32b

WASHINGTON

China’s holdings of US Treasuries fell by US$24 billion ($32.5 billion) to US$843.7 billion in June, a decline of 2.7 per cent, the US Treasury Department said yesterday in a monthly report.

China is the largest foreign holder of Treasuries. The June decline followed a US$32.5 billion drop in May. There are concerns that China could influence US interest rates by rapidly selling off its Treasury holdings, a move that could lead others to dump the securities and result in a spike in interest rates.

The debt figures are being closely watched at a time when the US government is running up record annual deficits.

Higher yields would mean the US government paying more interest on its US$13.3 trillion national debt and this would then ripple through the economy.

Consumer loans such as home mortgages and car loans track the yields on Treasuries, so they could rise, too.

But thus far, interest rates in the US have remained extremely low.

A weak economy has depressed borrowing by the private sector and the Federal Reserve has kept a key interest rate at a record low level of zero to 0.25 per cent in an effort to spur growth.

— China has continued to slash its holdings of United States government debt, adding to concerns that US interest rates would shoot up as foreign demand fell.AGENCIES