GIC ‘eyeing $3.2b stake in Brazilian bank’ — The Government of Singapore Investment Corp (GIC) is in talks to buy a 16-per-cent stake in Brazilian investment bank Banco BTG Pactual for US$2.4 billion ($3.2 billion), the Brazil-based Exame magazine reported on Friday, citing people familiar with the negotiations it did not name.Bloomberg, while spokespeople for BTG Pactual in Sao Paulo were not immediately available for comment.

SAO PAULO

GIC declined comment when contacted by

Banco BTG Pactual, controlled by billionaire Brazilian Andre Esteves, was created in 2009 after BTG took over UBS Pactual from the Swiss bank.

It is the largest independent investment bank in Latin America and has regional offices in key global financial capitals such as London and Hong Kong to leverage on its expertise in emerging markets.

The bank operates in the areas of investments, asset management and wealth management.

GIC already is the largest shareholder in Switzerland’s UBS and one of the biggest in United States’ Citigroup, with its stakes in the two banking giants estimated at some $12 billion at current market prices.

If it takes the stake in BTG, it will be spreading its multi-billion bets beyond Europe and North America into the South American market.

In  vIew  Of   rIsk  Of  near tOtal lOss

and   dIre  Of  near  zerO  Interest  rate

bEttEr  and  safEr  tO  depOsIt  In

GENTING  TWINS ?

REVERSE   ANNOUNCEMENT

TRUTH #### FACT

100% DEPOSIT GUARANTEE

REDUCED  TO

S$50,000  DEPOSIT INSURANCE

CLAIRE HUAN G

clairehuang@mediacorp.com.sg

SINGAPORE

Singapore started the scheme in April 2006 to protect ordinary depositors should a bank or finance company go under.

In a statement on Friday, the MAS said that it will go ahead with plans to raise insurance coverage from the current $20,000 to $50,000 for each depositor at each member bank.

That means if a depositor has at least $50,000 in a bank that folds, he would get back a maximum of $50,000 instead of $20,000.

The MAS said the move was made following public consultation. Members of the public had asked for a higher coverage of $100,000. However, it pointed out that the incremental benefit is small and may not justify the cost if the amount is over $50,000.

Some 90 per cent of depositors will be covered under the scheme.

The MAS also plans to include deposits of other non-bank depositors, such as sole proprietorships and partnerships, under the scheme.

It said it did consider insuring only certain types of businesses and excluding companies but this was not ideal. There was difficulty in setting a common criteria that applied to the diverse range of businesses.

The MAS hopes to implement the revised scheme early next year.— The Monetary Authority of Singapore (MAS) plans to enhance the Deposit Insurance (DI) Scheme, including raising the insurance coverage limit to $50,000 for the individual depositor.

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.

Mr Kenichi Hirano, operating officer at Tachibana SecuritiesAgencies— Japanese shares yesterday fell below the 9,000- point level for the first time since May last year on worries about the strong yen and the United States economy, with the headline Nikkei index ending down 1.3 per cent.. “We’re entering a bear market now.”

Is is time to   RE-look at  all my insurance policies?   How to get the most out of it?  Imagine, each of us paying "YEARS" for few policies and what have we gained from there?  

1) LIfe insruance policy - i can only claim when upon death

2) endowment fund - is going to due soon

3) medical - Dunno what i am paying, and , some got riders tagged to policies, some just ,medical/hospitalisation., only to realise i can

                   only claim from  ONE insurance company.

*$*$*$*$*$*$*$*

wIth  IncreasIng  Bank depOsIt  Interest  rates

[bOrrOwers at  hIgh  Interest rates are TRULY prOfitable and sUstaInable  bOrrOwers]

RetaIl  cOnsUmerIsm are  GrOwIng   due  tO IncreasIng  PurchasIng pOwer frOm  rIsIng  Interst IncOme 

as well as benefIts frOm  pOlIcy  drIven  sOnsUmptIOn  sUbsIdIes 

*$*$*$*$*$*$*$*

wIth  IncreasIng  Bank depOsIt  Interest  rates

[bOrrOwers at  hIgh  Interest rates are TRULY prOfitable and sUstaInable  bOrrOwers]

mOre  UPsIde  fOr  MALAYSIAN  BANKS

Bank Depositors  and  Insurance Policy Holders 

are at least  pOOrer  by  3.1%

S’pore inflation up 3.1%

Higher transport, housing and food costs

Mok Fei Fei

feifei@mediacorp.com.sg

SINGAPORE

According to data released by the Department of Statistics yesterday, cars and petrol were the main items contributing to the 10.7 per cent on-year spike in the cost of transport.

Housing cost also rose 2.7 per cent because of higher electricity tariffs and accommodation costs.

Compared to June, the CPI last month rose 1.3 per cent due to higher costs of housing, transport as well as clothing and footwear — the highest on-month prices increase so far this year.

DBS analyst Irvin Seah said rental costs and electricity tariffs are expected to push housing costs higher.

“We should, therefore, see inflation stay above 3 per cent for the rest of the year before falling to 2 per cent on weaker growth momentum in 2011,” he said.

Prices of clothing and footwear rose by 3.2 per cent on-month owing to more expensive ready-made items after the Great Singapore Sale period.

In the first seven months this year, the CPI moved up 2.1 per cent compared with the same period last year.

Excluding accommodation costs, prices rose 2.9 per cent during the same period.— Inflation in Singapore continued to rise last month with the consumer price index (CPI) increasing 3.1 per cent on-year, led by higher costs in transport, housing and food.

Cars and petrol were the main items contributing to the 10.7 per cent on-year spike in the cost of transport.

Department of Statistics

Japan PM, BOJ governor discuss yen strength but not intervention

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.

— 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

Sibor or SOR? Now you can have them both

Julie Quek

juliequek@mediacorp.com.sg

SINGAPORE

The bank claims it could reduce the anxiety of homeowners because the loan is pegged to at least two reference rates, unlike the banking norm in Singapore where home loans are usually pegged to only one.

Floating rate home loans are usually pegged to either the Singapore Interbank Offered Rate (Sibor) or the Swap Offer Rate (SOR).

Sibor is the rate at which banks in Singapore lend to one another, whereas SOR refers to the average cost of funds used by banks here for commercial lending.

As most housing loan interest rates track movements in the Sibor or SOR, this means that when the respective rates shift upwards or downwards, the interest rates of the home package will move in the same direction.

Analysts say that for homeowners buying properties over long-term periods, it is advisable to choose a loan with fixed rates or Sibor-pegged home package, as Sibor rates are known to be relatively more stable than SOR rates.

However, for home buyers with more aggressive risk appetite and who are investing over a shorter time horizon, they may consider the SORpegged packages at a time when the SOR rates are lower and more attractively-priced than Sibor rates.— ANZ Bank has launched a new floating rate home loan, believed to be the first of its kind here.

ANZ Bank offers unique floating rate mortgage

Watch what they do,

not what they say

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.