Some savvy developers, analysts see opportunity in privatisation targets and undervalued stocks

IT’S not just shares that have fallen from favour over the past month. Sentiment in the residential property market has also cooled noticeably.

One sign came just last week when the top offer for a residential site at Upper Serangoon Road went at well below the winning bid for a nearby plot sold only three months earlier.

Still, while analysts expect private residential prices to drift slightly lower, nobody is anticipating the stomach-churning wild swings that have become the new normal in the stock market.

Developers are fairly sanguine too.

Mr Kwek Leng Beng, the boss of property giant City Developments, was quoted last month as saying that he believed ‘the (property) market will not crash unless, of course, the worldwide scenario is so bad’.

But this has not been the case so far. Mr Kwek noted that the debt crises in the United States and Europe would not have much of an impact here unless interest rates go through the roof. But at the moment, the market is full of liquidity and there is a lack of alternative investments.

But he added that sentiment plays an important role too.

‘That is human nature. Just like property, the higher property prices go up, the more you want to buy, I guarantee you. The lower it goes, the more scared you are,’ he said.

So it is not surprising to find analysts still willing to stick out their necks to make ‘buy’ calls on property counters, despite the stock market gloom.

For example, CLSA analysts Pang Chin Hong and Wong Yew Kiang noted in a report last Monday that property stocks ‘have priced in a significant downside after the recent market sell-down’.

‘Value has emerged with property prices trading at 40-60 per cent discount to revalued net asset value.

‘This has defied the sound fundamentals of developers which have strong balance sheets, earnings visibility from high unbilled sales and low inventory levels,’ they added.

They were convinced that while developers might be less aggressive in their land bidding going forward, sites near MRT stations or those with commercial potential would continue to attract a large number of offers.

Despite the bullishness of developers and analysts, there is no denying that any share market plunge would cast a pall over the property market.

This has prompted some market strategists to go through past data to try to determine the likely flash-points before they occur.

In a report last week, UBS strategist Tan Min Lan examined the Straits Times Index’s trading patterns during the four recessions over the past 15 years.

Based on past trends, she believed that once the STI’s decline from its peak hits 20 per cent, the private property price index could start to show a decline as well.

Ms Tan said: ‘This happened in 1998 and again in 2009. If this repeats itself, we expect the URA property index to start falling if the STI were to slip to 2,500 and below.’

If STI falls to 2,500, the market is flagging a recession, while in the unlikely event that it falls to 2,000, the market is anticipating a financial crisis, she added.

Last Friday, the STI closed at 2,846, or 13 per cent above the 2,500 support.

In any case, property consultants are hopeful that the Government will cushion a sudden softening in property prices by removing some of the anti-speculation curbs imposed in January this year to cool the market.

These included hiking the seller’s stamp duty to as high as 16 per cent and making it payable for up to four years from the date of purchase of a property.

The heavy sell-off in the stock market has also made property stocks more attractive than, say, investing in a condo.

Given the steep plunge in stock prices, some are hopeful that other real estate bosses will follow in the footsteps of sugar king Robert Kuok, who took Allgreen Properties private by buying out the remaining minority shareholders.

They were also heartened by the determination of some developers to defend their badly hammered shares from further bear raids by launching share buybacks.

Take property giant CapitaLand.

Although its management told analysts last month that share buybacks were unlikely, the company ventured into the market on Tuesday to snap up 1.5 million of its own shares in deals worth $3.65 million. It was the firm’s first buyback.

The move propelled its share price up 10.2 per cent over the next two days, raising its market value by $1.1 billion.

It has not escaped the attention of investors that some cash-rich developers are using the depressed stock market conditions to expand their business.

One example is UOL Group which is described by UBS as a developer that has the financial strength to ‘acquire opportunistically’ because 80 per cent of its residential properties have already been pre-sold.

‘Over the medium term, UOL could obtain statutory control of United Industrial Corporation (UIC) in which it and related parties have a 47.6 per cent stake.

‘Crossing the 50 per cent barrier would make UOL the second-largest developer in Singapore by assets,’ UBS said.

This is reflected by the purchases of UIC shares by UOL on the open market, it added.

It is clear from these corporate actions that even while the fear of financial Armageddon is keeping most investors sidelined, savvy developers are sniffing opportunities and making hay while it lasts.

Source: Straits Times, 12th Sept 2011

THE strengthening Singapore dollar has made the Republic one of the most expensive countries to live in, according to a UBS report on wages and prices.

The latest update from UBS’ cost of living survey has also ranked Singapore lower for wages and purchasing power parity.

The report, which compiled data on wages and prices in 73 major cities around the world, is an exercise UBS undertakes every three years to measure global prices, wages, working hours and purchasing power.

This latest report is an updated edition of the one published in 2009, factoring in changes to the exchange rates.

The original Earnings and Prices report generated a cloud of controversy then by saying that Singaporeans were paid lowly and did not have much purchasing power.

It was criticised by local academics and Members of Parliament here for being inaccurate and making false assumptions while understating wage levels and overstating price levels.

According to the latest report, the rising Sing dollar has caused Singapore to shoot up from its 24th spot in the original 2009 report to become the 10th most expensive city in which to live.

The updated version also saw Singapore ranked 42nd out of 73 cities in terms of gross wage levels, and found that Singaporeans earn only 36 per cent of what New Yorkers do. It was ranked 40th in 2009.

However, the report noted that take-home pay here – after taxes and deductions for social security schemes – is slightly higher, at about 42 per cent of New York’s.

In terms of purchasing power, Singapore was ranked 47th, up from the 50th in the original report.

UBS noted that the Sing dollar has risen by some 10 per cent against the US dollar over the last two years, although it has fallen 3 per cent against the euro.

Commenting on the report, Lee Kuan Yew School of Public Policy’s Associate Professor Tan Khee Giap said it uses a common European basket of goods and services – which includes items like steak, frozen pizza and evening theatre tickets – to reflect costs of living across all cities.

‘The report also assumed that professionals formed just a small percentage of the working population rather than 52 per cent. These inaccuracies call into question the report’s finding,’ said Prof Tan, who is also the co-director of the Asia Competitiveness Institute.

Source: Straits Times, 18th Aug 2011

May prices rise at same pace as April’s; economists see no change in MAS policy

INFLATION came in higher than expected last month but is still below the peak levels seen earlier in the year.

The Consumer Price Index (CPI) rose 4.5 per cent in May over the same period last year – that is the same rate as April’s – but well under January’s 5.5 per cent jump when prices were likely to have peaked.

The main contributors to May’s price rises were housing, transport and food. Housing costs rose by 8.1 per cent year-on-year due to pricier accommodation and electricity tariffs.

Higher car and petrol prices led to a 7.5 per cent gain in transport costs while food prices went up 2.8 per cent. Communications was the only component lower, with prices dipping 0.3 per cent.

On a month-on-month basis, May prices rose 0.6 per cent over April, according to the Department of Statistics (DOS) yesterday.

Housing costs increased by 3.1 per cent from April, largely because rebates for service and conservancy charges were given out in that month but not in May, said the DOS.

Housing was the only component to record price rises from April to May but these were partly offset by lower transport and clothing and footwear costs.

UOB economist Chow Penn Nee tips inflation to continue easing in the coming months although it is unlikely to come off as quickly as forecasted.

Inflation pressure is coming from a rebound in certificates of entitlement (COE) prices and possibly higher food costs.

‘Domestic wage pressures from the tight labour market should also add to higher cost pressures,’ added Ms Chow.

Most economists believe that the Monetary Authority of Singapore (MAS) will stick to its currency policy stance when it meets in October.

With headline inflation expected to ease and global growth predicted to slow, the central bank is unlikely to adjust its strategy, they said.

DBS economist Irvin Seah said: ‘Inflation is expected to be on a downward crawl after peaking in January this year… And with inflation likely to ease and downside risks to growth still a concern, the probability of another round of tightening has reduced significantly.’

But others say that high headline inflation – it remains above the historical average of 2 per cent – coupled with a tight labour market and rising wages will keep the chances of tightening alive.

Unemployment fell to 1.9 per cent in the first three months of the year – its lowest level in three years and down from 2.2 per cent in the final three months of last year.

Barclays Capital economist Leong Wai Ho said that extreme weather in China and Europe has increased the risk of higher raw food prices in the second half of the year.

‘Also, with job creation likely to remain brisk, services costs are still biased upwards… Against the backdrop of upside risks to inflation but moderating growth, we believe the current gradual appreciation stance will be maintained in October,’ he added.

Another indicator, the MAS core inflation measure – which excludes accommodation and transport costs to give a better picture of out-of-pocket cash costs for consumers – rose 2.1 per cent last month from last year.

Credit Suisse economist Robert Prior-Wandesforde said that while the Government is likely to take some comfort from the drop, it cannot afford to relax.

‘After all, the combination of strongly rising wage growth and strengthening consumer demand is usually not a particularly good one for underlying price pressures,’ he said.

The MAS expects full-year inflation to average between 3 per cent and 4 per cent, with the monthly CPI falling towards 3 per cent as the year-end nears.

Source: Straits Times, 24th June 2011

Price increases likely to have peaked but risks remain, say analysts

INFLATION grew at its slowest pace in five months in April and fell under 5 per cent for the first time this year, prompting economists to tip that prices have peaked.

The monthly Consumer Price Index (CPI) rose 4.5 per cent last month over April last year and is now a full percentage point lower than the 5.5 per cent jump recorded in January.

On a month-to-month basis, April prices rose 0.3 per cent over March, according to the Department of Statistics yesterday.

Citigroup economist Kit Wei Zheng said: ‘The figure confirms that headline inflation has peaked and we expect inflation to moderate for the rest of the year.’

But inflation risks will still be around, said HSBC economist Leif Eskesen.

‘Underlying… pressures coming from food and fuel, as well as… from tight capacity are not likely to disappear any time soon,’ he said.

The main contributors to inflation last month were food, transport and housing costs, although only food price inflation actually increased in pace.

Food prices rose 2.6 per cent in March over the same period last year while they were up 2.9 per cent last month against a year earlier.

Higher salaries for maids also contributed to the ‘recreation and others’ component, which accelerated from 1.1 per cent in March to 1.3 per cent in April year-on-year.

Economists expect inflation to ease further in the following months owing to a high base last year as well as policy measures aimed at reducing transport and housing costs.

Bank of America Merrill Lynch economist Chua Hak Bin said utilities and service and conservancy rebates will lower housing costs in certain months.

Monetary Authority of Singapore (MAS) managing director Ravi Menon said last week inflation had likely peaked.

The central bank expects full-year inflation to average between 3 per cent and 4 per cent, with the monthly CPI falling to about 3 per cent towards the end of the year.

However, while CPI inflation looks to be moderating, another measure of inflation, core inflation – which excludes accommodation and transport costs to give a better picture of out-of-pocket cash costs for consumers – rose 2.2 per cent last month from last year.

This has left economists still divided on whether the MAS will tweak its monetary policy to allow for a weaker Singdollar, or if it will stick to its current policy of letting the currency appreciate, in its October meeting.

A stronger Singdollar helps lessen the cost of more expensive imported food and fuel but also makes exports pricier and less competitive.

Barclays Capital economist Leong Wai Ho said core inflation rose 0.72 per cent from March to last month on a seasonally adjusted basis, which was much higher than the 0.28 per cent rise in March over February.

There are also chances that the price of raw food could go back up again given some extreme weather in China and Europe, Mr Leong said.

However economists believe wage costs may be the main driving force behind inflation in the coming months due to a tight labour market that is unlikely to be eased through an influx of foreign workers.

Credit Suisse economist Robert Prior-Wandesforde said: ‘With the labour market as tight as it is, the central bank can’t afford to relax.’

Source: Straits Times, 24th May 2011

Ceiling for first-timers buying new flats could be raised to $10,000

Mr Mah chatting with Tampines residents last week. His announcement of the timeframe for the review yesterday follows a hint by PM Lee on Monday that couples in the middle-income group could get some relief from the Government’s review of the income ceiling. — ST PHOTO: JOYCE FANG

THE income ceiling for buying new HDB flats – unchanged for the past 17 years for first-timers – is set to be reviewed in the next six months, said National Development Minister Mah Bow Tan.

He said the ceiling could be raised from the current $8,000 to $10,000, though the actual level will be decided after the study.

If the ceiling is raised, it will be a stunning turnaround by Singapore’s policymakers, who, as recently as March, defended the ceiling as still relevant.

Mr Mah himself had said in Parliament that four in five households still qualify for public housing with the ceiling at $8,000.

‘Our budget is not limitless. Our subsidies are targeted to offer more help for the lower-income group,’ he said then.

His announcement of the timeframe for the review, made on the sidelines of his walkabout in Tampines Street 23 yesterday, follows a hint dropped by Prime Minister Lee Hsien Loong on Monday that couples in the middle-income group could get some relief from the Government’s review of the income ceiling.

A couple’s combined income now has to be below $8,000 a month for them to qualify to buy a new flat directly from the Housing Board, which is typically 20 to 30 per cent cheaper than a market-rate resale flat.

Those who go for resale flats from the open market receive a housing grant of up to $40,000 if their joint monthly income is below $8,000. It is unclear whether the review will also look at the income ceiling for this housing grant.

Calls have been getting louder for the ceiling to be raised, as couples bust the ceiling soon after joining the workforce and become barred from buying flats from the HDB or getting the grant.

At the same time, they say they are unable to afford resale flats or private property, prices of which have been on a bull run in recent years.

Mr Mah, who is leading the People’s Action Party team’s bid for re-election in Tampines GRC, yesterday acknowledged that the recent National Wages Council’s recommendation for a rise in wages in tandem with economic conditions and a tight labour market means that the ‘urgency… to look at the ceiling is there’.

The minister said he has received ‘a lot of feedback’ on this from residents through block visits, e-mail and other ministers.

The message from the middle class is ‘Don’t forget about us. The Government has done a lot for the low-income … compared with the middle class’, he said.

So it is important for the Government to assure this group – also called the sandwich class, who have to look after their children and their parents – that they are taken care of, he added.

Mr Mah said that when the Government raised the income ceiling for the top-tier flats under HDB’s Design, Build and Sell Scheme from $8,000 to $10,000, it held back on raising that for new build-to-order flats because the market was still very hot then.

‘If we raise the income ceiling, more people will join the queue. So we decided to wait for a while, until the queue gets shorter, and more and more flats are rolled out,’ he said.

Market analysts that The Straits Times spoke to expressed surprise at the timing of the review, but agreed that it has been a long time coming.

Property agency PropNex chief executive Mohamed Ismail said: ‘Many in the industry have said it’s worth considering, as we have to factor in the increase in current prices and inflation.’

Dr Yu Shi Ming, who heads the National University of Singapore’s department of real estate, noted that Singaporeans are now getting married later, so they are likely to bust the income ceiling by the time they settle down.

It is ‘natural’ that this policy is reviewed, and it could also take the pressure off the HDB resale-flat market and stabilise prices, he said.

Aspiring first-time flat buyer Koh Wan Ping, 27, said the review is good news, but will not influence how she casts her vote in Pasir Ris-Punggol GRC.

Mr Jeffrey Chua, 30, is less sanguine. Having balloted for a flat – unsuccessfully – twice, he is expecting the income ceiling revision to put more people in the queue.

‘It may be harder for me to get that dream flat then. We’ll have to wait and see,’ he said.

Source: Straits Times, 4th May 2011

WAGES in Singapore have not stagnated over the last 10 years, contrary to what some opposition politicians have been saying, Finance Minister Tharman Shanmugaratnam said yesterday.

He revealed that low-income workers have enjoyed a significant boost in their pay over the last five years, while the typical worker in Singapore has seen a bigger jump in salary than those in developed countries.

Opposition parties, including the Workers’ Party, Singapore Democratic Party and Reform Party, have accused the Government of not doing enough to help those on the bottom rungs of the economic ladder, saying the wages of the lowest-income households have remained stagnant in recent years.

But that is not so, Mr Tharman said, giving figures to refute their statements.

He disclosed that the average income of a family in a three-room HDB flat rose 28 per cent between 2005 and last year.

Even after adjusting for inflation, real wages would have jumped 14 per cent, he said at the People’s Action Party’s (PAP) lunchtime rally. This is before taking into account Workfare top-ups or any special transfers by the Government.

For other Singaporeans, the median income grew 25 per cent over the last five years, or 10 per cent after inflation.

This was better than in Hong Kong, where real wages rose 4 per cent in the same period; South Korea, which had a 2 per cent increase; or Taiwan, where real incomes fell 3 per cent.

Still, the 10 per cent rise in Singapore ‘is not good enough, and in the next 10 years, we want 10 per cent to become 30 per cent’, Mr Tharman said.

He attributed the increase in salaries to two factors: more jobs being created and wages as a whole moving up.

But he also acknowledged that ‘there are those who have not seen a wage increase’ and others whose wages have fallen, and that the Government must find the best way to help people ‘for whom day-to-day living is a real challenge’.

This can be achieved through ‘strategies that really grow our economy and keep it diversified’, said Mr Tharman.

The Government will help workers attain a ‘massive upgrade in skills in the next 10 years’, as well as keep redistributing resources to help the poor and middle-income groups more, he added.

‘We’ve got a sound revenue base, we’ve avoided debts and we’ve kept our reserves growing for the long term… That is how we must continue to run our economy and our policies for the next 10 years,’ Mr Tharman said.

‘Nothing is cast in stone, nothing perfect, but let’s keep centring our policies on raising living standards for all. And whatever we do, let’s avoid spending without the resources to sustain it, avoid spending that will lead to higher taxes.’

At yesterday’s rally in UOB Plaza, Mr Tharman also warned of the ‘very real risk of a setback in the global economy’.

‘Basically, the problems that led to the crisis are not over,’ he said.

‘The problems of excessive household debt, the problems of governments that have over-borrowed and the problems of banks that are themselves in a very fragile state are not over, and these problems will be with us for several years to come.’

New challenges – mainly of inflation and rising oil and commodity prices – have also emerged after the financial crisis, noted Mr Tharman.

‘No one can rule out a significant increase in oil and other commodity prices in the next year or two,’ he said.

‘And when you add that new risk to the old risks that are still with us, you have a world economy that is, as (World Bank president) Robert Zoellick said, one shock away from another major crisis.’

To top it all off, a new ‘fundamental challenge’ is emerging as China muscles its way into middle- and higher-value activities in manufacturing and services.

This means that it is not just the blue-collar manufacturing worker who is at risk, but also workers in white-collar jobs, Mr Tharman said.

‘China is progressing and behind China, you’ve got India, Brazil, some of the Eastern European economies are also catching up.

‘We can’t change that reality. We have to cope with it, adjust to it and find a way to thrive and prosper even with this challenge,’ he added.

Source: Straits Times, 4th May 2011

Many buy currency for investment or spending abroad as rate hits S$1.22

MONEY changer Rabi Ahamed used to get about 20 to 30 customers a day buying United States currency.

‘Recently, it has been about 50 to 60 people,’ he said, a result of many Singaporeans seeing dollars and sense in cashing in on the good exchange rate of the Singapore dollar against the greenback.

They are snapping up the US currency either for investment or for spending abroad.

Yesterday, the exchange rate was $1.22 for every US$1.

Last October, the Singdollar hit a then record high of $1.29, following the Monetary Authority of Singapore’s (MAS) decision to allow the local currency to appreciate, in order to combat rising inflation.

Then, just last month, the Singdollar was allowed to rise again, hitting $1.23 on April 22.

Economists said MAS’ policy moves could result in the Singdollar climbing to as high as $1.19 by the year end. Just a year ago, the exchange rate was about $1.37.

No wonder then, that Singaporeans are opening bank accounts in US dollars and accumulating the greenback.

With exchange rate hovering between $1.21 and $1.23, they are hoping they can buy low and sell high, reaping a tidy profit when the US dollar strengthens again.

In the past two weeks, money changers said they have been busy tending to more Singaporean customers loading up on US dollars.

Mr Rabi said the amounts bought ranged from US$500 to US$10,000.

Another money changer, Mr Mohamed Rafaak, 45, has also enjoyed brisk business in the last two weeks.

‘Based on what I can remember, this is the lowest exchange rate so far; it could go lower though,’ he said.

One investor is Mrs Florence Chin, 61, who is hoping that the greenback will rise again in two or three years’ time.

Last November, thinking that the exchange rate of $1.32 was low enough to trigger her investment move, she opened a US$10,000 foreign currency account with a bank.

‘I’m a bit annoyed because the US dollar keeps going down,’ said the retiree of its recent movements.

She has since bought another US$5,000 from money changers at rates of between $1.23 and $1.26.

The stronger Singdollar also means that online shoppers and those studying or travelling to the US can stretch their dollar further.

Exchange student Malcolm Koh, 22, said his parents had put more money into his Singapore bank account for him to access using his debit card.

‘Now that I’m running low on US dollars, it does seem more worth it to shop and travel using my Singapore account.’

The Nanyang Technological University (NTU) student is spending a semester at the University of Missouri-Columbia.

Another exchange student, Ms Lau Liang Tong, said the weak US dollar means that she can literally extract more mileage from her budget.

‘I did not plan to head to Las Vegas and the Grand Canyon, but since the rates have fallen, I thought it would be great to head to a few more places,’ said the 21-year-old NTU student, who is now at the University of Washington.

In Singapore, avid online shoppers are counting their savings too.

Public relations associate Jolin Ng took advantage of the weaker US dollar to buy a Balenciaga wallet for US$600.

The 23-year-old reckons that she saved at least $100 by buying it online.

Now that she has bagged a good deal, she does not intend to stop.

‘I will keep a lookout online, and if I see anything, I’ll just buy since the exchange rate is so low,’ she said.

Source: Straits Times, 3rd May 2011

Wages this year are expected to go up by more than last year’s increase, said labour chief Lim Swee Say yesterday, a day after the National Wages Council (NWC) released its recommendations for the year.

He also said that the total wage increase is likely to be higher than the inflation rate, which is estimated to hover at around 4 per cent overall.

Given the strong economy on the whole, he noted that ‘most companies are doing better… Therefore we are calling on companies, industries to grant higher total wage increase to the workers’.

The call comes on the back of the council’s key recommendations that workers be rewarded with higher wage increases this year, and that bosses consider a one-off special lump-sum payment to help employees better cope with the higher cost of living.

Finance Minister Tharman Shanmugaratnam, a People’s Action Party (PAP) candidate for Jurong GRC, also weighed in at a separate walkabout, saying: ‘We have had a good recovery. As in most recoveries, in fact wages tend to lag the recovery a little.

‘We have had a good increase last year, but I think we should get a good increase this year as well… This is a good year for a wage increase because businesses have done better. In fact, a whole strand of businesses and workers deserve it.’

Mr Lim, who moved from his Buona Vista ward to anchor the PAP’s East Coast GRC team, did not indicate what would be an adequate amount as ‘different industries face different situations’.

But at the release of the NWC’s recommendations on Friday, Singapore National Employers Federation president Stephen Lee told reporters that he too expects total wages this year to improve beyond last year’s 5.5 per cent.

Mr Lim was speaking at New Upper Changi Road, where he handed out stickers to food stalls which pledged to maintain their prices for at least six months.

He and team members Raymond Lim, Lee Yi Shyan, Maliki Osman and Jessica Tan had a packed schedule attending community events, in what was their first big day of campaigning together since Nomination Day.

Hundreds of residents turned up to meet and greet them at the various events. Mr Lim said people on the ground have been warm, supportive and encouraging.

At a carnival held at Bedok South, retiring Senior Minister S. Jayakumar said he was ‘very comfortable, satisfied and heartened’ with the response that Mr Lim and Dr Maliki – who moved from Sembawang GRC – were receiving.

Source: Straits Times, 1st May 2011

Total lending up 2.8% in March as economy rebounds

The building and construction sector notched up $55.9 billion in loans, a marginal 0.8 per cent rise from loans in the month before. — ST PHOTO: ALPHONSUS CHERN

SINGAPORE’S total bank lending rose 2.8 per cent last month to hit a record high, with business and consumer loans both increasing on the back of strong economic growth.

The total value of Singapore-dollar bank loans outstanding as of the end of last month was a record $343.4 billion, compared with $334.1 billion in February, according to statistics released yesterday by the Monetary Authority of Singapore.

‘Together with the unemployment rate coming down, the loans are another sign of the strength of the economy,’ said Action Economics economist David Cohen. ‘Singapore is benefiting from the strong regional economic performance. By all indications, that’s continued into the first quarter of this year.’

Singapore’s jobless rate fell to a three-year low of 1.9 per cent last month. In addition, recent flash estimates showed the economy grew a better-than-expected 8.5 per cent in the first quarter compared with growth in the same period last year. The economic growth was driven by a strong showing by the manufacturing sector.

Last month’s $343.4 billion in total bank loans also represented a 19.9 per cent jump from the $286.3 billion figure from a year earlier.

‘With year-on-year credit growth at 20 per cent, we are almost getting back to the best times in 2008,’ said Mr Cohen. ‘By most measures, we’re back in that territory.’

The last economic boom was in 2008, before the global financial crisis ravaged economies worldwide.

Last month, business lending grew 4.2 per cent from the previous month to $186.9 billion, stronger than the 2.3 per cent growth in February, as all the sub-categories took out more loans.

The building and construction sector notched up $55.9 billion in loans, a marginal 0.8 per cent rise from loans in the month before.

Lending to non-bank financial institutions rose 2.4 per cent to $41.1 billion, while lending to firms in general commerce rose 5.8 per cent to $35.3 billion.

Loans to manufacturers grew 16 per cent to $13.4 billion, an unsurprising result given the strong showing of that sector in the first quarter.

Firms in agriculture, mining and quarrying; transport, storage and communication and business services also took out more loans. There was also growth in loans to individuals for business purposes.

Total consumer loans grew as well, by 1.1 per cent to $156.5 billion. This was stronger than the 0.8 per cent growth in February.

The rise in consumer loans was driven by a 1.2 per cent jump in housing and bridging loans to $116.7 billion, from $115.2 billion in February. This came despite slower property price rises and lower sales volumes in the first quarter, after the Government introduced a tough round of cooling measures in January.

‘The demand for property loans continues to be strong,’ said Mr Cohen.

But some other components of consumer loans fell. Car loans taken out by professional and private individuals inched down by 0.2 per cent to $11.5 billion, while credit card loans fell 1 per cent to $6.7 billion and loans taken out for share financing fell 3.6 per cent to $1.3 billion.

Loans by professional and private individuals for other purposes fell 1.8 per cent to $20.2 billion.

Source: Straits Times, 30th April 2011

Central bank acts to curb inflation

Mr P. A. Mohamed, 58, of Majeed Money Changer counting Singapore dollars in his Ang Mo Kio shop. The Singdollar yesterday rose to a record $1.2452 against the US dollar but fell slightly to $1.2482 later in the day. — ST PHOTO: WANG HUI FEN

THE Singapore dollar hit another all-time high against the greenback yesterday, after the Monetary Authority of Singapore (MAS) announced a one-off hike in the domestic currency to combat strong inflation.

In its latest monetary policy review, which is conducted twice a year, the MAS said it had raised the band within which the Singdollar trades in the market.

This was less aggressive than recent MAS moves to strengthen the currency.

A stronger Singdollar makes imports cheaper, helping to mitigate the rising global prices of the many goods and services that Singapore imports.

Unlike in recent policy reviews, the MAS made no change to the width of the trading band – which gives the currency more or less freedom to fluctuate – or to its slope, which determines how rapidly the Singdollar appreciates.

The decision to move the whole band higher instead comes as the central bank warned that inflation is expected to stay elevated for most of this year, on the back of a bustling economy.

The Government said yesterday that the economy grew a better-than-expected 8.5 per cent in the first quarter, compared with the same period a year ago.

‘Economic activity is likely to be sustained at a high level for the rest of the year, even as the underlying growth momentum moderates,’ the MAS said.

It added that ‘domestic cost and price pressures will remain firm’ and inflation will moderate ‘only gradually’ to about 3 per cent towards the end of the year.

Inflation was 5.2 per cent in January and February and is likely to have peaked, Trade and Industry Minister Lim Hng Kiang said in Parliament on Monday.

For the whole year, inflation is expected to be at the higher end of the official forecast of 3 per cent to 4 per cent, the MAS said.

Core inflation, which excludes the largely non-cash cost of housing and the non-essential cost of cars, will be slightly lower at 2 per cent to 3 per cent, it added.

The lifting of the Singdollar band shows that the MAS has assessed inflation risks to be ‘more immediate than we had expected’, said Barclays Capital economist Leong Wai Ho.

DBS Bank economist Irvin Seah added that the decision to recentre the band, rather than changing its slope or width, signals that the MAS is tackling ‘transient inflationary pressure’ while trying not to undermine long-term growth.

However, economists noted that the central bank’s move to tighten policy was less aggressive than usual.

‘For such a strong first-quarter economic growth report, the MAS’ decision to upgrade the strength of its policy over the next six-month policy period is surprisingly gentle,’ said Royal Bank of Scotland economist Chia Woon Khien.

Typically, when the MAS performs a one-off shift of the Singdollar band, it moves the band all the way up to the level at which the currency is trading.

But yesterday, for the first time on record, it shifted the centre of the band only slightly upwards, letting it remain below the prevailing level of the Singdollar.

Economists estimate that the band was moved up by about 1 per cent to 1.5 per cent, effectively allowing the Singdollar to rise by that amount.

After the news was announced, the currency jumped to a record of $1.2452 against the US dollar, before weakening slightly to $1.2482 later in the day.

The MAS explained yesterday that it raised the band by a smaller amount than usual because it had already tightened monetary policy twice last year.

Those actions, which economists had described as exceptionally aggressive, ‘continue to have a restraining effect on the economy and prices’, the MAS said.

Inflation is being driven mainly by a recent sharp spike in the prices of certificates of entitlement (COE) for cars, as well as by rising housing costs. But the effect of these factors is likely to taper off as car and home prices stabilise this year.

In their place, however, other cost pressures are intensifying. Wages are up, as are oil and food prices.

Although higher wages have yet to translate into pricier services, this ‘pass-through’ could accelerate given the strong economy, the MAS said.

‘On the external front, global oil and food prices have increased and will remain high.’

Source: Straits Times, 15th April 2011