New Stock Market Terms

CEO --Chief Embezzlement Officer.

CFO-- Corporate Fraud Officer.

BULL MARKET -- A random market movement causing an investor to mistake himself for a financial genius.

BEAR MARKET -- A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex.

VALUE INVESTING -- The art of buying low and selling lower.

P/E RATIO -- The percentage of investors wetting their pants as the market keeps crashing.

BROKER -- What my broker has made me.

STANDARD & POOR -- Your life in a nutshell.

STOCK ANALYST -- Idiot who just downgraded your stock.

STOCK SPLIT -- When your ex-wife and her lawyer split your assets equally between themselves.

FINANCIAL PLANNER -- A guy whose phone has been disconnected.

MARKET CORRECTION -- The day after you buy stocks.

CASH FLOW -- The movement your money makes as it disappears down the toilet.

YAHOO -- What you yell after selling it to some poor sucker for $240 per share.

WINDOWS -- What you jump out of when you're the sucker who bought Yahoo @ $240 per share.

INSTITUTIONAL INVESTOR -- Past year investor who's now locked up in a nuthouse.

PROFIT -- An archaic word no longer in use.

.

Singapore (MAS) shifted to a neutral policy stance

Reprinted from Business Times

11 Oct 2008, MAS moves to neutral; US$ may head higher - S$1.50 by end-'08, S$1.52 to S$1.55 possible in 2009, say analysts

THE Monetary Authority of Singapore (MAS) shifted to a neutral policy stance yesterday 10 October 2008 as many had predicted, citing a deteriorating global economy and moderating price pressures, thus ending a policy of modest and gradual appreciation for the trade-weighted Singapore dollar that had been in place since April 2004.

In its semi-annual Monetary Policy Statement yesterday 10 October 2008, the MAS announced that it was moving to a zero appreciation stance for the trade-weighted Singapore dollar - or S$NEER - policy band. The current level of that band will be maintained, and there will be no re-centring of its mid-point or its width, it added.

And, in what was a likely response to recent volatile moves in currency markets, it said: 'MAS stands ready to intervene to dampen excessive volatility in the S$NEER should this become necessary.'

In pictorial terms, yesterday's 10 October 2008 policy change means that the band within which the MAS fine-tunes the external value of the Singapore dollar will now flatten out to a horizontal one, compared with an upward sloping one before. DBS and OCBC researchers, who predicted the MAS change, warn the US dollar may end the year closer to S$1.50.

Explained DBS: 'In US$/S$ terms, this implies that the topside is now estimated at S$1.4890 (at the time of writing yesterday 10 October 2008), with the mid-point located at S$1.4670. This suggests that our mid-2009 target of S$1.49 is too conservative given our expectation for more euro weakness to US$1.32. Hence, we now see the US dollar hitting S$1.50 by end-2008 before proceeding higher to S$1.52 in mid-2009.'

UK-based research firm Forecast, which expects the euro to fall even further to US$1.25, warns that a further move to S$1.55 cannot be ruled out over the course of the next 12 months.
Boosted by its broad gains elsewhere, the US dollar rose to a fresh one-year high of S$1.4850 yesterday, but thereafter ended the Asian session lower at S$1.4792.

Since the early 1980s, the MAS has fine-tuned the value of the S$NEER as its main monetary policy tool.

This value, in turn, is determined by the value of a basket of currencies chosen to reflect their importance in trade terms to the local economy. In terms of weighting, some of the largest components of this basket are believed to be the US dollar, Malaysian ringgit, Japanese yen and euro.

Thus, explained DBS: 'The neutral S$NEER policy does not ensure that the US$/S$ will head up indefinitely if the US dollar chooses to reverse gear and head down again.'

The undisclosed bands within which the S$NEER are allowed to move have been widely estimated to be between 1.5 and 2.5 per cent on either side of the policy mid-point, and this was re-centred higher when the MAS issued its previous semi-annual Monetary Policy Statement in April this year 2008.

Indeed, some currency strategists, such as those at JPMorgan and UBS, believe that the S$NEER was already trading close to the weakest part of that policy band yesterday.

UBS, in particular, questioned if it was really an easing in de facto terms.

Argued its strategist, Nizam Idris, yesterday: 'With the S$NEER having already drifted down to the policy floor before the MAS announcement, the new policy leaves almost no more room for the Singapore dollar to weaken against the policy basket.

'Conversely, the new policy leaves almost 4 per cent upside room for the S$NEER.

'In other words, the new policy would allow for either a neutral policy if the S$NEER sticks to the policy floor, or tighten, leaving no room for any easing from current levels. Further upside in the US$/S$ would be purely driven by broad-US dollar moves.'

Elsewhere, researchers at Barclays Capital, who also expect the greenback to trek higher to S$1.50 if the current climate of risk aversion persists, spoke of other possible fiscal policy options further out if things get worse, or even cuts to employers' CPF contribution rate.

They suggested: 'This could be coordinated with an inter-meeting move to re-centre the midpoint of the (S$NEER policy) band lower, ahead of the April 2009 monetary policy meeting. This is more likely to occur in Q1 09, when the threat of job losses seems greater.'

.

Singopre NEER - monetary exchange policy

Singapore recession with risks on downside

Reprinted from Business Times

11 Oct 2008 , S'pore slips into recession, risks skewed on downside, official 2008 growth estimate cut to 3%, but market economists already shaving 2009 forecasts

Even with the market primed for recession, the Q3 flash GDP estimates still fell below expectations. And, with no quick rebound in sight, economists are looking ahead at a lean 2009 as well.

The early estimates produced yesterday by the Ministry of Trade and Industry (MTI) show a broad-based sharp slowdown, with the economy contracting not only sequentially as widely expected, but in year-on-year terms too. MTI now expects the economy to grow 'around 3 per cent' in 2008, down from its August forecast of 4-5 per cent.

Based only on July 2008 and August 2008 data, GDP fell 6.3 per cent in Q3 from Q2 in adjusted, annualised terms. Coming straight after a 5.7 per cent decline in the preceding quarter, this spells a technical recession - Singapore's first since the second half of 2002.

But, against expectations, GDP has also fallen from a year ago in Q3, by 0.5 per cent. The last time the economy went into the red in year-ago terms was in Q2 2003 when GDP fell 1.8 per cent during the Sars outbreak.

Both MTI and the Monetary Authority of Singapore (MAS) - which yesterday 10 October 2008 eased monetary policy by moving to a neutral stance, from the 'modest and gradual' currency appreciation policy it had maintained since April 2004 - yesterday described the Singapore economy's near-term prospects in plain stark terms.

The external risks remain on the downside as the ongoing financial turmoil has presented 'new uncertainties' for the Singapore economy, MAS says. A more severe global downturn cannot be discounted, and Singapore's economic growth will 'likely remain below its potential rate over the next few quarters', the central bank adds.

A slip into technical recession here had been widely flagged, following months of sluggish manufacturing output due to pharmaceutical peculiarities. But now the precision engineering and chemicals clusters have also slowed because of weaker external demand, MTI says.

The ministry also expects the global financial crisis to take its toll in the months ahead on Singapore's financial services sector, particularly 'sentiment-sensitive' activities such as stocks trading and fund management.

MAS also sees services industries such as the transport-hub and tourism being hit by the global downturn.

As for the construction sector, 'despite a strong pipeline of projects, a shortage of contractors, a tight labour market for engineers and project managers, and longer waiting times for equipment' have delayed the projects, MTI notes.

Market economists share the official concerns - just more bearishly. Most had pared their forecasts of Singapore's 2008 GDP growth well before the latest official revision, and some now cite the risks of the growth falling below 3 per cent - probably between 2.5 and 3.0 per cent, they reckon.

Indeed, OCBC Bank's economists have belatedly cut their 2008 forecast to 2 per cent, and see the economic weakness extending into the first half of 2009.

UBS Investment Bank strategist Nizam Idris said the latest data show the economy to be in 'deep recession', with all the key figures 'well below expectations'.

The Q3 flash figures - which will eventually be updated with the September data - imply that industrial production probably grew modestly by 1-2.5 per cent last month, economists estimate. Any lower and the final Q3 GDP figure could well be worse than the already weak flash figures, United Overseas Bank's economists note. And, short of a strong pharma rebound soon, the manufacturing slump could extend into Q1 2009, they add.

Nanyang Technological University economist Choy Keen Meng notes wryly that his 'worse-case scenario' forecasts issued in March 2008 - of US recession and Singapore growing 3 per cent in 2008 - are coming true.

But he expects some recovery in year-on-year GDP growth to 3-4 per cent in Q4, partly on account of a low base in Q4 2007.

'Sluggish growth of 2-3 per cent is expected in the first half of next year. If the financial turmoil can be brought under control by then, we might be lucky to see a gradual recovery beginning in the second half.

All in all, the economic outlook for 2009 is not looking good. GDP growth is likely to come in at about 4 per cent or even lower, barring a protracted global economic slump.'

Others such as Standard Chartered Bank economist Alvin Liew recently halved his 2009 growth forecast for Singapore to 2 per cent.

One silver lining, perhaps, amid the gloom and doom: Inflationary pressures will ease. MAS sees Singapore's headline inflation rate falling to 2.5-3.5 per cent in 2009, from 6-7 per cent this year. Not fast enough, says Stanchart's Mr Liew, pointing out that Singapore's 'historical comfort zone' for inflation is just 1-2 per cent.

.

Global downturn will hit hard on Singapore

Reprinted from Business Times

(SINGAPORE) 10 Oct 2008, Economists look into 2009 and stare into more gloom, SMEs warned of possible contraction; some predict easier monetary policy

Expect the global downturn to hit Singapore hard, as GDP growth in Q4 and 2009 weakens, economists said at a Singapore Business Federation seminar yesterday.

They also warned SME managers of the worst-case possibility of a contraction next year.

Some predicted an easing of monetary policy allowing the Singapore dollar to depreciate. They were speaking ahead of two key announcements today - advance GDP data for the third quarter, and an exchange rate review from the Monetary Authority of Singapore (MAS).

'This downturn is unlike previous ones,' said CIMB-GK economist Song Seng Wun.

'It shouldn't be compared to the Asian financial crisis or the dotcom bubble, where there were still pockets of growth. What we now see is a synchronised slowdown across the world,' he said.

His base case forecast for GDP growth is 2.5 per cent for this year, and 0 to 2 per cent for 2009.

Anticipating that accelerated fiscal spending takes time to work its way through the economy, whereas falling demand hits headline GDP rates far quicker, Mr Song's worst case projection for 2009 is a negative 3 to 5 per cent in GDP growth.

Slowed growth and tapering inflation has led many to expect MAS to shift to at least a neutral stance, from the hawkish policy adopted in April to curb inflation.

OCBC economist Selena Ling said, 'The SGD has been trading at the lower end of the band, so there's actually room for the MAS to re-centre lower.'

This 'double-edged sword' though would lead to an interest rate rise. 'There is no lack of liquidity yet, though I think MAS will likely inject cash to ensure the interest rate doesn't surge excessively,' she said.

Mr Song added that Singapore's relatively strong corporate sector, the government's fiscal surplus and consumers who are not heavily in debt are favourable silver linings in these 'very trying times'.

Also, while job creation will slow, employment is unlikely to fall sharply with the integrated resorts contributing jobs, and the relative resilience of the construction sector serving to cushion, though not offset, recessionary effects.

Although most SMEs at yesterday's seminar said banks' tightened lending had not hit them yet, Singapore Manufacturers' Federation president Renny Yeo said this will likely be more keenly felt when the renewal of leases for their facilities comes round.

Mr Song said the fundamental question of how to restore confidence remains. 'We can cut interest rates to zero but if banks refuse to lend, it doesn't solve the problem.'

.

Singapore recession and its GDP

SGP facing recession, government have to keep credit flowing

Reprinted from Business Times

11 Oct 2008, Facing up to recession; Government should intervene to keep credit flowing to corporate sector

THIS time last year 2007, with the stock market near its all-time high, the property market booming and the Singapore economy cantering towards a growth rate of 7.5 per cent for 2007, who would have thought we were, in fact, on the cusp of a recession?

But here we are this year 2008, entering our first technical recession - two consecutive quarters of negative growth - since 2001; the flash estimate for Q3 growth was a worse-than-expected minus 6.3 per cent. We're also in the first quarterly contraction on a year-on- year basis (minus 0.5 per cent) since the time of Sars, in the second quarter of 2003.

It's a sobering reminder of how vulnerable even a fundamentally sound and well-run economy like Singapore can be to global economic headwinds; except that what we're facing now is no mere headwind, but a gale-force storm.

There is nothing Singapore could have done to prevent this. There is not much that any Asian country could have done. And the financial market turbulence we are seeing is only the beginning of a long spell - at least a couple of years - of pain for any economy that depends heavily on doing business with the United States and Europe.

After the current phase of the financial storm subsides - which depends on what the G-7 finance ministers decide to do at their meetings in Washington - the theatre of action will shift to the real economy. The US, Europe and Japan will experience a marked slowdown, if not outright recession, and rising unemployment. The great American consumption machine, in particular, which accounts for more than two-thirds of US GDP, will be reduced to a shadow of its former self.

While the International Monetary Fund still resists calling a global recession - it forecasts 3 per cent global growth next year - that view could change.

But global recession or not, few Asian countries - certainly not those with export-oriented economies - will be spared from the backwash of slowing growth in the major economies. Not even China; while its growth rate will probably still be respectable at around 7-8 per cent, the economy of the coastal provinces, where hundreds of thousands of factories have to depend for their livelihoods on the American consumer, will be devastated. Thousands of SMEs in China have gone bust already this year 2008.

India, for its part, has seen its financial markets ravaged as a result of selloffs by foreign institutional investors; but the real economy - which is still overwhelmingly domestically focused - will be relatively resilient.

But even if China and India boom, they cannot come close to compensating for a US slowdown: a mere 20 per cent reduction in consumption in the US wipes out the equivalent of all of the consumption of China and India combined. Add in a European slowdown as well and the problem is multiplied.

So in the circumstances, what are the policy options for a small open economy like Singapore? The focus would have to be on, first, ensuring that banking functions as normally as possible and businesses keep running.

Right now, banking is not functioning normally; the credit crunch and fear of counterparty risk has spread here too. Despite liquidity injections by the Monetary Authority of Singapore, interbank rates remain elevated. Banks have pulled in their credit lines to even well-run companies. If this continues, layoffs will inevitably rise.

There could well be more financial accidents, or at least strains, in the US and Europe in the months ahead, which suggests local banks will remain unusually risk averse. There is a strong case here for temporary government intervention to keep credit flowing to the corporate sector - whether through direct loans by government agencies such as SPRING (via their several loan schemes, which can be enhanced) or through credit guarantees.

There is a case, too, for an off-budget package of fiscal measures - particularly increases in public spending, as well as help to businesses and vulnerable groups - to cushion the impact of the slowdown. The last budget did not, and could not, see it coming, but it is here. And help can't wait till the next budget. A philosophy of prudent economic management practised over decades has yielded a legacy of fiscal surpluses. It's now time to put them to work.

This crisis is also an opportunity - for example, to ramp up infrastructure, to develop new capabilities through higher outlays on training and retraining, and promote new technologies.

Storms don't last forever and Singapore's recession, like so many before it, will pass. What matters now is how productively and creatively we handle it, and what shape we will be in when the global economy comes back.

.

Country up for sale in eBAY due to credit crunch

Reprinted from Business Times

11 Oct 2008 , Want to buy Iceland? eBay bidding soars to £10 million (London).

GREAT scenery and wildlife but financial situation in need of repair - collect in person.

Iceland, which is going cap in hand to Russia for a four billion euro (S$8 billion) loan to bail out its failed banks, was offered for sale as a wholesale lot on eBay yesterday.

Bidding started at 99 pence but had reached £10 million (S$25.4 million) by mid-morning yesterday.

Globally renowned singer Bjork was 'not included' in the sale, according to the notice, but there were nonetheless 26 anonymous bidders and 84 bids.

'Located in the mid-Atlantic ridge in the North Atlantic Ocean, Iceland will provide the winning bidder with a habitable environment, Icelandic horses and admittedly a somewhat sketchy financial situation,' the notice read.

Bidders' questions included: 'Do you offer volcano, earthquake insurance?', 'Is it possible that my payment will be frozen?', and 'Will you accept COD as a form of payment?'

.

An entire economy may go belly up due to credit crunch

Reprinted from Business Times

10 Oct 2008, Global Financial Crisis have cost Iceland's dalliance with high finance is pushing tiny Nordic nation to the brink bankruptcy.

(REYKJAVIK, Iceland) Iceland suspended trading on its stock exchange for two days and took control of the country's largest bank as it grappled with a banking crisis that is treatening to bankrupt the country.

The government's decision to take control of Kaupthing, the country's leading bank that has assets and debts across Europe, means that the country's Financial Services Authority now has control of all three of the country's major banks. The other two, Landsbanki and Glitnir, are in receivership.

The crisis is having a ripple effect throughout the continent, where tens of thousands of people have accounts with subsidiaries of the Icelandic banks. More than 20 British local government authorities as well as some universities also have hundreds of millions of dollars deposited in Icelandic banks because of their relatively higher interest rates.

The main opposition Conservative Party estimated that councils across the United Kingdom may have had as much as £1 billion (S$2.53 billion) saved with Icelandic banks.

Iceland is struggling to get a grip on the collapse of its top-heavy banking system, a situation that Prime Minister Geir Haarde has warned is putting Iceland at risk of 'national bankruptcy'.

The Financial Supervisory Authority said on Wednesday that it took control of Glitnir Bank, the country's third-largest lender, annulling a previous move by the government to buy a 75 per cent stake in the bank. A day earlier the watchdog seized Landsbanki Islands amidst concern the second-biggest bank may default.

Kaupthing, Landsbanki and Glitnir make up about three quarters of the benchmark ICEX 15 Index.

The index has decreased 52 per cent so far this year 2008, making it the third-worst performer among 88 indexes worldwide tracked by Bloomberg. Kaupthing has declined 26 per cent this year while Glitnir has plunged 82 per cent. Landsbanki has lost 43 per cent of its market value.

The banks are saddled with about US$61 billion of debt, 12 times the size of the economy, according to data compiled by Bloomberg. Mr Haarde said on Wednesday 8 October 2008, that the banking sector had 'become too big' as he acknowledged that it will take the tiny Nordic nation of just 320,000 people several years to recover from the current crisis.

The government is seeking a loan from Russia and may ask for aid from the International Monetary Fund to help guarantee deposits.

The authority said that the action was necessary to ensure the 'continued orderly operation of domestic banking and the safety of domestic deposits'.

It also used emergency powers, rushed in by parliament earlier this week, to hive off most of the domestic assets of Landsbanki into a separate entity to be called 'New Landsbanki' that is fully owned by the government.

'The decision means that the new bank takes over all the bank's deposits in Iceland, and also the bulk of the bank's assets that relate to its Icelandic operations, such as loans and other claims,' it said. 'The decision ensures continued banking operations for Icelandic families and businesses,' it added.

In an attempt to curb any panic, the regulator stressed that both Kaupthing and Landsbanki were open for business as usual yesterday and that all domestic deposits of the bank were guaranteed under Icelandic law.

However, the move leaves the international operations of Landsbanki, which have already caused a diplomatic spat with Britain, open to question.

British Prime Minister Gordon Brown has threatened to sue Iceland to recover the lost deposits of some 300,000 Britons who hold accounts with IceSave, the online arm of Landsbanki.

With local governments also holding accounts worth tens of millions of pounds in Icelandic banks, the British government has used powers under terrorism laws to freeze Landsbanki's assets until the status of the deposits is resolved. Mr Haarde said on Wednesday that discussions between the two countries had begun to find a 'mutually satisfactory solution'.

Wall Street dizziness

Reprinted from Business Times

11 Oct 2008, stocks gyrated wildly on Wall Street 11 Oct 2008 morning, plunging more than 700 points at the open before rebounding and then diving 432.89 points to 8,146.30 by midday.

'We are witnessing one of the biggest and fastest market meltdowns in the last 60 years,' said Fred Dickson, chief market strategist at DA Davidson & Co.

.