It is not the GIC’s forecast for the global economy.

The other two are an optimistic scenario where there is a recession in the US or globally, with an end to the credit crisis; and, a middle scenario where there is a mild US recession but no global recession.

Speaking at the GIC Staff Conference earlier this week, Dr Tan had said the world “could be facing a recession which is longer, deeper and wider than any recession that we have encountered in the last 30 years.”

He had also said that this could be mitigated if decisive and timely actions are taken by policy makers in the United States and elsewhere.

Putting those remarks in perspective, Dr Tan said that as part of GIC’s risk management discipline, it continuously reviews a range of economic scenarios which can affect its investment strategy.

Dr Tan explained, “In normal times, there will be a central scenario with a dominant probability, with the optimistic and pessimistic scenarios as outliers, each with much lower probability. However, in light of the current fluid and uncertain times, the probability of the pessimistic scenario, while not the highest, has risen to a level that warrants serious consideration by GIC.”

And this was why he had highlighted the scenario at the conference. – CNA/ir

Source : Channel NewsAsia – 25 Apr 2008

The post GIC’s Dr Tony Tan clarifies ‘worst recession’ remarks just one of 3 scenarios considered appeared first on LushHomeMedia.

According to the latest World Economic Report, the International Monetary Fund (IMF) is predicting a 3.7 percent growth in the global economy this year – down from a 4.9 percent expansion in 2007.

The IMF has also downgraded its growth projections for Singapore by expecting the economy to grow by just 4 percent this year. It also said home prices in the US could see a further slide.

Charles Collyns, Deputy Director, Research Department, IMF, said: “We are more concerned about the household sectors because of the impact of the housing correction.

“We’ve seen a 10 percent reduction in house prices on the index last year and another 10 percent could be on the way this year. That’s a 20 percent reduction in housing prices and that will have an effect on household balance sheet and will tend to dampen household’s willingness to spend going ahead.”

And according to the IMF, this will have a deep impact on the US economy and could even lead to a contraction.

It has projected that the US is likely to face a mild recession this year, with a possible recovery towards the end of 2009.

Although there are some downside risks, the IMF said according to its forecast, there is only a one-in-four chance of a global recession. That is partly because growth in Asia is expected to hold up, albeit at a slower pace.

For Singapore, the IMF has cut its 2008 growth projections from 5.8 percent to 4 percent.

On the whole, it said emerging Asia will be less vulnerable to shocks in the market, compared to a decade ago.

Ranil Salgado, Resident Representative, Singapore, Asia & Pacific Department, IMF, said: “Most of these countries run substantial trade surpluses and they have large foreign reserves… Policy steps in Asia have created some space for policy adjustments in the event that large downside risks do materialise.”

Besides the slowdown in the US, the IMF has warned that Asian economies need to address the concerns of inflationary pressures on food and oil.

This includes re-thinking biofuel policies and boosting agricultural output to meet rising demand. – CNA/so

Source : Channel NewsAsia – 21 Apr 2008

The post IMF says Asia less vulnerable to shocks in global market appeared first on LushHomeMedia.

They expect investment vehicles such as venture funds and private equity to pick up in 2008.

Asia has seen a sharp change – from a positive global economic outlook in 2007 to one of uncertainty this year.

Amid the market volatility, clouds are hanging over the direction of Asian financial markets. But some say Asia may be able to ride out the US storm if it is short-lived.

Heng Swee Keat, Managing Director of the Monetary Authority of Singapore, said: “At this point there is a risk of being caught in a negative spiral. Tightening credit standards and reduced credit availability will be mutually reinforced with the slowing of the macro economy.

“The extent to which the spiral takes hold determines the extent of the US slowdown. What we are likely to see, however, is the weak synchronisation of business cycles. The underlying momentum in the Asian economies will allow Asia to ride out the slowdown in the US if it is mild and short-lived.”

The Asian economy, excluding Japan, is still forecast to grow at around 7.8% in 2008. The region is seen as an attractive destination for investments.

Asian markets are still seen as an attractive investment destination, with foreign inflows of direct investment into East Asia more than doubling to US$200 billion over four years – from US$84 billion in 2002 to nearly US$200 billion in 2006.

Kirk West, Managing Director of Principal Global Investors said: “The longer term opportunities exist in the Asian corporates. They have been impacted by what has happened to the corporates in the US but there are some significant differences.

“The balance sheets of a lot of Asian corporates are very strong. They’ve got fully funded CAPEX programmes and from a operational perspective, a lot look very strong.

“So at the moment, they are being impacted by sentiment and that may well continue for the short to medium term. But longer term, I think some of these corporates with stronger balance sheet, good cash flows and fully funded CAPEX position will be very attractive investments.”

Within Asia itself, investment choices are also changing because of the rapidly ageing population. There is growing interest in products such as retirement planning and healthcare financing. By 2050, Asia’s population above 60 years old is expected to quadruple to 1.2 billion people.

Wealth is also being transferred to the next generation – leading to a younger group of investors.

“I believe that 2008 is going to be a very challenging year for investors and for Asia… We are going to start seeing the generational transfer of wealth, which means we are going to see a younger and more sophisticated group of owners of wealth. They will drive investment decisions slightly differently from their parent,” said Yeong Phick Fui, Managing Director of UBS Wealth Management.

Industry experts say investment vehicles such as venture funds, private equity, real estate and commodities are expected to pick up in the next year. – CNA /ls

Source : Channel NewsAsia – 19 Feb 2008

The post Investment growth in Asia marches through US recession concerns appeared first on LushHomeMedia.

In his Lunar New Year message, Mr Lee said the “Year of the Rat” begins under challenging circumstances.

But he added that there’s reason to remain confident because Singapore is in a strong position to weather any storm.

Turbulence in the financial markets worldwide has shaken consumer and investor confidence.

The US economy is slowing down and may slide into recession, and energy as well as as food prices have soared.

Given such challenging situations, PM Lee called on Singaporeans to prepare for more uncertainties.

He also gave the assurance that the government can and will directly help those in need.

“The Workfare Income Supplement Scheme made its first payment last month, paying $150 million to 290,000 low-income workers. With good growth, we have the resources to help ease the burden on Singaporeans, especially for the poor and elderly,” said PM Lee.

And like the rat in the Chinese zodiac, which symbolises wit, imagination and resourcefulness, Mr Lee called on Singaporeans to harness their creativity and ingenuity to tackle the challenges ahead.

So despite the difficulties, Singaporeans can look forward to another good year.

Mr Lee’s Lunar New Year message also touched on the importance of the family. He said this is the time for reunion and bonding.

“However busy we are, however faraway we may be from home, we should try to keep these traditions alive. If you are working abroad and cannot make it back for the New Year, at least call your parents and families back home, or better still, chat over the Internet using a webcam. These customs maintain and renew our bonds of family and kinship,” said Mr Lee.

He pointed out that government policies are formulated to preserve the family structure and foster close ties.

Mr Lee added that there are also concerted efforts to turn Singapore into a great place for families to bring up children.

The prime minister said it has been three years since the government introduced major policies to encourage families to have more children.

The downward trend in the number of births has been reversed, but only slightly.

There were 37,000 resident births in 2007, just 2,000 more than in 2004.

Mr Lee said it will take time for mindsets to change. And on its part, the government’s studying an even friendlier environment for families to have and raise children.

The Prime Minister wishes all Singaporeans a happy and prosperous Chinese New Year. – CNA /ls

Source : Channel NewsAsia – 6 Feb 2008

The post PM Lee calls on S’poreans to brace themselves for further uncertainties appeared first on LushHomeMedia.

Many market participants now take it as an article of faith that the US economy is, or will soon be, in a contractionary phase of economic activity. Some even argue that as long as it “feels” like a recession, it is one. But that sentiment obscures the reality that thus far, there is no definitive view among economists about how weak the economy is or might become.

That’s not to say anxiety is not riding high. The Fed, which cut interest rates by an unprecedented margin on Tuesday, has consistently downplayed and underestimated economic and market conditions over recent months. Clearly, policy-makers have grown more anxious.

Since September, the Fed has cut its key overnight target rate by nearly two percentage points and engineered novel mechanisms aimed at getting liquidity into financial markets. In turn, the institution’s good works have been washed away by weakening economic data, most notably on the employment and manufacturing fronts, and by a seemingly-endless stream of bad news from financial markets.

Views held by forecasters have been unusually diverse. In recent weeks, several major investment banks, including Goldman Sachs and Merrill Lynch, have officially endorsed the view that the US economy is contracting.

Merrill’s frequently-bearish chief economist David Rosenberg said the four factors watched by official business-cycle-dating body, the National Bureau of Economic Research, are each on the way down. Employment, manufacturing and retail sales, along with industrial production and income, all appear to be coming off cycle high points: Mr Rosenberg sees this as a clear sign of a recession.

What’s worse, “the healing phase involved in expunging all the excesses left over from a multi-year leveraged boom in asset values takes time,” Mr Rosenberg said. He reckons the current year will scrape by with an average growth rate of 0.8 per cent – the year will likely see three contractionary quarters – with 2009 limping by at a 1-per-cent pace.

Mr John Silvia, Wachovia Securities chief economist, sees 50-50 odds of a recession but believes if policy-makers move aggressively, a downturn need not take place.

Miller Tabak strategist Tony Crescenzi sees reasons to be hopeful. The monetary policy stance and the prospect of fiscal stimulus are reasons to believe any contraction will be short-lived. Low inventories, rising exports, healthy corporate cash positions and possible new mortgage refinancings now that rates are moving lower are other positives.

Mr Joel Naroff, who helms forecasting firm Naroff Economic Advisors, said the economic data now in hand “does not tell us we are in a recession yet”.

While he’s cautious about the outlook, he argued that Tuesday’s rate cut was forced as much by market expectations as anything else. It is entirely possible that the upcoming January jobs report may be stronger than many think, which could make the size of Tuesday’s action seem over the top, he said.

While Tuesday’s action clearly shows that Fed officials are at least mindful of worst-case outcomes, even there, one finds diversity. Mr William Poole, who will soon retire as president of the Federal Reserve in St Louis, Missouri, used his final vote as a Federal Open Market Committee member to say that the apocalypse is not now.

Mr Poole has been an unreliable guide on monetary policy, but he also represents the views of many when he argued that as bad as things are for markets, the real economy has not lost its bearings.

Source : Today – 24 Jan 2008

The post recession? WHAT RECESSION? appeared first on LushHomeMedia.

Investors all across Asia may be nervous about the outlook for the US economy, but the financial services firm is taking a positive stance.

Lehman Brothers’ global chief economist Paul Sheard said, “A lot of people, of course, are focusing now on the risk of a recession in the US. We do think the risk is quite high; we would put it at around 40 per cent. And that’s a lot higher obviously than a normal year where it’s probably just a five or six (per cent) chance that the economy could slip into recession.”

But he expected the worst to be averted.

“The monetary easing from the Fed and the other fiscal policies that are likely to be implemented may help the economy to skirt recession. But it’s a close call if the economy would be hit by another shock or a couple of shocks that could certainly tip the economy into recession,” he said.

The firm said it expects Asian economies, excluding Japan, to grow 7.5 per cent as a whole this year, down one point from 2007.

Although a recession in the US could shave that expansion by some 4.5 percentage points this year, Lehman Brothers is taking a bullish view for now.

Robert Subbaraman, Lehman Brothers’ chief economist for Asia (ex-Japan), said: “I would say that Lehman Brothers has an overweight position on Asia-ex-Japan and that we are bullish on the region for the medium-term perspective.

“So (for) medium-term, the equity market in Singapore and in Asia should do well. Singapore’s in a very good position to be a hub, a service centre to India and the other Southeast Asian economies which should be very positive for Singapore in the medium term.”

The financial services firm is predicting the Singapore economy to grow 5.3 per cent this year, in line with the government forecasts. – CNA/ac

Source : Channel NewsAsia – 22 Jan 2008

The post Lehman says Asia not likely to suffer downturn over next 2 years appeared first on LushHomeMedia.

This is the forecast from HSBC in its latest report on the region.

However, a recession in the US could knock off a few percentage points off Singapore’s economic growth.

With a US recession on the horizon and the US sub-prime mortgage crisis still taking its toll, HSBC is predicting a difficult year for Asia in 2008.

Economies such as Japan and Taiwan are expected to be most cyclically sensitive to the US slowdown. But emerging ones – led by China and India – are forecast to continue booming along.

Garry Evans, Pan-Asian Equity Strategist, HSBC, said: “Well, it’s going to be a difficult year, there is no doubt about that. We’ve got the US slowing – credit crunch out there, everyone is focused on the bad news.

“I don’t think it’s going to be quite as bad as that though because governments are going to react to this bad news. The Fed is going to cut rates in the US – we’ve going to have a fiscal stimulus package there and I think Asian countries are going to grow reasonably stronger this year.

“You’re not going to see that much of a slowdown, particularly in China and India – and if you do see a slowdown, governments here have also got room to cut rates and increase spending.

“So I actually see the Asian markets going up this year – ultimately 10 to 12 percent or something like that. I don’t’ see a bear market but I think it’s going to be a year of ups and downs – your probably going to have to be a little patient to get a return.”

Mr Evans added that inflationary pressure will settle.

He said: “Well, ultimately if we’re seeing global growth slowing, then I think you’re going to see inflation becoming less of a worry during the year. In general, in most places, inflation is still a food phenomenon, and it’s not really showing much signs of coming though to any other areas in the economy.

“We’re all a bit worried about inflation at the minute. Certainly the most worrying scenario is when you have high inflation and slowing growth – in a so called stagflation – and if we have that then we could be in for a very tough ride. But I think generally as growth slows, inflation will come off the radar scene as being a problem.”

Here in Singapore, HSBC says the financial and property sectors will remain positive, but exports will remain susceptible to a US slowdown.

Peter Morgan, Chief Economist, Global Research Asia Pacific, HSBC, said: “Well we are fairly optimistic on Singapore – we think that the strength in loan growth and the strength in the property sector is having a positive impact.

“Growth in Singapore is likely to slow, and Singapore is still a fairly export sensitive country and if the US looses a couple percentage points of growth than that could knock off maybe 3 percentage points on Singapore’s growth.”

HSBC is forecasting the Singapore economy will grow 7.3 percent in 2008. – CNA/ch

Source : Channel NewsAsia – 18 Jan 2008

The post HSBC says Asian economies to grow by 10% to 12% in 2008 appeared first on LushHomeMedia.

A Merrill Lynch survey found that a fifth of big investors now expect an outright global recession, an occurrence not seen since the 1930s. Some think the world is already in recession.

“The period of denial may be over,” said Mr David Bowers, who put together the closely-watched report.

“This month’s survey is the first in which investors have really started to recognise that the ‘credit crunch’ could lead to a major recession.

The vast majority expect profit margins to shrink in 2008.”

The report said global cash balances had jumped to 32 per cent of the average portfolio from 20 per cent as recently as November, with both bonds and equities falling out of favour. The survey covers 195 funds managing US$671 billion ($964 billion) across the three main regions.

The asset managers no longer want firms to take on more debt or pay out bigger dividends — the twin abuses at the height of the credit bubble.

They increasingly want them to batten down the hatches for a long storm by using cash flow to repair balance sheets.

What is striking is the broad perception that the US is no longer the sole epicentre of the crisis.

Indeed, most now think the US dollar is poised to rally as the trouble shifts increasingly to Europe.

A net 55 per cent view the euro as “overvalued”, and a net 61 per cent think the sterling is too high.

Asia is turning pessimistic as well. A net 29 per cent think China’s economy will slow and most are now underweight Chinese equities — preferring the Hong Kong stocks, which offers arbitrage opportunities against over-inflated Shanghai.

None of the regional managers thinks China’s growth rate will rise this year.

The Asian investors expect the region (excluding Japan) to face an unhealthy drift into stagflation, with growth slowing and price pressures rising at the same time. They are massively underweight on autos and media, but like staples and oil.

A net 50 per cent expect emerging markets around the world to deteriorate. A fifth seem to expect the bubble to burst altogether.

Bank and financial firms are the new pariahs.

Merrill Lynch’s credit strategist Barnaby Martin said the banks now faced much the same plight as telecom companies in 2002. “Their efforts to de-leverage will be bad for shareholders, but good for bondholders,” he said.

One glimmer of light is the rising — if small — number who think a fresh cycle of global growth is already beginning, despite the near-panic mood among their peers.— THE DAILY TELEGRAPH

Ambrose Evans-Pritchard has covered world politics and economics for a quarter of a century

Source : Today – 19 Jan 2008

The post Recession denial is over appeared first on LushHomeMedia.

The goblin that is the impact of the United States sub-prime mortgage problems could go away as early as then, and growth would return by year-end in time for Christmas, said Mr Ken Fisher, CEO of Fisher Investment.

Saying the sub-prime spook had been exaggerated, Mr Fisher likened it to the scare caused by the Y2K millennium bug and the avian flu warnings, where the perceived risks were greater than the actual threat to the global economy.

“The fact is, if every sub-prime mortgage that could possibly default defaulted, the most it could do is slow down US gross domestic product some,” he told the media on the sidelines of the Forbes Global CEO Conference here yesterday.

“The US economy may slow down, but so what? Because the US is the biggest economy, they tend to think that when the US gets a cold, the world is going to get pneumonia. This, today, is wrong,” said Mr Fisher, a long-running Forbes Magazine columnist with a reputation for accurately forecasting market trends such as the bursting of the dotcom bubble in March 2000.

He could well be proven right again. The International Monetary Fund (IMF) is reportedly raising its world economic growth forecast upwards to 5.3 per cent from the 5.2 per cent it indicated in July.

This is even as it expects the US economy to grow at a slower 1.9 per cent, versus July’s forecast of 2 per cent, according to Financial Times Deutschland, citing unnamed sources.

The IMF expects global growth next year to be 5.2 per cent, and US growth to pick up speed to 2.8 per cent. As for China, the forecast this year has been raised from 11.2 per cent to 11.5 per cent.

With the US’ GDP of US$13 trillion ($19.8 trillion) contributing to only about a third of the US$42 trillion global GDP, the shrinking US economy should actually be led by the performance of the larger non-US economies combined, Mr Fisher said.

Even so, the two economic powerhouses — China and India — would still be affected by a big slowdown in the US economy, said Nobel Laureate Michael Spence, speaking separately on the sidelines of the conference.

But things could be different in 10 years, he added.

“In 1981, when China grew at 9 to 10 per cent, it didn’t make a bit of a difference to the global economy — it was a tiny little economy. Now it is rather large,” said Prof Spence, who won the Nobel Prize in 2001 for economics and is Professor Emeritus of management with the Stanford Graduate School of Business.

The 10 per cent growth enjoyed by China last year is equal to about 2 per cent of the US GDP, and the professor believes that at current exchange rates, the Chinese economy could be worth up to US$4 trillion in the next three to four years.

While the longer term outlook may still be healthy, Mr Tharman Shanmugaratnam, Minister for Education and Second Minister for Finance, warned at a separate event yesterday: “The re-pricing of risk in financial markets is probably not over. There is also increased uncertainty in the near term for the US economy, which could impact the outlook in Asia.”

Speaking at the opening ceremony of a new office for SG Private Banking, he added: “It is too early to say what the economic impact in Asia will be. Should the US economy slow down sharply, Asia will certainly feel the drag.” 
 
Source : Today – 11 Sept 2007

The post Say goodbye to the goblin … Sub-prime spook was exaggerated, could vanish by Halloween: Analyst appeared first on LushHomeMedia.