Ways to pay for that overseas home
We uncover financing answers for homebuyers with their sights set beyond the shores of Sentosa Cove
Bryan LeeSun, Jul 22, 2007 The Straits Times
SECURING a home loan is a pretty straightforward affair for a local property, but once you venture further afield for that beachside hideaway or Paris pied-a-terre, things can get seriously complicated.
Beyond the usual considerations of interest rates, credit limits, loan tenures and affordability, buyers of overseas property need to deal with a number of other issues.
Foreign exchange risk is probably at the top of the list, but the rules and policies governing property ownership and financing often differ from country to country.
Also, processing fees are common for these mortgages.
Then there is the key question: Where do you get these loans in the first place?
The giddy rush of securing that prime unit with the perfect seaview might prompt many to sign up with the first bank that comes along. This could be the financier recommended by the agent selling the house or the lender with a booth at the property fair.
Well-heeled investors who have established themselves as favoured bank clients will probably be able to call on their private bankers to arrange a plethora of financing options.
But for the less privileged, a little knowledge can go a long way and help is at hand if you know where to look.
Mortgage brokers such as Mr Dennis Ng, who founded the loan consulting portal HousingLoanSg.com, can offer advice on the best route to take - and it is free as brokers earn their keep from the banks.
Global banks with outlets in Singapore such as Standard Chartered (Stanchart) and Lloyds TSB offer 'one-stop shop' services to anyone interested in an overseas home loan.
Stanchart mortgages head Elaine Heng says the bank can offer housing loans in many markets around the world through its international network.
Singapore bank United Overseas Bank (UOB) has been making a push offshore since the start of the year, aggressively marketing home loan packages for properties in Malaysia, Thailand and Shanghai.
Property experts say there are essentially three forms of financing available for those eyeing homes overseas.
Each has its pros and cons, and availability differs across geographies and across banks.
Borrowing local overseas
TAKING out a mortgage in the country where the property is located is probably the most straightforward route.
Many foreign banks, such as Australia's ANZ, have offices in Singapore and should at least be able to help buyers get in touch with mortgage managers in their home bases.
International bank Stanchart goes a little further by handholding customers throughout the entire application process. And it can do this for loans taken in any country in which it has a retail banking operation.
EXPERT ADVICE
Rental advantage
If the overseas property is to be rented out, a local mortgage makes for a neat solution as the rent collected can be used directly to repay the loan.
This eliminates foreign exchange risk, and in high-tax regimes such as Britain and Australia, mortgage interest can be used to reduce taxes on rental income, says Savills Singapore's property consultancy director, Mr Ku Swee Yong.
A quick click at the websites of the country's banks can yield a preview of what financing costs might be like. British and Australian banks give fairly detailed information about their mortgages.
Helping hand
Mortgage brokers such as Mr Dennis Ng, who founded the loan consulting portal HousingLoanSg.com, can offer advice on the best route to take - and it is free as brokers earn their keep from the banks.
Global banks with outlets in Singapore such as Standard Chartered and Lloyds TSB offer 'one-stop shop' services to anyone interested in an overseas home loan.
Singapore bank United Overseas Bank has been making a push offshore since the start of the year, aggressively marketing home loan packages for properties in Malaysia, Thailand and Shanghai.
Interest rates, terms and conditions would probably be fairly similar to those offered to local buyers and the loan would be secured against the newly purchased property.
As a foreign buyer, you might find yourself offered a smaller credit limit than a local buyer would. But 70 to 80 per cent of the property's worth seems to be the typical cap.
A quick click on the websites of the country's banks can yield a preview of what financing costs might be like. British and Australian banks, for instance, give fairly detailed information about their mortgage packages.
If the property is to be rented out, a local mortgage makes for a neat solution as the rent collected can be used directly to repay the loan.
This eliminates foreign exchange risk, and in high-tax regimes such as Britain and Australia, mortgage interest can be used to reduce taxes on rental income, said Savills Singapore's property consultancy director, Mr Ku Swee Yong.
But obtaining a local mortgage might become progressively harder, said Lloyds' deputy Singapore head, Mrs Suzanna Lee.
She said British banks, for example, have become stricter in their loan approvals because of heightened vigilance against money laundering and terrorist financing since the 2001 attacks.
And Thai banks have long been barred from issuing mortgages to foreigners.
Multicurrency offshore loans
OFFSHORE loans offer much more flexibility, which can translate into convenience and savings.
Such mortgages are provided by local and foreign banks in Singapore, and generally offer a number of currency options for repayment.
A mortgage for a sprawling homestead in Perth could, for example, be repaid in Singapore dollars. In many instances, the lender lets the customer change his repayment currency several times over the term of the loan to help offset exchange rate movements.
Lenders providing such loans include ANZ, Lloyds, Stanchart and the Royal Bank of Scotland. Each has a restricted list of countries for which they offer the service.
As with basic mortgages taken in the foreign country, the overseas property acts as the collateral, an arrangement that offers a number of advantages.
Interest rates are tied to the currency in which repayment is made. This means homebuyers might pay less interest than if they had taken a local loan in the country.
According to the Lloyds website, the interest rate for a British property loan can vary, ranging from 1.88 per cent if repaid in ten to 9.52 per cent if repaid in New Zealand dollars.
If Singdollars are used, the 3.79 per cent interest rate easily beats local rates charged to Britons of about 7 per cent.
Beyond the potential interest rate savings, offshore mortgages allow the canny investor to take advantage of currency movements.
For example, a customer could exploit the Singdollar's depreciation against the Australian dollar.
A loan of A$100,000 (S$131,590) taken in Singdollars years ago when the Singapore and Australian currencies were on a par would in effect be worth A$75,000 (S$98,693) today, so a switch to Australian dollar repayment using rent collected from the Australian property would yield handsome savings.
Of course, savings can turn into extra costs if you get it wrong.
As a general principle, homebuyers are advised to pick either the currency of the country they are buying the property in, or the currency they are paid in, said Lloyds' Mrs Lee.
Offshore loans are also the only way to obtain a mortgage to buy that luxury condo in Bangkok. In Singapore, the service is available only at UOB and Bangkok Bank.
Pledging Singapore assets
ASSET-RICH Singaporeans have yet another option.
If you have a home in Singapore that is paid up to some degree, you can take out an equity loan and secure it against that property.
This is not strictly a mortgage as the money raised can be used for non-property-related purposes.
But this option can come in handy when buying homes in restricted markets such as Thailand.
It can also help investors achieve full financing for the overseas property if it is taken together with one of the mortgage types described above.
These loans are typically set at the same interest rates that apply to a regular Singapore mortgage.
At today's average rates of 3 to 4 per cent, equity loans allow investors to take advantage of Singapore's relatively low borrowing costs.
Another alternative is to use other assets such as fixed deposits, unit trusts or shares as collateral. But the interest rates charged are generally higher for these types of loans.
The credit that can be raised from these financing options is not limited by the value of the foreign property.
For equity loans, the limit is generally set at 80 per cent of the Singapore property's worth.
This cap would be reduced further by any outstanding mortgage and Central Provident Fund obligations associated with the property.
The greatest disadvantage of these arrangements is the muddying of risk, as the overseas investment could affect your assets in Singapore.
If the foreign investment turns sour, you would suffer the dreaded double whammy if you lost the most permanent roof over your head.
Sunday, November 11, 2007
ST: Building your retirement nest egg
Building your retirement nest egg
Sun, Nov 11, 2007
The Straits Times
AT LEAST half of Singapore's population is not financially ready for retirement, according to a recent global survey.
Of the 600 Singaporean working adults and retirees covered in the AXA Retirement Scope 2007 survey, only half had done retirement planning. In contrast, 85 per cent of workers in the United States have started retirement planning.
The good news: In the light of recent events, the dismal figure for Singapore should improve.
Thanks to the recent publicity over changes to the Central Provident Fund (CPF), retirement issues are a hot topic now.
Announced in August, the changes include the Government paying higher interest rates on a portion of CPF savings, and making it compulsory to take up an annuity.
It is no wonder that insurers such as Prudential Assurance, UOB Life and Manulife have been quick to recognise the need for innovative retirement solutions. Of late, there has been a flurry of marketing activity - with more retirement products likely to hit the market soon.
What's your number?
MR GOH Yang Chye, the managing director of GYC Financial Advisory, believes that many Singaporeans are not aware of how much income they will need for their retirement. Nor do they know how to begin retirement planning.
'Start by asking yourself what kind of retirement you want. Do you wish to enjoy a standard of living similar to what you enjoy today? Based on your desired retirement lifestyle, you can work out your retirement goal and start building your retirement nest egg,' he said.
This objective formed the basis of Prudential's 'What's your number?' campaign, launched last month. It has worked out the likely expenses for five retirement lifestyles.
The model throws up a lump-sum savings goal, assuming a 20-year drawdown period in retirement after age 65. It also assumes a 1.5 per cent inflation rate and a 5 per cent investment rate of return.
The most modest lifestyle of the five - 'Budget' - assumes household spending of $1,040 a month for 20 years. This works out to a targeted savings pot of $195,000.
For a 'Modest' lifestyle, monthly spending is assumed to be $2,345. For this lifestyle, you would need to build up savings of $450,000.
The most luxurious is the 'Comfortable' lifestyle, for which monthly expenses are assumed to be $5,170. To keep up this lifestyle, you would need savings of $1,013,000.
Prudential's assistant director for marketing products, Mr Daniel Lum, said individuals can access its website at http://www.whatsyournumber.com/.
sg to identify their lifestyle aspirations, as well as how much monthly savings they would need to reach their retirement goals, assuming a specific rate of return.
Whole life plans with lifetime payouts
INSTEAD of a lump-sum premium outlay as required for an annuity, these plans allow for progressive saving over eight or 10 years to build a retirement nest egg.
A hybrid of whole life and endowment plans, they come with regular payouts. A major plus is that they are paid out for as long as the assured is alive, just as with annuities.
The exception is the AIA Platinum Rewards plan, where the cash payments, also known as coupons, are paid out till the assured turns 100. They are denominated in US dollars.
The fixed annual premiums are paid for a limited period only. The period is eight years for AIA Platinum Rewards and UOB Life Maxi Future, and 10 years for Manulife 3G.
With both UOB Life and Manulife, for a 30-year-old woman who has a sum assured of $100,000 for her baby, the annual premiums would range from about $8,000 to over $9,000.
Policyholders enjoy regular payouts with a guaranteed component of at least 2 per cent of the sum assured, after the premiums are paid up. There is also a non-guaranteed annual dividend, based on the performance of the insurer's life fund.
Such plans give the customer the chance to enjoy a lifetime of income and the option of leaving behind a legacy by taking up a policy on his child's life.
In this case, the policy owner can draw the cash coupons for as long as he likes up to the time that he is ready to assign the plan to his child. After that, the child would get the yearly cash coupons.
Based on a guaranteed cash payout of 2 per cent and a non-guaranteed dividend of 2.2 per cent of the sum assured, Manulife worked out that the total projected payout would be $515,904 after 85 years of cover. The premiums would add up to $82,500.
Calling such plans 'a no-brainer', Mr Patrick Lim, the associate director of financial advisory firm PromiseLand Independent, said he liked the feature of having lifetime guaranteed coupons that would not be hurt by market fluctuations.
'This plan can be considered part of an additional diversification in an investment portfolio,' he said.
Both AIA and UOB Life offer a benefit that covers 30 critical illnesses for an additional premium. In the case of UOB Life, the single premium for this benefit with a sum assured of $100,000 for 30 years would be $2,900 for a non- smoking male aged 30.
Here is Mr Lim's take on the plans' pros and cons.
AIA Platinum Rewards
Pros
The guaranteed cash payout of 3 per cent of the basic sum assured is the highest for all three insurers. Manulife and UOB Life come in at 2 per cent of the basic sum assured.
The dividends, if left to accumulate with the insurer, are also the highest at 4.25 per cent. This rate is not guaranteed.
Cons
As the plan is denominated in US dollars, there is some currency exchange risk, but if a person needs US dollars, this issue might not apply.
The high 'entry' level of about $8,500 probably places this plan out of the reach of both lower- and middle-income consumers. It is targeted at the mass affluent market.
The yearly payouts will cease if and when the assured reaches the age of 100.
The assumed projected investment rate of return is the highest at 5.75 per cent.
Manulife 3G
Pros
This plan is priced at a level that appeals to the widest segment of the population, with entry premiums of just over $1,500.
The assumed investment return of 4.2 per cent, comprising both guaranteed and non-guaranteed payouts, is pretty decent.
These payouts are made during the assured's lifetime.
Cons
The assumed investment return of 5.25 per cent is the highest for Singdollar participating products.
UOB Life Maxi Future
Pros
It assumes a lower projected investment return of 4.5 per cent.
Payouts are made during the assured's lifetime.
Cons
The fact sheet did not provide a specific figure for the non-guaranteed portion of the annual dividend.
Other retirement alternatives
RATHER than relying on retirement options with an insurance component, some financial advisers prefer to advocate separating insurance from investments.
'The best way to insure oneself is simply to buy a no- frills insurance plan. And the best way to manage one's investments successfully with consistent returns is to have a simple portfolio management of equities, bonds and cash,' said Mr Goh.
Mr Leong Sze Hian, the president of the Society of Financial Service Professionals, prefers the flexibility of lump- sum investments plus future top-ups on a globally diversified portfolio of funds.
This strategy allows free switching to re-balance the portfolio periodically. Also, regular or ad hoc withdrawals can be made when the need arises by liquidating the fund that has gained the most in value.
Mr Goh worked out that, if a customer bought a term policy with a sum assured of $100,000 and invested the rest of the 10-year annual premiums of $8,250, the projected total returns would be $753,548 based on an investment return of 5 per cent, after 85 years.
The customer could also expect to receive an annual cash payout of $4,200 after 10 years. If a higher investment return of 7 per cent were assumed, the projected amount would be $9.13 million.
Nevertheless, even for people who are averse to risk in terms of investing, it is better to have a 'not so good' financial plan than no financial plan at all, added Mr Goh.
Sun, Nov 11, 2007
The Straits Times
AT LEAST half of Singapore's population is not financially ready for retirement, according to a recent global survey.
Of the 600 Singaporean working adults and retirees covered in the AXA Retirement Scope 2007 survey, only half had done retirement planning. In contrast, 85 per cent of workers in the United States have started retirement planning.
The good news: In the light of recent events, the dismal figure for Singapore should improve.
Thanks to the recent publicity over changes to the Central Provident Fund (CPF), retirement issues are a hot topic now.
Announced in August, the changes include the Government paying higher interest rates on a portion of CPF savings, and making it compulsory to take up an annuity.
It is no wonder that insurers such as Prudential Assurance, UOB Life and Manulife have been quick to recognise the need for innovative retirement solutions. Of late, there has been a flurry of marketing activity - with more retirement products likely to hit the market soon.
What's your number?
MR GOH Yang Chye, the managing director of GYC Financial Advisory, believes that many Singaporeans are not aware of how much income they will need for their retirement. Nor do they know how to begin retirement planning.
'Start by asking yourself what kind of retirement you want. Do you wish to enjoy a standard of living similar to what you enjoy today? Based on your desired retirement lifestyle, you can work out your retirement goal and start building your retirement nest egg,' he said.
This objective formed the basis of Prudential's 'What's your number?' campaign, launched last month. It has worked out the likely expenses for five retirement lifestyles.
The model throws up a lump-sum savings goal, assuming a 20-year drawdown period in retirement after age 65. It also assumes a 1.5 per cent inflation rate and a 5 per cent investment rate of return.
The most modest lifestyle of the five - 'Budget' - assumes household spending of $1,040 a month for 20 years. This works out to a targeted savings pot of $195,000.
For a 'Modest' lifestyle, monthly spending is assumed to be $2,345. For this lifestyle, you would need to build up savings of $450,000.
The most luxurious is the 'Comfortable' lifestyle, for which monthly expenses are assumed to be $5,170. To keep up this lifestyle, you would need savings of $1,013,000.
Prudential's assistant director for marketing products, Mr Daniel Lum, said individuals can access its website at http://www.whatsyournumber.com/.
sg to identify their lifestyle aspirations, as well as how much monthly savings they would need to reach their retirement goals, assuming a specific rate of return.
Whole life plans with lifetime payouts
INSTEAD of a lump-sum premium outlay as required for an annuity, these plans allow for progressive saving over eight or 10 years to build a retirement nest egg.
A hybrid of whole life and endowment plans, they come with regular payouts. A major plus is that they are paid out for as long as the assured is alive, just as with annuities.
The exception is the AIA Platinum Rewards plan, where the cash payments, also known as coupons, are paid out till the assured turns 100. They are denominated in US dollars.
The fixed annual premiums are paid for a limited period only. The period is eight years for AIA Platinum Rewards and UOB Life Maxi Future, and 10 years for Manulife 3G.
With both UOB Life and Manulife, for a 30-year-old woman who has a sum assured of $100,000 for her baby, the annual premiums would range from about $8,000 to over $9,000.
Policyholders enjoy regular payouts with a guaranteed component of at least 2 per cent of the sum assured, after the premiums are paid up. There is also a non-guaranteed annual dividend, based on the performance of the insurer's life fund.
Such plans give the customer the chance to enjoy a lifetime of income and the option of leaving behind a legacy by taking up a policy on his child's life.
In this case, the policy owner can draw the cash coupons for as long as he likes up to the time that he is ready to assign the plan to his child. After that, the child would get the yearly cash coupons.
Based on a guaranteed cash payout of 2 per cent and a non-guaranteed dividend of 2.2 per cent of the sum assured, Manulife worked out that the total projected payout would be $515,904 after 85 years of cover. The premiums would add up to $82,500.
Calling such plans 'a no-brainer', Mr Patrick Lim, the associate director of financial advisory firm PromiseLand Independent, said he liked the feature of having lifetime guaranteed coupons that would not be hurt by market fluctuations.
'This plan can be considered part of an additional diversification in an investment portfolio,' he said.
Both AIA and UOB Life offer a benefit that covers 30 critical illnesses for an additional premium. In the case of UOB Life, the single premium for this benefit with a sum assured of $100,000 for 30 years would be $2,900 for a non- smoking male aged 30.
Here is Mr Lim's take on the plans' pros and cons.
AIA Platinum Rewards
Pros
The guaranteed cash payout of 3 per cent of the basic sum assured is the highest for all three insurers. Manulife and UOB Life come in at 2 per cent of the basic sum assured.
The dividends, if left to accumulate with the insurer, are also the highest at 4.25 per cent. This rate is not guaranteed.
Cons
As the plan is denominated in US dollars, there is some currency exchange risk, but if a person needs US dollars, this issue might not apply.
The high 'entry' level of about $8,500 probably places this plan out of the reach of both lower- and middle-income consumers. It is targeted at the mass affluent market.
The yearly payouts will cease if and when the assured reaches the age of 100.
The assumed projected investment rate of return is the highest at 5.75 per cent.
Manulife 3G
Pros
This plan is priced at a level that appeals to the widest segment of the population, with entry premiums of just over $1,500.
The assumed investment return of 4.2 per cent, comprising both guaranteed and non-guaranteed payouts, is pretty decent.
These payouts are made during the assured's lifetime.
Cons
The assumed investment return of 5.25 per cent is the highest for Singdollar participating products.
UOB Life Maxi Future
Pros
It assumes a lower projected investment return of 4.5 per cent.
Payouts are made during the assured's lifetime.
Cons
The fact sheet did not provide a specific figure for the non-guaranteed portion of the annual dividend.
Other retirement alternatives
RATHER than relying on retirement options with an insurance component, some financial advisers prefer to advocate separating insurance from investments.
'The best way to insure oneself is simply to buy a no- frills insurance plan. And the best way to manage one's investments successfully with consistent returns is to have a simple portfolio management of equities, bonds and cash,' said Mr Goh.
Mr Leong Sze Hian, the president of the Society of Financial Service Professionals, prefers the flexibility of lump- sum investments plus future top-ups on a globally diversified portfolio of funds.
This strategy allows free switching to re-balance the portfolio periodically. Also, regular or ad hoc withdrawals can be made when the need arises by liquidating the fund that has gained the most in value.
Mr Goh worked out that, if a customer bought a term policy with a sum assured of $100,000 and invested the rest of the 10-year annual premiums of $8,250, the projected total returns would be $753,548 based on an investment return of 5 per cent, after 85 years.
The customer could also expect to receive an annual cash payout of $4,200 after 10 years. If a higher investment return of 7 per cent were assumed, the projected amount would be $9.13 million.
Nevertheless, even for people who are averse to risk in terms of investing, it is better to have a 'not so good' financial plan than no financial plan at all, added Mr Goh.
Wednesday, November 7, 2007
Memstar completes RTO of MediaStream
Memstar completes RTO of MediaStream; invests $22m in new production facility for membrane products
• Memstar starts trading on 3 October 2007
SINGAPORE, 2 October 2007 – Memstar Technology Ltd. ("Memstar" or together
with its subsidiaries, the "Group"), starts trading tomorrow on the SGX-SESDAQ
following the completion of a reverse takeover of MediaStream Limited.
Memstar, which was founded by Dr Ge Hailin, a Chinese chemical engineer who has
been a permanent resident in Singapore since 1992, is a leading manufacturer and
distributor of PVDF (polyvinylidene fluoride) hollow fibre membranes and membrane
products. Memstar is one of the few PVDF hollow fibre membrane manufacturers in the
world. In the PRC, Memstar’s membrane products are widely used in both industrial and
domestic/commercial applications.
Riding on the growth in demand for PVDF hollow fibre membrane and membrane
products, Memstar turned in revenue growth of 1,326% to RMB60.5 million in the latest
financial year ended 30 June 2007, from RMB4.2 million in the financial year ended 30
June 2006. Correspondingly, its profit after tax increased to RMB40.7 million, from a profit after tax of RMB0.2 million.
Against a backdrop of robust industry prospects in the PRC and overseas, Memstar has
mapped out an expansion plan to increase its production capacity as well as the range of
its membrane products which are used by water purification and wastewater treatment
companies.
As its existing plant in Guangzhou which began operations in December 2005 is currently
running at almost full capacity, Memstar has started work on the construction of a second
production facility in Mianyang, Sichuan province.
Upon completion in 2008, this second production facility costing an estimated $22 million
will increase the Group’s membrane production capacity from the current 0.6 million sq m
to at least 1.8 million sq m per year as well as its production lines to nine. In the view of
the directors of Memstar, this will establish Memstar as the largest PVDF hollow fibre
membrane manufacturer in the PRC.
"With the expansion, we will be in a good position to meet the growing demand for
membrane products especially in the PRC," says Dr Ge who has been appointed CEO of
Memstar. "We intend to further expand the production space in Mianyang to establish
additional production lines so as to increase its production capacity to 3 million sq m per
year, if the need arises."
Besides the new production facility, Memstar will continue to expand its current product
line, strengthen its R&D capabilities to develop new membrane products for different uses, increase its marketing and promotional activities to strengthen the Memstar brand and also to expand into overseas markets.
For its industrial membrane products, which accounts for the bulk of its revenue, Memstar is working on new products to target a broader range of industries. The industrial applications are the submerged membrane and pressurised membrane modules that are used in water/wastewater treatment, wastewater reclamation, seawater desalination, food, pharmaceutical, chemical, power generation, petroleum, bio-separation and for other separation processes.
For domestic/commercial water purifiers, Memstar aims to develop new membrane
products that work under different environmental conditions such as outdoor units, units
operating at different water pressures and ultra compact units. It is also developing
membrane products that combine different technologies such as activated carbon
adsorption, ion exchange and RO (reverse osmosis) to treat challenging raw water
sources.
On the R&D front which is anchored in Singapore, Memstar has 7 researchers with
combined membrane production and application experience of over 80 years. The
financial support from EDB (Economic Development Board) is an endorsement of the
Group’s R&D capabilities. Memstar intends to embark on research projects in close
collaboration with renowned research institutes including Nanyang Technological
University in Singapore and Chinese Academy of Engineering Physics in Mianyang, PRC, on a project-by-project basis.
Memstar is also keen to penetrate new overseas markets as part of its efforts to ensure
sustained growth and to build its brand. For a start, it has collaborated with strategic
partners to bring its water purifiers and industrial membrane products to Malaysia and Indonesia and will continue to grow its business outside the PRC.
For the financial year ending 30 June 2008, Memstar intends to set aside 10% of its net
profit attributable to shareholders for dividends.
About Memstar Technology Ltd.
Established in 2005, Memstar is primarily involved in the manufacture and distribution of
polyvinylidene fluoride (PVDF) hollow fibre membrane and membrane products.
With its strong Singapore-based research capabilities and technologically advanced manufacturing facilities located in the PRC (Guangzhou and Mianyang), Memstar is one of few PVDF hollow fibre membrane manufacturers in the world. Its membrane products are used in both industrial and domestic/commercial applications. Industrial applications are the pressurised membrane modules and submerged membrane modules that are used in water/wastewater treatment, water reclamation, seawater desalination, food, pharmaceutical, chemical, power generation, petroleum, bio-separation and other separation processes. The domestic/commercial applications include membrane water purifiers or integrated water purifiers for households, commercial buildings, small businesses, hotels, schools and hospitals.
• Memstar starts trading on 3 October 2007
SINGAPORE, 2 October 2007 – Memstar Technology Ltd. ("Memstar" or together
with its subsidiaries, the "Group"), starts trading tomorrow on the SGX-SESDAQ
following the completion of a reverse takeover of MediaStream Limited.
Memstar, which was founded by Dr Ge Hailin, a Chinese chemical engineer who has
been a permanent resident in Singapore since 1992, is a leading manufacturer and
distributor of PVDF (polyvinylidene fluoride) hollow fibre membranes and membrane
products. Memstar is one of the few PVDF hollow fibre membrane manufacturers in the
world. In the PRC, Memstar’s membrane products are widely used in both industrial and
domestic/commercial applications.
Riding on the growth in demand for PVDF hollow fibre membrane and membrane
products, Memstar turned in revenue growth of 1,326% to RMB60.5 million in the latest
financial year ended 30 June 2007, from RMB4.2 million in the financial year ended 30
June 2006. Correspondingly, its profit after tax increased to RMB40.7 million, from a profit after tax of RMB0.2 million.
Against a backdrop of robust industry prospects in the PRC and overseas, Memstar has
mapped out an expansion plan to increase its production capacity as well as the range of
its membrane products which are used by water purification and wastewater treatment
companies.
As its existing plant in Guangzhou which began operations in December 2005 is currently
running at almost full capacity, Memstar has started work on the construction of a second
production facility in Mianyang, Sichuan province.
Upon completion in 2008, this second production facility costing an estimated $22 million
will increase the Group’s membrane production capacity from the current 0.6 million sq m
to at least 1.8 million sq m per year as well as its production lines to nine. In the view of
the directors of Memstar, this will establish Memstar as the largest PVDF hollow fibre
membrane manufacturer in the PRC.
"With the expansion, we will be in a good position to meet the growing demand for
membrane products especially in the PRC," says Dr Ge who has been appointed CEO of
Memstar. "We intend to further expand the production space in Mianyang to establish
additional production lines so as to increase its production capacity to 3 million sq m per
year, if the need arises."
Besides the new production facility, Memstar will continue to expand its current product
line, strengthen its R&D capabilities to develop new membrane products for different uses, increase its marketing and promotional activities to strengthen the Memstar brand and also to expand into overseas markets.
For its industrial membrane products, which accounts for the bulk of its revenue, Memstar is working on new products to target a broader range of industries. The industrial applications are the submerged membrane and pressurised membrane modules that are used in water/wastewater treatment, wastewater reclamation, seawater desalination, food, pharmaceutical, chemical, power generation, petroleum, bio-separation and for other separation processes.
For domestic/commercial water purifiers, Memstar aims to develop new membrane
products that work under different environmental conditions such as outdoor units, units
operating at different water pressures and ultra compact units. It is also developing
membrane products that combine different technologies such as activated carbon
adsorption, ion exchange and RO (reverse osmosis) to treat challenging raw water
sources.
On the R&D front which is anchored in Singapore, Memstar has 7 researchers with
combined membrane production and application experience of over 80 years. The
financial support from EDB (Economic Development Board) is an endorsement of the
Group’s R&D capabilities. Memstar intends to embark on research projects in close
collaboration with renowned research institutes including Nanyang Technological
University in Singapore and Chinese Academy of Engineering Physics in Mianyang, PRC, on a project-by-project basis.
Memstar is also keen to penetrate new overseas markets as part of its efforts to ensure
sustained growth and to build its brand. For a start, it has collaborated with strategic
partners to bring its water purifiers and industrial membrane products to Malaysia and Indonesia and will continue to grow its business outside the PRC.
For the financial year ending 30 June 2008, Memstar intends to set aside 10% of its net
profit attributable to shareholders for dividends.
About Memstar Technology Ltd.
Established in 2005, Memstar is primarily involved in the manufacture and distribution of
polyvinylidene fluoride (PVDF) hollow fibre membrane and membrane products.
With its strong Singapore-based research capabilities and technologically advanced manufacturing facilities located in the PRC (Guangzhou and Mianyang), Memstar is one of few PVDF hollow fibre membrane manufacturers in the world. Its membrane products are used in both industrial and domestic/commercial applications. Industrial applications are the pressurised membrane modules and submerged membrane modules that are used in water/wastewater treatment, water reclamation, seawater desalination, food, pharmaceutical, chemical, power generation, petroleum, bio-separation and other separation processes. The domestic/commercial applications include membrane water purifiers or integrated water purifiers for households, commercial buildings, small businesses, hotels, schools and hospitals.
BT: Equities market bullish but dangerous
Business Times - 07 Nov 2007MONEY MATTERS
Equities market bullish but dangerous
Heightened volatility is likely to be a constant companion as basic flaws in the US economy remain unresolved
By LIM SAY BOON
FOR the past 18 months, I have maintained my bullish equities stance in the face of three major corrections - the emerging markets meltdown, the Shanghai-led correction and the recent credit market crisis.
But with each 'survival' of a major correction, I have become more nervous. And I am taking nothing for granted for the rest of this year and 2008.
Yes, I am maintaining a cautiously bullish stance. But I believe heightened volatility is likely to be a constant companion as equity markets push higher. The basic flaws in the US economy - superficially, the housing downturn but more fundamentally, American over-consumption - remain unresolved.
Liquidity injections and rate cuts by the US Federal Reserve have stabilised financial markets, but are likely to exacerbate the global savings imbalance by propping up US over-consumption and worsening the twin deficits.
The fault lines in the fundamentals are likely to manifest themselves in coming months in, among other things, progressively higher spikes in equities volatility, periodic threats of an unruly unwinding of the yen carry trade, growing fears of a recession in the United States alternating with concerns that pump-priming measures could result in inflation down the road, and persistent jitters over the amount of leverage in financial markets. There is much for equity bulls to be nervous about.
I have identified five broad sources of tension in asset markets:
While equity valuations globally are still moderate relative to their 10-year ranges, a slowing US economy is likely to dampen earnings growth as liquidity drives stock prices higher. This will gradually push up price-to-earnings and price-to-book multiples. Similarly, while there is still a yield gap in favour of stocks over government bonds in both the US and Europe, the gap will narrow as stock prices rise.
There will be tension between the Fed's stimulatory actions and the likely worsening of the US twin deficits - already manifest in the recent downward pressures on the US dollar.
A conflict between the recovery in risk trades and growth in the global savings imbalance - both of which will be fuelled by the same rush of liquidity.
The 'magic bullet' of rate cuts that recently restored market stability will also exacerbate the leverage that was a root cause of the instability to begin with.
The contradiction between price and volatility in the equities market - as in the late 1990s, both are likely to rise in tandem. Spikes in volatility are likely to trigger the unwinding of currency carry trades and sharp declines in equity and commodity prices.
But liquidity is likely to be a deciding factor in asset prices. Cheap money - and the huge amount available - is a powerful driver of risk appetites and asset prices. Injections of temporary liquidity by central banks and rate cuts by the Fed are likely to continue driving asset markets. That's the bottom line.
However, liquidity makes for short memories - the pain of July-August now appears almost forgotten in the scramble for returns. And short memories make for bad economics and reckless investment strategies. I am taking the middle path. With rising tensions in global financial markets, unmitigated bullishness would be reckless, cavalier. But given the still-moderate valuations in equities, the oft-mentioned flood of liquidity, the low cost of funds, high returns on equity (ROE) globally and the generally still robust state of the global economy, there remains a strong argument that stock prices could push considerably higher yet.
So I continue to be bullish about equities - for now anyway. But I am by my own admission a nervous bull. I see the potential for financial blow-ups, much like that in July-August, around any of the fundamental flaws and tensions outlined above.
While I do not see much tactical advantage in US Treasuries at current yields, they are now more important than usual as diversification and negative correlation tools in the event of market turbulence or financial crisis.
It would also be sensible to seek out, for any core portfolio, strong-performing, multi-manager/multi-strategy funds of hedge funds with low correlations to equity markets.
I would reduce exposure to commodities, particularly base metals, for two reasons. One, demand-supply dynamics are likely to turn less favourable next year. Two, they have recently exhibited a correlation with equities and other risk trades. That is, there is obviously a speculative element in commodities beyond end-user demand - something that will rise and fall in tandem with risk appetites and inversely with equities volatility. Indeed, the crude oil market currently shares the same characteristic with industrial metals of being speculative demand-driven.
Buying some yen on weakness is another hedge against both the threat of an unruly unwinding of the currency carry trade but also against equities volatility. And although the price of gold could pause after a strong run-up, over the longer term it could be another useful hedge - against US dollar weakness and related currency/equity market turmoil.
Remember, when the end comes for the equities market, it is likely to be an extremely ugly affair all round - with all manner of correlated risk trades biting the dust in spectacular fashion.
That includes commodities (including crude oil), emerging market and high-yield debt, and currency carry trades.
Those already sitting on profits on risk trades should consider repositioning the gains into non-directional plays. For example, instead of betting that crude oil will head for and above US$100 - a brave call - they may consider a structure that goes long the 12-month crude oil contract and short the one-month, given the US$9 'backwardation' difference between the two. Instead of a long Asia ex-Japan position, they may consider a structure that pays on outperformance of Singapore's STI versus Japan's Nikkei. And instead of outright long positions on equities, they should consider structures that allow some upside participation while offering some downside protection.
The markets are in full rally mode - with some markets such as China in bubble territory with trailing price to earnings ratios running at 60 times. This may be the most profitable leg of the bull market. But it is also the most dangerous.
Lim Say Boon is chief investment strategist with Standard Chartered Bank, Group Wealth Management
Heightened volatility is likely to be a constant companion as basic flaws in the US economy remain unresolved
By LIM SAY BOON
FOR the past 18 months, I have maintained my bullish equities stance in the face of three major corrections - the emerging markets meltdown, the Shanghai-led correction and the recent credit market crisis.
But with each 'survival' of a major correction, I have become more nervous. And I am taking nothing for granted for the rest of this year and 2008.
Yes, I am maintaining a cautiously bullish stance. But I believe heightened volatility is likely to be a constant companion as equity markets push higher. The basic flaws in the US economy - superficially, the housing downturn but more fundamentally, American over-consumption - remain unresolved.
Liquidity injections and rate cuts by the US Federal Reserve have stabilised financial markets, but are likely to exacerbate the global savings imbalance by propping up US over-consumption and worsening the twin deficits.
The fault lines in the fundamentals are likely to manifest themselves in coming months in, among other things, progressively higher spikes in equities volatility, periodic threats of an unruly unwinding of the yen carry trade, growing fears of a recession in the United States alternating with concerns that pump-priming measures could result in inflation down the road, and persistent jitters over the amount of leverage in financial markets. There is much for equity bulls to be nervous about.
I have identified five broad sources of tension in asset markets:
While equity valuations globally are still moderate relative to their 10-year ranges, a slowing US economy is likely to dampen earnings growth as liquidity drives stock prices higher. This will gradually push up price-to-earnings and price-to-book multiples. Similarly, while there is still a yield gap in favour of stocks over government bonds in both the US and Europe, the gap will narrow as stock prices rise.
There will be tension between the Fed's stimulatory actions and the likely worsening of the US twin deficits - already manifest in the recent downward pressures on the US dollar.
A conflict between the recovery in risk trades and growth in the global savings imbalance - both of which will be fuelled by the same rush of liquidity.
The 'magic bullet' of rate cuts that recently restored market stability will also exacerbate the leverage that was a root cause of the instability to begin with.
The contradiction between price and volatility in the equities market - as in the late 1990s, both are likely to rise in tandem. Spikes in volatility are likely to trigger the unwinding of currency carry trades and sharp declines in equity and commodity prices.
But liquidity is likely to be a deciding factor in asset prices. Cheap money - and the huge amount available - is a powerful driver of risk appetites and asset prices. Injections of temporary liquidity by central banks and rate cuts by the Fed are likely to continue driving asset markets. That's the bottom line.
However, liquidity makes for short memories - the pain of July-August now appears almost forgotten in the scramble for returns. And short memories make for bad economics and reckless investment strategies. I am taking the middle path. With rising tensions in global financial markets, unmitigated bullishness would be reckless, cavalier. But given the still-moderate valuations in equities, the oft-mentioned flood of liquidity, the low cost of funds, high returns on equity (ROE) globally and the generally still robust state of the global economy, there remains a strong argument that stock prices could push considerably higher yet.
So I continue to be bullish about equities - for now anyway. But I am by my own admission a nervous bull. I see the potential for financial blow-ups, much like that in July-August, around any of the fundamental flaws and tensions outlined above.
While I do not see much tactical advantage in US Treasuries at current yields, they are now more important than usual as diversification and negative correlation tools in the event of market turbulence or financial crisis.
It would also be sensible to seek out, for any core portfolio, strong-performing, multi-manager/multi-strategy funds of hedge funds with low correlations to equity markets.
I would reduce exposure to commodities, particularly base metals, for two reasons. One, demand-supply dynamics are likely to turn less favourable next year. Two, they have recently exhibited a correlation with equities and other risk trades. That is, there is obviously a speculative element in commodities beyond end-user demand - something that will rise and fall in tandem with risk appetites and inversely with equities volatility. Indeed, the crude oil market currently shares the same characteristic with industrial metals of being speculative demand-driven.
Buying some yen on weakness is another hedge against both the threat of an unruly unwinding of the currency carry trade but also against equities volatility. And although the price of gold could pause after a strong run-up, over the longer term it could be another useful hedge - against US dollar weakness and related currency/equity market turmoil.
Remember, when the end comes for the equities market, it is likely to be an extremely ugly affair all round - with all manner of correlated risk trades biting the dust in spectacular fashion.
That includes commodities (including crude oil), emerging market and high-yield debt, and currency carry trades.
Those already sitting on profits on risk trades should consider repositioning the gains into non-directional plays. For example, instead of betting that crude oil will head for and above US$100 - a brave call - they may consider a structure that goes long the 12-month crude oil contract and short the one-month, given the US$9 'backwardation' difference between the two. Instead of a long Asia ex-Japan position, they may consider a structure that pays on outperformance of Singapore's STI versus Japan's Nikkei. And instead of outright long positions on equities, they should consider structures that allow some upside participation while offering some downside protection.
The markets are in full rally mode - with some markets such as China in bubble territory with trailing price to earnings ratios running at 60 times. This may be the most profitable leg of the bull market. But it is also the most dangerous.
Lim Say Boon is chief investment strategist with Standard Chartered Bank, Group Wealth Management
BT: CPF members can put up to 10% of savings in gold fund
Business Times - 07 Nov 2007
CPF members can put up to 10% of savings in gold fund
By GENEVIEVE CUA
CPF members can now buy shares in StreetTRACKS Gold exchange traded fund (ETF) - a move the fund's sponsors hope will boost volume. From today, members can invest up to 10 per cent of their CPF savings in the gold ETF.
StreetTRACKS Gold was listed on the Singapore Exchange in October last year as Asia's first gold-backed ETF. It is sponsored by the World Gold Trust and marketed by State Street Global Advisors.
CPF said late last year that members could invest in gold ETFs - but there was no gold ETF in the CPF Investment Scheme (CPFIS) at the time. State Street secured in-principle approval for StreetTRACKS Gold (GLD) in August this year.
Its inclusion in CPFIS has come none too soon. Gold touched US$819 an ounce yesterday, bringing it closer to its peak of US$850 in 1980. GLD ETF made its debut in Singapore when gold was at US$573 an ounce.
Gold's renaissance is thanks to a weak US dollar, rising demand, tight supply and geopolitical tension. A Credit Suisse report has suggested that while the weak US dollar provides a supportive backdrop, long-term diminishing supply could trigger 'quantum upward changes' in the gold price.
A JP Morgan report in June said gold could hit US$1,000 in the medium term - but it did not say just when this might be.
GLD ETF is priced at one-tenth of gold's spot price. It allows investors to invest in gold without the inconvenience of storage, custody and GST charges that go with the physical product.
The ETF holds 597.53 tonnes of bullion valued at US$15.45 billion. It has an expense ratio of 0.4 per cent.
Singapore investors who bought GLD at its inception in October last year would have reaped a return of 31 per cent, said World Gold Council director Albert Cheng.
Another avenue for those keen for gold exposure is a gold equities fund.
In this field, UOB Asset Management's portfolio manager for United Gold & General Fund, Alfred Wong, has just left the company. The new portfolio manager is May-E Leong, who has managed other UOB funds, including United Apec Equity and the Millenium Trusts. She will be supervised by UOBAM's deputy chief investment officer John Doyle.
BCA Research said in a note on Monday that gold has surged 13 per cent - amid record speculative interest - since the US Federal Reserve's rate cut on Sept 18.
Although positioning and short-term technicals suggest a consolidation is probable, the cyclical trend remains up, according to BCA.
It expects the Fed to continue to ease interest rates to support the US economy, and this suggests further weakening of the US dollar.
'In our opinion, gold is predominantly a global liquidity play,' BCA says. 'On the demand side, interest in gold ETFs continues to boom and central banks may boost their holdings as their distrust for the greenback grows. 1980's all-time high of US$850 is well within reach, and any break above that could spark a 'gold rush'. Bottom line: It is too soon to get out of gold. Stay long.'
CPF members can put up to 10% of savings in gold fund
By GENEVIEVE CUA
CPF members can now buy shares in StreetTRACKS Gold exchange traded fund (ETF) - a move the fund's sponsors hope will boost volume. From today, members can invest up to 10 per cent of their CPF savings in the gold ETF.
StreetTRACKS Gold was listed on the Singapore Exchange in October last year as Asia's first gold-backed ETF. It is sponsored by the World Gold Trust and marketed by State Street Global Advisors.
CPF said late last year that members could invest in gold ETFs - but there was no gold ETF in the CPF Investment Scheme (CPFIS) at the time. State Street secured in-principle approval for StreetTRACKS Gold (GLD) in August this year.
Its inclusion in CPFIS has come none too soon. Gold touched US$819 an ounce yesterday, bringing it closer to its peak of US$850 in 1980. GLD ETF made its debut in Singapore when gold was at US$573 an ounce.
Gold's renaissance is thanks to a weak US dollar, rising demand, tight supply and geopolitical tension. A Credit Suisse report has suggested that while the weak US dollar provides a supportive backdrop, long-term diminishing supply could trigger 'quantum upward changes' in the gold price.
A JP Morgan report in June said gold could hit US$1,000 in the medium term - but it did not say just when this might be.
GLD ETF is priced at one-tenth of gold's spot price. It allows investors to invest in gold without the inconvenience of storage, custody and GST charges that go with the physical product.
The ETF holds 597.53 tonnes of bullion valued at US$15.45 billion. It has an expense ratio of 0.4 per cent.
Singapore investors who bought GLD at its inception in October last year would have reaped a return of 31 per cent, said World Gold Council director Albert Cheng.
Another avenue for those keen for gold exposure is a gold equities fund.
In this field, UOB Asset Management's portfolio manager for United Gold & General Fund, Alfred Wong, has just left the company. The new portfolio manager is May-E Leong, who has managed other UOB funds, including United Apec Equity and the Millenium Trusts. She will be supervised by UOBAM's deputy chief investment officer John Doyle.
BCA Research said in a note on Monday that gold has surged 13 per cent - amid record speculative interest - since the US Federal Reserve's rate cut on Sept 18.
Although positioning and short-term technicals suggest a consolidation is probable, the cyclical trend remains up, according to BCA.
It expects the Fed to continue to ease interest rates to support the US economy, and this suggests further weakening of the US dollar.
'In our opinion, gold is predominantly a global liquidity play,' BCA says. 'On the demand side, interest in gold ETFs continues to boom and central banks may boost their holdings as their distrust for the greenback grows. 1980's all-time high of US$850 is well within reach, and any break above that could spark a 'gold rush'. Bottom line: It is too soon to get out of gold. Stay long.'
BT: Greenspan, Soros warn of more US housing pain
Business Times - 06 Nov 2007
LAST UPDATED 5.27PM
Greenspan, Soros warn of more US housing pain
TOKYO - Former Federal Reserve chairman Alan Greenspan and billionaire investor George Soros warned of more pain ahead for the US economy, saying the downturn in the housing market had yet to take its full toll on growth.
Mr Greenspan told a forum in Tokyo on Tuesday that high inventories of unsold homes presented a major risk to the US economy and financial markets and that he was not sanguine about how quickly the glut could be reduced.
'We still need to accelerate the rate of inventory liquidation, and that will mean bringing housing starts down and sales up. We have a long way to go,' said Mr Greenspan, who was answering questions at a CEO conference in Tokyo via video link from Washington.
The surge in defaults in sub-prime mortgages has taken a toll on major financial institutions, leading to billions of dollars in asset write-downs and the departures of the chief executives of Merrill Lynch and Citigroup.
Citigroup's additional US$11 billion write-down tied to sub-prime mortgage revived fears about the extent of the credit crunch, hurting equity markets and the dollar while keeping benchmark US Treasury yields near a two-year low.
Mr Soros said in a lecture at New York University that the US economy was on the verge of a serious correction and that the Federal Reserve may be underestimating the potential slowdown.
'I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Fed Chairman Ben) Bernanke is seeing,' he said.
The comments came after Bill Gross, chief investment officer at the world's No. 1 bond fund PIMCO, said on CNBC Television the Fed cannot afford to let US housing prices fall sharply and would need to cut rates aggressively, perhaps to 3.5 per cent.
The Fed has slashed rates by a combined 75 basis points to 4.5 per cent in an effort to limit the damage on the broader economy from the housing market slide and ease some of the financial strains from the resulting credit crunch.
But Fed Governor Frederic Mishkin said on Monday that the Fed should be prepared to reverse its monetary easing if the US economy escapes major damage from the market turmoil, even as a recovery is a way off in housing and sub-prime mortgages.
Mr Greenspan said about US$900 billion of sub-prime mortgages have been securitised into fixed-income instruments, and the excess level of unsold homes is driving the price declines that are eroding the value of the securities backed by those mortgages.
'The critical issue on the whole sub-prime, and by extension the whole financial system, rests very narrowly on getting rid of probably 200,000-300,000 excess units in inventories in the United States,' Mr Greenspan said.
PIMCO's Gross likened the US housing market downturn to the bursting of Japan's property bubble in the 1990s that dragged the world's second-largest economy into a protracted bout of deflation.
Mr Gross said the pain to household finances from adjustable-rate mortgages being reset higher had yet to be fully felt.
'We've only begun to see the pain from the standpoint of the homeowner in terms of those monthly payments. Defaults and delinquencies will increase as we extend throughout 2007 and then into 2008,' he said.
Inventories of existing US homes have jumped to the highest on record going back to 1999, while inventories of new homes remain at elevated levels as falling prices and tighter credit standards have deterred buyers.
But Mr Greenspan said the global economy was very powerful even with the 'extraordinary' rise in oil prices, and the underlying structure of the global economy was doing well. -- REUTERS
LAST UPDATED 5.27PM
Greenspan, Soros warn of more US housing pain
TOKYO - Former Federal Reserve chairman Alan Greenspan and billionaire investor George Soros warned of more pain ahead for the US economy, saying the downturn in the housing market had yet to take its full toll on growth.
Mr Greenspan told a forum in Tokyo on Tuesday that high inventories of unsold homes presented a major risk to the US economy and financial markets and that he was not sanguine about how quickly the glut could be reduced.
'We still need to accelerate the rate of inventory liquidation, and that will mean bringing housing starts down and sales up. We have a long way to go,' said Mr Greenspan, who was answering questions at a CEO conference in Tokyo via video link from Washington.
The surge in defaults in sub-prime mortgages has taken a toll on major financial institutions, leading to billions of dollars in asset write-downs and the departures of the chief executives of Merrill Lynch and Citigroup.
Citigroup's additional US$11 billion write-down tied to sub-prime mortgage revived fears about the extent of the credit crunch, hurting equity markets and the dollar while keeping benchmark US Treasury yields near a two-year low.
Mr Soros said in a lecture at New York University that the US economy was on the verge of a serious correction and that the Federal Reserve may be underestimating the potential slowdown.
'I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Fed Chairman Ben) Bernanke is seeing,' he said.
The comments came after Bill Gross, chief investment officer at the world's No. 1 bond fund PIMCO, said on CNBC Television the Fed cannot afford to let US housing prices fall sharply and would need to cut rates aggressively, perhaps to 3.5 per cent.
The Fed has slashed rates by a combined 75 basis points to 4.5 per cent in an effort to limit the damage on the broader economy from the housing market slide and ease some of the financial strains from the resulting credit crunch.
But Fed Governor Frederic Mishkin said on Monday that the Fed should be prepared to reverse its monetary easing if the US economy escapes major damage from the market turmoil, even as a recovery is a way off in housing and sub-prime mortgages.
Mr Greenspan said about US$900 billion of sub-prime mortgages have been securitised into fixed-income instruments, and the excess level of unsold homes is driving the price declines that are eroding the value of the securities backed by those mortgages.
'The critical issue on the whole sub-prime, and by extension the whole financial system, rests very narrowly on getting rid of probably 200,000-300,000 excess units in inventories in the United States,' Mr Greenspan said.
PIMCO's Gross likened the US housing market downturn to the bursting of Japan's property bubble in the 1990s that dragged the world's second-largest economy into a protracted bout of deflation.
Mr Gross said the pain to household finances from adjustable-rate mortgages being reset higher had yet to be fully felt.
'We've only begun to see the pain from the standpoint of the homeowner in terms of those monthly payments. Defaults and delinquencies will increase as we extend throughout 2007 and then into 2008,' he said.
Inventories of existing US homes have jumped to the highest on record going back to 1999, while inventories of new homes remain at elevated levels as falling prices and tighter credit standards have deterred buyers.
But Mr Greenspan said the global economy was very powerful even with the 'extraordinary' rise in oil prices, and the underlying structure of the global economy was doing well. -- REUTERS
BT: Soros warns of 'serious' US economic correction
Business Times - 07 Nov 2007
Soros warns of 'serious' US economic correction
He says things are worse than what Fed chief sees
(NEW YORK) Billionaire investor George Soros has forecast that the US economy is 'on the verge of a very serious economic correction' after decades of overspending.
'We have borrowed an awful lot of money and now the bill is coming to us,' he said during a lecture at the New York University, adding that the war on terror 'has thrown America out of the rails'.
Asked whether a recession was inevitable, Mr Soros said: 'I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Fed Chairman Ben) Bernanke is seeing.'
On the same note, David Rosenberg, chief economist for North America at Merrill Lynch & Co in New York, forecast that the US economy will come close to stalling in the fourth quarter.
The economy will probably grow at an annual rate of between zero per cent and one per cent, Mr Rosenberg said in his weekly report to clients dated Nov 2. He currently forecasts a 0.7 per cent pace of expansion this quarter.
The third-quarter's 3.9 per cent growth rate was artificially boosted by 'non-recurring factors' that will disappear in the last three months of the year, Mr Rosenberg said.
Add to that the collapse in sub-prime-mortgage lending and a worsening housing slump and the expansion will slow, he said in an interview on Monday.
'This is by far the most leveraged economic expansion in modern history,' Mr Rosenberg said in the interview. Parts of the mortgage market 'just aren't coming back. This is going to have a deleterious impact on growth.'
A drop in gasoline prices even as oil prices jumped, a surge in auto inventories before threatened strikes and an increase in defence spending propelled third-quarter growth and won't be repeated, Mr Rosenberg's report said.
On the forex market, Mr Soros, famous for his speculative attack on the Bank of England that made him more than US$1 billion, declined to nominate which currencies were more vulnerable currently. He also declined to comment specifically on the dollar.
'I know exactly where the currencies are going to but I'm not going to tell that to you,' he told the audience.
Last week, investment guru Jim Rogers, who co-founded the Quantum Fund with Mr Soros in the 1970s, recommended selling the dollar as well as US investment banks and US housing stocks.
In an interview with Bloomberg News Agency, Mr Rogers said that US credit markets are enduring their worst bubble ever and forecast that it may take six years for them to return to normal.
'Never in American history have people been able to buy a house with no money down,' Mr Rogers said. 'We have the worst credit bubble, and it's going to take a long time to work its way out. You don't cure a bubble in five or six months. It takes five or six years.'
Mr Rogers, the chairman of Beeland Interests Inc, also said he's pessimistic on the US dollar. He said he hoped the Fed raises interest rates to stem inflation, but if it does 'the dollar is going to collapse'. -- Reuters, Bloomberg
Soros warns of 'serious' US economic correction
He says things are worse than what Fed chief sees
(NEW YORK) Billionaire investor George Soros has forecast that the US economy is 'on the verge of a very serious economic correction' after decades of overspending.
'We have borrowed an awful lot of money and now the bill is coming to us,' he said during a lecture at the New York University, adding that the war on terror 'has thrown America out of the rails'.
Asked whether a recession was inevitable, Mr Soros said: 'I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Fed Chairman Ben) Bernanke is seeing.'
On the same note, David Rosenberg, chief economist for North America at Merrill Lynch & Co in New York, forecast that the US economy will come close to stalling in the fourth quarter.
The economy will probably grow at an annual rate of between zero per cent and one per cent, Mr Rosenberg said in his weekly report to clients dated Nov 2. He currently forecasts a 0.7 per cent pace of expansion this quarter.
The third-quarter's 3.9 per cent growth rate was artificially boosted by 'non-recurring factors' that will disappear in the last three months of the year, Mr Rosenberg said.
Add to that the collapse in sub-prime-mortgage lending and a worsening housing slump and the expansion will slow, he said in an interview on Monday.
'This is by far the most leveraged economic expansion in modern history,' Mr Rosenberg said in the interview. Parts of the mortgage market 'just aren't coming back. This is going to have a deleterious impact on growth.'
A drop in gasoline prices even as oil prices jumped, a surge in auto inventories before threatened strikes and an increase in defence spending propelled third-quarter growth and won't be repeated, Mr Rosenberg's report said.
On the forex market, Mr Soros, famous for his speculative attack on the Bank of England that made him more than US$1 billion, declined to nominate which currencies were more vulnerable currently. He also declined to comment specifically on the dollar.
'I know exactly where the currencies are going to but I'm not going to tell that to you,' he told the audience.
Last week, investment guru Jim Rogers, who co-founded the Quantum Fund with Mr Soros in the 1970s, recommended selling the dollar as well as US investment banks and US housing stocks.
In an interview with Bloomberg News Agency, Mr Rogers said that US credit markets are enduring their worst bubble ever and forecast that it may take six years for them to return to normal.
'Never in American history have people been able to buy a house with no money down,' Mr Rogers said. 'We have the worst credit bubble, and it's going to take a long time to work its way out. You don't cure a bubble in five or six months. It takes five or six years.'
Mr Rogers, the chairman of Beeland Interests Inc, also said he's pessimistic on the US dollar. He said he hoped the Fed raises interest rates to stem inflation, but if it does 'the dollar is going to collapse'. -- Reuters, Bloomberg
Subscribe to:
Posts (Atom)
