Economy
Bracing for serious trouble
Stock collapse and global downturn begin to take their toll
on Singapore. By Seah Chiang Nee.
Jan 19, 2008
IT'S
the sale of the year, so says the salesman shouting over
a hailer at a suburban mall: “LCD TV sets for only
S$990 each cash-and-carry, usual price S$1,350.”
“Promotion
only for three days,” proclaimed an overhead banner.
Elsewhere,
shops were promoting cheaper computers (tabletop for S$999)
as well as branded clothes, cameras, jewellery and other
luxury goods to catch the pre-Lunar New Year shoppers.
Even
prostitutes, many of them from China, are offering special
“discounts” to make as much money as possible
from the Lunar New Year crowds in Chinatown, a newspaper
reported.
According
to Shin Ming Daily, they are charging customers S$50 instead
of the usual S$70-S$80.
My letterbox
is stuffed with more brochures than I can count, screaming
offers for products ranging from cosmetics to canned abalone,
from post-holiday tours to gym equipment.
This
pre-festival sale is nothing unusual. This year, however,
as the city gears for a downturn, there is a greater degree
of urgency over previous occasions.
The
pulse of the Singaporean consumer is getting weaker as he
gets sandwiched between two evils – a painful stock
market fall and the highest inflation in 25 years.
His
biggest concern, however, is the prospect of a world economic
recession.
The
statistics show what could be the start of a trend regarding
Singaporeans’ greatest addiction: shopping. In November,
the retail index unexpectedly fell by 0.3% after a gain
of 3.8% in the previous month.
“Many
businessmen see the coming festival as the last chance to
sell their products before trouble hits,” a stockbroker
said.
“After
that, a consumer lull is likely to settle in.”
Sales
of cars and high-end property have begun to fall, not to
mention share values. The latest involves taxis.
In a
spontaneous reaction to the official fare increases that
many drivers opposed, many customers have abandoned taxis
for public transport.
Last
week, at the Singapore General Hospital, I saw so many empty
cabs cruising for passengers that they were contributing
to the traffic jam.
A pall
of gloom has descended on this city over the big sharp stock
market sell-off and the feared global recession.
“I
fear for the consequences. Tens of thousands of people,
from the super-rich to heartland retirees, have suffered
losses,” said a remisier who has seen many financial
storms in the last 30 years.
The
punters include workers, housewives and university students,
who had been attracted by last year’s market boom.
Some
are now facing bankruptcy because of the forced sale of
their devalued shares, which were bought on borrowed money.
In an
uneasy environment the biggest risks are in luxury goods,
which have had a good run in recent years.
“People
are already buying less, and fewer are eating in restaurants,”
the remisier noted.
This
pessimism is in contrast to the relative exuberance of a
strong economy over the past four years. That momentum was
still evident until recent weeks.
It is
also contrary to Minister Mentor Lee Kuan Yew’s expression
of confidence that Singapore will emerge stronger in the
next five years whether or not there is a downturn in the
United States and Europe.
Lee
said Singapore would be “at a different plateau”
by 2012.
“The
old Singapore, we are leaving behind,” he said.
Many
feel that while last year’s 7% growth (this year’s
projection: 5% or less) was great news for the nation, the
benefit to the people could have been much less than thought
possible.
Already
hit by inflation, many are now struggling with stock losses
that could take years to resolve.
“My
hands are cold and my heart pounds every time I read news
from Wall Street and see my stocks plunging by the minute,”
said an investor who has lost S$150,000 (RM344,000) in just
one month.
The
main stock index has fallen 20% in just two months.
Slowly,
Singaporeans are getting used to living with a global economy
and with the realisation that a strong GDP does not immediately
mean strong earnings for workers.
Another
is that irrespective of sound local fundamentals, the republic
can be dragged down by a banking crisis half a world away.
“Asians
are paying the price of overspending and over-borrowing
by Americans; and with no say on the matter,” a Chinese-language
teacher lamented.
Apart
from the all-embracing government policies, the property
and stock markets are factors that most affect Singaporean
lives – and both face poor prospects in the coming
year. (Malaysians are the second-biggest foreign buyers
of property here.)
Economists
who have seen all this before say they will recover and
move higher, but while it lasts the ripples will be widely
felt on people’s jobs, incomes and spending.
Last
year, property prices shot up by a dramatic 27%, with more
than 14,800 new private homes sold – or 1,200 a month.
In December,
however, only 305 deals were done.
For
the tens of thousands of troubled families, the immediate
crisis is managing losses in the stock market.
In a
Channel News Asia forum online survey involving 27 traders:
>
Almost half (47%) declared they had lost up to S$50,000
(RM115,000);
> Some 14% admitted to losing S$50,000-S$150,000 (RM115,000-RM344,000);
and,
> Three persons said they had lost more than S$1mil (RM2.3mil).
The
chat site reflects many of the painful individual –
and family – woes, with workers losing an equivalent
of several months to a few years of their salary.
One
said the recent crash would result in him working for 10
months without pay to clear his debts.
“I
don’t know how to tell my wife. She may divorce me,”
he moaned.
(This
article was published in The Star, Malaysia on Jan 19, 2008)
Since
it’s writing, the following were reported: -
*
Export growth in December surprisingly slumped
to slowest pace in five years, 2.3% from 8.5% for same month
in 2006 (official forecast: 4-6%). – Straits Times.
* The Sing-dollar fell sharply against
US-dollar with other Asian currencies (to 1.4420) on growing
fear that its exports will be hit by a US recession. –
Reuters.
Comments
(Excerpt of some online postings)
SammyBoy
forum
From Singapore Idle
Signs are showing every where clearer and clearer by each
day, that inflation is stepping up worst and worst, business
is harder and harder. Malls are quiet, food and products
are more getting expensive by each day.
I see businesses getting quieter by each day when I revisit
the same places over and over again.
Tonight is Friday night and Clark Quay is not even half
as crowded as it used to be on normal Fridays.
The food court on 3rd or 4th floor of Central Mall has 45%
seats unoccupied during the peak of dinner hours. Welcome
the arrival of Golden Period!
Pokimon1
We are going to be in deep sh-t very soon.
I read in the Chinese paper yesterday that vendors in Chinatown
are reporting sales down by 30% compared to last year.
beaver_juice
We have some nice construction projects in the pipeline
that should keep the economy puttering along barring some
deep external shock rippling from US sub-prime.
Think we should be threading water but okay - just like
the 1997 Asian Financial Crisis, we really got hit only
in late 1999/2000 when the US went into recession.
I'm hoping it gets real bad since I missed out on the recent
property run-up but there isn't any indication that our
property market is set to tumble like in 2000.
Only when banks start to cut their valuation and the mass
market reacts eg. HDB valuations drop from quarter to quarter
will there be blood in the streets. The blood-letting seems
to be happening right now in the stock market though...
newyorker88
I am hoping for the best. Business and cycles of economic
boom and doom goes hand in hand. We are only beginning to
see the tip of the ice berg.
1998 was a very serious depression and many Hong Kongers
left their HDB flats with big profits. I would say that
this round, the FTs (foreigners) would be the one defaulting
the loans. Just watch.
Jan 19, 2008
