US
storm
Slams into Singapore
Force bigger than most other countries because of city's
premier status as a world financial centre;
citizens hardest hit. By Seah Chiang Nee.
Sep 20, 2008
"MY
PARENTS have been affected by my failure - my heavy losses
in the stock market during the past year. Every night I
am having nightmares,” one trader recently wrote.
His
S$30,000 savings meant to be a deposit for a flat evaporated
during the downturn, particularly in recent weeks when shares
went into a tailspin.
“My
loss is beyond my means, it is very painful and I don’t
know what my future is,” said the lower-middle-class
bachelor.
“I
had to strive to rebuild my life or else I would have committed
suicide.”
He is
one of a growing number of people here who are hard hit
by the current US banking meltdown, which has reached Singapore.
At the
same time, hundreds of anxious insurance holders have been
flocking to the head-office of AIA branch in Singapore to
check on their policies after hearing news that its US parent
company, AIG was facing bankruptcy.
They
wanted to cancel their policies, even if it meant losing
in investment and coverage. That the US government is providing
US$85bil bailout to AIG did not stop the crowd.
The
Monetary Authority of Singapore has appealed for calm among
holders of its two million policies.
It also
acted to protect customers of another US institution, Lehman
Brothers, which declared bankruptcy by curtailing its operations
here. It cannot remit funds to third parties without approval.
These
days being a world banking hub is beginning to look like
a great idea turned sour for Singapore, particularly its
investment in foreign banks, as the citizens are finding
out.
The
US meltdown is hitting this financial centre like a tonne
of bricks at a time when it is already in the midst of an
economic slowdown and super-high inflation.
To be
sure, the years of excesses of Wall Street have not been
allowed to intrude into the financial district in Shenton
Way, which remains tightly-regulated. The impact, however,
is touching the lives of many people.
“The
trouble is it’s all imported; no Singaporean bank
is a casualty,” said an official.
Some
Singaporeans are, of course, hit worse than others, but
collectively the damage is far more serious here than in
other cities in the region.
Ironically,
it is due to success in becoming a wealthy financial centre.
The
world’s top banks and brokerages have set up their
regional offices here. Now their future remains under a
cloud.
And
when world banking is in turmoil, Singapore’s economy
is shaken up.
This
sector will go through a general lull, if not decline, which
will result in an exodus of foreign executives.
Lehman
Brothers’ operations in Singapore came to a halt on
Monday, a day after it went into bankruptcy. The jobs of
its 270 staff members may disappear.
This,
and the bailout of AIG and other large US corporations,
are sending shock waves throughout the financial industry.
The
many professionals in Singapore - foreigners and Singaporeans
- are deeply concerned about their jobs.
“It’s
quite worrying,” one executive told a TV reporter.
“We don’t know who will be the next target.”
Any
exodus of these highly-paid executives will aggravate an
already poor property market, especially in office and residential
rentals.
It may
retard Singapore’s growth as a banking hub, at least
until stability returns.
During
the past 10 years, it has made financial services one of
its four strategic pillars for growth.
Many
of its global investments are in Western and Asian banks,
which have set up operations here.
In addition,
tens of billions of Temasek Holdings and GIC (Government
Investment Corporation) money have gone into these investments.
They
couldn’t have been worse timed. Their values have
been decimated.
For
Mr and Mrs Singapore, these are worrying times as the economic
downturn begins to bite.
The
worst appears to be the stock market, where many Singaporeans
are invested. The index shares have fallen by 30% in the
past year, but many other shares are down by as much as
50% to 60%.
Some
life savings have been wiped out. Tens of thousands are
groaning under the weight of large losses.
Other
recent headlines, which are dealing fresh blows to Singaporeans,
included the following:
He is one of a growing number of people here who are hard
hit by the current US banking meltdown, which has reached
Singapore.
At the
same time, hundreds of anxious insurance holders have been
flocking to the head-office of AIA branch in Singapore to
check on their policies after hearing news that its US parent
company, AIG was facing bankruptcy.
* Government data confirms that high inflation
is eating into wage gains; average real earnings have fallen
by 4% between April and June;
* Private
home sales slumped 81% in August compared to a year ago,
dropping from 1,723 to 320 units (partly affected by the
Chinese Hungry Ghost Festival);
* Retail
sales fell for the first time in four months as car sales
slumped (by 8%) and consumers bought fewer luxury goods,
mobile phones and computers; and
* Despite
the price of oil falling by a third, the government controversially
raised buses and train fares by four cents (10 sen), adding
to the high inflation.
The
US crisis may trigger off a global recession, including
Singapore.
However,
the city has a protective shield: its large reserves of
US$300bil built up over the years and sound economic fundamentals.
If not
for these, Singapore could be overwhelmed.
But
the ordinary people are a different story. With their real
salaries down, they are vulnerable to any sustained unemployment
and the relentless price increases.
With
half an eye on the 2011 election, the government is taking
precautions. It will change the laws to allow it to dip
into investment returns of the country’s reserves
to offset rising costs of public services.
It’s
seen as a positive move, but also one that serves as a warning
that life can get worse for the people.
(This
was published in The Star on Sept. 20, 2008)
