Singapore 'can withstand most shocks'

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#1
What a resilient country we are!

The Straits Times
Jun 16, 2012
Singapore 'can withstand most shocks'

It has enough in financial arsenal should global meltdown occur: HSBC

By Aaron Low

SINGAPORE will have enough in its financial arsenal to ward off all but the worst of external shocks if the euro zone crisis triggers another global meltdown, said an HSBC report.

The bank noted that Asia would not be spared by the euro zone's woes but economies such as Singapore, China, South Korea, the Philippines, Indonesia and Hong Kong have enough in the bank to help themselves through.

The debt crisis in Europe could intensify within days with Greece heading to the polls tomorrow.

If the results are inconclusive, uncertainty and panic in the markets could break out, said OCBC economist Selena Ling.

'Expect more confusion in financial markets as a repeat of Greece going to the polls ad infinitum is unsustainable,' she added.

However, Barclays Capital economist Leong Wai Ho believes the risk of a big blow-up in Europe remains low.

'These events could be triggered by a sudden liquidity crunch or a bank failure that is large enough to unhinge confidence globally,' he said.

'Fortunately, with the liquidity buffers that central banks have put in place, the probability of contagion is minimised.'

But should the crisis escalate, there is no doubt that Singapore will be the hardest hit in Asia, said Credit Suisse economist Robert Prior-Wandesforde.

He noted that Singapore's exports to the euro zone directly account for more than 12 per cent of the economy while private sector holdings of euro zone debt and equities are higher than anywhere in Asia except Hong Kong.

Euro zone banks also make up a bigger proportion of domestic bank lending in Singapore than in other Asian economies, he said.

'It is obviously extremely hard to quantify how big the hit to GDP (gross domestic product) would be from a Greek exit and significant contagion to other euro zone countries, but we would not be surprised if the initial effect was at least as large as that experienced during the global financial crisis,' he added.

In the first quarter of 2009, Singapore's economy contracted 8.8 per cent, although it bounced back up after interest rates fell and the Government acted to inject funds into the economy.

Mr Prior-Wandesforde noted: 'The good news is that Singapore again has a huge amount of fiscal flexibility to tackle a major growth shock, but unfortun-ately the same cannot be said of both fiscal and monetary policy in most other countries in the world.'

HSBC's Mr Frederic Neumann agreed, noting that Singapore is one of several Asian nations with the capacity to use fiscal policy to buffer the fallout.

Based on public information, Singapore has government debt of 60 per cent, but this is misleading due to accounting numbers. Gross public debt leaves out the Government's assets from past surpluses, which the Government has been accumulating over the years.

'In the case of Singapore, however, this is misleading given the vast amounts of hidden fiscal reserves that the Government possesses,' said Mr Neumann.

He also noted that countries such as Singapore, which did not have a deficit of more than 3 per cent, are in a financially healthier position to roll out stimulus if needed.

The Government has a mandate to balance the budget books over the course of its term in office even though it does record budget deficits on a year-to-year basis. Still, this means that economies such as China, Hong Kong, South Korea and Singapore 'have plenty of room to add a kick to growth', said Mr Neumann.

In 2008, the Government said it would set aside $150 billion of past reserves to guarantee deposits in Singapore until the end of 2010. In 2009, it also drew down $4.9 billion from its reserves for the first time to fund the Jobs Credit programme and a special risk sharing initiative that helped keep credit lines open.

aaronl@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#2
During the asian economic crisis we were only asian country spared because we were exposed to both america and europe economy that are doing well before, we were laughing at everybody and talking about what a relief our little dot managed to dodge the bullet but now all are laughing all the way to the bank due to high commodity prices, our turn to suffer. Now america is having recession and the europeans have their own woes many of their people facing high retrenchments, high gst, high taxes they don't even have jobs or earn enough to eat how we can hope they can buy anything made by us?

talk rubbish lah our press how much and how long can the government afford to bailout? Look at the last crisis we had, massive layoffs everywhere labor union threw up their hands exasperated they couldn't do anything the press trying to make people believe "... layoffs no choice, better layoff some people but preserve the company here and cut pay, cut cpf ... what is that? that's all the government can do delay and buy time and hope crisis gets over soon"

When Oracle Corp bought over Sun microsystems the EU agreed to the buyout on specific condition that nobody in either Oracle or Sun microsystem in europe were laid off. What happened later they started closing down many places including singapore and spared europe, jobs were relocated and moved to europe. If you pass by central mall today you no longer see the huge billboard that says Sun Microsystem that once used hang on top of the building because that office has been closed and people laid off.

What I trying to say is that there are very powerful labor union in europe and since a lot of jobs here are created by foreign mnc there could be a lot european companies here start to down size to lower costs and maybe move jobs back to europe.
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#3
Good to know there is no need to rush to the ATM and withdraw some cash for this weekend. S$1 will still be S$1 on monday.
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#4
(16-06-2012, 10:54 AM)sgd Wrote: ...

When Oracle Corp bought over Sun microsystems the EU agreed to the buyout on specific condition that nobody in either Oracle or Sun microsystem in europe were laid off. What happened later they started closing down many places including singapore and spared europe, jobs were relocated and moved to europe. If you pass by central mall today you no longer see the huge billboard that says Sun Microsystem that once used hang on top of the building because that office has been closed and people laid off.

What I trying to say is that there are very powerful labor union in europe and since a lot of jobs here are created by foreign mnc there could be a lot european companies here start to down size to lower costs and maybe move jobs back to europe.

After Nokia run into loses, quite few suppliers of Nokia are restructuring now. As far as i know, instead of European companies move back jobs back to Europe, more are moving out of Europe to Asia. The key is to cut cost, the most expensive ones are in Europe, due to high operating cost, more holidays, Euro and of course the unions.

FYI, one European engineer cost more than ~5x of Singapore engineer at the similar level. Let alone China or India local engineer. The cost is after factor in currency exchange
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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