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Tuesday, 28 October 2008

StanChart says banks to be hit by more losses-paper

SINGAPORE, Oct 28 - Standard Chartered expects banks will be hit by more losses as the financial crisis moves into the real economy, while the market turmoil is far from over, its chief executive was quoted as saying on Tuesday.

"We're in uncharted territory -- the critical thing we're looking for is signs that the intervention launched two weeks ago is working," Peter Sands told the Business Times.

"What I will predict is we'll see more currency and interest rate volatilities and also see many banks with rising loan impairments as the financial crisis moves into the real economy and more corporates see the effect."

Banks worldwide have announced writedowns and credit losses of more than $600 billion since the collapse of the U.S. subprime mortgage market in 2007.

Analysts said on Monday Standard Chartered could need to raise up to $5 billion in capital to match bigger cushions held by rivals and as emerging markets face a slowdown. [ID:nLR327109]

But Sands said Standard Chartered was doing well as it was still hiring new staff and seeing growth.

He said the bank's primary route for growth is organic, but it had made acquisitions during the financial crisis and hired staff from distressed rivals to boost market share.

"We are continuing to hire, although we may pull back a bit in some places," he said.

At the end of June, the group worldwide had 75,000 staff, up from 69,000 at end-2007. It has more than 5,300 people based in Singapore, 900 more from 12 months ago, the paper said.

Singapore economy to remain weak in 2009: central bank

SINGAPORE, Oct 28, 2008 (AFP) - Singapore's economy, which is already in a technical recession, will remain weak in 2009 on projections the global economic outlook will deteriorate further, the central bank said Tuesday.

As a financial crisis evolves to impact economic activity worldwide, the city-state is likely to be hammered given its heavy exposure to external demand, the Monetary Authority (MAS) said in its Macro Economic Review.

"Looking ahead, the outlook for the global economy has deteriorated amidst heightened risk aversion and deleveraging in the financial sector," MAS said.

As a small and open trading economy, Singapore is vulnerable to any downturn in its major export markets such as the United States, Europe, China, India and Japan.

"The risks to external demand conditions continue to be on the downside, and a more severe global slowdown cannot be discounted," the MAS warned.

"Taking all these factors into account GDP growth is expected to be around 3.0 percent in 2008, and the economy will continue to grow below its potential rate into 2009," the MAS said.

Prospects for a recovery late next year hinge on the performance of key global economies, it said.

Singapore this month cut its economic growth forecast for 2008 to 3.0 percent from between 4.0 and 5.0 percent after the economy slipped into a technical recession, described as two consecutive quarters of negative growth.

Real gross domestic product (GDP) declined by 6.3 percent in the third quarter after contracting 5.7 percent in the previous quarter, according to preliminary government data.

The MAS said Singapore's financial sector will suffer from a direct impact, while weakening consumer sentiment will affect retail trade and the property market.

Other segments of the econonomy like manufacturing and tourism will suffer from falling external demand, it said.

S'pore economy weakens

SINGAPORE'S faltering economy has entered a 'more advanced stage of weakness' as falling trade and tourism from other Asian countries adds to a slump in demand for the city-state's exports from the US and Europe, said its central bank on Tuesday.

Singapore's economic growth could see further slippage in the quarters ahead', said the Monetary Authority of Singapore (MAS) in its macro economic review.

As the global financial turmoil evolves to impact eocnomic activity worldwide, MAS said that Singapore is likely to be hammered given its heavy exposure to external demand.

Apart from the manufacturing sector, services industries, such as transport and tourism, will also be hit by the slowdown in Asian economies, it said.

'Looking ahead, the outlook for the global economy has deteriorted amidst heightened risk aversion and deleveraging in the financial sector', said MAS.

'The risks to eternal demand conditions continue to be on the downside, and a more several slowdown cannot be discounted'.

'The bank reiterated a 2008 growth forecast of 3 per cent and said next year the economy will likely perform below its potential', which the government has previously estimated as an annual growth rate of between 4 per cent and 6 per cent.

Former Prime Minister Goh Chok Tong, who now holds the post of Senior Minister in the Cabinet, said recently the economy will likely grow less next year than this year.

Gross domestic product shrank 0.5 per cent in the third quarter compared with a year earlier as a global economic slowdown triggered by a credit crisis in the US hurt demand for Singapore's mainstay electronic and pharmaceutical exports.

Manufacturing fell 8.5 per cent in the third quarter.

'As the financial crisis evolves into a broader and more protracted contraction in economic activity worldwide, there will be significant knock-on effects for Singapore, given its heavy exposure to external demand', the bank said.

The bank reiterated its inflation forecast for this year of between 6 per cent and 7 per cent and for next year of between 2.5 per cent and 3.5 per cent.

Prospects for a recovery late next year hinge on the performance of key global economies, it said.

Singapore this month cut its economic growth forecast for 2008 to 3.0 per cent from between 4.0 and 5.0 per cent after the economy slipped into a technical recession, described as two consecutive quarters of negative growth.

Real gross domestic product (GDP) declined by 6.3 per cent in the third quarter after contracting 5.7 per cent in the previous quarter, according to preliminary government data. -- AP, AFP

1m Thais risk losing jobs

BANGKOK - ONE million Thai workers are at risk of losing their jobs next year because of a sharp fall in export orders, the Federation of Thai Industries said on Tuesday.

The federation's deputy chairman, Thaveekij Jaturajarernkul, blamed the slowdown in global economic growth for the bleak forecast, which he said could bring troubles worse than the 1997 Asian financial crisis.

'Exports orders from our main markets - the US, Europe and Japan - have dropped significantly in all industries.

'That will affect our labour employment and we estimate that next year around one million workers may lose their jobs,' Mr Thaveekij told AFP.

'If another economic crisis hits Thailand this time it's going to be far worse than in 1997 because it will affect every sector,' he added.

Between mid-September and earlier this month, Thai export orders from the top three markets dropped by an average of 30-40 percent across all industries.

The figure was higher still for the luxury goods sector, Mr Thaveekij said.

He said Thailand currently has about six million workers in the manufacturing sector, two million workers in small and medium-sized enterprises and 1.2 million workers in the service and logistics sector.

'Besides, around 700,000 students from colleges and vocational schools are expected to graduate and seek employment next year. They will be affected, too,' Mr Thaveekij said.

He said some businesses had recently cut down their employee workdays from six to five days per week, while others had put a freeze on overtime.

'This quarter we should have received orders for the first two months of next year. But so far we have fewer orders than usual and some orders cancelled,' Mr Thaveekij said. -- AFP

Friday, 24 October 2008

Think Big: This Mega-Bear Will End

ByArne Alsin, RealMoney.com Contributor


Who will be the biggest losers over the next three to five years? Surprisingly enough, it will be investors afraid of losing. Those who squirrel away cash in T-bills or CDs in an effort to get safe are not, in fact, safe. Chances are good that they'll be losers two different ways.

The first way is through diminished buying power. If you accept a 1% to 2% after-tax rate of return in safe investments, chances are good that over the next three to five years, you'll be a net loser after adjusting for inflation.

The second way ultra-cautious investors will lose is brutal -- more likely than not, they're cautious because they've been ravaged by the recent market debacle. They may have lost 50% or more in stocks. And so rather than endure more uncertainty in equities, they've opted out. It's been the biggest "fright flight" in history: After pulling $72 billion from equities in September, $57 billion more came out in the first two weeks in October. These investors will pay dearly, as they'll miss out on likely rebound gains of 50% or 100%.

Context, as they say, is everything. History says that the market doesn't go down and stay down. It has always snapped back, retracing 50% to 100% of the decline within two years of the low.

Since World War II, we've had only two "mega-bear" declines in the Dow Jones Industrial Average -- defined as a slump of 40% or more -- the 1973-1974 drop of 45% and the 2007-2008 decline of 40%.

Investors ran for the hills in 1974. They not only had to watch stock prices plummet, they also saw daily headlines about OPEC's oil embargo, the Watergate scandal, and a spike in inflation to 11%. It's too bad investors were scared out of stocks, because adjusted for dividends, the market retraced the entire decline in two years' time.

If we go back 100 years, we can find three more mega-bear markets. Following the 47% drop that ended 1921, the market retraced two-thirds of that decline over the next two years before reaching new highs shortly thereafter. And following a 52% bear market that ended in 1942, the market also retraced two-thirds of the decline over the next two years before going on to new highs.

And then there is the mega-bear to end all mega-bears: From 1929 to 1932, in the midst of the Great Depression, the Dow fell from 381 to 41, an 89% decline.

Don't listen to the fearmongers who say we're headed for a repeat performance. It's not going to happen. Unlike in the current market, the Dow was absurdly overvalued in 1929. Fueled by speculation and 10% margin requirements, the Dow soared 497% from 1921 to 1929.

A more reasonable run from the low of 64 in 1921 would have taken the Dow to 120 or 150 in 1929. While the low in 1932, at 41, is still quite a drop from 120, look at how fast it rebounded: The Dow rebounded 165%, to 109 in 1933, less than 12 months after reaching the low of 41. The five-year mega-bull market that started in 1932 saw the Dow reach 194 in 1937, a 372% gain off of the 1932 lows.

You shouldn't worry about whether the next 10% move in the market will be up or down. Think big. The next 100% move in the market is up. Your portfolio should be designed so it captures the biggest possible gain in the upcoming retracement while providing plenty of staying power.

The companies I named in my last column will soar in the upcoming retracement, plus they've got staying power. Dell , Boeing , Expedia and Tecumseh Products serve end markets that are not going away, they're loaded with cash, and they are tops in the sectors in which they compete. Here's another idea.


IDT Corp.: A Spectacular Opportunity
Normally, I would never recommend a stock trading below $1 a share. But the current market is light-years away from normal. There are a handful of companies trading at minuscule stock prices that have been mistakenly tossed into the trash heap. IDT Corp. is an excellent example. Trading at 63 cents a share, down from $9 a share at the end of 2007, it has net cash of well over $2 a share. The market says the whole company's worth $48 million. Even in the context of a vicious bear market, this stock never should have dropped to anywhere near its current quote.

The core telecom business, with $1.8 billion in annual sales, has undergone an impressive transformation over the last year. The profitability of the telecom business is masked by one-time charges and the closure or sale of unprofitable businesses. Now that the hard work is done, you'll see free cash flow in the current fiscal year (that started Oct. 1) of $20 million.

This is the type of nugget you can only find in a mega-bear market -- a company valued at $48 million that generates $20 million in free cash flow and has $150 million in net cash on the balance sheet.

In addition to the telecom business, IDT owns several businesses in energy and media. Over the years, the company has developed and sold many businesses -- Net2Phone is one of many success stories. While there is tangible evidence that these businesses have considerable value, even if you assume they're worth zero, the stock is still a bargain.

United we stand

Goh Eng Yeow on the blood-letting on the local stock market.
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THE financial tsunami of the century has finally hit our shores.

As I write, the benchmark Straits Times Index has plummetted 139 points or nearly 8 per cent.

Why the rout ?

I had written on Monday about the implosion of hedge funds which is causing a run across stock markets worldwide, as they desperately sell everything in sight - emerging markets equities, oil, commodities and even gold - to pay off angry investors and nervous bankers.

The only way we can trace their activities is through the foreign exchange market where they have made massive purchases of Japanese yen to repay their loans, sellng selling every other regional currency - the Aussie dollar, the Singapore dollar, the Korean won - after making an exit from these markets.

After the relative calm early this week, they have come back with a vengeance.

Nothing escapes. Hong Kong, Tokyo, Seoul and Sydney are in similar plight.

And Wall Street looks likely to suffer another bout of blood-letting tonight. The Dow Jones futures is already flashing red - down a staggering 483 points.

What should investors do in such circumstances ?

The selldown hit our local market at the worst possible times - when companies are unable to defend themselves with shares buybacks because they are in the midst of releasing their third quarter results.

But bear in mind that the blue-chips which form the bedrock of our economy are here to stay.

It will be business as usual tomorrow at Fraser & Neave, Singapore Airlines, United Overseas Bank and DBS Bank, even though their prices have taken a battering.

So don't lose heart as you see your nest-eggs melting away in the selldown. This had happened before during the SARS crisis in 2003 and the Asian financial crisis in 1998.

But the blue-chips came charging back stronger than before, after each crisis.

They have also taken the lessons from the Asian financial crisis to heart. They have plenty of cash to sit out any financial crunch that may come along.

A few examples: SIA sits on $5 billion of cash, while SembCorp Marine has a war-chest of over $1 billion.

Companies such as ComfortDelgro and SMRT will be ferrying hundreds of thousands of passengers every day - financial crisis or otherwise.

And unlike foreign banks, local banks and finance firms are highly capitalised. They have plenty of financial cushioning.

It is time to put the controversy over Lehman minibonds and High Five notes behind us. The institutions involved have been punished enough by the bad publicity. And the process of compensation has been put in place.

As one forum writer succinctly put it, the issue of compensation for the affected 10,000 investors had been pursued with so much zest that the tens of thousands of investors - many of them retirees - who had placed their savings in bank stocks had been neglected. They too are hurting from the collateral damage as listed banks lost billions of dollars in market value.

Yet, even as they shed their tears in silence, there is no mention of compensation for them!

As the financial crisis unfolds and hurt us in many ways, we have to stand united to fight it together. Divided, we will be fodder for the hedge funds now pounding on our gates.

Latin America in jaws of crisis

SAO PAULO - GOVERNMENTS in Latin America stepped forward on Thursday to reassure markets left despondent by fears of a global recession and Argentina's decision to nationalise pension funds.
Brazil and Mexico took measures to try to stop the long slide of their currencies against the dollar, while an Argentine official promised the pensions grab would not mean state intervention in banks and companies managing the funds.

Brazil's central bank also aggressively jumped in to support its currency, the real, promising to pump the equivalent of an extra US$50 billion (S$75 billion) into the market through currency swaps, causing the money to jump 3.25 per cent against the greenback.

Mexico announced an auction of an extra US$1.4 billion to support the tumbling peso, which on Wednesday had sunk to a record low of 13.74 to the US dollar.

Those efforts, along with official affirmations that countries in the region were well-placed to come through the crisis with little more than bruises, did little to offset volatility in equities, however.

On Thursday, the stock market in the region's biggest economy, Brazil, closed 3.57 per cent lower, extending deep losses of more than 10 per cent the day before.

Mexico's bourse closed 5.26 per cent down.

Argentine shares ended 2.43 per cent higher - a small consolation after the two previous days when the Buenos Aires stock market lost more than 26 per cent.

That was largely in reaction to the decision on Tuesday by Argentine President Cristina Kirchner to nationalise pension funds controlling US$30 billion.

Although she portrayed it as protecting retirees from the global crisis, analysts saw it more as a plundering of the funds to service the national debt, which stands at US$150 billion.

'It looks like they want to use the workers' money for non-pension spending,' Dr Gregorio Badeni, a professor at the University of Buenos Aires, told The Economist magazine.

The newspaper La Nacion quoted several lawyers as saying many of the 9.5 million clients affected were inquiring about suing the government over the move.

An Argentine government official, speaking to AFP on condition of anonymity, said however that Ms Kirchner was not looking to intervene in the management companies or private pension funds.

'That's not our intention, and in any case we couldn't do it from a legal point of view,' he said.

A Merrill Lynch executive handling Latin American investments told AFP his bank had now written off Argentina as an investment destination 'for at least the next half decade' because of the decision.

In Brazil, the woes caused by the global financial crisis have prompted further action from the government, which had been caught unprepared by the extent to which investors were also stepping back.

On Wednesday, Finance Minister Guido Mantega said state-run banks were now authorised to help shore up financial institutions left vulnerable by the sudden appreciation of the dollar against the real, which has lost more than 30 per cent of its value in just under a month.

Mr Mantega stressed that Brazil's banking system was 'solid' and said no bank in the country risked going under.

In Peru, the crisis was hitting hard despite a projected nine percent economic growth this year.

Analysts worried that investors were fleeing, and that inflationary pressures were rising. Gross domestic product expansion would probably be cut by at least two points next year, they said.

Part of the slide is due to the slump in copper prices. Peru is the second-biggest producer in the world, after Chile, and the price for the metal has halved in recent weeks.

Mr Oscar Dancourt, a former central bank director, said that could cause the current account deficit to swell.

'The outlook for the future is for inflationary pressures and even a recession. The strengthening of the dollar will also worsen inflation because the prices of various imported products are tied to the exchange rate,' he said.

The country's president, Mr Alan Garcia, has sought to soothe, telling investors on Monday they could 'have faith and confidence in Peru' and predicting the country would survive relatively well 'the international earthquakes' hitting the financial system. -- AFP

Layoffs to rise

WASHINGTON - UNEMPLOYMENT claims, already well into recession territory, are rising even faster than expected, leading economists to warn on Thursday that the worst is yet to come.

As the Labour Department released bleak new numbers on the job market, Goldman Sachs, Chrysler and Xerox all announced they were cutting workers by the thousands, adding to the woes of an economy beset by tighter credit and wobbly banks.

The government said new applications for unemployment insurance rose 15,000 last week to a seasonally adjusted 478,000, above analysts' estimates of 470,000. Jobless claims above 400,000 are considered a sign of recession.

The White House, in unusually stark language, acknowledged the economy is going through what spokesman Dana Perino called a 'rough ride.'

''We expect our GDP (gross domestic product) number next week not to be a good one and the next quarter to be tough as well,' Ms Perino said.

The Commerce Department will release its first estimate of third-quarter economic performance Oct 30, and Wall Street analysts project it will show the economy contracted by 0.5 per cent, according to Thomson/IFR.

Many economists expect the decline to continue into the current quarter and the first three months of 2009, if not longer. The classic definition of a recession is at least two consecutive quarters of negative growth.

Former Federal Reserve Chairman Alan Greenspan, testifying before a House committee, said he could not see 'how we can avoid a significant rise in layoffs and unemployment.'

Mr Zach Pandl, an economist at Barclays Capital, estimates that unemployment will rise to between 7 per cent and 8 per cent by early next year. Other economists have estimated it could rise to 8.5 per cent.

Currently, the unemployment rate is 6.1 per cent. Unemployment peaked at 6.3 per cent in 2003 after the brief recession of 2001. It peaked at 7.8 per cent in the 1991-92 recession, and above 10 per cent in 1982.

The Goldman Sachs Group said it would cut about 3,260 jobs, or 10 per cent of its work force, in the face of what Mr Greenspan called a 'once in a century credit tsunami' that has claimed several of Goldman's rival investment banks.

Also on Thursday, Chrysler LLC said it would cut 1,825 jobs and Xerox said it plans to eliminate 3,000 positions, or 5 per cent of its work force.

Other companies have announced reductions this week: Yahoo Inc. is cutting 10 per cent of its employees, or 1,500 people, drugmaker Merck is eliminating 7,200 positions, and financial services firm National City Corp. will shed 4,000 jobs.

The impact of the job losses is rippling through the economy. As jobs disappear, foreclosures rise when out-of-work homeowners can no longer make mortgage payments.

Home foreclosure filings jumped by 70 per cent in the third quarter, according to the listing service RealtyTrac.

Nationwide, nearly 766,000 homes received at least one foreclosure-related notice from July through September, the company said.

Mr Greenspan said that in order for the financial crisis to end, home prices must stabilise. But he said that was not likely to occur for 'many months in the future.'

Spending is falling, too.

Americans who still have jobs are worried about keeping them, and those who have lost jobs must watch every penny.

Consumer spending accounts for about 70 per cent of the economy, and economists estimate it fell by more than 3 per cent last quarter in what would be the first quarterly drop in 17 years.

Democrats in Congress have urged that unemployment benefits, which last for 26 weeks, be extended as part of a new economic stimulus package.

Democratic presidential nominee Senator Barack Obama endorsed that plan in a statement on Thursday, and said he would also 'suspend the taxes on those benefits and jump-start job creation by giving small businesses emergency loans and tax credits for each new job they create.'

His Republican opponent, Senator John McCain, said he would 'make sure that bailout dollars are used to ... stop the foreclosures and free-fall in housing prices.'

'Times are tough, and we need immediate action to take this economy in a new direction,' he said in a statement.

The four-week average of jobless claims, which smooths out fluctuations, dropped slightly last week from a seven-year high to 480,250, the Labour Department said.

The number of people continuing to claim unemployment insurance dropped by 6,000 to a seasonally adjusted 3.72 million, down from 3.73 million, a five-year high.

Claims were also higher because of the impact of Hurricane Ike in Texas, the department said, which added about 12,000 requests for unemployment benefits, the same as the previous week.

Worries over the economy and financial instability have caused the stock market to fluctuate wildly recently.

On Thursday, stocks initially fell but then recovered, and the Dow Jones industrials finished up 172 points, or about 2 per cent. -- AP

2.7m Chinese to lose jobs

DONGGUAN (China) - AT LEAST 2.7 million factory workers in southern China could lose their jobs as the global economic crisis hits demand for electronics, toys and clothes, according to industry estimates.
The region has seen massive export-driven expansion in recent years by supplying the world with cheap consumer goods, but rising production costs and falling US and European demand have marked a swift end to the boom.

Now 9,000 of the 45,000 factories in the cities of Guangzhou, Dongguan, and Shenzhen are expected to close before the Chinese New Year in late January, the Dongguan City Association of Enterprises with Foreign Investment estimates.

By then, the association expects overseas demand for products from the three manufacturing hubs to have shrunk by 30 per cent, as the knock-on effects of the US housing market collapse and credit crunch filter down to Chinese workers.

'I am afraid it is not going to look good on the Chinese government if the decline of the export-led industries and the unemployment problem continue to worsen,' Mr Eddie Leung, the association's president told AFP.

Mr Leung, also a member of the Chinese Manufacturers' Association, said the estimate of 2.7 million job losses was conservative, given that many of the larger factories in Guangdong province employ thousands of workers.

One of them, Hong Kong-listed Smart Union, a major toy manufacturer in Dongguan supplying US giants Mattel and Disney, closed its doors last week, leaving 7,000 workers out of work and with several weeks of back pay owed.

Clement Chan, chairman of the Federation of Hong Kong Industries, said a quarter of the 70,000 Hong Kong-owned companies in southern China, 17,500 businesses, could go to the wall by the end of January.

Describing the likelihood as a 'worst case scenario', he said Hong Kong firms in the region employed a total of 10 million workers, but did not want to speculate on the extent of possible job losses.

While small and medium-sized factories are especially prone, the threat of lay offs looms just as large over the region's manufacturing giants, further squeezed by the appreciation of the yuan.

Mr Harry To's Mansfield Manufacturing is a classic example of the spectacular growth in China's industrial heartland over the last three decades.

To started a metal business from a small room in Hong Kong in 1975. In 1991, he joined hundreds of other Hong Kong entrepreneurs moving their production across the border into China to take advantage of cheap labour and land.

He now employs 8,500 workers in 11 factories in China and Europe. His six factories in Dongguan cover 140,000 square metres.

Mr To's company, which is now a subsidiary of Singapore-listed InnoTek supplies metal components for cars, plasma televisions, printers and other electrical appliances to Japanese brands including Canon, Toshiba, Epson, Minolta and Fuji-Xerox.

Business for the company, among the largest in its field in China, has grown by 40 per cent annually in recent years, but with credit being harder to come by, no manufacturer is safe, he said.

'With banks being so tight on their lending policies now, bringing down a factory overnight has now become very easy.' All his expansion plans have had to be put on hold.

'Some of our long-time Japanese and European clients have asked us to stop producing for them in the next two to three weeks,' he said.

'They said they did not want to have too much stock piled up in their warehouse as demand continues to dwindle.'

Mr To recently started building a new 70,000 square metre factory in Dongguan and was planning to hire 2,000 more workers later this year. But now, all work on the unfinished factory has stopped until more orders roll in.

'No one would expand their business when the prospects for the entire manufacturing industry look so grim,' he said.

Instead of hiring more workers, Mr To is looking at cutting 1,000 employees across his operations.

But far from being downhearted, he is shifting part of the company's export-led production to developing energy-saving electrical appliances for the domestic market, which he sees as weathering the current financial turmoil.

'In the long run, I am confident that mainland Chinese consumers' purchasing power will keep rising as their Western counterparts continue to lose out.' -- AFP

Hundreds of hedge funds will fail; mkts shut down: Bloomberg

Bloomberg (October 23, 2008): Roubini Says `Panic' May Force Market Shutdown
PrintShare
Nouriel Roubini | Oct 23, 2008

Bloomberg October 23, 2008: Roubini Sees Crisis Worsening, Hurting Emerging Markets (click for video)

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From Bloomberg:

Oct. 23 (Bloomberg) -- Hundreds of hedge funds will fail and policy makers may need to shut financial markets for a week or more as the crisis forces investors to dump assets, New York University Professor Nouriel Roubini said.

``We've reached a situation of sheer panic,'' Roubini, who predicted the financial crisis in 2006, said at a conference in London today. ``There will be massive dumping of assets,'' and ``hundreds of hedge funds are going to go bust,'' he said.

Group of Seven policy makers have stopped short of market suspensions to stem the crisis after the U.S. pledged on Oct. 14 to invest about $125 billion in nine banks and the Federal Reserve led a global coordinated move to cut interest rates on Oct. 8. Emmanuel Roman, co-chief executive officer at GLG Partners Inc., said today that as many as 30 percent of hedge funds will close.

``Systemic risk has become bigger and bigger,'' Roubini said at the Hedge 2008 conference. ``We're seeing the beginning of a run on a big chunk of the hedge funds,'' and ``don't be surprised if policy makers need to close down markets for a week or two in coming days,'' he said.

Roubini predicted in July 2006 that the U.S. would enter an economic recession. In February this year, he forecast a ``catastrophic'' financial meltdown that central bankers would fail to prevent, leading to the bankruptcy of large banks exposed to mortgages and a ``sharp drop'' in equities.

Bear, Lehman

The comments preceded the collapse of Bear Stearns & Cos. and Lehman Brothers Holdings Inc. as well as the government seizure of Freddie Mac and Fannie Mae. The Dow Jones Industrial Average, a benchmark for American equities, has lost 37 percent this year, including its biggest daily drop in more than twenty years on Oct. 15.

The Dow average rose 0.5 percent to 8563.42 as of 10:09 a.m. today in New York.

Italian Prime Minister Silvio Berlusconi roiled international markets on Oct. 10, first saying world leaders were discussing shutting down global financial exchanges, and then saying he didn't mean it.

``In a fairly Darwinian manner, many hedge funds will simply disappear,'' Roman said, speaking at the same event as Roubini.

The hedge fund industry is stumbling through its worst year in two decades and posted its biggest monthly drop for a decade in September. Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.

`Very Ugly'

``Things are getting very ugly also in the emerging markets,'' Roubini said. ``We used to say when the U.S. catches a cold, the rest of the world sneezes. Well, the U.S. now has chronic and persistent pneumonia. It's becoming a mess in emerging markets.''

Developing nations' borrowing costs jumped to the highest in six years today as Belarus joined Hungary, Ukraine and Pakistan in seeking a bailout from the International Monetary Fund to help weather frozen money markets and a slump in commodities. Argentina risks defaulting for the second time this decade.

``There are about a dozen emerging markets that are now in severe financial trouble,'' Roubini said. ``Even a small country can have a systemic effect on the global economy,'' he added. ``There is not going to be enough IMF money to support them.''

Roubini, a former senior adviser to the U.S. Treasury Department, earlier this month said that the world's biggest economy will suffer its worst recession in 40 years.

``This is the worst financial crisis in the U.S., Europe and now emerging markets that we've seen in a long time,'' Roubini said. ``Things will get much worse before they get better. I fear the worst is ahead of us.''

Unit trusts lose over 20%

THE financial markets maelstrom has turned retirees such as Mr T.P. Wong, 57, into a 'bundle of nerves'.

He is sitting on paper losses of about $20,000 so far this year - even though he has avoided investing in the stock market directly. He had invested in eight unit trusts, thinking that they are safer than stocks because they are diversified and managed professionally.

The returns of his unit trusts, which include one in Vietnam, another in United States stocks and a technology fund, have ranged from negative 7 per cent to negative 26 per cent in the nine months to Sept 30.

'I sold off part of my unit trusts at a loss, but decided to hold the rest as it was too painful to swallow more losses,' he said ruefully.

Mr Wong is among investors who have been hit by a drop of well over 20 per cent in returns of unit trusts invested in equity and commodity markets during recent weeks.

Not surprisingly, funds sold here have also seen redemptions spike while sales dry up as investors flee from market turbulence to the safety of cash.

With the US market tumbling well over 20 per cent and Asia ex-Japan markets suffering falls of over 45 per cent in the year to date, the red ink is flowing deeper than during the Sars period.

Equity funds' performances have generally dropped less precipitously than those of stocks as they are diversified and managed by professionals.

Nevertheless, panicky investors have still been pulling money out of funds, note unit trust distributors and banks.

They declined to comment on the magnitude of redemptions in recent weeks but one bank executive said they were 'the highest he had seen since the Sars period', while sales are 'practically zero'.

Investors in funds approved under the Central Provident Fund Investment Scheme (CPFIS) have also been hit. These funds had returns of negative 11 per cent last month.

They 'were one of the lowest-performing products to date, with all component groups experiencing negative returns', said Mr Suthee Luangaramkul, a Lipper analyst, in a recent report.

CPFIS bond funds on average saw a negative 1 per cent return, while equity funds were in the red by 13.52 per cent.

Investors have flocked to cash while waiting for good equity opportunities. So the best-performing funds this year for distributors like Fundsupermart have been money market ones.

Still, daring investors are starting to dip their toes into certain funds with exposure to some emerging markets where shares have plunged steeply enough for analysts to call valuations attractive.

Just last week, Franklin Templeton Singapore launched three funds, including one invested in emerging or 'frontier markets' and another focusing on small Asian companies.

Mr Ernest Low, head of fund analytics at Providend, an independent investment manager in Singapore, advised investors to stay invested for the longer term, noting that 'this is the worst time to consider redeeming'.

Indeed, retired human resource professional Peter Wong, 67, has decided not to withdraw his money from unit trusts and stocks despite the 30 per cent paper losses that he has suffered so far.

He views them as long-term investments: 'What goes down must come up. I won't withdraw unless I need the money urgently. I still have some liquid cash,' he said. 'I'm not so worried unless it stretches to eight or 10 years. For one to two years, I think I have enough spare cash to tide me over.'

Mr Low noted that it is actually 'time to get back into equities because markets tend to move upwards earlier than economic growth'.

'We personally prefer to start buying again,' he said, adding that US equities looked attractive as 'the economy has been the first to soften and is likely to be first to rise', while the US dollar may strengthen in future.

He warned against buying global fixed income like US Treasuries and Euro bonds now as they are very expensive. He also advised investors to spread out their new investments to take advantage of value cost averaging, buying more of those that have fallen more in price and less of those whose prices have not fallen as much.

Investors flee emerging mkts

LONDON - A FLIGHT from emerging market debt and stocks helped push the dollar to a two-year high against major currencies on Thursday as fears built about a global recession.

Investors were also focusing on major company earnings reports, fearful that the worst financial crisis in 80 years and the deteriorating global economy could combine to batter corporate profits.

European shares put in gains on the back of some positive results, but Asian shares fell to four-year lows and emerging markets were again under the gun.

MSCI's main emerging market stock index was down 3.3 per centon the day, hitting a nearly four-year low after major losses on Wednesday.

Emerging market sovereign debt spreads blew out to more than 800 basis points over US Treasury yields, a gap not seen since late 2002.

The cost of insurance against sovereign debt default in countries such as South Korea, Indonesia, the Philippines, Russia and Kazakhstan has soared over the past two days.

'There is now little argument that the world economy will experience a period of sub-par growth, and a recession in several advanced economies looks increasingly likely,' Goldman Sachs said in a research note.

Investor flight from emerging markets over the past few weeks has accelerated this week, pushing the US dollar to new heights, among other things as money is both repatriated from overseas and seeks relative safety in US fixed income.

The dollar hit a two-year high against a basket of currencies with the dollar index up 0.2 per cent to 85.6 after hitting a two-year peak above 86. The euro slipped 0.3 per cent from late US trade to US$1.2817 (S$1.923).

'We are going to see the current pressures continue as tensions in emerging markets continue. The dollar will remain supported and the high yielders will stay under pressure,' said Ian Stannard, FX analyst at BNP Paribas. -- THOMSON REUTERS

Goldman to cut 3,260 jobs

NEW YORK - GOLDMAN Sachs Group Inc. is cutting about 10 per cent of its work force amid the ongoing downturn in the credit and lending markets, a person briefed on the plan said on Thursday.

Goldman Sachs will cut about 3,260 jobs. Goldman's work force, which was at record high levels at the end of the third quarter, will be pared back close to 2006 and 2007 levels. No additional cuts are planned, the person said.

The job cuts are a direct result of the current economic environment and significantly lower levels of business activity, the person told the Associated Press.

Last month, amid the increasing turmoil that saw Lehman Brothers Holdings Inc. file for bankruptcy protection and Merrill Lynch & Co. sell itself to Bank of America Corp., Goldman Sachs along with Morgan Stanley received approval to become bank holding companies.

September was considered one of the worst months during the credit crisis as banks essentially stopped lending money to each other for fear they would not be repaid. The problems intensified when Lehman filed for bankruptcy and the government loaned insurer American International Group Inc. US$85 billion (S$127 billion) to help it remain in business.

Goldman Sachs and Morgan Stanley made the change to bank holding companies as investors worried the stand-alone investment bank model may no longer be viable. With the new status, Goldman Sachs will likely face increased regulatory scrutiny, which could force it to scale back some of more leveraged and aggressive business units.

The new status also allows Goldman Sachs to grow a large deposit base to help fund its operations, while providing permanent access to borrow money from the Federal Reserve. Before changing its status, Goldman Sachs only had temporary access to that lending option.

Goldman Sachs has widely been considered among the best performing banks amid the ongoing credit and mortgage crisis that began in the middle of 2007. During its fiscal third quarter, which ended Aug 31, the company's profit fell 71 per cent, but that performance was still better than many of its competitors, which have reported quarterly losses throughout much of the year.

Last month, Goldman Sachs struck a deal with Warren Buffett to sell preferred and common stock to Buffett's Berkshire Hathaway. As part of the deal, Buffett planned to invest at least US$5 billion in fresh capital to help Goldman Sachs. The investment could double to US$10 billion.

At the same time, Goldman Sachs issued common stock to raise an additional $5 billion through a public offering.

Shares of Goldman Sachs fell US$1.71 to US$113 in premarket trading. -- AP

Bleak 2009 for car makers

MILAN/FRANKFURT - FIAT and Hyundai Motor Co added to the gloom surrounding automakers on Thursday with bleak forecasts for next year as the global financial crisis takes its toll.

Italian industrial group Fiat said global demand for its products could drop 10 to 20 per cent in a 'worst-case' scenario, while a senior official at Hyundai, South Korea's top automaker, said he expects car demand in emerging countries to fall next year.

Germany's Daimler, maker of Mercedes-Benz luxury cars and heavy trucks, is due to publish its quarterly results at about 6.00 pm and is widely expected to issue its second straight profit warning.

Global automakers are facing shrinking demand as consumers put off major purchases on fears of a recession.

At 3.32 pm, the DJ Stoxx European auto index was down 2 per cent, while the wider market was little changed. Fiat shares were suspended after a sharp fall.

Fiat said its trading profit could plunge by 65 per cent next year. Although the maker of cars, trucks and tractors called its forecast a 'worst case' scenario but analysts saw it as definitive.

'In any case, it will be seen as a profit warning,' one analyst said.

Fiat released better-than-expected third-quarter earnings, boosted by strong sales at its farm machinery business. Trading profit rose nearly 8 per cent to 802 million euros, beating market expectations.

Hyundai posted a 38 per cent fall in third-quarter net profit, also beating market expectations and lifting is shares, but its outlook was gloomy too.

'The market situation in emerging countries is much worse than expected,' Mr Park Dong-wook, a director at Hyundai's treasury division, told reporters. Hyundai is the world's No.5 auto maker along with affiliate Kia Motors Corp.

Sales of higher-end models are also slowing in Hyundai's domestic market, analysts said.

'The stock is rebounding on heavy foreign buying but it is hard to say the outlook for auto makers is improving,' said Mr Kim Joong-Hyun, an analyst at Goodmorning Shinhan Securities.

'There could be some pick-up in sales in the fourth quarter as Hyundai makes up lost output during strikes, but that alone doesn't support optimism amid the sinking world economy.' -- REUTERS

Crisis = 'Credit tsunami'

WASHINGTON - FORMER Federal Reserve Chairman Alan Greenspan told the US Congress in prepared testimony on Thursday that the current global financial crisis is a 'once in a century credit tsunami' that policymakers did not anticipate.

Mr Greenspan was to be the leadoff witness at a House hearing lawmakers called to question past key financial players about what they felt caused the most grave financial crisis since the 1930s.

The witnesses were also expected to be asked how they thought the government would deliver the U.S. from the economic turmoil.

Mr Greenspan was the chairman of the Federal Reserve for 18 1/2 years. In testimony prepared for the House Government Oversight and Reform Committee, he voiced shock over the present turn of events and called conditions deplorable.

He said that he and others who believed lending institutions would do a good job of protecting their shareholders are in a 'state of shocked disbelief.'

And Mr Greenspan also blamed the problems on heavy demand for securities backed by subprime mortgages by investors who did not worry that the boom in home prices might come to a crashing halt.

'Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment,' Mr Greenspan said. 'Fearful American households are attempting to adjust, as best they can, to a rapid contraction in credit availability, threats to retirement funds and increased job insecurity.'

He said that a necessary condition for the crisis to end will be a stabilisation in home prices but he said that was not likely to occur for 'many months in the future.'

When home prices finally stabilise, Mr Greenspan added, then 'the market freeze should begin to measurably thaw and frightened investors will take tentative steps towards reengagement with risk.'

Mr Greenspan said until that occurs the government is correct to move forward aggressively with efforts to support the financial sector. He called the US$700 billion (S$1.05 trillion) rescue package passed by Congress on Oct 10 'adequate to serve the need' and said that its impact was already being felt in markets.

In his written testimony, Mr Greenspan did not specifically address the criticism he is receiving now as being partly to blame for the current crisis.

Mr Greenspan's critics charge that he left interest rates too low in the early part of this decade, spurring an unsustainable housing boom, while also refusing to exercise the Fed's powers to impose greater regulations on the issuance of new types of mortgages, including subprime loans. It was the collapse of these mortgages and rising defaults a year ago that triggered the current crisis.

In his testimony, Mr Greenspan put the blame for the subprime collapse on overeager investors who did not properly take into account the threats that would be posed once home prices stopped surging upward.

'It was the failure to properly price such risky assets that precipitated the crisis,' he asserted.

Meanwhile, Mr Neel Kashkari, the interim head of the government's US$700 billion rescue effort, and other government officials were going before the Senate Banking Committee to lay out their plans for implementing the massive program.

Both hearings were expected to be contentious as lawmakers, already upset about having to vote for the biggest bailout in US history, sought answers to what went wrong and try to determine why the government's rescue effort, which just cleared Congress on Oct 3, already has undergone a radical overhaul.

All the action in Washington was taking place against a backdrop of continued turbulence on financial markets around the world.

The Dow Jones industrial average plunged by 514 points Wednesday amid fears that the government intervention will not be enough to prevent a serious global recession. Ahead of Thursday's market opening, the Dow was down 122 points at the 8,435 level.

Asian stocks fell for a second consecutive day on Thursday, with South Korea's market sinking 7.5 per cent. Japan's Nikkei 225 stock average closed down 2.5 per cent, and Hong Kong's Hang Seng Index was down 4.7 per cent. European stock markets were modestly lower.

Storm clouds were forming on the labor front, too. The government reported that new applications for unemployment benefits increased by more than expected last week as companies cut jobs due to the slow economy.

New claims for jobless payments rose 15,000 to a seasonally adjusted 478,000, slightly above analysts' estimates of 470,000.

While conducting major hearings so close to an election is unusual, House Oversight Committee Chairman Henry Waxman, D-Calif., said the current crisis was so serious that Congress could not wait until a new administration arrives in January to find out 'what went wrong and who should be held accountable.'

Democrats see the prime culprits as greedy Wall Street executives and lax government regulations under a Republican administration, a view that the administration and Republicans in Congress dispute strongly.

Once praised as the 'maestro' of the US financial system during the 1990s economic boom, Mr Greenspan, who was succeeded in 2006 by Mr Ben Bernanke, was likely to find himself defending actions he took that are being blamed for contributing to the current crisis.

Mr Greenspan, true to his Republican free-market principles, successfully opposed attempts to impose tighter controls on complex financial contracts known as derivatives, which are largely unregulated and which some see as a contributing factor in the current problems. -- AP

For '09 Grads, Job Prospects Take a Dive

by Cari Tuna

College seniors may have more trouble landing a job next spring than recent graduates, as employers trim their hiring outlooks in response to the slowing economy and financial-sector turmoil.

Employers plan to hire just 1.3% more graduates in 2009 than they hired this year, according to a survey by the National Association of Colleges and Employers.

That's the weakest outlook in six years and reflects a sharp recent downturn. Just two months ago, a survey by the same group projected a 6.1% increase in hiring. The August survey included 219 employers, 146 of whom responded to the new survey, conducted earlier this month. The big drop in hiring projections is "extremely unusual," says Edwin Koc, the association's director of strategic research.

The results continue a pattern of diminishing job prospects for college graduates. A year ago, employers told the association they would increase hiring for the class of 2008 by 16%. By this spring, though, the projected increase had fallen to 8%. The association doesn't report how actual hiring compares with its projections.

Some of the decline reflects the weakened financial sector, with employers like Lehman Brothers Holdings Inc. in bankruptcy protection and others, including Merrill Lynch & Co., being acquired. But other employers are tightening their belts as well. Insurer Progressive Corp. last fall expected to hire 4,000 college graduates in 2008. In fact, the company has hired fewer than 1,000 this year. Mari Pumarejo, who works with employment and recruiting for Progressive, says the company expects to hire fewer new grads in 2009, although she declined to offer a precise projection. "Things are changing very rapidly, and we are reassessing everything right now," she says.

General Electric Co. hired about 900 undergrads and M.B.A. graduates for full-time positions in the U.S. this year, but expects that number to shrink by 10% next spring, while hiring grows overseas. "It's going to be tougher for the class of '09 than it has been for the previous couple of years," says Steve Canale, manager of recruiting and staffing services.

Retailers Target Corp. and Walgreen Co. also have trimmed hiring projections for 2009. Maureen Reim, director of recruitment for Walgreen, says the company plans to open fewer stores next year and sees more recent hires staying in their jobs, in part because of the weaker job market.

The new survey comes amid the fall corporate recruiting season on college campuses and reflects the weakening U.S. labor market. Employers shed 159,000 non-farm jobs in September, and the unemployment rate was near a five-year high at 6.1%. According to the Department of Labor, the number of unemployed people has risen by 2.2 million in the past 12 months.

Meanwhile, more students are graduating from college, according to the National Center for Education Statistics. Colleges and universities will grant an estimated 1,585,000 bachelor's degrees this school year, up from 1,544,000 in the 2007-2008 year and 1,506,000 the prior year.

The weaker job market is most evident at colleges in the Northeast and schools that typically feed the finance sector. Trudy Steinfeld, director of career services at New York University, says about 15% fewer companies are recruiting on campus this year; the decline is primarily among financial-services firms, she says.

"There are some students who are quite nervous, especially those who thought they were headed to a Wall Street career," she says.

Nick Burch was one. The senior finance major at NYU's Stern School of Business says he had planned to interview with top investment banks. But he's since expanded his search to include midsize banks, like Piper Jaffray Cos. and Lincoln International, as well as finance positions at companies like Macy's Inc.

Mr. Burch is also considering Teach for America, which places recent graduates in teaching positions at underperforming schools. The downturn, he says, makes young people "feel freer to pursue your real passions."

Salaries are likely to suffer, too. In a separate survey, NACE members reported a 7.6% increase in the average starting salary paid to 2008 graduates to $49,224. But career counselors say they expect starting salaries to hold level or decline next year. Mr. Burch says he expects "downward pressure" on his starting salary, and he doubts that job offers in finance will include signing bonuses.

College career counselors are intensifying efforts to help students. Ms. Steinfeld's group is inviting recruiters from smaller employers around New York, soliciting job postings from NYU alumni and scouring newspapers to find companies that are expanding. This week, the career center will hold an information session on "alternatives to Wall Street."

At the University of Wisconsin-Madison, the number of companies attending a September career fair fell to 225, from 232 last year. Leslie Kohlberg, director of career services for the College of Letters and Science, is encouraging students to seek individual counseling, visit employers and develop a back-up plan -- or two.

"Things have been so good that students were able to rely on even some of the least-effective job search strategies," like sending résumés via email and searching online career postings, she says. "They can't really afford to do that now."

The employment outlook is not all bad, career counselors say. Despite cutbacks in finance, retail, manufacturing and construction, demand for recent graduates remains high in fields such as accounting, public service, health care, education and technology.

The federal government, in particular, is boosting campus recruiting ahead of anticipated worker shortages. By 2016, nearly 61% of current full-time government employees will be eligible for retirement, according to U.S. Office of Personnel Management.
0158 GMT [Dow Jones] Singapore banks at risk of credit losses from funding
Marina Bay casino-resort as operator Las Vegas Sands under financial
distress, says UOB KayHian. Notes U.S. gaming group''s US$8.8 million loss
in 2Q08, with debt/equity ratio at 3.9X while interest cover at only 0.83X,
share price down 88.3% year-to-date. All 3 Singapore banks among total of
19 lenders involved in S$5.4 billion credit facility for casino-resort,
with all 3 acting as lead arrangers. "We understand they are still holding
the bulk of term loans allocated. The only exception could be UOB as it
participated through UOB Asia, its investment banking arm." Says UOB could
have distributed portion of its term loans to some other foreign banks.
Downgrades OCBC (O39.SG) to Hold from Buy, cuts target price to S$6.55 from
S$9.80. OCBC off 4.9% at S$5.61, DBS (D05.SG) off 6.9% at S$10.80, UOB
(U11.SG) off 4.8% at S$13.82. (FKH)

GLG's Roman, NYU's Roubini Predict Hedge Fund Failures, Panic

By Tom Cahill and Alexis Xydias

Oct. 23 (Bloomberg) -- Hedge funds closures will eliminate about 30 percent of the industry, and policy makers may need to shut markets for a week or more to stem panic, according to presentations at an investor conference today in London.

``In a fairly Darwinian manner, many hedge funds will simply disappear,'' Emmanuel Roman, co-chief executive officer at GLG Partners Inc., told the Hedge 2008 conference in London today. U.S. regulators will ``find a way to force regulation,'' said Roman, 45, who runs New York-based GLG with Noam Gottesman, 47. The firm was founded 13 years ago as a unit of Lehman Brothers Holdings Inc. and now manages about $24 billion in assets.

Nouriel Roubini, the New York University Professor who spoke at the same conference, said hundreds of hedge funds will fail as the crisis forces investors to dump assets. ``We've reached a situation of sheer panic,'' said Roubini, who predicted the financial crisis in 2006. ``Don't be surprised if policy makers need to close down markets for a week or two in coming days.''

Many hedge funds have resisted oversight by the U.S. Securities and Exchange Commission, even as policy makers coordinated global interest-rate cuts and bailed out banks this month to try and stem the crisis. The hedge fund industry is stumbling through its worst year in two decades and posted its biggest monthly drop for a decade in September.

``There needs to be some scapegoats, and they are going to go hunt people,'' said Roman, who didn't indicate when new U.S. regulation may take effect. Regulation is ``long overdue,'' he said. In the U.S., ``someone can graduate from college on a Friday and start a hedge fund on a Monday.''

More Difficult

Increased regulation and higher borrowing costs will make the hedge-fund business more difficult, Roman said. Still, financial markets have ``overshot,'' he said.

In some areas of financial markets, including loans, there are ``once-in-a-lifetime opportunities,'' he said. ``At some point, people will say this isn't 1929 to the power of 10.''

Roubini, a former senior adviser to the U.S. Treasury Department, forecast this Feburary a `catastrophic' financial meltdown that central bankers would fail to prevent and that would lead to the bankruptcy of large banks exposed to mortgages and a ``sharp drop'' in equities.

The comments preceded the collapse of Bear Stearns & Cos. and Lehman Brothers Holdings Inc. as well as the government seizure of Freddie Mac and Fannie Mae. The Dow Jones Industrial Average, a benchmark for American equities, has lost 37 percent this year, including its biggest daily drop in more than twenty years on Oct. 15.

He predicted earlier this month that the world's biggest economy will suffer its worst recession in 40 years.

`Worst is Ahead'

``This is the worst financial crisis in the U.S., Europe and now emerging markets that we've seen in a long time,'' Roubini said. ``Things will get much worse before they get better. I fear the worst is ahead of us.''

Developing nations' borrowing costs jumped to the highest in six years today as Belarus joined Hungary, Ukraine and Pakistan in seeking a bailout from the International Monetary Fund to help weather frozen money markets and a slump in commodities. Argentina risks defaulting for the second time this decade.

``There are about a dozen emerging markets that are now in severe financial trouble,'' Roubini said. ``Even a small country can have a systemic effect on the global economy,'' he added. ``There is not going to be enough IMF money to support them.''

Italian Prime Minister Silvio Berlusconi roiled international markets on Oct. 10, first saying world leaders were discussing shutting down global financial exchanges, and then saying he didn't mean it.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.

Thursday, 23 October 2008

Oil trading down

September trades shrink by nearly half as market players face credit squeeze
By Yang Huiwen

OIL trading in Singapore, the world's No. 3 energy trading hub, shrank by almost half last month compared to September last year.
The problem? Severe strains in the global credit market have made it much harder for traders to borrow funds to punt on the future price of black gold, which is usually a booming market.

Trading in over-the-counter (OTC) oil derivatives fell by 44 per cent last month from a year earlier, according to price assessment agency Platts.

These derivatives, which include options, futures or swap agreements, are generally used to hedge against oil price fluctuations, and can also be used by speculators to punt on the market.

But while OTC trades can hedge against market volatility, market players are saddled with the credit risk of the party with whom they are trading. This is known as counterparty risk.

And in these uncertain times, with the recent failure of many financial institutions around the globe, market players are increasingly wary of such exposure.

With the recent freeze in global credit markets and much higher borrowing costs, market players, especially smaller firms, are finding it much harder to obtain financing from banks to do deals, say industry experts.

More than 70 firms trade in OTC derivatives here daily, said Platts Asia senior editorial director Dave Ernsberger. They range from global energy majors and investment banks to specialist energy merchants and smaller companies such as those in the shipping and bunker supply industry.

For some of the smaller firms, trading has ground to a halt as banks are reluctant to extend credit, he said.

Oil trading houses and investment banks have also been trimming their energy trading operations locally, contributing to the drop in volume.

In addition, there have been concerns that the transformation of investment banks Morgan Stanley and Goldman Sachs into commercial banks may drain more liquidity from the energy markets as they cut back their more speculative activities.

Oil industry consultant Ong Eng Tong expects a further slide in trading volumes, given the heightened market volatility, demand uncertainty and fluctuating market sentiment, which have left traders reluctant to take big positions.

'We'll see more pain before we get to the bottom,' said Mr Ernsberger, adding there could be another 15 per cent fall from current levels. 'It will take a year or two before trading goes back to the levels we saw last year.'

This increase in counterparty risk, exacerbated by the collapse of US investment bank Lehman Brothers, is spurring a move to clear OTC trades.

Traders who do not clear their OTC deals typically face a higher risk as they depend on their counterparties to perform.

Clearing houses such as Nymex Clearport and SGX AsiaClear which offer clearing for OTC derivatives to mitigate counterparty risk have reported a jump in demand for their clearing business.

Total trades cleared last month by SGX AsiaClear surged 145 per cent from August. Nymex Clearport, the largest clearing house in Singapore, expects business to double this month from September.

Counterparty risk is mitigated by transferring an OTC deal to the clearing house as the clearing house and its clearing members will act as central counterparty to the transaction.

'Nowadays, we are increasingly seeing larger companies trading with each other and then clearing their trades with SGX. Credit risks are unpredictable,' said Mr Benjamin Foo, SGX's head of clearing, commodities and AsiaClear.

'With the increased credit concerns, there is a growing acceptance of the need for clearing.' He added that Singapore is seen as a 'good location for Asian companies to maintain their clearing accounts and funds'.

'The process is not done as much here in Asia, compared to New York or London, but business has been growing tremendously,' said Nymex's senior director for Asia marketing, Mr George Ng.

'Now they don't mind paying a small fee to gain the stability and limit their exposure to counterparty risk.'

Tuesday, 21 October 2008

S’pore govt warns of slower growth and higher unemployment ahead

SINGAPORE: Trade and Industry Minister Lim Hng Kiang has said the country is set for several quarters of slower growth. Speaking in Parliament on Monday, Mr Lim said this could stretch on for longer, depending on the state of the global economy.

Singapore, an open economy, cannot escape the impact of the financial crisis and the global economic slowdown. It is already in a technical recession and there are signs this is affecting the job market.

Mr Lim said: "The slowing economy and more cautious hiring have contributed to an increase in the overall unemployment rate from two per cent in March 2008 to 2.3 per cent in June 2008."

Mr Lim said that the unemployment rate for this year is likely to be higher than the record low of 2.7 per cent in 2007.

For now, he said retrenchments are still unchanged from previous quarters.

The financial turmoil has hit the property, retail and tourism industries. For the construction sector, Mr Lim said it is expected to grow by 7.8 per cent in the third quarter of this year, falling short of the 18 per cent growth registered in the first half of 2008.

And construction on projects like the Downtown mass rapid transit line is expected to contribute strongly to the economy, but the slower growth is due to weaker market sentiments, contractor shortage and equipment delays.

Still, government projects will add S$13.5 billion to the economy this year and the government will bring forward more public sector projects, if needed.

While Singaporeans shopping for daily necessities found higher prices for basic goods this year, Mr Lim said inflation has peaked, so costs will come down, though there will be a lag.

He said: "I must caution that inflation will continue to be sticky in the next few months because some of these costs have a certain amount of lag. But going into the next year, over the next 15 months, both MAS and MTI are confident that our inflation will revert to the more normal two to three per cent that we saw previously."

For professional workers, Mr Lim is hopeful as foreign companies like Halliburton and Qualcomm launch their Singapore operations this quarter. - CNA/vm

Confession of a ex-bank relationship manager

POST-MINIBOND LOSSES: What makes good relationship manager



I REFER to last Thursday's article, 'Retirees recount their big losses'.

My heart went out to the elderly woman whose face was was shown on the cover. On reading her account, I could comprehend her predicament and anticipate the tremendous duress and social repercussions that could lie ahead for those folk who have invested their life savings in the Minibonds that result in their financial bondage.

While the witch-hunting process has begun, I don't see the issue of whether the bank has mandated that retirees should be targeted for this product. If the product is genuinely suited for risk-averse investors , I don't see any reason to target them.

The point of contention is whether the risk-reward ratio has been properly articulated and communicated to investors. My take is, many zealous relationship managers are trained to convey potential returns of the myriad investment products offered by banks, but not to fully disclose the other side of the coin.

A former relationship manager myself, I was often told to go to regular product launch training during my banking career. The modus operandi was, the product manager briefed us on the key features of the product and then gave us the sales pitch, emphasising the unique selling proposition (or USP) of the investment. The downside risk of the product did not seem inherent and it was taboo to talk about it.

The financial turmoil is undeniably caused by mispricing of assets. This Minibond crisis is, arguably, caused by mispricing and miscommunication of the risk-reward of the product.

Quite often during the sales process, reward of the products was highlighted, emphasised and repeated, but the risk factor was never clarified or verified, not to mention certified. The best thing the relationship manager could advise about risk was the line often highlighted in brochures, 'past records are not indicative of future performance'. Derivatives and structured products are complex investment vehicles that went through a rigorous financial engineering process and carry an element of risk. The risk of the principal defaulting is coloured with terms like 'principal protected' and 'capital guaranteed'. How can a layman understand these sophisticated terms? But he would look rather foolish if he asked, so such terms are not explained or discussed.

Second, the competence of relationship managers currently in the market is debatable. Many are fresh from university and, though armed with degrees in finance, business administration or accountancy, have not experienced, not to mention understood, the dynamics of the market. Many are given onerous weekly, monthly and yearly sales targets. These relationship managers, who are the profit centre, are pushed to bring in lucrative creme-de-la-creme fee-based income, as opposed to traditional interest income, by virtue that fee-based income has zero downside risk of loan default.

Having said that, it seems the so-called downside risk has been transferred to investors in the Minibonds case. The current infrastructure uses incentives to reward star relationship managers but humiliates non-performers. In the world of survival of the fittest, many relationship managers are under pressure to deliver the magic sales numbers. Perhaps subconsciously, I surmise, they downplay the risk of investment products while delivering their impeccably honed sales pitch.

Yes, for Singapore to move up as an international financial hub, 'caveat emptor' should be the principle mooted. However, while this remains as a guiding principle, it should not be the cardinal rule that overrides the spirit of transparency and governance, and the sanctity of the trust of people in banking institutions. For years, banks have been upheld as the epitome of integrity , underscored by the highest form of governance to allocate credit to the bloodline of the economy. The word credit has a Latin root meaning 'to believe'.

In short, integrity and competence have to be intertwined to lend credibility to a bank, that is, the relationship manager. These are two quintessential traits of a credible relationship manager. To have one without the other is a fiasco.

Given the current financial turmoil, with an urgent need to review the financial infrastructure of the international banking system, local banks should take time to soul-search whether they deliver value in the goods they bring to customers. Second, it is time for them to mull over their top-down approach in their strategy of increasing fee-based income, and whether this has shortchanged internal processes in order to fast-track profit.

The process of delivering the trade-off between risk and return with clarity should be in place. In this way, the consumer can then assess the ratio and make his own judgement and so take ownership of the outcome.

The explicit guarantee by the Government on all deposits will last until 2010, and banks should take this time to restore confidence or else the role reversal will continue. Banks which conduct KYC, Know Your Customers, will see themselves scrutinised, as customers are now conducting KYB, Know Your Bank.

Angela Hoe (Ms)

Five warning signs that your job is on the chopping block

Knowing a pink slip may be ahead allows you to prepare

WASHINGTON (MarketWatch) -- More than 750,000 jobs have disappeared from the U.S. economy this year and workers face the prospect of plenty more layoffs to come as a continuing credit crunch and weak consumer demand hamper firms trying to maintain payrolls.

The good news is that workers can look for red flags for approaching layoffs, and knowing that a job loss is coming is a first step to getting back on your feet, experts say. Here are five omens that may signal your position is on the line.

1. Others are losing their jobs
Even if colleagues have been let go, workers are often surprised when it's their turn to get called into the boss's office. You are not immune. If others are losing their jobs you may too, even if your boss says different.

"It's dangerous to assume that management has a crystal ball about these things. Situations can change very rapidly," said Monica Parker, founder of LeavingTheLaw.com, which helps unhappy layers find new work. "I don't think that people are going out of their way to deceive others. It could be that they are lacking information, or circumstances change."

The bottom line is that you need to be aware of the possibility of a layoff.

"It doesn't help to close your eyes to the situation and hope that it won't be you," Parker said. "There's this sense that it's going to be someone else. But, in fact, it's you. It's a very tough thing."

Depending on a company's policies, workers at greatest risk of layoffs may be those who were most recently hired. Other targets are workers who aren't getting the job done.

"If management sees that you are not following through with your responsibilities, that's a big piece of it -- if they don't see potential in you to advance," Parker said.

2. Hiring freeze
Vanishing job postings on Internet sites can also send a layoff signal.

"You have the ability to hire, and all of a sudden your manager says 'wait,'" said Melissa Fireman, co-founder of Washington Career Services, a career management firm.

Workers should look at whether colleagues are taking on more or less work, and whether some are being asked or told to leave.

Manny Avramidis, senior vice president for global human resources at American Management Association, said the newly budgeted positions that never get filled are the first to go, then replacement spots that used to be posted and have disappeared, and then come the retirements that seem to be welcomed by management and are not filled.

Even as businesses trim around the edges, some departments are at lesser layoff risk, and there won't necessarily be cuts across the board, he added. Workers that contribute directly to revenue may be safer.

"For example, a telemarketer selling product usually stays around," Avramidis said. "If you start to see budget dollars going away, and the people who supported those dollars are going away, there is [cause for] concern."

Workers should remember that layoffs don't translate to losses for a firm's entire work force, he said.

"As long as a business doesn't go out of business, they'll have to retain staff. The leaders know that when they get through this recession, they'll need employees," Avramidis said.

3. Training budgets cut, projects slow down
Even large companies may cut training budgets, a red flag that financial concerns could lead to layoffs.

"They are not going to train because they are not sure if everyone is going to be there," Fireman said.

While there are certain critical initiatives or projects that need to go forward if a company wants to keep up production, workers should watch out when project spending slows, Avramidis said.

"From an employee's standpoint, anytime they see an organization cutting back on its spending and cutting back on activities, as well as staff or initiatives around them, they need to think through the details and figure out at what point does it reach my desk," Avramidis said.

4. Office gossip
Conventional wisdom calls for taking office gossip with a grain of salt. But sometimes it makes sense to listen to what your co-workers are saying and doing, Parker said.

"It's helpful to listen to gossip. It makes sense to notice what the talk is and to notice how people's responsibilities or jobs are being redefined," Parker said.

Fireman said workers should be careful about gossip, but that it does make sense to keep a "temperature reading" on your boss.

"If you do have a good relationship, ask how things are looking for the next quarter," Fireman said. "When I have heard from people who have a good relationship with their boss, the boss says to them it's a good time to start looking."

5. Company is missing targets
While some management may be less than forthcoming about missed targets for financial performance, workers can investigate a company's health by checking out the budget.

"That will tell them a story they want to know," Avramidis said. "[Companies] have a budget they are trying to achieve. An organization usually only has so much tolerance in how much they want to tap into reserves, like an individual tapping into a savings account."

A major sign of approaching layoffs is a business that isn't performing well. Especially at publicly traded companies, performance is critical, because firms that don't perform to an expected level, even during recessionary times, will be forced to cut back.

Tips for keeping your job:

* Make yourself irreplaceable. Be very clear about what you responsibilities are, and make sure you are meeting them. Pick up additional responsibilities. Make sure your supervisors and colleagues are aware of your capabilities.

* Continue to build your skills. Look for opportunities at your company and elsewhere.

* Don't seem paranoid or anxious. Keep working at your current output level, and try to focus on getting the job done.

Japan government:Singapore and South Korea economy weak

TOKYO -- Two economic reports on the state of Japan painted a bleak picture for the world's second-largest economy, with expectations of sluggish growth as the financial environment continues to deteriorate.

Japan's government cut its overall assessment of both the domestic and overseas economies in a new monthly report issued Monday, saying the downward trend will be likely to continue as financial conditions in the U.S. and Europe worsen.

The government cut its view of the domestic economy in its October report for the first time in two months, saying the economy "has weakened further."

It also cut its assessment of the global economy to "slowing down," while judging the U.S. economy is "in a recession." It was the most pessimistic view of the U.S. since December 2001.

The October report also downgraded the assessment of Asia's economies, noting "a weak tone" in some areas, particularly Singapore and South Korea.

The government said the downward momentum of the world-wide economy could further accelerate if financial conditions continue to deteriorate.

"Attention should be given to the risks that economic conditions will become more severe due to the worsening financial crisis and to large fluctuations in the stock and foreign exchange markets," the report said.

The grim picture of the domestic and overseas economies provides justification for a new economic stimulus package expected from the administration of Prime Minister Taro Aso.

At the same time, the Bank of Japan Monday downgraded its core economic assessment of the nation's regional economies in its October report, with all nine regions cutting their economic views for the first time in the report's brief history.

"Economic growth has been sluggish in general, mainly due to the effects of earlier increases in energy and materials prices and weaker growth in exports, although there were some regional differences," the central bank's quarterly Regional Economic Report for October showed.

Eight of the nine regions had lowered their assessments in the previous report, issued in July, but Monday's report marked the first time all nine regions lowered their economic views since the bank started releasing the so-called sakura report in April 2005.

Assessments differed by region, but the overall trend is clearly downward. The BOJ last downgraded its overall assessment of regional economies in April, and in July maintained that the domestic economy was "slowing" due to the effects of high energy and raw material prices.

The BOJ also revised down its assessments of some major economic items. Corporate sentiment has grown more cautious, the report found, and business investment has been falling overall, though it remained flat in some regions, the report showed.

FIRE SALE: OWNERS DUMP CONDOS

The Electric New Paper : 20 October 2008
FIRE SALE: OWNERS DUMP CONDOS
Agents: Some clients give as much as 20 per cent discount
FOR sale: Luxurious multi-million-dollar apartments, not quite for a steal, but with a hefty discount.
By Elysa Chen

FOR sale: Luxurious multi-million-dollar apartments, not quite for a steal, but with a hefty discount.

Stock market losses have forced some property owners to resort to 'fire sales' for a quick return to liquidity. And because the property market is almost flat, they have had to let go of their property at huge discounts.

Property agent Henry Neo receives one SMS a day from different clients asking him to sell their homes.

Mr Neo, who has been a property agent for close to 20 years, said: 'The Asian financial crisis of 1997 and this crisis are real challenges.

'It's a tsunami of the stock market.'

Two or three of the 50 clients he is servicing now are what he calls 'desperados' - people who had their fingers burnt so badly in the stock market they need to sell their houses. The situation is worse for those who opted for deferred payment schemes, said Mr Neo, because some are no longer eligible for loans, and cannot meet payments once the developers issue the Temporary Occupation Permit (TOP). 'They have to get rid of their properties before TOP, so they would be giving even more discounts.'

Noting that the high-end property market seems to be hit the hardest, Mr Neo said: 'My colleagues who specialise in high-end properties are not doing well. They do not have any transactions at all.'

Mr David Cheang, senior vice-president of the Resale Division at HSR Property Group, noted that two out of every 10 clients are affected by the stock market crash, and are selling their property investments to 'get more liquidity'.

A property agent who declined to give his full name said one of his clients had made such losses on the stock market that he was selling his 27th floor freehold apartment at the Twin Regency for a mere $1.05 million, though its market price is $1.3 million.

Last year, he had sold another unit, on the 29th floor of the same condominium, for $1.4 million.

It is the same story for Mr Felix Young, 35, a property agent specialising in high-end condominiums. Some of his clients are prepared to go as low as 20 per cent below their offer price.

He had taken out an advertisement for five properties, all high-end condominium units in the city.

Apartments at The Sail at Marina Bay, which were going for $2,000 psf are now being offered for sale at $1,450 psf, said Mr Young. But even such a huge discount is failing to entice buyers, who are asking for $1,100 psf. That is because even with such discounts, the two-room apartment costs about $1.3 million.

In the current climate, not many people would be able to shell out that kind of money because they could be sitting on huge paper losses in the stock market.

Mr Young said: 'Buyers have the sentiment that the property market will cool even more, and prices will drop further.'

And because of this, said Mr Young, there has been a significant drop in transactions - up to 70 per cent for high-end properties that people buy for investments.

Most buyers also know developers' launch price for the condominiums and are holding out until they can get a unit at that price.

He said: 'These days, when buyers call me, they ask me if I have any owners who are 'bleeding'.'

Bleeding is a term that is used to describe owners who over-committed themselves financially and need to sell their properties in a hurry.

Mr Young said: 'Many of my clients' bank loans are kicking in soon, so they need to release the properties quickly, before TOP. 'They are stuck because they can neither sell their property, nor rent it out to cover their mortgages, as the rental market has slowed down a lot.'

Japan in economic stagnation

TOKYO - JAPAN'S economy is expected to remain stagnant for a while as a global economic slowdown weighs on exports, the country's central bank chief said on Monday.

Corporate earnings in Asia's largest economy are shrinking and companies are cutting their capital investment, Bank of Japan governor Masaaki Shirakawa told a meeting of the central bank's branch managers.

'The economy of our nation is currently stagnant due in part to slower exports stemming from the lingering effects of high energy and material prices and a slowdown in overseas economies,' he said.

Business confidence remains cautious while consumption has turned softer due to inflation and sluggish wages, Mr Shirakawa said.

'Looking ahead, it is highly probable that the economy will remain stagnant as it has become clear that overseas economies continue to slow down,' he said.

Japan's economy suffered its worst contraction in seven years in the second quarter of this year and many analysts believe it is already in recession, which is usually defined as two straight quarters of negative growth.

Mr Shirakawa said, however, that the Japanese short-term money market was more sound than those of the US and in Europe.

'The Bank of Japan will continue our efforts to secure the stability of financial markets,' he said.

Japanese banks have been less severely hit so far by the global financial crisis compared with many of their Western peers. -- AFP

20m more jobless by 2009?

GENEVA - THE financial crisis could lead to a 20 million increase in the number of unemployed world-wide by the end of 2009, International Labour Organisation chief Juan Somavia warned on Monday.

Estimates from the ILO indicate that the 'number of unemployed could rise from 190 million in 2007 to 210 million in late 2009,' said Mr Somavia.

The population of working poor living on less than a dollar a day could rise by 40 million, and those on two dollars a day by over 100 million, added the ILO.

But Mr Somavia said these projections 'could prove to be underestimates if the effects of the current economic contraction and looming recession are not quickly confronted.'

Thousands of jobs have already been slashed on Wall Street and other financial centres as banks collapse or are forced to merge due to the credit crunch.

But the ILO said that the axe was likely to reach ordinary working people, with sectors including construction, the automotive industry, tourism, services and real estate to bear the brunt of the financial storm.

'This is not simply a crisis on Wall Street, this is a crisis on all streets. We need an economic rescue plan for working families and the real economy, with rules and policies that deliver decent jobs,' he said.

Unemployment rates have been rising throughout the world.

Hong Kong earlier on Monday said its jobless rate rose to 3.4 per cent for the three months to Sept, compared to 3.2 per cent in the three months to Aug.

Meanwhile, the US reported earlier this month that it had lost 159,000 jobs in Sept.

Mr Somavia called for 'prompt and coordinated government actions to avert a social crisis', and said he welcomed calls for 'better financial regulation and a global surveillance system of checks and balances.' -- AFP

Yahoo planning layoffs

WASHINGTON - YAHOO plans to announce significant cost cuts, including layoffs, possibly as early as Tuesday when the troubled Internet firm announces its third-quarter results, The Wall Street Journal reported on Monday.

The newspaper, citing 'people familiar with the matter,' said that the exact number of jobs to be cut was not clear but it would be more than the 1,000 jobs the Sunnyvale, California-based company announced it was cutting in Jan.

The newspaper said some managers in Yahoo, which had 14,300 employees as of the end of Jun, had been asked to identify operating budget cuts of around 15 per cent.

Yahoo has been losing ground on the Web to companies such as Google, MySpace and Facebook, and was the target earlier this year of a failed takeover bid by US software giant Microsoft.

Its share price has shed more than 40 per cent over the past three months and was trading on Monday at US$12.58 (S$18.60) .

In a bid to reverse its fortunes, Yahoo has rolled out several new products and entered into an advertising tie-up with Google but the deal has yet to receive a green light from US Justice Department anti-trust regulators.

The Wall Street Journal said Yahoo's board was also considering a deal with Time Warner Inc.'s AOL which would see AOL folded into Yahoo and with Time Warner taking a minority stake.

The weak economy has also hurt Yahoo as advertisers cut back on spending, the newspaper noted, adding that the cutbacks 'appear to be hitting Yahoo's business harder than some of its competitors.'

''Advertisers are reducing spending for display ads, the graphical ads that make up much of Yahoo's revenue, faster than other segments such as search ads, Google's stronghold,' The Wall Street Journal said.

Yahoo is to announce its third-quarter results on Tuesday after Wall Street ends trading for the day. -- AFP

Factory shuts, 1,500 jobless

BEIJING - A HONG KONG-LISTED appliance maker shut its southern China factory on Monday, state media reported, making it the latest victim of the world economic slowdown's impact on Chinese manufacturing.

The closure of Bailingda Industrial Co.'s electrical appliance factory in the export hub of Shenzhen has left 1,500 employees jobless, Xinhua news agency reported.

It follows the failure on Friday of another Hong Kong-listed firm, toymaker Smart Union, which shut its factory in the nearby city of Dongguan in Guangdong province, throwing about 7,000 out of work.

The situation has highlighted the growing risk of instability in China's coastal manufacturing hubs as factories face financial difficulties leading to large-scale layoffs.

Xinhua said more than 1,000 of the laid-off Bailingda employees had gathered outside the factory on Sunday, demanding government intervention to secure unpaid wages.

The report made no mention of any disturbances.

It said worried Guangdong labour authorities were considering setting up a fund to help workers laid off by factory closures.

Smart Union owes its workers at least six weeks' wages each, Hong Kong's South China Morning Post newspaper has reported, citing a company employee.

The Smart Union workers crowded around the factory's gates last week seeking news of their jobs and unpaid salaries, prompting the local government to warn them against escalating their action.

Experts have warned of increasing pain in China's coastal manufacturing regions due to the world economic crisis, particularly in the main export markets of the United States and Europe.

Rising labour and raw materials costs and the appreciation of China's yuan currency, which makes Chinese-made goods more expensive overseas, are also seen as factors.

Chinese state press reported last week that more than half of the nation's toy exporters - about 3,631 enterprises - had gone belly up in 2008.

China's economy is heavily dependent on overseas demand for its cheap manufactured goods. The factories that make them provide work for tens of millions of poor Chinese. -- AFP

Signs of tough times ahead

Jayaram Perumpilavil sees an economic storm gathering on India's horizon.

In New Delhi

FOR most Indians, the global economic meltdown has until now been something that concerned ‘them’, not ‘us’. Even the news of the share market crash and fortunes being wiped out overnight has not caused them their sleep, as only a minuscule percentage of the 1.1 billion population has ventured into shares and mutual funds.

“What’s the fuss?” most wondered when Sensex, or the Bombay Stock Exchange Sensitive Index, soared from 12,500 mark in April last year to over 20,500 in early January. They asked the same question when the market tumbled to 10,527.85 points, its lowest close since mid-2006.

Even news of a non-resident Indian in Los Angeles, reduced from millionaire to pauper in the economic meltdown, shot dead his wife, three children and mother-in-law before taking his own life, or a family of four in Mumbai committed mass suicide after they lost everything in the share market, did not come as a shock.

Not surprising, really, in a country where farm suicides due to crop failure or mounting debts are not uncommon. Failed business, of late, has also been a cause of suicides.

In perhaps, the strangest fallout of the market crash, a 34-year-old housewife in the western city of Ahmedabad, who has been trading regularly and making a huge profit until recently, complained to a counselling service that her husband of 10 years is threatening to divorce her after she lost three million rupees.

But there have been straws in the winds that everything is not normal.

For once, those irritating calls on your cell phone, from telemarketers at all odd hours offering unsolicited loans, credit cards, insurance policies and attractive holiday packages have almost stopped, if not altogether. You almost miss them because those calls, though unwelcome, did give one a feeling of self-importance.

For some time now prices of almost everything have been going up – vegetables, meat, soaps, detergents, you name it. Popular restaurants, where one had to wait for a table if you have not booked one in advance, are less crowded. So are the footfalls at the malls.

Retailers report a 40 per cent drop in sales, even though Deepawali, one of India’s biggest festival, is just a week away. Normally, this is the time when there is a surge in sales because people not only buy for themselves but also to give gifts to relatives and friends.

Tourist operators report of bulk cancellations from the US and Europe that would affect a whole lot of people who depend on the tourist industry for their livelihood.

There is unease and uncertainty among the 1.5 million employees of the thriving business process outsourcing centres, or call centres, because of fears that the crisis in the US could lead to job losses. Already, according to reports, the mood in the industry has turned from cautious optimism at the beginning of this year to palpable apprehension.

Wipro Technologies Ltd., one of India’s top IT company, last month asked hundreds of its US employees to go on no-pay leave after it lost two of the biggest customers, Lehman Brothers and Merrill Lynch. According to reports since the middle of this year, the company had recalled many Indian employees from the US back to their bases in India.

But what probably brought home the seriousness of the creeping crisis was when TV channels showed pictures of scores of cabin crew of Jet Airways, India’s largest private airlines, protesting in front of the airlines office in Mumbai against the summary termination of their services.

In one blow, the airlines fired 1,900 staff. Many of the protesters who were shouting “We want our jobs back” had tears in their eyes. Some said they found they had lost their jobs only when they called the airlines office to find out why the company pick-up vehicles had not come to fetch them to work. Many of the cabin crew, all in their early 20s, said they had taken loans to do courses for airhostesses and other airline jobs and also to pay a security deposit of Rs. 55,000 (S$1,650) to Jet Airways.

This story, of course, had a happy ending. Less than 48 hours after they were sacked, Jet Airways chairman Naresh Goyal reversed the order and told all employees to report for work. He said he “could not sleep, could not bear to see their suffering,” though it is widely believed that it is political pressure that prompted his U-turn.
But while the Jet Airways story ended on a happy note, it could just be the signal of the gathering storm on the India’s economic horizon.

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