But now, the crowning glory is that the Premier himself has issued an emperor’s edict from the mountain: that ALL business debt from informal lending sources (aka Ah Loongs) can now be considered fully forgiven (i.e. They will now be hunted down and killed by the government). Better yet, the Premier has also re-opened the funding taps from local banks, so that the speculative party can get started again, at lower interest rates.

If we were betting men living in Wenzhou and all and any other cities in China for that matter, we would now be borrowing double the amount from BOTH loan sharks and local banks, because we know that we will get solid-gold government guarantees that a) we will never have to pay back the loan sharks and b) the local banks are going to keep the taps open for the indefinite future.

Risk on, baby!

From ChinaDaily “China ensures bank loans to help private sector“

WENZHOU, Zhejiang — Authorities in Zhejiang province have sent 11 work groups to oversee a bank bailout of private firms suffering from a liquidity crunch in a coordinated move to tackle the Wenzhou debt crisis.

A spokesman with the provincial government said on Tuesday that 25 banks in Wenzhou city have pledged to increase lending to bolster private firms to weather the debt crisis.

During a visit to Wenzhou on Oct 5, Premier Wen Jiabao asked banks to lend more money to small firms and tolerate higher levels of debt. He also requested a crackdown on the high-interest informal lending market.

By Tuesday, three of more than 90 private entrepreneurs who had gone into hiding in recent weeks to avoid repaying high-interest informal loans returned home.

The local business community said the Wenzhou debt crisis is an extreme case of small- and mid-sized private companies (SMEs) struggling to survive the liquidity crunch resulting from the country’s current macroeconomic control policies, which have been designed to cool inflation and rein in the runaway property market.

Under the government’s coordination, banks have also increased the lending ratio to SMEs.

Tao Lingfu, head of the Wenzhou branch of the Bank of China, promised the bank would continue to issue loans with interest rates lower than 30 percent to corporate borrowers that are having liquidity problems but able to sustain production.

Meanwhile, industry associations have also taken measures to provide financial assistance.

Zhou Dewen, chairman of the Wenzhou SME Development Association, said the association has prepared an emergency fund worth 900 million yuan ($141 million) to help private firms in urgent need of cash to sustain operations.

“The association’s member companies would make donations to the fund,” he said.

Zhou said about half of SMEs in Wenzhou have difficulties in borrowing from bank and are forced to obtain capital from the unofficial lending market, despite the danger of high interest.

“Many of the firms are labor-intensive manufacturing firms making narrow profits from the mass production of small commodities such as eyeglasses, clothing, shoes and lighters,” he said.

Among the three returned absconders, Hu Fulin, president of China’s largest eyeglasses manufacturer, the Zhejiang Center Group, is the biggest debtor. He fled to the United States from Wenzhou on Sept 21, leaving 1.5 billion yuan ($236 million) in debt owed to both Chinese banks and individual creditors.

Hu said upon arriving at an airport in Wenzhou on Monday that he hopes his company can overcome the current difficulties with the government’s support.

Chen Derong, vice-governor of Zhejiang province, pledged that the government will ensure Hu’s personal safety, as well as that of his assets.

“The government will provide support to help companies that are trapped in the financial crunch but have the ability to survive these difficulties,” Chen said.

Another runaway company leader Sun Fucai, chairman of the board of the Aomi Fluid Equipment Co Ltd, also returned to Wenzhou on Monday.

“I don’t want to spend the rest of my life living in the dark,” he said.

Hu Jianjin, an official in Dongtou county, Wenzhou, said Sun’s firm, which makes high precision sanitation pumps, valves and pipe fittings, has great market potential. The county government will help the company get enough loans to emerge from its current plight.

Sun’s company, founded in 2003, has 100 million yuan in debt to banks and informal lenders. As banks limited the lending amid the country’s current macroeconomic control policies, the company’s capital chain broke. He went into hiding on Sept 11, when he sent his staff on a vacation trip to a scenic spot.

“I will be more cautious in maintaining the cash flow if I can resume the company’s operation,” Sun said.

For those of you who are asking why Slovakia is being such a pain in the derriere, and why those grass-chewing retards from a half-nation just get their act together to save Greece and its lenders from a cocaine-induced gambling spree during the good old days, you might just want to read (further down in this post) Die Spiegel’s interview with Richard Sulik, head of minor Slovak party in the coalition government, on his take on the Greek tragedy. Then ask yourself: who’s the actual retard here? In fact, let’s go one step further: Richard Sulik for POTUS 2012.

From Today “Euro bailout fund foiled by Slovakia“

WARSAW – Europe’s efforts to stem the sovereign debt crisis suffered an embarrassing and potentially costly setback last night when the Slovak Parliament failed to approve the expansion of the euro rescue fund, a development that appeared likely to bring down the government but not to derail the measure.

In a vote of 55 for, nine against and 60 abstaining, the Slovak governing coalition failed to muster the necessary votes to pass the plan that would have required them to contribute roughly US$10 billion (S$12.8 billion) in debt guarantees.

But the country’s leading opposition party said it would be willing to discuss support for the fund after the government fell, pointing to eventual approval of the deal. Officials in Brussels were counting on a political solution, but weighing the possibility of some kind of messy workaround if Slovakia failed to pass the measure.

Prime Minister Iveta Radicova had made the issue into a vote of confidence to try to prevent one of her coalition partners, the liberal Freedom and Solidarity party, from opposing the bailout fund – known as the – European Financial Stability Facility (EFSF), but in vain.

If nothing else, the unwieldy process underscored how the entire US$590 billion euro stability fund, approved by the 16 other members of the euro currency zone, could be held hostage to the domestic politics of one tiny country. It also showed how a measure intended to increase confidence in the euro zone could instead emerge as a telling example of the shortcomings of a system that relies on an unwieldy group of nations to make and execute difficult decisions.

Politicians in capitals across Europe watched the developments in Bratislava closely. An agreement to expand the fund was reached in July by the leaders of the 17 countries that use the euro. Malta approved the plan on Monday, leaving Slovakia as the last to take up the accord for formal consideration.

The possibility that Slovakia, with a population of just 5.5 million, could scuttle an agreement endorsed and passed by European powers like Germany and France had seemed inconceivable.

One European official speaking on condition of anonymity because of the fluidity of the situation, said that, ultimately, it would probably be possible to go ahead with the bailout without Slovakia if necessary.

The rules of the EFSF were laid down in a “framework agreement”, rather than being written into the bloc’s governing treaty. As an inter-governmental agreement this benefits from “a certain flexibility”, said the official. “In these sorts of cases, where there’s a will, there’s a way.”

Still, most observers believe Slovakia – having made its point with yesterday’s hiccup – will eventually approve the EFSF. While few Slovaks want to foot the bill for other countries’ overspending, surveys show that the EU is popular in Slovakia, and people are very proud of having adopted the euro while neighbours like Poland and their former compatriots, the Czechs, have not.

“The image of Slovakia has already been damaged,” said Slovakia’s Finance Minister Ivan Miklos. “Slovakia shouldn’t be viewed as the unreliable member of the euro club.” THE NEW YORK TIMES

And to provide the “balanced” view, here’s the Richard Sulik interview in Die Spiegel:

Only two countries, Malta and Slovakia, have yet to ratify the expansion of the euro bailout fund. Its fate may be in the hands of a minor Slovak party headed by Richard Sulik. In an interview, the politician explains why he hopes the fund will fail and what he sees as the only way to save the euro.

SPIEGEL ONLINE: Mr. Sulik, do you want to go down in European Union history as the man who destroyed the euro?

Richard Sulik : No. Where did you get that idea?

SPIEGEL ONLINE: Slovakia has yet to approve the expansion of the euro backstop fund, the European Financial Stability Facility (EFSF), because your Freedom and Solidarity (SaS) party is blocking the reform. If a majority of Slovak parliamentarians don’t support the EFSF expansion, it could ultimately mean the end of the common currency.

Sulik: The opposite is actually the case. The greatest threat to the euro is the bailout fund itself.

SPIEGEL ONLINE: How so?

Sulik: It’s an attempt to use fresh debt to solve the debt crisis. That will never work. But, for me, the main issue is protecting the money of Slovak taxpayers. We’re supposed to contribute the largest share of the bailout fund measured in terms of economic strength. That’s unacceptable.

SPIEGEL ONLINE: That sounds almost nationalist. But, at the same time, you’ve had what might be considered an ideal European career. When you were 12, you came to Germany and attended school and university here. After the Cold War ended, you returned home to help build up your homeland. Do you care nothing about European solidarity?

Sulik: If we now choose to follow our own path, the solidarity of the others will also crumble. And that would be for the best. Once that happens, we would finally stop with all this debt nonsense. Continuously taking on more debts hurts the euro. Every country has to help itself. That’s very easy; one just has to make it happen.

SPIEGEL ONLINE: Slovakia’s parliament is scheduled to vote on the bailout fund expansion on Oct. 11. How do you predict the vote will turn out?

Sulik: It’s still open. The ruling coalition is composed of four parties. My party will vote “no”; the other three coalition parties intend to say “yes.” What the opposition says is decisive.

SPIEGEL ONLINE: The Social Democrats have offered your coalition partners to support the reform in return for new elections. Do you think the coalition is in danger of collapse?

Sulik: I don’t see any reason why it would.

SPIEGEL ONLINE: What will you do should the EFSF reform pass despite your opposition?

Sulik: For Slovakia, it would be best not to join the bailout fund. Our membership in the euro zone, after all, was not conditional on us becoming members of strange associations like the EFSF, which damage the currency.

SPIEGEL ONLINE: If the euro only causes problems, why doesn’t Slovakia’s government just pull the country out of the euro zone?

Sulik: I don’t see the euro as the problem. It’s a good project. Everyone involved can benefit from it — but only if they stick to the ground rules. And that’s exactly what we’re demanding.

SPIEGEL ONLINE: Which ground rules should we be following?

Sulik: We have to observe three points: First, we have to strictly adhere to the existing rules, such as not being liable for others’ debts, just as it’s spelled out in Article 125 of the Lisbon Treaty. Second, we have to let Greece go bankrupt and have the banks involved in the debt-restructuring. The creditors will have to relinquish 50 to perhaps 70 percent of their claims. So far, the agreements on that have been a joke. Third, we have to be adamant about cost-cutting and manage budgets in a responsible way.

SPIEGEL ONLINE: Many experts fear that a conflagration would break out across Europe should Greece go bankrupt and that the crisis will spill over into other countries, including Portugal, Spain and Italy.

Sulik: Politicians can’t allow themselves to be pressured by the financial markets. Just because equity prices fall and the euro loses value against the dollar is no reason for giving in to panic.

SPIEGEL ONLINE: But do you really believe that politicians can calm the financial markets by stubbornly sticking to their principles?

Sulik: Let’s just ignore the markets. It’s ridiculous how politicians orient themselves based on whether stock prices rise or fall a few percentage points.

SPIEGEL ONLINE: You’re not afraid that a Greek insolvency could mark the beginning of the crisis instead of the end?

Sulik: No. There’s not going to be a domino effect along the lines of “first Greece, then Portugal and finally Italy.” Just because one country goes broke doesn’t mean the other ones automatically will.

SPIEGEL ONLINE: Nevertheless, banks could run into significant problems should they be forced to write down billions in sovereign bond holdings.

Sulik: So what? They took on too much risk. That one might go broke as a consequence of bad decisions is just part of the market economy. Of course, states have to protect the savings of their populations. But that’s much cheaper than bailing banks out. And that, in turn, is much cheaper than bailing entire states out.

SPIEGEL ONLINE: Does one of your reasons for not wanting to help Greece have to do with the fact that Slovakia itself is one of the poorest countries in the EU?

Sulík: A few years back, we survived an economic crisis. With great effort and tough reforms, we put it behind us. Today, Slovakia has the lowest average salaries in the euro zone. How am I supposed to explain to people that they are going to have to pay a higher value-added tax (VAT) so that Greeks can get pensions three times as high as the ones in Slovakia?

SPIEGEL ONLINE: What can the Greeks learn from the reforms carried out in Slovakia?

Sulik: They have to make cuts in the state apparatus. The Slovaks could also give them a few good ideas about the tax system. We have a flat tax when it comes to income taxes. Our tax system is simple and clear.

SPIEGEL ONLINE: One last time: Do you honestly believe the euro has any future at all?

Sulík: I believe the euro has a future. But only if the rules are followed.

From Asiaone “CIMB Research downgrades Singapore’s property sector“

SINGAPORE – CIMB Research downgraded Singapore’s property development sector to underweight from neutral on Tuesday, citing weaker economic and jobs growth as a recession in 2012 becomes highly likely.

“We believe these indicators will precipitate in falling housing demand and office rents,” said CIMB in a report.

It is projecting a 22-26 per cent decline in capital values for both segments in 2012, and estimates property “stocks still has a 34 per cent downside to first quarter 2009 trough levels.”

The brokerage has lowered its rating for Keppel Land to underperform from outperform and cut its target price to S$2.15 from S$3.90.

Keppel Land, which has 23 per cent of its gross asset value from China, may see some share price overhang due to a potential broad-based slowdown in China’s property sector, CIMB said.

It has also downgraded Southeast Asia’s largest developer CapitaLand to neutral from outperform and lowered its target price to S$2.51 from S$3.62, to reflect higher risk premiums due to its China exposure.

However, CIMB noted that CapitaLand is in a stronger financial position in this cycle to tap on acquisition opportunities.

From Washington’s blog “Do we need banks, or can we cut out the middleman?”

The big banks do very little traditional banking. Most of their business is from financial speculation. For example, less than 10% of Bank of America’s assets come from traditional banking deposits.

Time Magazine gave some historical perspective in 1993:

What would happen to the U.S. economy if all its commercial banks suddenly closed their doors? Throughout most of American history, the answer would have been a disaster of epic proportions, akin to the Depression wrought by the chain-reaction bank failures in the early 1930s. But [today] the startling answer is that a shutdown by banks might be far from cataclysmic.***

Who really needs banks these days? Hardly anyone, it turns out. While banks once dominated business lending, today nearly 80% of all such loans come from nonbank lenders like life insurers, brokerage firms and finance companies. Banks used to be the only source of money in town. Now businesses and individuals can write checks on their insurance companies, get a loan from a pension fund, and deposit paychecks in a money-market account with a brokerage firm. “It is possible for banks to die and still have a vibrant economy,” says Edward Furash, a Washington banks consultant.

Yahoo Finance says we don’t need banks since we have peer to peer capacity:

There was a time when banks were the obvious place to go if you needed a loan, whether as an individual or business. However, with the economic difficulties of the past few years, they have become increasingly reticent about handing over any of their cash, despite Government intervention.

Thankfully a new way of borrowing money has come to the fore — peer-to-peer lending — and it offers an opportunity for both borrowers and investors alike.

In 2007, Ode provided a great historical perspective of the issue:

Banks’ shortcomings have been recognized for centuries—and for centuries, groups of people have been organizing themselves to take advantage of alternatives. In the mid-19th century, a pair of German economists extended the growing idea of “co-operative societies” to credit. By 1864, a group of farmers had joined together to secure loans for livestock, seeds and farming equipment, forming one of the first credit unions, a co-operative, community-based banking model that still thrives.

More recently, in the last 30 years, the rise of microcredit has brought many small loans to people in poor countries and rural areas who had no access to traditional banks or could not present the kind of bona fides a bank requires. Microcredit has sparked a revolution in the international development community, proving the existence of plenty of credit-worthy people who are simply overlooked by traditional banks.

Combine the principles of microfinance and online social networking, and you get a new phenomenon: peer-to-peer lending, or social lending as it’s sometimes called. In the last two years, more than a dozen websites have been launched to connect borrowers and lenders—no banks required.

***

Peer-to-peer lending appeals to lots of people. Americans already lend more than $89 billion to friends and family every year, according to Federal Reserve estimates. Nearly 75 percent of Britons said they’d consider using a peer-to-peer website to borrow or lend, and some estimates suggest the global market for peer-to-peer lending will grow to more than $5 billion by 2010.

***

While cutting out the middleman may be instinctively attractive to many people, it can have an economic advantage too. Compared to credit cards, peer-to-peer lending offers borrowers really attractive interest rates—often half what they might expect to pay Visa or MasterCard.

And peer loans are often structured more fairly. A debt can be paid off in installments, unlike with credit cards, which can trap borrowers under debt that snowballs every month. For lenders too, these loans offer a higher rate of return than what they can earn on savings accounts. Interest is important, say small lenders.

***

It is that goal—getting capital to people who need it at reasonable rates—that creates a strong sense of purpose and community in social lending. The sites promote personal ties between lenders and borrowers. And with the global reach of the Internet, borrowers no longer need to know someone with money to secure a loan. By the same token, lenders often feel they’re helping a real person get through a bad patch or realize a dream.

Traditional bankers have a hard time seeing it that way. “They’re dumbfounded,” says George Hofheimer, chief research officer for the Filene Research Institute, a Wisconsin firm that studies consumer finance. “Why would anyone lend money to strangers?” The banking establishment, after all, considers itself expert at evaluating the risks involved in lending money. Social lenders concede that point. Lending is risky, and peer-to-peer sites often use the same tools—credit reports, income verification—to judge how stable a borrower is.

But banks also have a vested interest in remaining the middleman, and they’ve never been quick to adapt to change. Industry observers point to the success of the online bank ING Direct, which caught brick-and-mortar banks unprepared, and say peer-to-peer lenders may have a similar effect.

Open Democracy points outs the two main banking functions – which could hypothetically be provided by third parties:

A lot of people are busy trying to figure out how to make banks better. There is anger about what has gone on and puzzlement about the apparent inability of anyone to start doing something about it. [W]e seem to be frozen in a technical discussion of bank separation, capital adequacy, product authorisation, remuneration and incentives, or taxation. All worthwhile subjects in their way, but guaranteed to keep the sans-culottes at home.

So let’s ask another question. Why do we need banks – what are they for?

From Today “CAD given yet more time for probe“

SINGAPORE – The courts have granted a time extension – for the third time – to the Commercial Affairs Department (CAD) to continue its investigations into landbanking firm Profitable Plots, while awaiting the expert report from an accounting firm.

Representing the CAD, the state prosecutor argued in the Subordinate Courts yesterday that extending the investigation period was justified due to the large amount of investments involved. The court heard that complaints have now risen to 304 with investments totalling S$30 million.

During the last hearing in March, there were 229 complainants who alleged Profitable Plots had cheated them into investing in various schemes to the tune of about S$23.5 million in all.

With the time extension, the three bank accounts of Profitable Plots – amounting to about S$70,000 now – will remain frozen.

The firm’s coffers – frozen since it was raided last August by white-collar crime detectives – originally held S$277,590, but the High Court later ordered the partial release of monies pay the firm’s employees.

Defence counsel Wendell Wong had argued against the time extension, saying the expert report would not assist in deciding the ownership of the money left in the firm’s bank accounts.

Mr Wong said that the funds seizure had severely affected his clients, who are also facing another lawsuit.

The CAD was supposed to provide an update on investigations yesterday following a four-month time extension but Deputy Public Prosecutor Christopher Ong said that the accounting firm appointed in April could only produce the expert report next month and the report would be “crucial” in determining whether to press charges against the company.

No criminal charges have been pressed against Profitable Plots yet.

MediaCorp had previously reported that the company was being sued by broadcaster ESPN Star Sports for failing to pay up about S$4.9 million but claims against Profitable Plots directors John Andrew Nordmann and Timothy Nicholas Goldring for alleged misrepresentation, conspiracy and fraudulent trading are still pending.

Mr Wong also sought for the name of the accounting firm to be disclosed for greater transparency of the investigation process, adding that his clients have not been interviewed by the CAD since March.

District Judge John Ng agreed with DPP Ong that there was no legal basis to make known the accounting firm during ongoing investigations.

Allowing another four months for investigations, the judge said he was convinced by DPP Ong’s arguments that appropriate steps have been taken to conduct the investigations.

He added that the money in the frozen accounts should not be released until investigations have concluded as it could be linked to the complaints.

The next hearing is on Nov 8.

1. The “Singapore-is-Monaco” theory – Singaporeans are confident about their own and the country’s economic future, and that global UHNWIs will continue to long yachts and short tax authorities in Singapore.
2. The “Singapore-is-Shanghai” theory – Singaporeans are scared that property prices will run away from them, thanks to the property shopping tours being arranged for The Bladi Rich PRC on a regular basis
3. The “Singapore-is-Singapore-pre-Resorts World Casino” theory – Singaporeans are sick and tired of negative real interest rates earned by money in bank, and see ZIRP visibility for another two years, thanks to Helicopter Ben’s announcement earlier this year.
4. The “Singapore-are-a-bunch-of-sex-maniacs” theory – Singaporeans are forming households at a rate much faster than houses are being built

The thing to note, young Grasshopper, is that whatever theory we subscribe to, we have one underlying assumption running across all of them: that property prices will CONTINUE TO GO UP, because this is a pao-chiak game. (ignoring the naughty blips that don’t conform to the Pao-Chiak theory back in 1997, 2001 and 2009). But never mind those isolated incidences: this time it is really different.

From BT “Mass-market condo prices rise further in Q3″ (sub required)

(SINGAPORE) Prices of HDB resale flats and mass-market private condos climbed smartly in the third quarter, the latest official flash estimates show.

This reflects substantial latent demand, say property analysts. ‘The increase in Singapore’s housing stock – both public and private- in the past few years has not kept pace with the increase in population growth, both through immigration because of high growth in jobs, as well as new household formation,’ says Jones Lang LaSalle’s South-east Asia research head Chua Yang Liang.

Most property consultants and a major residential developer BT spoke to said HDB resale and mass-market private condo prices are likely to continue to outperform the market in the near term – barring major shocks.

‘However, the rate of price increases is likely to moderate in the fourth quarter as people start to think more cautiously and rationally given the uncertainties (about the global economy),’ said Ong Choon Fah, chief operating officer, SE Asia, at DTZ.

Urban Redevelopment Authority’s flash estimates show that the overall private home price index rose 1.3 per cent quarter on quarter in Q3 this year. This was a slower rise than the 2 per cent q-o-q increase in Q2 and marked the eighth consecutive quarter of moderation in the rate of increase since Q4 2009.

URA’s flash estimates show that the overall private home price index rose 1.3% quarter on quarter in Q3 this year.

URA’s geographical breakdown of price indices for non-landed private homes reflects a halving in q-o-q price growth for Core Central Region (CCR) – which includes the traditional prime districts 9, 10 and 11 as well as the financial district and Sentosa – to 0.8 per cent in Q3 from 1.6 per cent in Q2. In Rest of Central Region (RCR), the increase was 1.1 per cent in Q3, same as Q2. However, the index for Outside Central Region (OCR), where mass market condos are located, escalated 2.1 per cent in Q3, a faster clip than the 1.7 per cent increase in Q2.

HDB’s resale flat price index posted a 3.8 per cent q-o-q gain in Q3 – faster than the 3.1 per q-o-q hike in Q2 and the biggest quarterly rise since Q3 last year, when the index climbed 4 per cent.

HDB said yesterday that it would launch 4,200 Build-To-Order flats in places such as Bedok, Bukit Panjang, Hougang, Punggol and Yishun next month.

ERA Realty Network key executive officer Eugene Lim noted that although HDB has stepped up launches of new flats, these will take time to build. In the meantime, the supply-demand imbalance continues to push up prices of completed HDB flats in the resale market. ‘With HDB resale flat prices at an all-time high, this has strengthened HDB flat owners’ ability to upgrade to mass-market private condos,’ he added.

The launch of new mass-market condos also supported the rise of condo prices in OCR, said property consultants.

Credo Real Estate executive director Ong Teck Hui said: ‘The mass market has been relatively buoyant, supported by demand from mainly owner-occupier buyers. The proportion of private homes (excluding exec condos) sold by developers which were in the OCR has been increasing steadily from 45 per cent in 2010 to 53 per cent in the first quarter of this year, 61 per cent in Q2 2011 and around 68 per cent for July and August combined,’ he added.

CB Richard Ellis executive director Li Hiaw Ho said: ‘Strong sales of new projects such as EuHabitat (median price of $1,015 psf), The Luxurie ($1,053 psf), Seastrand ($930 psf) and Thomson Grand ($1,300 psf) could have contributed to increases in the price indices in Q3 for both OCR and RCR.’

URA’s overall private home price index has risen 5.6 per cent so far this year from Q4 2010. Colliers International director Chia Siew Chuin reckons the index could probably increase one per cent in Q4 over the Q3 level, followed by increases of around one per cent or less per quarter for next year. ‘Potential home buyers will likely remain cautious, limiting their propensity to commit to prices above the last done, while developers are not expected to be in a hurry to cut prices on the back of still-healthy demand in the primary market,’ she added.

Knight Frank research head Png Poh Soon says that if the Singapore economy tanks, private home prices could correct by about 5 per cent year on year.

Credo’s Mr Ong said that ‘it will be a bit difficult to say when the Singapore economy slows down and the extent to which it affects housing demand’.

ERA Mr Lim said the prices of HDB resale flats may continue to rise unless there are policy changes that can increase the supply of resale flats put up for sale.

He suggested that the government should spare existing HDB flat owners who are moving into another public housing flat from the lower loan-to-value limit of 60 per cent on their new purchase, since such buyers will sell the first flat once they’ve bought the second one. ‘This measure has slowed supply flowing into the HDB resale market.’

On the other, this is the same country that enshrines the right of Gahmen employees to never be fired, and for whom non-productive, non-value adding Gahmen spending is equal to about half of the entire GDP. The only way in which Greece could “sustain” (if that’s the right word) such an unsustainable non-production generating approach was to keep borrowing to infinity, and pray no one ever asks for any money back. Ever.

Yet, to cope with depression, the same lenders (who knew well that Greece was never good for any repayment beyond the coupon – and now not even that, since it’s 66% to the 2Y) have demanded strict austerity and urgent tax measures (such as the mucho popular property tax delivered with monthly electricity bills, along with the threat of cutting off household electricity if not paid) as the pre-condition for more loans.

It’s like administering chemotherapy, radiotherapy, amputation, and a deep anal probe  – in a single sitting – to a patient that’s already terminal, perhaps in the vain hope that the second coming of JC will occur in Athens in the next few weeks. Because whatever is happening now will go on happening in the only way it can happen: leading to the Great Greek Default. However, anyone who can tell you what is likely to happen to global markets in the event of the GGD is merely trying to sell you his investment newsletter.

From Reuters “Greece to miss deficit target imposed by lenders“

Greece won’t meet 2011-2012 deficit targets imposed by international lenders as part of the country’s bailout, the Finance Ministry said Sunday.

The country’s deficit this year is expected to reach 8.5 percent of gross domestic product, or €18.69 billion ($25.2 billion) — higher than the targeted €17.1 billion ($23.1 billion), which would have been 7.8 percent of GDP, the ministry said.

Greece has been reliant since May 2010 on regular payouts of loans from a €110 billion ($150 billion) bailout from other eurozone countries and the International Monetary Fund. It was granted a second €109 billion package in July, but details of that deal remain to be worked out.

The Finance Ministry said the missed target was because of a deeper-than-expected recession, with the economy contracting by 5.5 percent instead of the 3.8 percent estimate made in May. It implied the deficit could even exceed this level by the end of the year unless all new austerity measures were implemented.

“The final estimate for a deficit equal to 8.5 percent of GDP can be achieved, if there is a proper response by the state authorities and the citizens themselves, on whose stance the country’s financial … and social future depends,” the announcement said.

The announcement reflects the government’s frustration with tax collection, which they blame on tax inspectors’ lax performance, and its fear that citizens, angry at seeing their wages shrink and, at the same time, having to pay an increasing amount of one-off taxes, would refuse to pay.

There are already widespread calls not to pay a property surcharge, to be included in the next batch of state electricity company bills, despite the fact that delinquent payers are threatened with having their houses disconnected from the grid. The government hopes that revenue from the property levy will raise about €2 billion ($2.7 billion) in 2011 and a similar amount in 2012.

The 2012 budget is projected to reduce the deficit to €14.68 billion ($19.82 billion), or 6.8 percent of GDP, up from the 6.5 percent target agreed with Greece’s lenders. Excluding serving Greece’s debt, the budget is projected to have a primary surplus of €3.2 billion, or 1.5 percent of GDP, meaning that Greece’s debt will stop growing, as a percentage of GDP.

The Cabinet also decided up to 28,000 public sector employees will be placed on “reserve” — that is, suspended with reduced pay, by the end of 2011.

The program falls short of the 30,000 reduction demanded by Greece’s creditors and, with few exceptions, it is actually an early retirement program on full pensions. Those affected will be paid a fraction of their actual salary for a period of one to two years, but will be able, at the same time, to hold jobs in the private sector, if they can find them.

“The approved proposal is the result of lengthy and difficult negotiations with (the lenders) who insisted that placing employees on reserve should have been a step towards firing them and not an early retirement” program, government spokesman Elias Mossialos said.

The government expects savings of €300 million from the plan in 2012.

The cabinet committed itself to reducing civil service jobs by 150,000 within four years.

From Economic Times “As gold vaults, storage space runs out“

Deep in the 7.4-acre Singapore FreePort next to Changi International Airport’s runways is the bullion vault of Swiss Precious Metals, behind seven-metric-ton steel doors built to survive a plane crash or earthquake.

The rooms are almost full after demand rose five-fold in the year since the Geneva-based company opened the facility. The firm plans an extension, and relocated Chief Executive Officer Jean-Francois Pages to Singapore last month to cope with the surge of investors willing to pay as much as 1% of the value of their holdings each year to keep them secure.

“The European debt crisis and its impact on the solvency of European financial players are driving European customers to find refuge in tangible values like physical gold and other precious metals,” Pages said. Demand “is totally compatible with the current financial and political global turmoil.”

Barclays Capital is building a new vault, The Brink’s Co. and Deutsche Bank AG may add more space, and the Perth Mint may expand for the first time since 2003, a sign they expect demand to keep increasing after the 11-year rally during which prices increased sevenfold. Investors in exchange-traded products backed by gold bought 2,198 tons of bullion since 2003, exceeding all except four countries’ official stockpiles.

Storage companies are responding. The 112-year-old Perth Mint, which refines more than 8% of all supply and is owned by the Western Australian state, may add a new vault within the next year, according to Treasurer Nigel Moffatt. The mint sells everything from gold coins to 400-ounce (12.4-kg) bars.

Brink’s, the largest bullion carrier in the UK, is considering adding more storage after opening a new London vault earlier this year. Barclays, based in London, is building a vault in the city that will open next year, the bank said in a statement last week.

Deutsche Bank, based in Frankfurt, is considering expanding existing facilities and developing new ones to meet demand, Matthew Keen, a director at the bank, said earlier this month. JPMorgan Chase & Co. started a vault at the Singapore FreePort location last year and opened another in New York.

“With gold prices where they are, we encourage people to keep it in safetydeposit boxes at banks or vaults, which gives that sense of security,” said Scott Carter, CEO of Goldline International Inc., a Santa Monica, California-based precious-metals retailer. Gold bought for investment accounted for 38% of total demand in 2010, compared with about 4% a decade before, the World Gold Council estimates.

PRIVATE INVESTMENT

All gold ever mined totalled about 168,300 tons by 2010 and would fit inside a cube measuring about 21 meters (69 feet) in length. Private investment in the metal reached about 31,100 tons by the end of last year, according to the council.

The gold stored in vaults typically meets the LBMA’s so-called good delivery standard, where bars are of at least 99.5% purity and include a serial number, the year of manufacture and the refiner’s assay mark. “The days where a secure vault in a basement was sufficient are long gone and in today’s operating environment, the expertise required in order to manage the substantial, and expensive, quantities of bullion are far reaching,” said Orit Eyal-Fibeesh, managing director for Brink’s in the UK Brink’s, the third-biggest provider of vaults in the UK behind New Yorkbased JPMorgan and HSBC Holdings Plc, is considering building another facility in London, said Eyal-Fibeesh.

STORAGE COST

As gold surged 27% and silver 29% this year, so did the cost of insurance. Fees charged by Lloyd’s of London members are pegged to the value, not volume, of the metals. Individuals preferring to hoard bullion under their own names in private vaults pay about 1% or more of the total value a year, compared with about 0.4% for investors in metal held through some ETPs. Insurers typically set maximum values for the metals they are willing to insure.

“Many vaults are hitting the insurance limit as prices of gold have surged and even if space is available, the full replacement insurance may not be available,” said Savneet Singh-,CEO of New-York-based Gold Bullion International, which offers precious-metals storage to wealthy individuals, hedge funds and financial institutions. “The smaller customers are already getting squeezed.”

Swiss Precious Metals, whose Singapore vault will be 80% full by December, charges as much as 1% of the market value of gold and silver stored, depending on the quantity, Pages said. The charge covers storage, insurance and related documentation, he said. The company has already arranged for more space for expansion.

If insurance costs rise by more than 50%, then the firm may ask for higher fees, according to Pages, who predicts gold may reach $2,500 by the end of the year. Swiss Precious Metals is owned by Geneva-based Palaedino Group SA and Euroasia Investment SA. Euroasia Investment is an investor in the Singapore FreePort through affiliates, according to Pages.

Lloyd’s of London, which offers socalled specie insurance, declined to provide information on rates or demand. Brink’s declined to elaborate on storage and insurance costs. JPMorgan, which also rents space at the Singapore FreePort, declined to comment.

BULLION DEPOSITORY

Sometimes the secrecy needed at vaults backfires. Ron Paul, a Republican congressman for Texas and threetime presidential candidate who has called for a return to linking the dollar to gold, isn’t sure there’s any metal at the U.S. Bullion Depository at Fort Knox in Kentucky.

Paul told Bloomberg Businessweek’s June 20 edition that the government “is asking the American people to trust that all the gold is there, while not allowing site visits and not publishing all the data.” Eric M. Thorson, the inspector general of the Treasury, said he has seen and accounted for it all.

The U.S. has the world’s largest gold reserves, 8,133.5 tons, according to World Gold Council data. The Kentucky vault, opened in 1937, stores more than 4,500 tons at a book value of $42.22 an ounce, according to the U.S. Mint’s website. The facility admits no visitors.

“Gold is simply a mirror of economic and political failure, of all the uncertainties that make people worry,” said Gerry Schubert, the head of precious metals at Emirates NBD in Dubai, who has traded the metal since 1979. “If you have $50 million, what would you do with that money? You buy gold. Hedge funds, central banks, sovereign funds: all are buying gold.”

From BT “FreePort strikes gold as investors seek safety” (sub needed)

(SINGAPORE) As investors seek refuge in precious metals such as gold, the smiles are getting wider at the place that offers to store the valuables securely: Singapore FreePort.

Ultra-safe: Located next to Changi Airport, Singapore FreePort is a high-security, state-of-the-art storage facility which operates in its own duty-free zone

‘Singapore FreePort has received more inquiries over the past six months on the storage of (precious metals). Tenants are already thinking of expansion plans,’ said Lincoln Ng, general manager of Singapore FreePort.

Located next to Changi Airport, Singapore Free- Port is a high-security, state-of-the-art storage facility which operates in its own duty-free zone.

Clients include private institutions such as Christie’s, Swiss Precious Metals, the Singapore Diamond Exchange (SDX) and Qatar Fine Art services – which, in turn, store goods for their own clients.

According to a Bloomberg report, Swiss Precious Metals expects its Singapore vault at the FreePort to be 80 per cent full by December – with clients willing to pay as much as one per cent of the value of their holdings each year – translating to a fivefold jump in demand in the year since the Geneva- headquartered company opened the facility.

‘The European debt crisis and its impact on the solvency of European financial players are driving European customers to find refuge in tangible values like physical gold and other precious metals,’ Swiss Precious Metals CEO Jean-Francois Pages was quoted by Bloomberg as saying.

Gold was trading at about US$1,807.6 an ounce at press time, albeit lower than the record US$1,921.15 an ounce on Sept 6.

Meanwhile, Singapore FreePort – a 25,000 square metre facility, which was launched in 2010 and is fully leased out – may expedite expansion plans if demand remains robust.

‘When there is a demand, supply comes naturally,’ Mr Ng said, adding that expanding the facility had been part of the plan from the beginning.

While rental space at the FreePort is generally charged on a per square metre basis, rent can vary depending on additional requirements.

Aside from storing precious metals, the FreePort is home to works of fine art, jewellery, antiques, vintage cars and even wine.

The FreePort-based SDX is hoping to benefit from the growing interest in precious stones. Launched in June, the tender house conducts by-invitation-only tenders for ultra high net worth individuals, in addition to storing gems for clients in its diamond depository.

According to SDX chief executive Steven Betsalel, the volatility in the markets has brought about mixed reactions from customers.

While its high net worth clients are treading more cautiously, its ultra high net worth clients are less likely to pull back.

‘(The ultra high net worth) are always looking for value,’ said Mr Betsalel.

Diamonds also have the advantage of being smaller than gold in size – making them an easy-to-carry asset.

SDX’s upcoming tender coincides with the Singapore Grand Prix this weekend, a glitzy event that is known to attract its fair share of multimillionaires to the island.

‘We have a lot of interest in this tender and the lots are (of) higher value,’ Mr Betsalel added.

With nine lots up for tender and each lot costing at least a US$1 million, the total value for this tender is in the region of US$40-odd million.

Prospective buyers are coming from China, Japan, Malaysia, the Middle East and Europe, in addition to Singapore.

In other words, “I’m from Oxford. It’s those guys from Cambridge you can’t trust.” 

From BT “China Sky case highlights a conflict between an ID’s role as AC chair and his firm’s role”

By MAK YUEN TEEN

MOST of the troubles faced by Chinese companies listed in Singapore – S-chips – can be attributed in the first instance to management of these companies and poor internal controls and accounting systems within these companies, even though independent directors in some of these companies may have contributed to the problems due to their lack of independence, competence or commitment.

On April 22, China Sky Chemical Fibre issued an announcement in response to a number of queries from the Singapore Exchange (SGX) which should set off alarm bells not only among investors but also among the local professional accountancy body and the regulators. It is unusual in that some of the most significant queries relate to the actions of a Singapore independent director, who is also a practising accountant.

China Sky has two Singapore independent directors, Er Kwong Wah and Lai Seng Kwoon. Both sit on multiple boards, including a number of S-chips. Indeed, in a report published in The Business Times on July 27, 2009, Mr Lai was referred to as ‘Mr S-chips’.

In that report, Mr Lai was quoted as saying: ‘I’m an ID who, I think, doesn’t have a very glorious record . . . I have gone through an S-chip that has fraud, an S-chip that is experiencing bond and liquidity issues, I have gone through an S-chip that has a controlling shareholder pledging all his shares, and I have an S-chip with missing accounting records.’

To that list, we can now add that Mr Lai has now also gone through an S-chip where he is a major source of its problems.

Among other issues, the SGX asked China Sky to identify the director whose firm was reported to have provided professional services to the company under its disclosure of interested person transactions (IPTs), and to explain certain discrepancies in the disclosure of IPTs in the 2009 and 2010 annual reports.

It has now emerged that Mr Lai’s accounting firm, SK Lai & Co, provided significant accounting-related services to China Sky, while Mr Lai was an independent director and chaired the audit committee (AC).

The payments for these services were recurring IPTs and amounted to some $112,000 in 2008, $183,000 in 2009 and $72,000 in 2010. The services relate to assisting in the review of the company’s internal, accounting and reporting controls, reviewing quarterly financial statements and results announcements, and providing consultancy and advisory services for various accounting procedures, including the consolidation of a subsidiary.

As the AC chairman, Mr Lai has a primary responsibility for overseeing the areas for which his firm is providing accounting-related services, and is therefore put in a position to review his own firm’s work.

Further, the AC oversees the external auditors, who are expressing an opinion on the financial statements, while his firm is advising management on the controls and accounting procedures which underlie the preparation of these financial statements.

The amount of fees involved suggests that the work of his firm was substantial.

In my view, there is an unacceptable conflict between his role as AC chair and his firm’s role in providing accounting-related services. While the company has claimed that the IPTs are conducted at arm’s length and that each member of the AC abstained from voting on matters in which he is interested, it still begs the question as to how SK Lai & Co was appointed when there are many accounting firms that can provide such services.

Primary beneficiary

Further, the AC is also tasked with reviewing the IPTs, but Mr Lai’s firm is the primary (only) beneficiary of the transactions which were reported. It has now also turned out that there were significant errors in the reporting of these IPTs.

The 2010 corporate governance report of the company includes a statement that the independent directors have confirmed that they do not have any relationship that could interfere, or be reasonably perceived to interfere, with the directors’ independent business judgment.

The nominating committee, chaired by Mr Er with Mr Lai as one of its two other members, was reported to have reviewed and confirmed the independence of the independent directors – that is, their own independence. The query from SGX has now resulted in a further statement that the board assesses Mr Lai to be independent despite his significant business relationships with the company, because of his ‘unequivocal ability to exercise strong independent judgement’, ‘to act professionally’, ‘to maintain a high standard of duty and care’ and to ‘observe the ethical standards of his profession’.

It is a mockery of our corporate governance regime if a director can still be considered to be an independent director given such significant business relationships and conflicts.

In The Business Times report mentioned above, Mr Lai was quoted as saying: ‘Of course, given my experience, I would want to get onto more boards.’

Mr Lai was also further quoted as saying: ‘Given the spectrum of experience I have on S-chips’ boards, I would like to humbly submit that I am better positioned to deal with the issues surrounding them.’

In the China Sky case, I would also like to humbly submit that some of those issues are of Mr Lai’s own doing.

As an addendum, those who have voluntarily declared offshore wealth holdings to IRS in a ‘plea-bargain’ move have also sung like a canary about banks based in Asia which helped said birds do the tax-dodge mambo. Another shame list coming out soon? 

From Reuters “Ex-prosecutor says tax-evading Americans turn to Asia“

Some Americans, worried about greater U.S. scrutiny of Swiss banks, are using bank accounts in Asia to hide their money from tax authorities, a former prosecutor involved in the U.S. government’s crackdown on Swiss bank UBS said on Monday.

Earlier this month in a U.S. court filing, the Department of Justice said HSBC in India helped potentially thousands of Americans dodge taxes, signaling the government may now be taking a closer look at Asia’s role in American tax evasion.

Jeffrey Neiman, a lawyer who recently moved into private practice after leading several high-profile government cases against UBS clients and bankers, said there were signs money from some tax-evading Americans has moved into Asia.

“The government crackdown has pushed some of these individuals to have to go beyond Switzerland,” he said in an interview.

“You’ve seen money that’s gone to India, money that’s gone to Singapore, to Hong Kong.”

Neiman did not say if Americans were using international or regional banks in Asia, where lawyers say some private banking units have likely gone on guard for potential U.S. investigations into their businesses.

The United States is probing other banks and their involvement in offshore tax services after UBS paid $780 million two years ago and admitted to helping Americans stash assets overseas tax-free.

Among those facing increased scrutiny is Europe’s largest bank, HSBC, as well as Credit Suisse and smaller Swiss banks, analysts and lawyers say.

In a sign the probe is also expanding beyond Switzerland, the government recently asked a San Francisco federal court to grant it authority to serve HSBC India with a “John Doe” summons forcing the bank to hand over the identities of an unnamed number of people, many of them believed to be wealthy Indian-Americans who may have engaged in tax fraud.

U.S. prosecutors used the same strategy in its case against UBS, and some attorneys say the government may now be seeking a similar summons for Credit Suisse.

HSBC and Credit Suisse have said they abide by all tax laws.

FOLLOWING THE MONEY TRAIL

Large volumes of capital have flowed into Asia in recent years, turning the region into an enticing destination for many investors put off by low interest rates in Western markets and the crackdown on banking secrecy in Switzerland.

Neiman said some recent U.S. legal cases involving Swiss bankers also highlighted how money has moved from bigger banks in Switzerland to smaller, cantonal ones with fewer ties to the United States.

“From a cantonal bank perspective, they look at it as there is less of a chance of being on the U.S. government’s radar,” he said.

But Neiman said authorities were following up on information gleaned in criminal investigations and from Americans who have come forward to declare their assets with the Internal Revenue Service (IRS) under a voluntary disclosure program aimed at getting tax dodgers to pay up.

“The barriers are coming down because when taxpayers who made their voluntary disclosures did so. They said Bank A in this country, wherever in the world it may be, not just Switzerland, helped me do this,” he said.

He also said American tax authorities were closely tracking the movement of money from possible tax evaders.

“They are following the money,” he said. “The one thing that the IRS is really, really good at is tracing the money and seeing flows of money, whether its from a big bank to small bank in Switzerland or big bank to a small bank outside of Switzerland.”

From BT “Fire at Sino Techfibre factory destroys records”

Blaze in Shandong facility may further obscure ongoing probe into its books

A FIRE at the China factory of mainboard-listed Sino Techfibre could further obscure an ongoing probe into its books as key financial records have reportedly been destroyed in the incident.

According to a statement released by the firm late Friday night, a fire had broken out at the administrative premises within its primary production facility at Longkou City in Shandong province in the early morning of April 20.

While the blaze did not cause any deaths or injuries, the financial records that were kept in the affected office have been destroyed, Sino Techfibre revealed.

‘The company has reported the incident to the local police, and the latter has commenced the necessary investigations,’ it said.

‘The cause of the fire and actual extent of the damage are currently still unknown, pending the completion of the police investigations into the fire and issuance of their report,’ it added.

The incident happened a week after the firm was red-flagged by external auditors Ernst & Young (E&Y) for accounting irregularities, adding to recent scandals surrounding the bookkeeping practices of several other China-linked companies.

Specifically, E&Y uncovered some discrepancies in the invoices issued by the firm and its suppliers.

Sino Techfibre said that it could not locate the sales manager who is at centre of this controversy, and has since lodged a local police report.

As E&Y did not obtain a satisfactory explanation on the issue, it could not complete and issue the audit report on Sino Techfibre.

In an update last Friday, the Chinese maker of polyurethane (PU) and microfibre synthetic leather products also announced that it has appointed an interim chairman and CEO following E&Y’s findings.

Sino Techfibre’s existing CEO Li Wenheng has been ‘re-designated as an executive director’ until further notice, the firm said.

Independent director Tay Wee Kwang has taken over as Sino Techfibre’s interim chief while Lee Wing Hang, another independent director, has been appointed as its interim chairman.

As part of his responsibilities, Mr Tay will oversee the independent investigations into the company’s audit issues as well as review the investigation report on last week’s fire. He will also take over the company seals of Sino Techfibre and all its subsidiaries.

Sino Techfibre is currently finalising the appointment of E&Y for an expanded audit.

In anticipation of this move, Sino Techfibre said that it has been ‘making the necessary preparatory work in respect of the relevant books and financial records of the company’ prior to last Wednesday’s blaze.

The counter has been suspended from trading since April 19.

Prediction (and we wish we were wrong in this): this will fall under the BFD category of discipline. Since S-chips now account for a significant portion of the “organic” growth that SGX is looking for, and with ASX deal dead, and the lack of any other catalist (haha) for growth, we can be sure no single member of S-chip management is worried about this – (p.s. not for nothing do they refer to IPO as the Exit Strategy). After all, all it takes to keep SGX quiet for the next few months will be a few re-printed pages and some appropriate signatures in the right places.

As for the most truthful (and hilarious) part of the article, courtesy of Lin Song, co-head of international China practice group at law firm KhattarWong, who explains that in the end, it doesn’t really matter what we do: “If you don’t have the cooperation of the legal rep, then you might not be able to go through the whole procedure and then to effect the removal of the legal rep because you can foresee that the legal rep will not give full cooperation in helping you to remove himself.”

We couldn’t have said it better ourselves.

From TodayOnline “S-chips racing against time to meet May 31 deadline”

Listed companies with operations in China are racing against time to put in place strict new measures that could give them more control over their mainland-based legal representative or top executives.

These so-called S-chips, or Chinese companies listed on the Singapore Exchange (SGX), might be able to comply with the May 31 deadline, according to industry observers. But other issues might haunt them and force the SGX to put more teeth to existing regulations.

Recent accounting and management scandals that hound Chinese companies listed here have led the SGX to require the firms to clearly lay down rules on hiring and firing their top management, including CEOs and company founders, who might have unlimited legal authority to enter into contracts and manage the company’s finances.

There are 155 China companies listed on the SGX and high-profile cases involving accounting controversies include names like Sino-Environment Technology Group, Oriental Century, Falmac and CDW Holding.

“We often find that the legal representative from China is not doing the right thing. When we need to replace them, we find difficulties because the articles of association did not provide for that,” said Mr Lim Lee Meng, tax expert at accounting firm RSM Chio Lim.

Experts said most S-chip firms will be able to meet the May 31 deadline set by the SGX to revise their articles of association. They are also given leeway to explain if they fail to do so.

But while the new measures look good on paper, their implementation might hit a snag.

“If you don’t have the cooperation of the legal rep, then you might not be able to go through the whole procedure and then to effect the removal of the legal rep because you can foresee that the legal rep will not give full cooperation in helping you to remove himself,” said Mr Lin Song, co-head of international China practice group at law firm KhattarWong.

The lawyer was referring to the paperwork involved in effecting the removal of the Chinese-backed legal representative. Company transactions become binding only when they bear the firm’s corporate seal and the power to affix this seal is vested only in the legal representative.

“The issue is more on the execution level even though you might have in the articles of association all these provisions when you really need to remove the legal rep … you may face difficulty,” Mr Lin said.

“For example, the listed company might be required to present the local authority a stamp registration form and other documents which might require the legal rep to sign,” he added.

Mr Robson Lee, partner at Shook Lin & Bok LLP, echoed the same sentiment that the SGX ruling might not be enough to clip the wings of Chinese-backed executives.

Mr Lee, who also sits as a director for S-chip firm Youcan Food International, said there are practical enforcement difficulties to ensure compliance by the executive management that are based in China.

“It would be better to put in place the necessary legal provisions in the articles of association to give the board of the listed company the legal right to intervene when things go wrong,” he said.

From TodayOnline “Discrepancies in Sino Techfibre invoices“

Mainboard-listed Sino Techfibre said yesterday that its auditors Ernst & Young had discovered discrepancies in invoices issued by the company and its suppliers.

Sino Techfibre said that explanations sought by Ernst & Young resulted in a probe by the management.

However, the company has been unable to locate one of its sales managers in China. It has filed a police report in China and requested local assistance to help find the manager.

The statement, signed by Sino Techfibre chief executive Li Wenheng, said the auditors are unable to verify whether the invoices are genuine and, therefore, cannot complete and issue the audit report.

Given the latest development, the company cautioned that the results announcement on Feb 15 might be subject to change.

From BT ‘It’s like asking: will you stop beating your wife?’

Bocker’s take on whether SGX will be takeover target now

(SINGAPORE) The proposed marriage between Singapore Exchange and ASX – which SGX chief executive Magnus Bocker acknowledged had fallen prey to Australian politics – is not the last of its kind, but for now, SGX is back to its usual business.

‘The primary focus has been all the time on organic growth,’ Mr Bocker told reporters yesterday at a briefing. ‘There will always be opportunities like the one we saw with ASX.’

Mr Bocker, who expressed disappointment at the rejection from Australian regulators last Friday, declined to draw out any fresh M&A plans, or address speculation that the London Stock Exchange or the Chicago Mercantile Exchange could be chummier partners in the future.

‘We got a very clear signal on Friday that we have a rejection by the Treasurer. We will take the time to analyse that,’ he noted.

Asked if politics had gotten in the way, Mr Bocker said: ‘Certain things become very evident (from) the way they pan out.’

Responding to how he can protect SGX from being a takeover target, Mr Bocker asked out loud if that was his job.

‘Certain questions are like ‘will you stop beating your wife’, and I can either say ‘yes’ or ‘no’, but the answer becomes very strange,’ he said.

‘There’s no static number,’ he added, when asked on the number of M&A options that he sees.

‘It wasn’t like we sat here a year ago, and was thinking of ASX. It wasn’t like that was a given at that time, when I started working,’ said Mr Bocker, who was in Kuala Lumpur as part of the F1 Grand Prix over the weekend.

‘When we look back five years ago, the world of exchanges looked pretty different’, and to predict how it will be five years from now is difficult, he said.

The A$8.4 billion (S$11.13 billion) cash- and-stock takeover for ASX came in October last year – or less than 12 months from the time Mr Bocker started work, leading market watchers to ask if the expectations for Mr Bocker has changed with the botched deal.

‘I don’t see it as a Magnus issue,’ said Mr Bocker, adding that this was not a case of ‘a lonely Swede walking down the street’.

‘Give us a break, we were a little bit more serious than that,’ he said, noting that both boards had reviewed the deal, and unanimously supported it.

Commenting on the current wave of consolidation in the West – with NYSE Euronext this week turning down an unsolicited takeover bid by its rival, the Nasdaq OMX Group, and the IntercontinentalExchange – Mr Bocker said that arguments for other proposed mergers remain valid.

‘We (ASX and SGX) have not changed our perception of the world’ with the rejection, he said.

‘The role of exchanges is changing.’

Shares of SGX were mostly higher in the day – gaining as much as eight cents or 0.95 per cent in early morning trade – before yielding to selling pressure about 30 minutes before yesterday’s closing bell. The stock closed at $8.35, down three cents or 0.4 per cent. Meanwhile, ASX gained 0.96 per cent to finish at A$33.65.

Some broking houses, including OCBC Securities and DMG & Partners Securities, have made no changes to their earnings forecast for SGX with the rejection from Australia, saying that they have continued to value SGX as a standalone unit.

All eyes will now be on the bourse operator’s third quarter results, which will be released this month, as well as its other initiatives in the past months.

These include Chi-East – the joint-venture dark pool between Chi-X Global and SGX – the launch of American Depositary Receipts of several Chinese firms, and paving a dual-listing route with Nasdaq OMX for listed companies.

But we guess that’s not important in the overall spin of things, especially not for S-chips paying dividends to tightly held shareholdings (cough brother holds 5% cough wife holds 20% of shares cough CEO holds 30% cough mistress holds 2%).

From BT “S-chips should implement market-friendly measures” (we have graciously and as a public service, included links to Financial PR’s client list page for boost their SEO rankings)

SENTIMENT towards S-chips has plunged sharply recently due to the account irregularities spotted on three S-chip companies, namely China Hongxing, Hongwei Technologies and China Gaoxian. This has once again shaken investors’ confidence in the S-chip sector.

The key question for us as investor relations practitioners has always been how to help investors differentiate good companies from the bad. (COINCIDENCE METER: All companies mentioned below this paragraph just happen to be clients of ours.)

Perhaps investors should pay attention to some ‘investor friendly’ measures to cherry-pick good companies. In particular, they should consider if the company has a habit of paying dividends, understand the impact of doing share buybacks, and whether its major shareholder understands the signalling effect of open market purchases by insiders.

Take the example of the largest S-chip on Singapore Exchange, Yangzijiang Shipbuilding, which recently proposed a final dividend of 4.5 cents for fiscal 2010, equivalent to 30 per cent payout ratio.

If one digs deeper, it is not difficult to notice the impeccable dividend track record of Yangzijiang. Since its listing on SGX in 2007, Yangzijiang has paid out cash dividends of $51 million on FY2007 earnings, $102 million on FY2008 earnings, $128 million on FY2009 earnings, and $173 million (proposed) on FY2010 earnings!

Even during the last financial crisis, Yangzijiang conducted persistent share buybacks from March to December 2008 at an average price of below $0.42. Both the dividend payouts and share buybacks have given Singapore investors greater confidence in the strong cash-generating nature and future growth of Yangzijiang’s business.

A lesser-known example is Lizhong Wheel, which has been diligent in paying down loans despite major expansion costs incurred last year. It also proposed a final dividend of 0.971 cents for FY2010 to reward loyal shareholders. Lizhong’s chairman bought back 840,000 shares at an average price of $0.395 in September 2010, and later transferred 129,000 shares as gifts to 16 key employees for their hard work and dedication.

Even a newly listed company like Anchun International understood the importance of investor friendly measures. Although no formal dividend policy is stated in its IPO prospectus, the company voluntarily proposed a maiden dividend of 0.7 cents for FY2010.

Another S-chip worth mentioning is C&G Environmental Protection, which just announced a dividend policy to distribute at least 20 per cent of its operating profit excluding one-off items to shareholders for the next three years. Other companies such as Pan Hong, Sunpower, Hu An Cable and 8Telecom have proposed final dividends for the latest financial year to reward shareholders for their support.

I believe the market notices such efforts. Perhaps, it is time for the media, investor-relation professionals, independent directors as well as corporate advisers to encourage more S-chip companies to implement some of these measures on a sustainable basis. This will help to separate the good S-chips from the not-so-good ones and renew investors’ confidence in the S-chip cluster.

Final note, HongWei Technologies, and China Gaoxian were customers of Financial PR too. We wonder what the totally unbiased and objective people at this agency said about their valued clients when they were being listed?

From BT “S-chip concerns must be addressed“

LAST week’s news that China Gaoxian’s auditors have had difficulty verifying some of the company’s accounts takes the total number of China stocks listed here – or S-chips as they are popularly known – to have reported accounting or governance issues to three so far in 2011 and 10 since 2009. This is a worrying trend, not just for the blow to the integrity of the whole S-chip segment, but also because four of the 10 are CPF-approved investments. In response to mounting worries that the remainder of the S-chip segment could be similarly blighted and the consequent effect that these worries is having on investor confidence, Singapore Exchange (SGX) has written to the audit committees (ACs) of these companies urging greater oversight of cash balances and other assets.

Because of difficulties dealing with legal representatives at some of the problematic S-chips, the exchange has also ‘strongly encouraged’ ACs to ensure that articles of association give boards the authority to remove these representatives if deemed necessary. Companies have until the end of May to comply. But the exchange was silent on potential penalties for failure to implement these recommendations before the deadline.

There is little doubt that these moves are long overdue. There is also no doubt that more could be done – especially as there are at least two dozen more S-chips that are CPF-approved stocks. When SGX was courting China listings for much of the past decade, it was never able to fully lay to rest concerns that only substandard companies would be listed here since the better firms would logically prefer to be listed in China or Hong Kong.

In its defence, SGX was merely satisfying market demand for investment proxies for a China that was booming, and at the height of the demand in 2006-7, investor appetite for S-chips ran high.

However, many questions raised then are still valid today – for example, the accountability to Singapore investors of largely foreign and anonymous boards that reside in China, the enforcement of local laws and disclosure standards on companies operating in remote provinces and even the authenticity of assets and operations in those places.

These are issues that the authorities should address now that the segment has been badly tainted by a string of accounting and governance failures over the past two years. In addition, it might be a good idea to review the CPF-approved status of others in the segment, at least until improved checks and balances are in place.

SGX and other regulators should also consider implementing and enforcing a strict disclosure timetable on findings from their investigations so that shareholders are kept informed on what exactly is going on. In some cases, suspensions have stretched back two years with very little news on what has or has not been found. Investors deserve better than to be kept in the dark for such a long period. More can and should be done to restore confidence in S-chips.

From BT (subn required) “Yet another S-chip bites audit dust”

Auditors of China Gaoxian unable to verify bank balances at its China units

(SINGAPORE) Accounting irregularities have surfaced in yet another S-chip – China Gaoxian, confirming investors’ fears over what triggered its trading halt.

The latest development comes barely a month after two other S-chips or Chinese companies listed here, China Hongxing and Hongwei Technologies, also flagged similar accounting problems.

In its disclosure yesterday, China Gaoxian said that its auditors Ernst & Young could not verify or confirm the bank balances for two Chinese subsidiaries for the fiscal year ended Dec 31, 2010.

‘The audit committee (AC) has instructed the auditors to carry out an expanded scope of its audit,’ said the group’s audit committee chairman, Chan Kam Loon.

Mr Chan, a former head of listings at the Singapore Exchange, said that the AC has also met executive chairman and CEO Cao Xiangbin, who indicated that he would cooperate and instruct the management to do the same.

The group has requested a trading suspension of its shares here, following a trading halt since Tuesday and a trading halt of its Korean Depository Receipts (KDRs) since Wednesday.

Yesterday, SGX also directed Hongwei to appoint special auditors, given the group’s inability to clarify its state of affairs ‘despite the severity and urgency of the situation’.

Auditors at Hongwei and China Hongxing could not finalise their audit for the 2010 financial year as they could not confirm certain cash and bank balances.

Reflecting increased concern over accounting issues cropping up at some S-chips, SGX sent out reminders to ACs of all S-chips this week, instructing them to undertake an internal review and report to the exchange by May 31.

SGX also asked the ACs to make sure that the Articles of Association at key Chinese subsidiaries gives them the ability to hire or fire legal representatives.

While market watchers welcome the latest directives from SGX, some are circumspect about the effectiveness of these measures.

Securities Investors Association Singapore (SIAS) president David Gerald noted that these initiatives ‘do not go far enough to meet the practical difficulties faced by directors and auditors to seek accountability and trace the funds parked in accounts outside Singapore’.

A classic case was Sino-Environment, which faced difficulties repatriating funds from a China bank account to Singapore, after questionable cash transactions were uncovered. Its judicial managers have since sought a court order to freeze the China account.

There must be the willingness on the part of the majority shareholder and senior management to cooperate with the Singapore authorities and the auditors, Mr Gerald said. He suggested that a mechanism be in place for at least one independent director to authorise any funds raised in Singapore to be transferred to an overseas account.

Then, there is the problem of uncooperative legal representatives, which reared its ugly head in recent times at companies such as Falmac, Tat Hong and Millennium & Copthorne.

In China, every registered company has a legal representative who holds the company seal that gives legal capacity to make and execute agreements, provide guarantees and transfer assets.

But problems arise when the legal representative abuses that power, refuses to step down or surrender the company seal.

While there is legal recourse that companies can seek in China, the actual implementation is unevenly applied across different local jurisdictions, said Lin Song, co-head of international China practice at KhattarWong.

To register a new legal representative, the company seal is still required and only the registered legal representative can apply for a new seal, though some courts may adopt a more flexible approach.

Still, it would be useful to review the whole constitution of the group of companies to identify areas that do not provide protection to shareholders and make amendments, he said.

‘With the recent scandals, it has become more urgent for listed companies, especially for S-chips, to look at this issue,’ Mr Lin added.

Chia Kim Huat, a partner at Rajah & Tann, pointed out that ‘the right to remove legal representative is one thing but to implement it is another thing’.

But he is against the idea of parking working capital, other than surplus cash, outside China where the companies’ key operations are, as that would be ‘killing the business to catch the thief’.

To New Century, we say, please sail safely to HKG, and steal from Chinese investors for once. At the very least, Singaporean “peanut” investors won’t be treated to the prospect of “unexpected profit warnings” appearing suddenly over the horizon within 3 months of listing.

From the BT “New Century IPO sets sail for Hong Kong” (sub required):

NEW Century Shipbuilding has upped and left after a rap on its knuckles from the regulators here – choosing to take up a listing in Hong Kong instead of Singapore, BT understands.

While the timing and size of the impending initial public offer (IPO) are unclear, sources note that the size should be similar to the S$666 million IPO that the Chinese shipbuilder failed to launch last year in light of reported inaccuracies in its IPO prospectus.

According to a Dow Jones report, the Chinese shipbuilder is expected to raise US$500-800 million in an IPO slated in the first half of this year. New Century had submitted an application for the listing earlier this month, it added.

New Century has hired a fresh set of bankers. Deutsche Bank and BOC International Holdings are handling the deal in Hong Kong, said Dow Jones.

Had the IPO been launched in Singapore in May last year as expected, it would have been the largest share offering for the year at that point. There were also hopes by some then that the IPO would boost waning enthusiasm over S-chips, a sector that had lost much favour among investors due to a few bad apples that had bad management and dismal credit controls.

But New Century pulled the IPO in the eleventh hour after regulators received a poison pen letter that highlighted material inaccuracies in its prospectus.

BT reported that there was an omission of information about a lawsuit battle involving the company’s subsidiary over the building of two bulk carriers for its client Sino Noble in a deal worth US$180 million.

One of New Century’s shipyards in China – New Times Shipyard – was reported to have been contracted to build the two ships. The shipbuilding contracts are said to have been cancelled in late-2009 and Sino Noble was claiming back some US$60 million – the amount that it had paid for those ships then.

Besides taking issue with the non-disclosure of the lawsuit, the complaint noted that the orders for the two ship were still part of the company’s order book in the prospectus.

The Monetary Authority of Singapore subsequently issued a warning letter to New Century for inaccuracies in its IPO prospectus. The letter, issued to the company and its executive directors, was over contravention of section 253 of the Securities and Futures Act in respect of its prospectus dated April 30, BT reported.

At this juncture though, New Century’s IPO – had it remained here – would have been a drop in the bucket with Hutchison Whampoa’s plans to spin off its port assets in Hong Kong and China into a separate listing in Singapore.

The listing of Hutchison Port Holdings Trust is reportedly aiming to raise as much as US$6 billion, easily trumping Singapore’s largest IPO to date – Singapore Telecommunication’s S$4 billion IPO in 1993.

First, we have highlights from The Sun Daily’s “UK land scheme shock“

Many Malaysians have “invested” between RM100,000 and RM500,000 each in land in various parts of the United Kingdom, only to find out that they will not be able to make any returns on their investments.

Actual numbers are hazy but it is understood that with the setting up of Profitable Plots Sdn Bhd (PPSB), an agent for UK land banking schemes, there have been a number of locals who were caught unawares.

They were promised returns of between 250% and 500% after a few years but the titles to the land they are holding are not worth the paper they are written on.

Although they legally own the land, they can do little with it as the land is situated in “green belts” or undeveloped areas which are protected from any form of development or agricultural land where no development is likely to be permitted.

The authorities here have taken action against several firms promoting such schemes but have been unable to prevent them from operating in Southeast Asian countries, including Malaysia, Singapore and Brunei.

Because such land is unlikely to be approved for development, they are bought at low prices and divided into smaller plots and offered for sale on the basis that when future development plans are approved, these plots will be more valuable.

On Tuesday, the Kuala Lumpur High Court upheld Companies Commission of Malaysia’s (CCM) declaration in October 2008 that Profitable Plots Sdn Bhd (PPSB), which is involved in land investments in the United Kingdom (UK), had contravened the Companies Act…..CCM’s investigations indicated that the company not only coordinated and managed the process with buyers to ensure that they gained legal deeds on the land they bought, but also directly sold the land to these buyers which it was not authorised to do so. Furthermore, CCM said these buyers also had to sign a 20-year-option agreement that they will not object to any planning development close to their property.

Followed by The Sun Daily “Celebrities roped in to sell UK land“

“Buy UK Land! We did!”

It sounded like the perfect business opportunity for Malaysians especially that investors could buy land so close to the world’s busiest airport for £8,000 (now RM40,000 but then about RM52,000) with the promise of a return of 250% within three years.

The company claimed in its website that the Lower Feltham Lakes site was ripe for a housing project comprising 1,000 homes and a previous entry boasted that development proposals had already been submitted.

However, Hounslow Council has confirmed that no application had been submitted.

No development can take place unless a planning inspector can be persuaded to overrule the site’s green belt status against the wishes of Hounslow Council, which opposes building there.

A council spokesman said: “We will develop green belt land only if there were very special reasons. We see no special reasons for doing so on this site.”

What can investors do?

Legal action to recover their monies is an option. But yet again, there’s a question as to which company – the UK or the Malaysian – which signed the contract? The Malaysian company has a RM2 paid-up capital and seeking redress may be a lengthy and costly exercise.

Malaysians who parted with their money have little to show – except a piece of paper which states they own a plot of land, which will remain undeveloped because of the strict laws on green belts and agricultural land.

They can offer to sell it, but it is unlikely that there would be any takers. The only consolation is a boastful “I own a piece of land near Heathrow Airport!”

• “I suddenly remembered that my child is going to school XYZ next month, so I have no choice but to sell my just-bought condo at the Sail, move to that run-down semi-d in Binjai Park”,
• “My father/mother/grandmother suffers from Parkinson’s/Alzeheimer’s/Porky’s disease, so I have to move from St. Regis into Napier 8, which is so much nearer to them”,
• “I have to sell within a year because I’m dying in 50 years time”,
• Or the always reliable “If the gahmen don’t treat me as special case, I won’t vote for PAP in next GE”

The coming trainwreck summarized neatly by this table courtesy of BT:

From BT “New steps rain on speculators’ parade (sub needed)”

Big hike in seller’s stamp duty and mortgage restrictions to cool property market

(SINGAPORE) Starting today, speculators in the Singapore property market will find their ardour cooled by a severe new regime. The seller’s stamp duty for private homes will rise to as high as 16 per cent, from up to 3 per cent previously, while tighter mortgage restrictions will be put in place.

The government yesterday unveiled a new and stronger round of demand-side cooling measures – the third set in less than 12 months.

The killer move, according to analysts, is a sharp hike in the seller’s stamp duty to 16 per cent, 12 per cent, 8 per cent and 4 per cent respectively for properties that are bought on or after Jan 14 this year and are sold in the first, second, third and fourth year after purchase.

Previously, owners who sold houses and apartments less than three years after buying them had to pay a seller’s stamp duty of only up to 3 per cent.

Singapore also further slashed the Loan-To-Value (LTV) limit on housing loans for both individual and corporate buyers.

Its move follows Hong Kong’s, which in late November 2010 announced some of its toughest-ever measures to cool the property market – including a stamp duty of as high as 15 per cent on apartments sold within six months of purchase. Hong Kong also tightened mortgage restrictions.

Analysts expect the higher seller’s stamp duty will wipe out most speculators’ gains and keep them out of Singapore’s property market.

‘For those buyers who intend to flip their properties within one or two years, the increased seller’s stamp duty erases their potential gains,’ said Merrill Lynch economist Chua Hak Bin. ‘So this measure is pretty targeted and will take away a big chunk of these potential investors.’

But most analysts found the unexpected sharp hike in the seller’s stamp duty to be harsh. In addition to hindering short and medium-term investors, it could also hurt genuine owner-occupiers looking to change homes.

International Property Advisor chief executive Ku Swee Yong said that a staggered-down capital gains tax – one that could perhaps be imposed only on capital gains from real estate – might have been more advisable. This would spare those who sell their properties at a loss.

‘The government’s intention of forcing people to treat real estate as a long-term investment is admirable,’ said Mr Ku. ‘But this (the higher seller’s stamp duty) will force people to hold, including some genuine cases where there might be a real need to sell off a property.’

In addition, Singapore lowered the LTV limit on housing loans from 70 per cent to 60 per cent for individual buyers with one or more outstanding housing loans at the time of the new home purchase.

And for corporate purchasers (such as firms, trusts and collective investment schemes), the LTV limit has been cut to an even lower 50 per cent – regardless of the number of outstanding housing loans at the time of the new home purchase.

In August 2010, the government reduced the LTV ratio from 80 per cent to 70 per cent.

Yesterday’s measures follow three gentler sets in September 2009, and February and August 2010.

‘Previous government measures have to some extent moderated the market, but sentiment remains buoyant,’ said the National Development and Finance Ministries in a joint statement with Singapore’s central bank, the Monetary Authority of Singapore.

‘Low interest rates plus excessive liquidity in the financial system, both in Singapore and globally, could cause prices to rise beyond sustainable levels based on economic fundamentals.’

Private home prices rose 17.6 per cent last year, according to flash estimates. A record 15,500-16,500 new private homes are also estimated to have been sold in 2010.

In a statement, the Real Estate Developers’ Association of Singapore (Redas) said it has ‘taken note’ of the latest measures.

The measures will discourage speculative demand and will encourage longer-term holding of properties which will contribute to the stability of the market, Redas said: ‘It is in the interest of the market to see a more gradual trend in growth and value for genuine home owners and investors.’

Merrill Lynch’s Dr Chua also said that in addition to curbing speculators, the government could be concerned by aggressive mortgage lending by banks.

Analysts expect the volume of new home sales to fall in 2011 but were spilt on whether the new measures will cause private home prices to decline.

‘There will be a sense of uncertainty in the market leading to hesitation among buyers and sellers and we can expect to see transactions easing in the short term,’ said Credo Real Estate executive director Ong Teck Hui.

But the measures may not lead to an immediate price decline in Q1 2011, he said. This round of measures is still not as severe as the anti-speculation measures announced in May 1996, which resulted in a 1.9 per cent drop in prices in Q3 1996. But any upside in prices in Q1 2011 will be ‘minimal’, Mr Ong added.

But in any case, analysts said that the 5-10 per cent growth in private home prices for the whole of 2011, which they predicted just one week ago, now looks highly unlikely. They also expect property stocks to fall today in reaction.