Buffett warns of inflation, cuts duration of bonds held

(NEW YORK) Warren Buffett shortened the duration of bonds held by Berkshire Hathaway after warning that deficit spending could force inflation higher.
Twenty-one per cent of holdings including Treasuries, municipal debt, foreign-government securities and corporate bonds were due in one year or less as of June 30, Berkshire said in a filing last week. That compares with 18 per cent on March 31, and 16 per cent at the end of last year's second quarter.
'It may be a sign that Buffett expects interest rates to start rising, maybe sooner than the conventional wisdom,' Meyer Shields, an analyst in Baltimore at Stifel Nicolaus & Co said.
Inflation has fallen to a 44-year low even as the Federal Reserve more than doubled its balance sheet in two years to US$2.33 trillion to help draw the economy out of recession.
A US jobs report last week showing that companies hired fewer workers than forecast in July pushed the two-year Treasury yield to a record low. Bill Gross, founder of Pacific Investment Management, advised investors to buy longer-dated maturities.
Mr Buffett, 79, urged Congress last year to guard against inflation as the US economy returned to growth. In an August 2009 op-ed in the New York Times, the Berkshire chief executive said government must address the 'monetary medicine' that was pumped into the financial system after the 2008 crisis.
'The United States is spewing a potentially damaging substance into our economy - greenback emissions,' Mr Buffett wrote. 'Unchecked greenback emissions will certainly cause the purchasing power of currency to melt.'
Berkshire maintains a fixed-income portfolio valued at about US$32 billion to back claims against storm damage and car crashes covered by insurance units like Geico Corp and General Re.
'He's probably biased toward inflation down the road,' said Glenn Tongue, a partner at T2 Partners LLC. 'He would want to gradually make the duration decline because in an inflationary environment it's a longer-term instrument that will be the most hit.' - Bloomberg

Inflation staying low over next few years

Business Times - 11 Aug 2010
MONEY MATTERS

By SHANE OLIVER
FEARS about inflation and deflation have fluctuated wildly in recent times. In late 2008, at the height of the global financial crisis, the big worry was a 'debt deflation spiral' dragging the world into depression. Six months ago, many were worried about inflation.
Global growth was recovering and fears abounded that major developed countries would print money to get out of their public debt problems. However, in the last few months, fears of deflation have regained the upper hand, on the back of still falling inflation rates and worries about a return to global recession.
Our base case is ongoing low inflation in major countries over the next few years, but the risks are skewed to deflation rather than accelerating inflation. But what is deflation? Why worry about it? Why is it more of a risk than a surge in inflation? And what would deflation mean for investors?
Deflation refers to persistent and generalised falls in prices. It used to be common, but with the advent of paper currencies not backed by gold and macro stabilisation policies, it became less common last century.
Nevertheless, there was a bout of deflation associated with the Great Depression of the 1930s. Japan has also experienced deflation since the 1990s.
Most people would see falling prices as a good thing because it means that their income and assets will buy more. Indeed there have been periods of 'good deflation'.
For example, in the period 1870-1895 in the US, deflation occurred against a background of strong economic growth, reflecting rapid productivity growth and technological innovation. Falling prices for electronic goods are a modern-day example of good deflation.
However, there can also be 'bad deflation', when falling prices are associated with falling wages, rising unemployment and falling asset prices.
For example, in the 1930s and more recently in Japan, deflation reflected economic collapse and rising unemployment made worse by a combination of high debt levels and falling asset prices. What's more, falling prices can cause people to delay spending, which in turn weakens economic activity.
In the current environment, deflation could cause serious problems because household debt and/or public debt levels are high in many major countries. A swing into sustained deflation would increase the real value of debt at the same time that asset prices would be falling and nominal incomes and government revenue would be weakening. If individuals or governments attempt to reduce their debt burden by cutting spending and selling assets, the risk is a 'debt deflation' spiral may take hold.
The standard arguments of those fearing a surge in inflation are that central banks have been printing money that will drive inflation up and governments will inflate their way out of high public debt levels.
More recently, some fret that the adverse weather-related 80 per cent or so rise in world wheat prices in the past two months signals a new bout of inflation boosting food price surges.
However, there are several reasons not to be too concerned by either of these. First, while quantitative easing has boosted narrow money supply measures such as cash and bank reserves, until this flows on to increased credit and spending increases to levels so that the spare capacity caused by the recession is all used up, there will be no threat to inflation. In fact, there has been no increase in credit growth and excess capacity remains huge.
Second, while it's easy to say 'governments will just inflate their way out of their public debt problems like they did post World War Two', this is now a lot harder to accomplish because it is central banks that control the money printing presses and in most major countries these days, they are independent of governments and firmly focused on keeping inflation in low single digits. Reversing central bank independence and inflation targeting will take a lot to change - and so far there is no sign of it.
Finally, while the surge in the wheat prices may boost food prices in the short term, weather-related surges and slumps in food prices are nothing new and usually give way to a reversal in prices six to 12 months down the track as the weather returns to normal and supply responds. So far, the surge in wheat prices doesn't appear to have led to a big flow on to other agricultural prices.
With underlying inflation rates now below one per cent in the US, Europe and Japan and headline inflation rates falling again, after a brief bounce on the back of the rebound in oil prices, it is little wonder that deflation worries have escalated. The key to the inflation outlook is capacity utilisation. The continuing downtrend in underlying inflation rates essentially reflects the normal lagged response to the global recession. This is because the recession led to global spare capacity which still hasn't been used up. It is readily evident in the 10 per cent or so unemployment rates in the US and the eurozone and in measures of business capacity utilisation.
A measure of business capacity utilisation averaged across the US, Europe and Japan fell well below normal levels during the 2008-09 recession. Historically, as long as it is below normal levels, inflation has continued to fall or remained weak.
While capacity utilisation has recently improved, it has only increased to levels associated with the early 1980s and early 2000s recessions. Levels that still saw inflation fall. Now with global growth slowing, it will take even longer to get back to normal levels of capacity utilisation, so spare capacity will be with us for some years to come, implying ongoing downward pressure on consumer prices.
So the bottom line is that as long as the recovery in major developed countries remains slow and excess capacity both in industry and labour markets remains, then inflation will likely fall. If the major economies return to recession, then the risk of deflation will escalate.
The risk of deflation varies between regions. Japan is already in deflation. The risk is highest in Europe because the recent fiscal tightening there and the European Central Bank's hard-line approach to monetary policy imply a greater risk of a faltering European economic recovery.
In contrast, countries in the Asia-Pacific region have had stronger economic recoveries, have less spare capacity and have higher inflation rates to begin with - implying a greater buffer against deflation - so the risk of deflation is much less.
Deflation is also less of a risk in Australia as there is less spare capacity, unemployment is low and a range of factors including increases in utility charges, health costs, rents and local government rates are boosting common perceptions of the cost of living. But global deflationary forces will nevertheless have a dampening impact on the local inflation rate via lower import prices, particularly if the Australian dollar remains strong.
While the risks of deflation exceed those of higher inflation, a sustained bout of Japanese-style deflation is unlikely.
· First, while goods price inflation may fall, services price inflation is relatively resilient because it has a higher wage element and wages are often sticky.
· Second, central banks including the US Federal Reserve are likely to step up the pace of quantitative easing if the risk of deflation increases. This is likely to include more aggressive buying of government bonds.
· Third, while comparisons with the US today and Japan over the past twenty years are common, there are big differences. In particular, the US has moved more quickly than Japan to stimulate its economy and the US corporate sector today is in good shape, unlike the Japanese corporate sector of the 1990s, so there is less pressure to sell assets and cut business investment.
As a general rule deflation would favour government bonds and cash over equities, property and corporate bonds for investors and defensive shares with good pricing power, such as utility stocks.
Fortunately with share market earnings yields, commercial property yields and corporate bond yields now well above government bond yields, it could be argued that the risk of deflation is partly factored into these assets.
While deflation is not our base case, the significant risk of its occurrence in major developed countries implies interest rates will be maintained at low levels well into next year and bond yields will likely remain low despite worries about high public debt levels.
Our base case is that inflation will remain low as more aggressive quantitative easing and sticky services prices will prevent an outbreak of sustained deflation.
However, with global spare capacity remaining high, at this stage the risks are still skewed towards deflation rather than a surge in inflation. This in turn means it is still too early to get particularly bearish on government bonds.
The writer is head of investment strategy and chief economist, AMP Capital Investors

China's No. 2 but it's not celebrating

Aug 18, 2010

It's a developing country with more than 40m poor people, says govt
BEIJING: China may have overtaken Japan as the world's No. 2 economy in the second quarter, but the Chinese government said yesterday that the country still has millions of poor people.
'China is a developing country,' Commerce Ministry spokesman Yao Jian told reporters. 'The quality of China's economic development still needs to be raised. It needs more effort to improve economic quality and people's lives.'
It was the government's first public reaction to news on Monday that China overtook Japan in economic output in the April to June quarter.
Many expect China to become the world's No. 2 economy this year, just behind the United States, taking the title Japan has held for 40 years and underscoring its emergence as an economic power.
While China has seen double-digit expansion in gross domestic product (GDP) for years, Japan's growth rates have been comparatively low.
On Monday, Japanese data showed that while Tokyo was ahead of its Asian rival in the first half, its second-quarter GDP was US$1.28 trillion, behind China's US$1.33 trillion reported earlier.
But in per capita terms, China lags far behind Japan. With a population of 1.3 billion, it had a per capita income of US$3,600 (S$4,900) last year, compared with Japan's US$37,800.
China also has more than 40 million people living below its official poverty line, Mr Yao said.
'We should care not only about the GDP data, but also about per capita GDP,' he said at a regular news briefing.
'We still have an enormous gap to make up.'
Chinese state media insisted that China, while contributing to global growth and helping to drive the world's recovery from the financial crisis, was still transforming itself into a world-class economic power.
'China's economic strength is still at the level of a developing nation. So the world's second-largest economy is not the equivalent of the second-largest economic power,' the People's Daily said in a commentary.
In just three decades, China has leapfrogged Britain, France and Germany on its economic ascent and has won developing countries a bigger say in the World Bank and International Monetary Fund.
However, the official China Daily said in an editorial: 'The Chinese economy still has a lot more room to grow and can contribute even more to the global recovery.
'But for those who expect China to assume greater international responsibilities just because of the size of its economy, they should take a hard look at the enormous development challenges that the country still faces.'
The Chinese government is in the midst of a marathon effort to spread prosperity from its thriving eastern cities to the poor countryside and the western region.
It is also trying to defuse tensions over a huge wealth gap between an elite group, which has benefited most from three decades of reform, and the poor majority.

HK tycoon buys prime land for top dollar

Aug 18, 2010
HK tycoon buys prime land for top dollar
HONG KONG: Hong Kong's richest man, Mr Li Ka-shing, snapped up two prime residential sites yesterday for prices well above market estimates, despite government measures to cool the overheating property market.
Mr Li's Cheung Kong Holdings bought a 7,551 sq m waterfront plot in the city's Kowloon district for HK$3.51 billion (S$612 million), with around 150 bids placed in just over an hour.
The final price was nearly twice the opening bid of HK$1.77 billion, and translates into a per-square-foot price of HK$9,597, making it the most expensive land in the district.
The whopping price exceeded estimates of HK$2.3 billion to HK$2.82 billion from analysts polled by Dow Jones Newswires.
The blue-chip developer also bought another auctioned site, a 7,326 sq m plot also in Kowloon, for HK$4.1 billion.
The price was 43.5 per cent higher than the opening bid and above the top end of the market estimate of about HK$3.9 billion.
'It so happened that the two pieces of land have excellent views and our colleagues have good developments plans for then,' Cheung Kong vice-chairman Victor Li told reporters after the auction. 'I don't think the auction prices are an indication of our outlook for property prices.'
A combination of low interest rates, ample liquidity and sound economic growth has pushed Hong Kong residential property prices up by almost 15 per cent this year, after gaining a third last year.
Hong Kong Financial Secretary John Tsang said last week that prices for large flats had exceeded previous highs in 1997 and were headed towards historic peaks, prompting the government to raise stamp duty on luxury apartments earlier this year and implement more measures last week.
'The new measures will not change the imbalance of supply and demand for residential buildings. The increase in land supply in recent months is not sufficient to satisfy the large appetite for residential flats,' Mr Charles Chan, managing director for Savills Valuation and Professional Services, said.
The government said last Friday that it would increase land supply and tighten mortgage lending to avoid a property bubble.
Mr Tsang said the government would auction three more sites before March next year, regardless of whether developers tabled an offer equal to at least 80 per cent of the government's minimum price - a requirement under the city's land auction rules.
Two of the three sites will be auctioned next month, he said.
'A large amount of hot money has flown into Hong Kong's financial system,' Mr Tsang said last week.
'There is an increased risk of a property bubble forming because interest rates are expected to continue to be very low for some time to come.'
The Hong Kong Monetary Authority warned banks that the credit risks they faced in residential mortgages were rising and unveiled measures to help them cope.
These included lowering the loan-to- valuation ceiling to 60 per cent for properties worth HK$12 million or more. The ceiling for all non-owner-occupied residential mortgages would also be lowered to 60 per cent.
Following Monday's declines on the Hong Kong stock exchange, property shares rebounded in response to the better-than-expected auction results.
Sino Land jumped 3.61 per cent to HK$13.76, Cheung Kong rose 1.05 per cent to HK$100.40 and Sun Hung Kai was up 0.46 per cent at HK$110.50.

Family philanthropy - beyond giving

It can become the life-force that invigorates the family identity and the keystone for the survival of the family dynasty
By JUNE LEE
IT HAS always been a tradition in Asia and across the globe that the very rich give substantial sums as alms to the very poor. The motivation varies, but normally revolves around the theme of social responsibility: 'giving back'; remembering roots and 'appeasing the gods' (as one philanthropist put it); or repaying a debt of gratitude for good fortune or assistance received - 'paying it forward'.
Among the most active companies in this arena are family-controlled businesses. It is a way for the families to thank the communities that have allowed their businesses to thrive, and to build closer ties with employees as owners who are engaged and in touch with their responsibilities to the community.
Family philanthropy takes on an added significance for families who have sold the family business. For such families, the sale of the operating business results in the loss of the most visible component of their identity. Family philanthropy has the opportunity to fill the void. Sitting together to deliberate the family philanthropy philosophy and strategy can be a way of reconnecting with the values and vision of the patriarch or matriarch.
Increasingly, philanthropy has been mooted as the 'glue' that keeps members of wealthy families connected to one another.
Family philanthropy is often associated with legacy as gifts are made in the name of the family foundation, which, more often than not, bears the name of the patriarch or matriarch. Well-known examples of some structures funded by family philanthropy are the Lee Kong Chian School of Business at Singapore Management University, the Khoo Teck Puat Hospital, and the Shaw Foundation Symphony Stage at the Singapore Botanic Gardens.
Perhaps family members feel some degree of pride and belonging when they encounter media publicity about such gifts from the family foundation. Perhaps the deliberations on grant-making provides a platform for them to reconnect with the vision and values of their predecessors. Perhaps the value is in the fact that, were it not for such occasions, they would rarely even meet each other.
The truth is that family philanthropy can be all those things and more.
It is clear that the effectiveness of family philanthropy in reinforcing the family legacy depends entirely on how well the family's philanthropy is planned and executed.
A cleverly designed family philanthropy programme can be the action learning theatre for nurturing values and developing a culture of collaboration among the younger generation of future shareholders and leaders of the clan and family business. It can be crafted as a new focal point, not just as an occasion to bring family members together, but also as a means of keeping the founder's legacy alive. In effect, the family's philanthropic activities can become the life-force that invigorates the family identity, and ultimately the keystone for the survival of the family dynasty.
At the most rudimentary level of engagement, family members should participate in the nomination and selection of beneficiaries to receive support from the family foundation. Subject to applying common sense in ensuring the level of participation and decision making is age-appropriate, involving young family members in such an exercise has much merit.
The Myer family, founders of the Myer Stores in Australia, have an interesting approach to involving family members in their family philanthropy. They have created a Family Grants Program in which family members' personal donations to approved charities will be matched by the Myer Foundation. In addition, they have created a separate platform for philanthropic giving involving their fourth generation. The G4 Program, as it is called, has a family development mission in addition to its philanthropic mission. The G4 program seeks to create opportunities for fourth-generation members of the Myer Family to gain hands-on experience in philanthropy, and in this way develop the G4 Committee as future leaders of Myer philanthropy in the 21st century. Causes supported are youth-related. With mentoring and guidance, young family members gain exposure to governance concepts and project evaluation, and develop an understanding of issues facing other young people.
Another edifying practice concerns the giving of grants for causes supported by young family members. For young family members who have no independent income, grants are given in proportion to the amount of volunteer time the young family member has personally contributed to the cause. This reinforces superbly the link between effort and reward.
Involving a family's young generation in site-visits and hands-on projects puts them in touch with reality and could be an eye-opener that helps reinforce good values and develop character in young family members. In addition, leaving them to discuss possibilities and come up with proposals allows them practice in working together as a team. Business families can look upon this as a safe ground for developing teamwork as decisions will have no impact on - and therefore pose no risk to - the operating business.
In the best-case scenario, as younger-generation family members continue their interactions, a natural leader could emerge from the cohort, who could be nurtured and further developed into the next CEO for the family business.
The Lien Foundation provides an excellent case study in the evolution of a family's philanthropy and the role it can play in igniting the family passion to yield tangible results.
The Lien Foundation was founded in 1980 by the late Lien Ying Chow, also founder of Overseas Union Bank. Dr Lien focused his energies on the bank, while the foundation restricted its activities to responding to requests for grants in the area of education and health.
In 2004, the foundation was restructured. Margaret Lien, widow of the late Dr Lien, felt that the foundation should not only honour the memory of his name, but also his spirit and values. The board of governors was expanded to include three family members (one each from the first, the second and the third generation of Liens) and two independent governors; a professional manager with substantial experience in the philanthropy arena was hired, and additional funding priorities were added.
Instead of merely reviewing and approving requests for grants, the Lien Foundation began to engage in a slew of activities ranging from awareness raising to capacity building, to conceiving of projects, their funding and realisation. Their basic tenet was that the activities must be impactful and create change. The transformation of the foundation completed, Mrs Lien stepped down from the chair to make way for the younger generation to take over at the helm. In June 2009, a new board of governors was appointed. The two senior-generation Lien family members retired. In their place, two more members from the third generation of Liens were appointed.
Today, the Lien Foundation is recognised as a leader in the social space, and family members take renewed pride in their origins and heritage.
Families taking their first steps on their family philanthropy journey can learn from these two exemplary families to ignite family passions through impactful family philanthropy, and to use the opportunities it provides for developing the next-generation team of potential family leaders.
The writer is head of family governance at UBS Wealth Management in Singapore

Big winner did it all for late mum

Aug 20, 2010
STUDENT ACHIEVEMENT AWARDS

The late starter's cancer-stricken mother died in June
By Leow Si Wan
MADAM Ong Siew Kee just wanted the son she loved to live the best life he could.
An administrative executive married to a foreman, she wanted her second child to work hard in school and live with purpose.
But Chang Ze Xun, though a good kid, was content to drift along.
'I slept in class and failed all my main subjects at the O levels,' said the former student of Hua Yi Secondary School. Those grades qualified him for the Institute of Technical Education (ITE). His parents were disappointed, but supported his decision.
Madam Ong would have been proud of her son yesterday - he was one of four winners of the inaugural Lee Hsien Loong Award for Outstanding All-Round Achievement for post-secondary students.
In fact, he was the biggest winner of the day, also winning the Sultan Haji Omar Ali Saifuddien Book Prize and the Lee Kuan Yew Scholarship to Encourage Upgrading, for ITE and polytechnic graduates.
But it was a bittersweet achievement for the young man, now 20 and a second-year mechanical engineering student at Singapore Polytechnic.
His mother, to whom he was 'extremely close', was not there to see him collect his awards. She had died on June 30, at age 52.
Yet it was only because of her that he had come this far. In his second week at the ITE, some two years ago, Madam Ong told him she had had a relapse of breast cancer. It was a wake-up call.
'She said I can't continue my life like that and that this could be the last time she would address me this way,' said the bespectacled youth softly. 'I started working much harder.'
He did - obtaining a perfect GPA score of 4.0 and becoming top student of ITE College West this year.
He also promised her he would win a new award he had found out about.
To give her reason to hang on, he made her a promise. 'I told her I would win this so she must stay alive to see me on stage,' said Ze Xun.
'Although she isn't here now, I know she will be happy. I will be visiting her at the columbarium, and will take my certificate along.'
The ITE held a mock graduation ceremony at his five-room flat in Jurong West the day Madam Ong died.
Said Ze Xun with tears in his eyes: 'That day, she was not responsive. But when the ceremony started, she opened her eyes and tried to sit up.
'After her death, because I remembered my promise, I really tried during the interview for the award. I spoke for 40 minutes.'
Ze Xun wants to go to a university here and eventually become a teacher.
His father, Mr Chang Swee Fatt, 56, no longer questions his choices. He said in Mandarin: 'When he told me he would go to ITE because he did not qualify for his first choice at the polytechnic, I was against it at first and wanted him to choose another poly course. He convinced me in the end, and now, after taking a longer route, he is studying in the place he had wanted to all along.'
At the annual Special Awards Presentation Ceremony at Seameo Regional Language Centre yesterday, awards were given out in nine different categories, to recognise students' achievements in academic and non-academic spheres. A total of 122 students received more than 130 awards.

Looking outside to forecast earnings

Business Times - 20 Aug 2010
BT-STARMINE AWARDS

Daiwa Capital Markets' Chris Sanda, a veteran analyst and top earnings estimator, shares his view with LYNETTE KHOO on what it requires to be a good analyst
WHEN it comes to earnings forecast, the answers are not always found in the excel spreadsheets laboriously drawn up by analysts, or the line items on the company's balance sheets. The answers are often found right outside the company.
Failing to pay attention to the external signals means that one could be missing the woods for the tree, one StarMine award-winning analyst believes.
'I find that accuracy is not necessarily happening because of my earnings model per se. The answer is not in the excel spreadsheet. The answer is outside the excel spreadsheet and asking people who really know this industry - people who do this day in day out. So, these are the suppliers, the vendors, the customers and the competitors within the industry,' says Chris Sanda, senior investment analyst at Daiwa Capital Markets Singapore.
'You could stare at the company when all the action is happening behind you and the rest of the world and any form of action that is happening within the company is a reflection of a much bigger trend,' the veteran analyst said.
For his 2009 recommendations and estimates, Mr Sanda is ranked No 1 earnings estimator for the industrials sector, the No 2 stock picker for retail and consumer products sector, and the No 3 stock picker for the industrials sector at the BT-StarMine Analyst Awards 2010.
He believes his earnings models are 'very much like everyone else's'. The difference that sets analysts apart lies in the assumptions they arrive at based on public information.
This is why he believes being a good listener and keeping abreast of the latest information are key traits an analyst should possess.
Noble experience
For earnings estimates of industrials stocks, Mr Sanda is ranked first of 25 analysts covering Sembcorp Marine, second of 16 analysts covering Sembcorp Industries and fourth of 13 analysts covering Noble Group.
He recalls how he was very bullish on Noble and sticking to a 'buy' rating when most analysts were bearish on the stock.
Noble was a 'very misunderstood' stock, he says.
'It was very easy to envision big problems happening for that company because it is very leveraged and there has been margins fall. But the reality is they are a well-managed company that can manage its business spreads and their debt isn't a necessity of how they finance their working capital,' Mr Sanda explains.
Constant curiosity
These observations came as a result of keeping his ears close to the ground to understand how the company operates.
Mr Sanda started out in this industry since 1996 as a buy-side analyst with various firms before joining Daiwa three years ago on the sell-side.
He believes that the stamina to remain in this job is having the curiosity to know what makes companies tick.
'One needs to be a constant student of business and have the type of mind that is constantly curious,' he says. This, perhaps, is exactly what motivates him despite the hard reality of his job.
'The reality is we are the poor bankers. We don't get paid as much as others. We work longer hours but we get less credit than others,' Mr Sanda puts it candidly.
'We have to do a lot of different tasks that, at times, are not that fun - sometimes, data entry, rehashing of numbers or making repetitive calls late into the night and working with very little sleep. If one looks forward to all these factors and still wants to come back to do it, there is always room for people who want that kind of 'punishment'.
'But I am those type of people,' he quips. 'I'm a curious person and I want to know what makes these companies tick. I get a rise out of being right and it frustrates me when I'm wrong. And that's the way it should be. You need to care and keep trying and trying again.'

Looking for dark horses in the Singapore market

By GABRIEL YAP
THE Singapore economy continued to roar in the second quarter of this year and I reckon it will surpass the first quarter's reported year-on-year growth of 16 per cent. This would have been powered by the two key sectors - financials and manufacturing, both of which contribute close to 50 per cent of Singapore's GDP.
Bank loans rose for seven consecutive months to 8 per cent in May 2010 on the back of strong housing and consumer loans at 21 per cent and 15 per cent respectively.
Notably, the growth in consumer loans at 15 per cent was the highest in the past five years. Moreover, car loans and credit card loans grew at a commensurate 12 per cent and 27 per cent respectively.
The biomed sector was the lynchpin of industrial output growth which grew a whopping 58 per cent in May 2010. Excluding the volatile biomed sector, the rest of the economy would still have grown a respectable 33 per cent.
The other sectors like retail and hospitality services sectors saw visitor arrivals at 946,000 or up 30 per cent, beating the consensus forecast hands down.
This was the highest ever recorded in the month of May when most market pundits always caution a 'Sell in May and Go Away'.
I would expect the momentum of strong GDP growth to continue into the second half of this year and put our economy on course to exceed the last GDP peak in 2007 by 10 - 15 per cent in 2010.
How should investors position their investment portfolios then for 2H 2010 and 2011? Play the office recovery theme: One of the earliest investment themes when I became a stockbroker in 1990 was the takeover tussle of Singapore Land and Malayan Credit (now known as MCL).
Not only did I make good money for my clients and myself betting on the outcome (certainly more predictable than betting on the recent FIFA World Cup), I learned that office demand is highly leveraged to corporate profitability, fresh hiring and corporate expansion, all of which I expect to dig deeper into next year.
There has been a sharp pick-up in hiring activities since the beginning of the year as well as expected hiring activities particularly in the banking and financial services sector.
There are reports on ANZ planning to expand by another 500 headcount over the next 12 months as it scales up its businesses from recently-acquired RBS; Citigroup and HSBC both intending to hire another 200 positions as they recover from the global financial crisis.
Moreover, other major banking institutions like UBS and Bank of Singapore (the former ING Asia) are also looking to hire another 400 and 100 people respectively.
The other critical factor to watch is the turnaround in office rentals.
The inflexion point could have been reached in Q2 2010 after 11 consecutive quarters of rental decline which saw prime rental fall like a bomb from $18.50 psf in Q3 2007 to $5.75 to $6.25 psf in Q2 2010.
Coupled with lower vacancy rates of 10 per cent (from a trough of 12 per cent), I would expect my hot stock picks of Keppel Land, CapitaCommercial Trust, Suntec Reit and KReit (all of which have seen share prices surge by an average of 33 to 50 per cent from current year's lows) for my clients' and my own investment portfolios, to continue to do well into 2011. Go where the tourists go: One of my best returns (in excess of 80 per cent) in my clients' and my own portfolios in 2009 was investing in the casino stocks of Wynn Macau, SJM Holdings and Sands China as tourists and punters flew, sail and rode to Macau where casino revenues soared to 50 per cent of Macau's GDP.
I think this will happen to Singapore this year and well into 2011.
Singapore tourist arrivals will be bolstered further in 2H 2010 by the inaugural Youth Olympics this month, Formula One in September and various new mega business conventions staged at the Marina Bay Sands and Resorts World Sentosa as well as Universal Studio's new thrill rides.
I believe the highest tourist arrival of 946,000 in May 2010 marked another inflexion point in the Singapore tourism, retail and service industries as I expect a structural change to permutate through the new decade with the opening of the two casinos and stabilisation of Asian economies after the global financial crisis.
In this regard, I will continue to stay with beneficiaries like CapitaMall Trust, Frasers CT, CDL HT, M1, Singtel, StarHub, SMRT, SPH and SingPost as tourists are likely to continue to fly, sail and ride to Singapore, a vibrant world-class city. The Empire Strikes Back: One idea I hold close to my heart as an investor (and also now in my philanthropy work) has been to always love the unloved and touch the untouchable stocks which have fallen out-of-favour, ignored by the investment community (which in my view, suffers from short-transom, is very fickle and too driven by corporate profitability) or have earnings blips.
My big winner this year thus far for my clients and myself were the Jardine empire group of companies. JMH, JSH, Jardine C&C, Dairy Farm and Hong Kong Land are easily the largest of the top 30 companies listed on the Singapore Exchange.
For years, they were largely ignored by investors, and not surprisingly, only two stockbrokers have research coverage on them.
Up till the beginning of this year, JMH traded at US$30 and JSH traded at US$17. Upon the release of its Q1 2010 better-than-expected results, JMH has traded up to US$40 and JSH traded up to US$24, registering stupendous gains of 33 per cent and 41 per cent respectively.
There are still many dark horses in the current market environment like the Jardine empire to be unearthed by thorough and consistent research and coverage.
The smart investor should always be looking for an 'empire strikes back' kind of stock. It was Ezra, Midas Holdings and OSIM last year.
So do come to the INVESTFair for more information and possible tips.

Is there a property bubble in China?

Business Times - 20 Aug 2010


There may be a visible slowdown in housing starts and construction towards the end of this year, KELVIN TAY believes
THRUST centre stage as a result of the decline in the G-7 economies in a post-2008 credit crisis world, the Chinese economy has gained a new level of significance and scrutiny that often generates unwanted, alarmist racket.
Is there a property bubble in China? The answer bears more significance now than ever before. China's construction and real estate sectors are likely to contribute to an estimated 11 per cent of its GDP in 2010. The construction industry employs 14.3 per cent of all workers in urban areas and consumes 40 per cent of all steel and lumber produced in China.
The private residential sector currently accounts for almost 40 per cent of the buildings completed by the construction industry. Never before has the health of the Chinese construction and real estate sectors been more closely followed.
Analysing a large, diverse economy like China's is complex, to say the least. Her sheer size and diversity in terms of economic development makes nationwide average figures rather meaningless. For example, from April 2009 to April 2010, residential property prices in China rose by 15 per cent and when juxtaposed with the price declines in 2008, would hardly set alarm bells ringing.
However, a closer examination of tier 1 cities revealed that in the 12-month period to April 2010, property prices rose by 64 per cent in Beijing, 39 per cent in Shanghai and actually doubled in Shenzhen.
The tier 1 cities accounted for almost 22 per cent of urban residential property sales, rather disproportionate to their share of 8 per cent of total floor space. Prices in Beijing reached a stratospheric 28,000 yuan per square metre in the same period.
Although long documented trends of urbanisation, rural to urban migration and a shortfall in the supply of public housing have resulted in property prices in China rising steadily over the last five years, what actually fuelled the extraordinary climb in prices over the last 12 months has largely been attributed to the increasing participation of state-owned enterprises (SOEs) in the property market.
Higher price
A study conducted by researchers from the National University of Singapore and Tsinghai University found that the transaction price of land tends to be 27.4 per cent higher when it is successfully bid by an SOE.
In certain cities like Beijing, the local and central SOEs' share of developers' land purchases have reached an estimated 71 per cent in early 2010, up from about 37 per cent in 2003.
Leverage, another indication of whether an asset bubble is building, has also seen a steady increase. If we assume that only urban households have access to mortgage lending, then mortgage debt as a proportion of urban household income is near 50 per cent, which makes it a tad uncomfortable.
We also need to take into consideration that in the case of China, where a large share of household wealth exists in the form of bank deposits, it is vulnerable to various forms of asset bubbles as and when households decide to shift a certain proportion to other asset classes, including property.
Although property purchases require a larger amount of capital (initial down payment), it is clearly not a major obstacle, especially in a period when property prices are escalating and return expectations get artificially inflated.
In that sense, we view the property tightening measures announced by the Chinese government in May with measured relief.
The policies are largely aimed at stabilising the market by curbing speculative demand and at the same time, increasing the supply of housing, in particular public housing.
At this stage of its economic cycle, a slowdown in China's property market is very much welcome news. If the Chinese real estate sector continues to grow at breakneck speed with little breathing space, it would certainly magnify the risk of overheating followed by a systemic collapse. This would have serious ramifications for Asia, including Singapore.
A collapse in China's property market resulting in financial contagion might affect the Singapore property market both directly and indirectly. As of July this year, Chinese nationals are currently the second largest source of foreign buyers of property in Singapore. Any crash in China's property market and subsequent economic slowdown would probably change that equation.
Furthermore, over the past two decades, systemic crises have always negatively impacted Singapore's property market. The Asian financial crisis in July 1997, Nasdaq crash in March 2000 and the credit crisis in 2008 all resulted in double-digit declines in the local property market.
However, it is the indirect impact that is actually more worrying. Since 2007, almost all home loans in Singapore are based on floating rates. Mortgage rates are usually pegged to the three-month Singapore Interbank Offered Rate (Sibor) or three-month Singapore Offered Rate (SOR), plus a premium that ranges between 1.25 per cent and 1.75 per cent.
Spike
Therefore, if Sibor or SOR spikes up suddenly and remains at stubbornly elevated levels for a period of time, property owners tied to such loans might suddenly find their monthly mortgages taking up a disproportionate amount of their monthly income.
Have there been instances when Sibor suddenly behaved erratically? The Asian financial crisis was one such example. Sibor spiked up to a high of 7.75 per cent before finally sliding to 1.9 per cent in December 1998. The average rate of Sibor during that 18-month period hovered at 4.9 per cent. As Asia was fortunately not at the epicentre of the credit crisis in 2008, Sibor did not behave erratically but averaged around 1.3 per cent, more than twice the current rate of 0.56 per cent.
So what is the likelihood of the above scenario panning out? Fortunately, we believe the chances are slim. The sharp appreciation in property prices in China have been largely restricted to the tier 1 cities, leaving the fundamentals of the broader market intact.
Although we do not expect China's property sector or economic growth to collapse, we believe that there may be a rather visible slowdown in housing starts and construction towards the end of this year, with any possibility of a reversal of the property tightening measures and/or loosening in monetary policy likely to be in early 2011. We believe this could potentially be the catalyst for the Shanghai A-Share Composite index, which is currently the worst performing stock market in Asia ex-Japan, to outperform.

China's Japanese debt buying spree soars

Aug 10, 2010

It bought 7 times previous full-year record in first half
TOKYO: China bought 456.7 billion yen (S$7.1 billion) worth of Japanese debt in June, Japan's Finance Ministry said yesterday, as Beijing further surpasses its previous full-year buying record.
For the first half of the year, China bought 1.73 trillion yen worth of debt, nearly seven times the full-year record of 253.8 billion yen in 2005.
In May alone, China bought a net 735.2 billion yen in Japanese government bonds, exceeding the 541 billion yen purchased in the four months previously.
China has sought to diversify its vast investments away from the United States and Europe since the onset of the financial crisis.
Most of the bonds bought by China are thought to be used by the government to manage its foreign reserves.
The increase coincides with renewed doubts about the pace of recovery in the US and Europe, and indicates that China is putting more of its swelling foreign exchange reserves into relatively stable Japanese bonds as a result, say analysts.
Japan's risk of default is perceived to be much lower than that for debt-hit Greece or other eurozone countries, even though its gross public debt is nearing 200 per cent of its gross domestic product, the highest among developed countries.
With around 95 per cent held by domestic investors, Japanese bonds are seen as a relatively safe bet.
China's foreign exchange reserves have ballooned in recent years.
The reserves, already the world's largest, grew 25.2 per cent to a record US$2.447 trillion (S$3.305 trillion) at the end of March from US$1.954 trillion a year earlier, the People's Bank of China said in April.
One way Beijing has diversified its investments is through sovereign wealth fund China Investment Corp, which manages around US$300 billion and has been investing heavily in resources companies.
Separately, a former senior Bank of Japan official said the yen's current rise is too rapid and may prompt the Japanese authorities to step up their verbal warnings.
Mr Eiji Hirano said Tokyo, however, is unlikely to be able to convince the US and Europe of the need to intervene in markets to weaken the yen.
'If the pace of the yen's rise is too fast, Japan may try to check it by showing its readiness to intervene,' said Mr Hirano.
'But current foreign exchange levels are the natural reflection of changing monetary policies in the United States and Europe and the fact Japan has not changed its policy. Japan is thus unlikely to obtain other nations' consent for launching a solo intervention.'
The US dollar yesterday bounced back to around 85.40 yen after hitting an eight-month trough of 85.02 yen last Friday. However, traders say it has room to fall again on expectations the US Federal Reserve could ease monetary policy even further as early as this week.
AGENCE FRANCE-PRESSE, REUTERS

Wheat prices rocket on Russia export ban

Weather forecasts from Russia point to a continuation of the drought
(LONDON) Wheat prices struck two-year highs last week as major exporter Russia banned grain exports after a record drought and fires ravaged its crop.
Markets shook off news that the US economy shed more jobs than expected in July.
Some 131,000 jobs were lost and the unemployment rate remained stuck at 9.5 per cent, the US government said on Friday last week.
The figures were seen as yet another sign that the US economic recovery was stagnating and that the country's employment market may take years to get back on its feet.
Grains and soya: Wheat prices soared in the wake of the decision by Russia - the world's third biggest exporter - to ban exports until the end of 2010.
Wheat futures struck US$7.89 a bushel (about 25 kg) on Friday in Chicago trade - the highest level since late 2008.
'Concerns on the impact of drought on Russian wheat production . . . is dominating market focus,' said Barclays Capital analyst Sudakshina Unnikrishnan.
'Weather forecasts from Russia point to the continuation of drought and the market focus remains on Russian wheat export potential and how lowered supply prospects will feed into global wheat production and trade balances,' she added.
Russia has seen 10 million hectares of arable land destroyed in the heatwave and the government has warned that grain production this year will be lower than annual domestic demand at 70-75 million tonnes.
'It is going to interrupt trade and create instability in the market . . . a situation which was not serious has now become serious,' said Abdolreza Abbassian, economist and secretary of the Intergovernmental Group on Grains at the UN Food and Agricultural Organisation (FAO).
'It was a very quick and unexpected decision,' he told AFP in Rome.
Crucially, the government decree to ban exports also stated that the decision should be matched by its partners in a regional customs union, Belarus and Kazakhstan.
Kazakhstan is a major player on global grain markets and officials in Astana said its position could be made clear this week.
Analysts at Commerzbank said the United States could be a key beneficiary of the crisis.
'The US, in particular, might benefit from this, because it once again had a good wheat harvest and it also has sufficient wheat inventories,' they wrote in a research note.
By Friday on the Chicago Board of Trade, wheat for delivery in September had jumped to US$7.69 a bushel from US$6.61 the previous week.
Maize for December rose to US$4.12 a bushel from US$4.06.
November-dated soyabean meal - used in animal feed - increased to US$10.30 from US$10.05.
Oil: Crude oil prices rose sharply to three-month highs above US$82, with sentiment boosted by soaring global stock markets, strong bank results and solid US economic data at the start of the week.
Traders meanwhile shrugged off downbeat economic news in China, which is the world's second biggest energy-consuming nation after the United States.
'Oil prices ran higher on the expectation that improving economic conditions will bring about energy demand growth,' said Mike Fitzpatrick of MF Global.
But he warned that 'financial markets can clearly run ahead of economic reality, as has been demonstrated time after time'.
By late Friday on the New York Mercantile Exchange, Texas light sweet crude for delivery in September had rallied to US$81.91 a barrel from US$77.67 the previous week.
On London's Intercontinental Exchange, Brent North Sea crude for September jumped to US$81.30 compared with US$77.04.
Precious metals: Prices advanced across the board.
'The entire precious metals complex posted gains . . . as equity markets regained upward momentum, (on) positive macro data and the euro made further gains against the dollar,' said Barclays Capital analyst Suki Cooper.
By late Friday on the London Bullion Market, gold advanced to US$1,207.75 an ounce from US$1,169.
Silver rose to US$18.30 an ounce from US$17.66.
On the London Platinum and Palladium Market, platinum climbed to US$1,571 an ounce from US$1,555.
Palladium increased to US$491 an ounce from US$487. -- AFP

Manila to study US$10b offer for casino franchise

Business Times - 10 Aug 2010

Manila to study US$10b offer for casino franchise
San Miguel chief intends to bid for govt monopoly with Robert Kuok and 2 other M'sian tycoons
(MANILA) Philippine President Benigno Aquino said yesterday his government would study a US$10 billion offer from a local tycoon to take over the government's monopoly casino franchise with Malaysian help.
Ramon Ang, vice-chairman of food and beverage giant San Miguel, made the stunning offer unofficially in an interview with the mass circulation Philippine Daily Inquirer, which carried his comments on its front page.
'It is a proposal, it is a very interesting proposal. But at the same time we have to study the matter first,' Mr Aquino told reporters.
'(We) have to ensure that if we intend to sell something, it is at the best price we can get.'
Mr Aquino, who began his six-year term as president on June 30, has said he is looking at privatising state assets to help deal with a growing budget deficit, and the Philippine Amusement and Gaming Corp (Pagcor) could be sold off.
'The sale of Pagcor fits in well with the president's agenda. Why wait for six years to have US$10 billion when you can have US$10 billion in just six months,' Mr Ang said, according to the Inquirer.
'Isn't this a spectacular deal?' Mr Ang said he intended to make a formal bid to acquire Pagcor once it was formally put on the auction block for privatisation, the Inquirer reported.
He said he intended to go into partnership with Malaysian magnates Robert Kuok, Ananda Krishnan and Francis Yeoh, according to the report.
'They are all my friends and they are interested in Pagcor,' the Inquirer quoted him as saying.
Mr Ang emphasised that he intended to go after Pagcor independently of San Miguel, one of South-east Asia's leading conglomerates.
A spokesman for Pagcor, Jay Santiago, said privatisation would not occur anytime soon.
'It is not as simple as it sounds. Eventually, there will be privatisation, but that is too far off,' Mr Santiago said.
'(But) we agree that US$10 billion is a good benchmark. If and when we do go through that process, at least we know we will not be getting anything below US$10 billion.' Pagcor, which operates 41 casinos, reported a net income of 29.62 billion pesos (S$884 million) in 2008\. \-- AFP

Landed home purchases by foreigners surge

Business Times - 10 Aug 2010

Landed home purchases by foreigners surge
But acquisitions of private apartments and condos slip 7.4% in Q2
By KALPANA RASHIWALA
(SINGAPORE) Foreigners including permanent residents bought 81 landed homes in Singapore in the second quarter of this year, up from 69 in Q1. And the Q2 figure is the strongest quarterly showing since Q2 2007, according to Knight Frank's analysis of URA Realis caveats information up to July 30.
District 15, which includes Katong, Telok Kurau and East Coast Road, overtook District 4 - where transactions are predominantly at Sentosa Cove - as the most popular district among foreign buyers of landed property. In Q1, District 4 was most highly sought after by such foreigners.
While foreigners picked up more landed homes in Q2 than Q1, they bought fewer private apartments and condos. The number slipped 7.4 per cent, from 2,261 units in Q1 to 2,093 in Q2, according to Knight Frank.
But Singaporeans bought more non-landed private homes in Q2 - 5,732, versus 5,315 in Q1.
Knight Frank chairman Tan Tiong Cheng said foreigners' strong interest in landed homes reflects their growing recognition of such assets as a prized commodity in land-scarce Singapore.
'The increased interest is not surprising as landed housing offers many foreigners a lifestyle closer to what they are used to in their home country,' he said. 'The added attraction is that Singapore is a very safe place, so landed housing is as secure as, say, a gated community.'
William Wong, managing director of RealStar Premier Property which specialises in selling landed homes in east and central Singapore, said permanent residents (PRs), after living in Singapore for a few years, tend to realise it's worthwhile investing in landed property.
'Bungalow prices (on per square foot of land basis) are still lower than apartment and condo prices on psf of strata area in the same location,' he said.
'On top of that, the supply of landed homes is more limited than that of condos and apartments. Landed homes also tend to maintain their value better, as the main component of, say, a bungalow's value would be the land it sits on, whereas apartment and condo values may depreciate faster as the property ages.'
PRs who choose landed property can easily get access to the facilities they would enjoy in a condo - such as a big swimming pool and gym - by joining a club, he noted.
Mr Wong said landed property transactions started to pick up in June-July, after a slow period in March-May. 'In District 15, bungalows in the Mountbatten and Meyer road areas can easily sell for about $1,000-1,100 psf of land today, compared with around $900 psf towards the end of 2009,' he said.
'In District 10, say in Coronation Road or Namly Avenue, a bungalow may cost about $1,200-$1,300 psf-plus today, up from $1,000-1,100 psf late last year.'
Besides an increase in the number of landed homes bought by foreigners in Q2, Knight Frank's report shows their share of total landed home purchases here rose from 6.3 per cent in January-March to almost 7 per cent in April-June.
The latter figure is a tad below an 8 per cent share in Q1 2007 and Q2 2008.
The 150 landed properties bought by foreigners in the first half of this year accounted for about 6.6 per cent of landed home deals in the period. On an annual basis, the share has ranged from 3 per cent in 1996 to 9 per cent in 1995 and 1997.
Knight Frank's analysis also shows PRs acquired 132 of the 150 landed homes bought by foreigners in the first half of this year.
The other 18 were bought by non-PR foreigners. This is not surprising as on mainland Singapore, being a PR is one of the major criteria a foreigner has to fulfil before being allowed to buy a landed home.
Sentosa Cove is the only place in Singapore where non-PR foreigners are allowed to buy landed homes, but this is still subject to approval by the Land Dealings (Approval) Unit, among other conditions.

Still screening at 75

Heading upriver in Sarawak to shoot in tribal longhouses was always part of film director L. Krishnan's plans. But what he did not expect was for his boat to capsize, in an action scene that could have come out of one of his own screenplays.

Back in the 1950s, he says, you had to use boats to get anywhere in Borneo. He was not so much worried for himself as for his recordings, which, to his horror, disappeared into the murk. Luckily, he had split the cargo into two boats.

Speaking to LifeStyle on the telephone from Kuala Lumpur, he says: 'I sent the cameraman and the film ahead in one boat. My boat, which sank, had the soundtrack.'

He would later overdub new dialogue and music back in Singapore and release it as Cinta Gadis Rimba, saucily titled The Virgin Of Borneo, in 1958.

The love story between a Malay man and a Dayak woman, which has since sunk into obscurity, is one of the many examples of Malayan cinema made by Cathay- Keris Studio in the 1950s and 1960s, a period now known as a golden age of local film. The studio, together with its rival, Shaw, made hundreds of Chinese and Malay movies during that time.

L. Krishnan today has deep affection for his Borneo feature because it was the first he had done on location, rather than in Cathay-Keris' soundstage in East Coast Road.

Cathay-Keris Studio made its last feature in 1973, the victim of changing tastes and competition from Hollywood.

But its parent, Cathay Organisation, is in good health and is celebrating its 75th anniversary this year. The close-knit, family-run firm has a history closely tied to the ups and downs of the entertainment industry in the region. In its time, it has created stars and classic movies and will be remembered for influencing the tastes of generations in Singapore and Malaysia.

Now 88 and a Datuk, the former film director L. Krishnan is today an elder statesman of the Malaysian business community. He has kept links to film-making. His Kuala Lumpur-based Gaya Color Laboratory made the cinema prints for the Singapore comedy Phua Chua Kang The Movie, to be screened here this month, he says.

Another historical footnote about The Virgin Of Borneo is that it is among films of the period to offer the exotically ethnic sights and sounds of Sarawak as entertainment.

Another of Cathay-Keris' most valued assets was comedian Abdul Wahid Ahmad, better known by his stage name Wahid Satay. He starred in films such as Chelorong Chelorong (1962), Bawang Putih Bawang Merah (1959) and Satay (1958).

He is still popular today and performs on television and live shows in Malaysia, Brunei and Singapore.

'I'm old but still capable,' jokes the 79-year-old in Malay.

He told LifeStyle that Mr Loke Wan Tho, son of tycoon Loke Yew and co-founder of Cathay, was a key driving force of the Cathay-Keris Studio.

After Mr Loke's death in a plane crash in Taiwan in 1964, 'the movie-making scene died along with him'.

A little-known fact of the golden age of Malay film-making is that it was never especially lucrative.

The small market in Malaya and competition from Indian, Indonesian and Hollywood films made the going tough and Cathay-Keris reported a loss of $1.5 million in its first eight years of operation. Big-budget prestige collaborations and international co-productions in the early 1960s also failed to light up the box office.

Mr Loke's legacy lives on today in the movie distribution, exhibition and other businesses. That side of the organisation has its own stars in its long-serving staff, such as Mr Teo Chai Koon, 67.

He joined the accounts department of Cathay Film Distributor in 1962. His first workplace was not at the more well-known Cathay Building in Handy Road but another bungalow-like building nearby, close to the historic MacDonald House in Orchard Road. �

In his time at Cathay, he has seen the industry change from grand single-screen cinemas to multiplexes and from a one-size-fits-all censorship to today's tiered classification system.

By 1980, he had become assistant manager of programming. One of his tasks was to decide when to start and end a film's run in the cinemas and how many screens it should be given. Hong Kong movies were all the rage when he took on the role, but by the time he retired last year, they, too, had had their time in the sun and are now a shadow of what they used to be.

'They were making too many of them, and they had no variety,' Mr Teo says, referring to how the film-makers would milk previously successful formulas to death.

Cathay is one of the few organisations in Singapore to both date back to pre-war times and to occupy the site on which it was founded.

Urban myths cling to it as a result. During the occupation, the building was taken over by the Japanese propaganda branch and the impaled heads of those who fell afoul of the occupiers were exhibited outside. There is gossip about restless spirits in the area but long-time employee Mr Teo dismisses such talk as nonsense.

'I never saw anything,' he says.

Mr Bilal Sapuan, 53, is a senior operations executive who has worked at the company for 22 years. He supervises projectionists, the crew who handle the display of images in Cathay cinemas.

He has a unique view of how technology has changed. In the past, film reels would be despatched by motorcycle from one cinema to another elsewhere in Singapore with minutes to spare. Today, when one reel can be looped to serve up to eight multiplex screens at the same time, despatching is no longer necessary, a fact which pleases Mr Bilal.

He shudders when he remembers how traffic mishaps would delay reel delivery. Screens would go blank for up to 30 minutes. But back then, audiences seemed to be more tolerant of mistakes, unlike today, he says.

'Now, patrons will complain if there is a slight delay,' he says.

Another veteran who has seen changes sweep through the business is Mr Chia Lye Huat, 64. The logistics executive has been with the firm for 45 years, having started as an usher and a 'poster boy', the person whose job it was to refresh movie posters in lobbies and hallways, then an essential advertising tool.

Now, he administers the delivery of Cathay-distributed films to the Board Of Film Censors. The current classification system is more complicated than before, but he thinks it makes for a much better viewing experience, compared to the time when all films were edited to fit all ages.

'It was just cut, cut, cut, a lot of movies lost their meaning,' he says.

The head of the company since 1984 is executive director Choo Meileen, niece of co-founder Loke Wan Tho.

In an e-mail interview, the media-shy 50-something boss of Cathay Organisation says that what stands out for her during the 75 years is 'how well Cathay has weathered crises that would have knocked any company out'.

'There are many valuable lessons that I have learnt from them. No Harvard Business School could have taught that,' she says.

Fidelity investment's Lynch urges charity

(BOSTON) Famed investor Peter Lynch, whose knack for picking winning companies helped millions of Americans make fortunes in stocks, is now urging the wealthy to follow his lead anew and give a lot of it back. To charity, that is.
'People who have been much luckier than everyone else should do more of the giving,' Mr Lynch, a vice-chairman at Fidelity Investments and trustee of the Lynch Foundation, said in a telephone interview.
The 66-year-old money manager, who earned his fortune by running Fidelity Investment's Magellan stock fund for more than a decade, is echoing the call to action billionaires Warren Buffett and Bill Gates made only days ago when they urged other billionaires to part with a chunk of their money.
'I hope it makes people think more of giving,' he said of Mr Buffett and Mr Gate's suggestion that other billionaires consider donating half their net worth.
Mr Lynch and his wife, Carolyn, announced on Sunday that they are making a US$20 million donation - their biggest ever - to support a programme to train principals at Boston College, the money manager's alma mater.
In the two decades since retiring from Magellan, Mr Lynch has stuck to what worked best for him - picking common stocks to make his foundation's money grow.
At Fidelity, Mr Lynch turned Magellan fund into a household name and the world's best performing mutual fund by increasing its value 700 times from US$20 million in 1977 to US$14 billion in 1990. Later, he wrote best-selling books that sent generations of Americans into equities.
Known for his shock of white hair and common sense approach to investing, Mr Lynch kept things simple by buying companies whose products he and his family used, like General Electric and the auto company Ford .
He also coined such axioms as 'Behind every stock is a company. Find out what it's doing.' Since retiring from running Magellan where the father of three routinely worked every weekend, Mr Lynch said he has concentrated on investing his foundation's money and mentoring younger analysts and portfolio managers at Fidelity.
'I'm like their older brother,' Mr Lynch said about guiding newcomers at the privately owned mutual fund giant in Boston.
His interest in passing on knowledge is now being spread very tangibly to education, long a favourite cause for Mr Lynch and his wife, who met as students at the University of Pennsylvania.
Discussing the project, Mr Lynch ticked of statistics making him sound exactly like the stock picker whose talent for numbers helped his investors earn a market-beating 29.2 per cent return at Magellan.
'The penalty of being a high school dropout is severe,' he said, laying out the low probability that people who do not finish high school face in finding decent work as the nation's unemployment rate hovers just below 10 per cent.
While Carolyn Lynch - whose father was a high school principal - runs the couple's foundation and searches for worthy causes, it is Peter Lynch's job as head of the investment committee to keep the millions growing.
According to 2008 IRS documents - the year the financial crisis decimated stocks - the Lynch Foundation had US$64 million. Documents for the previous year show US$113 million in 2007.
Over the years, Mr Lynch, who was sometimes seen in the Fidelity offices wearing sandals and holding his dog on a leash, hasn't changed much in the way he picks stocks. 'It is 99 per cent common stocks,' he said about how he invests the foundation's money.
But his frenetic work schedule has slowed over the years.'I don't work on Saturdays anymore,' he said.
Lynch also acknowledged lagging in the technological revolution and joked that his children had to teach him how to use a cell phone.
While sounding still very much like the stock picker he is, Mr Lynch also sounded like the philanthropist he has become in the last two decades. 'We are trying to make a difference where it counts,' he and his wife agreed.
Long ago, the Lynches - who have been married for 42 years - made education their cornerstone cause, supporting programmes like Teach for America and institutions ranging from Harvard Medical School to Marian High School in Framingham, Massachusetts.
The Lynches said they hope the programme to train principals will be duplicated in other cities around the country and eventually help narrow the divide between some of America's top-notch universities and what many call a crumbling public school system. -- Reuters

It's a 'fun' partnership with the kids

IT WENT against the usual learning process, but one of the most valuable lessons Mrs Ng Gim Choo ever received came from her little daughter 25 years ago.
Mrs Ng's first step on this particular learning curve came after she moved to London when her husband was posted to the British capital.
They sent their four-year-old daughter E-Ching to Pembridge Hall, a pre-school near Kensington Gardens, and were stunned at the result.
'She enjoyed going to school every day,' recalled Mrs Ng, 58. 'On weekends she would put on her school uniform and I would tell her that she couldn't go to school, and she would be so disappointed.'
Mrs Ng had never attended kindergarten and her own memories of life in a Chinese education system was that it was 'a pressure cooker, never fun'.
Looking at her daughter's smiling face sparked her curiosity and she became a parent volunteer at Pembridge Hall to see just what was getting E-Ching so excited.
Mrs Ng discovered a whole new educational philosophy, one that saw children's play as a central mode of learning.
Inspired by the British play-based curriculum, Mrs Ng set out to transplant that same fun and nurturing learning environment to pre-schools here when she returned to Singapore.
'At that time, the early years system in Singapore was still very much instructional, very much teacher-directed rather than student-responsive,' said Mrs Ng, who has three children aged 25 to 32.
In 1995, she walked from the kitchen to the boardroom when she opened the first EtonHouse school in Broadrick Road with $500,000 in seed capital from her husband and brother.
The curriculum blends the International Baccalaureate philosophy of inquiry-based learning with the Reggio Emilia approach.
This posits that children have 100 languages with which to communicate their ideas, including drawing, painting, composing, singing and dancing.
Today, the EtonHouse International Education Group operates 26 international schools and pre-schools in Singapore, China, India, Indonesia, Japan, South Korea and Malaysia educating 3,000 pupils.
Annual revenue is about $40 million a year.
Singaporeans comprise about 20 per cent to 35 per cent of the pupil mix here.
Fees range between $1,500 and $1,600 a month and a child may have to wait for as long as two years for a place.
One of the schools' key attractions - and reason for its high fees - is the high teacher-pupil ratio, said Mrs Ng.
A pre-nursery class for 18-month-olds has four teachers to a class of 16.
This sort of 'family setting', as Mrs Ng puts it, helps cultivate a personal relationship between teacher and child and allows teachers to tailor lessons to the learning styles of each child.
'We respect children,' said Mrs Ng. 'We look into their interests, and the learning is generated based on each child's interests.'
But parents are not excluded from the relationship either.
'We always say education is a successful partnership among the parents, the teachers and the children.'
EtonHouse schools maintain a strong line of communication with parents through fortnightly newsletters and portfolios for each student.
On top of the bi-annual parent-teacher meetings, the schools also hold student-led conferences once a year.
'Once a year, we turn around and let the children be the teachers, to show their parents how they learn,' said Mrs Ng.
'It's very interesting because you let students take ownership of their learning, and it's also a confidence-booster.'
These initiatives require a lot of preparation by teachers, who have to brief the parents beforehand, tell them to be positive and remind them not to put down their children if they are unable to grasp something that might seem simple.
EtonHouse employs 800 staff globally - with 320 here - of which 70 per cent are teachers.
'It's always a challenge to get good teachers,' said Mrs Ng, who recruited a principal and a few teachers from Britain when she started.
All prospective teachers have to go through a stringent selection process. A degree or diploma in early child education is one requirement.
EtonHouse also has its own teaching academy, the EtonHouse Education Centre (EEC), which focuses on pre-school teacher training, research and professional development.
Four pedagogists, specialists who study how children learn, are based there. They travel the globe to participate in conferences, and then share these research-based best practices with teachers here.
About 10 years ago, EtonHouse began providing primary education at the Broadrick Road main campus, by popular demand from satisfied parents whose children had graduated from the pre-school.
Mrs Ng is now also looking to expand to Britain, America and Australia and even Dubai in the longer term.
'At EtonHouse, we have children from 54 nationalities. We have children of Asian expatriates, we also have children of Western expatriates,' she said.
'We want to go to the West because a lot of our children, after studying at EtonHouse, they went back to America, they went back to Australia, to the UK, and they still missed the EtonHouse experience.'

Father of Swatch dies

Nicolas Hayek, who saved the ailing Swiss watch industry with his plastic timepiece, dies at age 82
New York - Mr Nicolas Hayek, a Lebanese-born business consultant who is widely credited with having saved the Swiss watch industry with the introduction of the Swatch, the inexpensive, plastic - and, as it transpired, highly collectible - wristwatch that made its debut in 1983, died on Monday in Biel, Switzerland. He was 82.
A founder and chairman of the Swatch Group, he died of heart failure while working at the company's headquarters, according to an announcement on the company website.
'Nicolas G. Hayek's greatest merit was his enormous contribution to the saving of the Swiss watch industry and the foundation and the commercial development of the Swatch Group,' the company said in a statement.
The formation of the Swatch Group, which in addition to Swatch today comprises high-end watch brands such as Breguet, Omega, Longines, Tissot, Calvin Klein and Mido, made Mr Hayek one of Switzerland's wealthiest men.
The irony is that the company came about after he was brought in to help shut the foundering Swiss watch industry altogether.
A flamboyant figure with a roguish sense of humour, he was 'a rare phenomenon in Europe - a genuine business celebrity', as The Harvard Business Review described him in 1993.
He was born in Beirut in 1928 and moved to Switzerland as a young man. After studying mathematics, physics and chemistry at the University of Lyon in France, he started a consulting firm, Hayek Engineering, in Zurich in the early 1960s.
By the 1970s, the vaunted Swiss watch industry, a pillar of the national economy for centuries, was in jeopardy.
Japanese watchmakers such as Seiko had begun to undercut Swiss prices. And public tastes were shifting from the finely wrought analogue timepieces in which Swiss artisans had long specialised to the pale flickering faces of mass-market digital watches.
In the early 1980s, with no apparent remedy in sight, a group of Swiss banks asked Mr Hayek to compile a report on how the watch-making industry might best be liquidated. Instead, he merged two of its former titans, the nearly bankrupt Asuag and SSIH, which between them owned brands such as Omega, Longines and Tissot.
He bought a majority stake in the reorganised group, known as SMH - the Societe Suisse de Microelectronique et d'Horlogerie. He was fond of telling interviewers that the initials stood for 'Sa Majeste Hayek' - 'His Royal Highness Hayek'.
In 1983, SMH introduced the Swatch. Lightweight, with vibrantly coloured bands and breezy novelty faces, it was remarkably inexpensive to produce.
It had 51 parts, as opposed to the nearly 100 needed to make a traditional wristwatch. It retailed for less than US$35 when it was first marketed in the United States later that year. The Swatch quickly became a sought-after collector's item worldwide. It was very likely the first time that people had even considered owning multiple watches.
Known to wear up to four timepieces on each arm, Hayek said Swatch produced 'beauty, sensuality, emotionality in watches - and we also produce high-tech on your wrists'.
SMH had produced 100 million Swatches by 1992. The success of Swatch also resuscitated the high-end brands under the SMH umbrella.
In 1998, the company's name was changed to the Swatch Group, taking the name of a brand that had become a pop marketing icon. It generated about US$4.9 billion (S$6.8 billion) in sales last year, The Wall Street Journal reported on Monday.
By redirecting consumers' attention to Swiss watch-making as a whole, the little plastic watch lifted all boats. Even the expensive brands, such as Breguet, 'we will continue to sell - and sell well', Mr Hayek told the publication Swiss News in 2008.
He became a national figure, despite his very un-Swiss flamboyance. In 1998, he came up with the idea for the ultra-compact Smart car, now made by a subsidiary of DaimlerChrysler AG.
He stepped down as the Swatch Group's chief executive in 2002 and was succeeded by his son, Nicolas Jr. His daughter Nayla sits on the company's board. He is also survived by his wife Marianne. He remained chairman of the group and head of Breguet.
Over time, the humble Swatch itself was borne upward by its own success: The company has issued limited-edition Swatches designed by noted artists such as Keith Haring.
In 1992, The New York Times reported that a Swatch by Kiki Picasso, a pseudonym of the French artist Christian Chapiron, sold at an auction at Christie's in London for US$28,000.

The envoy and his street-food diplomacy

MR JON Huntsman, widely viewed as one of the most colourful and accessible American ambassadors to China, thinks nothing of hopping onto his Shanghai-built 'Forever' brand bicycle to roam the hutongs of Beijing.
A polished Mandarin-speaker, he banters with locals with ease over breakfast at streetside stalls.
The 50-year-old envoy credits Singapore for helping him build up his street cred.
'I know my food, I'm a street food guy - I was trained in Singapore,' declared Mr Huntsman, whose diplomatic masterstrokes have included connecting with locals through his love of Asian food.
In 1992, he made headlines as the youngest-ever United States ambassador to Singapore at the age of 32. He was an instant hit at his first press conference, speaking in Mandarin and raving about his beloved morning fix of dou jiang (soya bean milk) and you tiao (deep fried dough sticks) from Chinatown.
In Beijing 18 years later, he still heads to the streetside hawkers for his favourite breakfast. His adopted daughters, Gracie Mei, 11, from China, and Asha, four, from India, sometimes accompany him on his rides through the city.
In the 11 months since he arrived in Beijing, Mr Huntsman has covered a lot of new ground, big and small. These include a trip with Gracie Mei to her remote Yangzhou village, to the complexities of engaging with the vast and fast-changing country that is China.
Speaking of the burgeoning scope of US-China relations, Mr Huntsman notes that it has undergone a major turning point.
'We're entering new territory here where neither side has ever gone before,' he told The Straits Times last Thursday at his office located north-east of the Forbidden City. He gave this interview ahead of his speech delivered on Monday at the FutureChina Global Forum held in Singapore, where he was one of the key speakers.
The two powers are 'deep in dialogue' on a wide range of issues, from the global economy to climate change and energy.
'These are all issues that were not part of our bilateral engagement in earlier years,' he said. 'But what marks our relationship today that is quite new and extraordinary is the range of issues that we cover together that go well beyond the bilateral into the global.'
Mr Huntsman may appreciate this evolution better than most, having followed this bilateral relationship since its inception in July 1971, with the establishment of formal diplomatic ties.
At the time, the young Mr Huntsman, then 11, found himself clued into the diplomatic groundwork that paved the way for this historic breakthrough. He had accompanied his father, who was an aide to then President Richard Nixon, to the White House.
While there, he was asked to carry Secretary of State Henry Kissinger's briefcase to a car. When he asked Dr Kissinger where he was going, he was told: 'Please don't tell anyone. I'm going to China.'
Mr Huntsman's childhood fascination with China took him to Taiwan for two years as a Mormon missionary, where he learnt Mandarin and the Hokkien dialect.
In 1984, he made his first visit to China as a member of the advance team preparing for then President Ronald Reagan's visit there and met paramount leader Deng Xiaoping.
He has been back many times since. As deputy US trade representative from 2001 to 2004, he grappled with nettlesome trade disputes over cheap Chinese exports flooding the US market.
But even for a seasoned hand, Mr Huntsman's first winter as ambassador to China was an unequivocably 'turbulent period', marked by disputes such as American arms sales to Taiwan and President Barack Obama's meeting with the Dalai Lama.
Those were 'very difficult, dark days', said the diplomat, whose signature Mandarin phrase 'I will learn from you' and mastery of the art of 'giving face' never fail to impress Chinese press and crowds.
But, Mr Huntsman added, 'the question is always how you manage your way through these cycles and how you even out those extremes'.
True enough, 'an extraordinary recovery' kicked in. Around March, both sides came to the realisation that they needed to find common ground and ways of getting along, he recalled.
There was simply too much at stake. 'We relied too much on each other from an economic and trade standpoint,' Mr Huntsman said.
President Hu Jintao's acceptance of Mr Obama's invitation to attend the Nuclear Security Summit in Washington in April marked a significant turning point in the relationship.
'The bilateral meeting went not for 60 minutes but for 90 minutes - and neither side pulled out the perfunctory talking points but spoke as friends,' said the ambassador.
This 'wide-ranging discussion... went a long way in mending the relationship'.
The momentum has since picked up. China's recent decision to join the US in reining in Iran's nuclear programme was cited as 'a good example of collaboration between the two sides'.
Another issue to watch is the South China Sea, which has been a source of territorial disputes between China and other Asian countries.
Beijing officially elevated it to one of its 'core interests' of sovereignty, on a par with Tibet and Taiwan this year, according to reports.
China's growing assertiveness in the South China Sea and South-east Asia has prompted Asian leaders like Minister Mentor Lee Kuan Yew to urge President Obama to step up America's presence in the region in order to 'strike a balance' with the Chinese.
Asked if the US would scale up its presence in the region, Mr Huntsman reiterated the stand that the United States is a 'Pacific power'.
'We care deeply about the free flow of goods and commerce, in other words, keeping the sea lanes open for the free flow of trade.'
The US' significant naval presence has been 'an insurance policy' to ensure stability in the region, he noted.
Mr Huntsman noted that Mr Lee's 'voice registering concerns coming out of South-east Asia is a helpful reminder that South-east Asia is and will always be important to the interests of the US'.
'I can see a future in the years to come, where our engagement will only ramp up, based upon what our needs are as a country and the growing needs of Asean,' he said.
For the present, he is focused on protecting American interests in China. This includes creating jobs for people in the US, where the unemployment rates are 'unacceptably high'.
He noted that China is rebalancing its economy towards a more consumer-based model - and 'that will be good for the US'.
'It will allow for exports to be kicked up, perhaps in an unprecedented way, resulting in greater job creation in the US.'
While some may see this as a political soundbite for a rising star tipped as a potential Republican candidate for the 2016 presidential race, Mr Huntsman does not mince his words when it comes to helping the folks back home: 'From a personal standpoint... every day I'm very mindful of creating jobs, in an enhanced economic relationship with China.'