Featured Topic: Singapore

causewaySingapore recently added toll charges to the Causeway, making travel to the region more expensive. Singapore followed suit. According to a member of the Land Transport Authority, Singapore’s policy is to do what Malaysia does. There are some specifics in the new toll (regarding the Eastern Dispersal Link [EDL] and the Malaysian Causeway Customs, Immigration and Quarantine Complex [CIQ]). Economists and businessmen are arguing that these tolls are resulting in a negative impact on Johor investment.

However, according to Tan Sri Shahrir Samad, the Singapore tolls will not have this effect. He believes that investors will find a way around it, like working virtually. In addition, he pointed out that property rentals in Johor were still significantly cheaper than renting in the republic.

But not everyone agrees with this. Nur Jazlan Mohamed – Pulai’s Johor MP – pointed out that Malaysians traveling to Singapore on a daily basis will “get hammered twice.” And, it will impact Johor’s businesses, as according to Boo Cheng Hau, “for an average car, it would cost RM33 the toll charges on both Iskandar and Woodlands CIQ. Even though it is only S$13, which may not be a burden for Singaporeans, it would certainly be a heavy burden for Johorean commuters.”

Thus it might be wise for both governments to figure out a solution together for further development. As far as Hau is concerned, this will include: “abolishment of tolls at the CIQs, speeding up MRT/LRT connections between Singapore and Iskandar Malaysia, and environmental protection of Johor Straits including the Forest City project.”

Rich Get Richer in China

It seems if you want to go where the wealth is, China is where it’s at. Today there are over a million millionaires living there; financial growth having escalated in the last year, alongside a thriving currency. Statistics from a BCG Global Wealth Survey show an increase in China of 31 percent of millionaires to 1.11 million from the previous year, placing China “in third place for millionaire households.” In addition, in worldwide figures, China is at number 8 vis-à-vis households having assets at a value of more than $100m.

Inaccurate Stats?

These figures however, only give part of the picture since monies earned from private businesses did not figure in the survey, nor did yachts, art, or fine wines. According to a partner at Hong Kong BCG, Tjun Tang, “this grossly underestimates true overall wealth in China.” As well, only around 5 percent of wealth is held offshore and there is a limit on the amount of products that international wealth management companies are able to offer inside the country.

Asian Affluence

Singapore isn’t a bad place to live either if you want to be bringing in the money. A staggering 15.5 percent of those living in Singapore are millionaires. Qatar came in at 8.9 percent which isn’t anything to be ashamed of either. In general, if you are anywhere in the Asia-Pacific region, the rate for growth wealth has an anticipated growth of 11.4 percent in the next four years. When compared to worldwide figures for the same time-frame, the growth rate is around half of this. Japan wasn’t included in the Asian anticipated economic growth for these years. India isn’t doing too badly either, coming in ahead of Canada with its 190,000 millionaires. Things are going to be getting even better for India too, with an anticipated wealth increase of 14 percent per year over the next five years alongside China’s 18 percent. But China seems to look good no matter which way you turn, as, according to the Bloomberg Economic Momentum Index for Developing Asia, it ranks “first among 22 emerging Asian economies as the country most likely to maintain steady and rapid growth over the next five years.

Chinese NZ Investment

New Zealand is becoming an increasingly more attractive to investors. This has been especially evident in China which has been purchasing more NZ bonds than ever. Recent reports show that investments from China could amount to $6b which will have an impact on the kiwi dollar that could increase to 81 cents (which would be a three year peak) “against the greenback.” According to Craigs Investment Partners market analyst Peter McIntyre, “there have been reports that the Chinese foreign exchange reserves are looking to diversify around about 1.5 percent of their assets into New Zealand denominated assets like government bonds, companies and dairy farms.”

Nice New Zealand

That is one way of describing the country. Nice. New Zealand is definitely “nice” for investors since in terms of financial security, it is very stable. There is also a “high domestic inflation rate” with large returns too. It seems to be the whole region is finding New Zealand attractive, most notably Singapore and Hong Kong which are looking into government bonds.

These changes have been happening for a few years now. Countries in Asia are boasting “very large reserves.” There is likely to be additional investments ahead too. China will see an increase in investment from BUD, the Brazilian-Belgium owned Anheuser-Busch InBev and intends to establish a “brewery to make Budweiser in the mainland by the third quarter,” according to Carlos Brito, CEO of the company. The intention is to put in “several hundred million dollars this year.”

Better Beer

The three “top-priority markets” set to “drive the volume growth of the global beer industry,” are: Brazil, China and the USA. Indeed, China alone drinks around 30 liters of beer per annum, rendering it “responsible for around 25 percent of global beer consumption.” Just last week the first brewery was launched by AB InBev in Sichuan, a southwest China province, which according to the company’s Asia Pacific president Miguel Patricio, “aims to better serve the 200 million consumers in the region.” So if you happen to be visiting the Great Wall, consider quenching your thirst with a barrel of beer.

Talks are in underway between investors from China and Qatar, along with Bahrain Bay Development (BBD). Discussions are underway about the possibility of the company making land available for purchase in BBD’s $2.5b Bahrain Bay property project in Manama. Apparently, already 65 percent of land plots have been sold and now “investors [are] eyeing the remaining 35 percent.” BBD is in talks with Bahraini and Chinese investors too. At the end of this year, the rest of the land will probably be sold “on hopes that market conditions will be better.” The project is in the north of the capital of Bahrain.

It seems like the land is not going to be lying dormant for all that long. BBD has plans to sell it all within “the next two or three years at most.” Land sales only went on hold a few years ago in the “wake of the global financial crisis.” As well, there is currently a bid by eight firms which want the contract to construct the Four Seasons Bahrain Hotel, for $350m.

Also included in the Bahrain Bay development is a trade center Arcapita Bank’s building and a project from Singapore’s CapitaLand. Around 95 percent of the infrastructure for the project has already been completed and the rest will be done by August.

Asian Political Troubles

Political troubles in the region don’t fare well for business. That’s exactly what has been happening in the Gulf Arab island kingdom, which was “wracked by political violence, inspired by uprisings in Egypt and Tunisia.” There has also been substantial stress due to the “economic downturn,” but irrespective of this, Bob Vincent, the CEO of BBD insisted the Bahrain Bay project would be “moving forward as planned.”

It seems like Asia may be encountering a few too many IBs around at the moment, (15 altogether – nine bank-backed and six non-bank backed). But which ones are doing really well? Apparently the CIMB group has a lot to say for itself, having been described as “ambitious” in its attempts at becoming a “leading universal bank in South- East Asia, providing a full array of banking services ranging from savings accounts to large corporate transactions for fund-raising.”

Going Global

What initially prompted CIMB to become global occurred in 2005 when it acquired RM500mil of GK Goh Holdings Ltd, which apparently gave the bank access to markets in the region, as well as London. Further to that, the bank purchased the Bumiptura Commerce Bank, Southern Bank, PT Bank Niaga and Bank Thai. Acquiring a “strong balance sheet” led CIMB to greater places.

IB Growth

There has been other regional growth for some of the non-bank IBs too. For example, OSK Investment Bank has established various advancement strategies while working hard on putting itself into the “smaller and mid-cap market as well as research capabilities.” Much of its profit hails from Asia, with 30 percent of its “overseas pre-tax profit” hailing from Singapore. Currently the bank is looking to establish its presence in Thailand and Cambodia. In the former country it is doing this with the purchase of BFIT Securities public Co. and in the latter it now boasts “a full-fledged commercial bank with nine branches as well as license for stockbroking and corporate finance.” OSK IB sees the necessity now to pump up its “institutional equity capability.” If it does this successfully in Hong Kong, it will be well on its way to establishing a very solid presence throughout the Asian region since it sees this country as “one of the largest financial gateways.”

There has been significant restructuring in OSK as well as new employees in an attempt to go further in its markets and develop a presence in Europe while “exposing the Asian markets to the Europeans.” As well the company is looking into what they can do in South Korea, Taiwan and China.

Stable Singapore Stakes

Is it true that things (financially-speaking) are that good in Singapore these days? Is that what is making the area so attractive for hedge funds, financiers and investors? Indeed the answer should be a resounding yes. The country is for sure facilitating things for these financiers as “setting up shop” is now deemed as much easier in Singapore than in any other Asian city.

If you just take a look at Hong Kong you will see just how much harder it is for such financiers to work. Indeed, managers of hedge funds alone are doing it tough, being forced to engage in the “same licensing requirements as mutual-fund managers.” Small funds in Singapore will be able to continue operating without having a license at all. Since it is today Singapore and Hong Kong which are the countries that have the most operation of hedge funds, of course these financiers would choose the former over the latter.

Seductive Singapore Taxes

The taxes haven’t always been so attractive in Singapore. But today they are, given what is going on in the UK. Currently the highest taxes for individuals reaches 20 percent in Singapore but the UK recently put their top rate up to a staggering 50 percent. In addition, the whole of Europe – as well as America – in general works on “tougher rules.”

So it makes sense that hedge funds in Singapore saw a significant development, reaching $48bn at the end of 2009 which was a jump of $10bn from just four years earlier. In 2001 there were only 20 hedge funds; two years ago that figure had escalated to 320 hedge fund managers. All predictors are pointing to a continued hedge fund interest looking to “tap Asia as a source of funds as well as a source of excess returns,” over the next year.

Singapore Squeeze?

While this is great for the country, is it so good for the people and the businesses already in existence there? Apparently there is the fear that “the increasing number of global hedge funds is unlikely to crowd out smaller Singapore-based managers.” There will however, be space for “large and niche players” as long as they keep adding “value to investors.” There is now more focus on “transparency and risk management by investors post-crisis,” also, which will lead to hedge fund managers around the world developing their “mid-bank office infrastructure.”

It’s great that Singapore is providing such an attractive environment for financiers around the world and that for sure will help the country’s economy. But at the same time, it has to ensure it looks after its own.

Border Clashes Negatively Impact Trade

There’s going to be trouble with the Asian economy, and a lot of it. That’s if the situation between Thailand and Cambodia continues. Currently the border clashes there are so detrimental to good sentiments between the two countries, that even though trade is developing, without an end to these clashes, the market share of Thailand goods in Cambodia will be reduced.

According to Kasikorn Research Center (KRC), what will happen is that Thai exporters and potential business investors will lose confidence in placing their businesses in Cambodia. In addition, other countries will start putting pressure on them to take business elsewhere, especially Vietnam.

Good Trading Between Thailand and Cambodia

But it would be a real shame if things went sour. Investment between Thailand and Cambodia has been increasing continuously over the last few years from $1.4bn in 2007 to $2.5bn in 2010. Thailand has been benefitting from this vis-à-vis trade. In addition, trade between the two countries accounts for at least 70 percent of overall trade – that is a huge amount that would be devastating for both places if it things stopped going well.

It’s not all been great news though. In March 2011 there was only a slight increase in export volume. Also, due to border clashes, there was a drop from 34.9 percent in 2008 to 29.9 percent in 2009. There was a large plummet of Thai investment in Cambodia from the 2008 figure of $30.7m to the 2010 figure of $1m.

Vietnam-Cambodia Trade Figures

Consequently there was additional merchandise from Vietnam to the Cambodian market with an increase of 19.5 percent in 2008 to 23.7 percent in 2009. But Vietnamese exports to Cambodia also increased in 2010 by a significant 35.3 percent, culminating in $1.5bn. But anyway Vietnam ranks as Cambodia’s largest investor with “an accumulated investment value of around $49.5m. Thailand comes in second at $47.2m, and Singapore in third place at $24.9m.

So there is work to be done. It would clearly be a huge economic shame if the political situation between Thailand and Cambodia wasn’t resolved – and fast.

Are Asian Women Financially Savvy Today?

Years ago the answer for sure would have been a resounding “no.” But today things are somewhat different. It seems that women in Asia (especially those married, 30+, in the workforce) know their won from their yen and their level of competence is likely to increase further “especially among the younger generation.”

For example, women from Thailand topped financial planning (87) and investment (69.3) scores for financial literacy but Vietnamese women also did pretty well, scoring 70.1 overall, placing them in fourth place. There wasn’t much to sniff at with women from the Philippines either (who did extremely well in Financial Planning), but those from Korea and Japan could probably learn a lesson or two on how to get more financially in-the-know.

Survey Assesses Savvyness

It was the MasterCard Index of Financial Literacy that took a survey of these countries. The questions were posed to 24 markets around APMEA (Asia/Pacific Middle East Africa). It looked at three main areas: Basic Money Management (budgeting, savings and credit responsibility); Financial Planning (their understanding of financial products and services as well as ability to make long-term financial plans); Investment (understanding of risks and products associated with investments). In general, Asian women as a whole did best in Financial Planning.

In developed markets it was women from Australia and New Zealand who were most successful in their financial knowledge. Females from Singapore are pretty good at basic money management but were pretty clueless vis-à-vis anything to do with investments. But when looking at financial literacy, India and China don’t seem to be all that with it.

According to VP of Communications for Asia/Pacific, Middle East and Africa, MasterCard Worldwide, Georgette Tan, “this new MasterCard Index has certainly provided us with fresh insights to women’s aptitude for and knowledge of managing their finances. While it is encouraging to see that women across Asia/Pacific have some degree of financial literacy, it is also apparent that there is still work to be done to improve levels across the board.” This is important as complexities increase in the financial world resulting in a necessity for women to become “more financially confident and competent.” MasterCard also seeks to give more power to these women.

Asia’s economy is a bit of a mess.  Actually it's a  big mess.  And it doesn’t look like this situation is about to improve any time soon either.  Inflation looks set to continue; capital flows are extremely volatile.  But the fact that China has been trying to liberalize its currency exchange rate could be good news for economies in the region, enabling them to move away from trade settlement within the current global economic climate.  It’s a shame Pridiyathorn Devakula is somewhat removed from the political scene these days though.  Thailand’s previous Deputy Prime Minister is quite well-to-do these days.  His wife has a staggering Bt258 million to enjoy while their daughter isn’t too badly off either at Bt7 million.  Perhaps if the family shares some of its wealth it can pull the region out of its financial hole.

Yuan Goes International

But even if the Devakula family decides to keep their wealth to themselves (giving them near-billionaire status), the yuan need not suffer.  It seems like the government of China is moving toward the possibility of internationalizing this currency alongside the Euro and the dollar.  As well, plans are set for Hong Kong to become the traing center for yuan-denominated assets enabling foreign companies to “issue yuan-denominated assets in Hong Kong” which will also mean the Bank of China NY branch will be able to open yuan deposits.  The hope is that investment abroad will increase too.  As well, if they adopt Devakula’s idea of “co-operation among regional economies” to establish a benchmark currency, then the region’s economy could potentially peak.

Pest storms are devastating rice production in Singapore, which is no good for anyone since this grain is a staple throughout Asia.  This is becoming a threat to the country’s food security and could completely destroy rice farms throughout the region, according to Singapore scientists.  Indeed, there is talk that the pesticides used to counter this problem may be doing the opposite – making it worse.  The problem has partly been caused by trying to go cheap:  use of less expensive pesticides; poor farmer education and destruction of ecosystems around paddies, to name but a few.

Historically this wouldn’t have been the case.  Farmers took immense pride in their plots and ensured their produce was protected.  King George VI would have been ashamed at his Asian brethren and might not have so readily agreed to having his face emblazoned on a set of Singapore stamps issued in 1948.