Singaporeans remain cautiously optimistic

A interesting article hit my WSJ reader this afternoon. From the title “Singaporeans stay buoyant in Asian storm,” I was not too sure which direction the article would take.

Here’s my take of the article.

The financial crisis has hit Singapore hard. The city-state after all is home to the largest container shipping hub in the world. When global trade slumped, inevitably so would the Singaporean economy.

The Financial Times in this article seems to agree with a observation I have made on my business trips to the city. The average Singaporean works very hard, earns a decent yet not absurdly salary, receives subsidized housing and generally speaking… LIVES WITHIN THEIR MEANS

Much like the average citizen, The city-state has also lived within its means. The Singapore Sovereign Wealth Fund is worth around $100 billion, which Singapore saved up during the good years.

This has transpired in the form of confidence, at least for Singaporeans that is. Foreign expats have ironically been the hardest hit by the crisis, suffering a major exodus after the fall of Lehman Brothers last year. Singaporeans on the other hand are holding up quite well, continuing to spend while waiting for a recovery.

“We suffered a fall in business, particularly among expats, after the collapse of Lehman Brothers in September. But the slack has since been taken up by locals who still have money to spend,” said Chris Churcher, the owner of the Red Sea art gallery.

Cem Karacadag, an economist at Credit Suisse in Singapore, said that Singaporeans are used to living within their means since he estimates half of the working population makes S$2000 ($1,354, €1,022, £914) or less a month in one of Asia’s most expensive cities. About 85 per cent of the population lives in publicly subsidised housing, leaving little risk of foreclosures.

“We are a resourceful people,” said Jeffrey Tan, who owns a small printing company. When business orders started drying up, he decided to take a part-time job as a taxi driver. “It is a flexible job so I have time to devote attention to my business when I need to. The only problem is that fewer people are taking taxis.” Mass transit use has risen as people try to cut costs on incidental expenses.

Click here to access the FT article which was used in writing this post.

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Mainland China makes first investment in Taiwan since civil war

Some highlights —

Taiwan stocks are soaring after the mainland made its first investment in the Island since the civil war.

China mobile agreed to buy a 12% stake in Taiwan’s 3rd largest mobile phone carrier, Far East Tone Telecommunications.

Direct flights between the two will increase.

Mainland institutional investors will be able to buy shares as of today.

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Will Microfinance be able "feed itself," or will the global crisis catch up to it?

Banks think small to achieve big; focusing on microfinance

India’s Microfinance sector is doing well, so well that the leading private and foreign banks in the country are planning to increase their MFI operations.

This article from the Hindu, MFI institutions are usually “fund-starved” in even the best of times due to the incredible demand that is unleashed as soon micro-credit becomes available to dis-enfranchised poor working within the context of a extra-legal economy.

“Despite the financial crisis, MFIs have been the least affected as they have managed to maintain the quality of the business. RBS will continue to expand its MFI portfolio and expects to grow the size to Rs 450 crore by the fiscal-end,” RBS Vice-President Moumita Sen Sarma said.

Additionally the lender does not expect any deterioration in the asset quality of MFI units in 2009-10.

The question I ask to those interested in starting a discussion is how long can the Microfinance sectors in developing nations go unaffected by the greater global recession and continue to grow?

Microfinance generally targets the poor people in countries where poor do not have access to modern financial instruments like loans, savings accounts. Many times they lack access to even the most simple of modern technologies, like a cell phone.

Is it possible for Microfinance to “feed itself?”

Consider this cycle. A poor migrant has just emigrated from the Andes mountains to Lima, Peru. After years of struggling to make ends meet, living in a hut constructed out of garbage on a sand dune in the Atacama desert, this woman secures a loan to buy a blender. She can now make tasty juices from all of Peru’s delicious fruits that she can sell to people waiting for the bus in her shanty town (Pueblo Jovenes as they are called in Lima).

Technically speaking wealth and economic activity have been produced in this corner of Peru’s extralegal sector. This woman is able to pay back her loan with interest so that the lender makes money, she is able to earn a new stream of revenue which she can then spend in the greater economy on goods and services and maybe, just maybe she will eventually be able to afford something like schooling for her children.

How long can this last? Even if money is made available for Microfinance, how long will those workers waiting for the bus in the Shantytown remain employed? If they do lose their jobs does this mean the demand for juice will disapear? Or is there such a high demand for simple services like cold juice in the extra-legal economy that this woman who took out a micro-loan will continue to be able to do business?

Is demand from the underbelly of the world’s developing nations so great that it can support itself and continue to grow even in the face of declining growth in the official economy in these countries (ie: the export, financial and real estate sectors)?

In the article from the Hindu it seems Indian banks remain confident growth in the microfinance sector will remain robust.

“We could nearly double our MFI portfolio over the last year. We have been working closely with 30 top MFIs to finance their projects and look forward for more such tie-ups in the future,” ICICI Bank General Manager (Agri, Rural and Micro Banking) Kumar Ashish said.

Foreign banks too…

“We are shortly launching a project in rural Maharashtra with a leading MFI… HSBC assists the MFIs to build up a strong business model in a number ways,” HSBC Group General Manager and CEO Naina Lal Kidwai said.

What do you think?

About the Hindu

The Hindu, started in 1878 as a weekly, became a daily in 1889 and from then on has been steadily growing to the current circulation of around 11,80,000 copies and a readership of about 4.05 million.

The Hindu’s independent editorial stand and its reliable and balanced presentation of the news have over the years, won for it the serious attention and regard of the people who matter in India and abroad.

The Hindu uses modern facilities for news gathering, page composition and printing. It is printed in twelve centres including the Main Edition at Chennai (Madras) where the Corporate Office is based. The printing centres at Coimbatore, Bangalore, Madurai, Hyderabad, New Delhi, Vizag, Thiruvanathapuram, Kochi, Vijayawada, Mangalore and Tiruchirapalli are connected with high speed data lines for news transmission across the country.

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Jimmy Rogers tells it like it is

Jim Rogers spoke his mind on Bloomberg TV – Singapore last night.

Here are some highlights of the interview with Betty Lu.

“If it hits the global economy like it did Asia 5-6 years ago it’s going to be a disaster. As you remember, I think you were Asia closed down for about 6 months. People didn’t goto school, they didn’t go to work, they didn’t ride the bus, they didn’t get on airplanes. This could be a real disaster at a time when the world economy is already weakened.”

and

“I hardly consider this an emerging markets problem, if you remember 5-6 years ago Singapore and Hong Kong which are hardly emerging markets were devastated by what happened. I mean in the US, so far apparently its hitting the US too, its certainly not hitting other markets, its hitting the big countries so far.”

and…

“Betty can you imagine what Karl Marx must be thinking right now! That poor guy somewhere is saying America is finally succumbing. The Automobile industry is owned by the government and by the labor unions. The banks, the financial institutions are owned by the government. What more could he want? When you look at America in 10 years what are you going to look back on?”

and one more…

“So i’m sitting here with some money, looking for things to invest in. The only things I can find where the fundamentals continue to improve are commodities, which we have discussed before on this show. The commodity fundamentals are getting better no matter what happens to the rest of the world. The fundamentals of General Motors are not getting better. The fundamentals of Citibank are not getting better.”

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Jim Rogers new book has also just hit the presses — A Gift to my Children

Product Description— [Amazon.com]

He’s the swashbuckling world traveler and legendary investor who made his fortune before he was forty. Now the bestselling author of A Bull in China, Hot Commodities, and Adventure Capitalist shares a heartfelt, indispensable guide for his daughters (and all young investors) to find success and happiness. In A Gift to My Children, Jim Rogers offers advice with his trademark candor and confidence, but this time he adds paternal compassion, protectiveness, and love. Rogers reveals how to learn from his triumphs and mistakes in order to achieve a prosperous, well-lived life. For example:

• Trust your own judgment: Rogers sensed China’s true potential way back in the 1980s, at a time when most analysts were highly skeptical of its prospects for growth.

• Focus on what you like: Rogers was five when he started collecting empty bottles at baseball games instead of playing.

• Be persistent: Coming to Yale from rural Alabama, and in over his head, Rogers never stopped studying and wound up with a scholarship to Oxford.

• See the world: In 1990, Rogers traveled through six continents by motorcycle, gaining a global perspective and learning how to evaluate prospects in rapidly developing countries such as Brazil, Russia, India, and China.

• Nothing is really new: anything deemed “innovative” or “unprecedented” is usually just overhyped, as in the case of the Internet or TV, airplanes, and railroads before it

• And not a bit off the subject, and very important: Boys will need you more than you’ll need them!

Wise and warm, accessible and inspiring, A Gift to My Children is a great gift for all those just starting to invest in their futures.

About the Author
Jim Rogers co-founded the Quantum Fund before he turned 30 and retired at age thirty-seven. Since then, he has served as a sometime professor of finance at Columbia University’s business school, and as a media commentator worldwide. He is the author of A Bull in China, Hot Commodities, Adventure Capitalist, and Investment Biker. He recently moved to Asia with his wife and daughters.

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Commodity markets retreat on swine flu fears

Commodity prices retreated around the globe as fears grew about the highly contagious swine flue .

Crude oil prices fell. ICE June Brent was down $1.15 to $49.17 a barrel while Nymex June West Texas Intermediate dropped $1.30 to $48.84 a barrel.

“There is a risk that the flu scare will hit international aviation travel, which would have a negative impact on demand for jet fuel,” said Eugen Weinberg at Commerzbank.

He added: “Current low oil prices will cause Opec to maintain current production constraints or take steps to cut back output even further, which supports our view that crude oil will trade at US$70 a barrel by the end of the year.”

Soy rose $.03 cents to $10.07 a bushel, steadying only after dropped $.35 cents in yesterdays session.

Copper fell 2.4% to $4,205.50 despite a fall in 5,000 tonnes of stockpiles according to the London Metal Exchange (LME).

Tin lost 3.6%, falling to $11,860 a tonne.

Nickel fell 2.6% to $10,860 a tonne.

Gold dropped below its 900 level to a spot price of $898 a troy ounce.

James Steel of HSBC said the gold market had failed to react positively to news of the swine flu outbreak for two important reasons.

“First, investors flocked mainly into the dollar and other safe haven currencies, rather than into gold. The subsequent rally in the dollar weighed on gold prices.

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China-Peru sign free trade deal

Completing over a year of negotiations, Peru and China signed their free trade agreement into life during middle of the night while most of the Western world slept soundly.

Chinese Vice President Xi Jinping (R) meets with Peruvian First Vice President
Luis Giampietri Rojas at the Great Hall of the People in Beijing, capital of China,
April 28, 2009. (Xinhua/Fan Rujun)

This makes Peru the second country in Latin America to sign such a deal with China after Chile which signed a agreement with Beijing in 2005.

According to Zhu Hong, deputy general director of the International Department of the Chinese Commerce Ministry, the FTA would come into full affect in 2010.

“The China-Peru FTA is a comprehensive deal, covering goods, service, investment and other fields while the accord with Chile deals with goods only,” Zhu said. A complementary deal on service trade was signed with Chile in 2008.

“The pact features a high degree of openness,” Zhu said, citing phased, free tariffs on more than 90 percent of goods ranging from China’s electronic products and machinery to Peru’s fish powder and minerals.

Under the deal, both pledged to further open their service sectors and offer national treatment to investors from the other country.

Trade between Peru and China reached $7.5 billion in 2008.

China is also in Free Trade talks with Australia, the Gulf Cooperation Council, Iceland, Norway and Costa Rica.

One thing is certain, the US is not the only one who can sign Free Trade Agreements, China has in all actuality has been far more successful in recent years (thanks in large to political squabbling in the US) at signing trade agreements with strategic partners around the world than the US has.

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Lets talk CHINA GOLD

Last week the Internet was a buzz with news that China officially announced that it would increase its gold reserves.

Newsworthy yes, but as Otto over at IncaKolaNews in this article magnificently articulates… major news reports and analysis seemed to miss the bigger picture.

I myself posted a small analysis on this topic last Friday, April 24, 2009.

I may have mislead readers slightly with the gold chart I included. I was not suggesting gold is a good investment at the moment. I am no gold expert, and I definitely am not in any position to say whether China’s move to buy more gold will affect the global price of gold.

However, I have read a good deal about gold in history text books and in the news in recent months with the global slowdown. It is clear gold remains as it has throughout history, a store of value.

My analysis simply to articulate the following:

China is concerned about the possibility of inflation eroding the value of the money countries like the United States will eventually have to pay back. As developed economies lower interest rates and print money to spur growth their currencies will eventually weaken as money floods the global economy. Likewise, the RMB (Yuan) will likely continue appreciating as China’s economy continues to develop. and modernize. All this is not good news for the money China has stashed away in its rainy day fund.

I highly recommend readers who periodically access this site for commodity or China related news or who have simply stumbled upon this post READ — Otto’s analysis on the impact China’s gold purchases on the greater market.

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China celebrates its military confidence — Reuters Video

(Reuters) – 60 years after the founding of the People’s Liberation Army Navy, China stages a festival of warships and submarines, aiming to project growing sea power.

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Chinese petitioners demand rights — Reuters Video

Protests hit the streets of China last week when a high profile Chinese academic asserted many people in China have been forced into mental health clinics, despite being healthy.

“We hate Beijing’s petition, but all the people we have met are corrupt. We have no rights.”

Says one protester who identified himself as Xiejiang Hui who been present at every gathering so far in China.

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China vs United States: A visual comparison

All pictures from Mint.com/blog/finance-core

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