" Because the banks have rapidly grown both their domestic and cross-border loans in recent years, we expect a moderate increase in problem loans, as interest rates rise, due to the US Fed' s expected raising of policy rates, and as asset prices are likely to fall," says Eugene Tarzimanov, a Moody' s Vice President and Senior Credit Officer.

" As a result, the banks will face a modest increase in their credit costs over the next 12-18 months," adds Mr Tarzimanov.

" Even a gradual increase in interest rates will put pressure on the banks' operating environment, because the rapid credit growth in recent years has led to a situation where many loans will not be fully seasoned when the repayment burden on more highly leveraged borrowers increases, as interest rates rise."

 

Providing the backdrop to a desperately boring day for most traders was a Hong Kong market that ended almost unchanged and a weak first hour for Europe. Brokers spoke in disparaging terms when asked to describe current conditions the lack of liquidity, direction and retail interest was bemoaned by some to be reaching " crisis proportions" .

The rises in UOB and DBS, combined with big jumps in Jardine Cycle & Carriage, Jardine Matheson and Jardine Strategic Holdings added 14 points to the STI.

Elsewhere, Global Premium Hotels was queried by the Singapore Exchange (SGX) in the morning for reasons behind an unusual rise in its share price. When the company said it had no explanation for it, SGX issued a " Trade With Caution" notice on the stock. GP Hotels' shares ended 4.5 cents or 13 per cent higher at 39 cents with 7.8 million done.

 

THE Monetary Authority of Singapore (MAS) has placed EcoHouse Group - an overseas property development firm which specialises in the construction of investor-funded housing for Brazilian families - on its Investor Alert List (IAL).

The IAL is a list of unregulated entities that may have been wrongly perceived as being licensed or authorised by MAS.

Since September 2011, EcoHouse has attracted more than 1,500 local investors, with a total investment sum of S$65.55 million, to its Brazilian property development projects.

But in March this year, BT reported that some investors here have failed to receive any cash payouts from EcoHouse, despite their investment contracts reaching their maturity dates.

IN THE 153 trading days between Feb 2 when the Dow Jones Industrial Average crossed 16,000 for the first time and last Thursday when it breached the 17,000 level, the Straits Times Index (STI) gained about 7.7 per cent. Not too shabby when you consider that the Dow' s rise of 1,000 points over that period amounts to only 6.2 per cent.

So although the headlines might focus on Wall Street' s all-time highs, anyone who bought and held the STI when the Dow hit 16,000 would actually be better off now than someone who invested in the Dow at that time.

Of course, sceptics might counter that the raw numbers tell only one side of the story. The STI' s lopsided reliance on a few heavyweights to thrust it higher is perhaps the biggest objection, though to be fair the criticism shouldn' t be directed at the index but more the absence of sufficient actively traded large-cap firms for the index' s guardians to choose from.

Moreover, performance appraisal of this sort hinges heavily on choice of the start and end dates. Choose correctly and even a lemon of a market can be made to look like a top performer. Year-to-date, the STI has gained only 3.4 per cent, which isn' t great.

 

About 288,000 workers were added to US payrolls in June during one of the best months for the jobs market of the economic recovery so far and a gain that far exceeded the roughly 250,000 anticipated by economists. The unemployment rate dropped to 6.1 per cent from 6.3 per cent, to stand at its lowest level since September 2008, when the financial and economic crisis began in earnest.

The Dow Jones Industrial Average rose 92 points to close at 17,086, breaking through the 17,000 milestone less than a year after it closed above 16,000 for the first time. Observers might be forgiven for wondering why the Dow didn' t rally further, however, given the long wait for a jobs report like last Friday' s. The report showed improvement in many of the areas thought to be holding back the recovery: the number of workers forced to stay in part-time jobs, the steady stream of workers who had given up looking for jobs, and the growth of both the private and public sectors.

So why did stocks not rally more dramatically? Two reasons: the jobs report was just a little too hot for the " Goldilocks" traders of Wall Street and the valuations of most stocks are already considered rich - even in a rapidly growing economy.

 

DBS economist Irvin Seah told The Business Times: " With June' s readings, we really don' t get a clear sign of where the overall manufacturing sector is heading. There is no clear upward or downward trend, and things are just running sideways."

By keeping above the 50-point threshold that separates expansion from contraction, June' s PMI still signalled growth in the manufacturing sector, despite falling short of expectations. Private-sector economists had earlier forecast a rise in overall PMI to 51.0, just shy of April' s six-month high of 51.1.

The slip was due to lower new orders both locally and from abroad, as well as lower production and import levels, said the Singapore Institute of Purchasing & Materials Management, which polls more than 150 industrial companies to compile the index each month.

Inventory continued to expand for the eighth consecutive month, while overall stockholdings of finished goods reverted to expansion. Both were up 1.8 points in June.

Said UOB economist Francis Tan: " To me, the overall performance is quite bad, especially considering the sub-indices. . . People are thinking that business is not good so they' re keeping more inventory they' re not importing raw materials because they know they can' t sell as much any more."

Singapore' s overall reading was not consistent with regional PMI reports, particularly those from China and Taiwan. The former posted its first expansion in June since December, while the latter' s reading rose to a four-month high.

But even with last month' s softer manufacturing performance, economists such as OCBC' s Selena Ling saw the " silver lining in the electronics PMI" .

The sector recorded further expansion with a reading of 50.7 in June, up from May' s 50.4.

Said Ms Ling: " The electronics PMI saw improvements across new orders, new export orders, and production, accompanied by lower inventory and imports, which bodes well for the industry' s near-term outlook - notwithstanding the recent disappointing performance in (electronics output)."

But DBS' s Mr Seah believes there is " really nothing to brag about" as far as the electronics cluster is concerned.

" If you look at the sub-indices, it' s clear that the uplift comes (quite a bit) from the new orders index (up 1.0 to 51.5). If you put that aside, the 0.1 increases in electronics new export orders and production are as good as flat. . . That shows electronics manufacturers are not seeing any significant improvement in demand," said Mr Seah.

Economists polled by Bloomberg had earlier anticipated a 50.5 reading for the electronics sector index.

Economists found it difficult to say which manufacturing clusters could have dragged purchasing managers' sentiment down. While CIMB' s Song Seng Wun thinks the dip could have come from the chemicals or pharmaceuticals segments, UOB' s Mr Tan thinks precision engineering or general manufacturing could have been the culprits.

" Unlike industrial production numbers, PMI isn' t weighted - it' s more of a general diffusion index. So the composition might make the readings harder to interpret," said Mr Song, who noted the possibility of more pessimistic firms pulling down overall sentiment.

Even as economists lament the difficulty in assessing June' s manufacturing performance - they blame the " all over the place" latest PMI reading - they do not think it' s all doom and gloom.

Said Mr Seah: " Overall, it' s not a very rosy picture, but it' s not a dire situation either. Things are just relatively flat, and that makes sense because it reflects the current global economic conditions. The US recovery is still sluggish, the eurozone is not out of the woods yet, and Asia is running slower."

[SINGAPORE] The Republic' s purchasing managers' index (PMI) slipped again in June to 50.5 - lower than May' s 50.8 reading - and even the apparent uptick in the electronics sector masked underlying weaknesses. The mixed nature of last month' s manufacturing performance - where overall PMI dipped while electronics PMI rose - has left economists grappling with what may come next.

DBS economist Irvin Seah told The Business Times: " With June' s readings, we really don' t get a clear sign of where the overall manufacturing sector is heading. There is no clear upward or downward trend, and things are just running sideways."

By keeping above the 50-point threshold that separates expansion from contraction, June' s PMI still signalled growth in the manufacturing sector, despite falling short of expectations. Private-sector economists had earlier forecast a rise in overall PMI to 51.0, just shy of April' s six-month high of 51.1.

The slip was due to lower new orders both locally and from abroad, as well as lower production and import levels, said the Singapore Institute of Purchasing & Materials Management, which polls more than 150 industrial companies to compile the index each month.

 

SINGAPORE stocks followed the lead of global markets to gain yesterday despite stubbornly low volumes.

The Straits Times Index opened on higher ground and kept above the treeline throughout the day. The blue chip-dominated benchmark gained 0.66 per cent, or 21.27 points, to close at 3,263.91 and break a three-day falling streak.

There were nine gainers for every five losers, or 272 stocks in positive territory versus 154 in the negative camp. " Overall, positive day for the market," one trader said.

It helped that global equity markets were also up.

 

The investigation is part of efforts to rebuild investor confidence in the country' s lagging stock markets.

More than 100 asset managers have quit their jobs so far this year, almost twice as many as in the same period last year, according to Chinese data provider iFund. Industry sources reckoned that a good many of the departures were due to fears of being caught up in the investigation.

A focus of the investigation is so-called " rat trading" .