TR EMERITUS

By Alex Frangos and Bob Davis from Wall Street Journal Concerns are mounting that efforts by governments and central banks to stoke a recovery will create a nasty side effect: asset bubbles in real-estate, stock and currency markets, especially in Asia. The World Bank warned Tuesday that the sudden reappearance of billions of dollars in investment capital in East Asia is "raising concerns about asset price bubbles" in equity markets across Asia and in real estate in China, Hong Kong, Singapore and Vietnam. Also Tuesday, the International Monetary Fund cited "a risk" that surging Hong Kong asset prices are being driven by a flood of capital "divorced from fundamental forces of supply and demand." Behind the trend are measures such as cutting interest rates and pumping money into the financial system, which have left parts of the world awash in cash and at risk of bubbles, or run-ups in asset prices beyond what economic fundamentals suggest are reasonable. Prices are surging across a host of markets. Gold, up about 44% this year, soared to a record high Tuesday. Copper is up about 50% in the past year. In the U.S., risky assets are rising rapidly in price: The risk spreads, or interest-rate premiums, on low-rated junk bonds have narrowed to about where they were in February 2008, before Bear Stearns and Lehman Brothers fell, according to Barclays Capital. Policy makers from Beijing to London, seared by the fallout from burst housing and credit bubbles, are searching for ways to head off new ones. How to handle a bubble "is one of the big two or three unanswered questions at the end of this crisis," says Adair Turner, chairman of the U.K.'s Financial Services Authority. Bank of Korea Governor Lee Seong-tae hinted last month he would raise interest rates, if necessary, to prevent Seoul's housing market from lurching out of control. "This is the beginning of another big and excessive run-up in asset prices," said Simon Johnson, a former IMF chief economist. The symptoms of a frenzy are most evident in Asia and the Pacific, where economies are recovering most quickly. In Hong Kong, high-end real-estate prices are soaring. A luxury flat in the tony Midlevels district is expected to sell for US$55.6 million, or $9,200 a square foot, said developer Henderson Land Development Co. Elsewhere, a bidder at a city-run auction to operate food stands at February's Lunar New Year celebration recently paid a record US$63,225 for the right to occupy a 400-square-foot stall to sell fish balls and other snacks. Prices in the auction of 180 stalls were up 33% from 2008. Over the summer, a Singapore condominium developer raised prices 5% the day before units went on sale. After dozens of would-be buyers lined up on a steamy night, the developer -- a joint venture of Hong Leong Group and Japan's Mitsui Fudosan -- held a lottery for a chance to bid on the units. Singapore home prices rose 15.8% in the third quarter, the fastest rate in 28 years. Australian real-estate markets also have heated up. After a Melbourne property-research firm recently predicted that average home prices will double over the next 12 years, a news report in Australia's Herald Sun said: "The staggering prediction shows the importance of buying a home as soon as you can afford it because the longer buyers delay, the more chance there is that their dream will slip out of their reach." The Australian dollar has jumped about 35% over the past 12 months as investors borrow in U.S. dollars to purchase Australian currency. The practice is propelling stock and bond markets faster than in the U.S. and Europe. Currency traders are betting that the Australian central bank, which raised interest rates by 0.25% on Tuesday, the second rise in two months, will continue tightening. Asian stock prices are shooting up, in part due to low interest rates in the U.S. Investors looking for higher yields are borrowing in U.S. dollars and then pouring that money "into countries that are growing more rapidly," said Stephen Cecchetti, chief economist at the Bank for International Settlements, the central banks' central bank, which warned early of the last asset bubble and is beginning to do so again. "That runs the risk of creating property and equity booms in those countries." About $53 billion has gone into emerging-market stock funds this year, according to data collector EPFR Global. Through Monday's trading, the broad MSCI Barra Emerging Markets Index this year was up 60.7%. Brazil was up 100%, and Indonesia had gains of 102.7%. Over the same period, the Dow Jones Industrial Average was up 11.5%. Discerning a bubble is as difficult as preventing one. Rapidly rising prices aren't definitive proof. Stocks in Asian emerging markets currently trade at about two times book value, about average for the past 20 years, according to UBS. From 2004 to 2008, the price-to-book-value average was about three times. "This doesn't feel like a bubble," said Hugh Simon, chief executive of Hamon Investment Group, which manages Asia-investment funds. "There's too much skepticism" among investors. To battle bubbles, policy makers are turning first to regulation. Singapore's authorities tightened mortgage requirements, ended real-estate stimulus policies and pledged to make more land available for development. South Korea regulators tightened real-estate lending requirements in seven districts around Seoul where prices have jumped. "Even those who say we should respond directly [and deflate bubbles] have no idea how to do it," said Laurence Meyer, a former Fed governor. "It is easy to take a philosophical position, but hard to become operational and practical about it." - WSJ  Read More →

From our Correspondent Following the widespread unhappiness and disgruntlement on the ground at the ruling party's liberal immigration policies, the Ministry of Manpower has moved in to amend the EntrePass scheme for foreigners who want to set up businesses in Singapore to placate the growing chorus of voices from Singaporeans who want to restrict the inflow of foreigners. The amendments have made it more rigorous for new applicants. Previously, applicants for the pass had to submit a business plan and put down a $3,000 banker's guarantee or get a Singaporean sponsor. Now, new applicants also have register their company as a private limited concern; hold a share of at least 30 per cent in the company; and have at least $50,000 in paid-up capital. There are also specific guidelines to ensure that the businesses they set up create employment opportunities for Singaporeans. When they first renew the permits - each permit is valid for a maximum of two years - the business owners will have to show that they employ at least two Singaporeans and have total business spending of at least $100,000 over the past year. At subsequent renewals, they have to employ at least four Singaporeans and have total business spending of at least $150,000 over the past year. The move came in the aftermath of a public furore over a Singapore PR Zhang Yuanyuan who proclaimed her loyalty to China on a Chinese TV channel. It was revealed that Zhang came to Singapore on a students pass armed with only a diploma from an unknown institution in China. She obtained her Singapore PR within two months of application. The authorities refused to reveal why Zhang was given a Singapore PR in double quick time and cleverly diverted the issue away by using the state media to blame Singaporeans for "over-reacting". A few senior PAP leaders including Senior Minister Goh Chok Tong also jumped to Zhang's defence, claiming that as she is still a China citizen, there is nothing really wrong in her pledging allegiance to China. Prime Minister Lee Hsien Loong repeated the circular argument during a PAP event last Sunday that foreigners helped to create jobs for Singaporeans and take up jobs not wanted by locals. The cosmetic changes made to the EntrePass scheme is unlikely to slow the intake of foreigners by much as there are few expats setting up businesses in Singapore compared to the large number of Chinese and Indians who flocked here every year to find work. The government should consider amending the students' pass and S-pass schemes if it is really serious to reduce the number of foreigners coming to Singapore. The duration of the students' pass should be reduced to one year and only those from accreditated institutions are allowed to further their studies in Singapore. S-pass schemes should be tightened to grant entry to only semi-skilled workers who are in demand in certain industries. For example, Chinese language teachers, clinic assistants, nursing assistants and administrative staff should be filled by locals instead of foreigners. The civil service and government-linked companies should set a good example for the rest of Singapore to follow by employing only Singapore citizens in its front-line desk. Of late, Filipinos are found manning many of Singpost and POSB banks counters where previously only Singaporeans are recruited for the job. The latest slew of changes are probably another "branding" exercise by the government to allay the concerns and anxiety of citizens in preparation for the coming elections. Prime Minister Lee had given no indication that he will make wholesale changes to the government's immigration policy except some minor "tweaks". In fact, he kept stressing on the fact that foreigners are crucial for Singapore's economy. A $10 million community integration fund was introduced lately to make foreigners feel "welcomed" in Singapore. Unless Singapore voters sent a strong message across in the next election, it is likely that the ruling party's immigration policy will continue until local-born citizens become a minority in their own country.   Related articles: >> SM Goh: New immigrants needed to make up population shortfall >> PAP ministers hailed contributions of foreigners >> SM Goh expressed support for Zhang Yuanyuan >> State media: citizens have more rights over PRs >> Zhang Yuanyuan got her Singapore PR in only 2 months >> Official reply from government on the Zhang Yuanyuan fiasco >> Singapore PRC PR proclaimed loyalty to China publicly >> PRC resident hung China flag to celebrate its National Day >> PRC student in Singapore wants more scholarships for foreigners >> PRC prostitutes solicit for customers on Singapore’s cyberspace >> ERA: 40 per cent of resale flats buyers are PRs   EDITORS’ NOTE: If you like our work and would like to support us, please transfer your donations via paypal to our account ([email protected]). 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By Low Wei Xiang, Social Correspondent It has been reported that the government will start selling the H1N1 vaccine – one million doses of it for our population of nearly five million - likely eliciting a rush to hospitals and clinics for those eager to be amoung the first to lay their hands on it. Should you be one of them? Instead of blindly joining in like how Singaporeans queued for hours to get their hands on the Hello Kitty plush toys offered by McDonalds sometime back, it would be useful to have an understanding – even if it is a layman’s one – of the virus, vaccine and what you could be in for. The H1N1 flu is not new to us – a variant of H1N1 killed millions worldwide during the Spanish flu epidemic from 1918 to 1919. This current one afflicting the world is a new variant, but really, perhaps it is time the general public got a sense of perspective instead of treating the H1N1 flu with uptight reverence. H1N1 is perhaps similar to known seasonal influenza strains in more ways than some imagine. The key differences are that H1N1 seems to affect a younger demographic, especially those pregnant or with pre-existing medical conditions, and that it is also seeing high activity at a period where seasonal strains are known to be more dormant. Other than that, symptoms of H1N1 and seasonal strains remain largely similar (vomiting and diarrhea may occur additionally for H1N1). More importantly, the death rates of both are comparable, with estimates agreeing on a mortality rate of substantially below 1%. On 11 Jun 2009, the World Health Organization (WHO) raised the H1N1 alert level to that of a pandemic, but it is important to understand that this is a reflection of the geographical prevalence of the virus rather than its lethality, which remains way below that of SARS (about 15%) and the bird flu or H5N1 (about 75%). Perhaps the reason why alarm bells were sounded for H1N1, creating worldwide media ruckus, is because the strain is a mix which the world has not seen before and has no defense against. But as long as we understand that the flu is highly contagious but is otherwise not virulent or deadly to most, with a mortality rate similar to that of the seasonal flu, there is no need for unnecessary panic or alarm. The only thing we should be afraid of right now is that the current strain would further mutate into a deadlier one.   What is a virus? The H1N1 flu is caused by viruses. Viruses are parasites – they do not metabolize (break down food for energy) and thus have to inhabit in host cells, “leeching” off their hosts to survive and replicate themselves. Without host cells, they are nothing. According to an article by Associate Professor Paul Ananth Tambyah from Yong Loo Lin School of Medicine in NUS, by Darwin’s theory of evolution, virus strains that are able to survive longer (which also means keeping their hosts alive) will find themselves replicating and infecting new hosts, while strains that kill their hosts will perish and gradually fade out themselves. The genital herpes (watery blisters or ulcers) virus, for example, is the model virus – there is no cure and it remains in the human body for life, causing “little” more than recurring pain or itch for its host, but whose life is otherwise not endangered. The human host is thus able to live an average lifespan, and similarly, the herpes virus is kept alive too. Thus it is safe to assume that as long as the H1N1 flu virus does not mutate into a new strain which is uncompassionate to the host, it should otherwise be relatively harmless and we should expect a continued low death rate, because there is no incentive for a virus which has been doing well for its survival to suddenly turn on its back and kill the hand that feeds (and also “committing suicide” in the process). In addition, the WHO estimates that up to a third of the world population would be hit by H1N1. If this is the case, this “fortunate” group of people would likely have developed some form of immunity against it, and are likely spared from this particular H1N1 strain. The danger is this – what if the H1N1 flu virus, by interacting with another influenza strain, mutates to form a deadlier version compared to its predecessor which people have no immunity against?   What are vaccines and how do they work? When viruses (like H1N1) invade our body, our immune system will cause the creation of antibodies (substances to fight the viruses). However, it might be too late by the time antibodies are produced. In this case, vaccines aid us – by using deactivated harmless viruses to stimulate an antibody reaction from our body’s defense mechanism, our body would be armed and prepared should the actual virus attack. However, vaccines are specific workers and would protect us from viruses that they can actually recognize (i.e. that of the same strain). In other words, should the H1N1 flu virus mutate into a new strain, existing vaccines would probably be rendered ineffective, and many Singaporeans would have queued up for nothing.   What does this mean? So much talk has been given to the dangers of a new strain springing up – has it happened yet? We are currently entering the peak season of seasonal influenza – traditionally, most flu outbreaks occur between November to April. Judging by the speed at which flu viruses replicate themselves, it would not be foolhardy to say that the new H1N1 virus might interact with an existing seasonal flu virus and emerge as a newer, hardier, not-so-seasonal strain which the world has not seen before. Whether this newest strain would be deadly or not remains another question – the pertinent issue is that the vaccines that the world spent the past few months in researching and producing could potentially go to waste. The one million machine guns that Singapore spent money in procuring for the defense of the country’s health might turn out to be only able to shoot blanks. One might wonder that if flu viruses are constantly mutating and coming up with new versions of themselves every year, it would then seem that vaccines are not useful in even protecting us against the seasonal flu, let alone H1N1. Not so – according to Shannon Brownlee, a senior research fellow at the New America Foundation, every year the WHO and the Centers for Disease Control and Prevention “collect data from 94 nations on the flu viruses that circulated the previous year, and then make an educated guess about which viruses are likely to circulate in the coming fall. Based on that information, the U.S. Food and Drug Administration issues orders to manufacturers in February for a vaccine that includes the three most likely strains.” Thus vaccines are actually products of human calculations, presumptions and projections – all of which have room for human errors, one might add. This is why vaccines were never a surefire way of protecting us against flu viruses – we can only hope that the projections the scientists have made turn out accurate. However, the H1N1 virus strain is new and we might not have the privilege to archives of information or knowledge collected about it to be able to predict with certainty future paths that the virus might take. What scientists probably relied on was data collected over the past few months that the virus has surfaced, but basing predictions on calculations done over such a short period of time would actually provide space for more human errors in the vaccine production. And consider this – a recent preliminary study conducted in Mumbai by pathologists who studied the tissue samples of those suspected to have died from H1N1 found that “two-thirds of those suspected to have died of swine flu did not have the virus, despite showing all clinical symptoms”. In other words, while they appeared to have been afflicted by H1N1, it seems that the virus in question is not a genetic match to the H1N1 strain we know of. In fact, a main finding of the study is that the “new” virus causes “a more potent viral infection” than the existing H1N1 virus – a mutation, anyone? Top research agencies and companies spent a few months rushing to produce a vaccine for the world, only to find out that they could potentially have been beaten to the finish line by the faster virus. Can we say for sure that we have kept up with the mutation of the H1N1 strain and produced a vaccine that will curb the spread of the latest strain for this upcoming flu season? Chances are that the H1N1 vaccines are ineffective – is it still urgent that people should rush to grab hold of the vaccine before it runs out of stock, especially if its side effects are still not established? You decide – after all, you do not want it to be like the Hello Kitty toys which we used to hanker after, but which have since been stashed away collecting dust.   Related articles: >> Cost price of H1N1 vaccine revealed >> H1N1 flu vaccination begins   EDITORS’ NOTE: If you like our work and would like to support us, please transfer your donations via paypal to our account ([email protected]). Any amount will be greatly appreciated! Alternatively, you can also help boost our advertising revenue by clicking on the ads displayed. Thank you! Join our tweet at: http://www.twitter.com/temasekreview   About the Author: Low Wei Xiang is a proud graduate of Hwachong Institution and a self-dubbed writer with journalistic aspirations.  Aged 20, he has been writing short stories and social commentaries for the past 3 years and will be entering NTU's Wee Kim Wee School of Communications and Information in 2010.  Read More →