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U.S. stocks pared gains as financial shares led losses, with Citigroup Inc. (C) plunging as much as 8 percent after reporting an unexpected drop in earnings.
Goldman Sachs Group Inc., which is scheduled to release results tomorrow, fell 1.5 percent.
The Standard & Poor’s 500 Index rose 0.2 percent to 1,291.99 at 3:14 a.m. in New York after earlier climbing as much as 1.1 percent
The Federal Reserve sought to curb the risk of financial turmoil by strengthening the central bank’s tools for preventing the collapse of large firms and demanding stricter oversight by companies’ boards of directors.“The proposal would create an integrated set of requirements that seeks to meaningfully reduce the probability of failure of systemically important companies and minimize damage to the financial system and the broader economy in the event such a company fails,” the Fed said in the draft rules today.The central bank’s proposed standards, aimed at averting a recurrence of instability following the collapse of U.S. mortgage finance, target banks with assets totaling $50 billion or more and financial firms deemed “systemically important.” The Fed delayed releasing rules for supervision of foreign firms and for risk-based capital and leverage requirements.The proposed Fed rules require boards of directors to oversee and approve plans for limiting liquidity risk, while imposing enforcement triggers for firms deemed to have weaknesses in capital and risk management. The standards are mandated under the Dodd-Frank regulatory overhaul law passed in July 2010.Comments on the proposal are due by March 31, the Fed said today.Shares of U.S. lenders have trailed the broader market this year, with the 24-company KBW Bank Index BKX dropping 30 percent in 2011 through yesterday, compared with a 4.2 percent decline for the Standard & Poor’s 500 Index. The KBW Bank Index rose 4.2 percent at 2:40 p.m. in New York.
The Singapore property market is bracing for a slowdown, with experts predicting a steep drop in transaction volume and prices over the next few months.
This comes after tougher residential property measures kicked in on Thursday, hours after they were announced on Wednesday night.
Under the new measures, foreigners and companies must pay an additional stamp duty of 10 percent of the value of residential property purchases in Singapore.
Permanent residents who buy a second property and citizens who buy three or more properties will pay an extra 3 percent.
The new stamp duty is on top of the prevailing fees of between one and three per cent.
Property buyers hit hardest by the new measure would be foreigners like Norman Lu.
The 34-year-old healthcare consultant arrived in Singapore a year ago to work in a multinational company.
Mr Lu is renting a place, but in the last three months he has been looking to buy a condominium in Paya Lebar or Braddell. However the new rules have put a stop to such plans.
He said: “We are very disappointed. Even though we are foreigners, we have been working in Singapore for a year, we also contribute to this country. So as a foreigner, we feel that the government does not welcome us.”
Mr Lu said he was on the verge of closing a deal, but will need to evaluate his options now.
He said: “(There is) 80 per cent (chance that) I will not buy now. I will wait for one year, then I can get PR (permanent resident status) then I will buy a private condo or buy an HDB flat.”
His other options include leaving Singapore, “because I can easily find another job opportunity in another country” and “if property owners drop the price by 10 to 15 per cent, then I will buy a condo immediately because I want to stay in my own property.”
Market watchers expect transaction volumes in the core region like Orchard Road and Bukit Timah to slump by 40 per cent, because of the significant number of foreign buyers for such properties.
Prices will also be hit, with a possible correction of up to 20 per cent.
Mohamed Ismail, CEO of PropNex, said: “It takes a very bullish decision from a foreigner to come and invest in Singapore in today’s market, having to pay a 13 per cent stamp duty upfront, and (being) subjected to the Seller’s Stamp Duty in the next four years, of 16 per cent, 12 per cent, 8 per cent, and 4 per cent.
“And even if he sells after four years, if he buys a property today, he must expect at least a 25 to 30 per cent increase in the property price to break even, taking into consideration other costs and interests and all other elements.”
Mr Mohamed said there were a few foreigners who had already expressed interest in buying properties and were planning to sign the option papers on Wednesday, but pulled out after the announcement of the new rules.
He added that even though these buyers will not be affected by the higher stamp duty, they felt their returns will be severely impacted.
The mass market segment – which has seen more foreign buyers moving in – is also expected to dip, which may be a boon for Singaporeans.
Mr Mohamed said: “When more foreigners enter the mass market, they are competing with Singaporeans and Singaporeans’ aspirations are challenged mainly because the prices keep increasing. Overall, the buyers are now going to wait and see….with such a policy, where is the correction before entering the market.”
He added: “I do expect, in the next six months, the mass market properties are likely to see a correction of 10 to 15 per cent.”
New developments are springing up all over Singapore, but may soon have difficulties finding buyers. Property watchers expect the market to be fairly quiet over the next one to two months.
December and January normally see fewer transactions due to the school holidays and New Year celebrations. And with the latest round of cooling measures, buyers are expected to adopt a wait-and-see approach, hoping that prices will drop, before dipping their toes into the market again.
At least one real estate agency thinks the immediate reaction to the latest cooling measures will be a slowdown in the private property market.
CEO of PropNex Realty Mr Mohamed Ismail said he expects a price correction of approximately 15 to 20 per cent in the central core region and a correction of 10 to 15 per cent in the mass market segment in the next six months.
PropNex also expects transaction volume to dive by as much as 40 per cent in the core central region and by as much as 20 per cent in the mass market segment.
Under the latest changes, foreign buyers of private properties in Singapore will now have to fork out 10 per cent more in stamp duty while permanent residents and Singaporeans are also affected with an increased stamp duty on their second and third properties respectively.
PropNex said the new measures could have been targeted to preserve affordable pricing in the mass market segment – homes costing less than S$2 million where prices have surpassed S$1,000 psf.
It argues that having a blanket policy will impact the high-end market which has been the investment interest of the foreign buyers.
European stocks rose amid speculation the European Central Bank will announce measures to boost the economy as the region’s leaders meet to lay the foundations for a fiscal union. U.S. futures fluctuated and Asian shares fell.The benchmark Stoxx Europe 600 Index advanced 0.5 percent to 242.52 at 8:10 a.m. in London, halting a two-day decline. The gauge posted its biggest rally since November 2008 last week as central banks lowered the interest rate on dollar funding and China reduced its reserve ratio for banks.“A rate cut of at least 25 basis points is expected from the ECB, but what may be more important is what will be said at the press conference,” said Robert Talbut, who helps oversee about $70 billion as chief investment officer at Royal London Asset Management Ltd. “We’re looking for words that the summit will bring forward early and significant additional policy from the ECB on bond buying. People will be hanging onto the words of any policy makers in the next 48 hours.”The Stoxx 600 slipped 0.2 percent yesterday after Germany rejected combining the current and permanent euro-area rescue funds and expressed pessimism over the outcome of a two-day European Union summit that starts today in Brussels. The gauge posted its biggest rally since November 2008 last week as central banks lowered the interest rate on dollar funding and China reduced its reserve ratio for banks.U.S., Asian SharesFutures on the Standard & Poor’s 500 Index fell 0.1 percent today, while the MSCI Asia Pacific Index dropped 0.6 percent after economic data from Japan and Australia signaled the global economy is slowing.Japan’s Nikkei 225 Stock Average NKY retreated 0.7 percent after machinery orders fell 6.9 percent in October from September, missing the median forecast of a 0.5 percent gain by 27 economists surveyed by Bloomberg News.Australia’s S&P/ASX 200 index fell 0.3 percent as the nation’s employers cut 6,300 workers in November from the previous month, trailing the 10,000 extra jobs forecast in a Bloomberg survey of 22 economists.ECB policy makers meeting in Frankfurt will cut the benchmark interest rate by a quarter percentage point to 1 percent, according to 53 of 58 economists in a Bloomberg News survey. They may also loosen collateral criteria to give banks greater access to cheap cash and offer longer-term loans, said three euro-area officials with knowledge of the deliberations.ECB RatesThe ECB announces its rate decision at 1:45 p.m. in Frankfurt and President Mario Draghi holds a press conference 45 minutes later. European Union leaders will meet for dinner at 7.30 p.m. in Brussels for talks on a “comprehensive” solution to the region’s debt crisis that will continue tomorrow.BNP Paribas BNP SA, the biggest French bank, advanced 1.6 percent to 33.51 euros. Results of tests from the European banking regulator released today will show French lenders’ capital shortfall shrank from the October estimate of 8.8 billion euros $11.8 billion, a person with direct knowledge of the matter said.Tesco Plc TSCO slipped 1.4 percent to 391.4 pence. The U.K.’s largest supermarket chain said a sales decline continued in the third quarter as cost-conscious Britons were weighed down by unemployment fears and rising fuel and food bills. Revenue at U.K. stores open at least a year fell 0.9 percent, excluding fuel and value-added tax, in the three months ended Nov. 26.To contact the reporter on this story: Peter Levring in Copenhagen at firstname.lastname@example.orgTo contact the editor responsible for this story: Andrew Rummer at email@example.comWant to save this for later? Add it to your Queue!
SINGAPORE: China’s biggest jet fuel supplier said world oil prices will remain elevated throughout 2012.
China Aviation Oil Singapore (CAO) said the global economic slowdown that is widely forecast to deepen next year will not undermine crude prices, which the company forecasts will trade between US$90 and US$110 per barrel.
Oil futures trade in New York is currently at around US$101 a barrel. Volatile financial markets this year have pushed oil prices to as low as US$76 in October, down from the year’s high of US$114.60 in April.
In an interview with Channel NewsAsia, CAO chairman Sun Li said that his forecast was barring unforeseen circumstances such as a full-blown financial crisis.
Mr Sun is also the president of China National Aviation Fuel Group Corporation (CNAF), a state-owned air transportation logistics service provider, which is also the majority shareholder in CAO.
The jet fuel trading company said regional Asian demand for air travel and transport will counter global economic uncertainty to support prices in crude oil and steady growth in China’s aviation sector will be the bedrock of support for oil next year.
That in turn will help CAO escape “relatively unaffected” by the global slowdown.
Mr Sun said: “Compared to the other economic players, I feel that the impact of the financial crisis is lesser. Generally, China’s economic developments in these recent years are faster. The aviation industry for example, only moderated partially and has stayed resilient after the financial crisis occurred. In 2008, the demand for aviation dropped to 7.8 per cent. In 2009, it dropped to 9.8 per cent. This year, it dropped to around 10 per cent.”
Mr Sun said that China’s jet fuel consumption should remain resilient next year and grow at the same pace of 9.5 per cent.
Still, the company said it will be more cautious in its expansion plans.
It has set a target to raise the contribution of its non-China markets to 50 per cent by 2014.
Right now, it stands at around 30 per cent.
CAO currently trades around 7.17 million tonnes of jet fuel per year, a large part of which goes into the Chinese market. China makes up about 70 per cent of its business, with the rest coming mainly from the Asia Pacific, Europe and the US and the Middle East.
CAO said it has the right systems in place to achieve that. It has also been gradually restructuring itself over the past few years to diversify into other segments.
The company on Tuesday marked its 10th anniversary of its listing on the Singapore Exchange and it has since come a long way.
In 2004, CAO was involved a financial scandal where it manipulated its accounts to hide huge losses in derivatives trading of about US$550 million.
Mr Sun said the company has moved on and has put stricter measures such as a risk management committee in place to prevent such incidents.
This is on top of its audit committee, nomination committee and remuneration committee.
There is also a tighter workflow of what it calls a “three-tier control” system” which involves closer supervision on the board level, the management level and operational/execution level.
The system makes sure that the company does not over expose itself to trading risks and ensures protocols are followed.
A reflection of the higher corporate standing it now has is in how it has managed to more than tripled its credit facilities from before the scandal in 2004 to US$1.63 billion currently.
And CAO said these have helped the company to grow strongly over the past three years.
For each year since 2008, trade volume has grown at 15 per cent, gross profit rose 37 per cent, and net profit up 18 per cent.
Mr Sun said: “For a company to come out with such results is not easy. We have grown fast. It shows we have maximised our opportunities with the support of other companies.
CAO said it expects earnings this year to surpass 2010 after a 24 per cent hike in its third quarter profit.
But it warns that next year could be more complicated as it expects greater risks and tighter funding due to the economic uncertainties.
German Chancellor Angela Merkel said Friday that European nations were on the verge of creating a “fiscal union” with rigorous budgetary oversight to battle the eurozone debt crisis.
“We are not only talking about a fiscal union, we are beginning to create it,” she said in a keenly awaited speech to parliament, adding it would be a “fiscal union with strict rules, at least for the eurozone”.
Merkel said the last gruelling months, packed with market turmoil, the threat of Greek default on its towering debts and political strife in the European Union, had focused minds.
“Anyone who had said a few months ago that we, at the end of 2011, would be taking very serious and concrete steps toward a European stability union, a European fiscal union, toward introducing (budgetary) intervention in Europe would have been considered crazy,” she said.
“Now these items are on the agenda, we are on the verge of it, there are still difficulties to be surmounted but their necessity is now widely recognised.”
Merkel was laying out what she said were the goals of Germany, the EU’s top economy, ahead of a crunch summit in Brussels next week.
She will hold talks with French President Nicolas Sarkozy on Monday to hammer out a common position ahead of the gathering.
In a landmark speech Thursday in front of 5,000 cheering supporters, Sarkozy warned that the developed world was entering a “new economic cycle” dominated by austerity, heralding tough times ahead for jobs and business.
He said that in Europe this would require a new political and budgetary consensus that would win back the confidence of the markets.
“France is fighting with Germany for a new treaty. More discipline, more solidarity, more responsibility … true economic government” he said, urging members to adopt a “Golden Rule” obliging them to balance their budgets.
Merkel said the “fiscal union” should lead to a new “European debt brake” to stop countries from spending their way to the brink of insolvency.
“We must strengthen the foundations of the economic and currency union,” she said.
Merkel said there was “no alternative to treaty change” which would codify budgetary discipline in the eurozone.
“Rules must be respected. Respect for them must be supervised. Their violation must have consequences,” she said.
But Merkel once again ruled out eurobonds, a proposal to pool European debt to keep a lid on borrowing costs for member states, which European Commission chief Jose Manuel Barroso formally tabled last week.
“Whoever has not understood that they (eurobonds) cannot be the solution to the crisis has not understood the nature of the crisis,” she said.