Monday, February 22, 2010

Interest rates / Oil / Property

Recently there have been a few major events in the market.

1. Fed raises the emergency lending rate from 0.25% to 0.75% last Thursday, marking the first change to interest rates since Dec 2008 though the all important overnight interbanking borrowing rate is unchanged at almost near 0%.

In my opinion, the Feds are just 'testing water' to see how the market react to such news (i.e. increasing only the EMERGENCY interest rates), because they did not increase the so called 'more important' overnight interbanking borrowing rates, which most people are looking out for. So if all goes well, and the market sentiments still remains good, they will then execute the plan to increase the interbank rate.

This is because, at the moment, the FEDs are keeping extremely low interest rates, which will inevitably erode the USD value. This will in turn cause the huge foreign reserves of countries like Japan and China who have large quantities of USD to start reducing their holdings of USD. (Reason being : They do not want their reserves, which are dominated in USD, to drop in value.) *Dumping of USD is not good, this is because, if the USD devalues too much, the USA will not have much spending power in the future!

On a side note, China have been selling quite some bit of its US treasury bonds, and has fallen behind Japan. Thus Japan is now the country with the larges holding of US treasury bonds of around US$768.8 billion as of Dec 2009, while China holds about US$755.4 billion.

2. Oil Industry

Presently, Singapore is the third largest oil trading hub, behind just New York and London. BUt there is still much intention to increasing the oil activities here.

For example Macquarie is going to start to conduct Asian oil trading in Singapore soon. It will be lead by industry veteran Steven Taylor, with a team of 6 men.

Also, the government is trying to increase Singapore's capability to be a strong force in the oil and gas industry.

The following was taken from The Straits Times:

SINGAPORE'S technical capability and skilled manpower have made it a strong player in the oil and gas industry despite lacking natural resources, but there is no room for complacency.

Mr S. Iswaran, Senior Minister of State, Ministry of Trade and Industry, and Ministry of Education, told an industry event last week that it was imperative the workforce here continues to meet the requirements of the industry.

He also pointed out that the era of finding 'easy oil' in areas close to the shore is over.

Exploration companies now venture into deeper waters offshore for oil and gas, creating rising demand for drill ships, floating production, storage and offloading (FPSO) vessels, as well as subsea equipment capable of withstanding the harsh underwater environment.

'Singapore is hence well-placed to benefit from this trend due to our global leadership in rig building and FPSO conversion, as well as in oil and gas equipment manufacturing and engineering,' said Mr Iswaran.

The minister was speaking at a joint symposium by the National Subsea Research Institute (NSRI) and the Centre for Offshore Research and Engineering (Core) last Friday.

3. Singapore property is on the rise again. And the government is trying to curb speculation by implementing stamp duty on sale of homes within a year of purchase, and decreasing the maximum loan amount to 80% of the house value from 90%.

Some interesting statistics of the Singapore housing market are as follow:
  • Jan 2010 has 3 times as many houses sold as compared to Dec 2009
  • Of this, 76% of the units were sold at more than $1,000 per square feet!
  • In 2009, 76% of all home deals are transacted by Singaporeans (no link to the above though)
  • In 2009, of all those homes transacted by PRs and foreigners, 27% are by Malaysians.
  • Price of mass market homes have increased to $610 per sq ft in Q4 2009, which is almost back to the peak price level in Q4 2007 ( so you can see that the recovery in the property is extremely fast! even faster than the stock market!)


Dou said...

Good post!!

Anyway i always wanted to join a oil rig companies and we have quite a no in Singapore.

ntuchartist said...

Hey thanks!

Haha, why not just try it out?

Actually I am going through different interviews in the oil sector. So I believe that they are actually still actively recruiting people.