I am writing in response to the post by Lohcifer: http://therealsingapore.com/content/i-am-glad-i-chose-not-emigrate Firstly, he cowpeh cowbu about his relatives who have migrated for allegedly not saying anything about Lee Kuan Yew. Perhaps they are not so close afterall. Anyway, silence can be also a form of respect…
I did a fact check, SPH and Mediacorp did not report Temasek’s $552.5 million failed investment in A.B.C. Learning Limited, which was listed in ASX and liquidated by November 2008. Singaporeans never knew how big the news was in Australia back in 2008. I understand that this was only one of the many failed investments Temasek and GIC made overseas. Nobody knew how much was lost. Not until recently, nobody knew that most of our hard earned CPF retirement monies are utilized by these companies to make ultra-risky investments. If Singaporeans had known about this prior to the 2011 general elections, would the PAP have garnered 60% of the votes? I don’t think so. Don’t forget, the directors of Temasek and GIC are currently our elected ministers and their PAP cronies. How much better Singaporean’s life would be if the $552.5 million was invested in our childcare services industry.
How much of a fool Temasek was when they invested in ABC learning? By the way, it makes Singaporeans even more of a fool by Temasek when you realize the sheer stupidity involved in this investment. The following is a series of videos by CPA Australia telling us how ABC learning collapsed. The presenter mentioned our dear Temasek Holdings at 3:18min: https://www.youtube.com/watch?v=YYF6JW9vJKo&index=1&list=PL12C0ADD577F6B741
Prior to the collapse of ABC Learning, there were already significant financial indicators seriously impacting its going concern status in 2007 (News limited 2008). In 2007, its current liabilities amount to 1.1 billion, expected to be repaid within one year. Its aggressive acquisitions overseas were funded by debt and share issuance, which seriously affected its liquidity and financial position. The current ratio in 2007 was 26.9%, down from 180% in 2006. Its debt-to-equity ratio skyrocketed from 25% to 114% in 2007 (A.B.C Learning 2006; A.B.C Learning 2007). This meant that it had to generate massive profits quickly to stay in business. Its collapse can be largely attributed the high price paid for its acquisitions, the huge amount of debt it took on and could not withstand the global financial crisis as the price of debt rose sharply throughout 2007, forcing it to sell off 60% of its portfolio in April 2008 on the cheap. Hence, that seriously impeded its profitability, for which they failed to generate sufficient funds to meet its financial commitments (CPA Australia Limited 2014).
Despite that, Temasek bought 55 million new shares valued at AUD$401.5 million in May 2007. It controlled 12 per cent of ABC Learning. It even increased its stake just as the child care operator’s shares were plunging 42% while the founders and directors of ABC Learning dumped millions of shares. Founder Edmund/Eddy Groves and his wife sold virtually all of their stakes of 20 million and 6 million shares respectively while director Martin Kemp unloaded 2.7 million shares. The combined Groves’ stake represented 8 per cent of the company (Korporaal & Meade 2008). Behold, for unknown reasons, Temasek bought another 8 million shares at the price of $2.14 each in early 2008 as shown in panel B of figure 1 below (News limited 2008). That was right before ABC learning sold off 60% of its assets. The overall ownership increased to 15% and its total investment amounted to the SGD equivalent of $552.5 million.
Figure 1: Stock Prices of ABC Learning Centres Limited (Intelligent Investor)
Trading in ABC Learning shares was suspended in August 2008 after the company failed to release its earnings for the 2007-08 financial year. By November 2008, it went into receivership subsequently wind up completely by June 2010.
I am pondering very hard. Did Temasek do its homework diligently before investing in a Childcare centre? The warning signs were very obvious. Directors who knew a lot of inside information were dumping all their shares, thus removing their ownership and ‘responsibilities’ in the company.
Besides, how much potential can you expect from a childcare service provider? We didn’t have enough childcare centres and services in Singapore at that time. How much better it would be if that $552.5 million was spent on improving Singapore’s low birth rate and related childcare services industry. Was Temasek aware of the ABC learning’s inability to fulfil its massive debt obligations impacting its going concern status or was it hoodwinked by material misstatements which promulgated a bed of roses? In my opinion, Temasek was too greedy for a “bargain.” They don’t care one bit how risky that investment was and also not one bit of remorse for the massive losses incurred. By the way, its not their money.
Singaporean’s CPF are invested in unrated SGSs bonds where Temasek and GIC utilize them for investments. They are only obligated to pay you 2.5% interest, not returns from the investments. They bear zero responsibility for any principal losses. There is a saying, “If I win, I take the earnings, if I lose, that’s your problem.” Singaporeans, say good bye to your $552.5 million and more.
A.B.C. Learning 2006, A.B.C. Learning Centres Limited: Annual Report 2006, A.B.C. Learning Centres Limited.
A.B.C. Learning 2007, A.B.C. Learning Centres Limited: Annual Report 2007, A.B.C. Learning Centres Limited.
ABC News 2012, Auditor suspended over ABC Learning report. Available from: <http://www.abc.net.au/news/2012-08-08/auditor-suspended-over-abc-learning-report/4185408>
CPA Australia Limited 2014, ABC Learning collapse case study. Available from: < http://www.cpaaustralia.com.au/professional-resources/education/abc-learning-collapse-case-study> and < https://www.youtube.com/watch?v=a4rcGpRXD9I&list=PL12C0ADD577F6B741&index=6>
Intelligent Investor 2015, A.b.c. Learning Centres Limited: Overview. Available from: < https://www.intelligentinvestor.com.au/shares/company-overview/14639>
Korporaal G. and Meade K. 2008 “ABC Learning’s Eddy stripped of stake” The Australian. Retrieved 2008-03-09.
News Limited 2008, Finance: Sinagpore’s Temasek lifts its stake in ABC Learning. Available from: <http://www.news.com.au/finance/singapore-circles-abc-learning/story-e6frfm1i-1111115669634>
Recently, I watched a documentary online about the global financial crisis: https://www.youtube.com/watch?v=VQzEWeGJLP0
It not that I knew nothing about the global financial crisis in 2008, in fact, my first job as a “personal financial consultant” in a bank was met with so much regulations and customer distrust that I almost quit my job within months of joining. I had a lot to do and understand from the aftermath of a crisis. That’s how I started and once the crisis was forgotten, greed crept back in, in the form of property investments.
Fast forward to 2015, I am tasked to research on the factors which may create a financial crisis. East Asia was my target area. It was no surprise that I started my research on Singapore, only because my other group members are from HK, Taiwan and China. We each targeted our respective countries.
I shall not bore you down with theories and details of my research. Rather, I shall describe the situation in excerpts and in layman terms why the next financial crisis will happen in Singapore soon.
The government grants easy access and cheap credit to banks during the global financial crisis in 2008. These banks must find a way to profiteer from the liquidity flux. Therefore, they started to grant loans easily to consumers comprising of businesses and individuals. The economy was spurred to activity, jobs were created and GDP rose. Consumer demand rose as a result and rallied the retail property market. Consumers started to take advantage of the hike in housing demand due to an influx of foreign workers, to speculate prices. First movers benefited from the price speculation while the government reaped generous profits from land sales, stamp duties and other increased demand for essential and other services. Asset bubbles were created to unsustainable levels, prices and inflation skyrocketed. The government thus stepped in to regulate the market. Many individuals were stuck with gigantic loan obligations as they are unable to sell off their depreciating investments. They are faced with rising cost of borrowing and property taxes. The future is bleak. A huge correction is expected. Its impact will be devastating to Singaporeans. The crisis is unfolding as the meltdown occurs in phases. Whatever foundations we have built and/or achieved in the last 5 years will be extremely fragile, i.e. sitting on a thin ice. I believe the government is suppressing some indicators and bad news as well. Government linked companies which form the core economy may struggle or are currently struggling as demand shrunk and costs escalate. The situation will only get worse because it is apparent that no concrete measures are taken to alleviate the fundamental problems. A full-blown crisis is expected after the next general election when interest rates hit dangerous levels, i.e. 3 – 5%. The crux of the matter is how much the government is willing to do to help those who have lost their savings, jobs and houses? How much reserves are there to bail out the economy? There are no answers and guarantees to the above questions. I don’t wish for a nosedive.
How it happened?
Easy access to credit
Back in 2009 – 2011, banks were flushed with cheap credit, i.e. the SIBOR (Singapore Interbank Offered Rate) was very low. Top executives from local banks were bragging on their newfound ‘power.’ What they meant was that they could lend more money to consumers and earn more interest income and more. These consumers comprise of businesses such as property developers, companies seeking to do an IPO, and as well as individuals seeking loans to buy properties. By lending money to these consumers, they suddenly become ‘powerful’ or wealthy. Why? Their buying power increased.
Do note that the access to cheap credit was not limited to Singapore, many East Asian countries benefitted because in part, the US decided on various quantitative easing measures, offering cheap credit to bail out its economy. Inadvertently, some of these funds flowed into East Asia.
Attractive rental yields coupled with increased demand for housing
And so the vicious cycle started, individuals realized that rental yields minus costs were very attractive. For example, John purchased a $1 million 2 or 3-bedroom property (back in the mid-2000s to 2009) bordering the CBD. He realized he could rent it out at $5000 or more. A one bedroom condominium could easily fetch $4000 in the central regions. His monthly instalments were about $2,500 per month. And so he earned a passive income of $2,500 per month, $30,000 per annum plus gains in property values (i.e. 20-30%). Many tenants were high earning expatriates. In those times, the government opened its floodgates to foreign talents and there was a temporary lack of housing options as occupancy rates were very high. Many individuals amassed abnormal profits by taking advantage of the profit making scheme at the expense of tenants.
Soon, many people jumped on the chance to earn a passive income. New developments were sold out within days or even in a single day for some small developments. Developers began to launch more projects and price them high due to the insane demand while increasing their profit margins. Realizing the demand, URA decided to jump in the bandwagon by releasing more land for sale. Competitive bidding drove up land prices (good for URA) and eventually when projects were launched, prices went up higher than ever. In some cases, they command a premium (higher than prevailing prices) simply because buyers will get a brand new unit, with better facilities and more beautiful surroundings.
Point of exaggeration- Asset bubble
Initially, the prospect of earning a passive income through property investments was very good. Developers, investment holding companies, property agents, individuals and even the government were attempting to profit from the demand over supply phenomena. Entrepreneurs started to publish books on their ‘rags to riches’ experiences and ‘secrets’ on property investments, thus influencing the masses to buy properties themselves, either with them or through them. They were probably the first movers.
It was probably the 2nd movers who will be taking a hit soon. Property agents were bragging on their own forays at the property market and smoking out their customers by saying “Property prices are expected to go up, rental demand will be there, loans are cheap. You will profit from the purchase soon enough.”
Bankers and mortgage brokers on the other hand would claim, “Loans are cheap and will probably continue to be cheap. Look at the past rates, it has been low for quite some time from 2009 till now. We are not expecting a rate hike anytime soon.”
The overall signal was ‘buy, buy and buy!’ Those who didn’t buy stand to lose out because inflation was catching up with their cash deposits. Soon, buyers from Indonesia, China and Malaysia etc were flying in to make an investment. Why were they here? Properties in China, Indonesia, Malaysia etc were also going up, but the investments were not as attractive as what you get in Singapore. In China, most if not all properties are 70 years leasehold. Property prices in Indonesia were very volatile and prices had already increased three times just a few years ago. Singapore is land scarce, unlike other countries, its safe and secure, therefore a proposition not to be missed. In addition, it was also easy to obtain loans in Singapore. All you need to do was to show you have deposits > $100,000 in Singapore, or get your local banker to write a letter to the bank saying you have lots of money in your domicile country.
False hype and unscrupulous sales tactics
Then you have the false hype created by property agencies and developers. Property agents would persuade their clients to quickly put in their cheques just before the launch date because developers were giving generous pre-launch discounts, furniture vouchers etc and by the time the project was launched, most if not all units would be sold by then. Well… technically all units are sold during launch date. Property agents were explicitly told to communicate that message to the clients who didn’t buy, so as to drum up the next buying hype. Behold, after some time, clients would get a call from their agents again claiming that new units are available at phase 2 launch! In reality, developers who corroborated with the marketing agencies were artificially limiting supply i.e. 100 out of 300 units would be released during phase 1, another 100 in phase 2 etc. In some cases, the number of units released would depend on the number of bookings or cheques given. Marketing agencies such as Huttons also created the impression where most if not all bookings had to go through a hyped-up ‘ballot.’ A ballot occurs when 2 or more buyers had intentions to buy the same unit. Property agents (not buyers) would crowd the whole showroom and cheer loudly as a group when one of its agents won the bid (for his buyer). They cheer because the agent earned his commission while the group leader earned his overriding commission, other agents were giving support. Customers watching outside would think there was really a high demand. That happened even when there was no demand or when there was only 1 booking. Why? That’s because when the bidder (customer) wins his bid, he thinks he is lucky and that there is competition. He is likely to keep his end of the bargain by signing the sales and purchase agreement later. That’s insider information. These agencies are very smart by not getting their hands dirty on their unscrupulous sales tactics. I don’t think there are any documents depicting their sales tactics available. The top executives are very secretive about it. I hope some whistle-blower could review more details on it.
Cushioning a potential meltdown
When I resigned from the bank, I had anticipated that many individuals will get their hands burnt. They would soon realise that rental yields are not a guarantee. Now, there is an oversupply of housing and demand curbed by the government. Loans for investment properties were limited to 60% and below, purchase by speculators, foreigners and locals as well were curbed by additional buyer’s and seller’s stamp duties. The government calls them ‘cooling’ measures. Why is the government doing this?
- Political implications – First-time buyers are feeling the pinch while commercial tenants are passing down their high rents in their goods and services sold to customers. Both groups form the bulk of the citizen core. Many citizens, especially the younger generation are already affected by the high prices and their life plans delayed because of that.
- Protecting their assets – Most of us would have known the first point. However, if you read between the lines, you may realize something else. Most of the essential services (Government linked companies) and assets are now privatized, which started during the 1990s. The question is who now owns them? The government would definitely care more for these privatised assets and services. It because these services cannot fail, as individuals in the government have vested interests in them (as directors and shareholders). Directly and indirectly, they are impacted by the resultant asset bubbles. Perhaps they have already reaped enough profits and pulled out before the rest who are not linked to them.
The second point argument is weak because the situation described is to macro in scale and difficult to grasp. Let me put it in this way, in a casino, the house always win, eventually. Who started the easy access to credit? Who is the first seller? Who made and changed the rules? Who has the largest market share? The answer is: The government and their cronies, the richest in Singapore.
Who are the losers? (other than the first movers)
- Consumers – tenants are passing their high rents to their customers. i.e. Petrol prices are not coming down as much as expected. Prices of products, food and groceries are going up and up. Inflation still have some time to settle.
- Individuals including first time buyers are facing a depreciation of their assets they paid so much for during the asset bubble.
- Individuals who invested too much in properties are now facing a rapid contraction in their asset values and facing an increased cost of borrowing including increased property taxes. Many who could not service their loans had their properties foreclosed by the banks. Those who bought when the seller’s stamp duties were imposed had to pay a hefty price to the government for disposing its investment. (Winner: Government)
- Misinformed individuals – They were coaxed to join in the bandwagon and now they are stuck in the investment with little or no rental income, depreciating values, unable to sell and increased costs of borrowing and taxes. (Winner: Banks linked with the government)
- Private developers – Developers are holding a lot of unsold units and undeveloped land. Some may have overpaid for the piece of land sold to them. There are rules stipulating when a certain project has to be completed and sold. A lot of them are expected to be completed in 2015 thereafter. What’s going to happen if they can’t sell off and breakeven? Are we going to witness a bankruptcy soon? Perhaps, the rich government linked companies may acquire them and bail out the development.
- Employees employed in this industry – Property agents becoming taxi drivers or insurance agents. Loan brokers, specialists and conveyance lawyers etc. may find themselves out of business and work soon.
Will a financial crisis take place in Singapore? Actually the process has already begun. News media are selective in their indicators and suppressive in aggravated information. But, it isn’t a crisis yet. Demand may return if the government retract its demand curb but will again suffer in votes. Bank lending rates are not at unsustainable levels yet. The question is, how much reserves are available when the crisis happens and how much the government is willing to do to help those who have lost their savings, jobs and houses? My take is that, a full blown crisis will occur right after the next election by 2016.
On a side note, don’t expect the PAP to call a general election in 2015. I am sure they know how unpopular they are now. It will be stupid to call for one so soon because they know they are bound to lose more seats. Perhaps they do it in 2017 when they suck you dry and give you some hong bao money they took from you. However, the only time they will call one is when LKY is about to die or announced dead. You will have plenty of advertisements promoting the good things he did and sympathy for LHL and the PAP.
As I read the news from independent and social media, as well as the “mainstream” media, I’ve realized the disconnection between citizens and the government is getting wider. I subscribe to both media such that I get views from both perspectives. Here are some trends I’ve noticed:
1. “Mainstream” media says Singaporeans are bullies while Social media says Singaporeans are the victims. i.e. Many MPs and their supporters calling Singaporeans bullies and xenophobic while social media exposes FT bullies and Singaporean victims. Recently, “Mainstream” media has been trying to cover their tracks by not publishing the nationalities of those behaving badly while actively exposing Singaporeans on their news.
2. Social media exposes problems due to negligence while “Mainstream” media blames it on the people.
3. “Mainstream” media never report on the losses Temasek Holdings and GIC make while social media actively promotes accountability, transparency on our CPF monies invested in these private entities.
4. “Mainstream” media always talk down to Singaporeans. I.e. Citizens complain too much, low productivity, Singaporeans should be grateful for what they already have and young Singaporeans are the noisy trouble makers.
5. 2 opposite views on the cost of living – Independent and international news claim Singapore is the costliest city in the world. “Mainstream” media rebutted with multiple news articles on why Singapore is not expensive.
6. “The government cares for you” – “Mainstream” media blare it so loud on TV and on the headlines. They won’t need to do this if they really cared. Action speaks louder than words. I’m still hoping show more care during policy making and enforcement.
7. Opposing views on the foreign talent issue – Social media shows all the bullying and ugly deeds from rouge foreign talents. I.e. Job displacement, discrimination, bad behaviours and attacks. “Mainstream” media plays them down and blames Singaporeans for being intolerant, spoiled and xenophobic.
8. The Job issue – “Mainstream” media says Singaporeans aren’t qualified or don’t want to work in these “low” level jobs, thus require foreigners to take them on. Employers harping on the lack of qualified people or lack of Singaporeans applying for the job. Meanwhile, social media says employers are offering peanuts (meagre) salaries, FT HRs excludes Singaporeans’ cv, displaced PMETs becoming taxi-drivers, age discriminated and retrenched, pregnant and fired for biased work appraisals… the list continues.
9. Singaporeans are under-happy or unhappy – Many or if not most citizens don’t have much avenue to voice out their opinions and frustrations, so they become the ‘minority angry netizens’ as the “Mainstream” media puts it. If that’s true, then social media should be renamed ‘minority media’ not very social indeed.
10. “Mainstream” media is Pro-PAP while social media is pro-opposition – Everyone knows about the propaganda Singaporeans have been listening to. Recently, we have seen a lot of Pro-PAP Facebook pages and websites trying their hardest to gain social media market share. You have the FLOP and FPAP who are hard-core PAP supporters. Some of them masks themselves as sites promoting SG50, while some put up politically neutral news to attract readers etc. Sometimes, they subtly promote and support the government. I reckon when the next general election comes, you will see them morph to a hard-core PAP supporter. Many independent social media are being held hostage with a performance bond on the type of news they publish. I am glad that there are still some websites who have escaped such ruling, not because I’m pro-opposition, but because we know “Mainstream” media has been unreliable throughout.
11. The Workers Party Farce – “Mainstream” media plus PAP MPs complain too much too shamelessly about the problems they created for them. I.e. holding a trade fair without a permit, even if the trade fair is good for residents. Social media actively rebuts “Mainstream” media but “Mainstream” media calls social media fabricating lies without justifying any of the so called ‘lies’.
Even though I’m residing overseas, I still can feel the pain and frustrations Singaporeans are currently facing. The reason I still care about Singapore is because my parents, relatives and siblings are still living there. My mum keeps complaining that she can’t retire peacefully, dad complaining about the rising cost of living, while my siblings and relatives work overtime every day and have no time for romance. If these trends continue and the government refuses to change, no good will come out of it. Singapore will be doomed.
“Mainstream” media refers to news reporting agencies owned and controlled by the government such as Singapore Press Holdings and Mediacorp. Singapore is ranked 150th out of 180 countries in the 2014 Reporters Without Borders press freedom index, down one place from 2013. See: http://rsf.org/index2014/en-index2014.php and http://en.rsf.org/singapore-government-subjects-news-websites-30-05-2013,44689.html
Even though I have voiced out, or complained, its pain that I am communicating. The pain of all Singaporeans oppressed. I don’t wish for a revolution with bloodshed. I hope to see a change in peace… no matter how unlikely its going to be.
I have read a meaningful quote recently and I feel it applies to us all:
Love your wife, children and family like how your parents loved you unconditionally. We have to do good, be good and create happiness for the people around us. Work hard not only for the money, work hard for happiness. Removing negativity from the mind is the biggest challenge of all because pain and suffering always exist.
Human nature is imperfect, that’s nature. So, live your life to the fullest with all honesty and perseverance. Make a contribution, with a conscious effort. Seek no monetary reward for they are nothing better than the reward of happiness.
However, the dilemma is always there: money and greed; money and happiness; survival. Survival is pain… do it gracefully.
When you feel that “the world is rapidly changing,” societies that define us are actually converging as we speak. We will be living in a country with a homogeneous global culture soon enough. Existing traditions and social norms that are incompatible with the new world order will be phased out or eliminated. These changes are spearheaded by us through the efficient distribution of information via the internet. Have you ever wondered what will happen to our future generations? Our current socio-economic structure is crumbling: There are lots of imbalances, lots of uneven grounds. Look at the amount of debt owed by everyone and every country, it has accumulated to $54,596,000,000,000 ($54 trillion). Source: http://www.economist.com/content/global_debt_clock
Besides, things are getting more expansive isn’t it? Property, cars, food, everything. Inflation is uncontrollable and inevitable. Your money is depreciating and believe me, its inversely proportional to the amount of debt we owe. You might not believe me because your government is trying its best to convince you otherwise by saying “We are trying our best to regulate inflation.” Read between the lines.
Capitalism is now the problem. It has been the problem since the United States dollar became a reserve currency. It was a temporary solution to begin with. Most governments are addicted to money. Money is synonymous with power. Many governments are afraid to cede control and thus power. Why? Without power, they will eventually cease to exist.
I believe oppression of the masses by these governments will eventually lead to their downfall unless they themselves evolve.