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Headliners | 15 May 2009
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By: David Lee
Articles (57) Profile

US To Resume Growth In 3Q09
The US economy is expected to begin growing in 2H09, while the jobless rate is expected to peak in 1Q10, according to a survey of top forecasters in the Blue Chip Economic Indicators newsletter for May. The May consensus expects economic growth to shrink 2.8% in 2009 but grow 1.9% in 2010.

The past month has provided fresh evidence that the economy is inching towards health, as the 4-week average of new jobless claims fell for the 4th straight weeks, the ISM’s index of activity in the manufacturing sector increased to a 7-month high in April and that of the service sector jumped to its highest level since October. Nearly 80% of the panellists believe total housing starts are at or near a bottom and residential investment is likely to subtract considerably less, if any, from GDP in 2Q09 and might conceivably begin to contribute slightly to growth by year’s end, the survey showed.

The consensus forecast put inflation-adjusted GDP growth in 3Q09 at a 0.5% annual rate compared with a month-earlier forecast of a 0.4% rise. Growth in 4Q09 is seen at 1.8% compared with a 1.6% rise forecast a month ago. Meanwhile, jobless rate is forecasted to peak at 10% in 1Q09.

Local Banks Surprise With Smaller-Than-Expected 1Q09 Profit Drops
Local banks – DBS Group, UOB and OCBC have all posted smaller-than-expected falls in their 1Q09 net profits, with a decent drop of 28% to $433m, 23% to $409m, 12% to $545m respectively, beating analysts’ forecasts across the board. Both UOB and OCBC made more loans at higher rates, as net interest margin rose to 2.41% and 2.42% respectively while DBS, which has seen its net interest margin falling to 1.99%, was boosted by trading gains which pushed its non-interest income segment higher by 76% to $269m.

All three banks made significantly higher provisions for bad debts compared to last year as more corporate loans in Asia are turning sour in view of the weakening Asian economies. DBS wrote down $414m, a rise from $140m a year earlier, UOB $378m from $89m and OCBC $197m from a writeback of $8m.

Both CEOs of UOB and OCBC shared the same pessimistic sentiment that the economic outlook remains difficult and uncertain, in contrast to DBS Chairman Koh Boon Hwee who is cautiously optimistic and thinks that ‘we have moved away from a systemic financial crisis’ and that ‘financial risk is significantly improved compared to over 6 months ago’.

Goldman Sees Singapore Home Prices Rising In 2010
Goldman Sachs has reversed its previous forecast of a 10% fall in 2010 in Singapore private home prices to a 5% gain, as ‘the recent pick-up of transaction volumes in the primary residential market is a harbinger of price stabilisation being just around the corner’, the US bank said. It expects the residential property sector to stabilise by end-2009, ahead of the office and retail sectors, which it sees stabilising around the end of next year.

Much of the price declines expected for 2009 for the average islandwide 99-year leasehold residential capital value have already taken place to date and Goldman sees price stability setting in by year-end. The 5% residential price increase projection for 2010 will be supported by expected healthy, above-consensus take-up activity that will gradually draw down on supply.

NOL Suffers Big On Poor Shipping Business
Neptune Orient Lines (NOL) posted a US$244.6m 1Q09 net loss as revenue tumbled by a third to US$1.54b as global trade flows and liner shipping volumes plunged while freight rates collapsed across all major trade lanes. The loss is in line with management’s guidance of about US$240m announced last month but is still a sharp turnaround from the US$120.7m net profit posted in 1Q08.

The company anticipates the adverse business operating conditions to continue and reiterates that it expects to post a significant full year loss. If the losses continue at the same pace, full-year losses could balloon to US$1b. The company has said to continue to focus on improving asset utilisation, yields and productivity.

DBS Group Hldgs  25.080 +0.08 +0.32%   
Business: [FY18 Total Income] Institutional banking (43.7%), consumer banking/wealth management (42.9%), treasury markets and others (13.4%).

Insight: Apr-19, 1Q19 net profit rose 9% to a record $1.7b.... Read More
Oversea-Chinese Banking Corp  10.800 +0.02 +0.19%   
Business: [FY18 Turnover] Global corporate/investment banking (35%), global consumer/private banking (34.8%), OCBC Wing Hang (11.5%), insurance (11%), global treasury & mkts (7.7%).

Insight: May-19, 1Q19 total income rose 14.7% driven by str... Read More
United Overseas Bank  26.140 +0.02 +0.08%   
Business: [FY18 Turnover] Group retail (43.3%), group wholesale (43.2%), global markets & investment management (5.1%), others (8.4%).

Insight: May-19, 1Q19 total income rose 7.8% to $2.4b due t... Read More

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