Singapore's safe haven image shattered: Analysts<\/p>\n
SINGAPORE (Reuters): A 340-point stock market plunge and a
\nseven-year low for its sagging currency this week has shattered
\nSingapore's reputation as a safe haven from Asia's financial
\nmaelstrom, analysts said yesterday.<\/p>\n
The stock and currency slide had been the most gradual in the
\nregion until this week, leading some to harbor hope that
\nSingapore would remain an island of relative calm the storm.<\/p>\n
But fears of exposure to debt-ravaged Indonesia and troubled
\nMalaysia sent Singapore markets tumbling back to 1991 levels,
\nshattering the illusion of their isolation from regional woes.<\/p>\n
"You can't be an island of tranquility in the whole thing when
\ncrises of this nature come. There was a lot of complacency in
\nSingapore when this thing hit, but Singapore is not an isolated
\nisland," Bruce Gale of the Political and Economic Risk
\nConsultancy (Perc), told Reuters.<\/p>\n
Fears of unrest in Indonesia, a poor response to Jakarta's
\nbudget and the rupiah's crash through the key psychological
\n10,000 to the U.S. dollar barrier this week combined to create a
\ncrisis of confidence in Singapore.<\/p>\n
Yesterday, Singapore's key stock index closed down 94.35
\npoints, or 7.43 percent, at 1,176.35. It started the week at
\n1,518.20. The Singapore dollar was trading at 1.7680 to the U.S.
\ndollar, some 3 percent down from its Monday opening of 1.72.<\/p>\n
"Singapore is not immune to the tribulations of its
\nneighbors. Indonesia is going through a period of extreme
\ndifficulty and that has an effect in Singapore," said P.K. Basu,
\nregional economist with UBS Securities.<\/p>\n
The effect was worsened by the lack of transparency in
\nSingapore's banking system, keeping markets guessing at exactly
\nits true exposure to bad and doubtful loans to its neighbors.<\/p>\n
"In matters of confidence, people look for weakness and they
\nfind it wherever they can. In Singapore the weakness is the
\nbanks' reluctance to tell anybody anything about their
\nexposures," Gale said.<\/p>\n
Singapore's support of Indonesia politically and economically
\nmeant it would suffer as long as Jakarta, said Daniel Lian, head
\nof Asian markets research at ANZ Investment Bank.<\/p>\n
"Singapore is being seen as the proxy to Indonesia," he said.
\nBut Singapore still had its strengths, Basu said.<\/p>\n
"Over the past 10 years it has built up substantial reserves,
\na budget surplus and has prudent financial policies. That has not
\nchanged," he said.<\/p>\n
With an annual current account surplus of some US$16 billion
\nand official reserves of US$118.5 billion as of October, 1997,
\nSingapore does not have the potential for the foreign debt and
\nbalance of payments problems at the heart of regional woes.<\/p>\n
"The Singapore dollar is strong on a trade weighted basis and
\nactually appreciated 3 percent in 1997. That has been forgotten
\nin the panic that we've seen in the past week in Singapore and
\naround the region throughout the crisis," Basu said.<\/p>\n
He said only tourism, real estate and financial services were
\nlikely to feel any significant hit, while electronics -- the key
\nsector -- business services and others would hold up well.<\/p>\n
"I don't think Singapore is doomed to be mired in recession
\nfor three years or more. I think 4 to 6 percent GDP growth is
\nachievable in 1998, and I think I'd be at the high end of that,"
\nBasu said.<\/p>\n
Singapore is in a good position to capitalize on the region's
\neconomic restructuring, but fears of further falls left potential
\ninvestors cold to the idea.<\/p>\n
"For those looking beyond the short term, now is the time to
\nbuy, but in a crisis nobody looks any further than the present
\nmoment," said Kaan Quan Hon, economist with DBS Securities.<\/p>\n
Gale said the opportunities for Singapore would be greater if
\nit pushed on with touted financial sector reforms.<\/p>\n
"Singapore's real challenge is how it is going to take
\nadvantage of Asia's changing business and economic structures and
\nnot worry in the short term that the Singapore dollar or the
\nstock market fell a little bit on one day," he said.<\/p>\n
"It has to look at the big picture and at the future.
\nSingapore has a historic opportunity to be the leading power in
\nSingapore's safe haven image shattered: Analyststhe region's finances."<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/singapores-safe-haven-image-shattered-analysts-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}