Quoteworthy: "Lately US law enforcement has been busy hyping up the so-called China infiltration and espionage issues to the point of paranoia."
–— Wang Wenbin, China’s Foreign Ministry spokesperson, responding to news that Singaporean Dickson Yeo has been convicted in the US for spying for China.
Singapore employment suffers deepest quarterly contraction in June
Singapore’s labour market is reeling from the effects of the Covid-19 health-turned-economic crisis, as total employment plummeted by 121,800 in June — more than four times the 25,600 contraction registered in March.
The latest data marks Singapore’s largest quarterly contraction on record since the SARS pandemic which saw hiring dip by 24,000 in June 2003, according to preliminary numbers released by the Ministry of Manpower (MOM) on July 29.
Job losses were seen across manufacturing, services and construction. Within the services cluster, declines were sharp- est for food and beverage services, retail trade, arts, entertainment and recreation and education, following restrictions on their patronage during the “circuit breaker” measures and Phase One of Singapore’s re-opening.
Meanwhile, the construction sector was also deeply hit, following the stay home notices and quarantine orders imposed on migrant workers who account for a sizable percentage of the sector’s workforce. In comparison, employment contraction for the manufacturing sector was more modest, according to MOM.
Singapore’s seasonally-adjusted unemployment rate edged up to 2.9% in June, worse than the 2.4% it was at in March. Unemployment among both residents and citizens rose — with the jobless rate for residents inching to 3.9% from 3.3% in March.
Meanwhile, the citizen unemployment rate came in at 4.0% from the 3.5% it was at in March. Overall, there were 90,500 unemployed residents in June, of whom 79,600 or some 88% were citizens.
At this level, the jobless rate remains lower than previous recessionary peaks during the Global Financial Crisis (GFC) and SARS. At the height of the GFC in September 2009, the unemployment rate was 3.3% while the percentage of unemployment for both residents and citizens came in at 4.9%. The unemployment rate was higher at 4.8% during the SARS period in September 2003: Resident unemployment stood at 6.2% while that for citizens was 6.4%.
Aside from this, retrenchments for June hit 6,700, more than double the previous quarter’s 3,220. “While retrenchments have now surpassed the high during SARS (2Q2003: 5,510), it remained below the peak observed in the Global Financial Crisis (1Q2009: 12,760),” said MOM, cautioning that the soft labour market is likely to persist. — Amala Balakrishner
Najib sentenced to 12 years jail in 1MDB-linked trial
Malaysia’s former prime minister and current member of parliament (MP) for Pekan Najib Razak was sentenced to 12 years in jail on July 28.
He was also fined RM210 million ($68.1 million) after being found guilty by High Court judge Mohd Nazlan Mohd Ghazali in the first of five trials related to the 1Malaysia Development Berhad (1MDB) scandal.
On July 28, Najib was found guilty of one count of abuse of power, three counts of criminal breach of trust, and three counts of money laundering. The trial was centred on the transferring of RM42 million from 1MDB’s former subsidiary SRC International into Najib’s private accounts.
Najib, who was in office from 2009 to 2018, is maintaining that he is innocent of all charges, adding that he was misled by financial advisors including fugitive businessman Jho Low. “We believe in our innocence and we believe we have a strong case. But of course, we have to convince the judges,” he told reporters after the verdict.
He has also said that he would file appeals up to the Federal Court. Najib’s bail, originally set at RM1 million, was subsequently increased by another RM1 million. He was also ordered to report to the nearest police station twice a month.
Najib will remain an MP until the appeal process is completed. However, he will not be able to defend his seat if an election is called before his appeal succeeds, reports have indicated. — Felicia Tan
GIC reports annualised real return rate of 2.7% for 2020, warns of “pandemic unknowns”
Singapore’s sovereign wealth fund GIC has posted a lower 20- year annualised real rate of return of 2.7% for the year ended March 31 2020, down from 3.4% in the previous financial year.
This means that over the past 20 years, from April 2000 to March this year, GIC has achieved an average annual return of 2.7% — over and above the global inflation rate.
GIC CEO Lim Chow Kiat said the reduction was largely due to the dropping out of a very strong tech-bubble year return 21 years ago, rather than the recent market moves.
GIC maintains that the rolling 20-year real rate of return is the primary metric for evaluating its investment performance, as it represents the fund’s mandate to preserve and enhance the international purchasing power of the reserves under its management over the long term, so as to achieve good returns over global inflation.
GIC said Covid-19 was an unforeseen shock to the global economic system, which revealed and accentuated certain long- term vulnerabilities and trends.
Lim added that GIC positioned its portfolio defensively as it became “increasingly concerned with high valuations, weakening economic cycle fundamentals, limited room for policy flexibility and geopolitical tensions.”
He noted these conditions could have significantly and permanently impaired GIC’s portfolio. However, GIC had “preemptively de-risked by reducing our allocation to equities in favour of cash, and evaluating investment transactions with more caution.”
He also said the global health and economic outlook remains challenging, and GIC will continue to proactively seek opportunities that will generate good long-term risk-adjusted returns, as well as ensuring that the total GIC portfolio remains resilient to uncertain outcomes.
GIC elaborated that the proportion of developed and emerging market public equities in the GIC portfolio fell, while private asset allocation grew as a percentage of the portfolio. The share of bonds and cash rose as these lower risk assets benefited from the flight to safety.
As for the global investment outlook, Lim expects it to be more challenging due to “pandemic unknowns”, such as the possibility of subsequent waves of infection. Other problems also include fundamental issues such as poor productivity growth, weakened social compacts, high debt burden, and rising geopolitical tensions.
He points out that the pandemic has led the world into uncharted policymaking as governments turn to “unconventional policies of large magnitudes” to support their economies. With global interest rates at 140-year lows, growing political divides, and corporate and public debt levels set to climb even higher, it will be very difficult to calibrate or withdraw these massive stimulus measures as the economy recovers. This introduces policy risks for inflation and currencies that investors have not had to contend with in recent history.
Furthermore, the commitment of major countries to globalisation has diminished, which means governments could also tighten restrictions on foreign labour and capital to protect domestic interests. This is likely to hurt global productivity growth and be particularly detrimental to emerging markets that have historically relied on foreign investments and export-led growth.
Other trends Lim identified would be that industry consolidation will be catalysed as smaller companies fail to survive the Covid-19 crisis, while others will require additional funding, seek alliances or be acquired. Companies with strong balance sheets and the technological edge are likely to become bigger and stronger.
Amid this crisis, GIC is committed to maintaining a long- term perspective. “This means emphasising fundamental trends over market sentiments, value over price, and partnerships over transactions,” said Lim. – Lim Hui Jie