How falling euro can affect Singapore

A2
TOP OF THE NEWS
WEDNESDAY, JANUARY 7, 2015
UOB sues Lippo Group
subsidiary and 7 others
COURT CORRESPONDENT
UNITED Overseas Bank (UOB)
has launched a $181-million suit
against a subsidiary of Indonesia’s
Lippo Group and seven individuals, claiming they conspired to get
inflated housing loans.
The loans were for the purchases of 38 condominium units at the
high-end Marina Collection in
Sentosa – developed by Lippo Marina Collection (LMC). Launched
for sale in 2007, each apartment
at the 124-unit development costs
an average of $6 million.
UOB, in its statement of claim,
alleges that while the development enjoyed “fairly strong” sales
at the start, property cooling measures in 2009 and the additional
buyers’ stamp duty introduced in
2011 saw interest dip. From late
2011 to July 2013, UOB was approached to provide housing loans
for the purchase of 38 units. Of
these, 37 have defaulted.
The bank alleges that LMC and
the other defendants failed to inform it of “very substantial” discounts of between 22 per cent and
34 per cent given to the buyers.
That meant the buyers paid a lot
less for the units than what was indicated on the loan forms.
The loans were therefore not
just in breach of Monetary Authority of Singapore rules, but were
even in excess of what the buyers
actually had to pay for the
99-year leasehold units.
UOB says it gave out the loans
after Lippo’s lawyers confirmed
that the buyers had paid the remainder of the purchase price –
but this was untrue. The remainder was instead set off against discounts or “furniture rebates”.
In addition, UOB alleges that
many buyers were fronts and did
not have the financial means to
service the housing loans. Instead, the real buyers were five
people who had links with the two
property agents involved in the alleged scam – ERA housing agent
Goh Buck Lim and freelance housing agent Aurellia Adrianus Ho.
UOB alleges that sums ranging
from $200,000 to $1.2 million
were transferred between bank accounts of the “buyers” and several defendants. This was to give
the bank the impression that whoever was applying for a loan had
at least $200,000 in their UOB accounts – one of the criteria for the
loan to be granted.
According to UOB, one of the
so-called buyers admitted being
paid $100,000 to act as a proxy.
LMC denies being part of any
conspiracy to cause loss to UOB
and will vigorously defend the
claims made against it. In its de-
By MARISSA LEE
THE euro plunged to a nine-year
low against the greenback on
Monday, on the back of political
instability in Greece, deflationary
fears and the continued fall in oil
prices. The currency hit
US$1.1869 on Monday, before recovering to US$1.1913 late yesterday. Go back a year, and it was
US$1.3724.
There is a similar tale unfolding with the Singapore currency.
A year ago, €1 could buy
S$1.73. That fell to $1.69 six
months ago, $1.60 last week and
about $1.59 yesterday. To put it
another away: That €80-a-night
hotel room in Paris that would
have cost you $138 a year ago
would now cost you $127. This
trend will cheer any Singaporean
visiting Europe this year, but the
economy here is linked to the euro
zone in more ways than one.
The European Union (EU) is
Singapore’s second largest trading
partner after China, accounting
for 11 per cent of the global trade
last year. It was also the largest
contributor of foreign direct investment (FDI) in 2012, accounting for
UOB alleges LMC and other defendants failed to inform it of “very substantial”
discounts given to buyers of units at Marina Collection in Sentosa. PHOTO: LIPPO
fence, LMC says the loans were a
matter solely between the buyers
and UOB, and that it had no knowledge of any alleged misrepresentation of the purchase price. It added that the bank should have done
its own independent checks.
The developer also said it dealt
with the buyers only through Mr
Goh. It was the agent who asked if
LMC could give a discount in the
form of furniture rebates.
LMC agreed to give rebates of
between 25 per cent and 34 per
cent to promote the sale of units,
adding that this was a “fairly common sales and marketing strategy”.
The bank is represented by Tan
Kok Quan Partnership and LMC
by Premier Law. The other defendants are defended by Straits Law.
elena@sph.com.sg
A DOCTOR has been fined
$5,000 and reprimanded for
breaching ethical guidelines that
bar physicians from noting their
medical qualifications in their
non-medical businesses.
The case – believed to be the
first of its kind here – centres on a
company called Avenza that sells
weight-loss supplement Reduze.
It is regarded as a non-medical
product and is not licensed by the
Health Sciences Authority.
Dr Tan Yew Weng called himself the firm’s medical director in
an advertisement for Reduze, and
said he was impressed by results
of clinical studies on the product.
But Dr Tan, 43, who runs David Tan Medical Aesthetics in Orchard Road, was Avenza’s director, not medical director, according to Accounting and Corporate
Regulatory Authority records.
Singapore Medical Council
(SMC) rules bar doctors from referring to their qualifications and
services in their non-medical
businesses. The rule is meant to
prevent the public from being misled into thinking that a non-medical product is medically beneficial or endorsed by a doctor.
A three-member SMC disciplinary tribunal said in its grounds
of decision yesterday that Dr Tan
had not referred to his academic
qualifications and the details of
his clinic in the ad for Reduze.
But it said his decision to call
himself Avenza’s “medical director” in the ad was calculated to
leverage his professional qualification as a medical practitioner.
It added: “We are of the view
How falling
euro can
affect S’pore
almost $190 billion, or 26 per cent,
of FDI in 2012, according to the
Ministry of Trade and Industry.
Economists see three ways a falling euro could affect Singapore:
L Limited impact on exports
A weaker euro could hurt
Singapore’s export competitiveness, but CIMB economist Song
Seng Wun said the currency’s
weakness “has been clear for
some time now, and most businesses would have hedged their
positions”. Moreover, most firms
have their goods priced in US dollars rather than euros, he added.
OCBC economist Selena Ling
noted that Singapore’s non-oil domestic exports to the EU were in
negative growth territory last
year: “It is just a matter of adjusting expectations lower – (exports)
were not high to start with.”
L Weaker euro will help euro zone
economies in the long run, and
Singapore will benefit
Bank of America Merrill Lynch
economist Chua Hak Bin sees benefits in the sliding euro: “A lot of
people have been suggesting that
the euro should be weaker to help
revive the euro zone economy, so
this readjustment to a stronger
US dollar is consistent with their
divergent growth paths.”
Economists also observed that
the European Central Bank is now
more prepared to embark on quantitative easing in the form of massive bond buying to lower borrowing costs, which would help the euro zone’s growth and, with it, its
trading partners like Singapore.
L Plunging euro signals fear and
uncertainty over global economy
The euro’s slide is creating unease
about whether the region is on the
verge of a new economic and financial crisis. As Mr Song points
out, the euro did not fall in a vacuum and signals broader shifts in
the world economy.
The key Singapore Interbank
Offered Rate and the Swap Offer
Rate have spiked in recent months
on expectations of a US interest
rate hike and stronger greenback.
Mr Song noted: “All this links
to a single thing – fear for the global economy outside of the US,
and a preference for US dollar assets. The moving around of assets
will create a lot more volatility.”
marilee@sph.com.sg
L SEE OPINION A22
Mortgage payment hike likely as key rate rises
Doc fined for alluding to medical qualifications in ad
By FENG ZENGKUN
A3
Economists believe the plunging euro will have only limited impact on Singapore’s exports,
while major benefits are possible once the currency correction starts to lift European economies
Bank alleges in $181m suit that they
conspired to get inflated home loans
By ELENA CHONG
TOP OF THE NEWS
WEDNESDAY, JANUARY 7, 2015
that (Dr Tan) took a pre-meditated and calculated move to draw
attention to the fact that he was a
medical practitioner... There was
clearly an intention to use his
medical qualification to benefit
himself by swaying potential consumers to purchase the product.”
In deciding Dr Tan’s punishment, it looked at previous cases,
including one in which a doctor
used an ad to mislead people into
thinking a therapy centre was a licensed medical clinic.
It also noted that it was Dr
Tan’s first offence in about 16
years of medical practice, and accepted he had been relatively new
to the non-medical product business when the ad was published.
Dr Tan told The Straits Times
the guidelines are “not entirely
clear-cut and well-defined, and
subject to broad interpretations”. He said there should be a
faster way for the SMC to resolve
such issues. If it had contacted
him soon after the ad was published in 2010, he said, he would
have quickly rectified the problem, avoiding the legal process.
zengkun@sph.com.sg
OUT AND ABOUT IN TOWN...
THEN THE RAIN CAME DOWN
Pedestrians across Singapore were caught
unprepared in the sudden downpour yesterday
afternoon.
Many areas, including neighbourhoods in the
north and central parts of the island, such as this
stretch of Upper Cross Street, experienced
thundery showers between 4pm and 5pm.
Based on the three-day outlook by the
National Environment Agency’s Meteorological
Services, thundery showers are again expected
this afternoon, and in the mornings over the next
two days.
Singapore is in the midst of the north-east
monsoon. ST PHOTO: LIM SIN THAI
By MOK FEI FEI
HOME owners face the prospect
of bigger mortgage payments, as a
benchmark interest rate continues
its relentless rise.
Many home loans here are
pegged to the three-month Singapore Interbank Offered Rate (Sibor), which rose 7.4 per cent yesterday to 0.62052 per cent, a level
not seen since April 2010.
The rise in Sibor followed
Monday’s 26.3 per cent jump to
0.57762 per cent from last
Friday’s 0.45738 per cent.
Rates have taken a sudden upturn this week, though they have
been climbing since August as the
US dollar gained value. Sibor
stayed near 0.4 per cent from last
January till August. At the end of
August, it crept up to around the
0.41 per cent to 0.42 per cent level, before picking up speed last
month to hit the 0.44 per cent to
0.45 per cent mark, after the US
Federal Reserve’s policy statement.
The Fed said last month that it
would be patient in keeping monetary policy loose, though interest
rate hikes would come eventually.
Another factor putting pressure on Sibor is that the Singdollar has been declining against the
greenback, falling to 1.3217 last
month.
Bank of America Merrill Lynch
economist Chua Hak Bin said the
“very sharp rise” in Sibor could be
driven by factors such as an expected hike in the Fed funds rate,
which is closely linked to Sibor. Also, since the start of this year, lo-
cal banks have had to set aside
more funds as a buffer, under the
Basel III global banking rules.
Sibor, the rate at which financial institutions borrow from one
another, could rise further.
Bank of America Merrill Lynch
forecasts that the three-month Sibor will reach 0.7 per cent by the
end of the year; Citi predicts it to
be 0.8 per cent, while United
Overseas Bank has it at 1 per cent.
“While an increase of 30 to 40
basis points is still manageable, it
is a warning sign that households
should be prepared for higher
rates,” said Dr Chua.
Mr Alfred Chia, chief executive
of financial advisory firm SingCapital, which specialises in mortgage
refinancing, said about 60 per
cent of his clients are on floating
mortgage rates; these are mostly
pegged to Sibor, with a premium
tacked on by banks.
Based on industry estimates of
a premium of around 0.9 per cent
for the first year, a 30-year
$500,000 loan would see the
monthly instalment rise $52.51 to
$1,730.53, with Sibor up from 0.4
per cent to 0.62052 per cent.
“I don’t think we have reached
any panic level yet as those on
floating rates are still seeing Sibor
below 1 per cent, but this is a good
time to relook options on refinancing,” said Mr Chia.
New home owner Huang Sijia,
26, who took out a Sibor floating
loan last year, is sticking to her
package for now. “I am not too
worried because the interest rates
have been quite stable for the past
three years,” said the consultant.
feimok@sph.com.sg