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7/23/2013
From irrational exuberance to irrational despair
The downgrading of local banks by Moody’s has elicited a strong rebuttal from MAS. MAS disagrees with the conclusion and offers a list of reasons to support its position. Our banks are financially sound with good asset backings and strong capital reserves. We also have strong regulations that are above what others are doing. The banks are regularly put under stress tests to ensure that they can hold their grounds when a financial crisis struck. So far the stress tests are showing good results.
As for the exposure to the high property prices and debt ratio, the Govt has implemented 8 measures to prevent a bubble forming. So there is no fear of a bubble bursting as there is no bubble at all. This part everyone must believe. All in, our banking and financial systems are rock solid. Would a huge pull out of funds affect our financial market? The answer is likely to be no even though the whole financial market is linked up to the whole world and when one market is affected the dominoe effect will bring the rest along.
I believe the arguments of the MAS are very sound and the people need not fear about what is going to happen to the world financial system and the contagion effect. But there is one possibility that we should not over look. A false and vicious domestic rumour may create a climate of irrational fear and lead to panic selling of assets. If that happens, it could be like a run on the banks and the result can be equally disastrous. The interconnectivity of today’s world has changed the dynamics of the financial markets. And the big funds and hedge funds will be there to do the damage and to profit from the stampede. We have seen how a single piece of news anywhere in the world can be used to push up the stock market or to crash a market.
Beware of the compounded effect of irrational fear, panic and the bull dozing of big funds to wreck the financial system irrespective of how solid it appears to be, or truly solid as a rock. Remember, we are just a little red dot in a stormy sea.
I think our financial system is OK.
ReplyDeleteBut I share the experts projections that the property prices will correct 20-30% once interest rates start to rise and people (especially investors) get into panic mode.
JUST LOOK THE HUGE NUMBER OF NEW HOMES/UNITS COMING UP IN COMING MONTHS.
ha ha ha !!!!!!!!!!!!
"...climate of irrational fear and lead to panic selling of assets."
ReplyDeleteRB
Very unlikely to happen lah.
As unlikely as WP announcing it is ready to be govt.
Maybe that exactly will happen when WP announce it is ready to be govt!
Hahahahaha.
The large numbers of unsold new units will cause people to panic ........... PANIC AND FIRE SALES!
ReplyDelete.......investors already experience difficulties in renting out their units even NOW! Look at Sat newspaper on rental of home... many many empty homes/flats finding tenants!
ha ha ha ......cheers....
I thot our banks very big and strong.
ReplyDeleteWhy they still cannot defend themselves against Moody?
Why they still have a subsidy mentality?
Why they still expect tax-payer funded MAS to defend them against Moody's?
Why is tax-payer funded MAS wasting our tax dollars defending profitable banks who are very big and strong?
Why didn't MAS work so quickly to speak out for the Mini-Bond investors?
Why MAS never say "Our banks are very big and strong. When they do business, they go in with their eyes wide opened"?
If you are a mini-bond investor, do you still think voting for PAP is in your best interest?
If you have just bought investment products from our banks, do you think PAP will protect you from the banks?
I will be a first time voter in GE 2016. Please let me have your thots. TQ
first, are u sure u get to vote. no walkover?
ReplyDeleteif u buy investment pdts, u hv to protect yourself.... wah! u want pap to protect u?
if u buy investment pdts, u hv to protect yourself.... wah! u want pap to protect u?
ReplyDeleteWhy pap-mas protect banks but why they never protect me?
....many many empty homes/flats finding tenants!
ReplyDeleteAnon July 23, 2013 9:14 am
That's because a lot of foreigners not yet come lah.
We have not reached 6.9 million population yet, have we?
Right, anyone who buys investment products must protect himself. But if you buy snake oils or toxic products or poisons that should not be sold in the first place, the authority that allows their sales must be responsible.
ReplyDelete/// The downgrading of local banks by Moody’s has elicited a strong rebuttal from MAS. ///
ReplyDeleterb, for a start you should get the fact right - there is no downgrading of local banks. All the local banks have maintained their credit ratings. It is only the OUTLOOK of the banking industry that has been down-graded.
"...the authority that allows their sales must be responsible."
ReplyDeleteRB July 23, 2013 10:12 am
But what if they are not responsible but still can get elected as govt?
Like that then how?
ReplyDeleteAnon 10.03, pls note:
I know, we want 6.9M or 10M population ................
But pls think about it. Will people be so stupid to come here if yr property prices stay high? Especially those/THE TYPES coming here.. they just cant afford.
DONT LISTEN TO SALES TALK!
MAS is warning about over leveraging, especially on housing.
ReplyDeleteSo in a way, the Authority is concerned.
'the authority that allows their sales must be responsible.'
ReplyDelete- Unfortunately they are morally bankrupted and thus will be financially bankrupted in near future. Anyway, the storm is coming. Moody is correct to issue a statement of warning. MAS does not need to worry if the statement is false.
'Govt has implemented 8 measures to prevent a bubble forming'
ReplyDelete- gov only introduced limited measures on properties but not the piece of paper called COE. Banks are also highly leveraged on that piece of hyper- inflated piece of paper. Debts are mainly built on bubbles.
If our bare basic home prices keep going up, you think people will come and settle here. 6.9M??
ReplyDeleteYou think they are stupid? They just cannot afford the high prices!