Geithner calms Chinese fears - for now

Business Times - 03 Jun 2009

TIMOTHY Geithner's maiden visit to China as US treasury secretary appears to have, for now, calmed some of the fears surrounding one of the world's most important bilateral economic relationships. However, the Obama administration will have to be seen to deliver on some of Mr Geithner's ambitious-sounding promises.

On the eve of his visit to Beijing, the US treasury secretary was faced with a delicate challenge. During his confirmation hearings in January, he had labelled China a 'currency manipulator', which had riled the Chinese establishment. Subsequently, as the US financial crisis deepened, Chinese Premier Wen Jiabao openly voiced concerns about the vulnerability of the US dollar in which the bulk of China's reserves are denominated, and hinted at the need for an alternative reserve currency.

Mr Geithner's priority was clearly to reassure the Chinese that the US dollar would remain a safe bet and that China had no cause to worry about its holdings of US Treasuries, amounting to US$768 billion as at the end of March.

But at the same time, he had to get the message across that China, too, has its part to play: it needs to make its currency more flexible and shift its economy away from export-led to domestic demand-led growth, to both help reduce its oversized trade surplus and to augment global reflation.

While in Beijing, Mr Geithner said all the right things: the US is committed to a 'strong dollar', China's investments in US financial assets are very safe, and the Obama administration is committed to reducing the US fiscal deficit over the medium term to a sustainable level. He also reiterated - more diplomatically than during his confirmation hearings - the US desire for a more flexible (read 'stronger') yuan and the need for Beijing to boost domestic demand.

But the promises will have to be backed up with meaningful action. Mr Geithner suggested, for instance, that the US aims to bring its fiscal deficit down to 'roughly 3 per cent' of GDP over the medium term, from close to 13 per cent at present. There are no credible policies in place to achieve this; much would depend on how the Obama administration proceeds with tax and spending measures, and particularly, healthcare reform, in the months to come.

Absent effective fiscal policies, the dollar, as well as US Treasury yields, would remain vulnerable. For its part, China, while professing to keep the yuan 'stable', did not oblige with any promises to appreciate its currency. And while it has put in place an aggressive economic stimulus package, the extent to which this will boost domestic consumption (as opposed to investment) demand remains to be seen.

Thus while the rhetoric on the US-China economic relationship might have helped calm nerves following Mr Geithner's visit to Beijing, what matters will be delivery on promises made - and the markets will be watching.

Singapore shows the way

Business Times - 03 Jun 2009

It is one of the most impressive examples of a smarter city that IBM has seen to-date

By TERESA LIM

IN WHAT many are calling the worst of times, let me offer a different perspective. I believe that the current economic crisis represents a once-in-a-lifetime opportunity to transform our current world, to build more intelligent cities, infrastructures and systems that will not just repair, but prepare our economy for the 21st century.

Consider this. In 1900, only 13 per cent of the world's population lived in cities. By 2050, that number will be 75 per cent. We are adding the equivalent of seven New Yorks to the planet every year.

While this unprecedented urbanisation is both an emblem of our economic and societal progress, it is stressing the planet's infrastructure with challenges including traffic congestion, water and waste management, sanitation, food and nutrition security.

We therefore need to start building a smarter world - one city at a time. The process has already begun. Intelligence is being infused into the way our cities work.

Malta, Germany and Denmark are applying smart meters and instrumentation to make the power grid more stable, adaptable and less costly. Masdar City, being built from scratch near Abu Dhabi, will be the world's first economically and environmentally sustainable city, with zero carbon emissions.

Asian countries are going through an even faster urbanisation frenzy. And its emerging nations are struggling with the resulting strain on their crumbling infrastructures.

Singapore is at the nexus of these changes. Singapore is one of the most impressive examples of a smarter city that IBM has seen to-date. It is transforming a world-class infrastructure managed by world-class professionals into a smarter city powered by the world's most advanced technologies.

By identifying the right opportunities and targeting investments in smarter systems, the government and businesses can drive the next wave of economic growth, while making life in Singapore better for all its citizens.

Singapore's recent stimulus package was clearly designed to fully exploit the potential of the future - rightly focused on investing in training to make its people more competitive, and creating more intelligent systems for transport and water management, and a more integrated health infrastructure.

Sam Palmisano, IBM chairman, president and chief executive officer, defines a smarter city as one with economic, technological and social systems that are sustainable, and are truly systems that come together to make the community more productive, more efficient, safer, more vibrant and more responsive to opportunities.

In our view, Singapore is doing many things right in becoming a smarter city. The Republic's systems currently come together efficiently and effectively for its residents and businesses.

These are some proof points:

Smarter transport: Cities in Sweden, Australia and England are using smarter transport systems to reduce both congestion and pollution. Stockholm has introduced a dynamic toll system that has reduced traffic by 20 per cent, decreased wait time by 25 per cent and cut emissions by 12 per cent.

Locally, we partnered with the Land Transport Authority (LTA) to build smarter transport systems to address traffic management challenges. We leveraged our research asset, the Traffic Prediction Tool, providing LTA with the ability to predict traffic flow up to 60 minutes into the future with an accuracy of about 85 per cent. Another collaboration is the LTA Green IT initiative where LTA achieved savings of at least 20 per cent in energy consumption for its IT environment.

Last November, LTA and IBM embarked on an initiative aimed at promoting Singapore as a centre for research for world-class urban transport solutions.

Smarter healthcare: Technology alone will not solve all the problems in healthcare, but we believe that they provide the building blocks for creating more integrated, more intelligent healthcare systems.

Smarter healthcare means integrating data and centring it on the patient, so patients 'own' their information and have access to a networked team of collaborative care. It means moving away from paper records, reducing medical errors and improving efficiencies. And it means applying advanced analytics to vast amounts of data, to improve outcomes.

Singapore continues to lead the region in healthcare with significant investment in healthcare infrastructure, including funds to develop a national electronic health records system, based on the principle of 'one citizen, one health record', accessible by all hospitals and polyclinics.

This is a bold and far-reaching move that will deliver smarter, more effective healthcare to its residents, especially those who need care from a variety of healthcare providers. This is an important first step towards the creation of an integrated intelligent healthcare system - linking diagnosis, drug discovery and healthcare providers to insurers, employers, patients and communities.

Smarter water: The theme at the inaugural Singapore International Water Week 2007 was 'Sustainable Water Solutions for Cities' with good reason. In Asia, 700 million people do not have access to safe drinking water. But Singapore already has in place a resilient infrastructure that delivers safe drinking water to every resident on tap, and a strategy that will provide adequate supply for both its residents and industrial needs.

Singapore's water management efforts have been widely recognised on the global water stage. Its Deep Tunnel Sewerage System (DTSS), a superhighway for used water management, was recently crowned the 'Water Project of the Year' at the prestigious Global Water Awards 2009 in Zurich, Switzerland. PUB Singapore was also honoured with the prestigious 2007 Stockholm Industry Water Award for its holistic approach to water resources management.

Singapore is clearly well positioned to seize the opportunities to lead in this area. This is precisely why we chose Singapore to be one of six worldwide locations to hold IBM's Global Innovation Outlook (GIO), specifically on oceans and water management. We brought together private and public sector, academic and commercial participants from 12 countries last October, to brainstorm on sustaining the world's water systems.

Another GIO will be held in Singapore this July, focusing on Smarter Cities - building intelligence into systems and processes that enable people to work, recreate and govern themselves.

Smarter people: Today's global economy is a giant service system, comprising billions of people, millions of businesses, and millions of technology products. In Singapore, the services industry accounted for 68 per cent of its 2008 GDP, and continues to grow.

We know that the service-oriented world calls for a new breed of workers of the 21st century. Our vision is to develop T-shaped professionals with deep proficiency in one area - engineering for instance - and a breadth of multi-disciplinary skills that will enable them to collaborate productively and fuel the growth of our services economy.

This new field is called Service Science, Management and Engineering (SSME). IBM worked with Singapore's top universities resulting in Nanyang Technological University, the National University of Singapore, Singapore Management University and the Institute of Systems Science introducing SSME into their curricula.

Partnering the Infocomm Development Authority of Singapore, we rallied leading industry partners to jointly sponsor the National Infocomm Scholarship, which supports students to pursue infocomm and SSME-related degrees.

Smarter cities are the result of years of planning and execution by a strong government with a single- minded focus on citizen welfare and business growth, coupled with the passion and responsible behaviour of a people with a thirst for innovation.

Singapore clearly possesses the blueprints of a smarter city, and more importantly, the opportunity to level the playing field and create economic value and vitality for its nation and a better quality of life for its population.

The Republic has achieved incredible economic success while maintaining social harmony in less than a generation's lifetime. Today, it is timely for Singapore to seize the global stage as here lives and breathes a smarter city model that many others in Asia and the rest of the world can follow.

The writer is managing director, IBM Singapore

Geithner reassures China on US$ holdings

Business Times - 03 Jun 2009

Washington committed to keeping dollar strong and inflation low, he says

(BEIJING) Chinese officials are giving US efforts to pump up its ailing economy a vote of confidence and understand why higher budget deficits are a temporary necessity, US Treasury Secretary Timothy Geithner said here yesterday.

Mr Geithner, on his first visit to China as Treasury chief, gave fresh assurances that Beijing can sleep easy over its huge holdings of US Treasury debt because Washington is committed to keeping the dollar strong and inflation low.

President Barack Obama's administration, moreover, is determined to get back to living within its means as soon as the crisis has passed, Mr Geithner said in a trio of interviews ahead of meetings with President Hu Jintao and Premier Wen Jiabao. 'I've actually found a lot of confidence here in China, justifiable confidence, in the strength and resilience and dynamism of the American economy,' he said.

China is the single-biggest holder of US government debt - it held US$768 billion in Treasuries in March - and has watched uneasily as Washington has spent lavishly to try to haul the US economy out of its deepest recession in 80 years.

Mr Obama is budgeting for a deficit of 12.3 per cent of national output this year - four times China's shortfall - while the Fed has resorted to unorthodox policies, including purchasing hundreds of billions of dollars worth of US Treasury debt, to unclog the arteries of the banking system. The risk that this will spark inflation, eroding the value of China's holdings, has caused unease in Beijing, where leaders are conscious of public criticism that they should be spending more money at home instead of lending it to America.

But Mr Geithner gave a staunch defence of America's expansive policy, describing it as the 'fiscally conservative' option. 'If we had not acted aggressively, our deficits would have been higher in the future,' he said.

'We are very committed to make sure that when recovery is established that we go back to living within our means; that we bring our fiscal deficits down to a sustainable level; that we unwind and reverse these exceptional measures we've taken in the financial sector,' he added.
Mr Geithner spoke to Chinese state television, the CNBC business channel and, in a webchat, to the English-language China Daily.

The Treasury chief heaped praise on Fed chairman Ben Bernanke, who he said had done 'an enormously impressive job in the worst financial crisis in decades'.

The Fed's cooperation with other central banks in ensuring ample levels of cash in global money markets had been critical to helping stabilise the crisis. 'But I am completely confident, as should you be, that he will have not just the will but the ability to bring this down so that we achieve the obligation of making sure that inflation is low and stable in the United States going forward,' he said.

'We will do everything that is necessary to try to make sure we're sustaining confidence in US financial markets, not just in the United States but around the world,' Mr Geithner added.

China has reacted to the risk of inflation leading to losses on its bond portfolio by buying more short-term Treasury bills. The nagging inflation worries and general market shift towards shorter-dated debt have driven up 10-year note yields and pushed the yield gap between two-year and 10-year notes near record highs on Monday.

Premier Wen reminded Mr Geithner of his concerns about the safety of China's dollar assets by saying there was a need to 'tighten oversight of international reserve currencies so as to ensure the stability and growth of China', Xinhua reported.

Analysts assume that Beijing is already hedging its bets by switching at the margin from the dollar into other currencies. Central bank governor Zhou Xiaochuan unsettled markets in March by floating the long-term possibility of even replacing the dollar as the world's main reserve currency with the Special Drawing Right (SDR), the International Monetary Fund's (IMF) unit of account.

Russia said yesterday that it might discuss the idea of such a super-sovereign currency when the leaders of Brazil, India, Russia and China meet later this month.

But Mr Geithner was unruffled by all the talk. 'I believe the Chinese expect the dollar to be the principal reserve currency for a long period of time, as do we,' he said.

Mr Geithner, eschewing confrontation as he seeks to build trust, was gentle in encouraging China to let the yuan's exchange rate rise - something that would help to reduce the country's big trade surplus by making its exports more expensive and imports cheaper.

The Chinese currency climbed 21 per cent against the dollar between July 2005 and last summer.

But since then, to shield China's exporters, Beijing has kept the exchange rate on hold.

'They have committed publicly to continue to move over time towards a more flexible exchange rate system because I think they recognise that is essential to their broader strategy of rebalancing sources of growth,' Mr Geithner said.

Turning to the global economy, he said there had been early signs of stabilisation, and he was very encouraged by signs that confidence was returning to markets. What had been a real risk of financial collapse had receded to a significant degree. 'But it's early, and this is still a very powerful storm. It's causing enormous pressures and damage, uncertainty, not just across our economy but in economies around the world,' he said.

As Mr Geithner flew out of Beijing, the US government announced that the US and China would inaugurate their Cabinet-level Strategic and Economic Dialogue in Washington in the last week of July.

Crude hits 7-month high on China industrial growth

Business Times - 02 Jun 2009

Oil climbs after US dollar falls to its lowest against euro since December

(LONDON) Crude oil rose to the highest since November as China's manufacturing expanded for a third month, signalling that fuel demand in the world's second-biggest energy consumer may increase.

Oil climbed as much as 1.8 per cent after the US dollar fell to its lowest against the euro since December, heightening the need for commodities to hedge against inflation. China increased prices of gasoline and diesel by as much as 8 per cent, a move that may prompt refiners to boost crude purchases.

'Recovery optimism is on a roll with green shoots erupting everywhere,' said David Hufton, managing director of PVM Oil Associates Ltd in London. The 'stock overhang and the prospects of permanent damage and change to oil demand elasticity are being swamped by the macro factors.'

Crude oil for July delivery rose as much as US$1.98, or 3 per cent, to US$68.29 a barrel on the New York Mercantile Exchange. That's the highest since Nov 10. The contract traded at US$67.85 at 12.32 pm London time.

Crude had its biggest monthly gain in a decade in May, surging 30 per cent, after Opec left output unchanged on signs the global economy is recovering and fuel demand will increase.

'All the attention is on the weaker dollar and macroeconomic sentiment,' said Christopher Bellew, senior broker at Bache Commodities Ltd in London. 'The market has advanced a long way on flimsy fundamentals and may pause for breath or see a setback now.'

Manufacturers preparing for an economic rebound are rebuilding inventories of everything from benzene to plywood, sparking a commodities rally that Goldman Sachs Group Inc says will produce 19 per cent returns in a year.

Oil climbed last week as the dollar fell beyond US$1.41 against the euro for the first time this year, making raw materials such as oil and gold attractive alternative investments.

China is raising prices for the second time this year, allowing the nation's refiners to pass on climbing crude oil costs. China Petroleum & Chemical Corp, the nation's biggest refiner, said on May 22 it will lose money turning oil into fuels should crude trade above US$60 a barrel and the government prevent it from increasing prices.

'Energy has overshot the current bottoming phase, because we all know that demand is not turning around in the spot market, which is where consumption commodities are priced,' Stephen Schork of the Pennsylvania-based Schork Group Inc said in a report yesterday.

The dollar last traded at US$1.423 per euro, having weakened 6.3 per cent in May, the biggest drop since December's 9.2 per cent decline.

Saudi Arabian Oil Minister Ali al-Naimi said last week that the Organization of Petroleum Exporting Countries opted not to alter its output targets because 'prices are good, the market is in good shape.'

Hedge-fund managers and other large speculators increased their net-long position in New York crude- oil futures in the week ended May 26, according to US Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 40,122 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report on May 29. Net-long positions gained by 4,885 contracts, or 14 per cent, from a week earlier.

Brent crude for July settlement rose as much as US$2.17, or 3.3 per cent, to US$67.69 a barrel on London's ICE Futures Europe exchange, and traded at US$67.20 a barrel at midday in London.

The fastest rise in 24 years

Business Times - 02 Jun 2009

Surge driven by manufacturers rebuilding inventories across the board to prepare for an economic rebound

(NEW YORK)

MANUFACTURERS preparing for an economic rebound are rebuilding inventories of everything from benzene to plywood, sparking a commodities rally that Goldman Sachs Group says will produce 19 per cent returns in a year.

The Journal of Commerce index that tracks prices of 18 industrial materials gained 9.5 per cent in May, the most in a month since the measure began in 1985. Goldman's forecast last month would beat the firm's estimate for a 4 per cent rise in the Standard & Poor's 500 Index this year.
Aurubis, the top manufacturer of copper-wire rods for cars, said last week that demand improved since April. Huntsman Corp, the biggest maker of epoxy adhesives, said last month that second-quarter results will benefit from improved sales to customers who have depleted stockpiles. Dow Chemical, the largest US chemical maker, said its plants operated at 70 per cent of capacity in April, up from 45 per cent in December.

'The distribution chain will generate this giant sucking sound of demand,' according to Alcoa chief executive officer Klaus Kleinfeld. The largest US aluminium producer said metal distributors have 'seen some green shoots' in orders and are concerned they won't be able to satisfy clients as the economy recovers because inventories are near zero.

While the US contracted 6.3 per cent in the fourth quarter and probably will shrink 2.8 per cent this year, according to 61 economists surveyed, commodity prices show that investors and corporate purchasing agents anticipate a rebound will begin later this year.

The Journal of Commerce Industrial Price Commodity Smoothed Price index improved to an annual rate of minus 26.82 last week, compared with a record of minus 69.9 in December. While the gauge of materials from tallow to steel indicates demand is contracting, the narrowing gap suggests manufacturing is bottoming.

Among exchange-traded commodities, copper rallied 57 per cent this year to US$4,830 a tonne as London Metal Exchange stockpiles dropped 42 per cent since February to a five-month low of 312,275 tonnes. Crude oil surged 49 per cent this year to US$66.31 a barrel on May 29 after a weekly drop in US inventories that was the biggest in eight months. Cotton is up 16 per cent.

'When you see copper and commodities doing well, then it's a sign that there are meaningful parts of the global economy that are stronger,' said Evan Smith, co-manager of the US Global Investors Global Resources Fund in San Antonio that's up 37 per cent this year. 'We like the outlook for commodities right now.'

Prices are showing signs of a rebound less than a year after the Reuters/Jefferies CRB Index of 19 commodities began its plunge from a July 3 record, dropping as much as 58 per cent by Feb 24 as the global economy entered its first recession since the Great Depression.

A freeze in credit markets that started with the collapse of the US property market in 2007 halted world growth and the world's biggest financial institutions reported more than US$1.48 trillion of writedowns and credit losses. The contraction prompted central banks and governments to cut interest rates close to zero and pledge more than US$13 trillion for stimulus programmes and rescue measures.

Signs of recovery are appearing. The CRB index, after dropping on Feb 24 to the lowest level since June 2002, reached 253.05 on May 29, marking a 14 per cent gain for the month, the biggest rally in 34 years. The dollar slumped last week to a five-month low against a basket of six major currencies, bolstering demand for energy, metals and crops as a hedge against inflation.

'The global industrial engine is restarting and that will mean these industrial commodity prices will continue to rise,' said Lakshman Achuthan, the New York economist who predicted in November that the world was headed for its worst recession since at least 1981. 'There are very clear signs that demand for commodities is improving.' The rally boosted mining and metals companies. Phoenix- based Freeport-McMoRan Copper & Gold Inc rose 28 per cent in New York trading in May, the sixth straight monthly gain and the most in more than eight years. Pittsburgh-based US Steel Corp also gained 28 per cent and reached a three-month high.

A sustainable recovery would be a surprise to analysts at Charlotte-based Bank of America. In a May 15 report, the bank dismissed proponents of an economic rebound as 'overly optimistic' and said the 'protracted credit cycle' may last through 2016.

The US economy has lost 5.7 million jobs since the recession began in December 2007, and the jobless rate rose to 8.9 per cent in April, the highest since September 1983. Unemployment probably rose to 9.1 per cent in May, according to the median estimate of 60 economists in a Bloomberg News survey ahead of the Labor Department's June 5 report.

Mortgage delinquencies and foreclosures climbed to records in the first quarter, and US builders broke ground on the fewest homes on record in April.

The slumping auto and housing industries will weigh on US growth and limit consumption of raw materials, said Stuart Flerlage, who helps manage more than US$600 million at NuWave Investment Corp in New York. 'We don't really buy into the theory that the recovery is coming, because a lot of parts of the economy are still weak,' Mr Flerlage said.

Even a sluggish recovery may help commodities because manufacturers have drawn down inventories.

US inventories of durable goods, from plastics and fuel to airplanes and tractors, dropped for four straight months through April, the Commerce Department said on May 28. Stockpiles of iron, aluminium and steel slid for seven straight months and are down 14.2 per cent from April 2008, the department said. Supplies of fabricated products such as kitchen utensils, cans and plumbing fixtures fell 5.9 per cent.

Stores of gasoline have fallen for five straight weeks to 203.4 million barrels, according to the Energy Department, a sign that consumers are using more fuel. The Organization of Petroleum Exporting Countries decided last week to keep production quotas unchanged, 'seeing a light at the end of the tunnel' for demand, secretary general Abdalla El-Badri said on May 28. Ali al-Naimi, the Oil Minister for Saudi Arabia, said last week energy demand is improving and predicted crude will reach US$75 this year.

Jeffrey Currie, Goldman's London-based head of commodities research, said in the May 8 report that a jump in agriculture and energy prices will help the Standard & Poor's GSCI Enhanced Commodity Index return 19.1 per cent over the next year. The measure jumped 16.8 per cent last month.

Equities won't do as well, according to David Kostin, Goldman's chief US stock strategist. In a Feb 26 report, he predicted the S&P 500 will advance to 940 this year, down from his earlier forecast of 1,100. The index closed at 903.25 on Dec 31 and 919.14 on May 29. A Goldman spokeswoman said on May 29 that Mr Kostin hasn't updated his forecast since February.

Mr Currie said copper, zinc and soybeans will have the biggest gains in coming months because they're tied to rising demand in China. Energy prices, hurt by slowing economies in Europe and the US, will get a boost once growth resumes, he said.

Commodity shipping rates are rallying, suggesting world trade is starting to pick up. The Baltic Dry Index, the measure of costs to move bulk goods, jumped to an eight-month high on May 29 after falling 94 per cent in the second half of 2008, as China increased purchases of iron ore. Imports of the steelmaking ingredient surged 33 per cent in April, setting a record for a third month. China is the world's biggest steelmaker.

Demand is also poised to gain in India as the government increases investments in ports, roads and bridges, Steel Secretary Pramod Rastogi said on May 18. Steel Authority of India Ltd, the nation's biggest state-run maker, said sales would increase 5 per cent in May as demand rose.

'What is unshakeable is our belief that China and India and other emerging economies will be the key engines of any return to world growth and commodity demand growth,' said Sam Walsh, an executive at London-based Rio Tinto, the world's third-largest mining company.

China is spending 4 trillion yuan (S$840 billion) to revive what has been the world's fastest-growing major economy. The expansion will accelerate to 8.3 in the third quarter and 8.9 per cent in the fourth, according to the median estimates of eight economists surveyed by Bloomberg.

The nation is also buying commodities in part to shift its sovereign wealth amid concern that the value of dollar assets may decline, the Royal Bank of Canada has said. Oil imports and stockpiling may be the reason oil rose above US$60, according to Sanford C Bernstein & Co.

'The whole industry rebounded in the first half of this year because demand for automobiles in China remained strong despite the economic slowdown elsewhere,' said Zhu Yijun, an auto industry researcher at the state-backed Shanghai Information Center. 'Many consumers in China are only starting to buy vehicles for the first time. So the outlook remains more bullish for the Chinese market than in other countries.'

Deere & Co, the world's largest maker of farm equipment, reported second-quarter profit that topped analysts' estimates as sales of machines remained 'strong.' Caterpillar chief executive Jim Owens said in May the residential real estate market is 'finding a bottom' and the 'recovery potential in this sector is very significant.'

Investors have begun putting money back into raw materials. Hedge funds are making the biggest bet in 10 months that prices of US commodity futures will rise. Commodity mutual funds received US$303 million in new money the week ended May 27, according to EPFR Global. Raw-materials funds have attracted US$5.2 billion this year, lifting total assets under management to US$34.3 billion, the group said. Energy funds have lured US$1.4 billion, increasing total assets to US$20.3 billion.

US Global's Mr Smith said the fund has expanded its holdings of mining and energy stocks during the past few months on expectations rising demand may push oil to US$75 by October. Copper in New York may jump 12 per cent in the next 90 days to US$2.40 a pound, said Michael K Smith, the president of T&K Futures & Options. 'A lot of money is coming back into the commodity markets now on the view that things are going to turn around economically and on the idea that inflation will become a threat again,' he said.

Pensions put commodities on back burner

Business Times - 02 Jun 2009

Inflation, low prices keep them from raising exposure

(NEW YORK) Pension funds that helped fuel the commodities bull run for years with outsized allocations have done little during this year's rally as subdued inflation made a less compelling case for them to raise their exposure.

Pensions like Calpers, America's largest retirement plan, poured hundreds of millions of dollars into funds tracking commodity index futures and other derivatives in recent years as they diversified their investments from stocks and bonds.

Such money helped oil soar to a record high of nearly US$150 a barrel last year from below US$20 in 2002, sent gold to above US$1,000 an ounce from around US$300, vaulted copper past US$4 a pound from 80 cents and rallied soya beans beyond US$16 a bushel from under US$6.

But since the meltdown of world markets in September, pensions and other institutional investors such as endowments and mutual funds have virtually put commodities on the back burner.

Analysts said these conservative fund managers did not feel the pressure to buy more commodities as a hedge as the global recession had knocked prices of most raw materials down more than 50 per cent from their highs and wiped out any immediate risk of inflation.

Even with energy, metals and grain prices rebounding lately, these investors have not been convinced that they should raise their weightings in commodities before the markets rose any further.

'If you look to see where the activity in commodities is coming from now, my guess is that it's more from the short-term traders and hedge funds and tactical asset allocation strategies than endowments and pension plans that are watching inflation closely,' said Al Pierce, director at SEI Investment Manager Services in Oaks, Pennsylvania.

More firms offer time and talent

Business Times - 02 Jun 2009

CORPORATE volunteerism is on the rise in Singapore, but companies need to spend more on headcount and training to develop volunteer management capabilities, industry players say.

'In the past few years I've seen more interest in corporate volunteerism,' says Lam Moy Yin, co-founder and vice-chairman of MOVE (Managing & Organising Volunteer Efforts), a professional body for volunteer programme managers.

'People recognise that volunteerism is not just about giving money, it's also about giving time and talent.'

More companies now have human resource policies in place to promote corporate volunteerism, Ms Lam says. And some give staff up to 12 days' paid leave a year to do volunteer work.

Property group CapitaLand, for instance, offers all confirmed staff three days' paid volunteer service leave each year, which they can use to do work to help the needy, the under-privileged or the environment.

And for staff who use all three days to do charitable work, the CapitaLand Hope Foundation will donate $500 to the employee's preferred children's charity.

The foundation was set up to support programmes dedicated to the educational, healthcare and shelter needs of under-privileged youngsters.

New policies

This year, CapitaLand has introduced two new policies to support volunteer work by staff. All confirmed full-time staff are eligible for up to six consecutive weeks of no-pay leave to do under-privileged and green volunteer work in Singapore or overseas, especially in other countries where CapitaLand operates.

Employees can also take up a volunteer/part-time work arrangement for up to six months if they want to volunteer on an extended period and regular basis.

'CapitaLand is constantly on the lookout for opportunities to make use of its multi-sector and extensive geographic reach to contribute back to the community,' says Tan Bee Leng, the group's vice-president for corporate social responsibility (CSR).

'Staff are notified of corporate volunteer activities through mass e-mails and Internet postings.'
But supportive HR policies need to be backed up by investment in resources.

MOVE's Ms Lam says: 'In the past two or three years, more companies have begun to see the benefits of CSR and are willing to invest in headcount to manage their corporate volunteer programmes. Putting best practices in place means corporate volunteerism programmes can be sustainable.'

Companies first need to hire people who are experienced at managing volunteer programmes.

Pioneer

A pioneer in this area is HSBC Bank, which has a three-person corporate sustainability team in Singapore.

HSBC, which has been here since 1877, has been providing service and support to the community in one way or another for many years.

In recent years, it has made education, the environment and volunteerism priorities in its community relations effort, and has staff whose main job is to manage these efforts.

Ms Lam says it is essential to ensure that people who are in charge of corporate volunteer programmes are properly trained.

MOVE, which was set up in 2006, aims to do just that.

The organisation, which took over training volunteer managers when the National Volunteer & Philanthropy Centre (NVPC) outsourced that function last year, has trained about 80-100 people since October 2008.

MOVE conducts one or two training sessions a month. It brings in trainers from places such as the UK and Australia, where the culture of corporate volunteerism is longer established.

However, most of the people trained so far have been from non-profit organisations, Ms Lam says.

'Corporations are still a little slow when it comes to seeing the need for volunteer management training,' she adds.

But the mindset has begun to change, she says.

'Companies are beginning to realise they cannot be haphazard when it comes to corporate volunteerism,' Ms Lam notes.