“Our increasing dependence on foreign workers is not sustainable,” Deputy Prime Minister and Finance Minister Tharman said in his budget speech for the fiscal year beginning April 1.

“A continued rapid infusion of foreign workers will also inevitably affect the Singaporean character of our society.”

“We must therefore take further measures to reduce the inflow of foreign workers, and help our businesses adapt to the permanent reality of a tight labour market,” Tharman said.

Measures to stem the rise in the number of foreigners in the city-state include lowering the maximum ratio of lower-skilled non-locals in the workforce to 60 percent for manufacturing companies, down from 65 percent currently.

For services firms, the cap that limits the number — known as “dependency ratio ceiling” — will be lowered to 45 percent from 50 percent.

MAJOR ASIAN HUB

Singapore, a major Asian hub for banks and multinationals, is facing pressure from citizens to tighten immigration and cap the number of foreigners, who now make up one-third of the island’s population of 5.2 million.

Friday’s annual budget speech was the first since Singapore’s ruling People’s Action Party saw its share of votes fall to the lowest since independence in May 2011 parliamentary elections. The PAP’s result reflected about rising income inequality and overcrowding of buses and trains due to the surge in the number of foreigners coming to Singapore.

Last year, Singapore-based companies employed an extra 79,800 foreigners — mainly from countries such as China, India and the Philippines — more than double the 36,600 increase in local employment, according to Singapore’s Manpower Ministry.

To offset the higher costs that businesses will incur, the government will increase grants and tax benefits for companies that invest in training and equipment to boost productivity, Tharman said.

Some observers expressed concern about moves to make it harder for companies to hire people from abroad.

“The proposed reductions in the dependency ratio ceiling do not appear to be addressing an already dangerously tight labour market,” said David Sandison, tax partner at PwC Services LLP in Singapore.

“It remains to be seen whether the measures introduced to encourage employment of older workers will counter-balance this proposed move to restrict the employment of foreign workers,” he added.

Singapore’s economy shrank 2.5 percent in the fourth quarter from the preceding three months on an annualised and seasonally adjusted basis, and the government has forecast GDP growth of 1-3 percent this year, down from 4.9 percent in 2011.

Unemployment remains low, however, at 2 percent, helped by the huge expansion in labour-intensive service industries such as tourism as well as government measures aimed at tightening the flow of low-skilled workers from the region.

BUDGET SURPLUSES

Singapore expects to report a overall fiscal surplus of S$1.3 billion for FY2012/3, equal to about 0.4 percent of gross domestic product, down from $2.3 billion in the current fiscal year.

The overall surplus does not include receipts from land sales and returns on from some of the city-state’s billions of dollars in overseas investments that are booked directly into reserves.

Citigroup, for instance, estimates Singapore collected S$10 billion from land sales between April 2011 and January 2012.

Given the huge surpluses, Tharman is under no pressure to rein in spending, unlike his counterparts in many developed countries.

Tharman said Singapore will double its yearly expenditure on healthcare to S$8 billion from the current S$4 billion over the next five years as well as spend S$1.1 billion to improve bus services.

Singapore will set aside S$3.6 billion over five years to finance a programme which will help offset goods and services tax for lower-income families. He also announced other steps to help a large part of the population had not benefitted from strong economic growth the last decade.

Singapore has the world’s highest proportion of millionaires but there is no minimum wage and some jobs pay less than S$1,000 a month. The government does, however, top up the wages of lower-income Singaporeans through a programme called Workfare and on Friday it announced a programme to offset the goods-and-services tax paid by lower-income families.

Earlier this month, rival Asian financial centre Hong Kong unveiled a budget that included nearly HK$80 billion worth of measures to support its economy, including a 75 percent income tax rebate capped at HK$12,000 to help the poor.

Tharman said “We are restructuring and upgrading our economy, so that workers can enjoy higher incomes… We are also introducing new initiatives, and deploying more resources to uplift and support lower- and middle-income Singaporeans.”

(Additional reporting by Harry Suhartono, Eveline Danubrata and Saeed Azhar; Editing by Richard Borsuk)

But SingTel comforted investors by reiterating a forecast
for low single-digit full-year revenue growth in the city-state
and stable dividends from its associate firms. Its shares were
up 1.3 percent in late morning trade, beating the broader stock
market’s 0.4 percent rise.

SingTel’s earnings have been on a downtrend due to weaker
performances by its once fast-growing mobile phone associates,
in particular Bharti Airtel Ltd, which last week
reported a 22 percent drop in net profit for the three months to
December.

Bharti, which ventured into Africa in 2010 by acquiring most
of the African operations of Kuwait’s Zain, has been
struggling to turn around the African businesses. Its
weaker-than-expected performance the last quarter was, however,
due to its performance in India.

“It has been a while since SingTel results beat market
expectations and some of the operational KPIs in the 3Q result
suggest rising competitive pressures, hence we think the share
price will likely remain weak,” said Sachin Gupta, Nomura’s
Singapore-based Asian telecom analyst.

SingTel, which is 55 percent owned by Singapore state
investor Temasek Holdings, reported a net profit of
S$902 million ($716 million) for the fiscal third quarter ended
December, down 9.6 percent from S$998 million a year ago.

The result lagged the S$922 million average forecast of four
analysts surveyed by Reuters. SingTel has now reported four
straight quarters of year-on-year profit decline.

Underlying net profit was S$895 million, 7.6 percent below
the S$968 million posted a year ago.

But while investors have punished Bharti’s share price after
several quarters of weak earnings, SingTel CEO Chua Sock Koong
said she was happy with the Indian firm’s performance in Africa.

“If you look at the margins it has actually gone from 19.1
pct to 26.7 pct. They have also improved on their market
positions in a number of markets… I would say that execution
in Africa has been tracking well,” she said at a media briefing.

As for India, Chua, who sits on Bharti’s board, said the
rollout of 3G services in India has raised costs but that will
be recovered as more customers sign up.

SingTel owns about one-third of Bharti.

SINGAPORE, AUSTRALIA

In Singapore, revenue rose 3 per cent to S$1.68 billion, but
EBITDA fell 7 percent to S$547 million due to higher mobile
acquisition and retention costs. SingTel, like most mobile
operators, subsidises the cost of handsets such as the iPhone to
get customers.

“The strong gain in mobile customers in Singapore during the
quarter led to higher acquisition and retention costs, while
contributions from the regional mobile associates declined due
to their weaker currencies and 3G losses from Bharti India,”
SingTel said in a statement.

SingTel saw stronger contributions from Telkomsel
in Indonesia and AIS in Thailand, but its Philippine
associate Globe Telecom reported lower earnings.

SingTel’s Australian unit, Optus, grew operating revenue by
2 percent to A$2.42 billion ($2.6 billion) while net profit for
the quarter rose 4 per cent to A$177 million.

SingTel reiterated guidance for low single-digit growth in
operating revenue and earnings before interest, tax,
depreciation and amortisation (EBITDA) in Australia.

SingTel shares have been flat so far this year,
underperforming the 12 percent rise in the benchmark Straits
Times Index.
($1 = 1.2599 Singapore dollars)
($1 = 0.9362 Australian dollars)

(Editing by Richard Pullin and Muralikumar Anantharaman)

SingTel, Southeast Asia’s largest telecom firm, reported a
net profit of S$902 million ($716 million) for the quarter ended
December, down 9.6 percent from S$998 million a year ago.

The result lagged the average forecast of S$922 million by
four analysts surveyed by Reuters. SingTel has now reported four
straight quarters of year-on-year profit decline.

“It has been a while since SingTel results beat market
expectations and some of the operational KPIs in the 3Q result
suggest rising competitive pressures, hence we think the share
price will likely remain weak,” said Sachin Gupta, Nomura’s
Singapore-based Asian telecom analyst.

SingTel’s underlying net profit was S$895 million, 7.6
percent below the S$968 million posted a year ago.

In Singapore, revenue rose 3 per cent to S$1.68 billion, but
EBITDA fell 7 percent to S$547 million due to higher mobile
acquisition and retention costs. SingTel, like most mobile
operators, subsidises the cost of handsets such as the iPhone to
get customers.

“The strong gain in mobile customers in Singapore during the
quarter led to higher acquisition and retention costs, while
contributions from the regional mobile associates declined due
to their weaker currencies and 3G losses from Bharti India,”
SingTel said in a statement.

SingTel’s earnings have been on a downtrend due to weaker
performances by its once fast-growing mobile phone associates,
in particular Bharti Airtel Ltd, which last week
reported a 22 percent drop in net profit for the three months to
December.

Bharti, which ventured into Africa in 2010 by acquiring most
of the African operations of Kuwait’s Zain, has been
struggling to turn around the African businesses. Its
weaker-than-expected performance the last quarter was, however,
due to fierce competition in the Indian market.

SingTel saw stronger contributions from Telkomsel
in Indonesia and AIS in Thailand, but its Philippine
associate Globe Telecom reported lower earnings.

SingTel’s Australian unit, Optus, grew operating revenue by
2 percent to A$2.42 billion ($2.6 billion) while net profit for
the quarter rose 4 per cent to A$177 million.

SingTel reiterated guidance for low single-digit growth in
operating revenue and earnings before interest, tax,
depreciation and amortisation (EBITDA) in Australia.

Shares in SingTel, which is 55 percent owned by Singapore
state investor Temasek Holdings, have fallen by about 1 percent
so far this year, underperforming a 12 percent rise in broader
Singapore market.
($1 = 1.2599 Singapore dollars)
($1 = 0.9362 Australian dollars)

(Reporting by Kevin Lim; Editing by Richard Pullin)

It may sound like Indonesia or perhaps the Philippines, but this is Singapore — the wealthy island state that has long been the envy of those neighbours for its ruthless efficiency, clean government and high standard of living.

The city-state remains a relative paragon of good governance but a succession of embarrassing setbacks is damaging its reputation and heaping pressure on the long-ruling government as it faces an unprecedented erosion of public support.

The problems highlight a growing gap between Singaporeans’ expectations of their government and the administration’s ability to deliver as it grapples with an influx of foreigners, a yawning wealth gap and strained infrastructure.

Those are all problems of success, but they have fuelled perceptions that the government is out of touch with Singaporeans’ concerns at a time when public debate is flowering as never before in the tightly controlled state.

That became starkly clear in elections last year when voters handed Prime Minister Lee Hsien Loong’s People’s Action Party (PAP.L: Quote, Profile, Research, Stock Buzz) its lowest ever share of the popular vote.

“There is an unleashing of frustration and everything is becoming a focal point of the frustration,” said Bridget Welsh, an associate professor of political science at the Singapore Management University.

“A lot of people in Singapore feel that they have to speak out to make Singapore brighter. This is actually something Singapore needs to go through to become stronger.”

The PAP, which has ruled Singapore since independence in 1965, responded to its election embarrassment with a series of government measures aimed at addressing citizens’ worries.

It tightened the flow of foreign workers, who make up 36 percent of Singapore’s population of 5.2 million, up from about 20 percent a decade ago.

It has also pledged to strengthen a flimsy social safety net in a country that has the world’s highest proportion of millionaires but where there is no minimum wage and some jobs pay less than S$1,000 a month.

In December, the government took new steps to cool surging property prices, with the toughest measures aimed at foreign buyers who have become increasingly visible in the residential sector. Most dramatically, Lee and his ministers agreed to slash their hefty seven-figure annual salaries by more than a third in a nod to growing discontent over wealth inequality.

“We must uphold inclusive growth and social mobility as pillars of a united Singapore,” Lee, who remains the world’s best-paid premier, said in his New Year message.

But the government’s perception problem took a further hit last month with the arrest of the chief of civil defence and the head of its police anti-drug unit on corruption charges, the highest level graft investigation in two decades.

Rather than an official announcement, the news was broken by a Chinese-language daily which felt bold enough to run the story without confirmation from the government.

A few hours later, the Home Ministry confirmed that both officials were being investigated by the anti-corruption watchdog for “serious personal misconduct”. It later emerged that the first arrest had been made a month earlier but not made public.

P N Balji, a former editor of Singapore’s New Paper, says the government’s handling of the case highlighted its inability to communicate well with an increasingly demanding public.

“This is not a stupid government, it has done a lot of good things for its people, it is respected overseas and its model of governance is highly sought after,” he wrote in a commentary.

“Yet, one of the basic attributes of a smart government — squaring with its citizens and carrying them along — seems to be missing.”

STRAINING UNDER GROWTH

The government regularly points to its world-class infrastructure and the top marks it scores in global surveys on the ease of doing business and low corruption levels.

Many Singaporeans still count their blessings compared with more unruly, poverty-scarred neighbours and the crisis-hit economies of Europe. Gerald Toh, a graduate student in New York back in Singapore for the Chinese New Year holiday, said unhappiness with the authorities partly stemmed from high expectations.

“In terms of delivery of services, Singapore’s is definitely one of the better governments in the world,” he said. “When you live overseas, you learn to appreciate Singapore better.”

But Tan Jee Say, an opposition politician, said such global accolades often had little bearing on the lives of Singaporeans, many of whom who have seen their incomes stagnate over the past decade.

Inflation at three-year highs around 5.5 percent is also hurting their pockets and the government has warned that slowing the flood of immigrants will mean slower growth for the economy, which likely expanded by 4.8 percent last year.

“In other developed countries, there is a big safety net. In Singapore, the net is very small,” he said. “For the poor, having the best airport in the world doesn’t affect them as they rarely travel.”

Rapid population growth fuelled by immigrants, combined with under-investment in infrastructure have fed complaints about over-crowding on buses and trains and increased competition for jobs, schooling and housing.

Multiple train breakdowns have become a political headache for Lee. In December, hundreds of commuters were trapped underground without light and ventilation for more than an hour before they heard from train operator SMRT Corporation Ltd (SMRT.SI: Quote, Profile, Research, Stock Buzz). The financial district has been hit by flash floods up to ankle level, threatening to damage the Louboutin and Gucci shoes favoured by many bankers.

“Singapore has developed very fast, but the economic development was too fast and so the cost of living is too high,” said 59-year-old food stall helper Ng Hwee Tiang as she cleaned the cafeteria where she works.

In a spate of announcements aimed at shoring up public confidence over infrastructure, the government said last week it would spend millions of dollars to upgrade its network of trains and water facilities.

The government, together with SMRT, is investing about S$600 million to upgrade its signal system and add trains. Authorities are also spending about S$750 million over the next five years to bolster flood defences.

Singapore is already breaking with the past. Founding father Lee Kuan Yew, prime minister of the republic for 25 years followed by 21 years in the cabinet as senior minister and “minister mentor”, stepped down from government last year.

Welsh said the setbacks and gradual democratisation of Singapore were forcing the government to become more responsive to voters’ demands to avoid further election setbacks in coming years.

“They have gone from being a government of arrogance and overconfidence to a government on the defensive. They are starting to adopt different forms of engagement with the public,” she said.

(Additional reporting by Mark Tay; Editing by Stuart Grudgings and Robert Birsel)

It may sound like Indonesia or perhaps the Philippines, but this is Singapore — the wealthy island state that has long been the envy of those neighbours for its ruthless efficiency, clean government and high standard of living.

The city-state remains a relative paragon of good governance but a succession of embarrassing setbacks is damaging its reputation and heaping pressure on the long-ruling government as it faces an unprecedented erosion of public support.

The problems highlight a growing gap between Singaporeans’ expectations of their government and the administration’s ability to deliver as it grapples with an influx of foreigners, a yawning wealth gap and strained infrastructure.

Those are all problems of success, but they have fuelled perceptions that the government is out of touch with Singaporeans’ concerns at a time when public debate is flowering as never before in the tightly controlled state.

That became starkly clear in elections last year when voters handed Prime Minister Lee Hsien Loong’s People’s Action Party (PAP) its lowest ever share of the popular vote.

“There is an unleashing of frustration and everything is becoming a focal point of the frustration,” said Bridget Welsh, an associate professor of political science at the Singapore Management University.

“A lot of people in Singapore feel that they have to speak out to make Singapore brighter. This is actually something Singapore needs to go through to become stronger.”

The PAP, which has ruled Singapore since independence in 1965, responded to its election embarrassment with a series of government measures aimed at addressing citizens’ worries.

It tightened the flow of foreign workers, who make up 36 percent of Singapore’s population of 5.2 million, up from about 20 percent a decade ago.

It has also pledged to strengthen a flimsy social safety net in a country that has the world’s highest proportion of millionaires but where there is no minimum wage and some jobs pay less than S$1,000 ($800) a month.

In December, the government took new steps to cool surging property prices, with the toughest measures aimed at foreign buyers who have become increasingly visible in the residential sector. Most dramatically, Lee and his ministers agreed to slash their hefty seven-figure annual salaries by more than a third in a nod to growing discontent over wealth inequality.

“We must uphold inclusive growth and social mobility as pillars of a united Singapore,” Lee, who remains the world’s best-paid premier, said in his New Year message.

But the government’s perception problem took a further hit last month with the arrest of the chief of civil defence and the head of its police anti-drug unit on corruption charges, the highest level graft investigation in two decades.

Rather than an official announcement, the news was broken by a Chinese-language daily which felt bold enough to run the story without confirmation from the government.

A few hours later, the Home Ministry confirmed that both officials were being investigated by the anti-corruption watchdog for “serious personal misconduct.” It later emerged that the first arrest had been made a month earlier but not made public.

P N Balji, a former editor of Singapore’s New Paper, says the government’s handling of the case highlighted its inability to communicate well with an increasingly demanding public.

“This is not a stupid government, it has done a lot of good things for its people, it is respected overseas and its model of governance is highly sought after,” he wrote in a commentary.

“Yet, one of the basic attributes of a smart government — squaring with its citizens and carrying them along — seems to be missing.”

STRAINING UNDER GROWTH

The government regularly points to its world-class infrastructure and the top marks it scores in global surveys on the ease of doing business and low corruption levels.

Many Singaporeans still count their blessings compared with more unruly, poverty-scarred neighbours and the crisis-hit economies of Europe. Gerald Toh, a graduate student in New York back in Singapore for the Chinese New Year holiday, said unhappiness with the authorities partly stemmed from high expectations.

“In terms of delivery of services, Singapore’s is definitely one of the better governments in the world,” he said. “When you live overseas, you learn to appreciate Singapore better.”

But Tan Jee Say, an opposition politician, said such global accolades often had little bearing on the lives of Singaporeans, many of whom who have seen their incomes stagnate over the past decade.

Inflation at three-year highs around 5.5 percent is also hurting their pockets and the government has warned that slowing the flood of immigrants will mean slower growth for the economy, which likely expanded by 4.8 percent last year.

“In other developed countries, there is a big safety net. In Singapore, the net is very small,” he said. “For the poor, having the best airport in the world doesn’t affect them as they rarely travel.”

Rapid population growth fueled by immigrants, combined with under-investment in infrastructure have fed complaints about over-crowding on buses and trains and increased competition for jobs, schooling and housing.

Multiple train breakdowns have become a political headache for Lee. In December, hundreds of commuters were trapped underground without light and ventilation for more than an hour before they heard from train operator SMRT Corporation Ltd. The financial district has been hit by flash floods up to ankle level, threatening to damage the Louboutin and Gucci shoes favoured by many bankers.

“Singapore has developed very fast, but the economic development was too fast and so the cost of living is too high,” said 59-year-old food stall helper Ng Hwee Tiang as she cleaned the cafeteria where she works.

In a spate of announcements aimed at shoring up public confidence over infrastructure, the government said last week it would spend millions of dollars to upgrade its network of trains and water facilities.

The government, together with SMRT, is investing about S$600 million to upgrade its signal system and add trains. Authorities are also spending about S$750 million over the next five years to bolster flood defences.

Singapore is already breaking with the past. Founding father Lee Kuan Yew, prime minister of the republic for 25 years followed by 21 years in the cabinet as senior minister and “minister mentor,” stepped down from government last year.

Welsh said the setbacks and gradual democratisation of Singapore were forcing the government to become more responsive to voters’ demands to avoid further election setbacks in coming years.

“They have gone from being a government of arrogance and overconfidence to a government on the defensive. They are starting to adopt different forms of engagement with the public,” she said.

(Additional reporting by Mark Tay; Editing by Stuart Grudgings and Robert Birsel)

“Asian sectors most vulnerable to adverse policy tightening,
cyclicality, and excess capacity include Chinese property
developers, as well as the refining and marketing, technology
and semiconductor sectors,” Moody’s said in a report.

“Weakening or volatile domestic currencies will likewise
increase cost pressures for importers in countries such as India
and Korea,” the U.S. ratings agency added.

Moody’s said it expects a negative ratings trend for Asian
corporates, indicating there will likely be more ratings
downgrades than upgrades this year.

Asian economic growth has slowed in recent months, hurt by
problems in Europe.

On Wednedsay, South Korea posted a shock 6.6 percent annual
drop in exports for January and saw new export orders fall for a
sixth consecutive month. Hong Kong also warned the territory
faced a grim year. {ID:nL4E8D12UI]

Indonesia’s largest oil-and-gas shipping company PT Berlian
Laju Tanker Tbk froze payments on its debt
of $2 billion last week, blaming a slump in freight markets.

Moody’s said the lack of investor appetite for high-yield
bonds will restrain prospects for Asian corporate issuers, and
it expects defaults in Asia to rise moderately in line with the
global trend.

But while weaker firms will face difficulty in raising or
rolling over debt, most Asian corporate issuers will find 2012
and 2013 to be manageable.

“About 90 percent of total refinancing among both domestic
and cross-border issuance reside with investment-grade corporate
issuers, of which 77 percent are domestic bonds issued by
blue-chip firms, well-recognized local names, or quasi-sovereign
entities,” Moody’s said.

“The likelihood of a credit crunch in Asia is low, thanks to
strong finances in most Asian governments and generally healthy,
well-capitalized banking systems,” it added, based on the
assumption there will not be a full-blown European sovereign and
financial crisis.

Nevertheless, the availability of credit in Asia will remain
tight amid heightened risk aversion of both investors and banks.

“Banks in Europe must deleverage to meet regulatory capital
requirements, and two years of rapid loan growth in key Asian
countries will constrain future lending,” Moody’s said.

(Editing by Paul Tait)

“As long as it is only one rating agency there is no need to
do anything really,” Klaus Regling, who runs the European
Financial Stability Facility, told reporters during a trip to
Singapore to meet investors.

“You had the same situation when S&P downgraded the U.S. The
others did not follow. There was no market impact.”

S&P on Monday cut its credit rating of the EFSF by one notch
to AA+, three days after it cut the ratings of France and
Austria by the same margin. The other two major ratings
agencies, Fitch and Moody’s, have not downgraded the EFSF and
still rate France as AAA.

Regling said he met with investors in Thailand and Singapore
on this trip and planned to go to Japan soon.

He said it was “no big secret” which investors he met,
although he declined to identify any of them when pressed on
whether Singapore’s large sovereign wealth funds were on his
agenda.

“I don’t go at the last minute when I need the money,”
Regling said, adding that his aim was to keep in constant
contact with potential investors to ensure that bond sales
continue to go smoothly.

He said the EFSF has had no difficulty finding buyers,
although Asian investors were somewhat more reticent in the most
recent offering, earlier in January. Asian investors took up
about 25 percent of that issuance, down from about 40 percent in
previous rounds, Regling said.

“We have to see whether it was an outlier or a new trend,”
he said, referring to the slackening demand from Asia.

Asia accounts for the overwhelming majority of the world’s
foreign exchange reserves, so it is important for the EFSF to
continue to draw strong demand from the region.

He expressed confidence that the European Stability
Mechanism, which is designed to replace the temporary EFSF,
would be operational in July despite disagreements over some of
the finer points. All 17 euro zone members must approve the ESM.

“The probability that everything will be in place by July is
very high,” Regling said.

The EFSF was set up by the 17 governments that share the
European single currency in May 2010 and has so far been used to
provide emergency loans to Ireland and Portugal. It is also
expected to contribute to a second bailout of Greece.

The fund has an effective lending capacity of 440 billion
euros, which depends on guarantees, mainly from the euro zone’s
AAA countries, only four of which now remain: Germany,
Luxembourg, Finland and the Netherlands.

Regling said repeatedly that investors were underestimating
both the euro zone’s growth prospects and the firepower amassed
among the various rescue programmes in place or in progress.

He dismissed the possibility of a euro zone breakup.

“No country will be forced to leave the euro area,” he said.
“We are family, and no family member is forced out as a policy
objective.”

** For the latest news on Europe’s debt crisis, see

Asia’s wealthy have showed increased interest in art in
recent years, pushing up prices and sparking concerns of a
bubble — particularly in the market for contemporary Chinese
art as the country rises as an economic and political power.

In Hong Kong, auction market turnover skyrocketed 300
percent from 2009 to 2010. Citigroup estimates that Chinese
buyers accounted for 23 percent of the $61 billion in global art
sales last year.

Some collectors like to think values will continue to rise
due to limited supply and continued strong demand as Asian
collectors become more affluent, but not all pieces will
necessarily do well, experts said.

“You can be buying the right name and the wrong pieces, and
your collection is not going to increase in value,” said Suzanne
Gyorgy, a director at Citi Private Bank Art Advisory and
Finance, who advises wealthy clients about their collections.

For example, a 1994 portrait by Chinese artist Zhang
Xiaogang from his Bloodline series — stylized portraits of
imaginary Chinese families with piercing eyes — sold for $8.4
million last year at a Sotheby’s auction in Hong Kong, but a
2005 piece by the same artist fetched just $1.2 million at a
Christie’s event.

“The work they (the artists) are doing now is really just
kind of miming the original work,” Gyorgy added.

Part of the reason is artist wariness about trying new
things for fear their income may take a hit.

“Some established artists are reluctant to go into
experimental mode because they can easily sell what they
produce,” said Gil Schneider, managing director at consultancy
firm ArtComplete.

Lorenzo Rudolf, the organiser of the annual Art Stage
exhibition in Singapore, said that while the loss of originality
is a genuine concern, collectors should not worry about works
done with the help of many assistants.

What is important is that the artist remains creative, he
said, noting that Andy Warhol employed a large number of artists
to produce the pop art that bears his name.

OLD MASTERS, IMPRESSIONISTS

Schneider, previously with Sotheby’s, said the Chinese
contemporary art market has been overheated for the past five or
six years and collectors might want to look at works by artists
from countries such as the Philippines and Thailand instead.

Others agreed that investors might well want to look
elsewhere for the best value.

Citi’s Gyorgy said Impressionist and Old Master paintings
are now more attractively priced compared with contemporary art.

“Those markets have been somewhat less popular so as a
result, you can get wonderful, wonderful works of art for
relatively, not that much money,” she said.

“Look at highs of the contemporary market where the American
painter Clyfford Still just had a painting that sold for $61
million… A recently discovered Velazquez painting came to
market and sold for $4 to $4.5 million.”

But many serious art collectors will stick to contemporary
art, despite the investment risk, because they find works by
artists who are still alive more relevant to their times.

“Art which has a certain age is established. It has gone
through several stages of selection… Everybody wants to find
fresh, new faces,” Art Stage’s Rudolf said.

(Editing by Elaine Lies and Yoko Nishikawa)

Subir Gokarn, who handles monetary policy at the Reserve Bank of India, said that economic growth concerns are back on “center stage”, suggesting that the slowing economy was weighing more on the RBI’s mind as the inflation threat recedes.

“We are basically saying that the cycle has peaked. I don’t think in any of the governor’s statements or in our guidance, we have made any explicit mention of actually starting to bring rates down,” Gokarn told television channel ET NOW after speaking at a conference in Singapore.

“That will depend on how the inflation momentum is playing out,” he said.

The food price index fell in late December on an annual basis for the first time since April 2006, data showed on Thursday, dragged down by a high statistical base effect and improved supply of crops such as pulses, vegetables and potatoes.

That has a triggered hopes that the headline inflation rate for December, due to be released next week, may come in below 9 percent for the first time in a year, which could make it easier for the central bank to relax its hawkish stance.

“The Reserve Bank of India has already given an indication that a reversal of the policy may be possible when there are definite signs of decline in inflation.” said C. Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council.

“I would think the December headline number could indicate when and how RBI may act,” he added.

The RBI has raised its interest rates 13 times since March 2010, but left them unchanged at its last monetary policy review in December, saying the risks to growth were increasing, suggesting it may relax its stance in coming months.

When monetary policy easing begins, the RBI could use instruments such as the cash reserve ratio, which “will help not only from the monetary perspective, but also from the liquidity management perspective,” Gokarn said.

“But till we arrive at that points, the (open market) operation provides that sort of a tactical instrument by which we can infuse liquidity to ease pressure in the money markets without necessarily signalling a very explicit change in the monetary policy stance,” he said, referring to open market bond purchases by the RBI.

The central bank has added 412.1 billion rupees to the banking system through bond purchases since late November, data from the RBI shows.

India’s headline inflation remained above 9 percent even in November, though economists expect it to come down to RBI’s target of 7 percent by March-end.

“We have emphasized the fact that the growth momentum is moderating and we expect that will translate into lower inflation momentum which we have already seen signs of,” Gokarn said.

Production at India’s factories, mines and utilities plunged 5.1 from a year-earlier in October, but recent data shows manufacturing activity and the country’s services sector gathered pace in December.

RUPEE STABILISING

Gokarn also said the rupee appears to be stabilising as its real effective exchange rate moves towards neutral.

The REER is the rupee’s value against a basket of currencies of India’s largest trading partners, adjusted for inflation.

The rupee was the worst performer among Asian currencies last year, losing close to 16 percent against the U.S. dollar as foreign investors pulled out of Asia’s third-largest economy on worries over its large fiscal deficit, stubbornly high inflation and slowing growth.

The deputy governor reiterated that the RBI’s policy on the currency was to maintain stability rather than to keep it at a particular level.

“I think the main concern is not so much what the value is, than its stability,” Gokarn told the CNBC-TV18 news channel on Thursday.

(Additional reporting by Anuradha Kanwar in SINGAPORE and Rajesh Kumar Singh in NEW DELHI. Writing by Shamik Paul and Ramya Venugopal; Editing by Kim Coghill)

Subir Gokarn, who handles monetary policy at the Reserve
Bank of India, said that economic growth concerns are back on
“center stage”, suggesting that the slowing economy was weighing
more on the RBI’s mind as the inflation threat recedes.

“We are basically saying that the cycle has peaked. I don’t
think in any of the governor’s statements or in our guidance, we
have made any explicit mention of actually starting to bring
rates down,” Gokarn told television channel ET NOW after
speaking at a conference in Singapore.

“That will depend on how the inflation momentum is playing
out,” he said.

The food price index fell in late December on an annual
basis for the first time since April 2006, data showed on
Thursday, dragged down by a high statistical base effect and
improved supply of crops such as pulses, vegetables and
potatoes..

That has a triggered hopes that the headline inflation rate
for December, due to be released next week, may come in below 9
percent for the first time in a year, which could make it easier
for the central bank to relax its hawkish stance.

“The Reserve Bank of India has already given an indication
that a reversal of the policy may be possible when there are
definite signs of decline in inflation.” said C.Rangarajan,
Chairman of the Prime Minister’s Economic Advisory Council.

“I would think the December headline number could indicate
when and how RBI may act,” he added.

The central bank has raised its interest rates 13 times
since March 2010, but left them unchanged at its last monetary
policy review in December, saying the risks to growth were
increasing, suggesting it may relax its stance in coming months.

When monetary policy easing begins, the RBI could use
instruments such as the cash reserve ratio, which
“will help not only from the monetary perspective, but also from
the liquidity management perspective,” Gokarn
said.

“But till we arrive at that points, the (open market)
operation provides that sort of a tactical instrument by which
we can infuse liquidity to ease pressure in the money markets
without necessarily signalling a very explicit change in the
monetary policy stance,” he said, referring to open market bond
purchases by the RBI.

The central bank has added 412.1 billion rupees to the
banking system through bond purchases since late November, data
from the RBI shows.

India’s headline inflation remained above 9 percent even in
November, though economists expect it to come down to RBI’s
target of 7 percent by March-end.

“We have emphasized the fact that the growth momentum is
moderating and we expect that will translate into lower
inflation momentun which we have already seen signs of,” Gokarn
said.

Production at India’s factories, mines and utilities plunged
5.1 from a year-earlier in October, but recent data shows
manufacturing activity and the country’s services sector
gathered pace in December.

RUPEE STABILISING

Gokarn also said the rupee appears to be stabilising as its
real effective exchange rate (REER) moves towards neutral.

The REER is the rupee’s value against a basket of currencies
of India’s largest trading partners, adjusted for inflation.

The rupee wasthe worst performer among Asian currencies last
year, losing close to 16 percent against the U.S. dollar as
foreign investors pulled out of Asia’s third-largest economy on
worries over its large fiscal deficit, stubbornly high inflation
and slowing growth.

The deputy governor reiterated that the central bank’s
policy on the currency was to maintain stability rather than to
keep it at a particular level.

“I think the main concern is not so much what the value is,
than its stability,” Gokarn told the CNBC-TV18 news channel on
Thursday.