The cost of the appreciating SGD

The SG dollar has strengthen against every other reserve currency since the start of 2004.

There was a report by the New York Federal Reserve in 2004 which quantified that for every 10 percent appreciation of the Singapore dollar against the U.S. dollar and other reserve currencies would result in a domestic currency capital loss of more than 10 percent of GDP.

Looking at the charts above, since the start of 2004, the SGD has appreciated more than 15% against the USD, more than 10% against JPY and GBP and remained unchanged against the EUR.

Given Singapore's GDP of about 140 bn SGD in 2006, these currency fluctuations would mean a loss of about 14bn SGD ... wow ... which may explain GIC's and Temasek's interest in the US banks - better to hold their stocks than to hold the USD.

The Importance of being fiscally prudent

Looking at the crumbling asset prices in the US and around most parts of the world, it inevitably reinforces the virtue of being financially prudent, rather than financially savvy.
The past 5 years have seen unprecedented creation of credit and the world economy was awash with 'cheap' money. As a consequence, property prices have also risen to unprecedented levels and there was a time when investors were 'educated' on the benefits of investing in properties - the huge potential financial gains that could be made simply by placing a 5% downpayment on any property developments. Every 1% upside in the property valuation would result in a gain which is 20 times multiplication of the investor's initial outlay. Such is the lure of leverage.
However, the reverse of the situation is also true. A 1% decline would also imply a loss 20 times the initial outlay.

The sticklyness of property prices - marked by sellers' reluctance to sell in a weak market and aided by cheap refinancing options means that the current downturn would take more than just a couple of months to clear. In the meantime, there will be many false dawns but until the speculative element in housing prices is replaced by realistic pricing, it is still wiser to remain at the sidelines and hang on to pure cold hard cash.