Mas­sive bank­ing cri­sis brew­ing in Sin­ga­pore: Zu­lauf

The Pak Banker - - FRONT PAGE -

A cri­sis of stag­ger­ing pro­por­tions is loom­ing in China, and tiny Sin­ga­pore will be caught right in the middle of the storm once the disas­ter fi­nally erupts. Speak­ing at the an­nual Bar­ron's roundtable, Swiss bil­lion­aire in­vestor Felix Zu­lauf warned that Sin­ga­pore's largest banks are at risk of mas­sive cap­i­tal out­flows if the Chi­nese econ­omy ex­pe­ri­ences a hard land­ing, which he ex­pects will hap­pen this year.

"We are in a down cy­cle that will end with cri­sis and calamity. China in to­day's cy­cle is what US hous­ing was dur­ing the fi­nan­cial cri­sis in 2008," Zu­lauf warned. Zu­lauf warned that cap­i­tal out­flows in China will con­tinue, prompt­ing reg­u­la­tors to de­value the yuan by as much as 15% to 20% within the year. When this hap­pens, Asian economies which are heav­ily de­pen­dent on China-par­tic­u­larly Sin­ga­pore-will suf­fer be­cause Chi­nese cor­po­rates cut their im­ports even more, while in­debted Chi­nese com­pa­nies will be placed at greater risk of de­fault.

"I ex­pect the sit­u­a­tion the de­te­ri­o­rate to a point where we will wit­ness a bank­ing cri­sis in Asia that will hit Sin­ga­pore and Hong Kong par­tic­u­larly hard," Zu­lauf said. "It is con­ceiv­able that Sin­ga­pore, which has at­tracted a lot of for­eign cap­i­tal over the years be­cause of its im­age as a strong-cur­rency state, will be ex­tremely ex­posed to the sit­u­a­tion in China. Sin­ga­pore's bank­ing-sec­tor loans have grown dra­mat­i­cally in the past five or six years.

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