SINGAPORE shares lost an incredible 50 per cent of their value last year.

TEXT & ILLUSTRATION: LARRY HAVERKAMP & MAROO

To show how bad things were, Japan lost 24 per cent and was still the top performing market last year.

The first six months of this year have been just the opposite. All markets have seen gains and some have been spectacular.

Indonesia, China and India had the biggest turnarounds. They went from losses of over 50 per cent last year to gains of more than 50 per cent this year.

*The last column should be 1 Jan to 30 Jun (and not 20 Jun).

Keep in mind that we are only halfway through the year. For a better comparison with 2008, double the six-month returns to put the yields on an annual basis.

It means Indonesia's first-half return is 120 per cent annually.

Here at home, the Straits Times Index lost half its value last year but it has bounced back by 33 per cent so far this year. On an annual basis, the return is 66 per cent.

Japan and the US have been the laggards this year with returns of only 10 and 6 per cent.

That isn't so bad. The US half-year return of 6 per cent translates to a 12 per cent annual yield, which equals the long-run average.

It isn't just stocks. Property prices had fallen but are now levelling off. HDB prices dropped by 0.8 per cent in the first three months this year but rose by 1.2 per cent in the past three months.

Interest rates are at record lows too.

All of which helps the economic recovery, but still, we are in a recession and the latest employment data shows workers in the US are losing their jobs at a rate of nearly half a million per month.

It has pushed the US unemployment rate to 9.5 per cent versus 3.3 per cent for Singapore.

How do recessions work?

RECESSIONS are strange. Machines, buildings and people haven't changed. So why should there be a recession?

A lot has to do with confidence. If people are afraid the economy will do poorly, they cut spending which slows the economy further. The fear produces a self-fulfilling prophecy that accelerates the downturn.

Some parts of this recession may be permanent. Here are five trends that are likely to hit us hard for the long run.

1. The new lower risk levels produce less borrowing and lending. It results in fewer assets to work with and fewer people needed to do the work.

You don't need as many architects, for example, to build five buildings instead of 10.

2. Many countries are looking inward and protecting local industries from foreign competition. This will slow world trade to the detriment of all.

3. The US recently made it difficult for its taxpayers to hide money overseas. This will reduce capital inflows to wealth management centres like Switzerland and Singapore.

4. US and European proposals to remove tax incentives for investing abroad are likely to reduce foreign direct investment.

5. We're a small open economy with the world's largest and most efficient port. We depend on imports and exports to survive, which makes us vulnerable to the new anti-foreign trends emerging from this recession.  Back to Columnists