Friday, April 30, 2010

More than 30 units of Marina Bay Suites sold

Prices for latest preview are 15-20% higher

MORE than 30 units were sold at a preview for Marina Bay Suites yesterday. They were among a batch of 36 apartments released on nine floors in the 66-storey condominium project and which are priced between $2,167 per square foot and $3,133 psf.

Analysts observe this pricing is about 15 to 20 per cent higher than the $1,900-2,600 psf for the initial batch of about 90 units sold in the condo late last year.

Some potential buyers may have found the quantum of price hike, taking place within a space of less than six months, 'a bit too heavy', as a market watcher put it.

The most expensive unit sold yesterday is said to cost about $8.4 million; it is a four-bedder-with-study on the 51st level. The 'cheapest' of the 36 apartments is a three-bedroom apartment on the seventh storey priced at $3.5 milllion.

The 90-odd units sold last year were mostly below the 46th storey sky terrace.

Those who picked up a unit yesterday are said to comprise a good mix of foreigners and Singaporeans. BT understands the 36 apartments offered range from 1,615 sq ft for a three-bedder to 2,690 sq ft for a four-bedder with study.

Marina Bay Suites has a total 221 units, comprising 218 three- or four-bedroom apartments and three penthouses. A typical floor has only four apartments with private lift lobbies in every unit. Each penthouse comes with its own swimming pool.

While the earlier preview was held on the mezzanine level of One Raffles Quay, yesterday's sales were at a showflat built on the fourth floor of the Marina Bay Financial Centre Office Tower 1.

The latest preview was open to those who had registered interest. From today, sales will be by appointment. The project is being marketed by CB Richard Ellis and DTZ.

This week's preview is timed to ride on the partial opening of the nearby Marina Bay Sands integrated resort on Tuesday.

Marina Bay Suites is being developed by a consortium controlled by Keppel Land, Cheung Kong Holdings and Hongkong Land Holdings.

Source: Business Times, 30 Apr 2010

Ho Bee Q1 earnings rise 11.8%

Joint ventures, led by Parvis project, are key contributors

PROPERTY developer Ho Bee Investment's net profit for the first quarter ended March 31, 2010, rose to $41.7 million, an 11.8 per cent improvement from the same year-ago period.

The increase was due chiefly to a surge in share of profit of jointly controlled entities, from $1.9 million to $10.8 million, of which the joint-venture project Parvis at Holland Hill was the main contributor.

Group turnover for the first quarter of 2010 fell 16.1 per cent year on year to $92.4 million - primarily because of lower recognition of revenue from property development.

In Q1 2009, the group enjoyed higher revenue recognition as two projects, Vertis and Quinterra, obtained Temporary Occupation Permit in that period.

Ho Bee chairman and CEO Chua Thian Poh said the group has benefited from the economic recovery and strong property market sentiment.

'Our residential projects, Trilight, located at Newton Road, and the JV project with MCL Land, Parvis, at Holland Hill, have sold very well. The progressive recognition of income from the residential projects sold will be a significant contributor to the group's profitability for 2010,' he added.

In the first three months of this year, Ho Bee sold 198 residential units in various projects - Orange Grove Residences, The Orange Grove, Trilight, Parvis, Dakota Residences and Seascape. About 17 per cent of the group's 151-unit Seascape condo at Sentosa Cove was sold as at end-March this year, although this has since improved to 21 per cent.

Cash and cash equivalents shrank from $171.7 million at end-Dec 2009 to $52.4 million at end-March 2010 as the developer repaid term loans of $104.7 million and put a deposit for its stake for the purchase of a prime residential site in Shanghai's Qingpu district. Ho Bee has teamed up with Yanlord Land Group for the acquisition.

Ho Bee posted earnings per share of 5.66 cents in Q1 2010, higher than Q1 2009's EPS of 5.07 cents. Net asset value per share rose from $1.63 at end-Dec 2009 to $1.68 at end-March 2010.

The counter closed two cents higher at $1.66 on the stockmarket yesterday.

Source: Business Times, 30 Apr 2010

MCL Land gets boost from The Estuary writeback

US$51m writeback helps bring MCL's Q1 net earnings to US$48.7m

A WRITEBACK of about US$51 million for an impairment charge on The Estuary condo in Yishun helped to boost MCL Land's first-quarter net earnings to US$48.7 million. In the same period of last year, it posted net profit of US$1.4 million.

'The group's results for 2010 should benefit from the completion of two development projects in Singapore, Waterfall Gardens and D'Pavilion, as well as the writeback of the impairment charge on The Estuary,' MCL chairman YK Pang said in yesterday's results statement.

MCL recognises revenue and profit on units sold in residential property developments when the projects receive Temporary Occupation Permit. Unlike most other listed property groups, it does not book profit and revenue progressively as the projects are completed.

Waterfall Gardens at Farrer Road and D'Pavilion at Upper Serangoon Road are slated for completion by Q2 and Q4 this year respectively. The 132-unit Waterfall Gardens is fully sold and 74 per cent of D'Pavilion's 50 apartments were taken up as at end-Q1 this year.

The Hongkong Land subsidiary writes back impairment charges on residential sites when the projects are launched and substantially sold.

Following the writeback on The Estuary, which MCL began to sell in February this year, the group continues to carry US$134 million in impairment charges against four other Singapore residential projects - on the Nob Hill site in Ewe Boon Road, the Nim Park site at Nim Road, the Dynasty Garden Court 1 plot at Sixth Avenue, and the Casa Nassau site at Upper East Coast Road.

The plan is to launch the Nim Road and Upper East Coast projects next year but hold back developments on the two other sites until the market improves further, MCL's chief executive Koh Teck Chuan told BT.

MCL had shareholder funds of US$583 million at end-March 2010, up from US$533 million at Dec 31, 2009. Progress payments received for the group's development properties continued to enhance MCL's financial position with net cash of US$140 million at end-Q1 2010, compared with US$93 million at end-2009.

'Sentiment in Singapore's residential property market remains positive, underpinned by an improving economic outlook,' Mr Pang observed.

MCL's net asset value per share rose from US$1.44 at end-December 2009 to US$1.58 at end-March 2010.

It posted earnings per share of 13.15 US cents in Q1 2010, up from 0.38 US cent in Q1 2009. On the stock market yesterday, the counter closed unchanged at S$2.22.

Source: Business Times, 30 Apr 2010

Strong growth puts Asia at risk of overheating: IMF

WHILE the European Union grapples with the risk of a contagious sovereign debt crisis and Japan with deflation, most Asian economies are growing at a rate where their very success is threatening them with problems of possible overheating and inflation, according to the International Monetary Fund.

For the first time, Asia's contribution to global economic recovery has outstripped that of other regions, the IMF said in its latest Regional Economic Outlook for Asia and the Pacific.

The stark contrast between Asia's performance (led by China, India and Indonesia but excluding Japan) is underlined by looming fiscal crises in Europe and also by high unemployment, weak household balance sheets and anaemic bank credit in advanced economies, the IMF noted.

'Asia's faster recovery relative to the rest of the world seems to mark a break from the past. Although Asia's GDP trend growth has exceeded that of advanced economies over the last three decades, this is the first time that Asia's contribution to a global recovery has outstripped that of other regions.

'In past recessions Asia's recovery generally was driven by exports, this time it has also been reinforced by resilient domestic demand, particularly household consumption.'

Asia is expected to continue leading the global recovery, the IMF said. The global and domestic inventory cycle is likely to boost Asia's industrial production and exports further for most of 2010 as demand finally recovers in advanced economies.

In many Asian economies, 'private domestic demand appears to have sufficient momentum to sustain near-term growth, as high asset values, strong consumer confidence, and a gradual improvement in employment conditions are expected to sustain consumption.'

Meanwhile, net capital inflows to the region have surged, the IMF said. This is 'a reflection of extremely high levels of global liquidity but also a testament to Asia's improved resilience and economic framework.'

But it warned that 'Asia's relatively strong cyclical position may pose near-term risks, particularly if bright growth prospects and widening interest rate differentials with advanced economies lead to further capital inflows to the region.

'These could lead to overheating in some economies and increase their vulnerability to a strong upswing in the credit and asset price cycles, with the propensity for a subsequent abrupt reversal.

'Although asset-price inflation in Asia has so far been generally contained, the increase in excess liquidity in many regional economies over the course of 2009 raises concerns' especially in asset and housing markets.'

The IMF report added that over the medium term, Asia's main policy challenge will be to ensure that private domestic demand becomes a more prominent engine of growth.

Source: Business Times, 30 Apr 2010

IMF warns of overheating risks in Asia

SHANGHAI: The International Monetary Fund (IMF) warned yesterday that Asian economies are at risk of overheating as strong capital inflows increase inflationary pressures and raise the risk of damaging bubbles.

It urged regional leaders to return to 'more normal' monetary policies after the global financial crisis, and increase the flexibility of their exchange rates to counter speculative funds flowing into their economies.

'For China, like in other economies in the region, the risk is to ensure that the boom we see in asset flows does not, like in the past, lead to a cycle of boom and bust,' Mr Anoop Singh, director of the IMF's Asia-Pacific department, told a news conference.

In its latest report on the regional outlook, the IMF said brighter economic growth prospects and widening interest rate differentials with developed economies 'are likely to attract more capital to the region'.

'This could lead to overheating in some economies and increase their vulnerability to credit and asset price booms with the risk of subsequent abrupt reversals,' the report said.

The IMF raised its growth forecasts for Asia to 7.1 per cent for both this year and next, higher than its prediction last week when it estimated regional economies would expand an average 6.9 per cent this year and 7 per cent next year.

But the fund warned that export-driven Asia remains vulnerable to a slower-than-expected recovery in the West, and urged governments to reduce their reliance on overseas shipments and boost domestic consumption.

'It will be important to implement reforms that boost the productivity and the competitiveness of the services sector,' IMF senior economist Olaf Unteroberdoerster told reporters.

The IMF said Asian policymakers need to safeguard against the build-up of imbalances in asset and housing markets caused by 'excess liquidity', and one way to do this was to adopt more flexible exchange rates.

'Letting the exchange rate appreciate can forestall short-term inflows,' the fund said, without specifically referring to China.

The IMF said last week a stronger yuan was 'essential' for both the Chinese and world economies, heaping more pressure on Beijing to revalue its currency, which has been effectively pegged at 6.8 to the US dollar since mid-2008.

Critics say the policy has given Chinese manufacturers an unfair advantage by making their exports cheaper.

Source: Straits Times, 30 Apr 2010

Rising sovereign debt will lead to inflation: Roubini

Nouriel Roubini, the New York University professor who forecast the US recession more than a year before it began, said sovereign debt from the US to Japan and Greece will lead to higher inflation or government defaults.

Almost US$1 trillion of worldwide equity value was erased on Tuesday on concern that debt will spur defaults, derailing the global economy, data compiled by Bloomberg show.

German Chancellor Angela Merkel and the International Monetary Fund pledged to step up efforts to overcome the Greek fiscal crisis, after bonds and stocks fell across Europe in the past week.

'The bond vigilantes are walking out on Greece, Spain, Portugal, the UK and Iceland,' Mr Roubini, 52, said on Wednesday during a discussion at the Milken Institute Global Conference in Beverly Hills, California. 'Unfortunately in the US, the bond market vigilantes are not walking out.'

'The thing I worry about is the buildup of sovereign debt,' said Mr Roubini, a former adviser to the US Treasury Department and IMF consultant. If the problem isn't addressed, he said, nations will either fail to meet obligations or experience higher inflation as officials 'monetise' their debts, or print money to tackle the shortfalls.

'While today markets are worried about Greece, Greece is just the tip of the iceberg, or the canary in the coal mine for a much broader range of fiscal problems,' Mr Roubini, who teaches at NYU's Stern School of Business, said. Increasing tax revenue won't be enough to 'save the day', he said.

Greece 'could eventually be forced to get out' of the 16-nation euro region, he said in a Bloomberg Television interview on Wednesday. That would lead to a decline in the euro and make it 'less of a liquid currency', he said.

'Eventually, the fiscal problems of the US will also come to the fore,' he said during the discussion. 'The risk of something serious happening in the US in the next two or three years is going to be significant' because there's 'no willingness in Washington to do anything' unless forced by the bond markets.

Mr Roubini said the US probably will need a combination of increased tax revenue and lower government spending, while Europe needs to curb spending.

Mr Milken compared the excess debt of US consumers, companies and government to the nation's obesity problem. 'If we could just get Americans to reduce their weight to the same as they weighed in 1991, we could save US$1 trillion and the US could create US$1 trillion of value,' the junk-bond billionaire-turned-philanthropist said. -- Bloomberg

Source: Business Times, 30 Apr 2010

Fed keeps rates at record lows; upbeat on economy

WASHINGTON: The Federal Reserve has sounded a more confident note that the US economy is strengthening but pledged to hold rates at record lows to make sure it gains traction.

Wrapping up a two-day meeting on Wednesday, the Fed in a 9-1 decision retained its pledge to hold rates at historic lows for an 'extended period'. Doing so will help energise the recovery.

The Fed offered a more upbeat view even as it noted that risks remain. It said the job market is 'beginning to improve', an upgrade from its last meeting in mid-March, when it said the unemployment situation was merely 'stabilising'.

It also noted that consumer spending has 'picked up', an improvement from its last observation that spending was expanding at a 'moderate pace'.

Even with the gains, the Fed noted reasons to be cautious. High unemployment, sluggish income gains and tight credit are still dampening consumer spending, a major contributor to economic activity.

Commercial real estate remains fragile. And though housing activity has edged up, it is still at depressed levels. Bank lending continues to shrink.

The Fed's statement included nothing that would lead most economists to move up their forecasts for when the central bank will start raising rates.

The soonest the Fed will do so is the fourth quarter, 34 of 44 leading economists polled told The Associated Press.

'The Fed did upgrade its assessment of the economy, but clearly there is too much headwind for the recovery' for the Fed to signal any plans to boost rates, said economist Sung Won Sohn at California State University.

Kansas City Fed chief Thomas Hoenig was, for the third straight meeting, the sole member to dissent from the overall decision to keep the 'extended period' pledge. He worries that this will limit the Fed's stated 'flexibility' to start modestly bumping up rates.

He fears keeping rates too low for too long could lead to excessive risk-taking by investors, feeding new speculative bubbles in stocks, bonds and commodities.

The Fed's brighter assessment helped give a modest lift to stocks. The Dow Jones industrials gained about 53 points, a rise of 0.48 per cent, on Wednesday.

The Fed has held its target range for its bank lending rate at between zero and 0.25 per cent, where it has remained since December 2008. In response, commercial banks' prime lending rate, used to peg rates on certain credit cards and consumer loans, has stayed at about 3.25 per cent - its lowest point in decades.

Nonetheless, signals are growing that the US economy has turned a corner. Employers added a net total of 162,000 jobs in March, the most in three years. Consumer confidence is rising and manufacturers are boosting production.

Source: Straits Times, 30 Apr 2010

Banker's 'fresh start' runs onto rocky road

It's been a long journey for tycoon whose firm is asked to pay rental arrears

Agus Anwar may have once owned banks in Indonesia, but now he is owing rent.

The Singapore investment holding firm controlled by the once prominent banker has proposed a plan at the eleventh hour to pay $1.2 million in arrears it owes Ngee Ann Development - just as the landlord was about to auction the firm's property to offset the unpaid rent.

Sources told BT that the public auction, which was supposed to be held on Wednesday, was called off after Investoasia (formerly known as Kapital Asia) proposed to make an initial payment of part of the arrears it owes by the end of the week.

No date has been set for another auction - if it is on the cards - to sell Investoasia's furniture and moveable property.

According to court documents, Investoasia owes Ngee Ann Development rent for two offices it occupied on the 24th and 25th storeys of Ngee Ann City's Tower A.

Investoasia owes Ngee Ann Development 13 months rent amounting to about $900,000 for the 24th floor office.

It also has to pay the landlord additional rent after it failed to hand over the office despite a notice to do so by Dec 11 last year.

Ngee Ann Development seized the office - and Investoasia's property in it - through a court order issued on April 1.

Investoasia also owes Ngee Ann Development another $190,000 for office space it rented on the 25th floor between September and November 2008.

The investment holding firm's failure to pay the arrears prompted Ngee Ann Development to file a suit against it in February through its lawyer Edward Tiong of Allen & Gledhill.

Early this month, an order issued by the High Court allowed Ngee Ann Development to auction property owned by Investoasia located at its former 24th floor office - unless it pays up.

Mr Agus and his lawyers have declined to comment.

The suit is one of many filed by creditors against Mr Agus and firms controlled by him and his family.

Last December, he applied for a stay of bankruptcy proceedings, saying he was looking to raise income from certain sources. His application was turned down - a decision he is appealing against.

Indonesian-born Mr Agus, now in his late 50s, moved here in 2000 to start afresh amid the fallout from the 1997 financial crisis, which hit Indonesia hard.

He became a Singapore citizen in 2004 - the year news reports quoted Indonesian officials as saying that he owed the Indonesian government 3.2 trillion rupiah.

The money, equivalent to $633 million at the time, was said to have been used to bail out two of his Indonesian-based banks which collapsed as a result of the 1997 crisis.

The banks, Bank Istimarat and Bank Pelita, are now defunct. According to the Indonesian Bank Restructuring Agency (IBRA), Bank Istimarat and Bank Pelita misused the Indonesian government's emergency loan.

When BT visited Investoasia's former office on the 24th floor of Ngee Ann City Tower A last week, the premises were locked. A notice instructed that mail be delivered next door - which houses listed telecommunications firm Teledata. Some Investoasia employees were in the Teledata office but declined to speak.

According to data from the Accounting and Corporate Regulatory Authority (ACRA), Investoasia was set up in 2001 and is controlled by Mr Agus and Marcel Tjia Han Liong, chief executive and executive director of Interra Resources, a petroleum exploration and production company which is listed in Singapore and Australia.

The latest financial data provided by Investoasia to ACRA dates back to 2006, where it reported a $24 million loss - after tax from continuing operations - and $4.8 million in revenue.

Companies it has an interest in include Keppel Telecommunications and Transportation (Keppel T&T), in which it had a 6.5 per cent stake, according to Keppel T&T's 2009 annual report.

In January this year, High Court judge Lee Seiu Kin ordered Mr Agus to repay a $10.5 million loan he received in 2008 from investment company Orion Oil.

The loan was secured by a mortgage on shares in Keppel T&T, among various things, and was to have been repaid in three months with $500,000 in interest. However, Mr Agus argued in court that the loan was void since Orion Oil did not have a licence to lend money. This claim was rejected by Justice Lee.

Mr Agus is appealing against the decision.

Last November, Mr Agus's two sons were ordered by the High Court to pay $15 million their father owes to the local branch of Societe Generale Bank & Trust after they signed documents agreeing to be liable for his debts.

When Mr Agus defaulted on payments in October 2008, the bank terminated the credit services it offered him. It held off taking legal action on condition that his sons Patrick Adrian Anwar and Andrew Francis Anwar take out mortgages on two apartments in Devonshire Road, which he bought in their names.

The sons signed an agreement to pay the bank all the money their father owed.

When Mr Agus again failed to make payments, the bank turned to the sons - who also failed to pay. This led the bank to sue Mr Agus, his sons and two investment holding companies, each owned by one brother.

Last July, the sum due to the bank was about $17 million.

Some $2.3 million has been recovered from the sale of shares, payment of dividends and sale proceeds from the two mortgages.

Source: Business Times, 30 Apr 2010

Bailout plan for Greece eases worries

News that negotiators may okay package for debt-laden nation soon boosts financial markets

BRUSSELS: Hopes that a bailout plan for debt-stricken Greece would be finalised soon gave financial markets some welcome respite yesterday.

European and German officials assured markets that they were working quickly on approving the bailout as they tried to keep Greece's crisis from dragging others into a continent-wide financial meltdown.

Germany's largest opposition party said it would move quickly to approve German participation, while European Union Monetary Affairs Commissioner Olli Rehn said yesterday he was 'confident the talks will be concluded in the next days'.

He said negotiators from the EU, the European Central Bank (ECB) and the International Monetary Fund (IMF) were 'working day and night' and were nearing an agreement on 'a multi-annual programme' that will include major changes in Greece.

However, Mr Rehn said he still could not provide details of the deal. He said the financial lifeline was being put together to avoid a wider crisis and was 'for every euro area member state and their citizens, to safeguard the financial stability in Europe and globally'.

Mr Rehn's appearance at the European Commission's daily news briefing was scheduled at the last minute and appeared designed to reassure financial markets that the money will come through and a Greek government debt default was not on the cards. Markets had been in turmoil the last few days as the seemingly never-ending Greek crisis threatened to drag countries like Portugal and Spain into the mire.

'Rehn's appearance means that we expect this deal to be wrapped up on the weekend,' said an EU official who asked not to be named.

Greece says it needs a bailout in order to pay €8.5 billion (S$15.4 billion) in bonds due on May 19. Mounting fears that Germany might hold up its share of the overall €45 billion bailout package agreed earlier this month was the catalyst to this week's market turmoil.

Europe's debt crisis ratcheted up a notch or two this week when Standard & Poor's downgraded Greece to junk status and cut its ratings on Portugal and much larger Spain.

As global stock markets plunged and the euro dived to a one-year low against the US dollar, the powers that be were finally mobilised into action, culminating in a meeting in Berlin on Wednesday between German Chancellor Angela Merkel, IMF managing director Dominique Strauss- Kahn and ECB president Jean-Claude Trichet.

The consensus in the markets is that a much more extensive package will be offered to Greece than the original one-year €45 billion deal agreed. This has helped to shore up confidence in the markets and Europe's main stock indexes advanced yesterday while the euro has clambered off its recent lows.

Many investors now think that a three-year €120 billion deal may be in the offing.

Greek stocks rallied yesterday after Mr Rehn's comments, with bank stocks heading for their biggest one-day rise on record. The Athens bourse's banking index was up 13.9 per cent in afternoon trading.

Meanwhile, union officials in Greece said yesterday that the country will impose steeper salary cuts and new austerity measures to clinch the aid deal and avoid default. They vowed to protest. Prime Minister George Papandreou met unions to discuss the EU and IMF bailout to prepare the ground for what are set to be unpopular measures.

Source: Straits Times, 30 Apr 2010

Fed opts for gentle touch on interest rates

It says economy is getting better but decides to keep rates low for extended period

IT was a message awash with hope and a surprisingly gentle punchline.

The employment market is improving, household spending is on the rise, business investment is picking up, the Federal Reserve's interest rate policymaking committee said on Wednesday. Despite this, the Federal Open Market Committee's stance on keeping short-term interest rates near zero for an 'extended period' remains unchanged.

The decision to peg the key federal funds rate in the range of 0 per cent to 0.25 per cent - where it stays - was initially taken more than a year ago, at a time when the financial crisis was running at fever pitch and the US economy appeared in imminent danger of plunging into its first depression since the 1930s.

The FOMC's decision to leave unchanged its promise to keep interest rates low 'for an extended period', brought to a somewhat surprising end weeks of speculation on Wall Street that the April meeting would mark the unofficial beginning of a period in which the Fed will begin to prepare investors for an eventual rate hike off its current historic low levels with an alteration or modification of some sort of the much-invoked phrase.

Steady improvement in economic data and minutes from the March FOMC meeting, which was marked by a steady chorus of dissent and debate among the committee's voting members regarding the need to keep interest rates so low, had investors braced for a new signal on how the central bank will begin pulling liquidity from the system.

'The betting was that we would get an upgrade on the committee's outlook on the economy, and along with that a downgrade on its belief that interest rates need to be kept at nearly zero without a change in the Fed's policy stance even on the horizon,' said Max Bublitz, the chief market strategist at San Francisco, California-based SCM Advisors, which manages over US$3.5 billion in institutional and private assets. 'Instead what we got from the Fed was a kind of a yawner of a statement,' he observed.

'While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the committee anticipates a gradual return to higher levels of resource utilisation in a context of price stability,' the FOMC said, using new, more optimistic language on the economy and pointing to improvements in various economic sectors at the beginning of its statement.

The key portion of its commentary, on its intentions, however, could have been lifted from any of the FOMC's policy meeting statements of the past several months:

The committee 'continues to anticipate that economic conditions, including low rates of resource utilisation, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. The committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.'

The Federal Reserve Board's mostly unchanged statement had a welcome calming effect on Wednesday on a stock market still feeling jolted by the unravelling of attempts to fix Greece's debt woes and the ripple effect those attempts are having on the value of the euro and the sovereign debt of first Portugal and now Spain, which on Wednesday saw its debt rating downgraded by S&P.

Stocks ticked higher after the Fed left interest rates unchanged and kept the 'extended period' language in its statement, turning a morning of losses into an afternoon of gains.

The Dow Jones Industrials finished with a gain of 53 points, or 0.5 per cent, to 11,045.27.

The S&P 500 gained eight points, or 0.7 per cent, to 1,191.36, while the Nasdaq Composite edged up by only a fraction of a point, or 0.01 per cent, at 2,471.73.

Debate over the merits of and the reasons for the Federal Reserve's willingness to maintain the 'extended period' language, despite strengthening in economic activity began almost immediately.

Some market strategists argued the Fed might feel handcuffed by the turmoil coming out of Europe's sovereign debt crisis, while others said the Fed might actually be hoping to see some inflation enter the economy as a way to raise values of the mountain of distressed assets still weighing on banks, which remain reluctant to lend.

'If they don't get their act together soon and start raising rates, it's not going to be too bullish when we have all this debt to refinance and the dollar keeps on weakening,' said Dave Rovelli, managing director of equity trading at Canaccord Addams.

Mr Bublitz agreed that looking longer-term, the Fed's willingness to keep rates so low could weigh on the economy and the financial markets in various ways. 'But bottom line is that for now, the Fed is keeping intact the basis for the 13-month-long rally, and that's obviously bullish for risk assets,' he said.

Source: Business Times, 30 Apr 2010

Businesses support 5-year plan to revitalise Singapore River area

Most businesses along the Singapore River are backing plans to revitalise the area.

The Urban Redevelopment Authority (URA) will appoint a business consultancy to kick-start a five-year plan to market the riverfront attractions.

Harry’s Holdings has nine bars and restaurants along the Singapore River, including stores at Esplanade, Marina Bay, Robertson Quay, Boat Quay and Clarke Quay.

The firm said that revenues have dipped over the years, as customers flocked to other lifestyle spots such as Dempsey Hill.

Hence, it said it is timely to look at rejuvenating the area.

Said Mohan Mulani, chief executive officer of Harry’s Holdings: “Maybe one large owner can put his or her effort together, a couple of owners can try to amalgamate the real estate and create a very beautiful boutique hotel… maybe you need a mix of tenants, maybe you need some retail.”

Observers say vibrant hotspots like Times Square in New York may provide inspiration.

However, getting things going may be an “up-hill task”.

“There would have to be an element of a leap of faith, there would be some initial seed funding spent on the branding, on putting in place the communication structure. I think we are talking about in the hundreds of thousands of dollars.”

Industry watchers said that working together will help businesses along the river attract more visitors.

However, getting buy-in from stakeholders and landlords like City Developments and CapitaMalls Asia will not be easy.

Said Colin Tan, head of Research & Consultancy at Chesterton Suntec International: “You are trying to get competitors to work together and sometimes with this type of place management you may have to contribute to a common pool, what’s the contribution and how will it benefit, will it benefit everyone equally?”

CapitaMalls Asia (CMA) told MediaCorp that it supports the new initiative and will play its part in the continued rejuvenation of the Singapore River.

CMA, which manages Clarke Quay, said it has undertaken major asset enhancement works to the attraction between 2004 and 2006.

Going forward, it plans to restore its two tongkangs docked at the river, which can be used as venues for various events.

Analysts said that if successful, the business plan could help to drive up rentals at Boat Quay. On average, rentals range between S$10 and S$12 per square foot per month, about 20 per cent off the peak in the mid-90s.

Separately, the URA is spending S$10 million to make Waterloo and Queen Street more pedestrain-friendly to spur street events and performances.

The Orchard Road precinct could be improved as well.

The Singapore Tourism Board (STB) said that a business consultancy could also come onboard to coordinate marketing efforts by year end.

Source: Channel News Asia, 30 Apr 2010

Thursday, April 29, 2010

Unit at Marina Bay Residences hits $3,500 psf

The buzz of excitement at the Marina Bay area with the opening of the US$5.5 billion ($7.5 billion) Marina Bay Sands integrated resort (IR) on April 27 is resulting in a pick-up in sales activity at the neighbouring Marina Bay Residences. The 55-storey, 428-unit upscale condominium tower is expected to be completed soon.

Prices at the 99-year leasehold high-end condo are fast approaching 2007 peak levels. Most recently, a 2,368 sq ft apartment on the 30th floor changed hands for $8.288 million, or $3,500 sq ft. The last time it hit such levels was in mid-June 2007, when a 4,489 sq ft unit on the 51st floor was sold in a sub-sale for $16.16 million, or $3,600 psf.

From March 30 to April 6, there were four transactions in the $2,531 to $3,049 psf range — the first time prices have breached $3,000 psf since December 2007, when a unit on the 25th floor changed hands for $3,080 psf.

Marina Bay Residences, next to The Sail @ Marina Bay, is one of the most actively traded properties in Singapore. The high of $3,049 psf was achieved for a 1,969 sq ft unit on the 30th floor. It was sold for $6 million, according to a March 30 caveat lodged with URA. The previous owner had purchased the unit in a sub-sale for $5.3 million, or $2,700 psf, in June 2007.

The most recent transaction at Marina Bay Residences was for a 1,055 sq ft unit on the 41st floor, which changed hands in a subsale for $2.986 million, or $2,830 psf, according to an April 5 caveat with URA. The apartment was sold in July 2007 for $2.405 million ($2,280 psf), hence the owner saw a gain of 24%.

Meanwhile, another unit, a 1,216 sq ft apartment on the 22nd floor, was sold for $3.49 million, or $2,869 psf, in a sub-sale, according to an April 5 caveat. The unit last changed hands in July 2007 for $2.86 million ($2,349 psf), hence there was a capital appreciation of 22%.

On the 14th floor, a 1,065 sq ft unit was sold for $2.7 million, or $2,531 psf, translating into a 47% gain for the previous owner, who acquired it for $1.83 million, or $1,720 psf, in January 2007. The unit was sold for $1.558 million, or $1,462 psf, in 2006, representing a 17.4% gain.

Beyond the opening of the IR, Marina Bay Residences is also seeing renewed investor interest as the second condo tower, Marina Bay Suites, is likely to release its second phase of units for sale over the next one to two weeks.

Last November, the developers had released around 90 units at Marina Bay Suites in a private preview at prices ranging from $2,200 to $2,500 psf. Another 130 units could be released in the upcoming second phase preview of the 66-storey, 221- unit Marina Bay Suites, which is said to be a more upscale version of Marina Bay Residences.

The pricing this time around will be guided by the transactions of properties in the vicinity, notes Joseph Tan, CBRE executive director for residential services. The remaining units are mostly on the higher floors and likely to fetch a higher price than those released in November, he adds. The project is expected to be completed in 2014.

At the 1,111-unit The Sail @ Marina Bay, two units changed hands for prices above $3,000 psf this year. The units were on the 58th floor of Tower 2. One was an 883 sqft apartment that sold for $2.69 million ($3,048 psf) on Feb 1, according to a caveat lodged with URA. The other was a 936 sq ft apartment that changed hands for $3 million, or $3,204 psf, in late January. From March 30 to April 6, there were three transactions, with prices ranging from $1,870 to $2,646 psf. The Sail @ Marina Bay, which was developed jointly by City Developments Ltd and AIG Real Estate and completed in 4Q2008, hit a high of $3,387 psf in 2008, when a 1,033 sqft unit was sold for $3.5 million.

Several properties sold at Marina Bay Residences are said to have hit prices above $3,000 psf, although the caveats have yet to be lodged. As the opening of the IR draws near, attention is returning to properties in the Marina Bay area like Marina Bay Residences, and it looks like prices are on an upward trend.

Source: The Edge, 29 Apr 2010

Sunrise may inject some assets into Reit

It has no plans to enter markets of Vietnam and China

(KUALA LUMPUR) Malaysian property developer Sunrise may consider injecting some of its property assets into a real estate investment trust (Reit) as they begin to deliver stable income, its executive chairman said.

'We have invested considerably in a pool of investment assets over the last few years, which are now starting to bear fruit,' said Tong Kooi Ong.

Sunrise, ranked ninth by market value among listed Malaysian developers, may consider a Reit 'at a later stage', Mr Tong said in an e-mail interview.

This month, larger rival Sunway City said that it will inject eight retail properties into a Reit in a deal that bankers said may raise up to RM1 billion (S$429 million) for the company.

Reits mainly invest in commercial property and pay most of the rent to shareholders as dividends, which are usually higher than yields of government bonds and offer capital gains if property prices rise.

Mr Tong, a former banker and stockbroker, said that Sunrise has not yet planned to enter the fast-growing markets of Vietnam and China.

'For the medium term, our overseas focus will be on Canada. We do not have plans for the moment to venture into Vietnam or China,' he said.

Later this year, Sunrise plans to launch two projects - an office tower project in the Malaysian capital, as well as a residential project in Vancouver, Canada, Mr Tong said.

Malaysian property developers, such as SP Setia and Gamuda, have embarked on multi-billion ringgit developments in Vietnam to tap rapid growth. Sunway City has formed property joint ventures in fast-growing China and India.

Malaysian developers expect higher sales from home this year as the economy rebounds from last year's downturn. The stock market rally in 2009, which saw the benchmark share index jump nearly 40 per cent, is expected to further boost house buyers.

Malaysia is one of the first in Asia to withdraw crisis measures when the central bank raised its key policy rate by 25 basis points to 2.25 per cent in March. Most economists expect more hikes later this year.

Sunrise shares trade at 6.57 times 2010 earnings, compared with Sunway City's 10.61 times, IJM Land's 24.98 times and Gamuda's 20.31 times, according to Thomson Reuters I/B/E/S.

Sunrise shares have risen 6.8 per cent so far this year, outpacing the 5.6 per cent gain in the property sector index . -- Reuters

Source: Business times, 29 Apr 2010

JLL S'pore posts 27% rise in Q1 revenue

Managing director says S'pore business in good position for the year ahead

The improving Jones Lang LaSalle Singapore has reported a 27 per cent year on year increase in revenue for the first three months of this year.

Chris Fossick, managing director Singapore and South East Asia, said: 'The Singapore business is in a good position for the year ahead due to the strong performance of our residential project sales, office leasing, investment sales and property and asset management divisions.

'Our newly-formed Singapore residential project sales team is capitalising on the increased demand for luxury residential real estate in Singapore, and during Q1, secured marketing appointments for high-end projects including The Holland Collection, The Marina Collection and Centennia Suites,' he added.

JLL has also been able to ride on the strong recovery in the Singapore office market, retaining marketing agency appointments on the majority of the choicest office developments under construction.

The firm's investment sales unit too has clinched a number of appointments for collectives sales this year. 'Considering that government efforts to streamline this process are under discussion, we expect to see further en-bloc activity this year,' he added.

'Following on from a remarkable performance in 2009, the property and asset management team added more than one million sq ft of space to their portfolio in a fiercely competitive market, a testament to the teams' trusted service delivery model,' Mr Fossick notes.

JLL's revenue in the Asia-Pacific region was US$136 million in Q1 2010, a 29 per cent rise from US$105 million for the same period last year. The region's earnings before interest, taxes, depreciation and amortisation for Q1 2010 was US$9 million, against a loss of US$1 million in the same year-ago period.

'Economic forecasts in the Asia-Pacific region are upbeat and recovery in the business environment is filtering through to real estate . . . however, there are concerns about inflationary pressures, particularly in the residential market, which has prompted anti-speculative measures like the introduction of a stamp duty for sellers in Singapore,' said Mr Fossick.

On Tuesday, NYSE-listed Jones Lang LaSalle Incorporated reported net income (on US GAAP basis) of US$246,000, or one US cent per share in Q1 2010. In Q1 2009, it had chalked up a net loss of US$61.5 million, or US$1.78 per share.

'Net income in the first quarter (of 2010) benefited from continued momentum from the fourth quarter of 2009 and the transition to a more variable compensation structure in a number of the firm's transactional businesses,' JLL said in its news release issued on Tuesday out of Chicago.

The firm's adjusted ebitda was US$37 million for Q1 2010, up from US$11 million in the same year-ago period. Revenue rose 18 per cent year on year to US$581 million.

Source: Business Times, 29 Apr 2010

Beijing land sale scrapped as bid tops set ceiling

An auction of land in Beijing was cancelled after bidding exceeded a price ceiling set for the lot as the Chinese government expands efforts to rein in the nation's property market.

The highest price bid for the Beijing lot, zoned for residential development, at the auction on Monday was 4,718 yuan (S$945) per square metre, exceeding the 4,700 yuan per square metre limit set by the government, the Ministry of Land and Resources said on its website yesterday.

The ministry's Beijing branch said it began setting limits on the price of land this month on a trial basis.

'Imagine a seller refuses your business because he thinks you are paying too much for his products?' Bank of America-Merrill Lynch analysts led by David Cui wrote in a report distributed yesterday. 'It demonstrates the type of pressure the central government is putting on local officials to get the property market right this time; this increases the risk of potential overshooting in the property market crackdown.'

China began requiring developers pay higher deposits for land purchases last month and banned banks from lending to developers found to be hoarding land as Premier Wen Jiabao pledged to crack down on real-estate speculation and keep housing affordable. Property prices in 70 Chinese cities gained a record 11.7 per cent in March from a year earlier.

The Beijing branch of the land ministry this month began limiting how much land developers may buy, according to a statement posted to its website on April 21. Video will also be taken of land auctions, notary personnel will observe the bidding, and contracts between Beijing's land bureau and developers for purchases of lots will be made public, according to the statement.

Separately, the land ministry's Shanghai bureau said on Tuesday it had postponed the auctioning of four land plots previously scheduled for yesterday to May 7, citing a 'technical hitch.' The average price of land in 105 Chinese cities rose 8.1 per cent in the first quarter from a year earlier to 2,700 yuan per square metre, Minister of Land and Resources Xu Shaoshi said last week.

China's property stocks have plunged 20 per cent this year, making them the worst performers among major industry groups. China Vanke, the nation's biggest publicly traded developer, has fallen 28 per cent this year compared with a 12 per cent drop in the benchmark Shanghai Composite Index.

Regulators have halted share sales by property developers to give the Ministry of Land and Resources the chance to investigate if companies manipulated market prices, the China Daily reported yesterday, citing an unidentified source close to the China Securities Regulatory Commission.

Beijing will be issuing policies limiting how many homes residents of the city are allowed to buy, the Shanghai Securities News reported yesterday. The city will also 'basically' stop loans for the purchase of third homes. - Bloomberg

Source: Business Times, 29 Apr 2010

China suspends capital raising by property firms

Moratorium may block 110b yuan in share issues planned by 45 companies

China will place a moratorium on capital raising by real estate firms as part of a broader campaign to rein in property price rises, state media reported yesterday.

The move could stand in the way of about 110 billion yuan (S$22 billion) in share issues planned by 45 companies, unnamed sources close to the China Securities Regulatory Commission told the China Daily.

The suspension will allow the authorities to examine whether companies have used illegal methods to manipulate market prices, the newspaper said.

Beijing, wary about the risks of an asset bubble, has been trying to cool the real estate market, raising mortgage rates and down payment requirements for second homes and pushing local governments to control speculative buying.

Those steps complement general efforts to prevent the economy from overheating as it fully regained its momentum with the help of booming credit and grew nearly 11.9 per cent in the first quarter from a year earlier, the fastest since 2007.

China's banking regulator has also issued new guidelines to make it harder for property developers to obtain funding from trust companies, the 21st Century Business Herald quoted an unnamed executive at a trust company as saying.

Real estate firms seeking loans from trust firms must meet the minimum capital requirement and provide proof of their qualifications for developing a project, the newspaper said.

This would represent a clarification and tightening of rules governing the financing relationship between trust firms and property developers. Real estate firms have been turning to trust companies because they have looser capital requirements than banks.

Share prices of Chinese property firms have tumbled over the past week, dragging down the main stock index in Shanghai to its lowest level in more than half a year.

But the formation of a property bubble in China has become one of the major risks to sustainable economic growth, the Development Research Centre, a think-tank under the State Council, said yesterday.

In its report, published in the China Economic Times, it said that steps taken in recent months by the government had not yet succeeded in tamping down on surging property prices.

'If the controls are not forceful, with our country's growth and development clearly outstripping that of other countries, hot money inflows will quicken and excessive domestic liquidity will increase, progressively inflating asset bubbles,' it said. -- Reuters

Source: Business Times, 29 Apr 2010

Sands eyes US$12 billion from sale of Macau assets

CEO raises Marina Bay Sands forecast, investment to be recouped in 5 years

Las Vegas Sands Corp chairman Sheldon Adelson said that the planned sale of the casino operator's Macau malls and apartments may raise as much as US$12 billion and recoup their construction costs.

'It will be like US$12 billion if we add up all the apartments and all the retail in Macau,' including those in buildings still under construction, Mr Adelson, the founder and chief executive officer of Las Vegas Sands, said in an interview in Singapore on Tuesday. The company may start selling the Macau assets within 21/2 years, he said.

Sands, which Adelson describes as 'an Asian company with a presence in Las Vegas and the US', gets 73 per cent of its revenue from Macau, the world's largest gambling market. He was in Singapore on Tuesday to open the first phase of Marina Bay Sands, and raised his earnings forecast for the resort, saying that the US$5.5 billion invested in it will be recouped in five years.

Sands' casino resort on Tuesday opened 963 of its 2,560 hotel rooms, the casino, the meeting and convention facilities, parts of its shopping mall and some restaurants. A grand opening party will be held on June 23 when the second phase is unveiled, including a sky park, additional shops and more restaurants.

Asia will contribute 85 per cent of revenue once the Singapore casino 'ramps up', said Mr Adelson. Last year's sales totalled US$4.56 billion, with 27 per cent coming from Las Vegas, where the company is based.

Macau assets that Sands may sell include the Four Seasons apartments and shopping areas in the Venetian Macau casino resort and in the Four Seasons hotel, Mr Adelson said. The plan also includes selling condominiums at the St Regis, where construction is resuming.

'That is our fundamental business model - we get our money back from the sale of non-core business assets,' he said.

Still, Jonathan Galaviz, an independent strategist who follows travel and leisure in Asia, said that apartments and malls in Macau may be a tough sell to investors, given that the city isn't a proven place for housing investment, and that a huge asset bubble may be developing in Asian real estate.

'Second-home buyers in Asia tend to have an affinity for beach and costal destinations, so Macau's proposition will need to be unique in order to compete,' Mr Galaviz said in an e-mail. As for malls, 'the average length of stay for Macau's average tourist - around one night - doesn't yet lend itself to a strong and dynamic retail opportunity'.

Sands fell US$1.51, or 5.8 per cent, to close at US$24.69 on the New York Stock Exchange composite trading on Tuesday. The stock has gained 65 per cent this year.

Mr Adelson, who is Sands' controlling shareholder, said in December that selling the retail areas at the Four Seasons and the Venetian would raise enough money to pay Sands' debt. The company has US$12.2 billion of bonds and loans due from next year to 2015, according to data compiled by Bloomberg.

The billionaire, who previously said that the Singapore project would add more than US$1 billion in annual earnings before interest, tax, depreciation and amortisation, didn't provide a new figure apart from saying that he was raising his forecast. The return period compares with four years for the Macau project, which cost about half as much to build, Mr Adelson said.

The Marina Bay Sands in Singapore will be a 'grand slam home run', Mr Adelson said. 'Asian people just love to gamble.'

Singapore aims to lure 17 million visitors and triple annual tourism revenue to S$30 billion (US$22 billion) by 2015, helped by two casino resorts, Marina Bay Sands and Genting Bhd's Resorts World Sentosa.

The Marina Bay Sands casino, which makes up about 3 per cent of the 15,000 sq m resort, has about 600 table games and more than 1,500 slot machines.

Asia has room for five to 10 cities like Las Vegas, Mr Adelson said. The most likely countries to approve casinos in the region are Japan and Taiwan, he said. -- Bloomberg

Source: Business Times, 29 Apr 2010

High demand for US home loans but refinancing falls

(NEW YORK) US mortgage applications fell last week as a drop in home refinancing volume outweighed the highest demand for home purchase loans in six months, data from an industry group showed yesterday.

A modest rise in mortgage rates weighed on demand for home refinancing loans, while the imminent expiration of federal home buyer tax credits likely drove consumers to lock in rates, which remain historically low and are widely expected to move higher as the economy recovers.

The Mortgage Bankers Association said that its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, decreased 2.9 per cent for the week ended April 23.

The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was down 3.1 per cent.

The MBA's seasonally adjusted purchase index, a tentative early indicator of home sales, increased 7.4 per cent, reaching its highest level since the week ended Oct 16.

'Purchase activity continues to increase as we approach the end of the homebuyer tax credit programme,' Michael Fratantoni, MBA's vice-president of research and economics, said in a statement.

'Purchase applications were up almost 9 per cent from a month ago, with a disproportionate share of the increase due to government purchase applications. Government applications for purchasing a home accounted for almost 49 per cent of all purchase applications last week,' he said.

To qualify for tax credits of US$8,000 for first-time home buyers and US$6,500 for home owners buying a new residence, eligible borrowers must sign contracts by April 30 and close loans by June 30.

Recent data on sales of new and existing home sales indicate a strong benefit from the tax credits. Government data showed sales of newly built US single-family homes touched their highest level in eight months in March, while industry data showed sales of previously owned homes also gained in March.

James Mallozzi, chairman and chief executive officer of Prudential Real Estate and Relocation Services, said that while home buyer tax credits have helped both first-time home buyers and the US housing market overall, their expiration should not deter home purchasing activity.

'When it comes to home sales, the absolute level of home prices ranks first in importance, the level of mortgage rates ranks second, while the home buyer tax credits ranks a distant third,' he said.

The MBA said that borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.08 per cent, up 0.04 percentage point from the previous week. Interest rates were also above the year-ago level of 4.62 per cent. An all-time low of 4.61 per cent was set in the week ended March 27, 2009, based on a survey that dates to 1990.

Mortgage rates could head towards 5.50 per cent or 6 per cent later this year, Mr Mallozzi said.

'This could dampen demand and I foresee a slow housing recovery,' he said.

The MBA said that fixed 15-year mortgage rates averaged 4.38 per cent, up from 4.34 per cent the previous week. Rates on one-year adjustable-rate mortgages, or ARMs, increased to 7.03 per cent from 6.95 per cent. -- Reuters

Source: Business Times, 29 Apr 2010

Non-central home prices outpace prime areas

NUS index shows they climbed 1.2% in March while central region home prices dipped

(SINGAPORE) Prices of non-landed private homes outside Singapore's prime districts are now growing at a faster rate than prices in the prime districts, according to a new index compiled by the National University of Singapore (NUS).

Flash estimates for March released yesterday show that 'non-central' home prices climbed 1.2 per cent last month, taking the first-quarter rise to 4.4 per cent.

In contrast, prices in the central region - postal districts 1-4 and 9-11 - dipped 0.07 per cent in March. For Q1, they rose 1.7 per cent.

NUS's Singapore Residential Price Index also shows that overall home prices rose 0.3 per cent last month and 2.8 per cent in Q1.

This puts the overall current value of the index just 0.1 per cent below the peak in November 2007. Prices in the central region are now 9.3 per cent below that peak, while prices in non-central areas are 6.4 per cent above the previous peak in January 2008.

'The rate of price growth in the central area has slowed, but for the non-central region, we have not seen an obvious decline in the rate of growth yet,' said Associate Professor Lum Sau Kim, who leads the group that compiles the index.

In 2009, price growth in the central region outpaced that in non-central areas. Home prices grew 27.3 per cent in the central region and 19.5 per cent in non-central areas. The overall index rose 22.2 per cent.

Analysts say that the moderation in the growth of prices - seen in both the NUS index and official Urban Redevelopment Authority index - is a sign that government measures to cool the market, implemented in September 2009 and February 2010, have reined in runaway price increases.

Official data released by URA last week showed that prices of non-landed properties increased 4.9 per cent in Q1, down from 7.2 per cent in the preceding quarter.

URA's index also showed that prices in the 'core central region', which roughly correlates to the central region classification used by the NUS index, rose 4.4 per cent in Q1 - faster than home prices in the 'outside central region', which rose 4.3 per cent.

URA's index showed that prices in the mid-level 'rest of central region' rose 7.9 per cent in Q1.

The numbers from URA and NUS differ because the two indices use different methods to track prices.

NUS's index, which is compiled by the Institute of Real Estate Studies, was launched in March to serve as a resource for developing property derivatives in Singapore.

It is computed using the market values of a basket of completed properties. Uncompleted projects are not included in the basket as price movements for such projects can be different from those in the rest of the market.

But the impact of new launches on the prices of completed properties in the vicinity is factored in.

The URA index, on the other hand, includes transactions at new launches and sub-sales. The differences mean that the two indices can throw up different numbers, market watchers have said.

Source: Business Times, 29 Apr 2010

Economy recovers 'lost' output to scale new peak

But CPI could hit 4% by Q4 this year, says MAS in nod to new pressures rising

Singapore's economy has more than regained ground lost in the downturn, with gross domestic product (GDP) now close to 3 per cent above its last peak in Q1 2008.

And the Monetary Authority of Singapore (MAS) says 'underlying drivers of growth are likely to remain intact', sustaining a high level of activity in the next few quarters, though growth momentum could slow.

However, a tightening labour market may add wage pressures to mounting inflationary ones. Consumer price index (CPI) inflation could thus hit 4 per cent by Q4 this year, MAS said in its Macroeconomic Review yesterday.

Two weeks back, MAS rolled out an unprecedented double tightening of monetary policy, citing firm recovery and emerging inflation risks. That same day, Singapore's official 2010 GDP growth forecast was raised to a range of 7-9 per cent.

A few private sector economists have already raised forecasts above this, on the back of unexpectedly strong Q1 data and soaring factory output.

Double-digit growth is quite possible, several economists told BT, since a forecast of 9 per cent assumes zero quarter-on-quarter GDP growth for the rest of the year. As long as Greece and Portugal's unfolding debt woes do not spread to the larger EU economies, financial or trade impact on Singapore's growth should be negligible too, they said.

MAS's report did note 'sovereign risk in some of the industrial economies' as a risk, but without much ado. 'Confounding initial expectations', global conditions have improved significantly, MAS said, presenting an outlook far more optimistic than its last review had.

Recent rapid expansion of the domestic economy also meant that the 9.5 per cent in output lost from peak to trough (Q1 2009) has been recovered. Q1 GDP is likely to come in at around $63 billion, some 2.8 per cent above what it was at the peak in Q1 2008.

And this year Singapore's growth will be driven by trade-related activity, which comprises manufacturing, wholesale trade, and transport and storage, the latest twice-yearly report said.

Recovery of the global IT industry, which has now moved from inventory restocking and the release of pent-up demand to a 'healthy balance of firm demand and well-managed supply', is crucial. Rising consumer demand for laptop PCs, notebooks and smartphones (especially in China and the US), and corporate demand, as companies upgrade ageing systems and servers, will support Singapore's electronic and precision engineering clusters, the report said.

And fresh capacity - such as that from four new biologics facilities by Roche, Lonza and GlaxoSmithKline (GSK); Shell and ExxonMobil's ethylene crackers; Applied Materials' semiconductor equipment plant; and REC's solar manufacturing complex - is also expected to offset the closure of Seagate's HDD plant and boost local manufacturing.

Asian demand, meanwhile, is expected to spur trade-related services like container activity in the shipping industry, and lift tourism receipts - all of which will offset residual 'pockets of weakness' in the chemicals, transport and construction sectors, the report said.

Though growth has been relatively subdued in the financial sector this year, gradual recovery will continue. Driving 70 per cent of its gains thus far were the core domestic lending and insurance segments, but recovery in the sentiment-driven cluster of stockmarket, brokerage and treasury, investment banking and fund management activity is now gathering pace too.

Also expected to quicken this year is the pace of job creation, although hiring demand will vary across industries, MAS said.

Labour supply constraints, seen in a resident unemployment rate now back down to pre-crisis levels, are likely to push wages up. This means 'industries that are unable to step up productivity quickly will face higher wage costs', which businesses might then pass on to consumers.

But about four-fifths of CPI inflation this year will likely stem from higher global oil and food commodity prices, and car prices, MAS said. These price pressures could build up to CPI inflation of 4 per cent by year- end. The official inflation forecast for this year is 2.5 to 3.5 per cent, and the projected MAS underlying rate (excluding private road transport costs), 2 per cent.

Source: Business Times, 29 Apr 2010

Sitting on a pot of 'collective' gold

Developers who snagged en bloc sites earlier have reason to smile

(SINGAPORE) While the market mulls over the impact that rule changes will have on collective sales, the spotlight has fallen on developers sitting on prime sites acquired during the previous en bloc boom in 2006-2007.

If the proposed changes make it tougher for prime freehold residential sites to make their way to the market, that will be good news to developers who are already holding such sites acquired earlier.

A compilation by property consultant CB Richard Ellis shows that developers currently have 26 sites in prime districts 9, 10 and 11 snapped up in collective sales in 2006 and 2007 where new projects are still to be launched.

These sites are planned for redevelopment into nearly 4,300 new homes. Outside the prime districts, developers could build a further 4,700 homes on 16 sites purchased through collective sales in 2006-2007

CapitaLand, City Developments Ltd (CDL), Wing Tai, GuocoLand and Overseas Union Enterprise are among the developers who bought prime district en bloc sale plots earlier. For instance, CapitaLand, together with its partners, acquired the Farrer Court plot and is planning a 1,715-unit redevelopment project. Hong Leong Group (including CDL) has exposure to six sites slated for development into over 600 units in locations like Leonie Hill, Anderson and Thomson roads.

These sites and projects will become more precious to developers and they will want to time their launch more judiciously if it gets tougher to replenish landbank in this segment through en bloc sales, say industry observers.

CB Richard Ellis executive director Jeremy Lake says: 'The proposed amendments are unlikely to facilitate the en bloc process significantly and as such, the number of collective sales coming to the market is likely to remain relatively limited.

'From a developer's point of view, it will be more difficult to replace landbank in prime areas so those who have such sites may think more carefully about the timing of launch of new projects on these sites as it will not be easy to find replacement land.'

Giving a more pessimistic take, a developer said: 'I don't think anyone would be too far wrong to say that en bloc sales are just about the only source of supply for prime district freehold sites. The proposed amendments to the Land Titles (Strata) Act will put the 'last nail in the coffin' for en bloc sales in the near future, and the market will be completely dried up for freehold District 9, 10, 11 land supply.'

This will create upward pressure on land prices, he added.

Putting things in perspective, DTZ senior director (investment sales) Shaun Poh says: 'En bloc sales in many developments have already been activated and these are unlikely to be affected by the proposed amendments. The supply from this source should be enough for the market for the time being.

'However, the future pipeline of en bloc sales will be affected.'

On Monday, the Ministry of Law released proposed amendments that will among other things make it harder to restart a collective sale within two years of a failed attempt. Any attempts to convene EGMs to appoint a sales committee during this period will require higher requisition levels from owners - 50 per cent by share value or total number of owners for the first re-try and 80 per cent for any subsequent attempts.

'Already it's not easy to secure requisitions for EGMs based on existing thresholds of 20 per cent by share value or 25 per cent of number of owners,' says DTZ's Mr Poh.

'Now that they're proposing to raise the threshold for restarting previously failed en bloc attempts, it's going to be more difficult for those who want to have another shot when, say, the market suddenly turns hot.'

On a more positive note, Credo Real Estate managing director Karamjit Singh notes that the instances of failed attempts that will be affected by the two-year restriction do not cover cases where owners' 80 or 90 per cent majority consent was secured but the Collective Sales Agreement (CSA) expired because a buyer could not be found in time.

'The projects that may be affected are likely to be those that had attempted an en bloc sale when they should not have, either owing to the project not being fundamentally 'enblocable' or the market was not on their side to an extent that the majority owners rejected the proposal,' he said.

MinLaw hopes its proposal will discourage repeated attempts at en bloc sales where there isn't enough support from owners.

Industry players lauded MinLaw's proposal to streamline the number of EGMs, which should speed up the process. 'We expect to see further en-bloc activity this year,' said Chris Fossick, managing director Singapore and South East Asia for Jones Lang LaSalle.

Others, however, complain that the the ministry is not doing anything to mitigate bottlenecks caused by the need to have lawyers witness signing of the CSA.

This has also jacked up legal costs. Some have suggested doing away with this requirement since those who sign are given a five-day cooling-off period.

Source: Business Times, 29 Apr 2010

Turnaround in tech sector spurs growth

It will help offset pockets of weakness in chemicals, construction sectors: MAS

THE rebound in trade is igniting a boom in sectors like manufacturing and wholesale trade which are in turn driving up the economy, the Monetary Authority of Singapore (MAS) said.

The remarkable turnaround in the global tech industry, in particular, will contribute heavily to economic growth, according to the regulator's macroeconomic review yesterday.

This will help offset the 'pockets of weakness' that remain in sectors such as chemicals and construction.

The global IT recovery has swept the Singapore economy to a faster-than- expected pace of growth.

Double-digit rises in electronics output, including a 73.8 per cent gain last month from a year ago, has led the manufacturing sector to grow 32.9 per cent in the first quarter.

The tech sector rally is now entering a period of sustainable growth where there is 'strong demand and well-balanced supply', the report said.

The first stage saw a recovery in supply as companies restocked their inventories early last year, while the second stage saw pent-up consumer demand catching up with supply at the turn of the year.

Consumers will be increasing their demand for laptops and smartphones, particularly in China and the United States, while many companies will be replacing computer systems later in the year.

This all means chip demand in particular will be boosted by their increased use in PCs and handsets. Industry associations tip a 20 per cent rise in global chip sales this year.

Chip production comprises more than half the electronics output here.

Manufacturing will be further bolstered by the opening of Applied Materials' semiconductor facility and Renewable Energy Corp's solar manufacturing complex this year.

These openings will help offset the eventual closure of the Seagate hard disk drive plant, the MAS said.

Other plants coming onstream include four new biologics facilities and the Shell and ExxonMobil cracker plants that will boost the pharmaceutical and petrochemicals industries.

Tourism will be spurred by regional visitors to the two new integrated resorts with an increase of more than $5 billion in receipts expected this year.

Shipping will see more container activity driven by intra-Asian trade, though an excess supply of ships may continue to dampen a recovery.

The financial sector has not recovered quite as rapidly but should continue on a recovery path this year.

Non-bank lending is expected to rise alongside the general economic recovery and drive financial sector growth.

Lending in manufacturing, trade and financial market activity should also rise in tandem with increased growth in these sectors, but inter-bank lending could grow slower as it is more linked to the performance of the G-3 economies of the US, the European Union and Japan.

It is not all smooth sailing though. The chemicals sector is facing a global downturn with demand for ethylene forecast to remain below its historical average growth rate over the next five years after a build-up of excess supply.

The construction industry will also take a breather in the next few quarters after the recent building boom. New contracts for large private industrial and commercial projects have continued to be weak.

Source: Straits Times, 29 Apr 2010

Optimism shines through in economic review

# Rebound stronger than that in previous downturns
# Economy now 2.8 per cent above its previous peak

ECONOMISTS looking for reasons to upgrade their Singapore growth forecasts into double-digit territory were presented with plenty yesterday.

A review by the Monetary Authority of Singapore (MAS) found that the economy's recovery from the global recession has been stronger than rebounds from previous downturns.

In fact, the economy has rallied so sharply that it is now about 2.8 per cent above its previous peak in the first quarter of 2008, the MAS said in its twice-yearly macroeconomic review yesterday.

And with the recovery broadening and global demand returning, the economy is likely to continue on a 'firm recovery path' for the rest of the year.

This is likely to raise hopes of higher economic growth than the Government's official forecast of 7 per cent to

9 per cent this year. Economists have suggested that even double-digit growth is not out of the question, as long as the economy stays on the recovery path in the coming months.

The MAS review seemed optimistic on this point. Although the pace of growth may moderate from the sizzling 32 per cent quarter-on-quarter rise in the first quarter of this year, 'the underlying drivers of growth are likely to remain intact, and the level of economic activity sustained at a high level', said the MAS.

While the Ministry of Trade and Industry said in February that the outlook for the second half of the year remains uncertain, the MAS yesterday said it is now less likely that there will be a significant pullback in output for the rest of the year.

Growth will be led mainly by improvements in IT manufacturing, trade-related services and tourism-linked activities, it added.

In tandem with the recovery, more jobs are likely to be created this year. But not all industries will hire at the same pace, the MAS said.

Prospects look brighter for job seekers in financial services, as banks expand in anticipation of high demand for corporate banking and wealth management services in the region.

A strong recovery in trade also bodes well for hiring in the wholesale trade and transport and storage industries, as well as in supporting industries such as business services, the MAS said.

On the other hand, workers in the retail, hotel and restaurant industries may be less in demand after the hiring blitz by the integrated resorts last year. Since these industries tend to recruit more foreign workers, employers may also be more directly affected by the impending hike in foreign worker levies and cut down on hiring.

Similarly, manufacturers and construction firms are unlikely to embark on enthusiastic recruitment drives this year in the light of the levy hike, said the MAS.

But in general, the labour market has already tightened significantly with the economic recovery and wages in some industries may soon go up.

While this sounds good for workers, higher wage costs will add to inflation, which is already expected to come in higher than normal this year. Consumer prices may grow by as much as 4 per cent in the fourth quarter - the highest level in almost two years - and are forecast to rise 2.5 per cent to 3.5 per cent for the whole year, the MAS said.

The main culprits are the prices of cars and the costs of commodities such as oil. Each could account for about two-fifths of inflation this year, the review said.

'Price increases are likely to be especially steep in the coming quarters, due largely to higher car prices, before moderating towards the end of the year.'

Anticipating these inflationary pressures, the MAS earlier this month tightened policy by letting the Singapore dollar appreciate in a 'modest and gradual' fashion.

Yesterday, it said the tighter stance was 'appropriate and timely, considering that the Singapore economy has recovered strongly from the global financial crisis, and is likely to continue on a firm recovery path'.

Source: Straits Times, 29 Apr 2010

Fined for renting shop

A 45-year-old man was fined $600 after he admitted to that he had rented out his shop space to an unlicensed massage business.

The case came to light in March last year, when police officers conducted checks at Oh Eng Siong’s shop in Fortune Centre and found three cubicles partitioned with curtains.

Investigations revealed that body massage services were being provided within these cubicles, out of the public’s view.

There was no valid massage licence on display.

Despite being warned by the police, Oh continued to rent out his shop space to the unlicensed massage business – a fact police discovered when they conducted checks a month later.

The owner of the massage business will be dealt with separately.

Source: Today, 29 Apr 2010

Two prime freehold commercial sites up for public tender

The red-hot property market has prompted the sale of two prime freehold commercial buildings.

One is a four-storey building at 23 and 25 Kampong Bahru Road, opposite the Singapore General Hospital. The price is $16 million, or $1,421 per square foot of gross floor area. The site area is about 3,402 sq ft, with a total strata area of some 11,259 sq ft.

The boutique building has been set aside for commercial use, but the vendor is seeking approval to convert it to hotel use.

Another building up for sale is another four-storey building at 213 Upper Thomson Road. It is set amid an established, affluent private residential enclave near the Singapore Island Country Club.

The asking price for the building is $5.5 million, which works out to $823 per square foot of gross floor area. This building has a site area of approximately 2,446 sq ft and a gross floor area of about 6,679 sq ft.

The proposed developments for the property are corporate offices, showroom space and F&B businesses.

CB Richard Ellis is the marketing agent for this public tender, which closes on May 20.

Source: Today, 29 Apr 2010

Office market is ‘bottoming out’

Raffles Place is not likely to lose its lustre as a business district, said Ms Lynette Leong, chief executive officer of CapitaCommercial Trust (CCT), which has three office properties in the area.

Despite some financial institutions moving to Marina Bay, she is seeing interest from existing tenants and potential tenants for more office space in the Trust’s Raffles Place properties, which include One George Street, HSBC Building and Six Battery Road.

“We believe the enlargement of the Central Business District by the extension of its boundaries … to encompass Marina Bay is well planned to meet this anticipated growing office demand,” said Ms Leong.

CCT, which held its AGM yesterday, assured the 230-odd unitholders present that the office market is bottoming out and CCT intends to ride the upside of the recovery through its “well-located properties and financial flexibility”.

“If the property has reached an optimal stage of its life cycle, then we will divest the asset and reinvest the sale proceeds into assets which have got better potential for upside,” said Ms Leong of CCT’s portfolio reconstitution strategy.

Under this strategy, CCT recently sold one of its assets, Robinson Point, to a private fund run by AEW Asia for $203.25 million.

Besides its properties in Raffles Place, CCT also counts Wilkie Edge, Bugis Village, Starhub Centre, Raffles City, Golden Shoe Car Park, Market Street Car Park and Capital Tower in its Singapore portfolio.

However, Ms Leong said with 4.5 million sq ft of office space coming on stream in the next two years, there was uncertainty clouding the recovery of office rentals.

CCT also told unitholders that as of the end of last month, the trust had tenants committed to renew close to 8 per cent of the leases due, leaving a balance of about 16 per cent of leases unrenewed. Distribution per unit for Q1 rose to 1.93 cents per unit from 1.62 cents in the corresponding period last year.

Source: Today, 29 Apr 2010

Wednesday, April 28, 2010

Govt to take fundamental re-look at real estate industry

The government is taking a “fundamental re-look” at the entire real estate industry.

Speaking in Parliament, National Development Minister Mah Bow Tan said this includes strengthening measures to curb unscrupulous practices and abuses.

Among the measures, the government plans to plug a loop hole on using public housing flats as collateral for loans.

Public housing flats are not meant to be used as security for any loans other than the mortgage to finance the unit’s purchase.

Yet, Parliament was told that some owners have fallen prey to such abuses.

“One current practice that is very common is that of credit companies filing caveats against HDB flat owners who had borrowed money from them at very high interest rates, so that when these HDB owners sell their flats, the credit card companies will get the first bite,” said Halimah Yacob, Member of Parliament (MP) for Jurong GRC.

In response, the National Development Minister said the government is working to plug the loophole.

“Unfortunately there has been a loop hole that has allowed legal money lenders to lodge such caveats, that is the reason why my ministry is now looking at how we can prevent this from happening,” said Mr Mah.

“This is going to be done even before the regulations for the real estate agents are finalised. I am treating it as a matter of urgency because it is obvious there have been cases of abuses, people have been exploited, and in this regard the role of some rogue estate agents should also be examined.

“We have received feedback that some moneylenders provide loans on the condition that the borrowers repay the loans from the sales proceeds of their HDB flats. We are currently working with the relevant authorities on appropriate measures to curb such abuses.

Complaints against real estate agents have risen in the past few years, according to figures from the Consumers Association of Singapore.

There were 1,079 cases last year, higher than 1,100 complaints in 2008 and 1,055 in 2007.

Meanwhile, the Inland Revenue Authority of Singapore, which is the licensing body for real estate agencies, received 154 complaints against agents in the past three years.

Mr Mah said existing rules are not enough to deal with potential abuses by errant property agents. He added that the industry needs to be better regulated, especially in the current climate where there are temptations for some agents to take short-cuts.

He said: “We are looking into whether we should have a more formal form of registration for real estate agents, what are the mediation avenues available, if not what are the dispute resolutions mechanisms available and if not what are the punishments that can be meted out to those who flout the rules.”

A new regulatory framework is expected to be announced shortly.

Source: Channel News Asia, 28 Apr 2010

More en bloc sale activity expected as developers cater to mid-market segment

Analysts expect more en bloc sales activity from the city fringes and East Coast areas as developers cater to a growing mid-market segment.

They were responding to proposals tabled in Parliament on Monday to smooth out the collective sales process.

The new rules also seek to address the role of the Strata Titles Board and balance the interest of property owners.

Collective sales have bounced back this year after a poor showing last year when only one deal was done.

So far, four developments have been sold with another deal at Margate Road expected to be completed this week.

These five sales combined are worth S$275 million versus the lone S$101 million deal done for the whole of 2009.

Going forward, market watchers expect between 20 and 40 en bloc deals to take place this year.

Donald Han, managing director, Cushman & Wakefield, said: “I think what we’re seeing now is more on the fringe of the central areas is looking more promising right now. Those we call the rest of the central core area. The East Coast area is looking interesting right now.

“Mainly there is a combination of investors, developers who are eager to come in and develop the mid-end segment of the market.”

Observers said such developments will likely attract small-to-mid sized developers that are currently being priced out of the government land sales programme where land prices rose up to 20 per cent last year.

Observers said they’re currently seeing appetite for en bloc sales worth under S$100 million on average and land sizes of around 15,000-50,000 square feet.

Karamjit Singh, managing director, Credo Real Estate, said: “There’s also a vacuum to satisfy larger developers demand for land in mid and prime sectors of the market because government land sale programme basically satisfies developers’ demand in mass market locations.”

Market watchers expect overall land prices to rise around five to 15 per cent this year.

They said good conditions and demand for property will drive developers into the collective market.

Source: Channel News Asia, 28 Apr 2010

Govt measures were not intended to stop price rise: says Minister

When the Government introduced measures to cool the property market in February, the steps were not intended to stop prices from rising.

Instead, they were calibrated to temper exuberance in the market and pre-empt a property bubble from forming, Minister for National Development Mah Bow Tan told Parliament yesterday.

Overall, property prices increased 5.6 per cent in the first quarter this year compared to 7.4 per cent in the fourth quarter of last year.

Recent data for public housing show signs of moderation. Resale prices registered slower quarter-on-quarter increase and the median cash over valuation has also stabilised, said Mr Mah.

MP for West Coast GRC Ho Geok Choo had asked what other measures MND intend to introduce as public and property prices continue to rise despite recent cooling measures.

Mr Mah informed the house that the government would “inject an even larger supply” of private housing through the Government Land Sales programme in the second half of the year if demand continues to be strong. Details of this will be announced in June.

Since January, the Housing and Development Board has launched 5,100 flats.

Another 7,400 units will be launched between May and September.

Source: Today, 28 Apr 2010

Changi site draws top bids at lower end of estimates

THE tender for a 99-year leasehold residential site at Upper Changi Road North/Flora Drive closed yesterday on a more subdued note than other recent tenders.

The 3.07 hectare site, which can yield up to 390 apartments, drew bids from six developers. Hong Leong Group unit Tripartite Developers made the top offer of $148.3 million or $321 per sq ft per plot ratio (psf ppr).

A tie-up between units of Far East Organization and Orchard Parade Holdings followed close behind, with a bid of $143.2 million or $310 psf ppr.

Frasers Centrepoint was in third place with a bid of $140 million or $303 psf ppr. Sim Lian, Ho Bee and BBR-Tagore also took part in the tender.

The top bids were towards the lower end of consultants' projections at $300-$400 psf ppr. The site's distance from an MRT station could be a factor in this.

DTZ South-east Asia research head Chua Chor Hoon suggested the large supply of state land may also have dampened competition. With the release of more government land sale sites recently, developers have more choice and could be 'slightly more comfortable', she said.

Last month, the tender for a residential site at Tampines Avenue 1/Ave- nue 10 closed with eight bidders in the fray. Sim Lian made the highest offer of $302 million or $421 psf ppr.

In the latest tender for the Upper Changi Road North site, Hong Leong's top bid is likely to translate to a breakeven cost of $650-$700 psf, said Colliers International investment sales executive director Ho Eng Joo. The selling price could range from $750-$800 psf.

Mr Ho said Hong Leong is familiar with the Pasir Ris area. It is behind seven other projects in the vicinity with names from A to G, such as Edelweiss Park, Ferraria Park and The Gale.

At The Gale - which is a freehold development - units have been sold for $743-$833 psf this month, going by caveats lodged.

Developers hoping for a project in Pasir Ris can turn to another site on the reserve list. The Housing & Development Board has made a 99-year residential plot at the junction of Pasir Ris Drive 3 and Pasir Ris Drive 4 available for application from today.

The site, which is on the reserve list, is about two hectares and can yield an estimated 380 units. It is near Pasir Ris Park and Downtown East, and is surrounded by other parcels of state residential land.

Source: Business Times, 28 Apr 2010

Temporary tax credits lift US home prices

MIAMI: United States home prices in February posted their first annual increase since the end of 2006, pumped up by temporary tax credits for home buyers. Another report showed that consumers in the US turned more optimistic this month as the growing economy raised hopes that jobs will become available.

However, although the Standard & Poor's/Case-Shiller home price index released yesterday eked out a 0.6 per cent gain, it was half the increase analysts had expected.

The data underscored the mixed and fragile nature of the housing recovery. Nationally, home prices are up more than 3 per cent from the bottom in May last year, but are still 30 per cent below the May 2006 peak.

And there is a 'risk that home prices could decline further before experiencing any sustained gains', cautioned Mr David Blitzer, chairman of the S&P index committee.

'It is too early to say that the housing market is recovering.'

Prices are getting a lift from temporary tax credits that expire at the end of this month. First-time buyers can claim up to US$8,000 (S$11,000) and home owners who buy and relocate can get up to US$6,500.

The Case-Shiller index measures home price increases and decreases relative to prices in January 2000. The base reading is 100; so a reading of 150 would mean that home prices have increased 50 per cent since the beginning of the index.

A rebound in prices is considered necessary to boost consumer optimism and help revive the economy. A home is the largest and most important financial asset for most Americans. So, as values climb, home owners feel wealthier and more comfortable spending.

For home owners who owe more on their mortgages than their properties are worth, rising prices rebuild equity.

Americans' confidence in the economy rose this month to the highest level since September 2008, just as the financial crisis escalated, private research group The Conference Board reported yesterday.

The Conference Board's confidence index rose to 57.9, exceeding all forecasts of economists surveyed by Bloomberg News and was the highest level since Lehman Brothers collapsed in September 2008.

The upbeat reading, combined with bullish earnings reports this week from companies ranging from Whirlpool Corp to UPS offered more hope that the economic recovery is gathering steam.

But unlike US businesses, which whittled down inventories during the recession, the housing market is suffering from a backlog of foreclosures. And as banks unload these properties en masse, it could overwhelm demand and push prices down again.

'The bottom line is that we're still fighting an uphill battle against a shadow inventory of foreclosures,' said Mr Daniel Alpert, managing director of Westwood Capital.

Still, it is 'highly unlikely' that price declines will approach the slide suffered in late 2008 and early 2009, wrote Mr Joshua Shapiro, chief US economist for MFR.

Source: Straits Times, 28 Apr 2010

Borrowers told to act as Sibor hits all-time low

Individuals and corporates asked to hedge their interest rate exposures now

Singapore's key interest rate has crashed to all-time lows and banks have been quick to capitalise on it.

The key three-month Sibor or Singapore interbank offered rate plunged to 0.546 per cent yesterday, crashing through the previous historical low of 0.56 per cent in June 2003.

DBS, the nation's biggest mortgage player, is launching today a five-year fixed-rate home loan package which charges 2.25 per cent a year.

The bank's popular three-year fixed-rate package remains unchanged at 1.99 per cent a year.

Jeremy Soo, DBS Bank managing director and head, consumer banking group, Singapore, said customers should understand how interest rates will impact their repayment.

'Based on the last 10 years' trend, three-month interbank rate peaked at 3.56 per cent in January 2006, and has shown to be volatile although it has stayed low for the last 1-2 years,' he said.

'This is one of the reasons why our three-year fixed-rate continues to be very popular with our customers, especially since our three and five-year fixed- rates are at a historical low,' said Mr Soo.

DBS is offering two five- year fixed-rate packages. The cheaper package at 2.25 per cent is sold bundled with mortgage insurance called My Protector Mortgage. The standalone package charges 2.5 per cent a year. DBS has offered five-year fixed-rate packages before on requests.

Many bankers said the three-month Sibor is near the bottom and that it is a good time for corporates to hedge their interest rate exposure.

Said Wee Wei Min, OCBC Bank head of treasury advisory: 'As long-term interest rates are close to historical lows, we are advising customers who have floating-rate loans to hedge their exposures. They can choose to hedge part or all of these exposures.'

Although this seems to be an obvious choice, some customers may choose to remain unhedged.

'This is because the short end rates are even lower and they will incur immediate high negative carry (difference between the three or six-months rates and the long end rates) when they lock in long-term fixed rates.'

Ms Wee said there are other hedging solutions like buying interest rate caps - akin to paying premiums to buy insurance to protect themselves from rising interest rates.

'When rates remain low, the customer enjoys low interest rates; and when rates go up, the customer will have protection,' she said.

'It's close to the bottom, it can't go to zero. We're still an emerging market where there's a premium,' said Jimmy Koh, United Overseas Bank economist.

US interest rates are at zero, but that's not possible for markets like Singapore despite their strong fundamentals. Usually, US interest rates are higher than Singapore interest rates by about 300 basis points.

'We've told corporates to hedge their interest rate exposures now,' said Mr Koh. The continued appreciation of the Singapore dollar is attracting inflows, which in turn pressures the local interest rate.

Investors also buy the Singapore dollar as a proxy for the yuan, which is expected to be revalued although no one knows when. But the yuan cannot be freely traded, unlike the local unit.

'If you like the yuan, you use the Sing dollar as proxy,' Mr Koh said.

The question is: how long before interest rates turn? Most say by year- end, as they expect the US to hike its rates then.

Gerard Feng, treasurer at Citibank Singapore, projects that three-month Sibor will rise to 0.8 per cent by year-end.

Selena Ling, OCBC Bank head of treasury and research unit, is looking at three-month Sibor rising gradually to reach one per cent by end-2010, 'on the assumption that liquidity management will likely take on an even more prominent function to drain excess liquidity conditions from further fuelling any potential asset bubbles in the making'.

Source: Business Times, 28 Apr 2010