Friday, October 19, 2007

Another Japan Reit Seeks Listing On SGX

Source : The Business Times, October 19, 2007

APL Japan Trust hopes to raise up to $514.9m as it submits prospectus

APL Japan Trust lodged a prospectus with the Monetary Authority of Singapore yesterday, making it the second Japan-based real estate investment trust (Reit) to seek a listing on the Singapore Exchange (SGX) this month.

APL Japan Trust will offer 391.32 million units to institutional and other investors in Singapore and 20.59 million units to the public here at between $1.05 and $1.25 per unit.

Based on the target price, it hopes to raise between $432.5 million and $514.9 million.

JPMorgan is the sole financial adviser for the offering, while JPMorgan and Lehman Brothers International are joint global coordinators and joint bookrunners. UOB Asia is international co-lead manager and coordinator of the public offer.

The Reit sponsor, Asia Pacific Land, is a Japanese real estate company.

It has assets of more than 100 billion yen (S$1.26 billion) under management, as well as development projects totalling 159,000 square metres across Japan.

APL Japan Trust will comprise nine commercial buildings in Tokyo, Yokohama and Nagasaki initially. These buildings have an appraised value of $838.8 million and are primarily for retail use plus 4 per cent for office space.

According to the prospectus, APL Japan Trust forecasts an initial distribution yield of 4.34 to 5.16 per cent per unit and cash distribution growth of about 7 per cent.

The Reit has right of first refusal to five acquisition and development pipeline platforms, including four existing pre-stabilised assets in APL Group totalling about 95,000 sq m and and projects under development of about 61,000 sq m in total.

Earlier this month, Saizen Reit lodged its prospectus. It hopes to raise $244.4 million in an initial public offering at between $1 and $1.08 per unit.

Saizen Reit's initial portfolio will comprise 146 residential buildings in 12 cities across Japan and is forecast to pay dividend yields of between 6.09 and 6.51 per cent per unit this year and 5.29 to 5.65 per cent next year.

CapitaRetail China Trust In $336m Deal

Source : The Business Times, October 19, 2007

CAPITARETAIL China Trust (CRCT) - the first pure-play China retail real estate investment trust (Reit) in Singapore - has entered into a deal to buy a mall in Beijing for $336 million from CapitaRetail China Incubator Fund (CRCIF).

Xizhimen Mall: The Beijing mall has a gross rentable area of 73,857 sq metres. This is CRCT's first acquisition since its listing on the Singapore Exchange in December 2006

Related Link -
CapitaRetail China Trust's news release

Located in Xizhimen in Xicheng district, Beijing, Xizhimen Mall is part of Xihuan Plaza, and has a gross rentable area of 73,857 sq metres. This is CRCT's first acquisition since its listing on the Singapore Exchange in December 2006.

CRCIF is a US$450 million private equity fund sponsored by CapitaLand Limited to buy completed malls in China. CapitaLand holds a 30 per cent stake in the fund, while the remaining equity is held by pension funds, insurance companies and corporations. CRCT enjoys the first right of refusal to purchase malls held by CRCIF.

Commenting on the purchase, Lim Beng Chee, CEO of CapitaRetail China Trust Management (CRCTM), said: 'Sitting atop one of Beijing's only two key transportation hubs with an average commuter flow of 300,000 on weekdays and 600,000 on weekends, Xizhimen Mall is well-positioned to capture the tremendous daily pedestrian traffic to the mall.'

He added that Xizhimen Mall along with the trust's other retail malls will position CRCT favourably to capture the city's strong retail growth opportunity which has averaged about 12 per cent annually in the last decade. CRCTM is the manager of CRCT.

Post-acquisition, CRCT's portfolio asset size will grow from its current portfolio of seven properties valued at $763.7 million to $1.16 billion.

The other properties are Wangjing Mall, Jiulong Mall and Anzhen Mall in Beijing, Qibao Mall in Shanghai, Zhengzhou Mall in Zhengzhou, Jinyu Mall in Huhehaote, and Xinwu Mall in Wuhu.

Xizhimen Mall was valued at $338.4 million and $340 million respectively by two independent property valuers, Colliers International (Hong Kong) Limited and Knight Frank Petty Limited.

Hsuan Owyang, chairman of CRCTM, said the trust is on track to achieve its target portfolio size of $3 billion by 2009.

Xizhimen Mall is expected to achieve a net property income yield (NPI yield) of 5.7 per cent next year, based on an average mall occupancy rate of 88.7 per cent, and an NPI yield of 6.4 per cent in 2009, assuming 100 per cent committed occupancy rate.

The proposed acquisition, which is subject to conditions including unitholders' approval, includes a conditional agreement for CRCT to buy the planned extension of the current Basement 1 of the mall from the original developer of Xihuan Plaza - Beijing Finance Street Construction Development.

The extension would increase the GRA of Xizhimen Mall by 15.6 per cent and would provide direct pedestrian connectivity to the underground Mass Rapid Transit station. The extension is expected to increase overall shopper traffic and enhance shopper flow within the mall.

To help fund the purchase, the trust said it is looking to raise about $280 million from an equity fund raising. It expects to fund the remaining purchase consideration through borrowings.

CapitaRetail China Trust, a shopping mall trust managed by Singapore developer CapitaLand

CapitaMall's Q3 Income Rises 29% To $53m

Source : The Business Times, October 19, 2007

CapitaMall Trust, Singapore's largest property trust by market capitalisation, on Friday posted a 29 per cent increase in quarterly distributable income due to higher returns from its portfolio of shopping malls.

The trust, controlled by developer CapitaLand, said it earned net distributable income of $53.2 million (US$36.44 million) for the three months ended September, higher than the $41.2 million it had earned in the same period last year.

CapitaMall said it would pay unitholders 3.4 Singapore cents per unit for the quarter. -- REUTERS

Related Link -
CapitaMall Trust's news release
Financial statement
Presentation slides

A-Reit Q2 Income Up 15%

Source : The Business Times, October 19, 2007

Ascendas Real Estate Investment Trust (A-Reit), Singapore's third-biggest property trust by market value, posted on Friday a 15 per cent rise in quarterly net income, boosted by rising business-parks rents.

A-Reit earned distributable net income of $46.5 million (US$31.8 million), or 3.51 Singapore cents per unit, for its fiscal second quarter to the end of September.

This compares with $40.5 million in distributable income in the same period a year ago.

A-Reit competes against commercial and industrial property-based trusts Mapletree and CapitaCommercial Trust among Singapore-listed property trusts.

The trust is managed by Ascendas-MGM Funds Management Ltd, a joint venture between Singapore's Ascendas Investments and Australia's Macquarie Goodman Industrial Management Ltd. -- REUTERS

Related Link -
A-REIT's press release
Financial statements
Presentation slides
Supplementary information

嘉茂中国产业信托基金 3.36亿购北京西直门商场

《联合早报》Oct 19, 2007

嘉德置地的嘉茂中国商用产业信托基金(CapitaRetail China Trust)以3亿3600万元买下北京的西直门商场。这将是它自去年12月8日在本地上市以来首个收购活动。

这座新商场原本归嘉德置地属下私人零售地产基金的嘉德商用中国孵化基金(CapitaRetail China Incubator Fund)所有,是它在北京管理的第四个零售商场。嘉德置地持有该基金的30%股权。



嘉茂信托管理主席欧阳勳表示,这项收购将使集团的投资组合资产值(portfolio asset size)自目前的7亿6370万元增至11亿6000万元。集团预计在2009年达到30亿元的目标。


A-Reit In Development Projects Totalling $277m

Source : The Business Times, 19 October 2007

ASCENDAS Real Estate Investment Trust (A-Reit) yesterday announced new investments for development projects at Changi Business Park and in Jurong totalling $277 million, including about 42,000 square metres of built-to-suit (BTS) business park space at Changi Business Park pre-committed to a 'leading international financial institution'.

The trust did not identify the party but market watchers said that it may be Citibank.

Giving details of A-Reit's new investments, the trust's manager Ascendas-MGM Funds Management said that they include the development of Changi Business Park's Plot 8 into three business park buildings - two BTS buildings and a multi-tenant block with an amenity podium. These buildings are on land of 29,864 sq m with 30 + 30 year tenure and will have a combined gross floor area of 74,660 sq m (803,633 sq ft).

The BTS portion pre-committed to the financial institution will be built in two phases, the first slated for completion in the first quarter of 2009 and the second in Q4 2010.

The multi-tenant building, with a gross floor area of about 33,000 sq m, will have about 6,000 sq m of amenity space to cater to the increasing population at Changi Business Park. The project is expected to be ready in second-half 2009.

The total cost for all phases of the development is $191 million.

Over at Pioneer Walk in Jurong, A-Reit will develop industrial space on a 36,600 sq m plot with a 30-year tenure.

On completion, the project will have 80,609 sq m of lettable floor area in two blocks of six-storey, ramp-up high-specification space.

Costing $86 million, the development will be built in two phases and is scheduled for completion in Q3-Q4 next year.

Eighty per cent or 28,376 sq m of phase 1 space has been pre-committed and 40 per cent or 18,396 sq m of phase 2 is under offer.

A-Reit also said yesterday that it renewed and signed new leases, including expansions, for a total net lettable area of 71,433 sq m in the quarter ended Sept 30. The overall portfolio occupancy rate increased to 98.3 per cent as at that same date, from 97.2 per cent a year earlier.

School In East Available For Short-Term Office Use

Source : The Straits Times, Oct 19, 2007

SINGAPORE Land Authority (SLA) has put up a former school in the east for short-term office use.

The tender for the former Upper Aljunied Technical School at 102 Upper Aljunied Road opens on Friday, the SLA said in a statement.

'These properties may command more competitive bids than the central locations, because they are spacious with attractive amenities and in choice locations within matured housing estates,' SLA's Assistant Chief Executive of the Land Operations Group Simon Ong said.

Sitting on a land area of more than two football fields, or about 19,704 sq m, the site has five blocks of between one and four storeys, and has a Gross Floor Area of 7,722 sq m.

Tenancy is renewable up to 2012.

SLA said property and leasing companies have expressed interest in taking up the site.

'Rental hikes in the office market have prompted more firms to consider cheaper locations further from town. SLA will identify more of such non-CBD and suburban sites for the market,' Mr Ong said.

NParks To Create Healing Garden Next

Source : The Straits Times, Oct 19, 2007

It will be first of 5 thematic ones added to Botanic Gardens

A GARDEN with healing plants will be the next new feature of the Singapore Botanic Gardens.

It is the first of five new thematic gardens the National Parks Board (NParks) will spend $30 million on, over the next four years.


Less than three weeks after it launched Asia's first children's garden, NParks announced yesterday it will create another 9.7ha of gardens - equivalent to more than 20 football fields - to bring the Botanic Gardens grounds from the current 54ha to 63.7ha.

The Healing Garden will be ready by the first half of 2010. The 3ha area, conceptualised in the shape of a seated human, will allow visitors to walk among medicinal plants that heal different parts of the body.

Director of the Botanic Gardens, Dr Chin See Chung, by way of example, said if visitors 'walk where the head is, they will see the willow, whose bark produces aspirin'.

This centrepiece, visible from the air, ties in with NParks' aim to encourage recreation and tourism with a focus on education and research.

Besides the Healing Garden, there will be a Fragrant Garden, Terrace Garden, Foliage Valley and Ethnobotany Garden.

The Ethnobotany Garden will have plants that are important in regional cultures. These 'could be the plants that families grow in their gardens that are used for cooking or medicine. For the Malays, this might be lemongrass, for Indians, the neem tree, and for the Chinese, the pomegranate,' Dr Chin said.

A cluster of bungalows dating to the 1930s will be conserved to house horticultural and arboricultural education centres and non-governmental organisations.

The Orchid Society of Southeast Asia and the South-east Asian headquarters of the Botanic Gardens Conservation International will move in soon. The Singapore Environment Council has already set up office there.

When Botanic Gardens MRT station at the north-west tip of the gardens is ready by 2011, the makeover by NParks should be complete.

Already, the gardens see three million visitors a year and more are expected with the station's opening. By then, more than $130 million will have been spent redeveloping them since 1990, noted Dr Chin.

'The gardens have been a part of Singapore since 1859. It is a part of our heritage which everyone can identify with,' he said.

A Beijing Mall For CapitaLand

Source : TODAY, Friday, October 19, 2007

CapitaRetail China Trust buys Xizhimen Mall for $336 million

CAPITARETAIL China Trust (CRCT), CapitaLand’s retail property business unit in Beijing, said yesterday that it was buying a shopping mall in the Chinese capital for $336 million — its first acquisition since the Reit’s listing on the Singapore Exchange last year.

The seven-storey Xizhimen Mall (picture) has a gross rentable area of 73,857 sq m and has an 87.1-per-cent occupancy rate as of Oct 11.

Based on the property price and an average occupancy rate of 88.7 per cent, Xizhimen Mall is expected to achieve a net property income yield of 5.7 per cent in forecast year 2008.

The committed occupancy rate is expected to reach close to 100 per cent in coming months.

CRCT will purchase the asset from CapitaRetail China Incubator Fund, which is 30-percent owned by CapitaLand.

Expected to be completed by January next year, the transaction will grow its portfolio asset size from the current $763.7 million of seven properties to $1.16 billion.

“With the secured and proprietary pipeline of quality assets from CapitaLand-sponsored private China retail property funds, as well as from potential direct acquisitions from the market, CRCT is on track to achieve its target portfolio size of $3 billion by 2009,” said Mr Hsuan Owyang, chairman of the trust manager.

The mall commenced operations on Sept 15 and was officially opened by Deputy Prime Minister Wong Kan Seng and Vice-Mayor of Beijing, Mr Chen Gang, last Saturday.

CRCT’s shares closed flat at $2.78 yesterday.

Asia-Pacific Land To List Trust

Source : TODAY, Friday, October 19, 2007

Tokyo-based Asia-Pacific Land plans to list Singapore’s first commercial real estate trust focused on Japanese property, a vehicle that will hold 65 billion yen ($820 million) in initial assets.

All of the trust’s initial assets will be bought from Asia-Pacific Land, which has invested in Japanese real estate for over 10 years.

Home To 67,000 Millionaires

Source : TODAY, Friday, October 19, 2007

And typical S'porean is better off than peers in Asia Pacific: Report

NOT only is the average Singaporean better off than his or her counterparts in the Asia-Pacific economies, the typical millionaire here is also wealthier than his or her peers in the region.

Last year, the average assets of a high-net-worth individual (HNWI) in Singapore was US$4.9 million ($7.2 million), higher than the regional average of US$3.3 million, said a wealth manager at a media briefing for the 2007 Asia-Pacific Wealth Report released yesterday by Merrill Lynch and Capgemini.

HNWIs are people who have more than US$1million in assets, excluding their primary residence.

These individuals in Singapore constitute 2.6 per cent of the Asia-Pacific HNWI population, but contribute almost 4 per cent, or US$320 billion, to the region's HNWI wealth.

Singapore is home to the fastest-growing millionaires club in the region, as the number of HNWIs rose 21.2 per cent to about 67,000 last year.

These millionaires are also getting richer. The average worth of their assets was US$4.7 million in 2005 — US$200,000 less than last year.

According to the report, the wealth of these HNWIs, comprising Singaporeans and permanent residents, mostly derives from business investments and inheritance.

But they also "built their wealth from investing in real estate and equities, cashing in the property boom of high-end units," said Mr Kong Eng Huat, market managing director at Merrill Lynch.

They grew their wealth by investing 36 per cent of their financial assets in real estate and 26 per cent in equities, the report said.

"The sophisticated investors were the early movers and they were beginning to allocate their assets into real estate even before it went up in a big way," said Mr Kong.

"These people reduced their asset allocation in alternative investment instruments like hedge funds because in the last two years, the real estate and equities market were outperforming the hedge funds."

The HNWIs in Singapore also tended to favour cash instead of fixed income, according to the report.

Among the fabulously wealthy, there are 928 individuals here worth more than US$30 million each.

Known as ultra HNWIs, they make up 1.39 per cent of the HNWIs in Singapore, above the global average of 1 per cent. Said Mr Kong: "More banks are beginning to organise teams to penetrate this market segment."

Strong economic growth coupled with high savings and strong returns from equities boosted wealth across the Asia-Pacific region. The number of HNWIs in the region rose 8.6 per cent to 2.58 million last year.

This growth is likely to be sustained despite recent volatility in the markets.

Swiss bank UBS told Today that liquid assets held by wealthy individuals in the region excluding Japan were predicted to grow by 9.7 per cent annually until 2009, compared to less than 6 per cent globally over the same period.

Singapore Botanic Gardens To Get New Attractions In 2011

Source : Channel NewsAsia, 18 October 2007

Visitors to the Singapore Botanic Gardens can expect many new attractions at the Gardens in four years' time.

Among them is a Healing Garden with hundreds of species of plants.

There will also be a Fragrant Garden that promises to not only look but also smell great.

Visitors can also look out for an Ecowalk which will connect visitors from the MRT Station.

The attractions are expected to open in phases in 2011 and will cost S$30 million.

They are being developed on almost 12 hectares of land around the Botanic Gardens.

According to NParks, the layout of the attractions has been carefully planned to provide new plant displays, while preserving the unique character of the Gardens. - CNA/ms

Japan's APL Plans To Raise Up To S$515m Through Listing Of REIT

Source : Channel NewsAsia, 18 October 2007

Japan's Asia Pacific Land is planning to raise up to S$515 million through a listing of its property trust on the Singapore Exchange.

It is offering nearly 412 million units through a placement tranche and a public offer.

The units are expected to be priced at between S$1.05 and S$1.25 each after a bookbuilding process.

The public offer will comprise about 20.6 million units.

The initial portfolio of the REIT will comprise nine retail and office properties in Japan.

These properties are worth 66 billion yen or S$832 million. - CNA/ms

A-Reit To Develop S$277m Worth Of New Property Projects

Source : Channel NewsAsia, 18 October 2007

Ascendas REIT has committed S$277 million to develop new projects in Singapore.

The projects are two business parks at Changi Business Park that will be completed in three phases as well as an industrial development at Pioneer Walk in Jurong.

The S$191 million Changi project comprises two build-to-suit buildings and a multi-tenanted block with an amenity podium.

These buildings will be sited on a 30,000-square-metre plot with a 30+30 years' lease. They have a combined gross floor area of 75,000 square metres.

The Pioneer Walk project is a partial build-to-suit facility. It will be built on a 36,600-square-metre site with a lease of 30 years. When completed, it will have a lettable floor area of over 80,000 square metres. - CNA/ir

CapitaRetail China Trust Makes First Acquisition Since Listing

Source : Channel NewsAsia, 18 October 2007

CapitaRetail China Trust (CRCT) has agreed to buy a mall in the Chinese capital of Beijing.

The S$336 million purchase will mark CRCT's first acquisition since its listing on the Singapore Exchange last year.

Xizhimen Mall has a gross rentable area of almost 74,000 square metres.

The deal will grow CRCT's portfolio asset size to almost S$1.2 billion, up from the current S$763.7 million.

CRCT is aiming to build its portfolio to S$3 billion by 2009.

The property is expected to achieve a net property income yield of 5.7 percent in 2008. - CNA/ms

CapitaRetail China Trust, a shopping mall trust managed by Singapore developer CapitaLand


《联合早报》Oct 19, 2007


房地产代理Newman & Goh说,业主希望,这栋36层楼的永久地契产业的售价能达到6亿7千万300万元,或相等于每平方英尺2千666元。


S'pore's Wealthy Ahead In Investible Assets: Report

Source : The Business Times, October 19, 2007

They allocate 36% of funds to property, next to Korea, say Merrill, Capgemini

THE average high net worth individual (HNWI) in Singapore has US$4.9 million of investible assets, slightly more than the regional and global average, the Merrill Lynch-Capgemini Asia Pacific Wealth Report has found.

Globally, HNWIs have investible assets of about US$3.9 million, while the regional average at end-2006 was US$3.3 million.

Singapore's wealthy allocated most of their investible funds - 36 per cent - to real estate. This was second only to South Korea, where the wealthy invested 42 per cent in property.

Other allocations by Singaporeans were 18 per cent cash and 26 per cent equities.

On real estate, Merrill Lynch Asia-Pacific investment strategist Stephen Corry told reporters yesterday the region's property cycle is 'closer to the bottom than to the top'.

A recent report by the firm found the boom is still in its early stages and said prices do not appear excessive relative to income. Asian property prices have also lagged global prices.

But Mr Corry said there are two exceptions: 'High-end Hong Kong and Singapore properties are looking expensive. I actually see good value in the mass residential side. The price gap between high-end and lower-end property has reached unprecedented levels.'

The Merrill Lynch-Capgemini Asia-Pacific wealth report aims to give a detailed profile of the region's HNWIs and their investment preferences.

The report found that Singapore has about 928 ultra HNWIs, comprising 1.39 per cent of the population.

These are people whose investible assets exceed US$30 million, as opposed to 'ordinary' HNWIs whose qualifying threshold is US$1 million.

The number of ultra HNWIs in the region grew 12.2 per cent to 17,500 at end-2006, said Gregory Smith, Capgemini Australia's vice-president for wealth management.

'We are seeing a sharp rise in the number of ultra HNWIs,' he said. 'This is particularly evident in China, where that country's phenomenal economic growth is reflected in a high concentration of ultra HNWIs.'

The study found that more than 28 per cent of the region's ultra HNWIs are in China.

In terms of the sources of Singaporeans' wealth, 36 per cent was derived from businesses and 22 per cent inherited. In total, wealthy Singaporeans' assets are estimated at US$320 billion, giving them a 4 per cent share of the Asia-Pacific's total wealth pie.

About 43 per cent of HNWIs in Singapore are aged 41 to 55 and 39 per cent aged 56 to 70. Merrill Lynch market managing director (South Asia) Kong Eng Huat said: '(Singapore) individuals tend to be more active investors and are continuing to build their wealth. They are also actively planning or in the process of transferring wealth to their beneficiaries and children.'

'Those with inherited wealth tend to have a more complex portfolio structure and restrictions. They tend to focus on capital preservation.'

The Merrill Lynch-Capgemini report expects the wealthy in the region to diversify into fixed-income and alternative investments and to increase their international exposure. At the moment, 51 per cent of their assets are invested in the Asia-Pacific.

S'pore Has 67,000 Millionaires

Source : The Straits Times, Oct 18, 2007

They are mostly businessmen in the 41 to 55 age group, with their wealth mainly in real estate.

THE typical millionaire in Singapore - and there are 67,000 of them - is a businessman aged between 41 and 55 with the bulk of his wealth in real estate.

The number of millionaires here rose by 21.1 per cent in 2006, making Singapore the fastest-growing population of the rich in the region, according to the second annual Asia-Pacific wealth report released by Merrill Lynch and research firm Capgemini on Thursday.

To join the super-rich club, these individuals must have US$1 million in assets, not including their homes. Other investments in real estate are included.

'Robust economic growth and strong financial markets, along with astute government fiscal policies has continued to contribute to Singapore's growth rate,' said Rahul Malhotra, Merrill Lynch's head of global wealth management for Asia Pacific.

'Real estate and equities investments have also continued to be the twin drivers behind this growth.'

The report found that rich Indonesians living in Singapore comprised a significant share of the local millionaire population and wealth.

There are also 928 ultra-rich people here, with net wealth of at least US$30 million each.

Singapore's millionaires held a combined US$323.7 billion in financial assets at the end of last year, up 24.5 per cent from 2005.

Of this, some 36 per cent was in real estate, with 26 per cent in equities, 18 per cent in cash and deposits, 10 per cent in fixed income investments and 10 per cent in alternative investments.

And 46 per cent of the millionaires are between 41 and 55 years, with 32 per cent between 56 and 70, and 15 per cent between 31and 40.

Over a-third of these millionaires derived their wealth from business, with the next two sources of wealth being inheritance (22 per cent) and income (18 per cent).

The report also found out that 78 per cent of them are men.

Regionally, the number of millionaires grew 8.6 per cent in 2006 to 2.6 million, making up 27 per cent of the world's millionaires.

India and Indonesia followed Singapore as the next two fastest-growing millionaire populations, with 20.5 per cent and 16 per cent increases in the numbers of millionaires respectively.

The combined wealth of the region's millionaires swelled 10.5 per cent to US$8.4 trillion, up by from 2005, with Japan accounting for 43 per cent and China about a fifth.

The report also said the region's class of super-rich individuals whose assets exceed US$30 million grew by 12.2 per cent to 17,500, exceeding the global rate of 11.3 per cent.

'It is really a story of growth, growth and growth, all across,' said Mr Malhotra.

Wealth creation was driven by the region's rapidly developing economies, among the fastest-growing in the world - led by China and India.

Handsome returns from regional stock markets also boosted wealth, as benchmark stock indices in China, Indonesia, India and Hong Kong outperformed most mature capital markets with returns over 30 per cent, the report said.

Savings rates, as a percentage of GDP, were higher in Asia-Pacific than most developed markets, with rates greater than 40 per cent in China, Singapore and Hong Kong.

HK's Wild Run Raises Fears Of '87 Crash Again

Source : The Straits Times, Oct 19. 2007

20th anniversary of October plunge is timely reminder not to get carried away

EVEN 20 years on, memories of the 'Black Monday' Oct 19, 1987 stock market crash on Wall Street can still send shudders down the spines of older investors.

The scale of the plunge back then was so breathtaking, and traumatising, that mini crashes that rocked markets earlier this year simply pale by comparison.

And many looking back to that fateful day on the 20th anniversary today may feel a sense of foreboding.

The anniversary offers a timely warning to investors not to get carried away by the bull run that has resumed on regional bourses, now that they have shrugged off the August blues that followed the US mortgage crisis. It is also time to realise that the next big global crash may well be set off in Asia, not Wall Street.

Back on Oct 19, 1987, following what has been widely regarded as an era of greed and irrational exuberance, Wall Street plunged 23 per cent in a single day amid a spate of big corporate bankruptcies.

It was the biggest single-day plunge ever on the New York market. The only warning signs had been several relatively modest falls the previous week.

As the crash reverberated around the globe, Singapore's Straits Times Index (STI) plunged 25 per cent in a day.

Hong Kong shut its stock market for four days in the hope that global markets would have regained their footing by the time it reopened for trading.

Alas, this turned out to be a fool's dream. The Hang Seng Index dived 33.3 per cent when trading finally restarted - triggering a collapse of the then-Hong Kong Futures Exchange.

In the 20 years since, it has been more common to see a series of mini-crashes, such as those in August, when the STI fell by over 100 points on four occasions.

And with all the safeguards that have been put in place since 1987, many are confident that a crash equal in magnitude to that sell-off is no longer probable.

It is, for instance, unlikely that a stock market plunge would trigger a global depression like the one experienced after the 1929 crash. Central bankers have learnt to flood the market with funds to lift investor sentiment.

In 1987, then newly installed Federal Reserve chairman Alan Greenspan made his mark by restoring confidence, saying the Fed 'stands ready to provide all necessary liquidity' in the wake of the crash.

Last month, current Fed chief Ben Bernanke did the same thing, surprising investors with a 0.5-percentage point cut in interest rates, after stocks around the world plunged by more than 10 per cent in a matter of weeks.

But while Wall Street is still regarded as the key global market to watch, the centre of gravity in the global financial system is gradually shifting to Asia.

To give some examples: The Industrial & Commercial Bank of China has overtaken United States-based Citigroup to become the world's most valuable bank. And the world's second- largest listed firm by market value is another China group, PetroChina, just after another oil giant ExxonMobil.

Many fear that a serious knock to global markets on the scale of that seen in October 1987 could well come from China.

A 9 per cent rout in Shanghai on Feb 27 ignited tailspins across Europe. Then came a 416-point plunge on Wall Street - its worst drop since falling 684 points on its first day of trading after the Sept 11, 2001 attacks.

The rocket-like ascent of Hong Kong's Hang Seng Index over the past two months almost defies credulity.

Since Aug 17, the Hang Seng has climbed almost 50 per cent from its intra-day low - touching the 30,000 level yesterday for the first time. China stocks in Hong Kong have risen even more - by an eye-popping 80 per cent.

Sure, there has been a steady stream of initiatives by the mainland to allow its citizens to invest in Hong Kong shares.

This has attracted billions into Hong Kong, as every fund manager and his dog salivated to get a piece of the action first.

But the gains may simply be unsustainable, even if China grows at the projected levels.

So the spectre of October 1987 hangs over investors 20 years on - not in New York but here in Asia, where a fresh wave of irrational exuberance may be looming over Hong Kong and Shanghai.

Property Booms, Busts Make Economy Vulnerable

Soure : The Business Times, October 19, 2007


Bubble cuts private spending, raises reliance on volatile foreign demand

PROPERTY price booms and busts make Singapore's economic growth more vulnerable to volatile factors and should be prevented, an economist at a think-tank said here yesterday.

While the impact of a spike in property prices on overall GDP growth is 'quite subdued', a property price bubble causes private consumption expenditure to shrink, making the economy more dependent on foreign demand and business spending which are much more volatile, said Tilak Abeysinghe.

The deputy director of the Singapore Centre for Applied and Policy Economics (Scape) at the National University of Singapore, was speaking at the inaugural Singapore Economic Policy Conference organised by Scape at Four Seasons Hotel.

His team's research found that while higher property prices spur construction investment, an accompanying dip in private consumption means overall economic growth does not change much as a direct result of property price inflation.

But the overall effect is still undesirable as it makes the economy far more dependent on business spending and foreign demand for its exports, both of which are more volatile than domestic consumption, he said.

The consumption expenditure share of Singapore's GDP has fallen from more than two-thirds in 1997 to about 40 per cent today. 'If consumption expenditure in Singapore falls further, GDP growth will be very vulnerable to external demand and investment demand,' he said.

Research found that in contrast with economies such as the US, higher housing prices here do not seem to encourage more personal spending.

In Singapore, 'housing wealth is relatively illiquid,' he said. 'You just can't sell your house and move to a suburban house.' This means the 'wealth effect' of housing price inflation seen in countries such as the US - when people spend more as the value of their homes rise - is much less noticeable in Singapore.

Also, 'when housing prices go up, mortgage payments also increase, so people have less to spend on consumption,' he said.

He believes policymakers here should 'do their best' to prevent a property price bubble because of its effect on private consumption spending and its tendency to widen the income gap between the rich and poor.

'It should be possible' to prevent another bubble from building by identifying the main cause of the recent run-up in property prices - likely to be people buying properties for investment rather than owner-occupiers - and introducing measures to dampen demand from this source, he said.

But he also cautioned against flooding the market with a vast supply of new homes, which could trigger a price crash and set the conditions for a new bubble.

No Bubble In Property Market: NUS Study

Source : The Straits Times, Oct 19, 2007

DESPITE Singapore's red-hot property prices, no bubble is forming in the property market here, according to a study by National University of Singapore (NUS) economists.

FINDING: The rise in home prices is below the market's long-run 'equilibrium' level, according to the study led by Prof Abeysinghe.

In fact, the rise in home prices is below the market's long-run 'equilibrium' level, based on factors such as income and property supply, preliminary findings of the ongoing study show.

In other words, the pace of housing price rises is still below the level that would be expected based on market fundamentals, according to the study conducted by a team led by Associate Professor Tilak Abeysinghe.

This is unlike the case in the early 1980s and mid-1990s, when property price inflation shot up above its long-term equilibrium levels, the study noted.

Early findings from the study, still a work-in-progress, was presented to a small audience at the Singapore Economic Policy conference yesterday.

House-price inflation is expected to hit 18 per cent this year, before easing to 13.7 per cent next year, and then to 3.2 per cent in 2009 and 3.4 per cent in 2010, the NUS team's model predicted.

Factors used to determine the equilibrium price level include disposable income per person, housing stock and the new supply of property.

The study also found that it takes a long time for property price inflation to adjust to its long-run equilibrium.

And a rise in property price inflation would lead to a spike in construction investment a year or so down the road, but its effect fades after that.

The study concluded that price bubbles should be avoided, as they affect private consumption as well as income redistribution, among other things.

Prof Abeysinghe is the deputy director of the Singapore Centre for Applied and Policy Economics at the NUS, which organised yesterday's meet.

The one-day conference also saw speakers examine issues ranging from fertility, migration and labour market trends, to CPF savings and the elderly.

The paper, entitled Singapore's Property Market And The Macroeconomy, can be viewed at