Wednesday, January 16, 2008

Eager For The Green Mark

Source : TODAY, Wednesday, January 16, 2008

ONLY 39 buildings made the mark last year. But just two weeks into 2008, nearly 120 building projects, both private and public, are lined up and eager for a Green Mark rating.

The idea of building sustainability is gaining acceptance among industry players and builders, even as need and legislation are providing the added impetus.

"So far, over 70 buildings have been Green-Mark-certified, and many more are in the pipeline for assessment. This is an encouraging sign," said Parliamentary Secretary for National Development Mohamad Maliki Osman yesterday, even as he announced even more good news: New construction demand is expected to reach between $23 billion and $27 billion this year.

The bulk of this is expected to come from private residential and commercial developments, while public sector housing, amenities and infrastructure projects will also add to demand. This buoyant period is also a time to look forward to the industry's environmental responsibilities, Dr Maliki said at the Construction and Property Prospects 2008 Seminar.

When the Building Control Act takes effect in a few months, all new buildings and existing ones undergoing major retrofitting will have to meet Green Mark standards. Green Mark Platinum buildings would have achieved 30-per-cent energy efficiency, and a basic Green Mark building at least 10-per-cent energy efficiency, said Building and Construction Authority (BCA) chief executive John Keung.

Meanwhile, to promote sustainable construction, the BCA will introduce new guidelines this month for the usage of high-strength concrete, while guidebooks on the use of steel and of recycled materials in building will also be launched soon.

A "wake-up call" came early last year, in the form of disruption to sand and granite supply that had "some developers exploring sustainable designs, using alternative or recycled construction materials," said Dr Keung.

And now — a year since Indonesia banned the export of concreting sand — Dr Maliki announced the BCA's assistance scheme to co-share the risk of bringing in sand from distant sources would be "discontinued".

"Concrete prices stabilised quickly after an initial spike and the construction boom last year was hardly affected … Based on feedback from the industry, the scheme is no longer necessary," he said.

But to ensure the long-term supply and quality of essential construction materials, the BCA is finalising details of a licensing scheme for importers.

Hedge Fund Gets Into Property Development

Source : The Straits Times, Jan 16, 2008

HEDGE funds do not usually get into property development, but a home-grown firm is venturing into the real estate game despite signs the roaring high-end market is slowing.

Ferrell Asset Management will develop Ferrell Residence, a project consisting of luxury flats and penthouses on a 31,371 sq ft site opposite Anglo-Chinese School (Barker Road), next to City Tower.

The freehold estate in Bukit Timah will have about 30 units worth at least $2,300 per sq ft.

Ms Jeanna Chan, executive director of Ferrell Asset Management, which manages more than US$700 million (S$1 billion) worth of assets, said the project would be launched around the middle of the year.

It signals a major shift for Ferrell. It has been a big investor in existing properties and counts real estate players such as Indonesia's Lippo Group as investors, but developing has not been in its game plan.

Ms Chan, however, sees it as a logical move.

'Development is a natural and strategic extension of our experience in managing properties,' she explained. 'I feel this is an opportunistic move in light of our outlook for local and regional properties.'

Ferrell's property portfolio includes The Trillium, 100 condominium units at RiverGate and 52 per cent of strata units in 79 Anson.

Ferrell is one of the few funds that have spent big money on single residential projects.

One play involved outlaying more than $182 million to buy units at RiverGate three years ago.

While non-property firms have ventured into real estate development - publisher Eastern Holdings is one - it is unusual for hedge funds.

Most funds typically invest in properties directly or via other property funds or team up with developers to take stakes in projects.

'When we have a property boom, it is not surprising that we have more players going into property development than the traditional developers,' said Daiwa Institute of Research analyst David Lum.

While industry watchers do not doubt Ferrell's ability to profit by buying and selling properties, they say developing is a different ball game altogether.

'You have to market the building. You need coordinators with real estate experience to manage the building. It's a case of specialising in what you do best,' Knight Frank director of research and consultancy Nicholas Mak said.

'Ferrell has always been deemed to be different compared to our peers in this market. Our principals are business-oriented in outlook other than being hedge fund managers,' Ms Chan said.

Ferrell's move may encourage other funds with the financial muscle to develop their own properties.

With assets so pricey, spotting an undervalued real estate deal becomes more difficult, so hedge funds would rather develop their own to sell.

'Now that interest rates have gone down, liquidity will be improved, and that will be an excellent time for the likes of private equity firms and funds to come back again,' said Jones Lang LaSalle Asia Pacific head of investments Lui Seng Fatt.

With interest rates being driven down further, sources of funding are becoming more attractive for hedge funds, he added.

Building Boom May Lift Deals To New High

Source : The Straits Times, Jan 16, 2008

Record $24.5b in contracts last year, with private sector leading the way

ROCKETING demand propelled the construction industry to record levels last year, eclipsing even the glory days of 1997, with even more to come this year.

Contracts totalling $24.5 billion were awarded last year, up 46 per cent from the $16.8 billion in 2006 and just above the $24 billion in the boom year of 1997.

The figures cover private projects and public works, such as new MRT lines, but private sector demand was the key driver behind the record numbers.

Mega projects like the Marina Bay Sands integrated resort (IR), Marina Bay Financial Centre and Somerset Central lifted private commercial contracts to a record $5.1 billion, according to official figures announced at an industry seminar yesterday.

Demand shows no sign of slowing, with contracts for this year forecast at between $23 billion and $27 billion, depending on whether some large projects get held back.

The bulk of the demand this year and next will come from developments such as the IRs and the Downtown MRT line.

Growth Driver
Construction stocks also prospered. Chip Eng Seng closed at 55 cents yesterday, below its high last year but up from a low of 31 cents last March. Lian Beng Group has risen from a low of 22 cents in March to 63.5 cents yesterday.

But there are concerns amid the bright outlook, including rising costs.

Dr Mohamad Maliki Osman, Parliamentary Secretary for National Development, told the Construction and Property Prospects 2008 seminar that high demand will keep exerting pressure on resources.

This demand has already placed 'a tremendous strain' on resources and has led to a 'chaotic price escalation', said Mr Seah Choo Meng, executive chairman of Davis Langdon & Seah Singapore, one of the seminar speakers.

He warned that if prices are not reined in, they will hurt the industry and even the overall Singapore economy.

'There will be some negative impact this year, but we have built up a momentum which can be maintained for the next two years,' he said.

The Government has reduced some pressure by putting more than $2 billion worth of projects on the backburner until 2010 at least, with more to come.

'All ministries are currently combing through their list of projects to identify more projects for rescheduling,' said Dr Maliki.

He urged the industry to move towards sustainable construction, which is environmentally friendly and can enhance Singapore's resilience against supply fluctuations in basic construction materials.

He also said the Building and Construction Authority (BCA) will release information on demand to enable the industry to get a better feel of the market and plan more efficiently.

It has all been a stark turnaround for a sector that was in the doldrums just three years ago. Now that things are rosier, contractors are facing new challenges.

The industry continues to grapple with the uncertainty of material prices, said Singapore Contractors Association president Desmond Hill.

Ready-mixed concrete is around $130 a cu m, compared with about $190 during the Indonesian sand ban last year and $74.40 at the end of 2006. Prices could rise to $150 per cu m in the next few years.

Steel bars cost about $1,000 a tonne, up from $744 a year ago, said the BCA.

There is also a lack of middle management staff as many bailed out of the sector in the last downturn, Mr Hill said.

S'pore Again Ranked World's Second-Freest Economy

Source : The Straits Times, Jan 16, 2008

The Republic closes in on HK and comes out tops in business and labour freedom

SINGAPORE has closed the gap on long-time rival Hong Kong in a ranking of the world's freest economies - a key indicator of a business-friendly environment.
The Republic came second in the ranking, finishing behind Hong Kong for the 14th straight year.

Singapore scored 87.4 on the Index of Economic Freedom, which is published annually by The Wall Street Journal and American conservative think-tank The Heritage Foundation. This was a 0.2 percentage point gain over its score last year and narrows the gap with Hong Kong to 2.9 percentage points.

The gap last year had widened to 3.4 percentage points, due partly to Singapore's lower scores on the degree of freedom in its financial sector and taxation.

This year, the editors of the index lauded Singapore as the top scorer in terms of business and labour freedom.

Besides those two factors, the index takes into consideration eight other types of freedom, including trade and monetary, as well as the size of the government and freedom from corruption.

Scores between zero and 100 are given, and the ratings in each category are averaged to produce an overall score. A total of 157 economies were surveyed.

Publishers of the index say that economic freedom has long been related to good economic performance. Hong Kong scored the highest in four of the 10 categories to top the rankings.

And while it may be easy to dismiss the latest index as one of many disparate economic rankings that use a wide range of measure, experts say that it has special significance for Singapore.

Action Economics economist David Cohen said: 'It is a reflection of the attractiveness of a location to conduct business in. It indicates little government interference and a low tax rate, among other factors.'

CIMB-GK economist Song Seng Wun agreed, saying: 'With two small open economies like Singapore and Hong Kong, which are dependent on external investment for growth, it's no surprise that they are at the top.

'The two economies share much of the same mindset, which is to be open, transparent, flexible and accommodating in order to attract more business and investment. It is a reminder of some of the factors and foundation of Singapore's success and progress.'

With Australia coming in fourth, the Asia-Pacific has three of the world's five freest economies.


Singapore finishes behind Hong Kong for the 14th straight year in a ranking of the world's freest economies.

Record Sales Of New Private Homes In 2007

Source : The Straits Times, Jan 16, 2008

Total of 14,826 sold, mostly in first nine months, before sales slid sharply at year-end

HOMEBUYERS picked up a record number of new private homes last year - before demand dipped sharply at year-end.

They bought 14,826 new homes in the year, up from 11,147 the year before, according to the latest figures from the Urban Redevelopment Authority (URA).

This all-time high figure was boosted by sales in the first nine months, when 90 per cent of last year's deals were done, said property consultancy CB Richard Ellis (CBRE).

Demand then went into a freefall in the last months of the year amid a slew of worries, including concerns over the United States sub-prime mortgage crisis.

New home sales, which had averaged 1,480 a month between January and September, fell to below 600 per month in October and November.

Last month, a mere 305 deals were done, the lowest number since the URA started tracking monthly new home sales in June. All the figures exclude executive condominiums.

December also saw a dip in the median price of new homes. Price gaps within each category of new homes also narrowed, said consultancy Jones Lang LaSalle (JLL). It noted that the gap between the highest and lowest prices for city-centre and mid-tier homes narrowed to its smallest in recent months.

But the year-end decline was 'expected', said JLL's head of Singapore research, Mr Chua Yang Liang. He said the 'looming uncertainty from the US sub-prime issue', coupled with the usual 'lull period' in December led to fewer launches of new projects and fewer home sales.

Developers tend to launch fewer projects at the end of the year because of the holidays. They launched only 1,673 units in the fourth quarter last year, about a third of that in each of the first three quarters.

But a bigger reason for the slowdown could be the fact that recent asking prices have soared so much, said Mr Ku Swee Yong, director of business development and marketing at Savills Singapore. 'A lot of recent new home transactions are at record-high prices,' he said.

Last year, developers sold almost 200 new homes at more than $4,000 per sq ft (psf), Savills said - a level never reached in previous years.

Even in December, three units at the Ritz-Carlton Residences in Cairnhill went for more than $5,000 psf.

Units at the Marina Collection also fetched record prices for Sentosa Cove last month at a median price of $2,734 psf, said CBRE.

'There is now a 15 to 20 per cent gap between what developers are asking for and what buyers seem willing to pay,' Mr Ku said.

This has led to a 'stand-off' and a more cautious mood among buyers which may persist well into this year, he added.

Already, the median prices of new uncompleted units have started to slide, said Knight Frank. They eased from $1,110 psf in November to $1,063 psf last month.

New home sales last month dropped off most in the mid-tier and suburban regions, consultants said.

Only 56 mid-tier units were sold in December, 80 per cent less than in November. For suburban projects, the number of units sold fell 35 per cent to 60.

In the prime city centre, new home sales jumped 36 per cent to 175, boosted by a bulk purchase of 97 units in Goodwood Residences at a median price of $3,200 psf.

New launch Zenith in Zion Road also helped city-centre sales, with 37 units sold at a median price of $1,665 psf.

Expect The Perfect Storm To Wreak Havoc This Year

Source : The Business Times, January 16, 2008

While we are probably yet to enter a bear phase for equities, it is going to be very difficult to make money trading stocks By LIM SAY BOON

THE YEAR 2008 is shaping up as the Perfect Storm. And probably few investors and bankers/brokers alike are prepared for what lies ahead - a US recession, uncertainties in emerging market economies and extreme volatility in global stock markets.

Indeed, all manner of hitherto bullish and tightly correlated risk trades - equities, commodities, high yielding currencies, and hedge funds - are likely to be severely shaken in coming months. The easy money from going long in all manner of risk assets is gone.

Over the past year and a half in this column, we have gone from outright bullish in 2006 and early 2007 to cautious by the middle of last year and increasingly gloomy since then. And while we are probably yet to enter a bear phase for equities, it is going to be very difficult to make money trading stocks in 2008.

The nightmare scenario is that the markets break key supports in 1Q2008 - triggering 'capitulation' - before rebounding in 2H2008. But before the rebound, it will severely test the patience of traders and investors with low conviction alike - prompting many to cut losses and possibly whipsawing them with volatility through the year.

For the past six months, we have been warning of the need for more disciplined strategies to cope with more difficult market conditions ahead. Those 'difficult market conditions' are here.

Standard Chartered Global Research has called a US recession in all but the most technical of definitions. That is, we have cut our 2008 growth expectations for the US from 1.4 per cent to only 0.5 per cent.

Fear and panic

And while there is a still a chance that the US might narrowly avert two consecutive quarters of negative growth, this really won't matter - it will just be a matter of semantics. To the markets, this will look, feel and smell like a recession.

The fear and panic is spreading.

In coming weeks and months, market attention will revolve around the deepening crisis in the US housing market - indeed, the 'doomsayers-come-lately' will suddenly wake up to the rapidly weakening UK housing market and the affordability crisis in the Australian housing market.

And suddenly, the talk will turn to a 'global housing bubble/crisis'. Certainly, with an inventory overhang of more than 10 months, the US housing market will give headline writers an endless stream of bear market material for the rest of 2008 and possibly well into 2009.

With that, US sub-prime mortgage defaults, which are already running in the region of 18-19 per cent, will accelerate upwards.

Mortgage backed securities will take an even more awful hammering in coming months - with the possibility of more ugly news of financial institutions facing balance sheet crises.

Markets will panic on talk of the Federal Reserve being unable to contain a worsening credit crunch as banks de-leverage. Indeed, there will even be comparisons between the US today and Japan of more than a decade ago - talk of a liquidity trap within which the financial system and economy just refuses to respond to interest rate cuts.

And some will even point to inflationary pressures in the emerging markets and rising headline inflation in almost all markets as harbingers of impending stagflation - wedging central bankers between the conflicting pressures of recession (requiring rate cuts) and inflation (requiring rate hikes).

Emerging market economies will not be spared the gloom. Rising inflation and interest rates in developing economies - most prominently China - will overshadow interest in their robust economic growth rates.

Indeed, analysts are also likely to start questioning whether the China-led era of global disinflation is over. And whether China itself faces a prices crisis over rising labour costs, food shortages, and an environmental crunch.

While there are reasons for legitimate concern in almost all the above, at some point, they will totally eclipse consideration of equally legitimate countervailing bullish factors.

At that point, the markets will see capitulation - sellers overwhelming buyers. Irrational bearishness will take over, possibly setting the markets for a rebound on oversold conditions.

At this point, it is worth remembering that equities are still reasonably valued in price to earnings terms. Indeed, the PE averages for the US and European markets are both at the bottom end of their respective past 10-year ranges.

Even within emerging markets, notwithstanding the notorious PE ratios of the Shanghai Composite, there is still value to be had.

The MSCI China, for example, offers better value at a forward PE of around 20 times - high by current international standards but offset by robust expected earnings growth of some 22 per cent.

The emerging market PE average of around 15-16 times forward earnings is still mid-cycle rather than the sort of valuations suggestive of 'end game'.

And there is the yield gap in both the US and Europe in favour of equities earnings yields over long-term bond yields.

In a similar vein, while prime lending rates are rising and running around 8 per cent in China, it is worth remembering that China's listed industrials are looking at returns on equity averaging around 16 per cent.

Also bear in mind that liquidity injections and rate cuts - especially of the magnitude that we are likely to see this year - can have very powerful effects on asset prices. There will be lags between the rate cuts that we have already seen in the US and the ones yet to come and their impact on the economy and the financial markets.

As in 1998, when Fed funds rate cuts pumped liquidity into the growth theme of the time, there is still a reasonable expectation that the cuts we have seen and are likely to see this year (and we are expecting at least another 100 basis points to come off this year, with the possibility of more if the economy or financial market does not respond) will pump liquidity into the growth story of 2008 - emerging markets.

But until then, it will be a stomach-churning ride.

Given the very tight correlations between equities, commodities and high yielding currencies (see chart - we have used the Australian dollar/US dollar as a proxy for high yielding/commodity currencies), there will be few places for directional-long trades to hide.

Indeed, if you overlaid any of the major hedge fund indices, the result would have looked pretty much the same.

The hedge fund universe has been running a 0.8 to 0.85 correlation coefficient to equities in recent years. So they too will take a nasty knock when risk appetites drop.

This is the year for finance professionals to have difficult but honest conversations with clients. Rather than attempting to time the corrections and rebounds, they should have the professionalism to take clients through the winning logic of the long-term buy (quality) and hold strategy.

They may be mocked by smart-mouthed traders who think they can do better punting the tops and bottoms.

But my riposte is that for every short-term winning trade in the market there is by definition a losing trade.

Add to that transaction costs and trading is by definition, system-wide, a net negative game.

This is the year for difficult conversations about complex issues such as diversification and the 'efficient frontier' - about how diversified portfolios, over time, generate better returns at lower volatility for higher risk-adjusted returns.

Satellite positions

But outside those core holdings - that clients should recognise as the 'stuff' of long-term wealth building - they can also have satellite positions. And for satellite positions, in such turbulent times, investors might want to consider alternatives to the directional bet on the whole equities or even commodities market.

That is, even when faced with corrections in global markets, investors could look at structured products as tailored solutions.

If, for example, they are taking profits off their emerging market positions in the face of a possible global market correction but still believe in emerging market outperformance, they could put the profits they take off the outright long positions into a relative outperformance note against one or several of the developed markets. They could also do relative outperformance structures between countries and sectors - say, Singapore banks versus S&P500 banks.

Investors could also buy portfolio protection through participation in the upside of equities volatility through a structured note - buying, say, the S&P500 volatility index VIX as a hedge against sharp drops in risk appetites and spikes in volatility.

And while commodity prices could broadly soften against a slowing global economy, investors could still look at specific sectors.

An example is food commodities such as wheat, corn and soyabeans as a play on rising food inflation and the catch-up of real food prices which are still around a 50-year low.

The opportunities are only limited by the willingness of professionals and investors alike to consider alternatives.

Lim Say Boon is chief investment strategist for Standard Chartered Bank, Group Wealth Management

Record Number Of New Private Homes Sold Last Year

Source : The Straits Times, Jan 15, 2008

Total of 14,826, mostly sold in first 9 months, before sales

HOMEBUYERS picked up a record number of new private homes last year - before demand dipped sharply at year-end.

They bought 14,826 new homes in the year, up from 11,147 the year before, according to the latest figures from the Urban Redevelopment Authority (URA).

This all-time high figure was boosted by sales in the first nine months, when 90 per cent of last year's deals were done, said property consultancy CB Richard Ellis (CBRE).

Demand then went into a freefall in the last months of the year amid a slew of worries, including concerns over the United States sub-prime mortgage crisis.

New home sales, which had averaged 1,480 a month between January and September, fell to below 600 in each of October and November.

Last month, a mere 305 deals were done, the lowest number since the URA started tracking monthly new home sales in June. All the figures exclude executive condominiums.

Read the full report in Wednesday's edition of The Straits Times.

GuocoLand Says Leedon Heights Redevelopment On Track

Source : Channel NewsAsia, 15 January 2008

GuocoLand said its plans to redevelop the Leedon Heights site are progressing on track.

It has named award-winning SCDA Architects as architectural consultant, while Intaran Design has been engaged as landscape specialist.

GuocoLand, which is scheduled to take over vacant units by June, completed the en bloc purchase of the site last month.

The developer is considering allowing former owners to continue staying in their units on short-term leases. - CNA/so

CapitaLand Selling Entire 50% Stake In Hitachi Tower For S$404m

Source : Channel NewsAsia, 15 January 2008

CapitaLand is selling its entire 50 per cent stake in Hitachi Tower for S$404 million.

The developer said it will make a gain of S$110 million upon completion of the sale.

Hitachi Tower is a 37-storey commercial building in Raffles Place.

The developer bought the office block in 2000.

In 2007, CapitaLand sold its 50 per cent stake in Chevron House for over S$366 million.

It has been taking advantage of the buoyant office property market to divest its interest in several commercial buildings. - CNA/vm

Buyers More Cautious When Buying New Properties Last Month

Source : Channel NewsAsia, 15 January 2008

Homebuyers were more cautious and realistic when paying for new properties last month, according to analysts' assessment of the latest data from the Urban Redevelopment Authority.

The figures showed the number of new properties sold in December was just half of those sold in the previous month.

After peaking at 1,800 units in August, monthly sales of new private properties have dropped to just 291 units in December – half of the number of units sold during the previous month.

Property consultants said that is not unexpected, given the global credit crunch, slowing US economy and withdrawal of the deferred payment scheme.

Tay Huey Ying, Research & Consultancy Director, Colliers International, said: "What all this does to the mind of the potential purchasers is that it becomes very grey which direction home prices are going to take. So I think a lot of potential purchasers have preferred to stay by the side in the month of December, in view of the fact that it's the year-end holiday season.

"I guess a lot of them preferred to take a vacation and defer any purchase or any investment decisions to perhaps 2008 and very likely, after the Lunar New Year period."

Analysts said the data showed home prices were stabilising, with luxury projects such as The Ritz-Carlton Residences achieving a median price of about S$5,088 psf for the three units sold.

According to Jones Lang LaSalle, the gap between the highest and lowest median selling prices has narrowed from 15.8 percent in October to 8.2 percent in December for the core central region.

The out-of-central region properties have also seen its median price gap drop from 14.2 percent in October to 5 percent in December. That means fewer buyers are willing to fork out significantly more than expected market prices.

Dr Chua Yang Liang, Director & Head of Research, South East Asia, Jones Lang LaSalle, said: "I call it the buoyancy level. If you look in terms of the highest median versus the lowest median, and the behaviour over the last few months, the gap has kind of narrowed in the last two months, which indicates that buyers are more conservative."

That applies to both luxury properties in the core central region, as well as mass market properties.

Despite a slowdown in the fourth quarter, the number of units sold last year still came up to a historical record of 14,800. - CNA/so

AMK Hawker Centre Re-Opens After $4m Upgrading

Source : Channel NewsAsia, 16 January 2008

A market and food centre in Ang Mo Kio will re-open on Wednesday after a $4 million facelift.

The 28-year-old hawker centre at Block 724, Ang Mo Kio Avenue 6, was closed for upgrading on April 1 last year.

The work was carried out under the National Environment Agency's Hawker Centres Upgrading Programme (HUP).

The refurbished single-storey market and food centre has 45 cooked food stalls, 30 lock-up stalls and 48 market stalls.

There are also more places for customers. There are now 196 tables, compared to 123 previously.

The new food centre also has a multi-coloured glass louvres facade as well as elderly and handicap-friendly features.

These include ramps and tables specially made for those in wheelchairs. - CNA/de

CapitaLand, NUS Sell Hitachi Tower

Source : The Business Times, January 16, 2008

CAPITALAND has sold its 50 per cent stake in Hitachi Tower for $403.5 million, the property giant said yesterday.

Upon the deal's completion, CapitaLand will recognise a gain of $110.1 million, it said.

The National University of Singapore, which owns the remaining 50 per cent of the Collyer Quay office building, also sold its stake.

The deal took into consideration the agreed value of the 999-year leasehold Hitachi Tower at $811 million, or about $2,900 per square foot (psf) of net lettable area. The consideration was arrived at on a willing-buyer willing-seller basis, CapitaLand said.

The developer did not name the buyer in its filing to the Singapore Exchange, but sources said that the building was bought by a fund linked to Goldman Sachs.

Goldman Sachs bought the next-door Chevron House, formerly known as Caltex House, for $2,780 psf in August last year. Chevron House is on a site that had a remaining lease of 81 years at the time of the transaction.

The 37-storey Hitachi Tower has a net lettable area of around 279,600 square feet. The building had close to 100 per cent occupancy as at Dec 31, 2007, and key tenants include Hitachi Asia and American Express.

Market watchers have said that it makes sense for Goldman to own two adjoining office blocks as it can take advantage of managing them together, as well as look into the possibility of redeveloping both properties collectively.

A Goldman Sachs real estate fund also bought DBS Towers 1 and 2 on Shenton Way in November 2005 for $690 million, or around $800 psf of net lettable area.

Based on CapitaLand's unaudited financial statements for the nine months ended Sept 30, 2007, the group's earnings per share would have increased from 74.4 cents to 78.3 cents assuming that the sale was effected on Jan 1, 2007, the company said.

CapitaLand's shares shed 13 cents to close at a one-year low of $5.62 yesterday amid a broad fall in the Singapore stock market. The company's stock price has dropped some 10.4 per cent since the start of the year.

Not Saying The R-word - But Alluding To It A Lot

Source : The Business Times, January 15, 2008

Bush concedes 'economic challenges' and the Fed stands ready to take 'substantive action'

FEDERAL Reserve chairman Ben Bernanke was asked whether he expects, as the questioner put it, 'the R-word'.

'The Federal Reserve is not currently forecasting a recession,' Mr Bernanke responded after his address in Washington last week. 'We are forecasting slow growth.'

Then he added: 'But as I mentioned today, there are downside risks and, therefore, it's very important for us to stand ready to take substantive action to address those risks and provide some insurance against those negative outcomes.'

Since the start of the downturn in the American economy - the housing crisis; the credit crunch; the high oil prices; signs of unemployment and lower spending - US officials and lawmakers, including the head of the central bank, have refrained from using the R-word.

If we accept the standard definition of a recession, as offered by Wikipedia to be 'a decline in any country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year', we'll be able to conclude that the US was in a recession only after that recession had actually taken place. But if you consider the nuances in the statements about the issue that are being made in Washington these days, it does seem that the Bush administration and Congress are operating under the assumption that the recession has, indeed, begun.

No one is using the R-word - but it's hanging out on the tip of everyone's tongue. Hence, after a government report last Friday showed that unemployment jumped to 5 per cent last month from 4.7 per cent in November, even President George W Bush had to admit that the economy was in bad shape. In a somewhat downbeat speech in Chicago, Mr Bush said that America was facing 'economic challenges' as a result of the home mortgage crisis and the other economic pressures.

'We cannot take growth for granted,' he said in a speech to a group of midwestern business leaders, acknowledging that 'recent economic indicators have become increasingly mixed'.

You don't have to be a Fed chairman to sense the rising unease among businesses and consumers over the economy. Adding to the bad news on unemployment have been signs of a drop in consumer spending and the rise in credit problems. The retail chains have reported a dramatic fall in sales in the recent holiday season. American Express and Capital One, two of the largest credit card companies, are experiencing rising problems with credit card holders who are failing to pay their debts, reflecting growing credit problems around the country. And there are new reports each day about more defaults on mortgage loans.

At the same time, the dramatic increase in oil prices amounts to a tax on consumers and businesses, and depresses their spending (while also putting upward pressures on inflation). The fall in housing prices and the uncertainty about share prices on Wall Street have a negative 'wealth effect' for those who have invested in the housing and stock markets. They sense that they have less money to spend.

Mr Bernanke seemed to be trying to respond to these and related developments in his speech last Thursday, stressing that the Fed 'must remain exceptionally alert and flexible, prepared to act in a decisive and timely manner and, in particular, to counter any adverse dynamics that might threaten economic or financial stability'.

In practical terms, by suggesting that 'additional policy easing may well be necessary', Mr Bernanke made it clear that he and his colleagues in the central bank will be ready to cut the short-term interest rate by half a percentage point at their meeting at the end of the month.

In theory, such a decision to cut the interest rate on Jan 30 could help stimulate the economy by encouraging businesses and consumers to borrow and spend, and as a result, could avert the recession.

By hinting at interest rate cuts, the Fed will be signalling that it is less concerned about inflation, which Mr Bernanke did last Friday, noting that 'inflation expectations appear to have remained reasonably well anchored, and pressures on resource utilisation have diminished a bit'.

And if Mr Bernanke hopes that the central bank could prevent recession by using its major policy tool (interest rates), President Bush and his aides, as well as Republican and Democratic leaders, are trying to come up with other policy ideas aimed at aborting recession or at least make the economic downturn less destructive.

Mr Bush and the pro-business Republicans have continued to stress the need to provide tax breaks for businesses and consumers. 'In a time of economic uncertainty, we don't need to be taking money out of your pocket,' Mr Bush said during his speech in Chicago. 'The smartest thing we can do is to keep taxes low.'

The Democrats, at the same time, have called for more emphasis on a fiscal stimulus through government spending, especially by providing financial assistance to people at the bottom of the economic ladder, in the form of increases in unemployment benefits and food stamps, in addition to tax rebates for low-income workers.

Most observers expect the administration and Congress to begin soon debating their various policy options and to come up eventually with a stimulus package that would include a mix of mostly targeted tax cuts and new spending projects.

The debate is bound to highlight concerns among economists that the increases in government spending could also lead to an expansion in the federal budget deficit. The long-term danger posed by such an expansion was dramatised by reports this week that the US was at risk of losing it triple-A credit rating within a decade unless it took action to curb the rising government spending on healthcare and on its national pension programme, aka Social Security.

Fiscal stimulus coupled with interest rate cuts by the Fed and the infusion of more credit that would discourage saving could also make it less likely that the structural economic problems relating to its growing current account and trade deficits will be resolved.

Moreover, the new credit could end up providing incentives for businesses and consumers to continue with their irresponsible behaviour that led to the current housing mess and by extension, the credit crunch, in the first place.

Finally, by cutting interest rates, the Fed could put further downward pressure on the weak US dollar. A weaker dollar is supposed to make imports more expensive (and exports cheaper) and thus help reduce the trade deficit. But the US trade deficit actually expanded to its highest level in 14 months in November as imports, especially of oil, surpassed growth in exports.

Clearly, the US economy is in for rough ride in the coming months.