Friday, August 22, 2008

Li Ka-Shing Says 'Worst Is Yet To Come' In Global Economy Slump

Source : The Business Times, August 22, 2008

(HONG KONG) Hong Kong billionaire Li Ka-shing, who predicted China's stock market bubble would burst, says the 'worst is yet to come' from the global credit crunch.

The crisis is turning Li 'very conservative about acquisitions', he told reporters here yesterday while announcing the results of his companies Hutchison Whampoa Ltd and Cheung Kong (Holdings) Ltd.

The US housing slump has triggered more than US$500 billion in credit- market losses for banks globally and led to the collapse and sale of Bear Stearns Cos, the fifth-largest US securities firm.

Mr Li, Asia's richest man according to Forbes magazine, controls companies that operate businesses including retail, real estate, container ports and energy in 57 countries.

'Mr Li's views tend to be accurate,' said Castor Pang, a strategist at Sun Hung Kai Securities Ltd here.

'Looking ahead, signs of a US economic slowdown will become even more obvious. Asia has a high correlation with the US, so market performances will likely get worse.'

Sometimes called 'superman' by Hong Kong's media for his investing skill, Mr Li arrived here from mainland China in 1940 and built his Cheung Kong (Holdings) Ltd into Hong Kong's second-biggest developer by market value from a company he founded in 1950 to make plastic flowers.

Mr Li's comments echo those of Kenneth Rogoff, former chief economist at the International Monetary Fund, who said 'the worst is yet to come in the US'.

Credit-market turmoil has driven the US into a recession and may topple some of the nation's biggest banks, Mr Rogoff, a Harvard University professor of economics, said in an interview in Singapore on Aug 19.

'The financial sector needs to shrink,' Mr Rogoff said. 'I don't think simply having a couple of medium- sized banks and a couple of small banks going under is going to do the job.'

Hong Kong will be shielded to some extent because of China's economic outlook, Mr Li said.

Hong Kong's negative real interest rates are keeping the housing market stable and real estate 'has always been a big part of the economy here', Mr Li said.

China, the world's fastest growing major economy, will see its economy continue to grow above 8 per cent 'in the next few years', Mr Li said.

China's CSI 300 Index is down 54 per cent this year, the most among 88 major benchmark indexes tracked by Bloomberg, because of concern measures to cool inflation will damp both profit and economic growth. - Bloomberg

Budget Hotel Boss Makes Rich List

Source : The Straits Times, August 22, 2008

Chief of Fragrance chain debuts on Forbes' S'pore list at No.24

BUDGET hotels and mid-range condominiums are hardly what one associates with the rich and famous.

But they proved the key to wealth for Mr Koh Wee Meng, the chief of Fragrance Group, which owns the chain of tourist-class Fragrance hotels, as well as boutique property developer Fragrance Land.

From far left: Kwek Leng Beng, Dr James Koh, Fragrance Hotel owner and Tan Boy Tee. -- THE STRAITS TIMES FILE PHOTOS

Mr Koh debuted on Forbes magazine's list of Singapore's richest people at No.24, propelled by a string of well-sold boutique condos and revenue from Fragrance's 18 hotels islandwide. But Fragrance - one of the few property companies that did better this year than last year - was an exception to the real estate riches rule.

Some other property bigwigs found their fortunes halved as the market slowed and stock prices tumbled. Upmarket developers such as SC Global's Simon Cheong and Ho Bee Group's Chua Thian Poh suffered especially from the downturn in the luxury homes segment.

Mr Cheong, who made his debut on the list last year, fell from 15th place to 22nd as his net worth fell from US$480 million (S$680 million) to US$245 million. Mr Chua slipped from 13th position last year to 20th this year after his fortune fell from US$500 million to US$260 million.

Mr Cheng Wai Keung, chairman of property and retail group Wing Tai Holdings, saw his wealth plunge to US$255 million from US$475 million last year after the company's stock fell 50 per cent.

Generally, the rankings released yesterday remained much the same as last year, particularly in the top spots.

Property magnate Ng Teng Fong, who heads Far East Organization, was named Singapore's richest man for the second year in a row. His fortune rose from US$6.7 billion last year to US$7 billion.

Mr Ng was again followed by the family of the late banker Khoo Teck Puat, who are worth US$6.1 billion, up from US$5.7billion last year.

United Overseas Bank chairman Wee Cho Yaw also kept his third spot with a family fortune valued at US$3.6 billion, from US$3.3 billion last year.

In fifth and seventh places are Singapore's newest billionaires: Mr Kuok Khoon Hong of Wilmar International and remisier-turned-investor Peter Lim.

Mr Kuok, who founded Wilmar as a tiny palm oil outfit and turned it into one of Asia's largest agribusinesses, saw his stock surge nearly a third in the last year due, in part, to soaring palm oil prices.

Mr Lim, coincidentally, also got rich off Wilmar. He bet on Mr Kuok's success with an early investment in the palm oil producer and is now reaping the benefits.

Commodities also launched Mr Sunny Verghese, the chief of cashew and cocoa trader Olam International, into the rich list for the first time. He debuted in 39th place with a fortune of US$125 million.

Another new entry was Mr Wong Fong Fui, the chief executive of Boustead Singapore, whose successful turnaround of one of Singapore's oldest companies echoes his own classic rags-to-riches story.

Forbes said Mr Wong was born into a poor family and worked as a tree tapper on a Malaysian rubber plantation when he was seven. He was accepted into a secondary school after he wrote an essay, with the following lines: 'I tap rubber trees. I see rubber trees in the morning. I see rubber trees in the evening. I see rubber trees every day, day in, day out. Rubber trees, rubber trees. I hate rubber trees.'

As always, shipping magnates sailed smoothly into the wealth rankings. In the top 20 alone were Labroy Marine's Tan Boy Tee, Yantai Raffles' Brian Chang, Pacific International Lines' Chang Yun Chung, Singapore Shipping Corp's Ow Chio Kiat and Ezra Holdings' Lee Kian Soo.

Notable dropouts this year include fashion entrepreneur-turned-high-end hotelier Christina Ong, wife of tycoon Ong Beng Seng. Her fortune was dragged down by the falling stock price of bag maker Mulberry, in which she has a stake.

After her removal, only three women remain on the list: Ms Olivia Lum, founder of water treatment firm Hyflux; Ms Vivian Chandran, the widow of energy firm Chemoil founder Robert Chandran; and Mrs Margaret Lien, the widow of banker Lien Ying Chow. The total net worth of the richest 40 remained at US$32 billion.

Lum Chang Wins $76.5m Contract From A-Reit

Source : The Business Times, August 22, 2008

ASCENDAS Real Estate Investment Trust (A-Reit) has awarded a $76.5 million design-and-build contract to a unit of Lum Chang Holdings for the construction of a new eight-storey tower and a three-storey ancilliary podium in Changi Business Park.

The building will be on land with an area of over 28,000 square metres - one of the biggest developments there, Lum Chang said. The project is due to be completed by October 2009.

The contract marks the second time that A-Reit has appointed homegrown construction company Lum Chang for a Changi Business Park development.

In 2007, Lum Chang was awarded a $71.8 million tender to build an eight-storey office building - the first of three towers in the Changi Business Park commercial development.

Construction of this building as well as the basement carpark is currently underway, and progress is well on track for completion in the first quarter of 2009.

The building has been leased to Citigroup to house up to 4,000 operational and backroom staff.

The latest contract brings the total value of contracts Lum Chang still has in progress to over $456 million, the company said.

The newest project is expected to be 60 per cent completed by the end of the financial year ending June 30, 2009.

The earnings from this contract will be recognised progressively according to the stage of completion, Lum Chang said.

Lum Chang's shares lost two cents to close at a 52-week low of 19 cents yesterday. A-Reit's stock similarly shed two cents to end the day at $2.30.

UK Economy Stands Still In Q2, Weakest Since 1992

Source : The Business Times, August 22, 2008

LONDON - Britain's economy failed to expand in the second quarter of this year for the first time since the slump of the early 1990s and reinforcing expectations interest rates will have to fall to avoid a painful recession.

The Office for National Statistics revised down its GDP reading to show it was unchanged on the quarter in the three months to June from an initial estimate of 0.2 per cent growth and down from 0.3 per cent growth in the first quarter.

That larger-than-expected revision was the lowest reading since the second quarter of 1992 when the economy was in the throes of its last recession. On the year, GDP was just 1.4 per cent higher, the weakest since the final quarter of 1992.

Sterling and the FTSE 100 index of leading British shares fell and interest rate futures rose after the data boosted expectations that borrowing costs will need to fall to prevent a deep and protracted slowdown.

'This really does put a rate cut firmly on the agenda although it is unlikely to come until we have seen the peak in inflation,' said Brian Hillard, an economist at Societe Generale.

The Bank of England is already factoring in the economy standing still over the next year and has said growth needs to slow to tame inflation, which is running at more than double the central bank's 2 per cent target and expected to spike higher.

The figures are likely to fan further criticism of Prime Minister Gordon Brown's handling of the economy. He will no longer be able to boast of the economy growing continuously since the Labour government came to power in 1997.

But the government is likely to point out high oil prices and a credit crunch are hurting economies right across the world. The euro zone economy contracted in the second quarter.

The downward revisions to the preliminary estimate of British GDP were across the board. Britain's dominant services sector grew by just 0.2 per cent on the quarter, its poorest showing since the fourth quarter of 1995.

Manufacturing output fell by 0.8 per cent on the quarter, the weakest since the first quarter of 2005. Construction output, which has been hard hit by the housing market slump, fell by 1.1 per cent on the quarter - the worst since Q3 2005.

Household spending fell 0.1 per cent on the quarter, its weakest since the second quarter of 2005.

However, policymakers have said they expect a weaker pound to boost exports, helping to rebalance - and bolster - the economy. Net trade contributed 0.3 percentage points to the Q2 reading and government spending also lent some support. -- REUTERS

Buffett Says US Economy's Troubles Will Continue

Source : The Business Times, August 22, 2008

OMAHA, Nebraska - Billionaire investor Warren Buffett said on Friday the economy continues to be in a recession, by his definition, and will continue to be for at least several more months.

Mr Buffett said during a live appearance on CNBC that ripples of the credit crunch are continuing to cause problems in financial businesses and the economy.

He said earlier this year a financial crisis reveals which players have been 'swimming naked', because the tide goes out.

That picture has worsened along with the crisis.

'We found out that Wall Street has been king of a nudist beach,' said Mr Buffett, who is chairman and chief executive of Berkshire Hathaway Inc.

Mr Buffett said the businesses Berkshire owns, especially ones related to housing construction such as Shaw carpet and Acme Brick, continued to slow during the summer.

He said he's confident the US will be doing better five years from now, but the economy could be worse five months from now.

He says the economy is in a recession because most Americans aren't doing as well today as they used to be. The technical definition of a recession most economists use is two consecutive quarters of negative growth in the nation's gross domestic product.

Mr Buffett and another billionaire investor, Pete Peterson, appeared at a special screening of a new documentary on the nation's debts on Thursday in Omaha. The two Nebraska natives were part of a panel discussion after 'I.O.U.S.A.'s' premier that was broadcast in 358 theatres.

The film's message is that an economic disaster will befall the nation if the federal government's US$53 trillion in debts continue to grow.

Mr Buffett said he doesn't think the situation is as dire as the film portrays.

'I admire the fact they tackled the subject,' he said. 'I don't agree with many of the conclusions in the movie.' -- AP

CapitaLand To Realise S$313m Gain From Asset Injection

Source : The Business Times, August 22, 2008

PROPERTY giant CapitaLand has inked deals to inject four Raffles City-branded integrated developments in China - in Shanghai, Beijing, Chengdu and Hangzhou, into its Raffles City China Fund.

The US$1 billion (S$1.4 billion) real estate private equity fund will be purchasing CapitaLand's effective 55.9 per cent stake in Raffles City Shanghai, and 100 per cent of the other three Raffles City projects under development.

CapitaLand has a 50 per cent stake in the fund.

The property group is expected to receive a total consideration of about US$841 million (S$1.149 billion) which takes into account the agreed value of Raffles City Shanghai at 4.5 billion yuan (S$889 million) and the agreed land values of the other three Raffles City projects.

Net of its 50 per cent stake in the fund, CapitaLand will obtain an eventual net cash flow of about US$420 milllion (S$574 million).

In addition, CapitaLand will realise a total portfolio gain of S$313 million, which includes a net gain of S$183 million from the dilution of its interest in the four Raffles City assets as well as the fair value gain of S$130 million for Raffles City Shanghai.

Besides originating and retaining a sponsor stake in the fund, CapitaLand is also managing the fund and its properties.

HDB Awards DBSS Site In Toa Payoh To Hoi Hup-Led JV

Source : The Business Times, August 22, 2008

The Housing & Development Board on Friday awarded the tender for a Design, Build and Sell Scheme site at Lor 1A Toa Payoh to the top bidder - a consortium comprising Hoi Hup Realty Pte Ltd, Sunway Developments Pte Ltd and Hoi Hup JV Development Pte Ltd.

Their winning bid of about $198.82 million works out to about $160 per square foot per plot ratio. The tender closed on Tuesday.

Eng Wah Sells KL Condo For US$157,000

Source : The Business Times, August 22, 2008

Eng Wah Organisation has sold a unit in The Corinthian Condominium, Jalan Binjal,Kuala Lumpur, to two individuals for RM525,000 (US$157,171) cash.

The sale was made after the firm entered into a reverse takeover deal with Transcu Ltd, that requires the disposal of its existing assets and businesses.

GuocoLand's FY08 Net Profit Drops 43%

Source : The Business Times, August 22, 2008

Property developer GuocoLand Limited on Friday reported net profits of S$161.8 million for the financial year ended June 30 - 43 per cent down from a year ago.

Group revenue shed a slight four per cent to S$670.9 million.

Earnings per share for the year stood at 20.17 cents, less than half of that for FY2007.

The decrease in net profit was largely due to lower gross profit contribution from sales of property development projects in Singapore, lower revaluation gain on investment properties and higher income tax expense mainly from the group's property development projects in China.

GuocoLand declared a dividend of eight cents per ordinary share.

Hersing, Global Property Fund Ink Storage MOU

Source : The Business Times, August 22, 2008

It plans to expand self-storage business in region and S'pore

HERSING Corporation said yesterday that it has signed a non-binding memorandum of understanding with a leading global real estate fund for a proposed joint venture relating to Hersing's self-storage business.

Store and more: The deal sees Storhub transferring 4 properties to 4 S'pore-incorporated asset-holding firms

Hersing, through wholly owned subsidiary Storhub Self Storage, manages and operates self-storage centres in five locations across Singapore.

The company intends to expand the business throughout the island and into regional countries.

'The proposed joint venture will allow the company to leverage on the financial expertise, network and other resources of the real estate fund for this intended expansion,' Hersing said in a statement.

It did not name the real estate fund.

Under the terms of the MOU, Storhub will transfer four properties - 25A Changi South Street 1, 743 Lorong 5 Toa Payoh, 615 Lorong 4 Toa Payoh, and 15 Changi South Street 1 - to four Singapore-incorporated asset-holding companies, which in turn will be beneficially owned by an entity 80 per cent held by the global real estate fund and 20 per cent by Hersing.

The real estate fund will also buy from Hersing a 20 per cent stake in a company that will be set up to provide property management and asset management services for the asset-holding companies.

Hersing said the deal will allow it to realise capital gains that will enhance shareholder value.

CityDev Issuing 1st Tranche Of Islamic Bonds By Year End

Source : The Business Times, August 22, 2008

CITY Developments said yesterday that it will issue the first tranche of Islamic bonds by the end of the year, as it looks to build up its war chest.

Singapore's second-largest developer announced last week that it plans to sell $1 billion of Islamic multi-currency medium-term notes, arranged by Malaysian bank CIMB. The deal will be Singapore's first Islamic unsecured financing arrangement.

CIMB Group is listed on the Malaysian stock exchange through Bumiputra-Commerce Holdings.

'We hope to do the first tranche before year-end, subject to market conditions,' CityDev's chief financial officer Goh Ann Nee said at a briefing yesterday.

CityDev said that it has not decided on the size or the coupon rate of the first tranche of notes. But management has indicated that the rates will be competitive and that it expects to see good institutional demand.

CityDev will use the funds to buy land or buildings, and has said that it will inject its own properties, freeing funds for new investments.

Islamic financing will allow CityDev to tap a broader base of investors, says managing director Kwek Leng Joo.

'Many are curious why City Developments is enhancing its war chest,' Mr Kwek said. 'We always believe that in the midst of any economic slowdown there are tremendous opportunities.'

CityDev did not say which markets it is interested in. But management has guided that it will look at distressed assets in the region, including Vietnam, China, the Middle-East and Russia, CIMB analyst Donald Chua said in a note yesterday.

'Given restrictions on the use of syariah/Islamic products, we believe proceeds will be used for investments primarily in residential property and commercial (office) investments,' he added.

CIMB Investment Bank head of debt capital markets Thomas Meow said that the bank has been in discussions with other Singapore firms to set up syariah-compliant financing.

Vince Cook, chief executive of DBS unit Islamic Bank of Asia, told Reuters: 'Given the ongoing difficult conventional market conditions, it is not surprising that issuers are looking at ways to open up new pools of investors.'

CityDev shares gained six cents to close at $10.20 yesterday.

More Flexible Guidelines For M'sian Reits

Source : The Business Times, August 22, 2008

More leeway for expansion, but withholding taxes not addressed

MALAYSIA has announced new real estate investment trust (Reit) guidelines that would give Reit management companies greater flexibility to manage and expand their portfolios, but left the issue of its uncompetitive withholding taxes untouched.

Revised guidelines: Reits can now buy property that is under construction or uncompleted real estate

The new measures - a follow-on to earlier ones announced in the last national budget where foreign shareholders were allowed to hold up to 70 per cent of Reit management companies, from 49 per cent previously - make it easier for Malaysian Reits in terms of acquisitions and fund-raising.

Reit managers would be given more leeway to invest in foreign real estate and a portion of their portfolio can consist of real estate that it does not wholly own or claim a majority stake in.

The Securities Commission's (SC) revised guidelines also allow Reit managers to seek a general mandate from unit-holders for issuing units up to 20 per cent of its fund size, where previously the issuance of any number of new units required the specific approval of unit holders.

Although Reits are still not permitted to acquire non-income generating real estate such as vacant land, they can now buy property that is under construction or uncompleted real estate up to 10 per cent of their total asset value.

Trustees would also have a bigger role to play in related party transactions, with new rules introduced to regulate such transactions.

But the new rules designed to give more management flexibility and to augment investor protection aside, there was disappointment in that the main drag on the industry was not addressed.

Reit managers and analysts have repeatedly stressed the country's high withholding taxes on Reit income make it an unattractive proposition for investors, particularly foreign ones, and have stymied the sector's growth with potential Reit owners preferring to look elsewhere.

While the SC has done a good job trying to relax the sector yet protecting the interest of investors, Quill Capita Trust chief executive Chan Say Yeong said the measures would not boost the industry unless the tax issue was addressed. 'What is more important right now is the withholding tax,' he observed, the lack of attention to the matter in the past three years being a sore point with investors. 'Investors tell us on our roadshows that the government is not serious in promoting the industry.'

Malaysia's withholding tax on Reit dividends received by foreign institutions is 20 per cent or twice the amount Singapore imposes. Individuals are also taxed at 15 per cent.

At 7 per cent, Malaysian Reits might offer higher yields, but after deducting the tax, it is not significantly more attractive than the 5-6 per cent yield offered by Singapore Reits - a reason why they did not perform as well even when the stock market was roaring last year.

Despite these disadvantages, CapitaLand has committed to the listing of a RM2 billion (S$844 million) asset-sized retail Reit on Bursa Malaysia, likely to be the largest Reit in the country.

However, the Finance Ministry's reluctance to lower the taxes has been a source of frustration for players who continue to clamour for a reduction ahead of every national budget - 2009's to be tabled next Friday. At the same time, a number of local owners with large property assets have said they do not discount listing their Reits overseas in more favourable markets.

Why the ministry continues to maintain the rate is unclear as analysts said the funds earned are not huge given Malaysia only has some 11 Reits at present, the average asset size less than RM500 million.

In its statement, the SC also said its prior approval on real estate valuation was now only required where the purchase of a real estate is financed, or re-financed within one year, through the issuance of new units. In all other circumstances, it would conduct a post-review of the valuations to ensure they are reasonable and well-supported.

Stanchart Launches Transparent Home Loan Pegged To Sibor

Source : The Business Times, August 22, 2008

Package has offset feature - interest earned on deposit can cut loan interest

STANDARD Chartered Bank has upped the ante in the mortgage market here with a new transparent home loan pegged to the Singapore interbank offered rate (Sibor). The loan comes with an offset feature where customers can use the interest earned on their deposits to reduce the interest payable on their home loan.

MortgageOne Sibor loans will be priced at 0.8 per cent a year above the three-month Sibor for the first three years.

Customers enjoy the same interest rates as their mortgage loan on two- thirds of the deposits linked to MortgageOne Sibor, subject to a maximum of their loan principal outstanding.

The remainder of the deposits will enjoy an interest rate of 0.5 per cent a year.

By paying less interest every month, customers can repay their mortgage loan faster compared with a traditional mortgage loan.

Under this loan package, customers can put any surplus funds in their current account to reduce interest costs.

They also have the flexibility to withdraw these funds at any time and capitalise on investment opportunities.

'MortgageOne Sibor is designed for all customers,' said Dennis Khoo, general manager of lending at Standard Chartered Bank Singapore.

'For example, for a $500,000 mortgage loan with a 25-year tenure, a customer can reduce interest payments by 20 per cent, just by saving $500 every month.'

DBS Bank said it was the first to offer Sibor- pegged interest rates early last year, after it launched the CPF ordinary account pegged rates under its flagship POSB Home Ideal product in November 2006.

Under the DBS Managed Mortgage, customers can choose between the three-month and 12-month Sibor benchmark and the loans are priced between 0.8 and 1.25 per cent a year above the benchmark, depending on the period of commitment.

Other big players in the home loan market here, however, do not seem to be pressured to launch Sibor- linked loan packages as yet.

'There are many different housing loan packages in the market today. Ultimately, what matters to the home loan borrower is that he is given a choice of which home loan package best suits his needs and his reading of the interest rates trend,' said Gregory Chan, head of secured lending at OCBC Bank.

The bank currently offers fixed and variable packages as well as the swap offer rate package, which is a customised home loan with interest rates that are pegged to the three-month Singapore dollar swap offered rates (SOR), starting from one per cent above SOR for the first two years and 1.25 per cent above SOR thereafter.

Maybank told BT yesterday it does not have any immediate plans for Sibor- pegged home loans at the moment.

Its home loan single board rate stands at 3.75 per cent a year currently and is benchmarked against interbank rates, market conditions, as well as business costs.

Temasek Willing To Pump More Into Merrill Lynch

Source : The Business Times, August 22, 2008

It was aware at time of investing that Merrill could plunge before rebounding

Just a month after it injected an additional US$900 million in US securities firm Merrill Lynch, Singapore's Temasek Holdings has indicated that it may raise its stake even further in the troubled bank.

Mr Dhanabalan: When an SWF is government-linked, no matter how tenuously, scrutiny is magnified manifold. A world of more restricted trade and capital flows is not good for Temasek and Singapore, nor for the world.

The investment company's chairman S Dhanabalan said yesterday that it would be willing to look at the possible opportunities to do so, but 'whether we do it depends on our assessment and risk diversification'.

The 71-year-old chairman was speaking to 175 business leaders at a Raffles Hotel luncheon organised by Talent ideas Enterprise, a non-profit organisation that promotes entrepreneurship.

Last December, Temasek paid US$5 billion for a stake in Merrill. Giving a deeper insight into the considerations leading up to the deal, Mr Dhanabalan said: 'We saw an institution that had good management, good business. We thought the price was attractive, but we also knew that it was very likely it would go below what we invested. But we look at it (for a period) of 5-7 years.'

Merrill's shares have dipped 55 per cent since last Christmas Eve, the day it announced Temasek's purchase of about 5 per cent of its stock.

In his speech, Mr Dhanabalan also revealed that Temasek's assets had increased to $185 billion at the end of March this year, 13 per cent higher from a year earlier.

'Growing with our blue- chip companies and our direct investment activities, Temasek now owns a net portfolio of about $185 billion at market value as at March 31, 2008,' he said.

These latest figures come ahead of Temasek's anticipated release of its annual report next Tuesday.

Mr Dhanabalan said that Singapore and Asia make up about 75 per cent of Temasek's investments, down slightly from 78 per cent a year ago.

Looking ahead, he said that Temasek's growth outside Singapore 'will be higher', meaning the proportion of investments here will inevitably shrink.

Of late, Temasek has been venturing into markets outside of Asia, excluding Japan, in a bid to seek higher returns and diversify its portfolio.

Besides the heavy investments in Merrill and Barclays, Temasek is also busy hiring for its new offices in Brazil and Mexico.

Temasek's original breakdown in terms of geography has been one third Singapore, one third Asia, and one third in the developed markets.

But Mr Dhanabalan explained that the ratios alone do not drive Temasek's investments.

'We are very opportunistic. We don't say we need to have so much in this market, so let's go invest. If the opportunity arises, we go and invest. We have no prior sort of proportion that we must invest in Brazil or Mexico,' he said.

Mr Dhanabalan also took the opportunity to once again reiterate Temasek's stance that it is an atypical sovereign wealth fund in that it owns its assets and is not a fund manager like most other SWFs.

Describing Temasek as an institution that 'often finds itself drawn unwittingly into this controversy', he said that while Temasek is seen as the 'gold standard', it still risks collateral damage from any backlash against SWFs in general.

The controversy surrounding these funds stems from how they have significantly increased their influence on global markets in recent years. UK-based research organisation IFSL says assets under the management of SWFs increased 18 per cent last year to hit US$3.3 trillion. This is likely to exceed US$10 trillion by 2015, it said.

'When the investor is government-linked, no matter how tenuously, the scrutiny is magnified manifold. A world of more restricted trade and capital flows is not good for Temasek and Singapore, nor for the world,' said Mr Dhanabalan.

Cooling Property Market Takes A Seat At SLA Auction

Source : The Business Times, August 22, 2008

Only four of eight in-fill sites launched for residential use were eventually sold

The wait-and-see attitude that buyers have adopted in the cooling property market was evident at a Singapore Land Authority (SLA) auction yesterday.

All eyes only: 200 individuals and small developers packed a room at M Hotel, but there were only a few bidders

Some 200 individuals and small developers packed a room at M Hotel, but there were only a handful of bidders. Only four of eight in-fill sites launched for residential use were eventually sold, for a total of $13.81 million.

In-fill sites are pockets of state land in established landed housing estates that have been left untouched by nearby development or were once used for public purposes. All eight sites came with fresh 99-year leases.

'The response today was very cautious,' said auctioneer and executive director (auctions) at Knight Frank, Mary Sai. SLA conducted a similar auction for six sites last November but sold all the plots then.

Those at yesterday's auction told BT that opening prices were higher than expected. 'I think a lot of people were surprised - that's why there was not much bidding,' said retiree Anthony Tan Ho Peng.

Mr Tan won the bidding for a 4,720 sq ft three-storey bungalow plot in Glasgow Road for $710,000 or $150.40 per sq ft. Bidding started at $680,000, whereas Mr Tan had expected an opening price of $550,000.

According to SLA, the Chief Valuer decides reserve prices for sites, which cannot be awarded if bids are too low.

The timing of the auction - coinciding with the Hungry Ghost Festival or the seventh month of the lunar calendar - could have affected interest. But Ms Sai reckons this was not the main reason. 'Market sentiment is still weak,' she said. And high construction costs could be another concern.

While the auction did not generate heated competition throughout, one parcel received considerable attention. A 15,461 sq ft good class bungalow plot in Ridout Road attracted 34 bids, which drove the opening price of $7.31 million up steadily.

BreadTalk chairman George Quek eventually won the site for $8.96 million or $579.50 psf - the highest psf price of the four sites sold. Mr Quek told reporters that the land will be for his own use.

A three-storey bungalow parcel in Namly Avenue went for $2.63 million or $338.40 psf to Martha Lim. The 31-year-old CEO of Lim Seng Kok Contractor may also keep the 7,771 sq ft site for her own use.

A plot in Tanah Merah Kechil Road was sold for $1.51 million or $346.60 psf.

As for the unsold sites, SLA will work with the Chief Valuer to re-assess their prices. 'If we lower the reserve price, we could release (the site) subsequently,' said SLA's deputy director of land sales, Teo Jing Kok. Alternatively, 'if the feedback is that maybe the site is not popular and there are other in-fill sites, then we will release other sites'.

According to Mr Teo, SLA could hold one or two land auctions a year if market conditions remain steady.

Key Barometer Signals Deeper US Gloom

Source : The Business Times, August 22, 2008

Slide in Conference Board's widely-watched index is much more than a Wall St consensus estimate

(NEW YORK) In a sign of further US economic unravelling, the index of leading US economic indicators plummeted 0.7 per cent in July to the lowest level in nearly four years.

The Conference Board's index, a key forecasting gauge of the US economy, fell to 101.2, the lowest since it was 100.7 in October 2004.

The influential private business group's economic indicator was pushed lower by declines in the stock market, drops in new building permits and rising unemployment.

The fall in the indicator is also much more than the consensus estimate of a 0.2 per cent decline by Wall Street economists surveyed by Thomson/IFR.

The last time the index of leading US economic indicators showed a drop this great was last August, when it fell by one per cent.

The index points to the direction of the economy over the next 3-6 months. In the last six months, the index has risen only once - by 0.1 per cent in April. It also has fallen 0.9 per cent over the same time period, the board said.

A separate report showed manufacturing in the Philadelphia region shrank in August for a ninth month.

The numbers are 'consistent with the weak economy right now, probably an economy in recession', James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, said in a Bloomberg Television interview.

The index was forecast to decline 0.2 per cent, according to the median of 63 economists in a Bloomberg News survey, after an originally reported drop of 0.1 per cent in June. Estimates ranged from a decline of 0.9 per cent to a gain of 0.1 per cent. Sagging orders and falling sales hurt factories in the Philadelphia region this month, a report from the Federal Reserve Bank of Philadelphia showed.

Its general economic index rose to minus 12.7 from minus 16.3 in July. Negative readings signal a decline. The measure averaged 5.1 last year.

The leading index decreased at a 1.8 per cent annual pace over the past six months. A decline of around 4-4.5 per cent at an annual pace is one signal that a recession is imminent, according to the Conference Board. The gauge met that requirement in January, when it dropped at a 4.7 per cent pace.

Five of the 10 indicators in yesterday's report subtracted from the index, led by declines in building permits and stock prices.

Housing subtracted 0.53 percentage point. Building permits, a sign of future construction, fell 18 per cent in July, while work began on the fewest houses in 17 years, the Commerce Department reported this week.

A 0.25 percentage point drag came from the Standard & Poor's 500 index, which averaged 1,257.3 last month, down from June's 1,341.2.

First-time claims for jobless benefits took away 0.23 percentage point from the leading index. Claims rose to an average 420,800 in July, and jumped to a six-year high earlier this month.

Earlier yesterday, a Labor Department report showed initial jobless claims fell to 432,000 - indicating that the labour market is still deteriorating.

A decline in orders for consumer goods and a drop in the money supply adjusted for inflation, which has the biggest weighting, also hurt the leading index. -- AP, Reuters, Bloomberg

Market Could Do With Wing Tai Plainspeak

Source : The Business Times, August 22, 2008

WHEN Wing Tai Holdings holds its fourth-quarter and full-year results briefing next Tuesday, it will be the last of the major Singapore-listed property groups to announce results for the period ended June 30, 2008. Net earnings are expected to be lower than the $382 million record performance for the preceding year. But the wait may still be worth it, if the Cheng brothers who helm the group once again give a candid assessment of the state of the Singapore property market.

The duo has made some of the frankest pronouncements on market prospects. Last August, during the early days of the US sub-prime mortgage crisis, Wing Tai chairman Cheng Wai Keung was probably the first major developer to say publicly that sub-prime woes had slowed property transactions across the entire market in Singapore.

He said: 'Yes, temporarily, it has affected some of the take-up rates. But it is actually not a bad thing. The market needs a bit of consolidation. High-end home prices have gone up 100 per cent within the last 6-9 months. It's just not sustainable. But if sub-prime settles within a reasonable period, I believe there is still room to grow in the property market. We're not at the end of the property cycle.

'On the other hand, if sub-prime or the credit market continues to be in turmoil and it affects confidence in general, then, of course, it will be a completely different scenario,' he had added.

That was in August last year. By February this year, when the sub-prime crisis and its bite on the local property market had worsened, some developers here were still singing a positive tune, hoping the sub-prime gloom would blow away after mid-year.


But Wing Tai deputy chairman Edmund Cheng told BT at the time that it may not be realistic to expect sub-prime problems to fade away by mid-year. 'They are likely to linger beyond this year, as the exposure has extended to many other areas, and it may still take some time for the full extent of exposure to be discovered,' he said.

Now, with the official forecast for Singapore's GDP growth this year trimmed and all-round warnings for tougher times ahead, the market will hopefully once again be able to count on the Cheng brothers to deliver an honest verdict for the property market - and perhaps even offer some advice for property investors caught in the turbulence.

After all, Wing Tai itself has been through tough times. It was one of the worst-hit developers during the Asian financial crisis. It chalked up huge losses and was strained by a pile of debt.

It had bought some high-priced residential plots in Singapore in June 1997, on the eve of the Asian crisis. These included a 99-year leasehold residential site at Draycott Park that it purchased at $1,103.60 per square foot per plot ratio (psf ppr) and another plot in the Newton Road area for $611.91 psf ppr. The price of the Draycott plot remained a record for 99-year leasehold prime district residential land for about a decade.

Better shape

Wing Tai had high net gearing ratios (over 1) during the Asian crisis years and again during the more recent property slowdown in 2000-2004. Today, the group is in much better financial shape. As at March 31, 2008, its net gearing ratio was 0.5.

Like all developers, Wing Tai will try to hold off launches given the current weak market sentiment, especially since it has strengthened its financial position from the recent Singapore residential market boom between 2005 and 2007.

But, as Morgan Stanley Research said in a recent report: 'Should the residential market remain subdued for a prolonged period, Wing Tai may have no choice but to stomach lower selling prices to entice buying activity, particularly if the other developers have cut selling prices in their projects.'

The group's existing Singapore residential land bank was by and large acquired at more attractive prices, except for a 40 per cent stake in a 99-year leasehold plot at Alexandra Road bought for $639 psf ppr late last year.

Fortunately for Wing Tai, its other prime district freehold sites like Anderson 18, Ardmore Point, Belle Vue and Newton Meadows were acquired between 2005 and May 2007 at relatively attractive prices of $1,650 psf ppr and $1,369 psf ppr for Anderson 18 and Ardmore Point respectively and about $660 psf ppr for both Belle Vue and Newton Meadows.

If necessary, Wing Tai could take a hit on selling prices for new condos on these sites and should still be able to make a decent profit. Wing Tai seems to have learnt its lessons from the past and, hopefully, history will not repeat itself. As a bonus, the Cheng brothers may again offer probing insights into the local property market next week.