Saturday, November 29, 2008

Recession? New Outlets, Malls Still Opening

Source : The Business Times, November 29, 2008

Retailers remain upbeat and are thinking of new ways to pull in shoppers

THE recession may have induced a round of belt-tightening, but industry players are still investing in new outlets and even opening new malls.

Sports chain Nike, for example, opened its $5 million flagship store in Orchard Road's Wisma Atria yesterday.

The 8,000 sq ft store is Nike's first flagship store in South-east Asia and the first here operated and owned by the brand itself. Till now, Nike stores have been opened with local partners.

NTUC FairPrice is opening another hypermarket, and a third retail mall is coming up in Tampines, which already has Century Square and Tampines Mall.

Nike's country marketing manager here, Mr Glenn Heng, said the sportswear giant had wanted to open a flagship store for some time, but the right location was not available. The opportunity came four months ago when Topshop closed its Wisma Atria outlet. It was too good a chance to pass up, said Mr Heng, who added that, despite the gloomy outlook, 'we are still quite positive'.

The increased interest in sports here, along with Singapore's clinching of the bid to host the first Youth Olympic Games, will only help the brand, he said.

Retailers hoping to sow some seeds for growth during this downturn include the biggest supermarket chain here, FairPrice, which will open its third hypermarket in Jurong Point next month and at least two more outlets next year.

FairPrice managing director Seah Kian Peng said: 'Even in the downturn, our customers will still need essential items for their daily needs.'

Mall owner AsiaMalls, which reopened the refurbished Liang Court this month and will open the Tampines 1 mall in March, remains confident of attracting shopper traffic to its malls. The group's assistant general manager Stephanie Ho said 'tactical promotions' which reward spending and reach out to target shoppers were the way to go.

Tampines 1 has secured 90 per cent of its tenants, including first-time entrants to the suburbs Topshop and Promod.

Orchard Central has signed up 60 per cent of its tenants, while Mandarin Gallery, which is being renovated, has signed up half.

A spokesman for Overseas Union Enterprise, which owns Mandarin Gallery, said: 'Leasing activities are still active as there are smart retailers who see downtimes as opportunities to get good space at viable rents.'

Mall owners who have snagged these retail tenants are working more closely with them to offer promotions and organise mall events to beat the effects of the economic slump. Far East Organization's deputy director of retail management Susan Leng said the yet-to-open Orchard Central will be open till 11pm daily to 'cater to tourists on tight schedules and true-blue shopaholics'.

Malaysian Growth Slows Sharply

Source : The Business Times, November 29, 2008

(Kuala Lumpur)MALAYSIA'S economic growth slid sharply in the third quarter to its slowest pace since mid-2005 as the global slowdown started to hit and the central bank said that it was ready to cut rates again if needed.

Annual gross domestic product growth slowed to 4.7 per cent in Q3, data showed yesterday, down from 6.7 per cent in the second quarter, and just above a 4.5 per cent increase forecast in a Reuters poll.

Earlier this week, data showed growth cooling in the Philippines and Thailand, and the World Bank forecast a sharp slowdown in China next year, while Japan posted a larger-than-expected fall in industrial production yesterday.

Malaysia's central bank governor, Zeti Akhtar Aziz, said that interest rates, cut this week to 3.25 per cent from 3.5 per cent, were not restricting bank lending, though she said that the central bank was ready to act again.

This week's rate reduction was the first in five years.

At a press conference, Ms Aziz said that Malaysia would not slip into a recession in 2009, and she forecast that inflation would drop to less than 3 per cent in the second half of 2009, down from 7.6 per cent in October, the latest month for which data is available.

The Malaysian government, which cut its growth forecast to 3.5 per cent from 5.4 per cent, has announced a US$2 billion stimulus package to boost the domestic economy so as to offset weakening exports. -- Reuters

Jurong East 'White' Site Joins Reserve List

Source : The Business Times, November 29, 2008

But market watchers say that like the Bukit Chermin site, it is not likely to be triggered anytime soon

FOR the second day running, the Urban Redevelopment Authority has made available for application a reserve list site in an attractive location, despite the inopportune timing.

Its latest offering is a 1.9-hectare 'white' site next to Jurong East MRT Station. At least 30 per cent of the 1.15 million square foot maximum gross floor area must be set aside for office use and the rest for additional office use or other uses permitted under the white site zoning such as commercial (like retail and entertainment), hotel and residential uses.

The 99-year leasehold plot is the first sale site being offered in URA's Jurong Gateway precinct since Singapore's planning authority unveiled plans for the Jurong Lake District earlier this year.

On Thursday, URA went ahead with the scheduled release of a plum hotel site at Bukit Chermin on hilly terrain overlooking the coastline.

Market watchers yesterday gave the Jurong East site the same verdict that they did for the Bukit Chermin site - it's not likely to be triggered anytime soon.

'Given the current uncertain business environment, it's unlikely there will be any interest in the Jurong East site. There's also difficulty in getting funding. Investors would rather go for completed, income-generating assets that can give immediate returns than to embark on a fresh development with higher risks,' DTZ executive director Ong Choon Fah said.

Market watchers also note that substantial office supply is expected to be completed from 2010.

Colliers International director Tay Huey Ying: 'It's unlikely the Jurong East site will be triggered for launch until the market picks up significantly. The land parcel is quite attractively located next to an MRT station and in an area within a growth centre.'

URA said: 'Given its strategic location, it is vital that the proposed development on the first sale site in Jurong Gateway is a well-designed landmark development with appropriate quality.

'Hence, the design of the proposed development will be reviewed by a Design Advisory Panel (DAP), chaired by URA.

'The DAP will work with and guide the development team in the design of the development after the tender has been awarded.'

Reserve list sites are launched for tender only upon successful application by a developer with an undertaking of a minimum bid acceptable to the state.

The tender for the Jurong East site will be awarded on the basis of land price.

S'pore Faces Years Of Slow Growth After Recession: PM

Source : The Business Times, November 29, 2008

Recovery will not depend on its own measures but state of US economy

SINGAPORE is likely to face several several years of slow growth after the current recession, Prime Minister Lee Hsien Loong said yesterday.

CRISIS CONTROL - PM Lee speaking to business leaders at the ENADE fair in Santiago, Chile; the current financial crisis involves the entire world and the magnitude is the worst in more than 60 years, he told reporters

Painting this glum picture amid the global financial crisis, he said that recovery for Singapore will not depend on its own measures but the state of the US economy.

Mr Lee explained how the current crisis differs from others that he has experienced - first in 1985, when Singapore's soaring costs required tough medicine; and then in 1997 when the Asian financial crisis hit.

This time around, the crisis involves the entire world and the magnitude is the worst in more than 60 years, he told Singapore reporters in the Chilean capital of Santiago as he wrapped up a week-long trip to South America.

'Imbalances have been built up over the past five to seven years - the balance of payments; deficits; the surpluses in Asia; the budget deficits in America; the borrowing and excessive consumption by US consumers,' he said.

'To get back to growth, we cannot go back to where we were before, which is - Asians lend money to Americans, Americans borrow money to spend. So how do we get back to the model where savings and consumption are in balance?'

Now that the American consumer is not spending as 'extravagantly and profligately' as before, those from other countries - be it China, India, or from Europe - will have to 'take the slack', said Mr Lee.

With many Singaporeans keenly awaiting the coming Budget, which has been brought forward a month to January, Mr Lee said that it is important to manage people's expectations realistically.

He made clear why the government is not keen to reduce the Goods and Services Tax. What will be more effective, he said, is to maintain the current 7 per cent rate and use the revenue in a targeted way, such as by helping businesses feeling the impact of the crisis.

'You cannot look at individual revenue items, but the overall package,' he said. 'Where is the government getting its money, where is it spending the money? The balance - are we putting assistance into the system, or are we running a big surplus during a time when the economy cannot afford to run a surplus?'

Mr Lee also ruled out any cuts to the CPF scheme 'in the immediate term' as there were more practical ways to reduce business costs. Slashing the CPF rate now would send too pessimistic a signal, he said. 'Then everybody takes fright and shrinks back. It would make things even gloomier.'

He recalled how, back in 1985, then-prime minister Lee Kuan Yew explained in his National Day Rally speech why Singaporeans had to 'take the medicine' to combat the downturn at that time. This included a hefty 15 percentage point cut in the employers' share of the CPF as a crucial way to bring down business operating costs.

Singapore's cost structure that year was way out of line with those of other Asian economies such as Korea, Hong Kong and Taiwan, said Mr Lee. 'That year in 1985, there were no goodies. Not one. People listened carefully, they understood the issues. The medicine worked.'

In the coming Budget, there will be 'a bit more sugar coating' on the pill, he said. There will be assistance for needy families, and the middle-income group - commonly known as the 'sandwich class' - will not be neglected.

Regardless of how the crisis pans out, the government will not lose sight of the over-riding priority - keeping people in jobs, reducing business costs and maintaining the country's competitiveness.

'That's what we have been doing this year and that will be the focus for the Budget,' said Mr Lee. 'At the end of the day, the situation will pass. Asia is dynamic with opportunities, and we must still be with Asia. During this downturn, we must do all we can to prepare ourselves and emerge in that position.'

Santiago was the final leg of Mr Lee's visit, during which he attended the Asia-Pacific Economic Cooperation summit in Lima, Peru, before heading to Sao Paulo and Brasilia in Brazil for bilateral talks. He returns home today.

Property Exposure Of Banks Well Below Limit

Source : The Business Times, November 29, 2008

MAS does not expect sliding real estate market to affect lenders as their loan portfolios are generally well diversified

EVER since the market gathered steam in 2005, property-related loans have grown steadily. In fact, they were the key drivers of non-bank loan growth over the past two years, according to the Monetary Authority of Singapore (MAS), which released its Financial Stability Review yesterday.

Now, as a chill settles over the market again, concerns are being voiced over banks' exposure to the property sector. Brushing aside these worries, the MAS said that the overall property exposure of banks stands at just 18 per cent, well below the regulatory limit of 35 per cent. Of course, some banks may be closer to the threshold. 'Most banks' property exposures were well below the limit, with a few banks' property exposures closer to the limit,' MAS said.

Home loans are not included in the regulatory limit as they are typically very low risk. They accounted for 28.4 per cent of non-bank loans.

Banks' exposures to building and construction (B&C) firms are generally well-diversified with no bank having exposures concentrated in any particular property firm, it said. Lending to the B&C sector accounted for 18 per cent of total domestic banking unit (DBU) non-bank loans in September 2008. The asset quality of B&C loans has remained high, with the non-performing loan (NPL) ratio remaining low at less than one per cent.

'Going forward, the NPL ratio of B&C loans is expected to rise, given the economic downturn and ongoing corrections in the property market,' MAS said.

However, it does not expect this to affect the financial soundness of the banks as their loan portfolios are generally well diversified.

MAS said that the leverage ratio of the property sector has remained at almost the same level as before the Asian financial crisis, at around 60-80 per cent.

'Generally, the small property developers are more highly geared than the large property developers, with the small developers' debt to equity ratio at 76 per cent, compared to the large developers' 62 per cent in Q2 2008,' it said.

While there has been a substantial moderation in the interest coverage ratio since Q2 2007 for both small and large property developers, their earnings are still more than adequate to cover their interest liabilities in Q2 2008 with earnings at about 8.6 times of interest expense, it said.

On housing loans, the MAS said that they 'typically turn in low single-digit NPL ratios and have a low risk profile with 75 per cent of housing loans accounted by owner-occupied residential properties'.

In addition, Singapore banks' mortgage exposures are currently in the form of direct loans. Unlike in the US, there has been no securitisation of mortgages and repackaging into complex products, which had contributed to lax lending standards and the mispricing of risk, it said.

It added that the growth of property-related loans has tapered off recently, reflecting falling home demand and property transactions.