Beijing will act rationally and any effort to rein in lending probably won’t weigh on economic growth, he says

INVESTOR Mark Mobius says the bubble in China’s property market isn’t about to burst.

‘The Chinese will act rationally and they’re not going to kill the market,’ Mr Mobius, who oversees US$34 billion of developing-nation assets at Templeton Asset Management Ltd, said in an interview in Singapore. ‘There’s still a lot of savings in China. Prices are high but I don’t see a crash.’

Mr Mobius said he plans to increase holdings in Chinese stocks by purchasing shares that benefit from consumer demand, including developers and raw-material suppliers.

Shanghai’s index of property stocks has lost 28 per cent in the year through Jan 7 after reaching a one-year high in July. It rallied 1.1 per cent yesterday, halting four days of losses.

Rising new loans last year caused property prices to climb ‘too quickly,’ while surging commodity costs increased inflationary pressure, Premier Wen Jiabao said on Dec 27. The central bank sold three- month bills at a higher interest rate for the first time in 19 weeks on Thursday after saying that policymakers will seek ‘moderate’ loan growth while managing inflation expectations.

Any efforts to rein in lending probably won’t weigh on economic growth, and productivity will keep a lid on inflation, Mr Mobius said in Thursday’s interview. China’s economy grew 7.7 per cent in the first nine months of 2009, near the government’s 8 per cent target for the year.

‘They are watchful and they are not going to let things get out of control,’ he said. ‘We don’t think they are going to dampen growth. They want growth to continue but they want it at a measured pace and there’s nothing wrong with that.’

The central bank, which has kept its benchmark one-year lending rate at a five-year low of 5.31 per cent after five reductions in the last four months of 2008, allowed a record 9.21 trillion yuan (S$1.88 trillion) of new bank loans in the first 11 months of 2009.

Stock investors remain ‘complacent’ on inflation and tightening risks, BNP Paribas said in a report dated Jan 7. The brokerage said the central bank is likely to implement ‘a series of hikes’ in three- month and one-year bill auction yields to guide market expectations of a monetary policy shift and may raise the bank reserve ratio in the first quarter.

The Shanghai Composite Index, tracking the larger of the nation’s two stock exchanges, climbed 0.1 per cent, reversing an earlier loss of as much as 1.4 per cent. Hong Kong’s Hang Seng China Enterprises Index of mainland shares traded in the city fell 0.3 per cent.

‘We actually have a long-term bullish view on China but in the short term, we’re actually less bullish,’ Joseph Zeng, head of Greenwoods Asset Management Ltd’s Hong Kong office, said in a Bloomberg Television interview yesterday.

‘The market is going to be like a ‘W’ shape. This means more volatility, but it’s still going to move up.’

While China remains Mr Mobius’s top pick among the largest emerging markets, its weighting in his portfolios lags behind Brazil, Russia and India because of gains in other markets, he said.

China’s property prices climbed in November at the fastest pace since July 2008. Residential and commercial real estate prices in 70 major cities rose 5.7 per cent from a year earlier, compared with a 3.9 per cent gain in October. The government imposed a sales tax last month on homes sold within five years of their purchase and took other steps to curb property price increases.

China Vanke Co, the nation’s largest publicly-traded developer, and Guangzhou R&F Properties Co are among the worst performers on the MSCI China Index in the last six months. The measure has climbed 23 per cent during the period, lagging behind a 35 per cent gain in the MSCI Emerging Markets Index.

Property stocks will rebound because the policy changes have already been ‘factored into’ share prices, CLSA Asia-Pacific Markets’ Shanghai-based head of China A-share research Manop Sangiambut said last month.

Andrew Mattock, who manages the US$342 million Henderson Horizon China Fund, also said in December that he will stay ‘fairly aggressive’ on property stocks because the risks of curbing loan growth are priced in.

Source: Business Times, 9 Jan 2010

SINGAPORE-BASED Pacific Star Group yesterday said it has appointed Wong Wing Kien as president of asset management.

Mr Wong, 49, will lead the real estate investment house’s expansion of its asset management business in Asia. This includes enlarging its portfolio of third-party assets, as well as developing asset management and enhancement strategies for the group’s existing properties to enhance both asset values and yields.

Prior to joining Pacific Star, Mr Wong was group chief operating officer of Surbana Corporation, a wholly-owned company of Temasek Holdings.

In total, he has over two decades of experience in construction, project consultancy, property development and real estate investment in the region.

Pacific Star manages over 2.5 million square feet of prime office, residential and retail space across Asia. Its portfolio includes Capital Square and TripleOne Somerset in Singapore, 88 Gloucester in Hong Kong, Pavilion Residences in Kuala Lumpur, Noon Square in Seoul, and Cross Tower in Shanghai.

The group, which has offices in key cities such as Kuala Lumpur, Bangkok, Hong Kong, Beijing, Shanghai, Seoul, Tokyo, Sydney, Doha, Munich and New York, recently made its foray into Vietnam.

It was appointed asset management adviser to Sunrise City Shopping Mall, a mega shopping centre in Ho Chi Minh City, that is expected to be ready by late 2012. The mall is part of a US$500 million mixed-use project developed by Vietnam property firm Novaland.

Pacific Star has also advised and managed multi-billion-dollar real estate transactions since its inception in 2001. It manages a suite of funds, including the 1.2 billion euro (S$2.4 billion) AREIF Fund, the US$600 million Baitak Asian Real Estate Fund, and the US$650 million Asian Real Estate Prime Development Fund.

The group’s latest fund activities include fundraising for its US$500 million Enterprise Fund and US$2 billion Asia Fund Select fund.

Source: Business Times, 9 Jan 2010

RETAILER John Little could soon vacate its large Orchard Road site, raising the possibility that more prime space on the shopping strip will be up for grabs.

John Little is the sole tenant in the seven-storey Orchard OG Building but the three-year lease expires on May 16. The company did not exercise its option to renew the lease, according to landlord OG.

Existing tenants often have priority in renewing a lease if it is within a contract’s pre-agreed terms.

This is usually done about six months before a lease ends but sources party to the agreement said that John Little’s option to renew expired late last year and no offers have come in.

John Little is part of the Robinsons Group, which includes the Robinsons and Marks & Spencer stores.

A Robinsons Group spokesman did not confirm or deny that John Little would vacate the premises.

He added: ‘John Little has a wide presence in Singapore both in the main Orchard Road and Marina shopping belts, as well as the heartland areas, and we continually review the locations of our outlets to ensure we stay relevant to our customers.’

John Little moved to the OG premises in 2007 from the Specialists’ Shopping Centre across the street that has since been redeveloped.

The building, which is opposite the newly opened 313@Somerset, is on freehold land with a gross floor area of 44,315 sq feet. It was last refurbished in 1992.

OG, a family-run firm and one of Singapore’s oldest department stores, said a few companies, some foreign, have expressed interest in leasing the space.

The company also owns other office and retail properties in Albert Street and at People’s Park and Orchard Point.

‘Although rents have dipped during the financial crisis, they have been going upward since about half a year ago, so we are optimistic about getting a good price,’ an OG spokesman said.

He added that the guide price is $10 per sq feet (psf), with the total rent amounting to about $443,150 per month.

This might seem like a steal, with property firm CB Richard Ellis (CBRE) reporting that prime Orchard Road rents averaged $32.40 psf in the fourth quarter of last year.

But Ms Chua Chor Hoon, the South-east Asia head of DTZ Research, said retail rents, even in the Orchard Road district, encompassed a wide range.

Since OG might want a single tenant for the large building, the average psf might be lower as it will take into account both prime and non-prime retail space, she added.

‘The profit margin is also lower for larger-format stores, such as department stores, as compared to stand-alone stores,’ Ms Chua added.

‘It is also harder to get a big tenant, so the landlord might take that into the rental consideration as well.’

Knight Frank group managing director Danny Yeo said the OG Building was ‘challenging’ as it occupied middle ground.

It was an awkward size, he said, too small and with a multi-level format that made sub-divided tenancy difficult, but also too big, making the search for a single tenant a tricky endeavour.

But the free-standing building had an excellent frontage that made it a good location in the Somerset area, which has been given a new lease of life with the opening of Orchard Central and 313@Somerset, he said.

Dr Lynda Wee, the chief executive of retail consultancy firm Bootstrap, said that health-themed concept stores or a retail brand with a strong following might be suitable candidates to take up the space.

*SCAPE – a youth-themed mall – is also due to open in Somerset Road in June. It has filled about 80 per cent of its 40,000 sq feet of retail and food and beverage space since the launch last September.

Retail rents are aso rebounding after four straight quarters of decline.

Rent for first-storey Orchard Road and Scotts Road space inched up 1 per cent in the fourth quarter of last year after falling 7.3 per cent since the third quarter of 2008, said DTZ Research.

CBRE also reported that $801.5 million worth of retail investment transactions were concluded in the fourth quarter of last year, making up 85.5 per cent of the full-year total.

Mr Yeo expects rents in the Somerset area to start climbing 3 per cent to 5 per cent towards the later part of this year.

‘The vibrancy of Somerset will definitely increase and if the economic recovery is sustained, I believe that in two or three years, rents in this area will increase more significantly as well,’ he added.

Source: Straits Times, 9 Jan 2010