Infrastructure works, personal spending enough to carry the day, says DBS chief

(SINGAPORE) Asia’s robust growth will be affected but not derailed by what looks increasingly like a stalling of growth in the US and Europe, said DBS chief executive Piyush Gupta.

Infrastructural development and personal consumption in Asia will carry the region and take up much of the slack from the global economies, he said yesterday.

Asia today is pretty much like the US in the 1950s, with governments in the region spending on building dams, railroads and roads and there is also the rise of the middle classes, he said.

‘Asian infrastructure investment is where it was in the US in the 1950s.’

Mr Gupta was speaking last night at the Singapore Indian Chamber of Commerce & Industry-DBS awards dinner.

‘Asia’s infrastructure spending will pump growth rates up. Between infrastructure spending and personal consumption, Asia will be able to generate its own demand.’

Between now and 2020, infrastructural spending is estimated to come to US$8 trillion.

Wealth creation in Asia is the fastest growing with reports of more millionaires being formed in the region than anywhere else in the world, he said. ‘Asia is generating more of our own demand.’

The tipping point came this year, he said.

According to DBS economists, 20 years ago, for every dollar incremental growth in the US, Asia contributed less than 50 cents.

But today, for every dollar the US puts out, Asia will put out 102 cents, said Mr Gupta.

Asia’s consumption rate is up 70 per cent compared with sub-one per cent in the rest of the world, he noted. ‘While I am not overly sanguine of the global economies and credit expansion, I am sanguine about Asia.’

Last year, 138 Asian corporates were among the Fortune 500 companies and they were the fastest growing ones, he said

As for the silver tsunami which will hit Japan, China and Singapore, the ageing population will create demand and business opportunities in areas such as health care and financial planning and other related services, he said.

There are political risks to doing business in many Asian countries as they face challenges in the growing disparity between the poor and the rich, Mr Gupta said in answer to a question from the floor.

China faces significant challenges in managing its social equity, between its richer coastal areas and the poorer inland economies, and increasing pressure on wages, he said.

The financial crisis has also made borrowing in US dollars more expensive for Asian countries.

‘Asian economies are dollarised significantly,’ he said.

For instance, Chinese banks are borrowing US dollars in Hong Kong to lend onshore, pushing up US interest rates there by 100 basis points over the wholesale Libor rate, he said.

Indonesian banks are facing a similar situations, he said.

Source: Business Times, 6 Jul 2010

Outlook for rest of year less rosy as uncertainty in global economy likely to keep buyers away

PRIME property prices are at record highs having surpassed the peak seen in the first quarter of 2008, according to Jones Lang LaSalle (JLL).

Prices of prime homes – in Districts 9, 10 and 11 – shot up 8 per cent in the second quarter, hitting an average of $1,350 psf.

However, prices for luxury prime properties – those in the same districts but at least 3,500 sq ft in size and with ultra-luxurious fittings – are still about 8.4 per cent below the last peak in 2008, at about $2,500 psf.

Early government estimates last week said private home prices rose a higher- than-expected 5.2 per cent in the second quarter after a 5.6 per cent jump in the first.

JLL’s report yesterday noted that price growth has been supported by an improved rental market.

Prime rentals have grown by an average of 10.8 per cent over the first half of the year, supported by increased demand from expatriates in the financial and petrochemical sectors, said JLL.

Investment sales also appear healthy.

DTZ Research said in a separate statement yesterday that investment sales for the second quarter posted a 64.1 per cent increase over the previous three months to hit $4.71 billion, of which 58.3 per cent were from residential transactions.

This was driven by a record-breaking quarter in sales of government sites earmarked for residential use. These totalled $1.85 billion in the second quarter, surpassing the $1.51 billion record set in the last quarter of 2007.

However, the outlook for the rest of the year is not as rosy.

JLL’s head of research, South-east Asia, Dr Chua Yang Liang, noted that until buyers can predict the impact of the euro zone crisis on the property market, there will be further slowdown in both sales volume and price growth for the next six months.

JLL said the uncertainty in the global economy has kept buyers at bay: 3,127 caveats were lodged in the second quarter, a 21.6 per cent drop from the previous quarter.

Still, this is 78.4 per cent above the average of 1,753 units sold per quarter from 2000 to last year, noted JLL, whose figures are based on Urban Redevelopment Authority (URA) data as of June 26.

Its report found that the number of foreign buyers are falling – down 28.3 per cent to 898 in the second quarter compared with the previous quarter, while the number of local buyers slid by 21 per cent to 2,112 over the last quarter.

Chinese buyers are proving the most resilient.

They accounted for 18.5 per cent of caveats lodged by foreigners for resale private apartments in the second quarter – up from just 6.2 per cent in the first quarter of 2007.

JLL’s head of residential, Ms Jacqueline Wong, noted that increasingly, ‘Chinese buyers are climbing up the price ladder and buying up properties in the prime market which is traditionally dominated by the rich Indonesians and Malaysians’.

These are high-net-worth individuals who can spend at least $2.5 million, she said.

The caveats lodged by Chinese buyers for resale units priced $1.5million and above are more common today than a year ago, she added.

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RESILIENT

‘Chinese buyers are climbing up the price ladder and buying up properties in the prime market which is traditionally dominated by the rich Indonesians and Malaysians.’

Jones Lang LaSalle head of residential Jacqueline Wong

Source: Straits Times, 6 Jul 2010

Lingering fears over global recovery keep trading volumes low

INVESTORS stayed away in droves yesterday as the market endured its quietest day in five trading sessions.

Lingering worries about the strength of the global recovery kept interest at a minimum, leaving the Straits Times Index flitting between positive and negative territory for most of the day.

It closed at 2,844.02 points, a marginal 0.17-point dip, while overall volumes fell to 976 million shares worth $890 million.

It was a rerun of last Monday when trading got off to a slow start and volumes dipped below the one-billion mark.

DMG and Partners Securities co-head of research Terence Wong said that fears over the world economy contributed to the low volumes.

Uncertain employment data from the United States last week and weak manufacturing figures from China have reignited fears of a global slowdown.

Mr Wong added: ‘For the rest of the week, we will see a trading lull. Volumes will still remain low as we head to the end of the World Cup. There’s a lack of trading ideas out there.’

Property counters and stocks with heavy real estate exposure ended mixed. Fraser & Neave lost nine cents to $5 and CapitaLand dipped one cent to $3.61, but Keppel Land rose two cents to $3.97 and City Developments rose four cents to $11.06.

Last week, official estimates showed that private home prices here rose a higher-than-expected 5.2 per cent in the second quarter, and are now higher than the 1996 peak.

‘With rising concerns over the strength of the US economic recovery, signs of a slowdown in China and the ongoing euro-zone debt crisis, buying sentiment could be dented in the near future,’ noted OCBC Investment Research, which has a ‘neutral’ rating on the property sector with a preference towards the residential segment.

‘Nevertheless, fundamentals of the residential property market remain sound,’ added OCBC.

A notable gainer was plantation firm Wilmar International, which put on 13 cents to $5.88. It said before markets opened that it has agreed to acquire Australian sugar and renewable energy firm Sucrogen for A$1.75 billion (S$2.1 billion).

‘We are positive about the acquisition as it allows Wilmar to leverage on Sucrogen’s management to expand the sugar business into fast-growing emerging markets by tapping on Wilmar’s strong distribution network,’ said CIMB in a note. CIMB maintained its ‘neutral’ call and target price of $6.50 on Wilmar.

China Animal Healthcare dipped half a cent to 31.5 cents. A fund controlled by the Blackstone Group is investing about US$45 million (S$63 million) in the mainland firm.

Building contractor CCM Group saw an upbeat trading debut. It rose throughout the day to close at 35.5 cents, up a whopping 78 per cent from its IPO price of 20 cents.

Stocks elsewhere in the region ended up mixed. The Nikkei-225 in Tokyo put on 0.7 per cent but Hong Kong’s Hang Seng Index slid 0.3 per cent. Shanghai shares fell 0.8 per cent to close at a 15-month low on fears of slowing growth and rising inflation.

Source: Straits Times, 6 Jul 2010

Orchard retailers moving to new sites with higher traffic

OLDER malls in Orchard Road are seeing smaller tenants jump ship because of the ever-changing flow of shoppers coursing through this prime area.

Smaller retailers at complexes such as The Heeren, The Centrepoint and Midpoint, say customers are more attracted to their shiny new neighbours Ion Orchard, 313@Somerset and the Mandarin Gallery.

At The Heeren, there are more than 20 boarded-up shop spaces and only about 60 tenants in operation. Business has halved in the past year for clothing store Mon Chavon, said its manager, Ms Wan Choy Kun. ‘Sometimes, we get our first customer at 6pm. Then we hear them say the place is so empty they will not come here again.’

She hopes business will pick up when the mall’s new anchor tenant, department store ALT, opens on Saturday.

Some businesses have seized the upper hand by migrating to the new malls, while others are closing down. In response, the managements of the malls are working to reinvent themselves.

The Heeren is one of them, but the revamp has come too late for designer shoe chain Limited Edt Vault, which moved out in April. Owner Mandeep Chopra opened two new outlets, at 313@Somerset and Marina Bay Sands (MBS), saying there were ‘no walk-in customers at all’ at the shop in The Heeren.

‘The traffic has moved to the newer malls. It was a no-brainer to shut down the Heeren store and move elsewhere,’ he said. The rental at 313@Somerset is similar to that at The Heeren, he added.

Ossia International, which manages brands like Camper and Springfield, pulled its Camper shoe store out of The Heeren in March, before its lease ended, and opened two outlets in Ion Orchard. Brand manager Pauline Sing said it left because of ‘bad sales performance’ with ‘only about 10 walk-in customers a day’.

Down the road, at The Centrepoint, skincare chain L’Occitane moved out on June 24 and opened at MBS in the same month. Another tenant, handbag shop Furla, called it quits in May, after opening an outlet in Ion Orchard last year.

Men’s clothing store Caserini will close down later this month when its lease ends, as it is in the red, said its spokesman. ‘We were badly affected, especially when 313@Somerset opened.’

At Midpoint and Orchard Plaza, two of the older malls in Orchard Road, outlets such as Burger King, Midpoint Electronics and This Fashion have moved out in the past six months.

Not all malls have seen their tenants bail, however, with Ngee Ann City and Paragon and their higher-end tenant mix relatively unfazed.

And long-time stalwarts such as Robinsons at The Centrepoint are still packing them in. Robinson Group spokesman Donna Chua said it had ‘no plans to move out of The Centrepoint’.

‘We are fortunate to have a strong customer base, many of them long-standing and loyal customers,’ she said.

The Centrepoint is working on ‘improving tenant mix and introducing new concepts’ to pull in more shoppers, said Frasers Centrepoint Malls general manager Wendy Low.

This includes a basement foodcourt which features new dishes such as crab roe dumplings from Shanghai, she added.

Acknowledging the recent departures at The Heeren, a spokesman for Swee Cheng Management, which manages the mall, said it is currently ‘repositioning to focus on a new target market of the young and sophisticated professionals, managers, executives and businessmen crowd’.

ALT is an exclusive new entrant which will occupy three levels of prime space in the mall, he added.

About 1.5 million sq ft of lettable retail space was added to Orchard Road in the past year, said Orchard Road Business Association chairman May Sng, an increase of 25 per cent.

‘In such a situation, there will definitely be cannibalisation,’ she said.

Singapore Retailers Association president Jannie Tay said a ready supply of retail space has led to business owners being able to pick and choose.

‘At the moment it’s a retailers’ market. They have more choice now and will get out of unprofitable places,’ said Ms Tay, who suggested landlords reduce rents to make their malls more attractive to retailers or offer other incentives.

Old or new, Orchard Road malls also face competition from big suburban malls. Estate agents say they are drawing more shoppers, which consequently drives up rents at the more popular malls in the suburbs.

Source: Straits Times, 6 Jul 2010

Most of the speculative and arbitrage capital from overseas that has entered China in recent months has ended up in the property and equity markets, an official at the country’s foreign-exchange regulator said in rare comments as the agency usually plays down the effect of hot money inflows into China.

An investigation that began in February has uncovered 190 cases of hot money inflows involving US$7.35 billion ($10.23 billion), Mr Deng Xianhong, a vice-director at the State Administration of Foreign Exchange (Safe), said in an interview published yesterday in the state-run People’s Daily.

“A situation of continuous foreign exchange fund inflows forms easily,” Mr Deng said.

“Higher interest rates for the yuan compared to foreign currencies and expectations of yuan appreciation create very strong attractions for overseas capital … The resulting higher domestic stock and property prices and strengthened expectations of a stronger yuan lead to further foreign exchange fund inflows,” he said.

Rather than attracting hot money, the yuan exchange rate should be a means of getting rid of inflows of such funds, Mr Deng said.

The comments come after the People’s Bank of China (PBOC) loosened the yuan’s exchange-rate mechanism on June 19 in a surprise move.

The PBOC set the US dollar-yuan central parity rate at 6.7733 yesterday, compared to 6.7720 on Friday.

China’s property prices have risen steadily over the past year, leading Beijing to introduce a series of measures to cool the sector, including higher minimum downpayments and other requirements.

Home prices were up for the 12th straight month in May from a year earlier, though the rate of increase slowed slightly from the previous month.

The benchmark Shanghai Composite Index has fallen 28 per cent this year as Beijing withdraws the stimulus measures introduced to cushion the effects of the financial crisis.

China yesterday also revised up its first-quarter current account surplus to US$53.6 billion from US$40.9 billion, according to a statement on the Safe website.

Source: Today, 6 Jul 2010

Auction sales in Singapore grew for the first half this year, totalling about $87 million. Property consultant Jones Lang LaSalle’s Auction House reported more than 80 per cent of all listings were put up for sale by owners.

The increase in the number of properties for sale by auction is due to a change in mindset – many now see it as an effective mode of sale, the firm said.

Auction attendances have also increased on-quarter, with June seeing attendance rates of more than 120 punters.

Jones Lang LaSalle expects the third quarter to see maintained levels of owner-sale listings as people return from holiday.

Source: Today, 6 Jul 2010

The “Waterway Terraces” at Punggol have been making waves in the property circle, with 5-room units oversubscribed by 12 times.

The Build-to-Order project, which houses 1,072 units, opened for applications on June 30.

As of Tuesday evening, the 5-room units saw 12 times the number of applicants.

The smaller units are also favoured, with 4-room units in demand at a ratio of 9 applicants to 1 unit.

With the closing deadline looming next Tuesday, analysts said applications for the bigger flats will keep streaming in.

They are expecting a hundred per cent increase for the 4- and 5-room units.

Source: Channel News Asia, 6 Jul 2010