But euro zone’s debt woes posing threat to recovery, it warns

HONG KONG: The International Monetary Fund (IMF) upgraded its 2010 global growth forecast yesterday, citing robust expansion in Asia and renewed private demand in the United States, but warned the euro area’s debt crisis posed a big risk to recovery.

The IMF said the euro zone’s sovereign financing problems and resulting financial market turbulence were significant challenges, especially with the web of financial and trade links connecting Europe to the world. However, a double-dip world recession was highly unlikely.

The fund raised its global output forecast for this year to 4.6 per cent from 4.2 per cent in April’s review of the global economy, but kept its view for next year unchanged at 4.3 per cent. The world economy shrank 0.6 per cent last year as a result of the global financial crisis.

‘What has happened in Europe is likely to slow down the path to recovery relative to what could have happened, but I think the chances of a double-dip are very small,’ Mr Olivier Blanchard, the IMF’s chief economist, said at a briefing in Hong Kong for the organisation’s latest World Economic Outlook and Global Financial Stability reports.

But in a move that might fuel concern that recovery is fading, the fund lowered its growth forecast next year for China from 9.9 per cent to 9.6 per cent, for Japan from 2 per cent to 1.8 per cent, for the euro zone from 1.5 per cent to 1.3 per cent, and for Britain from 2.5 per cent to 2.1 per cent.

Persistent weakness in the US housing and labour markets, euro zone debt problems and a slowdown in growth of manufacturing activity in Asia have made investors speculate that the global economy will slow sharply for the rest of the year.

While uncertainty about bank regulation has added to investor concerns, the IMF focused the majority of both reports on the implications of the euro zone sovereign crisis.

In the news briefing, Mr Blanchard said the European bank stress test disclosures due on July 23 were an important step towards transparency but underscored that countries must return to a sustainable level of fiscal spending.

Under one scenario – assuming shocks to the global financial system resulting from Europe’s debt problems are as severe as those experienced in the wake of the Lehman Brothers’ failure two years ago – world gross domestic product growth next year would be reduced by 1.5 percentage points, the IMF said.

Asian economies will expand faster than expected this year but ‘downside risks’ have intensified for the region following financial turmoil in the euro zone area, the IMF warned.

The Chinese economy should expand by 10.5 per cent following a strong rebound in exports and resilient domestic demand, the fund said, revising upwards its April forecast of 10 per cent.

India’s growth this year was revised higher to 9.4 per cent from 8.8 per cent as robust corporate profits and favourable financing conditions fuel investment.

With the upward revisions for the world’s two most populous countries, Asia as a whole was forecast to grow by 7.5 per cent this year, up from 7 per cent in April.

However for next year, when stimulus programmes are expected to be withdrawn in several countries, Asia’s growth is expected to settle to ‘a more moderate but also more sustainable rate’ of 6.8 per cent, the IMF said.

Following warnings by the fund earlier this year about the formation of asset bubbles in Asia, such problems in the market had eased, said Mr Jose Vinals, the IMF’s financial counsellor.

But the IMF warned that any stalling in the European recovery could affect Asia through both trade and financial channels, even though the region has only limited direct financial linkages to the most vulnerable euro area economies.

‘Many Asian economies (especially the newly industrialised economies and the Asean economies) are highly dependent on external demand, and their export exposure to Europe is at least as large as their export exposure to the United States,’ the report said.

However, in the event of ‘external demand shocks’, large economies such as China, India and Indonesia could provide a cushion to growth, it said.

REUTERS, AGENCE FRANCE-PRESSE, ASSOCIATED PRESS

Source: Straits Times, 9 Jul 2010

It also aims to be a hub for science, technology and innovative projects

AFTER years of being the ‘world’s factory’, the Suzhou Industrial Park (SIP), together with Suzhou city, is now embarking on a transformation to become the ‘world’s office’ in a bid to re-invent itself.

The goal was made known at a media briefing during which Suzhou government officials shared their plans for the city as well as the landmark Sino-Singapore project, SIP.

By ‘world’s office’, Suzhou party secretary Jiang Hong Kun was referring to a hub for services, such as in software outsourcing, financial, logistics & exhibition and commercial tourism. There will also be a new focus on science and technology projects and innovative activities.

‘Following the global financial crisis period, the world economy is undergoing major adjustments and restructuring,’ said Mr Jiang, in Mandarin. ‘China, which has often been deemed the world’s factory, also hopes to achieve economic transformation. As for Suzhou, it has also been heavily focused on manufacturing in the past and our hope is to tap on the opportunities available to speed up the economic development and move towards more advanced manufacturing and scientific activities.’

The transformation of Suzhou and SIP will see a deepening and broadening of relationships between Singapore and China, as governments from both sides have signed a letter of intent to deepen the cooperation. Separately, cooperation for 31 projects have been inked. Among the Singapore organisations involved are the National University of Singapore, which will be setting up an incubator office at the SIP, the Singapore Exchange, and the Singapore Nanotech Association. Altogether, the 31 projects would lead to total investments exceeding US$1.6 billion.

Currently, about 60 new jobs have been created by 44 Chinese and foreign companies in SIP. They include positions in electronics, precision engineering, education, finance and biomedical sectors.

At a symposium attended by the private sector, Suzhou mayor Yan Li also highlighted the nanotechnology and environment sectors among the emerging industries that his city is promoting. Minister of State for Trade & Industry Lee Yi Shyan suggested that both sides also encourage the exchange of talent to facilitate cross-learning. Started in 1994, the SIP has become a benchmark for other industrial parks in China and an expression of the strong Sino-Singapore ties built over 20 years. Beyond the SIP, Suzhou itself is Singapore’s leading trading partner in China’s Jiangsu region.

The SIP is managed by the China-Singapore Suzhou Industrial Park Development Co (CSSD), which is preparing for a listing within the next one to two years. Officials said the option is still open as to whether the listing site will be in Singapore or China.

Source: Business Times, 9 Jul 2010

SMRT shares plans for Orchard, Circle Line at launch of Esplanade Xchange

SMRT is carving out a new shopping area at Orchard MRT station – and plans more such spaces at upcoming stations on the Circle Line.

The transport group shared the plans at the launch yesterday of Esplanade Xchange – a 2,000 sq m retail enclave at the Esplanade MRT station.

Teo Chew Hoon, vice-president of SMRT’s commercial and taxi divisions, said that Orchard Xchange could be ready at the end of the year and will have a lettable area of around 1,500 sq m. The tender process for space has started and the group expects good take-up.

There are also plans for ‘a few’ Xchanges at MRT stations in Stages 4 and 5 of the Circle Line, Ms Teo said, without elaborating on where they might be. These stages of the line will run through such places as Botanic Gardens and Holland Village.

SMRT now has seven Xchanges. Esplanade Xchange is the third largest, after Raffles Xchange (about 2,400 sq m) and Tanjong Pagar Xchange (about 2,000 sq m). The group has about 29,000 sq m of retail space across the SMRT network.

Esplanade Xchange is fully let and there will be 26 shops. Tenants include the Infocomm Development Authority of Singapore’s iExperience centre, Coffee & Toast, Dunkin Donuts and IT gadget retailer Juzz1. More than 90 per cent of the outlets have opened and all will be operating by the middle of this month.

Rents at Esplanade Xchange are at ‘market rates’, Ms Teo said, declining to elaborate further. At the nearby Suntec City Mall, the committed average passing rent was $10.89 per sq ft per month in March, according to Suntec Real Estate Investment Trust’s first-quarter financial results.

Ms Teo said that Esplanade Xchange’s location is a strong selling point. It is near Suntec City, Marina Square, CityLink Mall and Bras Basah, and will be directly linked to Raffles City Shopping Centre around the middle of the month. She expects pedestrian traffic to grow after the Circle Line is completed.

Juzz1 general manager Warren Teh said that the store has about 600 walk-in customers a day, and he expects the number to grow after the link to Raffles City opens.

SMRT shares closed unchanged yesterday at $2.32.

Source: Business Times, 9 Jul 2010

The Greek crisis highlights need for fiscal tightening

THE global economy, led by emerging markets, is still on track for a fairly strong overall recovery this year and in 2011. But the road ahead is strewn with an unusually large number of obstacles and dangers, the International Monetary Fund (IMF) warned yesterday with the publication of its latest World Economic Outlook (WEO) report.

Predicting that world GDP (gross domestic product) growth would be around 4.5 per cent this year (slightly ahead of the 4.25 per cent forecast in April) – slowing slightly to 4.3 per cent next year – the WEO identified the dangers of financial system shocks transmitted via banking systems and over-rapid fiscal consolidation as being among landmines ahead.

The Greek crisis and the market reaction to it have highlighted the need for fiscal tightening around the world, IMF officials said, while cautioning that this is going to require painful adjustments such as ‘reduced social entitlements’ in some countries and the raising of retirement age to take pressure off public pension systems.

‘We are cautiously optimistic (about the global economic outlook) but there are clear dangers ahead,’ said IMF economic counsellor and director of research Olivier Blanchard at a briefing in Hong Kong where the WEO launch was held for the first time outside of IMF headquarters in Washington.

Growth was stronger than expected in the first half of 2010 in economies such as the United States, Europe, Japan, Brazil and India, pushing overall world growth for that period to 5 per cent, Mr Blanchard noted. ‘But most recent indicators point to some slowdown of demand,’ he said, adding that ‘it is too early to assess how significant this will be’.

The WEO expects advanced economies to grow by 2.6 per cent this year and by 2.4 per cent in 2011, while it forecasts 6.8 per cent growth in emerging and developing economies in 2009 falling to 6.4 per cent next year. But this assumes that countries make the right policy responses to global challenges, Mr Blanchard said.

He cautioned that all economies face slowing growth in the short term with fiscal spending cuts. They also face a slowdown in bank lending under the impact of a ‘freeze’ in inter-bank markets in the wake of the Greek crisis and a reallocation of capital flows between advanced and emerging markets.

Fiscal consolidation could ‘derail’ the global recovery if not handled properly, Mr Blanchard acknowledged. ‘While fiscal stimulus was necessary to stem a potentially catastrophic collapse of output in 2008 and 2009, countries must return to a sustainable fiscal path,’ he insisted.

‘The adjustment should start soon, but too much front-loading, too sharp a cut in deficits this year or next year would be counter-productive,’ he suggested. ‘The recovery is still fragile and monetary policy (already very accommodative) cannot yet be used to significantly offset the adverse short run effects of fiscal consolidation.’

Calling Asia a ‘fitting’ place for the first launch of the WEO, and of the IMF’s Global Financial Stability Report, outside the US, because the region is providing ‘momentum for a robust global recovery’, IMF financial counsellor and monetary and capital markets department director Jose Vinals said it would nevertheless be dangerous to assume that Asia is immune to aftershocks from the eurozone crisis.

‘Global financial stability has experienced a setback,’ he noted. ‘Sovereign credit risks in part of the euro area have materialised and have spread to the financial sector there, threatening to spill over to other regions and re-establish the adverse feedback loop with the economy.’

Banks mainly (but not only) in the euro area ‘remain cautious about lending to each other’ in the aftermath of the Greek crisis, Mr Vinals noted. Along with their legacy of bad debts resulting from the global financial crisis, many banks now find that they have problematic assets in the shape of government bond holdings, he said.

Domestic liquidity conditions in Asia have remained calm but ‘European banks are significant providers of liquidity in certain Asian markets’, he noted, without specifying which. The authorities in these markets will need to act quickly to prevent financial contagion from spreading via such mechanisms, Mr Vinals suggested.

Apart from the danger of a liquidity crunch, there is also a danger of ‘crowding out’ of private borrowers as they compete with governments for funding, he said, citing the cases of Japan, Britain, the US and the euro area where around US$4.3 trillion of government debts will need to be rolled over during the second half of this year.

Mr Vinals also warned of disruptive capital flows into Asia, while praising Singapore, Hong Kong and China for taking measures to offset the impact of such flows by introducing ‘prudential measures to dampen real estate price appreciation and (to limit)the share of real estate loans in new bank lending’.

Source: Business Times, 9 Jul 2010

Rates have followed the dizzying rise in private property prices but ‘will stabilise or even correct’

Rental rates for residential units have tracked the dizzying rise in private property prices, with rents for condominiums posting a significant increase of 5.8 per cent over the first five months of this year.

Based on data from the Urban Redevelopment Authority (URA), median rentals of non-landed residential properties in January amount to $30.54 per square metre (psm) but were propelled higher to $32.41 psm in May.

Rentals for units in the central region are even higher at $36.89 psm in May.

The maximum rental per month for non-landed residential properties in the central region amounts to $114.58 psm, while minimum rental amounts to $11.64 psm.

Condominiums in the east and west recorded median rents of $27.68 psm and $27 psm, respectively, for the same period.

Meanwhile, rentals in the north-east region hit $26.39 psm, while north region rentals stand at $24.47 psm.

As for the rest of the country, maximum rentals range from $33.65 psm to $60.87 psm, while minimum rentals range from $10.18 psm to $14.36 psm.

Market watchers said the significant increase in residential rents is due to an improving economy and a robust property market.

Donald Han, managing director of Cushman and Wakefield, attributed the rise to landlords looking to pocket higher returns from the bullish growth by increasing rents.

“Businesses have started to relocate to Singapore and are bringing in a lot of foreign workers, which have increased demand for residential housing, as compared to the first half of last year, when companies were shedding staff,” said Mr Han.

However, Mr Colin Tan, head of research and consultancy at Chesterton Suntec International, said the rental increase is due to a sharp drop in housing supply.

In the fourth quarter of last year, the number of demolitions jumped to 1,441 – more than the 1,400 units available.

Mr Tan attributes this to an increased number of collective sales, which resulted in more units being demolished during that period.

Unable to make up for the drastic loss, the first quarter of this year, only saw 1,407 units available for occupancy.

“The higher number of demolitions is probably a one-off effect. The numbers of demolished units returned to about 400 units-odd in the first quarter of this year,” added Mr Tan.

With a lot fewer units available and the ongoing high demand for residential properties, rentals hence saw a considerable increase.

Barring drastic changes, he expects rentals to stabilise in the coming months.

“Once the effect of the sharp reduction in housing stock wears off, the rise in rentals will stabilise and may even correct in the coming quarters unless demand is ramped up suddenly but that does not seem to be the case,” he said.

Mr Han expects rentals to increase to about 5 per cent to 8 per cent by the end of this year, in line with the bright outlook for Singapore’s growth.

With growing yields, it is also an ideal time for home owners looking to lease out their properties to hedge against inflation and volatile markets.

“Yields have risen slightly to 3 per cent to 3.8 per cent and are likely to go up over 4 per cent at end of the year. With the low interest rate of 1 per cent to 1.2 per cent, this is a good time for residential yields,” said Mr Han.

Source: Today, 9 Jul 2010

City Developments Limited (CDL) has sold about 80 per cent of the launched units at 368 Thomson, its latest freehold residential development at the former Concorde Mansions site along Thomson Road.

Private previews for former owners of Concorde Residences, Balestier Court, Bright Building, and directors and staff of CDL, started on Thursday, while the public preview began on Friday.

CDL said 120 units of the 36-storey freehold development comprising 157 units were released in Phase 1.

Going at an average price of S$1,350 per square foot, the apartments range from S$918,000 for the 689 square foot one+study units to S$4.4 million for the 3,391 square foot 5-bedroom penthouses.

Singaporeans made up the majority of buyers, with Permanent Residents and foreigners mainly from Malaysia, Indonesia, China and Hong Kong accounting for 25 per cent.

“With its prime District 11 location, freehold status and attractive pricing, 368 Thomson represents an excellent investment opportunity and also good rental potential,” said CDL’s group general manager, Mr Chia Ngiang Hong.

368 Thomson has a sky terrace on Level 3, with therm jet pools, a 25-metre main pool and a gymnasium. It also has a Club House, family barbeque and Children’s Aqua Treat areas.

CDL said it will release more units progressively to cater to the demand.

Source: Channel News Asia, 9 Jul 2010