ONE of the big surprises in the global economic picture for 2010 so far is how strongly Asian economies have performed, despite lacklustre growth in the G-3 economies of the United States, Europe and Japan.

The International Monetary Fund (IMF) has just raised its 2010 growth forecast for Asia to 7.75 per cent, about 0.5 percentage point higher than it projected as recently as April. Private sector forecasts for the Singapore economy have also been progressively raised as the year has unfolded, with many economists now predicting double-digit growth. The Ministry of Trade and Industry might also raise the official growth forecast following the release of advance GDP estimates for the second quarter.

While all of this may sound like good news, there are reasons to be circumspect. As the IMF has cautioned, Asia is vulnerable to some significant downside risks.

The region’s torrid growth in 2010 so far has been driven both by exports and private domestic demand. Exports have been powered partly by the inventory rebuilding in the advanced economies following the recession of 2008/09, during which inventories were substantially depleted. Private demand has been boosted by massive fiscal stimulus programmes, which were launched across the region, most dramatically in China. However, going forward, both these drivers of growth will be less conspicuous: the inventory restocking process is close to ending, and the impact of fiscal stimulus programmes will also wane from the second half of this year. After that, Asia can no longer rely on temporary growth drivers; it will have to look to traditional sources of growth – namely, demand from the G-3 and, to a lesser extent, sustained domestic consumption.

Unfortunately, neither of these can be taken for granted. While the IMF predicts 3.25 per cent growth for the US economy in 2010, the dismal US unemployment figures suggest that growth will slow in the second half of this year. Ditto for Europe, which is embarking on continent-wide fiscal austerity. There will be negative feedback loops from these developments on Asia’s exports. Exports could suffer further as Asian currencies strengthen against the majors, which is very possible, especially if the Chinese yuan continues to rise. While Asian currency appreciation would have positive effects in boosting domestic consumption and helping to contain asset bubbles, in the short term it will lead to some loss of competitiveness.

Rapid growth also entails costs. In the Singapore context, these could include rising wage and business costs, further exacerbated by increases in foreign worker levies.

Thus, despite the glowing growth forecasts, there are grounds for caution in the months ahead. While Asia’s economies might be on a roll for now, many of them face both internal and external vulnerabilities. Most importantly, the global economy is nowhere near out of the woods. And as we have learnt in 2008 and 2009, that counts for a lot.

Source: Business Times, 14 Jul 2010

PROPERTY group Perennial has inked a $250 million deal to buy a large portion of Chinatown Point from City Developments (CDL).

Its purchase, which is likely to be completed by mid-October this year, comprises 283 retail units, plus four office suites, at the 99-year leasehold site located at the junction of New Bridge Road and Upper Cross Street. Both the retail and office units are managed by former CapitaLand veteran Pua Seck Guan, the founder and chief executive officer (CEO) of Perennial Real Estate.

CDL said in a statement that the sale was in line with its strategy to continually review its existing portfolio. It added that because it did not own all of the office units in Chinatown Point – the mixed development comprises 283 retail units and a 25-storey office block consisting of more than 100 office units – the group felt that it was an opportune time to unlock value from its holdings.

Perennial plans to revamp Chinatown Point retail mall with offerings such as traditional Chinese speciality food and foodstuffs, goldsmiths, jewellers, traditional and modern Chinese or Asian accessory stores, and travel agencies.

Perennial CEO, Mr Pua, formerly CEO of Capitaland Retail, said: ‘By enhancing the ambience of the mall, we hope to provide shoppers with an improved shopping experience where various treasured trades closely associated with Chinatown are conveniently housed in a well-integrated retail mall environment.’

NTUC FairPrice is likely to be a supermarket anchor tenant at the repositioned Chinatown Point retail mall.

Source: Straits Times, 14 Jul 2010

(DAEJEON, South Korea) The International Monetary Fund’s chief reiterated yesterday that strong growth in Asia and Latin America made it unlikely that the global economy would suffer a double-dip recession.

Last week, the IMF upgraded its 2010 global economic growth forecast to 4.6 per cent from 4.2 per cent due to robust expansion in Asia and renewed US private demand, but kept its 2011 outlook unchanged at 4.3 per cent.

‘We expect 2011 to be a little lower than the level of 2010. But all this is too far from any kind of double- dip,’ managing director Dominique Strauss-Kahn said.

South Korea’s Finance Minister Yoon Jeung Hyun, who attended the conference too, also voiced confidence in the global economy, saying the recent slowdown in the United States and China was temporary.

The world economy has been recovering this year from its worst downturn in decades, but signs of cooling growth in the world’s largest and third-biggest economies sparked worries that the global upswing could prove short-lived.

‘The recent weak economic data in the US and China is transitory with the end of governments’ stimulus packages. They will be normalised soon,’ Mr Yoon said. – Reuters

Source: Business Times, 14 Jul 2010

Signs from financial markets, real economy point to improving prospects

(PARIS) The signs are growing that Europe may have turned a corner in its struggle to restore financial stability.

The evidence comes partly from financial markets, which are calmer, partly from the real economy, which is perkier, and partly from policy, which is responding at last to some investor concerns.

There are still plenty of risks – lack of faith in planned stress tests of European banks, low or no economic growth, more credit rating agency downgrades of sovereign debt, an eventual Greek default or debt restructuring, weaknesses in eurozone governance, and political resistance to painful reforms.

But on balance, things are starting to look up.

‘The figures we have are not confirming this pessimism,’ European Central Bank president Jean- Claude Trichet said, dismissing analyst predictions of stagnation or even an austerity-induced double- dip recession in the eurozone.

‘There is a tendency among some investors and market participants to underestimate Europe’s ability to take bold decisions,’ Mr Trichet said in an interview with France’s Liberation published on the ECB’s website on Monday.

‘In their defence, I would simply say that the institutional structure of Europe is very different to what they are used to, especially on the other side of the Atlantic.’

Although the Europeans may not have time to arrange the recapitalisation of any banks found vulnerable before the results are published, there is a strong political commitment of governments to do so where necessary, possibly drawing on a newly established eurozone financial backstop, created in May originally to lend to states shut out of credit markets.

The existence of a 440 billion euro (S$766 billion) European Financial Stability Facility (EFSF) guaranteed by eurozone states should reassure investors that any exposed banks won’t be left twisting in the wind, even though it would require a unanimous political decision to use it.

So let’s examine the case for a turning point.

The euro has recovered from lows of around US$1.19 to touch two- month highs above US$1.27 last Friday, partly due to disappointing US economic data.

Spain and Portugal have been able to sell their debt at auctions, albeit paying higher risk premiums.

The ECB withdrew 199 billion euros in crisis liquidity from the market smoothly at the end of June, and the central bank’s emergency purchases of eurozone government bonds have steadily declined. Mr Trichet felt confident enough to highlight that tapering-off last week.

European stock markets have begun to rebound, led by bank shares, on growing expectations that the stress tests will not uncover new horrors.

Governments across Europe are introducing austerity measures to bring down public deficits, and structural reforms designed to address longer-term problems of ageing populations, rigid labour markets and soaring health costs.

Greece, under the whip of a European Union/IMF bailout programme, is pushing through unpopular reforms – cutting pensions, raising the retirement age and reducing layoff payments and notice.

France is raising its retirement age and the contribution years needed for a full pension. Spain is easing hiring and firing laws to try to bring down 20 per cent unemployment.

This will not be smooth or easy, given resistance from labour and interest groups, but the political climate is more permissive for such reforms than at any time in a generation.

At the EU policy level, the Greek bailout and the EFSF are on track and the stress tests are under way.

Governments are broadly agreed on strengthening enforcement of the bloc’s battered budget discipline rules. The EFSF, created as a temporary expedient for three years, may be extended and morph into a permanent crisis resolution mechanism.

Longer-term worries, particularly about Greece’s ability to pay its debts on time and in full, may continue to dog the eurozone, as well as pessimism about the economic growth prospects of ageing and inflexible west European societies.

Protests against austerity and a shrinking welfare state may grow. Governments may fall over unpopular reforms. But for now, it looks as if the worst of the eurozone crisis may just be over. — Reuters, Bloomberg

Source: Business Times, 14 Jul 2010

Buyer is consortium of investors that includes German fund manager SEB

CITY Developments Ltd (CDL) has sold the retail mall of Chinatown Point as well as four office units for $250 million to a consortium of investors, which includes German fund manager SEB.

The consortium was put together by Pua Seck Guan’s Perennial Real Estate group.

The transaction price reflects $1,403 per square foot based on the total strata area of 178,187 sq ft. The asset comprises 283 strata-titled retail units and four office units.

Mr Pua, who is Perennial’s CEO, said the new owner plans to reposition the mall and enhance its ambience. NTUC FairPrice is expected to be a supermarket anchor tenant at the revamped Chinatown Point mall. The envisaged trade mix of the repositioned mall would comprise a wide variety of offerings such as traditional Chinese specialty food and foodstuffs, jewellery, traditional and modern Chinese or Asian accessories stores and travel agencies.

The property is strategically located at the junction of New Bridge Road and Upper Cross Street and is very near the Chinatown MRT Station serving the North-East Line. Current tenants at the mall include Swensen’s and McDonald’s.

‘In time, Chinatown Point mall is expected to benefit from the increased footfall to the area once the upcoming Downtown Line, which is expected to connect to the adjacent Chinatown MRT Station, is operational.

‘We expect the revamped mall to appeal not only to the locals, but also tourists who would like to experience the charms and flavours of Chinatown in a contemporary setting,’ Mr Pua said.

Seller CDL said in a statutory filing with Singapore Exchange that as it does not own all of the strata-titled units in Chinatown Point, it is of the view that it is an opportune time to unlock value from its holding in the sale units.

Chinatown Point’s mall spans six levels – including part of Basement 1. It is part of a mixed development that also includes a 25-storey strata titled office block. The development is built on a site with a 99-year leasehold tenure starting November 1980.

Last year, a private trust set up by Perennial bought Katong Mall for $247.6 million and last week plans were announced for a $60 million redevelopment of the asset.

Source: Business Times, 14 Jul 2010

JTC Corporation has started construction of the $30 million Components Manufacturing and Maintenance, Repair and Overhaul Facilities (CMMF) at Seletar Aerospace Park.

The CMMF comprises seven standard factory buildings on a three-hectare site at the southern tip of the park and is intended for companies engaged in maintenance, repair and overhaul activities, and those that manufacture aerospace components.

Ms Tang Wai Yee, director for the Aerospace, Marine and CleanTech Cluster, JTC, said: “The CMMF and other developments in SAP will be home to companies that will contribute to the SAP’s annual value-add target of $3.3 billion by 2018.”

JTC is now evaluating the tender submissions for the building works of the CMMF and plans to award the tender by this month.

It recently awarded the piling works tender for the project to Leong Hin Piling for $1.8 million.

CMMF is located near the future facility of the power systems and aircraft engine giant Rolls-Royce. JTC said response from industry players has been very encouraging and targets to complete the CMMF by the middle of next year.

Source: Today, 14 Jul 2010

Prime Minister Lee Hsien Loong, commenting on Singapore’s latest GDP growth estimates and its 2010 outlook, said the country is on a “firm path” towards a record year.

Earlier Wednesday the Ministry of Trade and Industry (MTI) upgraded Singapore’s 2010 GDP growth forecast to a blistering 13 to 15 percent, outstripping estimates for China.

The revision followed the 16.9 percent year-on-year GDP growth in the first quarter while second-quarter expansion is estimated at 19.3 percent.

Mr Lee, speaking to reporters at the end of an official visit to the US, attributed the rebound mainly to the success of the two integrated resorts and a sharp increase in pharmaceutical output.

Mr Lee also said Singapore should go into double-digit growth this year. But he tempered sentiments, saying that this is an exceptional year.

“It’s a good result and we should be happy. But at the same time we should understand that it doesn’t mean that next year you are going to get this, and the year after that you will get this. This is a rebound,” he said.

“We are on a firm path upwards. Now we must make the most of this opportunity to implement the restructuring, the upgrading, the productivity improvement which we have been pursuing and talked about in the Budget.

“Because unless you get these longer term structural changes, we are not going to be able to sustain growth in the future years. And when we say ‘sustain growth’, we don’t mean 9, 10 percent or 11 percent in future years but 3, 4, 5 percent steadily for another 10 years,” added Mr Lee.

Mr Lee was also asked about his thoughts on issues that may crop up at the next General Election due by 2012.

But he remained tight lipped.

“No, it’s just a great mystery! (laughter). I think it’s too early to say. I mean we are just midway through 2010, with a record economy. I have not decided when the election will be.”

Source: Channel News Asia, 14 Jul 2010

For the first time in a year, Liu Long, 26, thinks he may consider purchasing an apartment in Beijing, despite the fact that the average price is still rising.

Liu seemed a little tired when he stepped into Kylin Zone, a property project near Beijing’s North Fourth Ring Road.

“This is the fifth real estate project I’ve seen this week,” Liu said.

“To be honest, in the past year, every time I read residential news, I frowned, because I hate to see the price continually rising.”

But he thinks the capital’s tightened property policies may offer a glimmer of hope for him, because property prices have stopped soaring since April and there are signs that prices might be starting to drop.

The Xi’an-born man graduated from Beijing Forestry University in 2008. His desire to own a property in Beijing is pressing because he would like to buy a house for his future wife before getting married.

From local media reports, Liu knew that around 75 property projects in Beijing had begun offering discounts recently; a rarity during the past 12 months.

At Kylin Zone, the project Liu was looking at was offering six discounted apartments as of the Dragon Boat Festival.

The previous average price of a property at Kylin Zone was 30,000 yuan per sq m, but the discounted properties were as low as 26,000 yuan per sq m.

Other projects such as the newly launched Seven Carat near Majiabao subway station and the popular Xifuhui International Community have all offered discounted apartments. The discounts vary from 1 to 10 percent.

Some developers are even waiving property management fees and providing refrigerators, air conditioners or furniture as extra gifts.

“Because the transaction volume in Beijing’s housing market has dropped to a record low for the past two years, the situation has prompted developers to take action to attract buyers,” said Carlby Xie, head of research & advisory in North China at Colliers International.

“In the following six months to 12 months, I expect a further 10 percent to 15 percent price drop in Beijing’s housing market,” Xie continued. “Though I don’t know whether the price will drop to early 2009 levels, I still regard now till the end of this year as a good buying time for house shoppers.”

The tough property policies have greatly influenced the market, Xie added.

At the beginning of this year, the central government and related authorities commenced a series of policies intended to rein in the rocketing property prices.

The controls include increasing the deposit for a second house and credit loan suspension for a third house.

In addition, local families are banned from buying more than one additional home, and non-locals are not allowed to buy an additional home unless they have worked in Beijing for a year.

From June 1 to June 19, only 1,398 non-subsidized residential properties were sold in Beijing, down 79.5 percent on the same period last year, according to statistics from Beijing Real Estate Transaction Management Website.

However, most developers in Beijing denied they have adopted a price drop strategy and insist their recent initiatives are merely normal marketing promotions.

Feng Chun, a real estate investment consultant at No 8 Party House, a high-end service apartment project in Beijing’s Chaoyang district, said some Chinese media had misunderstood the company’s preferential policy.

“They reported we would drop the price by almost 10,000 yuan per sq m, but actually we just pre-paid the investment return (6 percent) to our buyers when they purchase the apartments, and in the following five years, they don’t receive any money at all.”

Tian Wei, saleswoman at Kylin Zone, which has been called “the most favorable discounted project in Beijing” by local media, said her company was merely conducting a regular marketing move, not a price drop.

Officials from China Vanke Co’s Beijing branch, also revealed Vanke projects in Beijing are unlikely to experience a significant price drop.

“Different regions should adopt different strategies. Currently, in Beijing, we don’t see any necessity to lower our property prices directly,” said a woman surnamed Shi from Vanke’s public relations department.

Jin Yong, senior managing director of northern China at CB Richard Ellis, explained why real estate developers are cautious about dropping price.

“If they openly lower the price, they may face pressure from previous home buyers, because they paid more to buy a similar product,” Jin said.

“These concerns lead developers to adopt covert price-reductions such as offering discounts or sending furniture as gifts, instead of cutting the price directly.”

Jin predicted that in the following months, there is a good chance that property prices will fall further, but that it depends on many factors such as inflation and a possible property tax.

When Liu Long stepped out at Kylin Zone, he felt the price was still too high for him.

“The buying time may be coming, but I need to watch and wait for the best opportunity,” he said.

Tens of thousands of people in Beijing obviously share a similar view as they joined a “Chaodi Yubei Dui”, or Team Preparing for Bargains in June.

The team was organized online on June 1 by house.sina.com.cn, a leading property website in China. More than three million people supported the movement and around 200,000 people participated during the first three weeks of June.

“Half of our team members are from Beijing. We all believe that it may not be the best time to purchase a house in the capital now, but it’s time to get ready for it,” Yang Xi, editor-in-chief at house.sina.com.cn, told METRO.

“Most are young people who want to purchase their first property in Beijing. We select and supply them with information and organize visits to discounted projects. It may help them find a suitable property as quickly as possible,” Yang said.

Source: China Daily/Asia News Network, 14 Jul 2010

The Singapore government on Wednesday upgraded its 2010 economic growth forecast to a blistering 13 to 15 per cent, outstripping estimates of around 10 per cent growth in regional powerhouse China.

Robust demand for its manufactured exports, particularly biomedical products, resulted in the sharp upgrade from the earlier estimate of 7.0 to 9.0 per cent growth in gross domestic product (GDP).

GDP growth in the first quarter was 16.9 per cent from a year ago, the Ministry of Trade and Industry (MTI) said, while second quarter expansion is estimated at 19.3 per cent.

MTI said growth would moderate in the second half of the year due to a slowdown in the US recovery and sovereign debt problems in Europe.

On an annualised and seasonally adjusted basis, Singapore economy expanded 26.0 per cent in the April-June period.

The manufacturing sector is estimated to have grown by 45.5 per cent year-on-year.

Growth was driven by a surge in the output of the biomedical manufacturing cluster, as well as a strong expansion in the electronics cluster.

Singapore also revised upwards its forecast for total trade growth this year to between 17 and 19 per cent. This compared to the previous forecast for between 14 and 16 per cent growth.

The forecast for non oil domestic exports (NODX) has also been raised to between 17 and 19 per cent, up from the previous projection of between 15 and 17 per cent.

Trade promotion agency IE Singapore said among the reasons for the upward revisions were better-than-expected second quarter trade performance.

The year-on-year expansion in both Singapore’s total trade and NODX was larger than expected for the second quarter of 2010, at 28 per cent each.

The corresponding figures for the second quarter of 2009 were declines of 27 per cent and 14 per cent.

IE Singapore said another contributory factor was strong trade growth of Asian economies.

They continued to enjoy buoyant growth in the first half of 2010, with the International Monetary Fund upgrading Asia’s 2010 real GDP growth forecast to 7.5 per cent, up from April’s forecast of 6.9 per cent.

The agency said global semiconductor demand also grew at a much faster pace than in 2009.

IE Singapore said for the month of June, NODX rose by 29 per cent on year after the 24 per cent growth in the previous month, due to both electronic and non-electronic domestic exports.

Electronic NODX increased by 44 per cent in June on-year due to higher domestic exports of ICs, parts of ICs and PC parts.

The agency said non-electronic NODX grew by 21 per cent. The increase was led by higher domestic exports of pharmaceuticals, petrochemicals and specialised machinery.

NODX to all of the top 10 markets increased in June. The largest contributors to the increase were the European Union, China and Japan.

Source: Channel News Asia, 14 Jul 2010

Singapore on Wednesday looked set to become the world’s fastest-growing economy after the government upgraded its 2010 forecast to a blistering 13 to 15 percent expansion, economists said.

The new forecast, up sharply from predicted 7.0-9.0 growth, outstrips estimates of around 10 percent growth in regional powerhouse China and came despite lingering worries over the US economy and Europe’s debt crisis.

“Singapore will be the strongest growing economy in Asia for the year and probably in the world,” said Song Seng Wun, a Singapore-based regional economist with CIMB Research.

David Cohen, a regional economist with research house Action Economics, said Singapore will “probably come on top of the charts worldwide.”

Cohen, however, said this should be seen in the context that Singapore’s economy contracted by 1.3 percent last year due to the global economic crisis, while China’s gross domestic product (GDP) grew at around 9.0 percent.

Robust demand for Singapore’s manufactured exports, particularly biomedical products, resulted in the sharp upgrade for the trade-driven island’s GDP growth forecast.

Growth in the first quarter was 16.9 percent from a year ago, the Ministry of Trade and Industry said, while second quarter expansion is estimated at 19.3 percent.

The ministry said growth would moderate in the second half of the year due to a slowdown in the US recovery and sovereign debt woes in Europe.

“Although the global economy remains on a recovery path, the pace of growth has slowed,” the ministry said.

“In the US, there are now signs of a slowdown in the labour market following the recovery earlier in the year. This has affected consumer confidence. In the EU, domestic demand remains depressed as concerns over the sovereign debt crisis persist.”

Source: Channel News Asia, 14 Jul 2010