BT: UBS sees more downside to property on gov't new cooling measures

Business Times - 08 Dec 2011

UBS sees more downside to property on gov't new cooling measures

By YEO AIQI

UBS Investment Research on Thursday sees further weakness in the physical prices of property given the severity of the government's new measures unveiled on Wednesday.

'We believe it is not in the government's interest to drive down property prices. But, given the severity of the new measures, it is hard to see how physical prices will not start falling. Assuming stocks fall as per Jan 2011, first quarter of 2012 may be a good time to start putting cash to work in the developers. In 2009, stocks recovered in Mar 2009, even as property prices fell another 14 per cent quarter on quarter in first quarter 2009 and 4.7 per cent quarter on quarter in second quarter of 2009,' said UBS.

It cited historical data where stocks typically bottomed ahead of physical market prices. In 2009, the Singapore market index bottomed in March 2009, even though the URA property price index continued falling.

Similar experiences happened during the Asian crisis in 1998, post the 9/11 incident, in 2001 and SARS period in 2003.

On Wednesday, the government announced harsh new measures that will raise buyer's stamp duties to as high as 13 per cent for foreigners and companies, 6 per cent for permanent residents buying beyond their first property and 6 per cent for citizens buying beyond their second property.

BT: New terms may hit large collective sales

Business Times - 09 Dec 2011

New terms may hit large collective sales

To avoid paying ABSD, developers must build, sell all units on residential sites within 5 years

By KALPANA RASHIWALA

(SINGAPORE) The latest measures unveiled by the government are expected to have major implications for developers buying residential land, especially involving collective sale sites. They will have to develop any residential sites they buy from Dec 8 and sell all the units in the new project within five years - if they want to avoid paying the new 10 per cent additional buyer's stamp duty (ABSD).

'This can be very onerous especially when the property market is slow,' said Credo Real Estate executive director Ong Teck Hui.

Drew & Napier head of tax practice Ong Sim Ho said: 'For developers, it has become more difficult and costly to land bank.' He suggested one intention of the new rule could be to give more certainty to supply numbers on the completion of private homes.

Information in the Inland Revenue Authority of Singapore e-tax guide on the ABSD indicates that the new 10 per cent ABSD is payable by corporate entities buying vacant land and development sites for residential use - although they can apply for upfront remission if the buyer (developer) undertakes to develop and dispose of all units in the new development (which must have more than four residential units) within five years of the date of contract or agreement to buy the site, among other conditions.

If this condition is not met, the ABSD (with interest) becomes payable immediately upon the expiry of five years. The residential sites include Government Land Sales (GLS) plots and private-sector sites including en bloc sales.

Market watchers say that with the five-year limit to complete the project and sell all units, developers will have to weigh their land purchase decisions more carefully.

'They must be confident of developing the project and disposing of all residential units in it within five years - taking into account the possibility of any turn in market conditions and in the case of en bloc sales, the risk of a possible delay in court approval,' says Lee Liat Yeang, partner in real estate practice group at law firm Rodyk & Davidson.

For en bloc sales, the date of contract or agreement refers to the date when the site is awarded by the Sales Committee. From this point, it can take six to 12 months or even longer for legal completion of the site's purchase (including court approval of the en bloc sale).

This additional time eats into the five-year limit the developer has to complete building the new residential project on the site and selling all the units, said Mr Lee.

But for sites bought through the GLS programme, the impact will be less as there is certainty that the legal completion of the land purchase will take place by the 90th day of the site's award (the latter is deemed date of contract), added Mr Lee.

Credo's managing director Karamjit Singh said the new rules will hit big collective sales very badly. 'For the small and medium-sized en bloc sale sites, most developers would already aim to buy the site, develop it and sell new units within five years, even before the new rules kicked in - whereas for the bigger sites it can be very difficult to be certain that you can clear all your units within five years.'

This will further reduce the attraction of bigger en bloc sale sites, which have already put developers off due to their steep pricing, say analysts.

There has not been any collective sale deal this year exceeding $200 million.

KPMG partner, tax services, Leonard Ong, said: 'The ABSD will certainly increase the costs of acquisition by developers who are unable to meet the conditions for remission.

'These costs are then likely to be passed on to end-buyers when the developed residential properties are sold. This would be regardless of who the properties are eventually sold to, including first-time home buyers. This cannot be the intention of the government.'

Under the new rules that took effect yesterday, foreigners and non-individuals (that is, corporates) buying any private residential property in Singapore will pay the 10 per cent ABSD. However, foreigners of certain nationalities - the United States, Switzerland, Liechtenstein, Norway and Ireland - who fall within the scope of respective free trade agreements will be accorded the same treatment as Singapore citizens.

Singaporeans pay a 3 per cent ABSD for their third or subsequent residential property purchase. Permanent residents pay the same ABSD rate when they buy their second or subsequent home in Singapore.

Even before the ABSD kicked in yesterday, any developer buying a GLS residential site has been given a five-year limit by the state to complete the project, although the GLS conditions do not stipulate any timeframe on the sale of units.

However, when it comes to buying a private sector residential site (for example, through an en bloc sale), foreign developers have to obtain a Qualifying Certificate, conditions for which include a five-year limit to obtain Temporary Occupation Permit (TOP) for the project and another two years from TOP date to finish selling all the units in the project.

Any developer with even a single non-Singaporean shareholder or director is deemed 'foreign'. Hence all the big listed developers, including City Developments and CapitaLand, are counted as foreign developers.

Hitherto, Singapore developers (such as Far East Organization and Hoi Hup) have been spared any time limit for completing or selling a residential project on a private site, although they face the five-year limit to complete GLS projects.

'So now the Singapore developers too will face a time limit to complete and sell units in all residential projects on sites bought from Dec 8, - if they wish to avoid ABSD,' said Mr Lee.

BT: Stocks fall, sales stall as new normal kicks in

Business Times - 09 Dec 2011

Stocks fall, sales stall as new normal kicks in

Analysts project big drop in private home prices and sales with new measures in place

By CHEN HUIFEN

(SINGAPORE) Bank and property stocks tumbled yesterday as investors reacted with shock to the latest round of measures to curb foreign and speculative buying in Singapore's private property market, potentially setting the stage for a period of uncertainty with implications for the economy.

Counters of City Developments Ltd, DBS, UOB, UOL, CapitaLand and OCBC shed between 2 and 9 per cent, as increasingly shrill and sombre analyst reports flagged the pitfalls facing these companies.

Developers, especially those in the luxury markets, are seen to be the most vulnerable, given that their projects tend to attract a sizeable pool of foreigners who, together with corporate entities, will have to fork out 10 per cent more in buyer's stamp duty from now on.

This is higher than the 1-3 per cent that they paid previously, depending on the purchase price or market value of the transacted property.

As well, permanent residents will have to pay 3 per cent more in additional stamp duty on their second and subsequent homes, while Singaporeans will be taxed similarly on their third and beyond.

These measures are expected to dampen the residential property market by lowering overall demand in the purchase of private residential properties for investment.

Coupled with the release of new government land sites in the first half of next year that will give rise to about 14,100 private homes, the measures are aimed at giving Singaporean households the chance to own or upgrade to private housing.

While the intent is laudable, industry players and observers are questioning the timing of the announcement.

One economist has suggested that the latest moves could potentially tip Singapore into a recession, given that there could be spillover effects on peripheral sectors such as legal, banking and construction. Consumer spending may be hurt as well if falling property values lead to shrinking wealth.

'Given that the economy is already fairly weak and we are sort of bouncing on the edge, it may have tipped the balance into recession given that our readings are already pointing to a possible recession,' said Bank of America Merrill Lynch economist Chua Hak Bin.

Already, sales agents have indicated that clients who had previously shown interest in projects here are now holding back on decisions. Developers are said to be deferring upcoming launches as they take stock of the situation. It remains to be seen if any buyers who have signed options to purchase may back out of their deals in the coming weeks.

Analysts are projecting a fall of up to 30 per cent, in terms of both home prices and monthly sales volume, next year. But of significance is the message that the calibrated taxes may send to foreign talent and investors.

'In cosmopolitan Singapore, property and housing not only showcase the country but are the best key expression of our city,' said Norman Ho, a partner at Rodyk & Davidson LLP. 'To our foreign friends and investors one of the few things Singapore can offer is a good environment for living and place to call their own while they invest their talents and time here.

'This past year, the financial crises in Europe, struggling recovery in the United States, civil uprisings in the Arab Spring as well as slowing economies amidst our region are cause for consolidation and reflection.

'The measures should only be announced with careful and prior consultation with the stakeholders in the real estate industries and with the view of the possible macro 'knock-out' effect which may have on the already fragile economy.'

BT: Govt to release smaller supply of residential land in H1 2012

Business Times - 08 Dec 2011

Govt to release smaller supply of residential land in H1 2012

Industry players fear it may still be too much, given latest cooling measures

By UMA SHANKARI

(SINGAPORE) The government will release a slightly smaller supply of residential land in the first half of 2012. But industry players feared that it would still be too much, given the latest cooling measures and the substantial supply of private homes already in the pipeline.

The Ministry of National Development (MND) said yesterday that it would release new land for about 14,100 private homes in the first half of 2012 as part of its twice-yearly land sales programme. This includes 3,500 executive condominium (EC) units.

Of that amount, around 7,000 units (including 2,900 ECs) will be rolled out through the confirmed list.

This is slightly less than the 8,100 units offered under the confirmed list in H2 2011. Land parcels under the confirmed list are sold according to scheduled dates.

MND said that it took into account the new policy measures announced yesterday and the large supply pipeline of 81,600 private homes when it decided on the land sales programme for the first half of 2012.

'In deciding on this supply, which is slightly less than the 8,100 units in the H2 2011 confirmed list, MND has taken into consideration the large supply of 81,600 private residential units - including 5,300 EC units - that are already available in the pipeline as at Q3 2011, as well as the possible moderation in investment demand for private housing due to the policy measure announced today,' MND said.

Of the 81,600 units available in the pipeline, about 41,000 units (including 1,900 EC units) were still unsold, the ministry added.

But while it cut the total land supply for private homes, more land for building EC units will be up for sale.

Sites for 3,500 EC units will be made available in H1 2012 - including 2,900 EC units on the confirmed list. This is comparable to the 2,985 EC units from five sites sold in 2011.

Demand for EC units is expected to climb after the government raised the monthly income ceiling for the purchase of new EC units to $12,000 from $10,000 in August 2011.

National Development Minister Khaw Boon Wan pointed out that the EC supply is being ramped up. 'This will help higher-income Singaporeans own private condominium units in an affordable way, as the sale of new EC units is restricted to Singaporean households only,' he said.

EC units are initially sold with eligibility and ownership restrictions similar to HDB's public housing flats, but will be converted to private housing after 10 years.

Analysts were worried that the total supply of residential land for H1 2012 is excessive as it comes on top of the new cooling measures.

'I think that under normal circumstances, the market will probably be able to absorb the supply,' said Bank of America Merrill Lynch economist Chua Hak Bin. 'But with the kind of measures that have just been announced, there is a danger that demand could collapse altogether.'

International Property Advisor chief executive Ku Swee Yong similarly said that the upcoming supply seems to be 'abundant'.

He also noted that more than half of the supply from the confirmed list will be concentrated in the north-east of Singapore (specifically, in Sengkang, Pasir Ris and Punggol). 'The concentration of supply is a risk for home owners in those locations,' he added.

Jones Lang LaSalle's head of research Chua Yang Liang said that in the slightly longer term, the rate of immigration will play a large factor in whether the supply will be absorbed.

'Currently in the market, there is a mis-match between supply and demand due to the quick growth in population over the last few years,' Dr Chua noted. 'The measures will reduce some of the demand. But a lot will also depend on the rate of immigration next year and the years after.'

In addition to the supply of residential land, the H1 2012 government land sales programme will also comprise some 2.35 million square feet of commercial space as well as 4,800 hotel rooms.

The programme also includes a commercial plot in Paya Lebar at the junction of Sims Avenue and Tanjong Katong Road - which was put up for tender in 2011 but not awarded as the sole bid from UOL Group and Singapore Land was deemed to be too low. It will be added to the reserve list for H1 2012.

BT: Developers fear impact of targeted stamp duty

Business Times - 08 Dec 2011

Developers fear impact of targeted stamp duty

Extra 10% duty for foreigners set to help cool prices for S'poreans

By KALPANA RASHIWALA

(SINGAPORE) The government yesterday announced significant steps that could bring private home prices back within the reach of Singaporeans. Developers, however, have called these steps, which are expected to hit sales and prices, untimely.

Starting today, foreigners and corporate entities buying private homes in Singapore will have to pay an extra 10 per cent by way of an additional buyer's stamp duty. This duty will also apply to permanent residents (PRs) buying their second or subsequent homes and Singaporeans buying their third residential property or more - though only to the tune of 3 per cent. Overseas properties are excluded from the count of properties owned.

The move is aimed at reining in private property prices, which some felt were slipping beyond the reach of many Singaporeans. Real Estate Developers Association of Singapore (Redas) said, however, that the measures are untimely given that the local economy is expected to slow down next year. 'Redas is disappointed in the lack of consultation on the latest measures. They came as a surprise as the current market outlook is uncertain. The good take-up rate in the primary market is driven by the increased number of new launches and unique selling points of certain projects. It is not indicative of a return to a speculative market.'

The government also boosted the supply of land for executive condos in H1 2012 as part of its land sales programme.

Though the additional buyer's stamp duty (ABSD) kicks in today, remission will be given for options granted on or before Dec 7 and exercised within three weeks (that is, on or before Dec 28) or the option validity period, whichever is earlier.

Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said: 'We have always had open markets and must keep them that way. However, the reality is that investment flows into our property market are now larger than before, and unlikely to recede as long as interest rates remain low. The additional buyer's stamp duty should help cool investment demand, and avoid the prospect of a major, destabilising correction further down the road.'

A joint release from the Ministry of Finance and the Ministry of National Development yesterday evening said: 'A higher ABSD rate for foreign buyers in particular is necessary, in view of the large pool of external liquidity and strong buying interest from abroad, and the relatively small size of the Singapore market.'

It added: 'Excessive investment demand will . . . make the property cycle more volatile, and thus increase the risks to our economy and banking system.'

Foreign purchases accounted for 19 per cent of all private residential property purchases in H2 2011, up from 7 per cent in H1 2009, it noted.

Credo Real Estate's analysis showed that foreigners' presence is much stronger in the prime and mid-prime districts, where they accounted for nearly a quarter of caveats lodged in Q3 2011 - up from 16 per cent in 2010 and 13 per cent in 2009.

For the suburban mass- market segment (Outside Central Region), the proportion has also been rising, from 5 per cent in 2009 to 7 per cent in 2010 and nearly 15 per cent in Q3 2011.

'The suburban mass market is probably of greater concern as buyers of first private homes would feel threatened by increasing number of foreign purchasers,' said Credo executive director Ong Teck Hui.

DTZ's Southeast Asia chief operating officer Ong Choon Fah said the ABSD is not a blunt policy tool. 'They have made distinctions between foreigners and PRs and whether they are buying for owner occupation or investment. This is very carefully calibrated to strike a balance between the price that Singapore has to pay for being an open economy and ensuring property prices remain within the reach of Singaporeans.'

She reckons developers will take a wait-and-see attitude, evaluate their options and watch how buyers react.

'Prices should fall but activity has to drop significantly first before developers re-price their projects. The likelihood is that some may first take soft measures to mitigate the situation - such as absorbing the additional buyer's stamp duty or giving furnishing vouchers - before resorting to a price cut.'

Knight Frank chairman Tan Tiong Cheng too acknowledged that prices will soften. 'With so much supply coming into the market, developers will either have to revise their prices to move units, or absorb the additional buyer's stamp duty.' The latter will be tantamount to a price cut as far as a developer is concerned, note analysts.

'This set of measures will definitely help to cool prices. The concern has been that foreign buying is pushing up prices,' said Mr Tan. With the 10 per cent ABSD on foreign buyers, the long-awaited recovery in demand in the luxury sector will take even longer, he added.

Standard Chartered Bank said in a research note last night: 'We expect the policy to induce a 20 per cent decline in sales volume in Q1 2012. . . We continue to expect residential prices to fall 20-30 per cent next year.'

CNA: Residential project at Capitol Building site to be launched in 2012

Residential project at Capitol Building site to be launched in 2012

By Millet Enriquez | Posted: 22 November 2011 2057 hrs


SINGAPORE: A high-end residential project will soon rise at the site of the iconic Capitol Building and Stamford House as it broke ground on Tuesday for a possible launch between March and April 2012.

It is part of a landmark project that will feature residential, hotel, retail and theatre components in the conserved site. Its developer Capitol Investment Holdings said it has awarded the S$338 million contract to Japanese firm Shimizu Corporation for the project.

The project is expected to be completed by the fourth quarter of 2014. Capitol Development said it has secured a 42-month tenure, S$532.0 million syndicated loan facility from an OCBC-led consortium of banks to fund the development.

The residential property will only have 34 units. Meanwhile, the Capitol Theatre will also be conserved and transformed into a theatre with 800 seats.

-CNA/ac

BT: Capitol to be the epitome of luxury

Business Times - 23 Nov 2011

Capitol to be the epitome of luxury

By MICHELLE TAN

IT IS yet to be launched, but the property market already seems to be abuzz about the 34 uber luxurious residential units that will be built on the old Capitol site.

Attributing the residential tower's popularity to its exclusivity and stellar location, executive chairman of Perennial Real Estate Pte Ltd (Perennial), Pua Seck Guan, noted that a number of 'serious buyers' have already expressed their interest in the project despite not knowing the finalised launch price.

Centrally located and just a short walk from the City Hall Interchange MRT station, which straddles both the major North-South and East-West lines, the residential units of the Capitol Development Project by Capitol Investment Holdings Pte Ltd (Capitol) will boast views of the Marina Bay area as well as that of the Saint Andrew's Cathedral.

An average apartment will be around 3,000 square feet. In addition, two garden villas (over 9,000 sq ft) and five penthouses will also form part of Capitol's residential offering upon the development's completion.

Commenting on the generous-sized units, Mr Pua highlighted that due to the site configuration and the surrounding landscape, larger units would be better able to bring out the 'advantages' of the development.

Due to the exclusivity of the units, Mr Pua also remains unfazed by the site's 99-year leasehold status and remains confident of the demand and pricing of the apartments going forward.

Just yesterday, Capitol - a consortium comprising Chesham Properties Pte Ltd, Perennial (Capitol) Pte Ltd and Top Property Investment Pte Ltd - held a ground-breaking ceremony to mark the commencement of the Capitol Development, which involves the redevelopment of conservation pieces such as Stamford House, Capitol Building and Capitol Theatre into a high-end mixed development.

The 34 highly exclusive residential units will be attached to a six-star hotel wing, retail components as well as a theatre-cum-cinema, and is expected to become a landmark destination in the downtown area when it is completed.

Leading Japanese construction player, Shimizu Corporation, will be the developer for the Capitol Development project, following a $338.2 million contract win from Capitol.

The development is slated to be completed by the last quarter of 2014.

BT: Top Global unit clinches Braddell Park for $85m

Business Times - 21 Jun 2011

Top Global unit clinches Braddell Park for $85m

Brookvale Park, off Sunset Way, up for en bloc sale at $550m

By NICHOLAS YEO

IT may be the school holiday season but activity continues in the collective sales market. A unit of Top Global Limited, listed on the Singapore Exchange, has clinched Braddell Park for $85 million or $665 per square foot per plot ratio.

In the Sunset Way location, Brookvale Park has been put up for en bloc sale with an asking price of $550 million or $950 psf ppr.

Braddell Park is a 45-unit apartment at Jalan Lateh, off Braddell Road and Upper Serangoon Road.

Under the 2008 Master Plan, the site is zoned for residential use with a plot ratio of 1.4 and an allowable height of up to five storeys. The sale was brokered by Credo Real Estate.

The site is freehold and has a land area of 91,360 square feet.

Singapore Land Authority has granted an in-principle approval for the sale of an adjoining piece of state land measuring some 6,540 sq ft, thereby allowing the purchaser to enlarge the site to about 97,900 sq ft and build up to a gross floor area (GFA) of 137,060 sq ft - sufficient for a new condo project with about 130 apartments averaging 1,000 sq ft, depending on layout and configuration, Credo said in a news release on Monday.

If the developer chooses to purchase the adjoining state land parcel, its effective land rate of the amalgamated site may be lowered to around $639 psf ppr.

'The locality has seen major transformations with NEX mall at Serangoon Central and the completion of the MRT interchange between the North-East Line and the Circle Line,' said Tan Hong Boon, deputy managing director of Credo.

'Coincidentally, the Woodleigh MRT station, which is some 350 metres away from the site, commenced operations today after being closed in 2003.'

Top Global is controlled by Sukmawati Widjaja, who has a 30 per cent stake in the consortium that is developing a retail/theatre, hotel and residential project on the landmark Capitol site.

The sale is subject to the approval of the Strata Titles Board, if necessary.

Brookvale Park, off Sunset Way, has been put up for collective sale with an asking price of $550 million or $950 psf ppr, inclusive of an estimated development charge (DC) of $16.77 million.

The 373,000 sq ft, 999-year leasehold residential site is zoned for residential use with a gross plot ratio of 1.6 and a maximum height of 12 storeys under Master Plan 2008.

If the successful developer fully utilises the 10 per cent bonus balcony allowance, the unit land price works out to a lower $892 psf ppr (including an estimated DC of $35.4 million), said CB Richard Ellis, which is marketing Brookvale Park's collective sale.

'At this price, the potential developer can expect to break even at below $1,400 psf,' said Charles Hoon, director of investment properties, CB Richard Ellis.

'New residential launches in nearby Bukit Timah Road such as Floridian and Jardin have recently transacted at a median price of $1,700 to $1,800 psf. The Trizon, situated nearby at Ridgewood Close, off Mt Sinai Drive, recently transacted between $1,500 and $1,800.'

The site enjoys easy access to the downtown Central Business District (CBD) and the Marina Bay Sands integrated resort via the Alexandra Expressway (AYE). The Orchard Road shopping belt is also easily accessible via Holland Road.

'Developers can take advantage of the site's unique hilly characteristics to incorporate balconies into their design scheme,' said Mr Hoon.

'We expect strong local and foreign interest, in particular, parties who are considering a 'freehold equivalent' site in prime District 21.

'Brookvale Park is likely to be the only condominium site available in this locality.'

CB Richard Ellis is the sole and exclusive marketing agent for this tender exercise, which closes on July 28 at 3pm.

BT: How to invest in foreign currencies

Business Times - 23 May 2011


How to invest in foreign currencies

The asset class is gaining popularity as a means of diversification, says MINDY TAN

THE term 'safer' is relative, to be sure, but it must be said that despite its inherent dangers, the forex market can be a lucrative one, if played right. In particular, because currency markets are not strongly linked to stock and bond markets, forex is gaining popularity as a means of diversification.

Low Buen Sin, director of the NTU-SGX Centre for Financial Education, notes: 'Foreign currencies can be a rewarding asset class to invest in. Having exposure in FX will help investors gain diversification.'

In fact, don't be surprised if you are already exposed to foreign currencies, even though you haven't made a conscious decision to dabble in it!

Prof Low explains: 'Even if you buy a stock that is listed in Singapore, all of the company's revenue could come from other countries. Take, for instance, Global Logistics Properties.'

The company, which was listed on the Singapore Exchange in October last year, owns, manages and leases 296 properties within 122 integrated parks, according to its prospectus. Its network is spread across 25 major cities in China and Japan.

Prof Low says: 'Most of (the company's) income comes from Japan and China . . . (and it) doesn't have any property in Singapore, despite being priced in Singapore dollars.' As such, the company's bottom line is affected by market sentiment, economic performance and natural disasters affecting those two countries.

But what about investors who wish to be directly exposed to FX? There are a couple of options available:

Dual currency deposit

A dual currency deposit (DCD) is a derivative instrument which combines a money market deposit with a currency option to provide a (potentially) higher yield than what is available for a standard deposit.

How does it work?

1. The base currency is deposited for a pre-determined term, from a week to a few months.

2. A specific exchange rate between the two currencies (the strike price) is agreed upon. These two currencies are known as the base currency and the alternative currency.

3. The return you get on your deposit depends on the market movement of the exchange rates between the two currencies, i.e. the investor is obligated to exchange an agreed amount of the base currency for the alternative currency at the strike price when the alternative currency weakens beyond the pre-agreed price.

Factors affecting return:

# Investment tenor: A longer investment period translates into higher returns.

# Strike price: The further away the strike price is from the current price, the lower the return. In other words, the higher the chance of the investor getting the alternate currency, the higher the investor's returns.

# Volatility of currency pair: Currency pairs with higher volatility will reap higher returns.

What are the risks?

# Foreign exchange risk: Apart from the inherent risks involved when dealing with FX, investors should be aware of potential losses when converting currencies. When the maturity proceeds are returned in the alternative currency and subsequently converted back to the base currency, a loss may be experienced due to movements in currency exchange rates. These losses may offset any interest earned on the deposit.

# Liquidity risk: Investors are essentially locking in their money for the tenure of the deposit as penalties are enforced if withdrawal is made prior to maturity.

# No guarantees: This is a non-principal guaranteed product, which means investors may lose part of their principal sum. This may happen especially when the investor ends up holding the alternative currency.

# Credit risk: As this is an investment product, it is not protected by the Monetary Authority of Singapore's guarantee on saving deposits.

Foreign currency fixed deposits The foreign currency fixed deposit (FCFD) is similar to the Singapore dollar fixed deposit in that a sum of money is deposited with the bank for a fixed tenure and at a fixed interest rate. The main difference is that this deposit is denominated in a foreign currency.

Factors affecting returns:

# Investment tenor: A longer investment period translates into higher returns.

# The interest rate is calculated based on prevailing foreign currency market interest rates, and is adjusted to accommodate the bank's costs, risks associated with the product, and the bank's profit margin. The interest rate quoted at the start of the term is fixed for the entire tenure.

# Volatility of currency pair: Generally, an investor has to be confident that the target currency will appreciate in order to ensure positive returns. Alternatively, ensure that you have a sufficiently long investment horizon to ride out exchange rate fluctuations.

Bonds

Bonds are issued by corporations or governments from around the world. Some banks here offer foreign bonds in an international currency.

Such investments can be attractive, especially compared to local bonds. However, as this requires conversion to a foreign currency, it is a good proposition only as long as the Singapore dollar does not appreciate substantially against that currency.

Who should enter the tiger's den?

Broadly speaking, these investment alternatives are suitable for investors who:

# Have sufficient funds to withstand the loss of capital in the event that the currency option is exercised;

# Understand forex risks;

# Don't mind holding an alternative currency.

Finally, an investor should be aware that currency exchange rates can be influenced not only by the monetary policies of his own country's central bank but also the monetary policies of trading partners. Market sentiment, economic performance and even natural disasters can play a role in shifting currencies up or down relative to the currencies of other countries.

The Asian proverb, 'You cannot catch a tiger cub unless you enter the tiger's den', holds true. If you decide to dabble in FX, however, make sure you have a firm grasp of the market and its accompanying risks.

Prof Low points out: '(For) young investors building and establishing their careers, FX trading is definitely not for him/her. They should consider investments in FX instead.'

BT: Forex dos and don'ts

Business Times - 16 May 2011


Forex dos and don'ts

Trading and investing in the volatile currency market calls for understanding and care. MINDY TAN reports

THE global foreign exchange market is huge. In April 2010, the market's average daily turnover was estimated at US$3.98 trillion, a growth of some 20 per cent over April 2007, according to the Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in 2010 conducted by the Bank for International Settlements (BIS).

While it is true that the foreign exchange market is one of the most exciting markets around, is it the right platform for young investors?

Low Buen Sin, director of NTU-SGX Centre for Financial Education, says: 'Newcomers in forex, stock and other asset markets should first try to become investors instead of traders. Trading should be done only after you have accumulated an adequate sum of investment and can afford to put some spare cash to take trading risk.'

While used interchangeably by laymen, a clear line should be drawn between 'trading' and 'investing'.

In trading, the appreciation of capital is the objective; if dividends are paid out, this is an added advantage. Traders look to profit on short-term price fluctuations, which means the amount of time an active trader holds onto an asset is very short.

In contrast, investing looks more towards income over time. Income producers - for example, dividends or bond interest payments - are thus the prime motivation.

Professor Low adds: 'Foreign currencies can be a rewarding asset class to invest in. The investment can be done by directly investing in foreign currency deposits or bonds, or FX funds. It can also be invested indirectly through equities and other foreign currency- denominated assets. A more sophisticated investor can consider capital-protected structured products.'

What is forex?

When talking about forex, the image conjured up in the mind of most people is the risky and exciting world of forex trading.

The foreign exchange market is the figurative place where currencies are traded. The need to exchange currencies is the primary reason why the forex market is the largest, most liquid financial market in the world.

There is no central marketplace for foreign exchange; rather, currency trading is conducted electronically between traders around the world.

The main thing young investors should be aware of is the fact that forex trading has much higher leverage than the stock market. When someone decides to invest in forex, they can expect higher profits - and, conversely, higher losses.

Currency trading is generally short-term in nature. A day trader who buys euros versus the dollar is not trying to predict what is going to happen to the euro in the next 10 years; he is concerned with the price fluctuations after he enters a position.

His goal is for the euro to appreciate in value as soon as possible after his purchase. In order to increase his chances of trading successfully, a currency trader will study the past price history of the currency pair he is trading and compare it to the current prices to determine what the price is probably going to do next.

Many people use forex as a means of diversification. According to Jeremy Goh, associate professor of finance at SMU's Lee Kong Chian School of Business: 'The key to having a diversified portfolio is to not hold just a single class of assets. Hence, having forex in one's portfolio can be a good source of diversification. The basic idea is that forex returns are not perfectly correlated with the market, just like bonds, real estate and commodities. So as long as you have an asset class that is not perfectly correlated to the market, having them in a portfolio will help with diversification of unsystematic (or idiosyncratic) risks.'

The trading pairs

Major currency trading consists of seven international currency pairs which are divided into the majors, and the commodity pairs.

The majors are the most liquid and thus most widely traded major currency pairs. They include euro/US dollar, US dollar/Japa- nese yen, British pound/US dollar, and US dollar/Swiss franc.

The commodity pairs consist of major currencies trading associated with commodities.

US dollar/Canadian dollar is associated with oil commodities, whereas Australian dollar/US dollar and New Zealand dollar/US dollar are closely associated with gold commodities. Forex traders often trade these commodity pairs to gain exposure to commodity volatility.

Each pair responds to different events and requires a unique approach and strategy.

'The specific currency pairs that you choose would depend on several factors,' says Ser-Keng Ang, senior lecturer of finance at SMU's Lee Kong Chian School of Business. 'One such factor is liquidity or volume. Generally, the G-7 currencies have good liquidity or volume. It is also dependent on your appreciation and understanding of the economies of the two countries - for example, to understand how the Australian dollar performs, you would need to understand that its value is driven by commodities (hence it is known as a commodity currency), and who it sells these commodities to (for example, China, to fuel its growth). This explains why the Australian dollar has appreciated significantly, in tandem with China's fast pace of growth.'

A final caveat emptor

Though currencies don't tend to move as sharply as equities on a percentage basis (where a company's stock can lose a large portion of its value in a matter of minutes after a bad announcement), it is the leverage in the spot market that creates the volatility. It is therefore important to take into account the risks involved in the forex market before diving in.

NTU's Prof Low says: 'Before entering the FX market, you must know the forex market well and you must have time. Trading is not something you spend 5-10 minutes on. You must pay attention to market movements because you are essentially taking advantage of short-term changes. You must also understand how to control downside risk and the maximum loss you are willing to incur.'

SMU's Mr Ang adds: 'I would recommend that young investors undergo requisite training to understand the market and to monitor the market carefully before putting a significant proportion of their monies into FX trading. Set some trading rules to ensure trading discipline is maintained - for example, set a time horizon, level of return and/or cut-loss levels. This will provide a non-emotional way of trading. Prudence also dictates that one should diversify one's portfolio.'

(Next week, we will show you how you can get exposure to currencies and forex, without getting involved in forex trading.)

BT: Rise in private, HDB home prices slowing

Business Times - 02 Apr 2011

Rise in private, HDB home prices slowing

Govt cooling measures working, say analysts, as URA index climbs 2.1% in Q1 while HDB resale prices see slowest rise in 7 quarters

By KALPANA RASHIWALA

IN a sign that the property cooling measures are taking effect, Urban Redevelopment Authority's overall private residential price index posted a 2.1 per cent quarter-on-quarter increase in Q1, compared with a q-on-q increase of 2.7 per cent in Q4 last year, latest government flash estimates show.

'The rate of increase has moderated for six consecutive quarters since Q4 2009,' URA said in its release.

Similarly, the Housing & Development Board's resale flat price index registered a 1.6 per cent q-on-q gain in the first quarter, the slowest increase in seven quarters.

URA's sub-index for prices of non-landed private homes posted a q-on-q gain in Q1 2011 of 0.9 per cent for Core Central Region (which includes the prime districts 9, 10 and 11, as well as the financial district and Sentosa Cove) - a smaller hike than the 2.2 per cent q-on-q rise for Q4 2010.

However, the index for Rest of Central Region (which covers places like Bukit Merah, Queenstown, Geylang, Toa Payoh and Katong) increased 2.2 per cent in Q1 over the preceding quarter - a bigger gain than the 1.9 per cent q-on-q gain in Q4 2010. The index for Outside Central Region (covering suburban mass-market locations like Woodlands, Clementi, Jurong, Hougang, Tampines and Bedok) posted a 3.1 per cent q-on-q rise in the first three months of 2011, after rising 2.1 per cent q-on-q in Q4 2010.

Credo Real Estate executive director Ong Teck Hui said: 'The cooling measures did not affect genuine home buyers as much as they did investors and speculators. And demand for OCR is sustained by genuine buyers.' Some market watchers suggest there may be some diversion of investment demand from high-end property to lower-priced segments as the cooling measures stretched budgets.

However, some analysts point out that the rate of q-on-q price increases for OCR had moderated in Q3 and Q4 last year before rising again in Q1. And the Q1 flash estimate for the region reflected a year-on-year appreciation of 13.6 per cent; this figure has been easing since peaking at 36.1 per cent in Q2 last year.

CB Richard Ellis executive director Li Hiaw Ho attributes the 3.1 per cent rise in the Q1 flash estimate for OCR to projects like Waterfront Isle along Bedok Reservoir, The Lakefront Residences near Jurong Lake, and The Tennery in Bukit Panjang which registered strong take-up at median prices (in the first two months of this year) of about $990 psf, $1,050 psf and $1,200 psf respectively. 'These projects attracted home buyers mainly because of their proximity to an MRT station,' Mr Li said.

He attributes the 2.2 per cent appreciation in the RCR's price index to Spottiswoode 18 and The Cape - both transacting at a median price of about $2,000 psf - as well as projects with small-format units like Palmera East ($1,225 psf).

URA said that as at end-2010, there were about 33,000 yet-to-be-sold private homes in uncompleted projects with planning approval - of which 40 per cent is in OCR. In addition, there were 1,500 executive condominium units (a hybrid of public and private housing) that were still unsold.

The above supply figures do not take into account new sites that were recently sold (which can generate about 8,100 units) or which will be made available for development through the confirmed list of the Government Land Sales (GLS) Programme in H1 2011 (which can generate about 5,360 units). Additional supply may also come from private land sources, such as en bloc sales.

Nomura Singapore analyst Sai Min Chow said: 'The combination of more completions (tempering rental expectation), government measures that cap home buying capability, and supply that could be launched from sites (both GLS and en-bloc) sold will continue to weigh on home prices. We expect this to translate into a flattish outlook for mass prices and up to 8 per cent correction for luxury prices this year.

Colliers International, however, predicts that overall private home prices will rise by up to 8 per cent for the whole of this year.

Knight Frank chairman Tan Tiong Cheng said: 'Certainly the cooling measures are working. If developers' sales continue to come off, prices may ease. But any price drop may be mitigated in a scenario of rising construction costs amid the increase in oil prices and expected reconstruction efforts in Japan.

'Interest rates are likely to remain low for the foreseeable future and the fact that HDB resale prices are still strong will continue to create a push for upgrading to the private market.'

HDB yesterday said it will launch about 17,800 build-to-order flats in the first nine months of this year - close to the 17,700 new flats offered for the whole of 2010.

ERA Realty Network and Propnex said cash-over-valuation amounts have stabilised at about $20,000 in Q1 based on transactions handled by their firms.

ERA's key executive officer Eugene Lim said: 'We estimate the total HDB resale volume for Q1 to be just below 7,000 deals.' The figure for Q4 was 6,454.

For the whole of 2011, he predicts HDB's resale price index to increase about 6-9 per cent with total resale applications of about 28,000-30,000. The index rose 14.1 per cent last year, when there were 32,257 resale applications.

PropNex CEO Mohamed Ismail predicts a 6-8 per cent hike in HDB's resale price index this year.

BT: Top Global's top gun has ambitious plans

Business Times - 08 Feb 2011

Top Global's top gun has ambitious plans

Group sets up joint venture property consultancy

By KALPANA RASHIWALA

(SINGAPORE) Top Global, controlled by Sukmawati Widjaja - sister of tycoon Oei Hong Leong - is looking at building up a property investment and development business in Singapore, China, Indonesia and Malaysia. It also plans to acquire or lease hotels in Chinese cities, says CEO Hano Maeloa, who is the son of Madam Sukmawati.

And the Catalist-listed company recently established a property consultancy company in Singapore with two partners which it hopes to franchise in Indonesia. Top Global set up Global Property Strategic Alliance Pte Ltd, or GPS Alliance Pte Ltd for short, late last year with Dennis Yong and Jeffrey Hong.

The two men were previously chief operating officer and executive director (agency) respectively at HSR and each holds a 15 per cent stake in the new property consultancy group.

Top Global controls the remaining 70 per cent. GPS Alliance's existing suite of services includes real estate brokerage (covering resales of condominiums and landed properties in Singapore), corporate leasing, commercial properties, and investment sales.

Next month, it plans to begin brokerage of HDB resale flats and marketing of overseas properties.

GPS Alliance Pte Ltd currently has about 30 full-time staff and over 100 associates (who are paid by commission only). The target is to grow the associates number to 500 to 1,000 by year end.

Setting up a property consultancy business will not only help parent Top Global source for deals like development sites in Singapore but give it first-hand knowledge of the latest property market trends, says Mr Maeloa.

Mr Hong is GPS Alliance's CEO and Mr Yong, its agency mentor. 'Top Global is not involved with the day-to-day management at GPS. Our partners run GPS separately and our offices are also in separate locations. So we keep it at arm's length,' says Mr Maeloa when asked if rival developers may not be comfortable with giving marketing and other jobs to GPS, because of its links to Top Global.

GPS Alliance's office is at Jalan Pemimpin near Bishan (Top Global's premises are at Shaw Centre in Scotts Road) and 'we plan to franchise the GPS name to Indonesia, and when we have a presence there, we can do a lot of cross border selling. For example, we can market Singapore properties in Indonesia, or sell Indonesian properties here, or Australian properties in Indonesia'.

Top Global has a 30 per cent stake in the consortium developing a retail/theatre, hotel and residential project on the landmark Capitol site in Singapore.

Chesham Properties, controlled by members of the Kwee family of Pontiac Land Group, and Perennial Real Estate hold 30 and 40 per cent stakes respectively in the consortium.

'(Chesham director) Kwee Liong Seen is my mum's very good friend and approached us on this site,' explains Mr Maeloa.

Mr Maeloa bought a stake of about 20 per cent in Top Global in 2007 but sold it within a year because he could not get control of the company. He remained an executive director.

In early 2010, Madam Sukmawati emerged as a substantial shareholder in the company, taking up a placement offer, which led her to do a general offer for Top Global.

The company also did a rights issue last year. Madam Sukmawati's stake in Top Global today stands at slightly over 50 per cent.

Under the leadership of Madam Sukmawati, who is the company's executive chairman, and Mr Maeloa, Top Global has divested the construction and waterproofing business and decided to focus on three core businesses - property development/investment; hotels; and real estate support services including property consultancy.

For the property business in Singapore, Top Global initially focused on the residential sector, but following the introduction of the Jan 13 property cooling measures, it decided to broaden its focus to include commercial and industrial properties since these segments are not targeted by these measures.

As well, capital values in these segments have not gone up as much as for the residential sector, notes Mr Maeloa.

'It has become more viable to have mixed developments comprising residential and commercial components rather than doing pure-residential projects in Singapore,' he observes.

'Residential property prices have gone up so much...and I think going forward there will be some sort of oversupply in the residential sector, so you have to position yourself as a niche player.'

Equally at ease at Nassim or Chomp Chomp

By KALPANA RASHIWALA

HANO Maeloa is just at ease sipping fine wine in his house at Nassim Road as eating at hawker centres. His favourite hawker food is carrot cake at Chomp Chomp in Serangoon Gardens.

His most expensive wine investment is a Romanee-Conti magnum, which he had bought from a London merchant about 10 years ago for $50,000. All in, he estimates that he could have invested about $20-30 million in his wine collection of about 8,000-10,000 bottles housed in the 2,000-square-foot cellar in the basement of his residence at Nassim Road.

Mr Maeloa, his homemaker wife and their three school-going children, along with his mother, Sukmawati Widjaja (of the family that controls the Sinar Mas group in Indonesia), and his sister live in the bungalow.

The family developed the house on a site of about 40,000 sq ft which Madam Sukma purchased in 2006 from Peter Kwee. The house was designed by local architect Timothy Seow and the interiors were done by Hirsch Bedner Associates, Mr Maeloa says.

Perhaps Mr Maeloa's ease at fitting into both ends of the lifestyle spectrum may have to do with his having spent some of his early years here.

He did his entire primary school education at Catholic High (in Queen Street) followed by a few years at Whitley Secondary School (at Dunearn Road) - before moving to Boston for prep school. He holds a BSc in business administration from the University of Southern California.

Mr Maeloa used to run an IT fund in Los Angeles around the time of the Internet bubble, and when the bubble burst, he returned to Singapore in 2001 and set up a shipping business to coordinate the logistics requirements of the Sinar Mas group.

Around 2007, he sold the shipping business and invested in Top Global in Singapore, but failed to gain control of the company. He soon sold off his interest in Top Global but stayed on as an executive director.

His mother arrived on the scene a few years later, taking up a placement issue by Top Global in early 2010. She later made a general offer and also participated in Top Global's rights issue last year. Her stake is slightly over 50 per cent.

'My passion has always been in property,' declares Mr Maeloa, in an interview with BT on his 42nd birthday. Both Madam Sukma and Mr Maeloa are Singapore citizens now.

As a student of Whitley Secondary School, he excelled in badminton, winning trophies in interschool tournaments. These days, his hobbies include travelling with his family to ski resorts and hot springs in Japan, and touring the US and Europe. 'When I'm overseas, I like to visit places with unique architecture.'

In Singapore, he visits showflats of other developers in his free time. 'I like looking at how people do wonders with just a square space and sometimes small units.' Mr Maeloa is the only son and the eldest of four children of Madam Sukma.

BT: Developer shoots for moon on Capitol site but braces for chill

Business Times - 02 Feb 2011

Developer shoots for moon on Capitol site but braces for chill

By KALPANA RASHIWALA

(SINGAPORE) The $750 million mixed development project that will come up on the Capitol site will include some 60-70 luxury apartments which are expected to be launched in the third or fourth quarter of this year.

The consortium developing the project has secured debt financing from OCBC. Market watchers reckon the project's gearing ratio could be about 70 per cent.

Internal rates of return will be 'very fantastic... more than the teens', Pua Seck Guan, CEO of Perennial Real Estate Pte Ltd, told reporters yesterday. He and his co-investors hold a 40 per cent stake in the consortium developing the retail/theatre, hotel and residential project that will be developed on the Capitol site.

The historic Capitol Theatre, Capitol Building and Stamford House will be conserved and restored for adaptive re-use while a new 15-storey structure will be built on the existing Capitol Centre site.

The other members of the consortium - Chesham Properties (controlled by members of the Kwee family who own Pontiac Land Group) and Sukmawati Widjaja's Top Global - each hold a 30 per cent stake.

Mr Pua said the consortium is in 'a very comfortable position' with regard to its breakeven costs for all components of the project, given the competitive price it paid for the site - $250 million or nearly $461 per square foot per plot ratio.

'We can make very good money from this project, but it's not just about making money. We must do justice to this project,' he said.

The final pricing for the apartments, which are slated for launch later this year, will depend on market conditions prevailing at the time. For now, the pricing expectation has been clipped to about $2,500-3,000 per square foot from an initial range of $3,000-3,500 psf following the introduction of the Jan 13 property cooling measures, according to Hano Maeleo, CEO of Top Global.

The apartments will range from 1,200 sq ft to over 2,000 sq ft and likely comprise two- to four-bedroom units. They will be housed on the third to 15th levels of the building that will be built on the current location of Capitol Centre.

Levels one and two, and basements one and two, of the same building will house retail space. The existing street between Capitol Theatre and Stamford House/Capitol Building will be transformed into a glass-covered pedestrianised galleria lined with eateries.

There will also be an underground mall link to City Hall MRT Station, and retail space on the ground floors of Capitol Building and Stamford House.

The development will have at least eight flagship retail and 30 F&B stores, and at least 40 per cent of total retail space in the project will be dedicated to new-to-market brands, revealed Mr Kwee Liong Seen, director of Chesham Properties.

Said Mr Pua: 'We will be different because this site is unique and deserves a lot of our careful attention and effort to make it different. So if you are just another Bugis Junction, I think we will fail and we will not have done this site justice.'

The $750 million total development cost includes the land price of $250 million, construction costs (inclusive of at least $30 million to restore Capitol Theatre) and the cost of fitting out a luxury hotel with about 200 rooms on the second to fourth levels of the four-storey Capitol Building and Stamford House.

A building agreement was signed yesterday between the consortium members and the Singapore government, which sold the Capitol site to the consortium in 99-year leasehold tenure.

Capitol Theatre will be restored and upgraded into a single-screen cinema with about 800 seats and alternate as a performance theatre. Ground level access will enable the hosting of a wide range of activities from first-run screenings to red carpet movie premieres, to in-house theatre and dance productions.

The project is slated for completion by end-2014.

Richard Meier, managing partner of the eponymous US firm that is the design and concept architect, said: 'The new structure will complement the existing historical architecture, creating a new civic centre that will look to the future while it is respectful of the past.'

The consortium's bid was selected following a dual-envelope tender last year, which drew 14 bids. The winning consortium offered the highest land price among the three bidders that were shortlisted based on their concept proposals.

BT: IDA points the way to 4G speed

Business Times - 25 Jan 2011

IDA points the way to 4G speed

Local operators offered two options to upgrade cellular networks for broadband-speed surfing

By WINSTON CHAI

(SINGAPORE) The government has laid out two paths for local operators to upgrade cellular networks which could eventually mean broadband-speed surfing for smartphone users.

Under the rules prescribed by the Infocomm Development Authority of Singapore (IDA) yesterday, telcos are allowed to roll out a so-called fourth-generation (4G) networks on two mobile frequency spectrums for which they already have licences.

The upgrade, typically achieved with the implementation of a technology called long-term evolution (LTE), promises to bring cellular surfing speeds up to around 100Mbps (megabits per second). This is on par with premium fixed-line broadband packages offered in Singapore today and would allow consumers to enjoy blazing Internet access both at home and on the go.

While Singapore is among the first in the region to consider 4G, operators such as Verizon in the United States and TeliaSonera in Sweden have already gone the LTE way.

According to the IDA, local operators can use the 2.3 and 2.5 GHz (gigahertz) spectrum band, as well as the 900 and 1800 MHz (megahertz) frequency range for 4G services in future. The 2.3 and 2.5 GHz (gigahertz) was auctioned off for nearly $10 million to six companies in 2005. Beyond incumbent operators Singapore Telecommunications, StarHub and M1, three other companies - Qmax Communications, DoCoMO interTouch and PacNet - also paid for the licences.

Despite having paid top dollar, the spectrum band remains largely under-utilised even till today. Qmax, which has since been acquired by M1, is the only company to have introduced commercial wireless broadband services following the auction.

In 2009, the dormant licence from DoCoMO interTouch was transferred to the M1 subsidiary, while one from PacNet was turned over to Malaysian firm PacketOne later in the year.

These licences are valid until 2015 but the IDA intends to conduct an auction by as early as next year to re-allocate the spectrum for 4G services upon their expiry.

Besides tapping on the underused 2.3 and 2.5 GHz band, telcos can also choose to use the 900 to 1800 MHz range for the upgrade, the IDA said yesterday in a set of documents detailing its 4G interim decision.

This spectrum is currently used by telcos to offer basic mobile services on older GSM (Global System for Mobile Communications) networks and the licences they hold are valid till 2017.

By issuing its stand now, the IDA is hoping to give operators ample time to plan their 4G rollout, it explained.

'We don't want the move to 4G to be impeded by a lack of clarity at the policy level', Leong Keng Thai, IDA's deputy chief executive and director-general of telecom and post, told BT.

The pathways laid out by the Singapore regulator are in line with the recommendations by agencies such as the International Telecommunication Union. This will make life easier for equipment makers as they will not need to repeatedly tweak their products to suit different countries.

In addition, the IDA's decisions are also largely in sync with the feedback it received from operators during its public consultation last year.

When contacted, local operators cheered the regulator's decision.

'This spectrum (2.3 and 2.5 GHz) is very suitable for 4G, and we support its early re-allocation,' StarHub spokeswoman Cassie Fong said.

'SingTel is exploring all options available and is working closely with network providers to ensure commercial LTE services can be introduced to our customers in good time,' the company said.

Both StarHub and SingTel have conducted LTE trials and plans to deploy this 4G technology down the road. M1 on the other hand, has committed to rolling out the upgrade over the next 12 months.

'We will be upgrading our network to LTE this year. We are now in the planning stages,' an M1 spokesperson said.

BT: New steps rain on speculators' parade

Business Times - 14 Jan 2011

New steps rain on speculators' parade

Big hike in seller's stamp duty and mortgage restrictions to cool property market

By UMA SHANKARI

(SINGAPORE) Starting today, speculators in the Singapore property market will find their ardour cooled by a severe new regime. The seller's stamp duty for private homes will rise to as high as 16 per cent, from up to 3 per cent previously, while tighter mortgage restrictions will be put in place.

The government yesterday unveiled a new and stronger round of demand-side cooling measures - the third set in less than 12 months.

The killer move, according to analysts, is a sharp hike in the seller's stamp duty to 16 per cent, 12 per cent, 8 per cent and 4 per cent respectively for properties that are bought on or after Jan 14 this year and are sold in the first, second, third and fourth year after purchase.

Previously, owners who sold houses and apartments less than three years after buying them had to pay a seller's stamp duty of only up to 3 per cent.

Related link: Click here to read the government's news release

Singapore also further slashed the Loan-To-Value (LTV) limit on housing loans for both individual and corporate buyers.

Its move follows Hong Kong's, which in late November 2010 announced some of its toughest-ever measures to cool the property market - including a stamp duty of as high as 15 per cent on apartments sold within six months of purchase. Hong Kong also tightened mortgage restrictions.

Analysts expect the higher seller's stamp duty will wipe out most speculators' gains and keep them out of Singapore's property market.

'For those buyers who intend to flip their properties within one or two years, the increased seller's stamp duty erases their potential gains,' said Merrill Lynch economist Chua Hak Bin. 'So this measure is pretty targeted and will take away a big chunk of these potential investors.'

But most analysts found the unexpected sharp hike in the seller's stamp duty to be harsh. In addition to hindering short and medium-term investors, it could also hurt genuine owner-occupiers looking to change homes.

International Property Advisor chief executive Ku Swee Yong said that a staggered-down capital gains tax - one that could perhaps be imposed only on capital gains from real estate - might have been more advisable. This would spare those who sell their properties at a loss.

'The government's intention of forcing people to treat real estate as a long-term investment is admirable,' said Mr Ku. 'But this (the higher seller's stamp duty) will force people to hold, including some genuine cases where there might be a real need to sell off a property.'

In addition, Singapore lowered the LTV limit on housing loans from 70 per cent to 60 per cent for individual buyers with one or more outstanding housing loans at the time of the new home purchase.

And for corporate purchasers (such as firms, trusts and collective investment schemes), the LTV limit has been cut to an even lower 50 per cent - regardless of the number of outstanding housing loans at the time of the new home purchase.

In August 2010, the government reduced the LTV ratio from 80 per cent to 70 per cent.

Yesterday's measures follow three gentler sets in September 2009, and February and August 2010.

'Previous government measures have to some extent moderated the market, but sentiment remains buoyant,' said the National Development and Finance Ministries in a joint statement with Singapore's central bank, the Monetary Authority of Singapore.

'Low interest rates plus excessive liquidity in the financial system, both in Singapore and globally, could cause prices to rise beyond sustainable levels based on economic fundamentals.'

Private home prices rose 17.6 per cent last year, according to flash estimates. A record 15,500-16,500 new private homes are also estimated to have been sold in 2010.

In a statement, the Real Estate Developers' Association of Singapore (Redas) said it has 'taken note' of the latest measures.

The measures will discourage speculative demand and will encourage longer-term holding of properties which will contribute to the stability of the market, Redas said: 'It is in the interest of the market to see a more gradual trend in growth and value for genuine home owners and investors.'

Merrill Lynch's Dr Chua also said that in addition to curbing speculators, the government could be concerned by aggressive mortgage lending by banks.

Analysts expect the volume of new home sales to fall in 2011 but were spilt on whether the new measures will cause private home prices to decline.

'There will be a sense of uncertainty in the market leading to hesitation among buyers and sellers and we can expect to see transactions easing in the short term,' said Credo Real Estate executive director Ong Teck Hui.

But the measures may not lead to an immediate price decline in Q1 2011, he said. This round of measures is still not as severe as the anti-speculation measures announced in May 1996, which resulted in a 1.9 per cent drop in prices in Q3 1996. But any upside in prices in Q1 2011 will be 'minimal', Mr Ong added.

But in any case, analysts said that the 5-10 per cent growth in private home prices for the whole of 2011, which they predicted just one week ago, now looks highly unlikely. They also expect property stocks to fall today in reaction.

DJ: Wilmar falls 3.4% at 14:51pm

DJ MARKET TALK: STI +0.6%; Wilmar Falls 3.4%, NOL +3.6%
1/4/2011 2:51:00 PM

0651 GMT [Dow Jones] The STI is +0.6% at 3254.11, off its earlier 3260 high, but is likely to remain in positive territory as sentiment remains upbeat with regional bourses mostly higher, and DJIA futures pointing north amid increased optimism over the health of the U.S. economy. 1.66 billion shares have been traded worth S$1.25 billion, with gainers pipping decliners 263 to 220 on the broad market. With the STI breaking above resistance at 3220 Monday, and trading above psychological 3250, analysts mostly agree that 3300 is the next key level on the upside.

Wilmar (F34.SG) is down 3.4% at S$5.47 in heavy trade after JP Morgan downgrades the stock to Underweight from Overweight and slashes its target price, citing competition in China, overly optimistic consensus earnings, and worries over its intended deviation into property.

Publish Post

the most active stock today is Top Global (519.SG), flat at S$0.015. (matthew.allen@dowjones.com)

DJ MARKET TALK: JPM Cuts Wilmar To Underweight; Target S$4.60
1/4/2011 10:37:00 AM

0237 GMT [Dow Jones] STOCK CALL: JPMorgan downgrades Wilmar International (F34.SG) to Underweight from Overweight and slashes its target price to S$4.60 from S$7.20. Says the stock is likely to underperform near term due to a regulatory overhang and competition in China; also cites an overly optimistic consensus earnings estimates and likely lackluster earnings momentum, while investors may accord a lower P/E multiple for its intended deviation from the core business. Reduces FY11/FY12 earnings forecasts by 5.3%/7.3% as the house lowers oilseeds crushing and consumer products margin assumptions; it also reduces the target P/E multiple to 14X from 20X. Says Wilmar's deviation from its core business may attract a "conglomerate discount." Adds future property projects under its JV with Kerry Properties and Shangri-La "could see more capital reallocated to property investments than reinvested in its core agri-commodities business in future...this may lead to a lowering of the P/E that investors are willing to accord the stock." Stock off 0.2% at S$5.65. (matthew.allen@dowjones.com)

BT: Wilmar's property foray - best to keep open mind

Business Times - 04 Jan 2011

Hock Lock Siew
Wilmar's property foray - best to keep open mind

By FELDA CHAY

THERE is an adage that a company should concentrate on what it knows best. So it comes as no surprise that the market has cast a negative eye on palm oil giant Wilmar International's recent forays into the Chinese property market - two activities that are said to be as different as cheese and chalk. Some even worry that the move could be a signal of a bad spell in the group's core agri-business. However, it is premature for sceptics to write off the new ventures as, with the collaboration of experienced partners, they could well turn out to be a lucrative business.

Wilmar, which is headed by 'sugar king' Robert Kuok's nephew Kuok Khoon Hong, announced that it was entering the Chinese property market two weeks ago. It will pump in a maximum 889.2 million yuan (S$173 million) to develop three residential, commercial and hotel sites in China's Yingkou city. Its project partners are Shangri-La Asia (SA) and Hong Kong- listed Kerry Properties (KPL) - two companies that are related to Malaysia's Kuok Group. It followed up by announcing last Wednesday that it will enter into a joint bid with KPL and SA for six plots of land, also for residential, commercial and hotel developments in Yingkou city. This time, Wilmar will be investing up to 2.63 billion yuan.

The market's reaction to the deals has been largely negative. The day after the first announcement, Wilmar's shares, which some say have been correcting amid China's consumer price cooling measures, fell 5 per cent to $5.62. The stock was caught in a rut before recovering some lost ground, ending three cents higher at $5.66 yesterday amid bullish trading in the first market day of the new year.

Analysts appear to worry that the group has lost its business focus. Yet, it is not the first company to diversify from its core business. A good example, in the commodity sphere, would be The Straits Trading Company, whose core business was, and still is in tin smelting, but went into a whole host of other ventures in the late 1990s such as property holding and development and even media advertising.

Deciding factor

The point is, just because a company decides to dip its fingers into something else, doesn't mean that it has lost its focus. In fact, around the time that Wilmar first announced its foray into the Chinese property market, the group also said that it was partnering UK-based PZ Cussons plc - which is listed on the London Stock Exchange - to set up a palm oil refinery and food ingredients business in Nigeria, in which Wilmar will invest US$27.5 million. And it recently completed the acquisition of Australian raw sugar exporter Sucrogen Ltd for US$1.8 billion. Clearly, Wilmar remains very much focused on the agriculture front. The deciding factor to consider in this, and other cases, is whether the diversification would destroy, or enhance, shareholder value.

In Wilmar's case, there are several factors that could act in its favour. If there are fears that Wilmar is a stranger to the property business, then consider its partners. Both are seasoned real estate players. KPL, for one, is a long-standing player in the Chinese property market. Properties it holds include hotels, commercial and residential developments, with many a mix of the three. It has a presence in China's top cities such as Shanghai and Beijing, as well as cities such as Hangzhou, Tianjin and Chengdu. In KPL's fiscal year 2009, about 34 per cent, or HK$1.5 billion (S$247.6 million), of its net profit came from mainland China. Hong Kong and Singapore listed SA is also well-established in China, having developed numerous hotels there.

Experienced operators

Wilmar brings something to the venture too. Its role in the tie-ups, as stated by the group in its announcement last Wednesday, lies in 'sourcing of suitable sites and the implementation of the projects' in Yingkou city - where it currently has an oilseed- crushing plant. Having established its operations in Yingkou and other Chinese cities, its partners are hoping to ride on its network and knowledge in the country and expand further. In the words of Wilmar: 'The brand recognition of KPL's properties and SA's hotels, together with their expertise in operating and managing such properties, will further enhance the value of the joint venture.'

Right now, the market is taken up by the risks associated with the diversification. But if the ventures succeed, the returns could be substantial, given the potential of the Chinese market. Nothing should be taken for granted, obviously, but Wilmar has mitigated some of the risks by partnering companies which are experienced operators. It has a decent chance of succeeding. So while it might be hard to associate Wilmar with hotels, apartments and office buildings, don't be surprised if there's increasing mention of contributions from these non-core activities in future earnings reports. As in most things, it's best to keep an open mind, for now at least.