Saturday, October 15, 2011


Biz Trusts with wrong incentive structure.

Base Fee
In effect, by doing share purchase.....
They are trying to nudge A up and bring C down, have been unsuccessful at D and know that they can't raise B becos the cost of equity is so much higher than the cost of debt at the ridiculous price MIIF (discount to NAV) is trading at.

Performance Fee
The only way they can bring the share price up (more correctly support the share price in a plunging bear market)  is by share purchase.

My Thots....
As a fund manager, their track record on "Buys" and "Sells"; on trading of assets is weak.
Check out their acquisition and divestments of Arqiva and CAC.
In one fell swoop, they negated all the profits made since IPO.
The acquisition and divestments were made to comply with the wishes and decisions made by fellow co-investors ( or some higher ups in the MacQ structure?)  who have their own calculations and motivations.

As a FoF (fund of fund), the basic U would expect from such an investment fund  is that they will buy when prices are down and sell when prices are up. They did the exact reverse.
Having sold in a distressed mkt, U would expect them to have better acquisitions in mind. Instead, they got stuck with cash they do not seem to be able to make better use of for the past yrs.
Failed to do due diligence when buying Miaoli windfarm : i.e. they bought a windfarm w/o much wind.
Somehow, the Big M name did not live to its reputation and the whole biz model of the M Group failed to deliver when under savage attack by Jim Chanos and his gang.

Management of MIIF should put shareholders first, not their siblings in the MacQ Group.
MIIF is one big lesson for me.
Divested, about breakeven, slightly underwater.
Needs plenty of patience and a bouyant equity mkt to recover.

Other Thots...

MAS should review Biz Funds Incentives & Structure too

MIIF remains opaque. altho it owns 81% of Hua Nan ,we do not know much about the loan structure.
 See Hua Nan slide 19, the senior debt is supposedly pegged at
5 year PBOC2 rate:
- 7.83% without 10% discount
- 7.05% with 10% discount
As the loan starts after acquistion  in 2007, and  the  interest rates(based on the above) are pegged at  5yrs PBOC rate, will the interest rates change?
And when? Every year ? Or every 5 yrs? Will it go up or down in 2012?
What instruments do they use to hedge this huge variability?
There is no update on this, since the acquisition.
 At the same time, slide 20, says there are no hedging mechanism for both forex and the interest rates in China.
So what are we to make of the latest results 2011 Interim presentation that maturity is 2022?
There is no info on whether how the Senior Note is structured .
Who subscribed for the Senior Notes?
Are there covenants?
Asset level debt is supposedly non-recouse at MIIF level.
Are there SPVs involved, what are they and how are they structured?
 MIIF has 81%, the vendors Topwise and Preciseway has 9% and the Guangzhou authorities 10%, so if anything go wrong with the Senior Notes, who is ultimately responsible .
Will MIIF be ultimately accountable; as with Miaoli; even tho the debt is non-recourse?

Some may argue that the incentive structure  for Performance Fees are aligned with unitholders interests.
True, but the fact is that after the sale of Arqiva, MIMAL has NOT matched Basic minimal performance expected of Infrastructure Fund.
Yes, the question is NOT Performance Fees, but whether MIMAL should even be paid Basic Fees.
MIIF's raison d'etre as an Infrastructure fund, is to do the basic of  researching and finding good long term Infrastructure assets and investing in  them to provide DCF; this they are not doing well as I will explain later.
MIIF has ended up as a short term trader of assets, destroying shareholder value in the process as they  incurred losses from their trades.
NIV is basically pegged to Market Cap (with Cash at hand end of yr and Borrowings as other side factors).
MIMAL,  it seems has "switched off " , focussed on using the cash for Daily Share buy backs to shore up Market Cap ( a no-win situation in a Bear Market);  which arguably could be better put to better use to acquire  good undervalued Infrastructure assets in a bear market.
MIMAL is sitting on the Cash Pile they hurriedly collected when they sold in the last distressed market (during the GFC) and  NOT putting it to use in the current bear mkt caused by the Eurozone crisis.
Yet, MIMAL is collecting the Base Fees, altho they are not doing what they are expected to do.
Isn't the incentive i.e. "Base Fees"----- not aligned to unitholders interests?
In fact, one may even argue that the cash be better spend as a dividend payout to long suffering unitholders, if they cannot be put to better use than share buybacks ( which is arguably a form of  leakage thru Base Fees).

MAS Review?
The reason I am revisiting this post is that I think that MAS should look into both the incentive structure for Biz Trusts; as well as the need for  more disclosure about the assets whereby the Biz Trusts has majority (>50% control) of the assets.
There is a strong case for making the Biz Trusts asset class more transparent .... less opaque.

see post at Valuebuddies forum

Thursday, October 13, 2011

Landed Homes

Published October 13, 2011
Approvals for PRs buying landed homes set to plunge


(SINGAPORE) The number of approvals given to permanent residents (PRs) who want to buy landed homes in Singapore is set to fall by more than half after the criteria was tightened further recently, Law Minister K Shanmugam said yesterday.

'After the further tightening, I suspect we are looking at very few people who would qualify. I think probably less than half of those who had previously qualified - under the previous already strict criteria - would qualify now. I'd be surprised if approvals are more than 50 per year,' Mr Shanmugam said.

'Our belief is that landed property is primarily for Singaporeans and the exceptions have to be very rare.'

Mr Shanmugam was speaking to reporters after visiting a black-and-white bungalow at Goodwood Hill.

The Ministry of Law said that the criteria was tightened 'recently' but declined to provide a more exact date.

A ministry spokeswoman said that over the last three years, the ministry had received an average of about 230 applications a year from PRs for the purchase of landed residential property.

On average, about 60 per cent of the applications were approved. With the revised criteria, the approval rate could drop by more than 50 per cent, she said.

This means that the number of approvals could fall from around 138 a year to Mr Shanmugam's prediction of not more than 50.

Foreigners who are PRs currently own about 3.5 per cent of the total stock of 70,000 landed homes in Singapore. This includes properties in Sentosa Cove, where the government has made a decision to liberally allow purchases by foreigners.

Foreigners cannot buy such properties without the prior approval of the law minister. And only foreigners who are PRs can apply to purchase landed properties.

Mr Shanmugam told The Business Times in an interview in July that his ministry regularly reviews the rules to ensure that they are current and relevant. And yesterday, he said that the 'strict' criteria were tightened further this year.

'We have reviewed it further this year . . . as we are even stricter, it (the number of approvals) may fall by half,' Mr Shanmugam said.
The Law Ministry spokeswoman added that PRs who want to buy landed properties must demonstrate that they are making a 'very significant economic contribution' to Singapore.

'Some discretion is also exercised by considering the commitment shown to Singapore by the applicants, including how rooted they and their children are in Singapore,' she said.

'Since the criteria have been further revised this year, the approval rate is expected to fall further from the already small number of approvals in the past years.'



My Observations & Thots.....
138 out of 70K is 0.2%;  so not significant enuf to affect the property mkt for landed homes.
More likely that the policy change is meant to reflect the benefits of citizenship.
Will these PRs then be encouraged to become citizens?

Pinnacle Notes

Will the Pinnacles Notes Trial in a NY court be a gamechanger?

This BT article dated 13/10/2011, by Grace Leong, analyses....
These are interesting times for those burnt by products linked to failed US investment bank Lehman Brothers.In the two years since 10 local distributors were penalised for having mis-sold such products, at least one lawsuit has been brought in the Singapore High Court by investors alleging they were misled into thinking these were low-risk investments.

That case, a test case brought by five investors who were part of a group of 165 investors with more than S$20 million in Lehman Minibonds, wasn't successful in recovering losses from the entities that issued and distributed the Lehman notes. The investors dropped their suit in May.

But a class action lawsuit filed in New York by law firm Kirby McInerney LLP on behalf of a group of Singapore investors of Pinnacle Performance Ltd series 1,2,3,5,6,7,9 and 10 notes may prove a game changer.

What makes the Pinnacle Notes case unique is that it doesn't target the distributors that sold the allegedly rigged investment products. Instead, it targets the entities it says engaged in 'undisclosed self-dealing' when they allegedly created and approved products that were 'designed to fail' so that every dollar the investors lost was gained by the bank.

Morgan Stanley is accused of placing the Singapore investors' funds, about US$154.7 million, in synthetic CDOs (collateralised debt obligations) of its making, where the bank itself was allegedly a counterparty on underlying swap agreements.

These underlying assets were then allegedly collateralised by sub-prime mortgages and Icelandic banks that failed. When those assets went belly up, all the money allegedly went to the bank in New York, the suit said.
US District Judge Leonard Sand, in a recent federal court hearing in Manhattan, acknowledged the investors' lawyers face an uphill battle.

'As I understand the gist of plaintiff's claim, it is that Morgan Stanley, in the creation of these notes, did so with an intent that they would fail. Of course, that is a very hard thing to prove. That is the sort of thing which is proved by documents, created and preserved documents which would indicate that, or by testimony of usually a disgruntled ex-employee,' he said in court transcripts obtained by The Business Times.

This case is pivotal. If fraud is indeed proven to have been committed by Morgan Stanley and its affiliates, the Monetary Authority of Singapore (MAS) may have good cause to take another look.
MAS banned 10 distributors from selling structured notes. It had jurisdiction over them, but not over the creators of the products.

If, however, the arrangers and issuers are proven to have deliberately created the toxic products, then that's a whole other ballgame.

The local distributors that had to shell out millions of dollars in compensation to investors may look closer at possible actions against the product's issuers or arrangers.

At least one distributor, Hong Leong Finance, is already trying its luck. It has got hold of some documents it hopes will explain the failure of Pinnacle Notes series 9 and 10, and help determine if it has a viable claim against Morgan Stanley Asia (Singapore).

The Pinnacle Notes case also highlights whether Singapore investors need statutory protection from boilerplate clauses found in many investment products sold here, particularly complex derivatives that are typically very hard to understand, but that apparently give legal immunity to their arrangers and issuers.

Morgan Stanley lawyer Bruce Angiolillo cited one such clause in the bank's defence.
'The economic interests of Morgan Stanley and/or its subsidiaries and affiliates in each such capacity may be adverse to the interests of the noteholders and potential and actual conflicts of interest may arise from the different roles played by Morgan Stanley and its subsidiaries and affiliates. As a result, noteholders will be exposed not only to the credit risk of Morgan Stanley and/or its subsidiaries and affiliates but also to the operational risks arising from the lack of independence of Morgan Stanley. . .'

Simply put, it's like selling a knife to a child, and making the child sign a statement saying it fully understands how dangerous the knife can be, and that exempts the adult from liability.

Such boilerplate clauses are insufficient, especially if it's proven that the Pinnacle Notes are 'fraudulent products specifically designed to fleece the plaintiffs of their money, and they did so by misrepresenting the terms and conditions of the notes', Andrew McNeela, the investors' lawyer, argued.
But whether such issues get to see the light of day hangs on whether the case proceeds in New York.

Morgan Stanley has so far refused to comment on whether there was a plan to create securities that would fail. It also denied any ties between the New York parent company and the Asian affiliates it claimed put together and sold the securities in the region.

'The Morgan Stanley entity most directly involved was Morgan Stanley Singapore, which is in Singapore, which arranged the transaction. They put it together,' Mr Angiolillo said. 'This is all about a Singapore dispute, a Singapore transaction, Singapore plaintiffs and Singapore sellers.'
But Mr McNeela disagreed.

'The witnesses we need to establish the fraud, to put the lie to what they said in their offering materials, they are located most likely New York, based on where the synthetic CDOs were made, and in England with MS International, because that is the entity that engaged in the self-dealing.'

And while Morgan Stanley raised questions over whether a US class action judgment in a securities fraud matter would be recognised in Singapore, the bank's own foreign law expert Tan Cheng Han had testified to the contrary in an unrelated fraud case in New York.

In his declaration in the other case, Mr Tan, who is dean and professor of law at the National University of Singapore, said he believes it is 'highly probable that a Singapore court will recognise and enforce a judgment issued by a court in the United States'.

This fight in New York will be closely watched in Asia.

My Thots.....

The Mom & Pop retail investors were at the unfortunate end of a long food chain.
Tracing back the food chain is necessary and useful, to prevent the culprits from repeating such "scams".
But doing in different jurisdictions with cross border issues makes the process ardous and painstaking.
Glad that HLF and the others have the courage to pursue the case in the US Courts.

Chinese statistics

The art of reading China's statistics
The distrust some hold towards basic Chinese data may be misplaced


CHINA'S former premier Zhu Rongji once ascribed 'embellishment and falsification' to the country's national statistical system. Meanwhile, Li Keqiang, now its vice-premier, admitted to man-made data forged by local officials when he spoke in 2007 to the US ambassador, as revealed by WikiLeaks.
So how much trust can investors place on the integrity of potentially market-swaying data steaming out of Beijing? Incredible as it may sound, quite a lot. At least, that's the conclusion of Tom Orlik, a Wall Street Journal correspondent and author of a new book, Understanding China's Economic Indicators.

A Mandarin speaker who reads Chinese, Mr Orlik previously subscribed more or less to the popular distrust of all basic Chinese data. Not any more.

Mr Orlik believes exaggeration and embellishment are not aligned with Chinese leaders' interest because they need solid data to help shape national policy.

He also dismissed the possibility of China keeping two books: one for outside consumption and the other for internal scrutiny. 'If there are two books, then you'd start to see the government making decisions which don't make any sense in the context of public data,' he said in an interview with BT.

China appears to have cleaned much of its act since the Asian financial crisis in 1998 when it was caught brazenly cooking the book to report a 7.8 per cent growth in its gross domestic product (GDP) when it was collapsing.
'What we've seen in the last 16 years following the Asian financial crisis is a significant move to improve China's data collection system. Fundamentally, what happened is control in the data collection has been centralised, from industrial output to consumer price index, and household income,' Mr Orlik said.

'In 1998, they were still producing dodgy data. In 2010, they collected the data directly. They've taken the meddling local officials out of the equation. That means China's national data is much more reliable.'

Beginning this year, for instance, Chinese statisticians took a big step by starting to compare GDP figures on a quarterly basis, rather than keeping to the old practice of releasing yearly growth trends which tends to smooth out turbulent quarterly fluctuation, like it did at the depth of the 2008-2009 financial crisis.

But improvement has been uneven. Each piece of official data still seems to run on a different internal clock, with varying speeds of progress, or stagnation.

Mr Orlik groups them into three categories on an integrity scale, with the most reliable being trade-related numbers.

'The trade data are quite reliable and quite detailed. I think it's because China joined the WTO (World Trade Organization). They had to meet much higher standards on their trade data. The whole trade data system really improved a lots when they joined the WTO,' he said.

On the other end of the scale are incredulous figures relating to labour such as wages and unemployment, and inflation and house prices. Their departure from reality has not escaped the watchful eyes of Chinese analysts.

Figures about house prices and unemployment remain politically sensitive in China, but Mr Orlik said: 'It's not that they have politicians come in and change the data. It is really a benign neglect. Basically, they don't bother. They rely on very old sample sets. That's kind of convenience for them because it shows very stable employment.'

Hence, the official figures reported a constant 4 per cent unemployment rate each year, all the way through the last decade, despite a significant surge in 2009 suggested by other relevant indicators.

Standing in-between is a grey area such as GDP, consumer price index and fixed-asset investment, where data is not fundamentally flawed but does not reflect the full reality.

'The government isn't making up the data,' he said. 'But it is not reflecting what is going (on). It misses a part of the picture.'

How so? 'It is difficult to measure the Chinese economy because it is growing very fast, and there are new sectors contributing to the data,' he said. 'The problem with Chinese GDP is that the economy is actually bigger than the government reports. The problem is not because of political manipulation. The problem is because they have technical problems in collecting the data. The national statistics cannot keep up with what's happening.'

For GDP, in particular, the national statisticians were surprised by their own field-work findings twice in recent years: first in 2004, when its national survey reported GDP to be 16.8 per cent bigger, and then in 2009, another national survey added 4.4 per cent to the GDP.

Mr Orlik went back to history and suggested that one of the reasons that China uses a magic number of 8 per cent GDP growth every year as its national target could be the result of Deng Xiaoping's intention for its economy to quadruple the size from 1980 to 2000, 8 per cent being the compounded figure. The other reason is 8 per cent growth is what is needed to create the number of jobs to keep the nation fully employed.
Perhaps Deng Xiaoping got it right all those years ago.


My Thots......

I will like to disagree on unemployment and property data.
For unemployment, the problem is one of  "migrant workers", I think until they are properly housed and paid, the statistics will remain parsimonious on this aspect of China's society.
For property, Beijing is serious in tackling the housing problems, so it makes sense that they collect good data so as to help them be effective in their policymaking. The local govts could have their own agenda, but Beijing has tied promotions to the policies on housing of the local govt. In  fact, they have warned that those found "cooking  data" will be removed or demoted.

Sg news...

MND sees Tengah, Bidadari as potential new towns
By Joanne Chan | Posted: 12 October 2011 1852 hrs

SINGAPORE: The government sees Tengah and Bidadari as potential residential towns as it plans ahead for a growing population.

This was mentioned on Wednesday in the National Development Ministry's addendum to the President's Address.

The addendum was issued by Minister Khaw Boon Wan.

Highlighting his ministry's commitment to achieve sustainable economic, social and environmental outcomes, Mr Khaw said: "We will balance competing land demands to achieve sustainable economic, social and environmental outcomes. We will create underground space and reclaim from the sea, wherever viable.

"We will also build infrastructure ahead of demand and start to prepare for new towns at Tengah and Bidadari. They will not be needed soon, but we are planning ahead so as to retain flexibility."

Mr Khaw also reaffirmed his ministry's goal to provide good, affordable housing.

He noted that more Singaporeans are now eligible for housing grants and public housing, after the income ceilings for singles and families were raised in August.

Mr Khaw acknowledged the "sudden rise in housing prices following the sharp economic recovery has worried many Singaporeans".

He said his ministry is "taking active measures to address the temporary imbalance in supply and demand."

The monthly income ceiling to buy executive condominiums (ECs) was raised from S$10,000 to S$12,000 in August.

As of end-September, the HDB received 140 bookings from buyers who previously did not qualify.

Singles too have benefited after the income ceiling for a housing grant was raised from S$3,000 to S$5,000.

HDB has approved 75 applicants who were previously not eligible.

HDB is also speeding up the construction of new flats.

To cater to needs such as wanting to stay near parents or to take advantage of a location's amenities, HDB said that where possible, it will build its new flats in mature estates such as Queenstown and Bishan.

Another aim is to provide vulnerable families with a roof over their heads.

Madam Praveen, 27, has benefited from the Public Rental Scheme.

Previously staying with her parents, Madam Praveen now has a two-room rental flat in Punggol.

Madam Parveen, who lives with her husband and two children, had faced difficulties in getting a rental flat.

"My parents had to sell their house and we had no place to stay. I got rejected the first time because they said my husband is a foreigner... I had to give birth to my son in order to get this rental flat," she said.

To qualify for a rental flat under the Family Scheme, the main applicant must be a Singaporean and the other a Singaporean or Permanent Resident.

HDB said the stock of rental flats will be increased to 57,000 units by 2015.

But rental housing is not a long-term solution, and HDB said it will work with social agencies to render help.
Videos and text of President Tony Tan's speech at the opening of parliament are available

- CNA/cc



Note the similarities between HK & Sg policies.

EC Site Bids

EC site attracts 11 bids

The tender for an Executive Condominium (EC) site located at the junction of Pasir Ris Drive 3/ Pasir Ris Link attracted a high number of 11 bids. This site is adjacent to a condominium site, which attracted 13 bids recently. We  believe that the strong interest is in part due to the  change in government policy (a raise in monthly income  ceiling to purchase the ECs), as well as the decent  response for recent EC launches and nearby launches.

A tie up between Ho Lee Group and Maxdin submitted  the highest bid at S$291 psf ppr for the site. Ho Lee  Group will hold a 70% stake, while Maxdin, a subsidiary  of UE E&C Ltd (part of the United Engineers group) will  take a 30% stake. The group plans to build a 400-unit  project on the 1.8 ha site, which can house a total GFA of  419,978 sf. The project, comprising units of various sizes, is expected to be launched towards late March next year.

The bid price of S$291 psf ppr is fair and is in line with  market expectations. The tight range of the 11 bids which fell between S$214-291psf also indicated consistent expectation of the prices for end products. We expect breakeven cost to be around S$550-580 psf and the project should generate a 15-20% profit margin if sold at S$650 - 680 psf. Recent transacted prices for ECs range between S$622 - 731 psf.

The latest land transaction continues to highlight our view that developers are taking a cautious stance
towards property prices as there appears to have no element of forward pricing. At the same time, they are likely to continue to replenish their land bank selectively, supported by healthy balance sheets. Property stocks are trading at a steep 40% discount to asset backing and appear to have factored in much of the anticipated deterioration in prices. Prefer UOL with its multi-growth engines.

Wednesday, October 12, 2011

Euroland Timetable...

--Tuesday, Oct. 11: Greek and Italian T-bill auctions.

--Slovakia parliament votes on EFSF changes.

--Thursday, Oct. 13: Italian bond auction.

--Friday, Oct. 14-Saturday, Oct. 15: G-20 finance ministers meeting.

--EUR2 billion of Greek T-bills mature

--Monday, Oct. 17-Tuesday, Oct. 18: EU Council meeting

--Tuesday, Oct. 18: Spanish and Greek T-bill auctions.

--Thursday, Oct. 20: Spanish and French bond auctions.

--Friday, Oct. 21: EUR1.625 billion of Greek T-bills mature

--Saturday, Oct. 22: EUR1.059 billion of Greek bond interest payments due

--Tuesday, Oct. 25: Spanish T-bill auction.

--Friday, Oct. 28: Italian bond auction.

--Monday, Oct. 31: Belgian bond auction.

--Tuesday, Nov. 1: Mario Draghi replaces Jean-Claude Trichet as president of the ECB

--Thursday, Nov. 3: ECB policy meeting

--Thursday, Nov. 3-Friday, Nov. 4: Meeting of G20 leaders in Cannes

--Monday, Nov. 7: Meeting of Eurogroup finance ministers

HK news...

OCTOBER 12, 2011, 2:32 A.M. ET
Hong Kong to Build Subsidized Homes
By Chester Yung

HONG KONG—Saying property prices remain far beyond many local households' reach, Hong Kong Chief Executive Donald Tsang Wednesday unveiled plans to resume construction of subsidized homes.

"We share the public concern about rising property prices and the difficulty in buying affordable small and midsize flats," Mr. Tsang told lawmakers in his final policy address, saying the government will provide more than 17,000 subsidized homes for sale over four years starting in 2016-17.

Such a program was widely expected, as Mr. Tsang, who has just under nine months left in office, has promised in recent months to address housing, a sore spot for his administration in the past few years.
"To be flexible, the actual number of flats to be built or put up for sale each year will depend on the demand at that time," Mr. Tsang said, adding that the government may stop building and selling the flats when private residential markets meet the demand.

The program would be a modified version of the government's earlier Home Ownership Scheme, by which low-income residents could buy housing at subsidized prices. It was abandoned in 2003 after developers complained that government intervention in the property market contributed to a sharp drop in residential property prices.

Mr. Tsang will step down at the end of June after serving the maximum two terms. His final policy address comes at a critical time for the city as social tensions simmer over inflation and property prices. Hong Kong's underlying inflation rate hit a three-year-high of 6.3% in August, up from 5.8% in July, while private-home prices—driven by abundant liquidity and persistently low interest rates—have surpassed the peak hit in 1997. Home prices rose 12% in the first eight months of this year after surging 56% over the two years ended last Dec. 31.



My Thots...

Much expected...
Note the starting date of 2016.
And the qualifier :  "the government may stop building and selling the flats when private residential markets meet the demand"

"Tsang introduced a new Home Ownership Scheme that will provide more than 17,000 flats over four years from 2016 onwards. Families with a monthly income of 20,000 to 30,000 Hong Kong dollars ($2,570 to $3,850) will be eligible to buy flats priced at 1.5 to 2 million Hong Kong dollars ($192,800 to $257,000) with a floor space of 400 to 500 square feet"

Tuesday, October 11, 2011

China news...

What part should China play in European debt crisis?

Updated: 2011-10-10 10:23

It is difficult for China not to get involved in the European debt crisis. China's Foreign Ministry and Ministry of Commerce both recently expressed support for the beleaguered euro zone. However, that raises the question of how to help European countries without sacrificing China's own national interests.

Scores of Chinese economists from all around the country discussed these topics and more during the recent academic forum titled China-Europe Relations from a Global Perspective, which was hosted by the China-Europe Academic Network under Tongji University.

Improper responses likely to cause double-dip recession 
Due to the slow pace of Greece's fiscal reforms, which has made the country unable to fully meet the bailout conditions of the European Union and the International Monetary Fund, it is still uncertain whether Greece can secure a second round of bailout loans.
Ding Yifan, deputy director of the World Development Research Institute at the Development Research Center of the State Council, said that although Greece's economic scale only accounts for a small part of euro zone's total and its possible debt defaults will unlikely pose a severe impact on the euro zone, Greece's debt defaults will undermine investors' confidence in the euro.
"All euro zone countries must take some actions. Improper responses will lead to chain reactions. The financial tsunami will likely spread to the entire world again, and the world economy will likely fall into a double-dip recession," Ding said.
Furthermore, Moody's ratings agency recently downgraded the credit ratings of two French banks of Credit Agricole and Societe Generale. "The European debt crisis will likely cause a banking crisis in Europe. If the debt crisis continues to spread, European banks will have to be reluctant to put funds into the real economy and accordingly slow the pace of the global economic recovery," Ding said.

No backing out for euro zone countries 
Experts at the meeting said that there is no backing out for euro zone countries now. They must shoulder their responsibilities and make practical efforts to overcome the debt crisis.
First, a timely injection of cash into debt-laden countries is crucial to resolving the crisis. A late cash injection will result in higher bailout costs and leave euro zone countries with fewer choices.
Second, the deterioration of the debt problems in euro zone countries is the direct cause of the crisis. Many European countries have grown to rely too much on borrowed money, and should cut government spending as well as wasteful social welfare expenditure.
Third, the difficult situation may lead to a more unified E.U. fiscal policy.
The history of the euro zone has proven that every crisis will push forward its internal integration. However, the euro zone is still on a bumpy road to a fiscal union. Qiao Yide, a financial expert, said that to form a fiscal union, the European Union must undergo the long process of amending its constitution, obtaining the approval of the national parliaments of its member states and holding referendums.

How can China help Europe get out of debt?
China cannot turn a blind eye to a global crisis, which may be caused by the deepening European debt crisis.
Qiao made several suggestions about China's assistance to the euro zone.
First, China should buy more bonds from multilateral institutions, including euro bonds and the bonds issued by the European Financial Stability Facility, because they are less risky.
Second, China should encourage domestic enterprises to expand in Europe, carry out business cooperation with European companies or purchase those companies' preference shares that do not carry voting rights to avoid political obstacles.
Third, China should increase the weight of the euro in the RMB's currency basket.


My Thots....

If only the Eurozone can be clear about what they want to do -- countries like China are prepared to help including buying EFSF and Eurobonds.
China views the Euroland crisis with concern becos the contagion can spread and affect China's exports.

Sg Property news.... Loans

Published October 8, 2011
Fixed rate home loans more popular as Sibor rises
Analysts expect local interest rates to rise due to slower S$ appreciation


AS interest rates threaten to inch higher, more home loan buyers are turning to fixed rate loans for peace of mind. The key three-month Sibor or interbank rate yesterday ended at 0.38 per cent. Although unchanged from the previous day, it is now up almost 12 per cent from a month ago when it hit a low of 0.34 per cent on Sept 9.
DBS Bank, the largest home loan provider here, said 20 per cent of new borrowers now go for its interest rate cap package, first launched in August. Since Sept 1 the rate has been sitting at 1.49 per cent.
A DBS spokeswoman said that while the outlook for interest rates is to remain low for an extended period, the volatile global economic environment has created risks and uncertainties.

'To give customers peace of mind when it comes to their mortgage repayment, which is a long-term commitment, DBS introduced three-month Sibor floating rate packages with interest rate cap in August,' she said. 'Under this unique scheme, customers benefit from the current low interest rate and at the same time, enjoy certainty if interest rate starts to rise.

'Since its introduction, 20 per cent of our customers who have opted for the 3-month Sibor packages have taken up this scheme,' she added.
More and more analysts expect local interest rates to rise further given the slower economic growth outlook which could lead the Monetary Authority of Singapore to slow down the rate of appreciation of the Singapore dollar at next week's monetary policy statement.

'We expect a slower rate of appreciation of the SGD which means that interest rates will rise relative to the US interest rates,' said Wei Zheng Kit, Citi economist. The three-month Sibor could rise to 0.50-0.70 per cent, depending on the stand the MAS takes next week, he said.
Bankers said that given the uncertainly it will be better for borrowers to opt for a package which gives flexibility.

Alan Lau, Maybank Singapore head of consumer banking, said that traditionally its fixed rate home loan packages have been very popular with its customers, but in recent months, more have gone for the interbank-pegged packages, in part due to the low interbank rates environment.

'Yet there is a segment of customers who take a short-term view that Sibor rates will remain relatively low but want to hedge their risks against possible uptrend of interest rates after 12 months,' he said.

Maybank's hybrid home loan packages which come with the first-year rate pegged against the three-month Sibor and thereafter fixed rates for the second or second and third years will cater well for this group of customers, said Mr Lau.


My Thots....

Too much uncertainty due to volatilities, so clients are playing safe.
Published October 6, 2011
Singapore ranks high on property investment listIt is 9th in a field of 25, at US$10.8b; leaders are New York and London


(SINGAPORE) Gateway Asian cities feature prominently in Cushman & Wakefield's report on the biggest and fastest-growing cities in real estate investment for the year ended the third quarter of 2011.

Singapore came in ninth in the list of top 25 cities that attracted the most capital into real estate, comprising office, retail, industrial, hotel and serviced apartment properties but excluding development sites.

The island republic drew US$10.8 billion of investment in the 12 months to Q3 2011, up 87.2 per cent year on year.

New York City (US$29.7 billion) nudged ahead of London (US$27.2 billion) into first place.

However, London topped the global ranking for attracting foreign property investment with US$14.2 billion invested in the year to Q3 2011. The figure was down 9.6 per cent year on year.

This was followed by Paris and New York. Singapore was in fourth position, with US$3.9 billion of investments. The figure was up 63.4 per cent year on year. Beijing and Nanjing were in fifth and sixth positions.

'With economic uncertainty and financial risks both impacting further on sentiment in recent months, momentum has slowed in the market, but supply levels are up in some markets, notably of late London, and strong activity is expected to be maintained, albeit with deals taking longer to close as due diligence remains high,' said the report, Winning In Growth Cities 2011/2012.

The cities experiencing the highest growth in investment volumes include Singapore (No 7) and Seoul (No 9). Chicago, New York and Boston were the top three.

London emerged as the top city for global office property investment with US$18.9 billion of deals, followed by New York (US$14.1 billion) and Paris (US$12.5 billion) and Tokyo (US$11.5 billion). Seoul, Hong Kong, Shanghai and Singapore were in sixth, seventh, 10th and 11th positions respectively.

For industrial property investments, Singapore was top with US$3.65 billion in the year to Q3 2011, up 345 per cent year on year. Los Angeles was second with US$2.81 billion, followed by Hong Kong (US$1.76 billion).

Hong Kong led the field for retail investment up to end-Q3 this year with US$6.99 billion, boosted by the HK$18.8 billion (S$3.2 billion) sale of Festival Walk in Kowloon Tong by Swire Properties to Singapore's Mapletree Investments.

The Rhine-Ruhr metropolitan area in Germany and New York were in second and third places, followed by Manchester and London.

In the hotel sector, Singapore was in eighth position with US$1.3 billion of deals. Six of the world's top 10 locations for hotel investments over the 12 months to Q3 2011 were in the United States, led by New York (US$4.2 billion).

Cushman & Wakefield managing director of capital markets (Asia Pacific) John Stinson said: 'The lion's share of the global appetite for development sites up to Q3 2011 was taken up by Asia, which dominated the entire top 25 field.'

Beijing was top with US$24.5 billion of investments in all property development sites, followed by Shanghai (US$13.7 billion), Dalian (US$11.5 billion), Wuhan (US$11.3 billion) and Suzhou (US$10.7 billion).
Singapore was sixth with US$10.4 billion of development sites sold; Hong Kong was seventh (US$9.4 billion) and Tokyo was ranked 21st. Except for these three, the rest of the top 25 cities for development site investment deals are in mainland China.

'While investors are still keen to acquire development sites, overall volumes are now easing as policy tightening in China aimed at reducing the risk of overheating in the residential sector in particular, leads to lower levels of activity,' said the report.

'Economic factors alone do not make up a great global city. Transport, education, liveability and ease of doing business all become important differentiating factors as gateway cities around the globe compete for the investment dollar. Asia again figures strongly considering these often ignored parameters.

Said Mr Stinson: 'Singapore is the No 1 port in the world for container throughput, closely followed by another five cities all based in Asia - Shanghai, Hong Kong, Shenzhen, Busan and Guangzhou. Singapore ranks No 4 globally as a financial centre.

'On the human side, Singapore ranks No 1 for personal safety in top global tourist locations.

'There is no doubt that economic, social fabric and culture (goals) combined with investor sentiment place many Asian cities in the top global ranking with Singapore winning gold in many surveys.'


My Thots.....

Many No 1s.... many top rankings....
 Flow of foreign investments into Sg assets means higher asset prices; there are "plus and minus" arising from this.
Policymakers have a tough job balancing those "plus and minus" - the concomitant inflow of foreigners, accentuation of the wealth gap, rising costs...
But, Sg cannot go back, RoA (rest of Asia) is developing and our niche is in continuing with policies that enhance the "global city" qualities of Sg.

Monday, October 10, 2011

Sg property news... Orchard Rd rentals

Published October 5, 2011
Prime Orchard Rd retail rents up 5% q-o-q : CBRE
This marks the first quarterly increase since Q3 2008. Average rents in Orchard Road were $30.11 psf pm in Q2 2011.

'We are witnessing almost full occupancy at Orchard Road malls,' said Letty Lee, CBRE's director for retail services.

'New-to-market brands continue to actively explore taking up Orchard Road space, encouraged by fresh opportunities offered by newly available large prime space - including with the recent exit of Borders at Wheelock Place.'

Rentals should hold steady for the fourth quarter, she added.

DTZ Research last week said that the average gross fixed rent of prime first-storey space in the Orchard/Scotts Road area increased by 0.5 per cent on quarter to $40.20 psf pm in Q3 2011. The two property firms use different baskets of retail space to track rents.

CBRE's report also said that prime suburban rents rose 2.9 per cent quarter on quarter to $29.75 psf pm in Q3 2011, from $28.90 psf pm in Q2.
CBRE estimates that some 657,000 sq ft and 1.57 million sq ft of retail space will be completed in 2012 and 2013, respectively.

PRIME retail rents in Orchard Road rose 5 per cent quarter on quarter to average $31.60 per square foot per month (psf pm) in Q3 2011, according to a new report from CB Richard Ellis (CBRE).



Orchard Rd prime rentals showing growth

Sg Office rents....

October 5, 2011, 1.23 pm (Singapore time)
S'pore prime office rents mostly flat in Q3
SINGAPORE - Office rents in Singapore's central business district were largely flat in the third quarter, while rental growth in other areas moderated as slowing economic growth weighed on demand for office space, DTZ Research said on Wednesday.
The average gross rent for office space in Raffles Place in downtown Singapore was US$9.80 per square foot per month July-September.
Along the central business district, rents at Marina Bay and Marina Centre were unchanged quarter-on-quarter while those at the Shenton Way area rose 2.0 per cent from the previous quarter to US$7.75 per square foot per month.

'Leasing activity remains subdued as occupiers become increasingly wary of the uncertain global economic outlook,'said Cheng Siow Ying, DTZ's executive director of business space said in a statement.

She added that although some occupiers were holding back their expansion plans, there were space expansion needs from selective business sectors such as financial and professional services, IT-related companies and energy companies. -- REUTERS



Office rents....
Prime Office, flattish to slight growth....

Sg Property... Landed homes

October 6, 2011, 11.24 am (Singapore time)
Landed homes' price growth outpace non-landed in Q3: DTZ


The limited availability of landed homes drove the average resale price of leasehold landed homes in non-prime districts up 3.8 per cent quarter-on-quarter, while non-landed leasehold condominiums in suburban areas grew at a slower pace of 2.5 per cent quarter-on-quarter.

Freehold landed homes in the prime districts of 9, 10 and 11 saw a quarter-on-quarter price increase of 2.8 per cent in Q3. In contrast, the average resale price of luxury condominiums in the prime districts of 9, 10 and 11 were unchanged in Q3.

According to DTZ Research, primary home sales averaged 1,373 units per month in July and August, slightly above the monthly average of 1,358 units over the last four quarters from Q3 2010 to Q2 2011.
Secondary home sales averaged 1,278 units per month in July and August, which was 23.2 per cent lower than the monthly average of 1,665 units sold in the secondary market from Q3 2010 to Q2 2011.
DTZ notes that as the lodging of caveats is voluntary and can be delayed, the number of secondary units actually sold in the secondary market could be higher.

'As many of these buyers are buying for owner-occupation and investment beyond four years due to the seller's stamp duty measure, they probably take a longer-term view and are thus less worried about the current global economic uncertainties. However, if the global outlook worsens and the economy continues to slow down, this will eventually affect buying sentiment and lead to less exuberant purchase activity,' said Chua Chor Hoon, head of DTZ SEA Research.




But positive growth for landed prices with a faster rate of growth than non-landed.

Singapore landed home prices grew at a higher rate than that of non-landed homes in the third quarter of 2011, said DTZ Research.

Euroland news....


Merkel, Sarkozy Pledge Bank Recapitalization in Crisis Plan

October 09, 2011, 11:57 PM EDT
By Patrick Donahue and Helene Fouquet

Oct. 10 (Bloomberg) -- Angela Merkel and Nicolas Sarkozy, racing to stamp out the euro debt crisis threatening to engulf the financial system, gave themselves three weeks to devise a plan to recapitalize banks, get Greece on the right track and fix Europe’s economic governance.

By the end of the month, we will have responded to the crisis issue and to the vision issue,” the French president said in Berlin yesterday at a joint briefing with the German chancellor before they dined at her office.

Under rising pressure to defuse turmoil that’s raged for 18 months, and facing growing concern Greece is headed to a default, Merkel said European leaders will do “everything necessary” to ensure that banks have enough capital. Sarkozy said they would deliver a plan by the Nov. 3 Group of 20 summit.

“Maybe they’re still running one step behind, but they are at least discussing the right things,” Carsten Brzeski, an economist at ING Group in Brussels, said in a phone interview.

Underscoring the urgency, the board of French-Belgian Dexia SA met yesterday to begin dismantling the lender, the first victim of the debt crisis at the core of Europe. Belgium’s government announced early today it would pay 4 billion euros ($5.4 billion) to take over the local consumer-lending unit as part of the process.

Greek Membership
While the heads of Europe’s two biggest economies reiterated their intention to keep Greece in the euro, they left it to international auditors, known as the “troika,” to guide the next steps. Sarkozy didn’t repeat the line he used 10 days ago that “we can’t let Greece fail.”

The euro advanced today after the remarks by Merkel and Sarkozy, rising 0.5 percent to $1.3447 as of 11:27 a.m. in Singapore.

The focus on Europe’s banks and the search for what each called a “durable” solution for Greece signal a willingness to accept a debt restructuring there, an outcome Sarkozy has resisted. Investors may be pushed to take a bigger share of the losses, effectively spiking a debt swap that was part of a July 21 bailout that would impose a 21 percent write-off.

“This in my opinion kills the July deal for sure and sets up a more credible and deeper Greek debt restructuring,” Jacob Kirkegaard of the Peterson Institute for International Economics in Washington, said in an e-mail.

Rescue Fund
After their eighth bilateral summit in 20 months, the two leaders unveiled no new agreement on what role should be played by the bailout fund, the European Financial Stability Facility, amid reports that they differed on how to use it.

“We will recapitalize the banks,” Sarkozy said. “We’ll do it in complete agreement with our German friends because the economy needs it, to assure growth and financing.”

European banks need as much as 200 billion euros of capital, Antonio Borges, the International Monetary Fund’s European department head, said last week.

European leaders are bracing for the consequences of a Greek default. German Finance Minister Wolfgang Schaeuble told Frankfurter Allgemeine Sonntagszeitung that euro governments may have come up short on the scale of Greek debt writedowns when they reached the agreement in July. He cited a “great risk” that the crisis could spread further.

Next Step
Merkel said a report from a team of inspectors from the IMF, the European Union and the European Central Bank later this month will help determine the next step to keep Greece in the 17-nation euro zone.

“On Greece, we are waiting of the troika report,” Sarkozy said. “Here, too, we are on the same line: we will take the appropriate decisions.”

The Greek debt load will climb to 172.7 percent of gross domestic product in 2012 -- about double Germany’s -- as the economy contracts for a fourth year, the Finance Ministry in Athens said Oct. 3.
“The decision for a single currency was a path-breaking decision and therefore we’ll defend it with all possible strength,” Merkel said alongside Sarkozy. Sarkozy repeated several times that the two leaders agreed “on everything.”

The typical German-French experience over the last 20 months is that almost every time they really had to agree when time was running out, they agree,” said Holger Schmieding, chief economist at Joh. Berenberg Gossler & Co. in London.

Paying a Premium
Investors are demanding a premium of 21.5 percentage points to hold Greek 10-year bonds over benchmark German bunds of similar maturity. The euro has declined almost 7 percent against the dollar since the beginning of September as investors assessed the risk of a European financial crisis.
Banks’ credit-insurance costs have surged and their shares have tumbled as the crisis spread from peripheral nations to the core euro states, even including AAA rated France.

The 50-member Stoxx 600 Banks index of European banking shares has slid 34 percent in the last six months, reaching its lowest since April 2009 on Sept. 23.

Paris- and Brussels-based Dexia was victimized by the debt crisis, which has caused the evaporation of short-term funding to what used to be the world’s largest municipal lender. The French, Belgian and Luxembourg governments said they backed management’s plan paving the way for dismantlement.

--With assistance from Tony Czuczka in Berlin, Cornelius Rahn in Frankfurt, Radoslav Tomek in Bratislava, Francois de Beaupuy in Paris and Rebecca Christie in Brussels. Editors: James Hertling, Chris Anstey


My Thots .......

Merkel and Sarkozy sets the tone...
The way the Euroland crisis has played out -- Merkel will delay and let the crisis come to a boil, to create pressure on the laggards to comply -- however, when faced with the inevitable, she would meet up with Sarkozy and a solution will be agreed upon.

"Wisdom is purified by virtue and virtue is purified by wisdom. Where one is, so is the other."