Private bank RBS Coutts looks to expand in S’pore

Private bank RBS Coutts looks to expand in S’pore

 

By CHOW PENN NEE

 

(SINGAPORE) Fresh from a rebranding exercise, RBS Coutts – formerly known as Coutts Bank – is gearing up to expand in Singapore.

 

And like many other private banks, it is keen to make Singapore the headquarters for its international wealth management business.

 

‘Singapore is growing quickly, and is best positioned in the whole of Asia,’ said Hanspeter Brunner, chief executive officer of RBS Coutts International, noting that Singapore’s regulatory and tax framework supports the growth of private banking.

 

Singapore will serve as a hub for the Asian region, which is the main driver for private banks, with markets here experiencing 10- 20 per cent growth, driven by India and China, Mr Brunner said.

 

RBS Coutts’ Singapore branch serves clients from Singapore, Indonesia, Malaysia and Thailand.

 

The bank’s client base grew 25 per cent last year, when revenue from its Asian operations grew 51 per cent and profit rose 53 per cent.

 

This contributed to a rise in assets under management at RBS’ wealth management division to £pounds;35.1 billion (S$96.6 billion), up 24 per cent from 2006.

 

Mr Brunner said current market volatility will not mar the wealth business. ‘We are not irritated by short-term market corrections,’ he said.

 

Asia‘s economy will continue to grow, and there will be more wealthy clients who need private banking services and solutions.’

 

To keep up with this growth momentum, RBS Coutts is continuing to boost staff strength.

 

Currently, it has more than 150 private bankers and 500 staff in the region. And almost 300 of the staff are based in Singapore.

 

The bank has seen a 65 per cent increase in headcount in the past two years and has plans to add another 100 people in Asia.

 

RBS Coutts serves clients with US$2-5 million of investible assets. Mr Brunner described this as a ‘sweet spot’.

 

The bank identifies successful mid-career entrepreneurs and professionals and grows and matures with them, he said.

 

The bank is one of the oldest private banks in the UK, with a history going back more than 300 years.

 

After being acquired by The Royal Bank of Scotland Group, RBS Coutts is now the international private banking unit of RBS group.

 

Source: Business Times

Dire need for an Asian Renaissance

Dire need for an Asian Renaissance

 

With the centre of gravity of international affairs shifting to the East, Asia must get its act together to progress

 

By K KESAVAPANY

 

ASIA needs a strong and united India and China to play an important role in global politics and economics. This is easier said than done, considering the distrust between India and China caused by the Sino-Indian War of 1962, their territorial disputes, and their jostling for world power and resources, such as energy and minerals. However, I take heart from (former foreign minister) Dr Swaran Singh’s argument that India does not view its relations with other countries on an either/or basis, but that it actively pursues mutually beneficial cooperation with as many partners as possible.

 

Notably, both India and China are huge economic engines. It is evident that when China (beginning in 1980) and India (since 1991) carried out reforms and liberalisation policies and programmes, global trade and manufacturing patterns expanded and shifted. Asia began to increase its share of global trade and wealth. Japan, Korea and South-east Asia benefited from the rise of the two countries. China and India are predicted to be the top foreign direct investment (FDI) destinations in Asia in the longer term, while Thailand, South Korea, Malaysia, Indonesia, Vietnam and Singapore are expected to perform well.

 

According to a report, The Rising Tide of Asian Investment in Asia, the ‘high ranking of these countries by both experts and MNCs suggests a general consensus on individual country prospects’. Interestingly, a large share of the FDI inflows into Asia is originating in other Asian countries. For example, of the US$138 billion of FDI inflows into South, East and South-east Asia in 2004, approximately 40 per cent is estimated to have originated in other Asian countries. China, Hong Kong, Indonesia, the Philippines and Thailand stood out as having inward FDI that was dominated by Asian investors. These increasing levels of intra-Asian FDI are driven by reasons such as the realisation by MNCs that Asia is a rising force in a global economy; by developing- country MNCs investing in other countries to reduce the risk of overdependence on the home market; and by the emergence of offshore centres of excellence, such as India’s data recovery centres in Singapore.

 

On the foreign reserves front, India has more than US$200 billion. Although these reserves might be only a sixth of China‘s, they are impressive all the same.

 

Increasing intra-Asian trade and tourism is not new. In ancient times, India, South-east Asia and China formed a massive trading system, largely seaborne and governed by the monsoon winds. There was also landborne trade along the Silk Road, along which Chinese monks and merchants travelled to India to acquire Buddhist scriptures and Indian textiles in exchange for Chinese tea, porcelain and silk. The modern equivalents being constructed are the Asean Plus Three grouping, which brings together the 10 Asean members with China, Japan and South Korea.

 

The second, larger group includes India, Australia and New Zealand under the East Asia Summit process. The third, trans-Pacific grouping is Apec, which brings in the USA, Canada, Mexico and several Latin American states but which excludes India. We can thus see tentative efforts to recreate the ancient trading systems uniting different regions of Asia.

 

These patterns should be borne in mind when Asians try to construct a modern security architecture for Asia.

 

India is involved in South-east Asian trade and economics through such mechanisms as the India-Asean Dialogue, BIMSTEC, Ganges-Mekong Cooperation and various FTAs. India is also cooperating in the security sector with Asean members via bilateral defence cooperation and its support/ accession to the Asean TAC (Treaty of Amity and Cooperation) and South-east Asia Nuclear Weapon- Free Zone treaties. The Straits of Malacca and Singapore are crucial for Indian oil supplies and trade.

 

There is another aspect of economics that should be mentioned. This is the trend of Reverse Globalisation. We usually consider globalisation’s impulses as emanating from the West through such concepts as democracy and human rights, and markets for goods and services, trade and investment. With the rise of India and China, we now see Indian CEOs being hired by Western MNCs (such as Mr Vikram Pandit in Citigroup); Indian companies buying up Western firms (such as Mittal taking over Arcelor, and Tata, Jaguar); and Chinese and Singaporean sovereign wealth funds buying shares in Western financial institutions (UBS, Merrill Lynch, Morgan Stanley and Citibank) owing to the sub-prime crisis.

 

The rise of Asia, including the Arab Gulf states, includes a financial aspect, as many Asian states have massive foreign exchange reserves, which amount to about US$3 trillion in total. Chinese and Indian ideas about economic development and political stability are now prominent in global conversations about human progress. Indian management gurus such as Dr CK Prahalad, Ram Chandra and Vinod Khosla, founder of Sun Microsystems, are making great contributions to global thinking. Nobel Laureate Amartya Sen has emerged as a leading thinker on development issues. His book, Development as Freedom, makes an eloquent case for treating economic development as a means for the enlargement of liberty.

 

The book suggests practical measures through which development can be translated into policies that further freedom.

 

How should Asia respond to geopolitical trends that are underpinned by the shift of economic power from the West to the East? My former colleague, Ambassador Kishore Mahbubani, makes several interesting observations in his new book, The New Asian Hemisphere: The Irresistible Shift of Global Power to the East. Kishore, who is now dean of the Lee Kuan Yew School of Public Policy, argues that power is shifting to the East because it is building on areas of ‘Western wisdom’ seen in free-market economics; science and technology; meritocracy; pragmatism; the ‘culture of peace’ prevailing among Western states since the end of World War II; the rule of law; and Western education.

 

It was these strengths that allowed the West to outpace Asia over the past 200 years. Today, according to Kishore, the West is insecure even as Asia marches towards modernity. He calls on the West to encourage Asia by sharing global power with it gracefully. Should that not happen, he warns, an Asian backlash would be inevitable to Western domination of global political institutions such as the United Nations Security Council and economic organisations such as the IMF and the World Bank.

 

His views have not gone uncontested, but what he has done is to spark a necessary debate on globalisation and Asia‘s role in it.

 

I would add that it is essential that the new global distribution of power be recognised and reflected at the UN Security Council, of which India and Japan should become Permanent Members. It is absurd that the Security Council, which is the security arm and the most powerful institution in the UN system, should operate as if we were still in 1945, when the Permanent Five – Britain, France, the Soviet Union, the United States and China – were the chief powers that won the War.

 

The end of the Cold War created a new international dispensation. India and Japan deserve a place of prominence in that dispensation.

 

What about Asian countries themselves? How are they responding to this shift in world power? My view is that India, China and South-east Asia are full and active members of the global economic, financial, trade and political systems. They all have regional as well as global agendas, interests and commitments. So they should act and interact, bearing in mind their regional and global parameters. But at the same time, they could also increase their cooperation in a greater Asian context. This is exactly what the West has done in such groupings as Nato (security), the EU and Nafta (economic cooperation), trans-Atlantic dialogues (cultural), G-7 (the global economy) and at the UN Security Council (world politics). Within Asia, regional cooperation is still at a nascent stage since the Asean Plus Three (launched in 1997), the East Asian Summit (launched in 2005) and the Asian Cooperation Dialogue (started in 2002) are new creations. The struggle to create an East Asian Economic Community will take a long time, and it needs to be preceded by regional reconciliation between China, Japan and India.

 

Thus, much more remains to be done to promote substantial and meaningful intra-Asian cooperation. In the field of Asian security, new forums include the Shangrila Dialogue (based in Singapore and started in 2002), the Asean Regional Forum (1994), and the Shanghai Cooperation Organization (1996).

 

India and Asean have increasing economic and trade ties as well as expanding security interests, especially in the maritime and energy security areas. Many South-east Asian states perceive India as a more benign neighbour. This has to do with history and the fact that India and Asean do not have conflicting territorial claims. In historical terms, Communist China supported the various communist insurgents in South-east Asia.

 

Then there are still unresolved territorial claims over the Spratlys in the South China Sea. Hence the rise of India is seen in benign terms by Asean, some of whose members envisage India as acting as a counter-balance to a possibly overdominant China in the future.

 

With a middle class whose numbers equal the entire population of the United States, India enjoys immense economic power. It possesses significant soft power as well, as has been argued by former UN under-secretary-general Dr Shashi Tharoor in his book, The Elephant, the Tiger and The Cell Phone.

 

In this decade, India has a golden window of opportunity to woo Asean and to reinforce its positive image. One very concrete action could be to quickly conclude the Asean-India FTA, which has been overtaken by the China-Asean FTA. New Delhi should note that it is not the only great power cultivating Asean: there are others like China, Japan, South Korea, the US, Australia, plus the EU and Russia.

 

We cannot predict the future because none of us at this conference is a soothsayer. However, we can look at regional and global forces as they shape up and seek to understand the direction in which they are headed. What is clear, however, is that the centre of gravity of international affairs is shifting to the East.

 

One consequence of this shift in gravity would be the need for a mechanism to address the host of problems confronting the continent, both historical and contemporary. Unless the baggage of the past (between China and Japan, and between China and India, for example) can be discarded, confidence and trust – the basic ingredients for regional integration – will be missing.

 

These three great Asian powers need to cooperate in earnest. India, on its part, can leverage on its assets via projects such as the revival of the Buddhist Nalanda University project; play a constructive role in maritime and energy security; develop people- to-people linkages; and assist Asean in human resource development, science and technology, and education and culture.

 

Singapore stands ready to be a key partner for India in creating this Asian Renaissance.

 

Source: Business Times

CCT gets option to buy 1 George Street for $1.17b

CCT gets option to buy 1 George Street for $1.17b

 

Deal comes with income support from seller CapitaLand till 2013

 

By KALPANA RASHIWALA

 

(SINGAPORE) Big office investment sales deals have not ground to a complete halt. CapitaCommercial Trust announced yesterday that it has an option from sponsor CapitaLand to buy 1 George Street for $1.165 billion or $2,600 psf of net lettable area, showing that income support may be the way to make acquisitions palatable to Reits.

 

This is especially so when it comes to office blocks with a substantial portion of leases signed a few years ago when rentals were weak. Never mind that income support for such deals may once have been frowned upon.

 

The deal for 1 George Street involves a five-year rental guarantee, with seller CapitaLand ensuring a minimum net property income of $49.5 million per annum, translating to a net property yield of 4.25 per cent per annum on the purchase price till 2013.

 

This means that CapitaLand will top up any shortfall in net property income to ensure that the $49.5 million floor is achieved every year for the period. The acquisition will be funded entirely through debt; there will be no equity raising.

 

1 George Street is a 23-storey Grade A commercial building that was completed three years ago. It is fully leased and its tenants include The Royal Bank of Scotland, WongPartnership and Lloyd’s of London (Asia).)

 

Most of the leases were signed around 2004/2005, when office rents were weak, which is why CapitaLand is providing yield protection for the asset’s acquisition by CCT. The $49.5 million annual minimum net property income implies gross monthly rentals of $10.50 psf. Given that the current average market rental in the Raffles Place area is about $16.30 psf, this spells upside for 1 George St as leases are renewed, CapitaCommercial Trust Management CEO Lynette Leong said.

 

Leases for about 50 per cent of the net lettable area in the property will come up for renewal in 2008 and 2009. Recently, a new lease for a small space in the building was signed for $19 psf, Ms Leong revealed.

 

‘With the yield-protection given by CapitaLand, CCT will be able to attain minimum returns from this asset. The five-year yield protection eliminates all the downside risk and whatever upside there is from the asset, it will all flow through to CCT. That’s a pretty compelling offer,’ Ms Leong said.

 

The deal drew an inevitable comparison with K-Reit Asia’s acquisition of a one-third stake in One Raffles Quay from its parent, Keppel Land. The two deals have similarities – they involve income support and are at prices seen as lower than market.

 

However, Ms Leong, at a media and analyst briefing yesterday, argued that there were important differences between the two deals.

 

For one, CCT will get 100 per cent direct ownership of 1 George Street, and the asset will enjoy full tax transparency as a result of being owned by a Reit. This means that CCT would not have to pay tax on income from this asset, unlike K-Reit Asia’s acquisition of a one-third stake in ORQ which is being effected through the purchase of shares in the company that owns ORQ. Hence, the income that K-Reit will receive from the asset would be net of 18 per cent corporate tax.

 

Another difference is that KepLand will provide income support only till 2011 whereas CapitaLand is doing so till 2013, beyond the 2011/2012 timeframe when a spike in Grade A office space is expected.

 

CapitaLand Commercial CEO Wen Khai Meng explained that the reason for ‘providing the floor for five years is to address the view that there will be a huge supply in 2011/2012’.

 

Another difference: CCT has secured 100 per cent committed debt funding for its proposed acquisition of 1 George Street and will not have any equity raising exercise. K-Reit, on the other hand, is seeking unitholders’ approval for a rights issue to help partly refinance a bridging loan taken from Keppel Corp to complete the acquisition of the one-third stake in ORQ.

 

The $2,600 psf of net lettable area at which CapitaLand is proposing to sell 1 George St to CCT is lower than the $2,700 psf at which the asset was valued at in a deal last August when CapitaLand bought the remaining half share in the asset to gain full ownership of the award-winning property.

 

CapitaLand expects to book a gain of about $47.1 million after taking into account the yield protection and the company’s 30.5 per cent interest in CCT.

 

Mr Wen said that the group had to pay $2,700 psf in last August’s deal for control premium. ‘We feel $2,600 psf, plus income support, is a good deal given that CapitaLand still has about 30 per cent stake in CCT and given that we are the manager of the Reit and have a certain responsibility to help our sponsored-Reit to grow.

 

‘I personally dislike income support, because it conjures up all sorts of wrong impressions. But it would be challenging for a Reit to justify non-yield accretion for the first few years in an acquisition. Based on current rental rates at 1 George Street, the yield would be below 4.25 per cent, but we are seeing very strong rental reversion,’ he said

 

‘The yield-protection arrangement of 4.25 per cent pa for five years makes the acquisition compelling, given the current blended yield of CCT’s Grade A office assets is 3.2 per cent,’ Ms Leong said.

 

Even with 100 per cent debt funding for the acquisition, CCT’s gearing will rise to only about 40 per cent from the current 27 per cent, the trust’s manager highlighted.

 

The deal will be subject to CCT unitholders’ approval at an extraordinary general meeting to be held by June 30, as it is deemed an interested party transaction. CapitaLand is not allowed to vote. The acquisition is slated for completion by end-July.

 

Get the link to CCT’s

 

news release at http://www.businesstimes.com.sg

 

Source: Business Times

Choa Chu Kang residential parcel up for sale

Choa Chu Kang residential parcel up for sale

 

Analysts think the 99-year leasehold site may fetch $230-$270 psf ppr

 

By UMA SHANKARI

 

THE Urban Redevelopment Authority yesterday launched a 1.9-hectare residential site in Choa Chu Kang Drive for sale by public tender.

 

Analysts reckon the 99-year leasehold site could fetch $230-$270 per square foot per plot ratio (psf ppr), or $131.7 million to $154.6 million in all.

 

The site has a maximum gross floor area of 572,600 sq ft.

 

It is within walking distance of Choa Chu Kang MRT station and should prove attractive to developers, analysts say.

 

‘Judging by the healthy response to recent government residential land sale tenders in West Coast Drive and Yishun, this site should attract a fair number of bidders – possibly two to three genuine bids and two to three other opportunistic bids,’ said Tay Huey Ying, director of research and consultancy at Colliers International.

 

‘Bidders may include Far East Organization, Allgreen and Centrepoint,’ she said.

 

Going by the response to nearby Yew Tee Residences when it was launched last year, a project on the latest site should be popular with mass-market buyers, she feels.

 

Ku Swee Yong, director of marketing and business development at Savills Singapore, agrees that the project will be popular: ‘Mass market private homes are still in good demand because of the strong HDB market, where many sellers are getting large amounts of cash-over-valuations (COVs) for their flats. There is also a ready pool of HDB upgraders in Choa Chu Kang.’

 

Colliers’ Ms Tay says that at a bid price of $230-$250 psf ppr, the breakeven price will come to about $560 to $580 psf. According to her, ‘Developers would be looking to sell the new units at prices ranging between $620 and $650 psf’.

 

Units in The Warren condominium have transacted at an average of $570 psf between July 2007 and now, while units in Yew Tee Residences are changing hands at an average of $535 psf, she said.

 

Mr Ku, on the other hand, believes units on the upcoming site could go for about $700 psf. Some 500-550 homes can be built on the land, he said.

 

The plot is one of four new residential sites to be launched for sale as confirmed sites under the government land sales programme for the first-half of 2008.

 

Source: Business Times

FCT to buy $480m malls from parent

FCT to buy $480m malls from parent

 

FRASERS Centrepoint Trust (FCT) , which owns suburban malls, said yesterday that it would buy three properties worth $480 million in two years, funded mostly through loans as investor appetite for new equity dries up. ‘Right now, the capital market is not there unfortunately, but the banks are still lending and I’ve got the debt headroom to go much higher,’ Christopher Tang, CEO of Fraser Centrepoint Asset Management, told Reuters.

 

FCT is acquiring the three suburban malls from parent Frasers Centrepoint, the property arm of conglomerate Fraser and Neave, and is prepared to raise its debt gearing from 29 per cent to 45 per cent to do so, he said. ‘Our long-term target is always about 30-35 per cent but we’re now prepared for short periods of time to go as high as 40-45 per cent, until the capital market works through its issues.’

 

FCT’s share price rose up to 3.3 per cent in late session trading before ending 0.9 per cent up in line with the broader market. Rival retail Reits CapitaMall Trust was up 1.2 per cent, while Suntec Reit lost 0.7 per cent.

 

Poor market conditions have caused Reits such as MacarthurCook Industrial and Allco Commercial to scrap plans for fund-raising by issuing new shares. With the Reits’ ability to fund their growth and repay existing debts squeezed, analysts such as Goldman Sachs and UBS are predicting that smaller Reits such as MacarthurCook will become acquisition targets.

 

Mr Tang said that FCT’s balance sheet remained strong with most debts due in 2011, and FCT had an A3 corporate rating from Moody’s. He declined to say if he was planning to acquire another Reit, but did not rule it out. ‘I think, as a strategy, it’s something that most people would not rule out. It’s obviously another way of growing. M&A will probably be an area that will have more activity in the Singapore Reit market in the future. Like in the United States and Australia, it’s an inevitable phase for the market that there will be consolidation from time to time.’

 

Mr Tang remains bullish about the outlook for suburban malls, despite concerns that consumers would cut expenses amidst fears of a slowing global economy and surging inflation. ‘Even in the worst of times, during the Sars period in 2003, our occupancy never dropped because suburban malls are non-discretionary spending and it rides economic cycles very well,’ he said\. \– Reuters

 

Source: Business Times

$484m gain in value of A-Reit properties

$484m gain in value of A-Reit properties

 

The trust attributes the 14.2% surge to improving industrial property market

 

By UMA SHANKARI

 

ASCENDAS Real Estate Investment Trust (A-Reit) said yesterday the book value of its investment properties rose $483.6 million – about 14.2 per cent – during the latest annual valuation exercise.

 

A-Reit attributed the increase – from the previous book value at Feb 29, 2008 – to an improving industrial property market, which has led to higher occupancy and higher rents across its portfolio.

 

The latest valuations will be reflected in A-Reit’s financial statements for the year ending March 31, 2008, the trust said.

 

Valuations were revised upwards across all sectors, with the business & science parks sector registering the largest appreciation of $244.4 million.

 

Properties in the high-tech industrial sector appreciated $116.5 million, while those in the light industrial sector (including flatted factories) and logistics & distribution centres registered gains of $60.2 million and $63.2 million respectively.

 

A-Reit’s third development property – HansaPoint@CBP, which was completed in January 2008 – appreciated by $43.2 million, or 166 per cent, from its development cost. Post-revaluation, the annualised net property income yield of the property portfolio is about 6.4 per cent, which is in line with the prevailing market, A-Reit said.

 

The adjusted net asset value, based on the Dec 31, 2007 balance sheet, will be $1.85 per unit.

 

The valuations were done by DTZ Debenham Tie Leung, CB Richard Ellis, Chesterton and Jones Lang LaSalle, A-Reit said.

 

The trust said the increases in valuation are testament to the ‘manager’s proactive asset management strategies in maintaining high occupancy rates and the manager’s ability to deliver value to unit-holders by pursuing attractive acquisitions and development opportunities while maintaining a disciplined approach to ensure risks are mitigated’.

 

A-Reit’s shares closed nine cents higher at $2.29 yesterday. The stock price has shed 6.9 per cent since the start of the year.

 

Source: Business Times

Singapore’s growth could slow to 3% if US enters recession

Singapore‘s growth could slow to 3% if US enters recession

 

It should come in at 5.5% if America suffers a slowdown only, say NTU experts

 

By Alvin Foo

 

SINGAPORE‘S economic growth could slow to 3 per cent this year if a recession hits the United States in these few months, said Nanyang Technological University (NTU) economists yesterday.

 

The growth figure is expected to be 5.5 per cent if the US experiences a slowdown instead.

 

These predictions by the Econometric Modelling Unit of NTU’s Economic Growth Centre were arrived at using models that depict two economic scenarios for the US.

 

The optimistic outlook assumes a growth slowdown, while the pessimistic one has the US experiencing negative growth over the first two quarters before rallying later this year.

 

A recession is typically defined as two straight quarters of economic shrinkage in quarter-on-quarter terms.

 

Assistant Professor Choy Keen Meng, who leads the team responsible for the macroeconomic forecasts, said: ‘We expect a V-shaped pattern which implies faster recovery in the first scenario, and U-shaped growth if the US sinks into a moderate or severe recession.’

 

Growth forecasts for Singapore this year range between 4 and 6 per cent among government and private-sector economists.

 

CIMB-GK economist Song Seng Wun said of the NTU prediction: ‘Three per cent sounds like the worst-case scenario – it implies a sharp global slowdown in the second half of this year.’

 

He added that ‘5.5 per cent to 6.5 per cent is still doable because of the growth momentum carried over from last year’.

 

A recent Monetary Authority of Singapore survey found that economists and analysts had lowered growth expectations for this year to 5.6 per cent, from 6.3 per cent in December.

 

Last year, Singapore‘s economy grew 7.7 per cent, fuelled by the booming construction and services sectors.

 

Dr Choy noted that Asian economic growth, most notably in China and India, will provide Singapore with a buffer against a slowdown or recession in the US.

 

However, consumer confidence and spending could be affected by the negative wealth effects.

 

Nevertheless, investment spending should remain robust because of construction projects, the integrated resorts and Formula One, Dr Choy said.

 

If Singapore grows at 5.5 per cent, NTU economists predict that overall inflation would hit 4.6 per cent for the year.

 

Under this scenario, some 141,000 jobs would be created, the unemployment rate would be 1.9 per cent and monthly wages would grow 6 per cent.

 

However, if Singapore grows at 3 per cent, inflation is forecast at 3.9 per cent.

 

In this case, 110,000 jobs are expected to be created, the unemployment rate would be 2.3 per cent and monthly wages would grow 3.5 per cent.

 

 

Source: Straits Times

Asia-Pacific exporters to be ‘hardest hit’ by US turmoil

Asia-Pacific exporters to be ‘hardest hit’ by US turmoil

 

GENEVAASIA-PACIFIC economies like Singapore are entering a phase of ‘heightened uncertainty’ with export-led countries expected to be hardest hit by the ongoing financial turmoil in the United States, a United Nations report said yesterday.

 

‘In the worst-case scenario of a recession in the US and a deeper depreciation of the dollar, the impact on much of the region would be harsh.

 

‘Most vulnerable will be the exporters of high-technology products, such as electronics, to the US: Singapore, South Korea and Taiwan,’ said the report outlining the economic and social situation for the region for this year.

 

Exporters would face a double whammy of a weakening US dollar due to sharply lowered interest rates in the US, as well as slowing demand.

 

But even with the credit crunch casting a pall over export-led economies in the region, the financial turmoil is also throwing up opportunities, the report said.

 

‘Interest in Asia-Pacific assets may increase because of the strong growth projections for the region,’ said the report by the UN Economic and Social Commission for Asia and the Pacific.

 

In addition, sovereign wealth funds in the region are increasingly being tapped to help bolster weakened banks in the US and Europe.

 

‘That shifting balance of financial power is also evident in the dramatic rise in the overseas investment of Asia-Pacific corporations,’ the report noted.

 

It also pointed out that the region’s corporations, being ‘cash-rich and not highly leveraged’, have been largely resilient to the US credit crunch.

 

Meanwhile, the economic locomotives of China and India are expected to boost the resilience of the region, with their economies to continue chugging along, offering opportunities to other export-led economies.

 

India is expected to maintain growth at 9 per cent this year while in China, government spending increases will spur domestic demand.

 

Overall, developing economies in the region are projected to grow 7.7 per cent this year, while its developed countries are projected to expand at 1.6 per cent, slowing from 2 per cent last year.

 

Source: Straits Times

Real estate reality check

Real estate reality check

 

THE HDB resale checklist to be implemented from May should bring transparency to transactions that often leave buyers and sellers dissatisfied. It aims to put them and property agents on the same page in regard to policy, procedures and pricing. Not every agent knows or cares about the proper way to close a deal. Buyers

 

and sellers are even less familiar with transactions they may make only once or twice in their lives. Beyond plugging the knowledge gap, the checklist will rely on the contracting parties’ competing interests to keep things honest and ethical. If agents stray from this stringency, aggrieved buyers or sellers should have recourse to redress through the HDB. Otherwise, the measure will not raise ethical standards.

 

Having to be thorough in observing procedures should deter agents from rushing clients into making hasty decisions. Although the HDB’s remit does not extend to real estate agencies, it should have something to say about the practice of agents representing both sellers and buyers and receiving commissions from both. Conflict of interest situations are best avoided, if it is feasible to separate the two functions. If it is not, guidelines are necessary to ensure the interests of both buyers and sellers are served evenly. As for financial commitments, a comprehensive checklist will act as a reality check against going into debt. Unprofessional agents could persuade clients into making buying decisions against their better judgment, which could lead to problems in servicing loans. This is more likely to happen in a rising market. If it proves effective, the checklist could point a way to professionalising agents in the private market, where more serious malpractices are known to occur.

 

Agents, agencies and their trade associations have been half-hearted about regulating themselves in a trade that is still left to them to police. Accreditation is voluntary. Enforcement against misconduct, if carried out at all, is next to meaningless. Misbehaving agents, when found out, can move from an agency that is accredited or requires accreditation to another that is neither. No central database exists to keep a watch on those convicted or reprimanded for misconduct. This is practically a free-for-all, as rising prices in the past year attracted all manner of people into the trade. The situation rewards those bent on making quick money but it penalises those who are professional. Many clients do not bother or do not know enough to bother about agent or agency accreditation. It is time for agents and their companies to get serious about self-regulation, before demands for legislation emerge.

 

Source: Straits Times

US economy expected to worsen before it gets better

US economy expected to worsen before it gets better

 

IT WILL be a slow and painful road to recovery for the United States economy, as its sub-prime write-downs and credit crisis deepen, according to the British Chamber of Commerce’s resident economic spokesman in Singapore.

 

Mr Roman Scott told the chamber’s first biannual economic briefing yesterday that total write-downs had amounted to about US$195 billion (S$269.5 billion), but this could be just ‘the tip of the iceberg’.

 

He said further write-downs for other associated credit losses could eventually bring the total bill to as much as US$500 billion.

 

‘It is very misleading to say it’s a short-term problem. It is not a shallow recession, not a passing blink,’ said Mr Scott, who is also the managing director of Calamander Capital, a Singapore-based investment and advisory firm.

 

He added that it would take two to three years to clear up the credit mess.

 

The credit crunch and the spectre of a recession coupled with inflation and the massive depreciation of the US currency – each a big problem in itself – are, in combination, something of a perfect financial storm, said Mr Scott.

 

‘The US has been an accident waiting to happen for a long time,’ he said.

 

The Federal Reserve’s rate cuts will help ailing banks by reducing their cost of money, but these will be ineffective in staving off a recession, which is consumer- and household-driven.

 

Rate cuts are also fuelling inflation and exporting the problem to the rest of the world.

 

Mr Scott is also pessimistic about the US dollar, believing it will ‘continue to lose its fiat status’ – its authority as the world’s reserve currency.

 

He does see a smidgeon of good news in all of these developments: Inflation will be partially cured by cooling growth, while a slowing US economy will also help prevent commodity prices from shooting further through the roof.

 

There will also be a shift in and a realignment of the world economy from a US-dominated one to a more balanced, less volatile one, with the euro region and Asia, led by China and India, gaining greater prominence.

 

Source: Straits Times