Bankers brace for slowdown in loans growth

Bankers brace for slowdown in loans growth


Core lending to take a hit as building and construction ease up




(SINGAPORE) Bankers here have warned of a knock-on effect from the US slowdown, saying loans growth will slip from the blistering pace fuelled by last year’s property price explosion.


First-quarter figures from the Ministry of Trade and Industry (MTI) seem to confirm that the finance industry is already feeling the impact of the US slump.


Although Singapore’s economy grew 6.7 per cent in Q1, this was below the market consensus and the official flash estimate of 7.2 per cent, though up from 5.4 per cent a quarter earlier.


Financial services felt the effect of the US sub-prime crisis, with growth slipping to 13.4 per cent year-on-year from 16 per cent in the preceding quarter.


MTI said the local stock market was weaker due to concerns over global financial turmoil, but growth was ‘driven by robust expansions in both the domestic and offshore banking segments’. Commercial bank loans continued to grow strongly, especially to the building and construction sectors, MTI added.


Despite the slowdown, there are pockets of activity the banks can capitalise on, such as wealth management. ‘The nature of banking here has taken on an additional level by attracting international money,’ said Gerald Chan, UBS Singapore country head.


But there are also areas where growth will taper off. And one of them is the core business of lending. Loans growth may have continued in Q1, but it is unlikely to be sustained. The Q1 pipeline of loans remained healthy, with growth in the 20 per cent range. But Lim Cheng Teck, chief executive of Stanchart Singapore, said: ‘Some correction will be seen.’


Loans and advances to non-bank customers were $249.47 billion in Q1, up 24 per cent year-on-year, MTI figures show. But a moderation – into the low double-digit range – will probably start to show after Q2.


Given that some 55 per cent of the growth in bank loans has been driven by the building and construction sectors, which are abating, core lending is bound to be hit.


At the same time, a staggering increase in expenses will eat into bank profits. Wages are set to be a huge part of this expenditure. ‘Looking ahead, staff costs are the biggest expense,’ said Wee Ee Cheong, group deputy chairman and chief executive of United Overseas Bank.


A key inflation indicator – the consumer price index (CPI) – hit a 26-year high of 7.5 per cent last month, forcing the government to up its forecast for 2008 CPI by half a point to 5-6 per cent.


Tellingly, the outlook for the finance sector over the next six months has taken a dive. More financial institutions are forecasting a downward trend in business, as the mood is very much dictated by newsflows coming out of the US.


Q1 of this year registered a net downturn in sentiment – a sharp contrast to all four quarters last year when more firms indicated positive prospects.


OCBC chief executive David Conner said: ‘I see very good growth in Singapore, Malaysia and Indonesia – our principal markets.’ But that growth potential ‘could fall off fairly dramatically’ if sentiment sours.



Source: Business Times

M Stanley sells Russian mortgage business

M Stanley sells Russian mortgage business


MOSCOW – The Russian subsidiary of Morgan Stanley said on Monday it plans to sell its mortgage lending unit.


Morgan Stanley bought the City Mortgages bank in 2006 in a deal valued at US$185 million, or 4.75 times the book value.


Russian business newspaper Vedomosti quoted a source close to the deal as saying Morgan Stanley is now seeking 2.5 times the book value.


City Mortgages has capital of 1.7 billion roubles (US$72.03 million) and is rated 142nd among Russian banks by assets.


Vedomosti said Morgan Stanley has started a due diligence process for City Mortgages and is taking offers.


The sale is part of a wider plan to scale back Morgan Stanley’s home-lending business, which was hit by the global credit crunch. Morgan Stanley plans to shut down its UK mortgage origination business in June. — REUTERS


Source: Business Times

HK home owners brace for interest rate hikes

HK home owners brace for interest rate hikes


HONG KONG home owners are expecting interest rate hikes as banks in the city attempt to bolster earnings, ending a long run of cheap mortgage costs. But some market factors may militate against such a move.


Banks have been sounding the alarm bells as their margins feel the squeeze amid a succession of interest rate cuts. Last month, lenders failed to match a Hong Kong Monetary Authority (HKMA) interest rate cut, the first time since September that banks did not follow the de facto central bank.


Last week, senior bankers warned that an interest rate rise could be imminent. With competition for home financing fierce, no lender has yet to take the lead and raise interest rates.


Raymond Or, chief executive of Hang Seng Bank, spoke of the pressure facing lenders regarding raising interest rates.


Other bankers have cited an unfeasibly low interest rate for bankers to turn a profit, with home owners being loaned cash at between 2.5 and 2.8 per cent with cash rebates often thrown in. The Hong Kong interbank offered rate is, meanwhile, 1.7 per cent.


Meanwhile, record-high oil prices are unlikely to lead to a further cut in Federal Reserve key rates, from which the HKMA takes its cue as Hong Kong’s currency remains pegged to the greenback.


Banks have also not seen a huge uptake in mortgage financing as external factors bite into potential home owners’ appetites.


Despite low interest rates, property sales in the mass market have remained sluggish. This is partly because of a wait-and-see attitude buyers are taking amid global economic uncertainty.


According to the latest Land Registry figures, the total number of sale and purchase agreements in April was down 0.4 per cent from the previous month to 10,945. The total consideration for these deals was down 23.9 per cent from March, to HK$33.5 billion (S$5.8 billion).


Chief economist at Bank of East Asia Paul Tang, however, remains optimistic that home owners will not face a massive uptick in their financing costs in the next 12 months.


‘I think it really depends on the United States interest rate movements – and that’s a big uncertainty,’ he said.


‘There’s still a lot of room for it (interest rates) to go up and right now it’s at a very low level. The US economy will take one to two years before it recovers to a more healthy stage. Interest rates (in Hong Kong) should remain low despite inflationary pressure,’ he explained.


Developers likewise sounded a more bullish note, perhaps unsurprisingly as jitters about mortgage rate increases took a toll on their stocks last week.


On Thursday, shares in the main developers took a tumble as speculation that Hong Kong lenders would no longer slash interest rates began to spread.


Shares in Sun Hung Kai Properties, Cheung Kong (Holdings) and Hang Lung Properties all fell slightly on the rumours.


Tycoon Li Ka-shing, chairman of Cheung Kong (Holdings), said last week he expects the property market to remain steady amid low interest rates and relatively tight supply in the market.


Source: Business Times

Barclays considers daring takeover bid

Barclays considers daring takeover bid 


Bank rumoured to be eyeing Lehman or UBS


British banking giant Barclays is considering making a daring takeover bid for a rival as part of a move to raise capital from shareholders.


There has been intense speculation about whether Barclays will follow its rivals in raising capital to bolster its balance sheet, but the bank itself has remained enigmatic. Mr Chris Lucas, Barclays finance director, told analysts last week that “all options are open”.


Guiding Barclays’ decision is understood to be a consideration about whether to try to take advantage of rivals’ weakness by launching a large rights issue with a double purpose: To improve its capital ratio and to fund an acquisition.


Barclays’ top team feels that it has earned kudos with London by walking away from last year’s battlefor ABN Amro, which was bought by a consortium led by RBS for£47 billion ($125.5 billion). Barclays is thinking seriously about whether it can snap up a rival bank at a time when the shares of many banks are at record lows.


Sources said Barclays could try to buy an investment bank. Its own investment banking arm, Barclays Capital, is run by Mr Bob Diamond — an ambitious American.


In the past few weeks, he is thought to have looked at both America’s Lehman Brothers, which has traded as low as 60 per cent of its book value, and UBS, whose shares have also plummeted following its £18 billion of write-downs.


One senior banking source said: “Bob is up to something.”


Another said that after Mr Diamond had missed out on top jobs at Citigroup and Merrill Lynch, he wanted to go on the offensive with an expansion of Barclays Capital.


Sources said that UBS would bring Barclays an equities business and its wealth management and private banking arms, which it would like to acquire. But UBS is still seen as being in the throes of a crisis and Barclays’ shareholders fear the Swiss giant may have to disclose further bad debts.


The Government of Singapore Investment Corporation (GIC) now owns an effective 9.5-per-cent stake in UBS after providing the latter with funds in the wake of hefty sub-prime-related write-downs and losses.


Lehman would add to Barclays Capital’s existing stronghold in the debt market — which could mean massive job cuts — but would bolster its presence in the United States. A Lehman deal is becoming increasingly difficult, sources pointed out, because there are signs that the US market is improving, raising the price of acquisitions there.


Some believe Mr Diamond may not be able to persuade the Barclays board about the merits of an investment banking deal, particularly as Barclays Capital itself might have to write down further losses on investments. Mr Diamond may instead stick to bolstering his business by picking up teams of investment bankers from other institutions that are clamping down. Barclays Capital recently hired a senior team from ABN Amro.


Barclays is understood to have consulted its shareholders about raising capital. Some believe it will raise about £3 billion.


The bank is likely to approach China Development Bank and Singapore’s Temasek Holdings, which bought shares last year as part of Barclays’ pursuit of ABN. But Beijing and Singapore have indicated that Western banks’ risks are still too opaque, which could mean Barclays has to bring in other investors, possibly from the Middle East. — The Daily Telegraph


Source: Today Newspaper

BOJ keeps rates steady in uncertain times

BOJ keeps rates steady in uncertain times


TOKYO – The Bank of Japan (BOJ) left interest rates unchanged at 0.5 per cent on Tuesday, as expected, opting to take more time to determine when the fog will clear from the economy – both in Japan and around the world.


Uncertainty over the global economy and soaring energy and raw material costs are adding to concerns that growth is weakening in the world’s No 2 economy, but the BOJ’s room to move is constrained as Japan’s interest rates are already very low.


The central bank’s policy board, currently seven members, voted unanimously to keep its key policy rate at 0.5 per cent.


With no surprise in the rate decision, traders are waiting for BOJ Governor Masaaki Shirakawa’s post-meeting news conference, set to start at 3.30pm (0630 GMT), to hear what he has to say about rising prices of food and commodities and their impact on the economy.


At its last policy meeting about three weeks ago, the BOJ dropped a two-year bias towards raising rates and took a neutral stance on monetary policy, saying it was inappropriate to predetermine its future policy direction given high uncertainty.


Many market players expect the central bank to sit tight for some months before eventually raising rates – possibly around the end of this year or early next year – given a perception that the worst of the credit market turmoil is over and that the Federal Reserve could raise US rates later this year.


‘We are now at the stage where we need to pay utmost attention to the downside risks to the economy,’ Mr Shirakawa said last week.


But he also revived the BOJ’s mantra of adjusting Japan’s low rates towards more normal levels, a phrase dropped in the BOJ’s twice-yearly outlook report on April 30.


‘We need to bear in mind that real short-term interest rates are around zero, a very low level. So if we are certain that the Japanese economy will follow a growth path under stable prices, we will be adjusting interest rates,’ he said.


Swap contracts on the overnight call rate show investors a roughly 60 per cent chance of the BOJ lifting rates by the end of this year up from a 35 per cent chance early last week.


Growth in Japan has so far held up better than economists had expected. Gross domestic product grew 0.8 per cent in the first quarter, thanks to strong exports that have so far weathered a US downturn.


But the data also showed firms cut investment as they braced for slowing global growth and high energy costs to take its toll on Japan, underscoring the view that the domestic economy would slow in the current quarter.


BOJ sources had said before the data was released that GDP figures would not change their view on the economy much.


Weak machinery orders figures released last week pointed to a slowdown in capital spending ahead, making it harder for the BOJ to justify any rate hike in the near future.


In further evidence that the corporate sector, which has led Japan’s growth, is suffering, the nation’s manufacturers turned pessimistic for the first time in five years in May, according to a Reuters survey released on Monday.


Still, most economists say a rate cut is unlikely as Japan’s real interest rates are very low, with the BOJ’s overnight call rate target of 0.5 per cent well below annual consumer inflation of 1.2 per cent.


The nine-member BOJ policy board currently has two vacancies, including one for a deputy governor, but there has been almost no public talk among lawmakers about who should fill the positions.


But with the current parliamentary session ending in less than a month, discussions may resurface in the coming weeks. – REUTERS


Source: Business Times

BOJ revises up view on housing investment

BOJ revises up view on housing investment


TOKYO – The Bank of Japan (BOJ) upgraded its view on housing investment in its monthly report released on Tuesday, saying it has been recovering moderately.


The BOJ had said in last month’s report that there were signs of recovery in housing investment although it remained at low levels.


The central bank kept its assessment unchanged that the nation’s economy is slowing mainly due to the effects of high energy and raw material costs.


Japan‘s gross domestic product grew 0.8 per cent in January-March from the previous quarter, beating market expectations for a 0.6 per cent increase thanks to strong exports that weathered a US downturn.


Housing investment also rebounded in the first quarter.


Firms shrank from investment in the quarter as they braced for slowing global growth and high energy costs to hit the world’s No 2 economy, the data released last Friday showed. – REUTERS


Source: Business Times

Home rates going back to 2003 levels? Not quite

Home rates going back to 2003 levels? Not quite


SINGAPORE interbank rates – the prices banks charge each other for short-term funds – are threatening to fall back to record lows.


The benchmark three- month rates are now nearing one per cent, down from around 3.5 per cent a year ago and threatening to ease to the record levels around 0.5 per cent in early 2003. Naturally, it should be good news for homeowners as they expect to see their borrowing costs return to the low levels of 2003, when banks were dishing out loans at 50 basis points and below.


Is this on the cards again? Well, it depends on who you talk to. If you call your local bankers, they are likely to tell you that the domestic and global credit situations are quite different from the Sars days when banks had to fight for their home business.


Foreign banks were relying more on the interbank market for their retail funding and when interbank rates fell to near zero, they were able to price their home loans at well below one per cent. Some of the foreign banks had also just gotten their Qualifying Full Bank licences then and were using their home loan platform and price cutting to jump-start their consumer business. Today, they have been allowed to build a wider retail network of branches and ATMs and they depend more on the retail deposits to fund their home loans.


As such, they are not able to use the undercutting strategy too aggressively, having built up some expensive retail deposits. Maybank, for instance, launched a 1.58 per cent package which was limited to a short promotion period. Given the costs of running the retail branches and the limit that deposit rates can be cut, pricing for home loans is also not given much leeway downwards, local bankers argue.


Also, the banks are more disciplined now with their credit pricing, given the global credit crunch and the sub-prime-related problems in the US. Because of their overall tighter credit policy, it is no longer easy for them to build their business based on an underpricing strategy with risks in property loans having gone up worldwide. In the last quarter, banks such as HSBC and Citigroup continued to write off sub- prime and other real estate-related portfolios at alarming levels.


In fact, many bankers reckoned interest rates after the recent spate of cuts may be headed upwards. ‘Given that the sub-prime crisis and the subsequent credit turmoil has not abated with the financial markets remaining volatile, the outlook for interest rates is still uncertain at this point in time with upside bias as the longer-term interbank rates have been on the uptrend over the past one month,’ said Gregory Chan, head of secured lending, OCBC Bank.


Perhaps the biggest difficulty for the consumer has been the expensive refinancing costs. Banks well aware of the possibility of refinancing in a downward trend market have been clever to price in the higher penalty costs should consumers make their switch. For instance, those who borrowed at around 3.2 per cent last year would have to factor in a 1.5 per cent prepayment charge, repayment of legal subsidies and other administrative charges which may work out to well over 2 per cent of total loan size, making it difficult for them to refinance. As such, some of the banks have actually enjoyed some widening in margins as their deposit rates fell while their home loan rates have not been adjusted down as much.


‘Banks still have to make a margin. People forget that at 2-3 per cent, it is historically still very low for home loans, compared to the days of near 10 per cent after the 1997 crisis,’ said one banker. The bottom appears to hold around 1.6-1.7 per cent for the first year for the time being but with heavy prepayment penalties priced in.


In any case, observers noted – unlike the sluggish credit market of 2002 – Singapore, underpinned by projects such as the integrated resorts and ongoing massive private and public building, is undergoing quite a boom on the corporate front. Local banks have been able to repark their surplus funds elsewhere in better-yielding corporate loans and papers instead of the falling interbank market.


Building and construction loans continued to absorb some of the surplus funds. Bankers reported the spreads in Asia for good corporates have widened by 100 basis points or more in the last few months and Asian borrowers long spoilt by the massive liquidity are now finally paying the right price for loans.


In fact, some developers suspect the banks are nearing their regulatory limit themselves for property-related loans with the two casinos and the ongoing condo building sucking up much liquidity. Smaller developers are even being avoided or squeezed with some getting quoted up to even 400 basis points above interbank.


Banking analysts, however, present a slightly different picture.


One foreign analyst reckoned foreign banks have not pulled their punches and didn’t believe that they have been tied down by other global credit issues.


‘Asia has never been more important to the foreigners and they will remain very active in the region,’ he argued, adding that mortgage demand seemed to have dried up and most of the activity is now refinancing. He figured the foreign banks have actually won market share from the local banks, seen from Q1 results.


The other change is the emergence of interbank- pegged home packages. One analyst said these are becoming increasing popular and the fall in the interbank market would automatically adjust some of these home rates. But he conceded tighter credit controls and a more disciplined approach will mean – all else being equal – that rates will fall less than they would have in the past when Sibor fell.


Also, the looming global slowdown and property downturn could mean banks may have to drop rates again, analysts say.


One thing is for sure: if rates were really to fall back to the levels of 2003, analysts and bankers reckon it would also mean that while you may save on borrowing costs, you would probably have another property recession and negative equity at hand.


Source: Business Times

Libor anticipated changes lead to sharp rate rises

Libor anticipated changes lead to sharp rate rises





US and European interest rates jumped last week on fears of inflation and concerns that there would be a change in the calculation of London Interbank Offered Rates (Libor).


The British Bankers Association (BBA) meets at the end of the month and bankers will discuss an advisory report which will discuss changes to Libor, the interbank benchmark for US dollar, euro, yen, sterling and other short-term interest rates.


Since the credit crunch began in the middle of last year, Libor has been volatile, with spreads over US Treasury bills and European government and Japanese rates tending to widen. Libor reflects the market for interbank borrowing. Rates are at a premium over government paper because participants are wary about troubled banks and the possibility of failures.


US three-month Treasury bills are currently on yields of 1.82 per cent, but three-month dollar Libor rates are 2.9 per cent. Interest rate experts and economists have raised questions whether those banks were providing accurate quotes. A three-month dollar rate is calculated, for example, even though banks rarely actually borrow or lend to one another at that maturity. Similarly, German three-month interest rates are 3.93 per cent, but the euro libor rate is 4.85 per cent; three-month UK treasury bills are 4.85 per cent, but three-month sterling Libor is 5.77 per cent while yen three-month treasury bills of 0.6 per cent compare with yen three-month Libor of 0.9 per cent.


Following months of turmoil, bankers want to change the Libor formula, which comes from the input of 16 participating banks on the grounds that the benchmark fails to adequately reflect conditions in the money market. The BBA, however, is reluctant to institute radical changes as it fears this could adversely affect nervous investors. Libor is calculated each day by the BBA not on the basis of actual deals but instead as an average of what 16 banks, which include only three US-based institutions, believe to be the cost of short-term finance.


The US Federal Reserve Board and other central banks are concerned that Libor is well above treasury rates and fear that the knock-on interest rate effect will continue to dampen economic growth. Central banks regard Libor as a barometer of the banking system’s health. It is the basis for rates on trillions of dollars of global corporate securities, interest rate contracts and mortgage loans


Source: Business Times

Sub-prime hangover lingers over US banks

Sub-prime hangover lingers over US banks


Earnings results show woes may extend beyond Q2


(NEW YORK) Financial firms that had hoped to swallow their sub-prime mortgage pain and move on are finding the hangover is lasting longer than expected.


Bonds of banks and insurers that have been crushed as their sub-prime losses surged still may not be cheap enough to buy.


The conventional wisdom last year was that companies such as Citigroup and Merrill Lynch & Co , under new leadership, would use the last quarter of 2007 as a so-called ‘kitchen sink’ quarter, to report their worst write-downs and losses, and move on.


That didn’t happen.


Earnings results from banks, bond insurer MBIA Inc and American International Group Inc show the situation is worsening and may stretch beyond the second quarter or longer. As a result, investors are mostly avoiding their bonds and stocks for now.


‘To say we hit some speed bumps and now we’re ready to race again, is not the case,’ said David Hendler, an analyst at research firm CreditSights. ‘This is a prolonged problem and this is not going to get better next quarter and maybe even next year.’


Financial shares have dropped almost 11 per cent this year, the worst performing sector year-to- date, versus a 3.7 per cent decline in the Standard & Poor’s 500 Index. Bank and brokerage debt has lost 3 per cent year-to-date, versus a 0.3 per cent gain for overall high-grade corporate debt, according to Merrill Lynch data.


Finance firms continue to underestimate exposure to mortgage losses, missing their earnings targets as a result. At the same time, major revenue streams are drying up, such as those from building specialised bonds like collateralised debt obligations, or CDOs.


Fears of systemic meltdown of the financial system have eased after a slew of Federal Reserve actions to put more money into the banking system. Yet the aftershocks reverberating with each earnings season suggest the financial crisis that gripped global markets since last year may be entering a new phase – one that now reflects declines in US consumer debt markets.


Bond insurer MBIA recently posted a US$2.4 billion loss and AIG, the largest US insurer, reported a record quarterly loss due to exposure to derivatives, or investments which ‘derive’ their values from other underlying securities.


‘The financials are going to be under pressure, and it’s all coming from derivatives, ‘ said John Tierney, a credit analyst at Deutsche Bank AG in New York. ‘Prime residential mortgages and consumer debt portfolios may be the next shoe to drop.’


The deterioration seen in sub-prime mortgage debt is spreading to auto loans, credit cards and home equity lines of credit, all of which were bundled into bonds and other derivatives held by banks.


That will make it more difficult for financial companies such as Bank of America Corp to match earnings expectations.


Bank of America last month posted a 77 per cent decline in quarterly profit, and said the housing market will remain weak all year as problems shift to areas such as credit cards.


The fallout from mispriced mortgage assets is lasting longer than expected as both banks and rating agencies miscalculated the values of bonds underwritten by the shaky mortgage securities.


The new cracks in consumer debt follow years of sub-prime bond sales and then severe losses that devastated Wall Street, leading to at least US$400 billion in losses so far.


‘Housing declines combined with increases in energy prices may force consumers to appreciably slow spending,’ said Mirko Mikelic, a portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan. ‘Then you will see more write-downs as tightening standards are already having people stop using home equity lines and tap into credit cards.’


Indeed, Moody’s Investors Service last Tuesday said it underestimated losses for residential mortgage debt. Moody’s said bond insurers, including MBIA and Ambac Financial Group Inc, have ‘significant exposure’ to deteriorating second-lien mortgages.


That means the bond insurers’ top-tier ratings may be at risk, and further earnings hits may come.


To be sure, Fitch Ratings estimates that global banks already accounted for 80 per cent or more of their losses. Fitch said total market losses from sub-prime mortgage debt have climbed to US$400 billion, and some estimates may be as high as US$550 billion. — Reuters


Source: Business Times

Developers face higher funding costs

Developers face higher funding costs




PROPERTY developers in Asia face a ‘double whammy’ of rising credit spreads on loans and banks lending less against the value of new projects, a senior Asian property fund manager said yesterday.


And the wider interest margins that banks have been demanding on loans since the start of the financial market turmoil are likely to be sustained, said Olivier Lim, chief financial officer of CapitaLand, South-east Asia’s largest developer.


Mr Lim and Ng Beng Tiong, the Singapore-based director of operations at ARA Asia Dragon Fund, were speaking at a panel discussion on the last day of a conference organised by Merrill Lynch that started on Tuesday.


Mr Ng said that although benchmark interest rates in Singapore and Hong Kong have fallen, ‘what we’ve seen is that the margins have shot up tremendously – more than double in many cases’.


Before the US sub-prime mortgage crisis broke, property companies in Asia could borrow at spreads of less than 100 basis points or one percentage point above interbank lending rates, Mr Ng said.


‘Now banks are quoting 200, 300 and for some smaller developers we understand that they’re being quoted 400’ basis-point spreads.


Besides paying higher interest rate spreads on loans, developers are also finding that the proportion of a project’s value that banks are willing to fund – the loan-to-value (LTV) ratio – has shrunk, he said.


‘In the bullish days, we were seeing 70-80 per cent LTV. Now banks are quoting 50-60 per cent, so it’s a double whammy for project financing.’


ARA Asia Dragon Fund is the flagship private real estate fund of ARA Asset Management, an affiliate of Hong Kong’s Cheung Kong Group. At the end of last year, the fund, which invests in major cities throughout Asia, had more than US$1.5 billion of capital from institutional investors worldwide, including Calpers, the largest US public pension fund.


CapitaLand’s Mr Lim said the first quarter saw ‘the worst credit market situation I’ve seen in my 19-year career’.


Although spreads have since narrowed slightly, ‘I think the blow-out in the credit margins will be sustained’, he added. ‘I don’t see it compressing to where it was last year.’


At CapitaLand, ‘we’re seeing, on average, rates go up by between 60 to 100 basis points, depending on whether it’s corporate risk or project risk’.


‘But we are sensing a flight to quality, so for us we’ve been able to raise about S$4 billion overall of credit debt from multiple sources in the first quarter alone. We still have access, but we do have to adjust to a higher margin. Thankfully, the cost of money is much lower, so the overall cost is about the same as it was last year.’


Last month, the firm raised another S$2 billion of bank funding for its new condominium development at Farrer Court. ‘Banks are still lending,’ he said.


In Asia, outside its main markets of Singapore, China and Australia, CapitaLand has been ‘probing many other markets’ including Thailand, Malaysia and the Middle East, ‘but it’s becoming much clearer to us that two countries are at the top of the list – Vietnam and India’, he said. ‘We’re starting to accelerate our investments in both of those countries.’


Meanwhile, despite suggestions that property prices in Singapore have risen too far too fast, ‘I think the market is a lot healthier than people indicate’, Mr Lim said.


Source: Business Times