Mapletree to manage JTC’s industrial property trust - Singapore

Mapletree to manage JTC’s industrial property trust  - Singapore
GOOD-QUALITY ASSETS: Mapletree Investments finds the JTC Reit’s portfolio attractive in terms of tenancy, location and asset type, says Mr Hiew.

INDUSTRIAL landlord JTC Corporation has appointed Mapletree Investments to establish and manage a real estate investment trust (Reit) that it plans to list around the middle of the year.
The Reit will acquire some of JTC’s high-rise, ready-built properties, including flatted factories and multi-tenanted business park buildings, said JTC and Mapletree in a joint statement yesterday.

Singapore’s largest industrial landlord first announced its divestment plan in late 2005. It said the move would create a more vibrant market and enable it to focus on strategic industrial developments such as the Jurong Island chemicals hub.

JTC announced last July that it had shortlisted seven firms to manage the Reit.

It also said that it will sell $1.4 billion to $1.6 billion of assets - about 10 per cent of its $10.6 billion portfolio and that part of it will go into a Reit.

JTC chief executive Ow Foong Pheng said yesterday: ‘We received quality submissions from a wide range of international and local players.’

All proposals were evaluated on individual merit against an objective set of criteria, and Mapletree was chosen after a rigorous process, she said.

Mapletree, a Temasek Holdings subsidiary, is the sponsor for Singapore-listed Mapletree Logistics Trust.

The firm has an asset base of about $5.3 billion and assets under management of $2.5 billion across Asia.

Mapletree chief executive Hiew Yoon Khong said: ‘We find the asset portfolio very attractive. It is well diversified in terms of tenancy, location and asset type.’

The properties are also strategically located close to or have good access to the city centre, housing estates, key industrial belts and transport nodes, he said.

They enjoy high occupancy rates, a good quality tenant base and long-staying tenants.

JTC said it will work closely with Mapletree to effect a smooth transition upon the transfer of the selected properties.

The timing for the proposed Reit is around mid-2008 and subject to market conditions, said the joint statement.

The current outlook for initial public offerings is bearish as volatility rocks the stock market.

Singapore’s industrial property market has done well, with prices up 22.7 per cent last year, according to Urban Redevelopment Authority data.

Rents of industrial properties chalked up a stronger 32 per cent growth last year, as the sector had benefited from spillover office sector demand.

Source : Straits Times  - 02 Feb 2008

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Even fortresses like CapitaLand can show signs of stress - Singapore

Even fortresses like CapitaLand can show signs of stress  - Singapore

By Goh Eng Yeow, Markets Correspondent

INVESTORS scurry for cover in the strongest fortresses they can find when a storm breaks - such as the ferocious one currently raging in global financial markets.
But even the strongest citadel will show signs of wear and tear amid the panic that has been unleashed in recent weeks - just look at CapitaLand.

With a market value of $16 billion, the real estate giant must surely qualify as an ideal ‘fortress’ for property bulls to take cover in until calm is restored on global bourses.

And while the counter managed to stay relatively unscathed as the shares of other developers crumbled under the strain of the United States sub-prime mess and a vicious selldown, its strong walls showed signs of stress last week.

In the big frenzy that started on Jan 21, a Monday, when regional bourses were hit by widespread panic-selling, CapitaLand plunged to $5.10 at one point - its lowest levels in 19 months.

However, the relief rally sparked by the US Federal Reserve’s emergency interest rate cut of 0.75 percentage point last week enabled it to recover to a high of $6.55 on Tuesday.

But investors are now wondering if that is the best CapitaLand can manage in the near term. A further Fed cut of 0.5 percentage point on Wednesday failed to give CapitaLand a lift even though its bottom line should get a boost from the falling costs of funds.

Yesterday, the stock fell to a low of $5.58 before closing 10 cents lower at $5.80, as investors were spooked by news that it was raising $1.3 billion via a 10-year convertible bond issue.

This begs a question. Surely, in the current climate when the availability of credit is drying up globally, raising such a big sum should be a feather in CapitaLand’s cap.

The conversion price of $8.614 - which works out to a hefty 48.5 per cent premium over yesterday’s close - is not the same as giving away the family silver.

But some market observers believe the selldown could be due to fund managers switching out of CapitaLand into the bonds that pay a coupon rate of 3.125 per cent per annum.

Said a dealer: ‘In times like these, preservation of capital is king. If you believe that CapitaLand has more downside, you can cap your loss by selling the shares and buying the bonds. And since it is a convertible bond, you get to enjoy any upside if it subsequently rebounds above $8.60.’

So using the fortress analogy, fund managers are simply taking shelter in the strongest part of CapitaLand’s edifice, as storm clouds continue to gather and the global financial system encounters further stress from the sub-prime fallout.

Even the usually ebullient property analysts are not getting excited over developers’ prospects. Morgan Stanley analyst Melissa Bon noted in a report on Jan 25 that the attractive valuations for property counters may be an illusion.

Even though the sector is now trading at a 28 per cent discount to its net asset value, compared with a 15 per cent premium a year ago, she ’sees potential downside risks if there are further delays to residential launches’.

CLSA is also cautious, saying in a recent report that ‘2008 will see a year of more sustainable price growth though the pace of increase is likely to slow’.
Source : Straits Times  - 02 Feb 2008

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Singapore SIA surprises with strong 3rd quarter gains

Singapore SIA surprises with strong 3rd quarter gains

Excluding one-time gain from earlier period, net profit is up 51% at $590m

By Gabriel Chen
HIGHER TRAFFIC: SIA’s earnings were lifted by healthy passenger traffic, as the airline carried 4.96 million passengers in its third quarter - 3.5 per cent more than what it recorded in the preceding year. — PHOTO: BLOOMBERG NEWS

SINGAPORE Airlines (SIA) yesterday handsomely beat market expectations with strong third- quarter profits, but it also warned of an uncertain business outlook.
The carrier said the outlook beyond the near term is weighed down by stress in financial markets and growing concerns about a potential United States recession.

SIA also acknowledged yesterday that the price of oil futures points to oil prices holding at current high levels.

However, despite the cautionary outlook, SIA reassured investors that its rising spending on jet fuel will be partially mitigated by hedging and passenger surcharges.

SIA’s net profit for the three months ended Dec 31 last year was $590 million - just above the $589.2 million reaped in the same period a year earlier. But it was almost 30 per cent higher than a $457 million forecast by a Dow Jones Newswires poll of analysts.

Industry watchers say the carrier’s performance was remarkable because the earlier period was inflated by a $199 million one-off gain from selling a stake in associate Singapore Aircraft Leasing Enterprise.

Excluding that exceptional gain, net profit this year would be 50.7 per cent up on the previous period, according to SIA.

SIA’s third-quarter revenue rose to $4.28 billion from $3.79 billion in the corresponding quarter a year ago. Operating profit was 50.7 per cent higher at $674.6 million compared with $447.7 million a year earlier.

Healthy passenger traffic led the group to posting operating profits of $1.65 billion for the first nine months ended Dec 31 last year - up 68.9 per cent on the previous period.

SIA said that it carried 4.96 million passengers in the third quarter, which was 3.5 per cent more than in the preceding year.

Passenger traffic improved 2.7 per cent while capacity gained 2 per cent.

Subsidiary SIA Cargo’s freight traffic for the quarter was down 2.6 per cent year-on-year. This was in line with the decline in cargo capacity of 2.4 per cent, the group said.

SIA’s other subsidiaries - Singapore Airport Terminal Services (Sats) and SIA Engineering Company (SIA Engg) - had mixed quarterly results.

Sats’ operating profit inched up 2 per cent to $47 million, while SIA Engg’s fell 27.9 per cent to $19 million.

Fuel costs, which accounted for 36.9 per cent of the group’s expenditure in the quarter, rose 8 per cent to $1.33 billion.

SIA also gave updates about its fleet and route development.

During the third quarter, SIA took delivery of its first Airbus A380-800 and its 11th Boeing 777-300ER, both of which feature SIA’s newest cabin products.

‘The new cabin and seats on the aircraft have been well received by customers,’ SIA said.

SIA Cargo, it said, also commenced new freighter services from Brussels to Chicago and Los Angeles in November last year.

As at Dec 31 last year, the operating fleet comprised 94 passenger aircraft, with an average age of six years and seven months.

Earnings per share for the quarter rose to 49.8 cents from 47.7 cents, while net asset value per share rose to $12.12 as at Dec 31 last year from $12.11 as at March 31 last year.

SIA shares closed 24 cents higher at $15.64 yesterday. The results came in after the market had closed.

Source : Straits Times  - 02 Feb 2008

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CapitaLand tells Singapore Gillman Heights owners to honour sale

CapitaLand tells Singapore Gillman Heights owners to honour sale

Resident circulates letter to stop deal; developer warns of breach of contract

By Fiona Chan, Property Reporter
ANOTHER collective sale dispute is brewing between the majority sellers of a condominium and its buyer.
This time, it is the owners of Gillman Heights in Alexandra Road that are locking horns with property developer CapitaLand, which agreed to buy the sprawling 607-unit estate in February last year.

The condo’s minority owners are already filing an appeal against the $548 million deal, which got the green light in December from the Strata Titles Board (STB), the body that governs collective sales.

But even some Gillman Heights majority owners, who originally agreed to sell, are not all happy about the sale.

At least one home owner has circulated letters to his neighbours, calling for a concerted application to the High Court to invalidate the collective sale agreement.

The letters, distributed at the beginning of last month to residents’ mail boxes, prompted a quick response from CapitaLand after they were brought to its attention.

It sent out at least two lawyers’ letters addressed to all Gillman Heights majority owners, warning them ‘not to do anything…that may hinder or prevent’ the sale.

These strongly worded letters, sent through law firm Rajah & Tann, identified the dissenting majority owner as Mr Jerry Lum.

Rajah & Tann also sent a six-page letter addressed specifically to Mr Lum, urging him to ‘take notice’ - in full capital letters - that CapitaLand ‘may have no option’ but to take legal action against him unless he stopped circulating the letters and organising any similar activities.

The letters stressed the sale agreement is ‘binding’ on all who have signed it and any attempt to block the sale could be viewed as a breach of contract.

A copy of the letters was obtained by The Straits Times this week. When contacted, Mr Lum confirmed he had distributed letters and had received the lawyers’ letters, but declined to comment further.

Among other things, Mr Lum argued in his original letters that the sale should require consent from 90 per cent of owners, rather than the usual 80 per cent. This is due to a dispute over Gillman Heights’ completion date.

He was also unhappy with the sale price, which he said ‘many neighbours’ feel is ’so, so cheap’. Each owner can expect to receive about $890,000 to $950,000 from the collective sale.

Although Mr Lum was the only one who signed off on his letters, the liberal use of the pronoun ‘we’ in the letters suggests he may have been writing on behalf of other like-minded, but unidentified, owners.

However, the Gillman Heights sales committee has claimed no knowledge of any activities aimed at obstructing the collective sale. It responded to CapitaLand’s letters with a letter of its own, sent through its lawyers Lee & Lee. In its letter, it said it ‘has every intention to and will carry out’ its obligations under the sale agreement.

Meanwhile, a group of 22 minority owners at Gillman Heights are appealing to the High Court to overturn STB’s approval of the sale. They filed it on Jan 16 and are awaiting the hearing. They are appealing on the grounds that the sale price is too low, and that more owners’ consent is required.

The Gillman Heights brouhaha is the latest in a series of unusual conflicts between an estate’s majority owners and its buyer. Historically, the quarrels have involved minority owners instead, who are unwilling to sell their homes.

But recent cases such as Horizon Towers in Leonie Hill and Regent Garden in West Coast Road have thrown up examples of majority owners who signed on the dotted line but later wanted to back out.

The Horizon Towers owners ended up being sued by the buyer - the suit is now on hold. The Regent Garden owners managed to get the sale dismissed earlier this week.

Source : Straits Times  - 02 Feb 2008

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Singaporeans just want a team that delivers results: Swee Say

Singaporeans just want a team that delivers results: Swee Say

By Lynn Lee

A SPARKLING economy and jobs for almost everyone saw Singapore come out tops in a study on how 56 countries fared last year.
‘There was this little red star - not little red dot - Singapore,’ Minister (Prime Minister’s Office) Lim Swee Say said yesterday, citing a survey reported in The Economist, which included economic powerhouses such as China, India and the United States.

It showed that last year, Singapore was the only country to have achieved both high economic growth and full employment.

The economy expanded by 7.5 per cent and the unemployment rate was 2.1 per cent - a 10-year low.

Explaining what these numbers meant for workers, Mr Lim, the secretary-general of the National Trades Union Congress (NTUC), said retrenchments hit a 14-year- low, while unionised firms paid out the fattest bonuses in 18 years.

Mr Lim, who said this at a discussion wrapping up the day-long Institute of Policy Studies conference, was not just delivering another report card on Singapore.

Rather, he was making this point: that these results matter to Singaporeans and they want a high-performing government that can continue to deliver them.

For that matter, they are not fussy about whether there is a one-party or multi-party system. ‘If the single party turns out to be the best government…then so be it.’

‘But if this one party turns out to be a bad government, obviously as NTUC chief, I will mobilise my workers to vote for a better government,’ he said, as the audience chuckled and applauded.

Mr Lim’s comments were in response to a question on whether there was a cost to continuing one-party dominance in politics.

The discussion’s moderator, Professor Kishore Mahbubhani, dean of the Lee Kuan Yew School of Public Policy, posed it as it had come up in an earlier session on what Singapore politics would be like in 2030.

There, Straits Times Associate Editor Zuraidah Ibrahim and political correspondent Peh Shing Huei envisaged a variety of possibilities for Singapore’s political system in an era without Minister Mentor Lee Kuan Yew.

One scenario: Values like the primacy of economic development over political freedom could change.

This could be a result of new ideas and mindsets that the waves of immigrants bring in, they said in a presentation.

But going by current trends, both were doubtful that a two-party state would emerge in the next 20 years.

At most, it would be a ‘1.5 party system’, said Mr Peh.

‘This is simply because… the opposition is not strong enough, and Singaporeans have a high comfort level with the PAP. Also, the PAP has shown that it is determined to maintain an overwhelming majority in Parliament,’ he added.
Source : Straits Times  - 02 Feb 2008

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Singapore can be Asia’s global city

Singapore can be Asia’s global city

By Alvin Foo

SINGAPORE has the edge over key regional cities in its drive to become Asia’s global city, according to speakers at yesterday’s Singapore Perspective 2008 conference.
They identified three key ingredients in winning this crown: being very cosmopolitan, having world-class amenities, and possessing good government support.

One of the speakers, Minister Mentor Lee Kuan Yew, said: ‘I am not sure that we can compete with New York or London but in the Asian context, I think we can compete with Tokyo, with Shanghai, with Hong Kong, with Sydney. I’ll tell you why.

‘First, Sydney’s too far away … it is the antipodes. We are in the middle of Asia, straddling the Indian Ocean and the South China Sea.

‘Tokyo is too Japanese. Shanghai is still too Chinese. Shanghai will try very hard to go back to the kind of cosmopolitanism they had when it was a treaty port and I think the Chinese government will say ‘Go’ because they want it to be a vibrant city.

‘But I do not believe they can produce the kind of cosmopolitan atmosphere, a cosmopolitan climate, environment that we have in Singapore.’

Deutsche Bank’s regional chief economist Sanjeev Sanyal also cited Singapore’s increasingly cosmopolitan nature as a key strength in its push to be a global city.

‘There’s no doubt that Singapore is Asia’s most cosmopolitan city,’ he said.

‘Just look around you, every nationality, every ethnic group. No other Asian city comes close.’

Another factor: excellent amenities here such as good schools and hospitals - which aid in attracting human talent.

Then, there is good governance fuelled by strong government support, he said.

Another speaker - Dr Gillian Koh, senior research fellow at the Institute of Policy Studies - painted two possible long-term scenarios for Singapore as she touched on the drivers for change.

The first is a market-driven model named ‘F1 Singapore’, in which the nation aims for ‘high octane growth’. This will see the country aiming to be a magnet for talent and having global firms emerge from Singapore.

The second sees Singapore becoming more closely tied to regional neighbours, in which it focuses on building bridges through the region and tapping resources there.

Earlier, scenario-planning guru Peter Schwartz, the Global Business Network chairman, identified several themes and challenges which are likely to affect Singapore in the future. These included the need for sustained innovation, dealing with the issue of climate change, and a regional disease outbreak.
Source : Straits Times  - 02 Feb 2008

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Singapore Govt taking steps to narrow income gap

Singapore Govt taking steps to narrow income gap

By Zakir Hussain

THE growing income gap has been taxing the minds of Singapore ministers for the past five to six years, Minister Mentor Lee Kuan Yew said yesterday.
And from the start, they had in mind one crucial factor: Singapore could not have too wide a gap between the haves and have-nots.

‘If we have that, then we’ll have a disproportionate number of the unsuccessful who are minorities,’ Mr Lee said.

For this reason, the Government had, from the outset, set out to make sure everyone has a home.

There would also be no disparity in the schools their children go to, he added.

MM Lee was replying to a question on how the income gap can be reduced. It was posed by Ambassador at Large Tommy Koh, who was chairing a dialogue at an Institute of Policy Studies (IPS) seminar on Singapore’s future. Professor Koh is also chairman of the IPS.

To help shrink the gap, Mr Lee listed various measures the Government had taken to raise the salaries of the lower-income, such as skills upgrading and job redesign.

‘Then we’re making up with Workfare and other supplements,’ he added.

Mr Lee also cited the Government’s home ownership policy, adding that newlyweds receive grants of up to $40,000 to $50,000 to start off, and HDB flats had risen in value over the years.

‘And we’re topping up by giving them subsidies for the conservancy, the power, water, many different ways where expenditure is necessary and cannot be avoided.’

However, he is not in favour of subsidising transport ‘because then you will have unnecessary travel’.

He said: ‘In this way, we impose on every individual the responsibility for his life.’

The biggest problem, as Mr Lee saw it, is getting people to understand they are in charge of their own medical problems, weight and diet.

The state topped up Medisave accounts to help people meet medical costs, he noted.

‘You keep yourself healthy, that Medisave can go on to your children. That’s an incentive to keep healthy. And we’ve got to think up all these ways to make sure that whatever the divergences, the people at the bottom, the less successful, do not feel deprived.’

Source : Straits Times  - 02 Feb 2008

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Major task to find next ‘A Team’ from small talent pool - Singapore

Major task to find next ‘A Team’ from small talent pool  - Singapore

MM: Two-party system not viable as there’s not enough top talent

By Clarissa Oon
POLITICAL FORECAST: MM Lee and Prof Tommy Koh at a dialogue with 900 participants at a conference on the future scenarios facing Singapore. — ST PHOTO: LAU FOOK KONG

SINGAPORE’S talent pool is not big enough to support a two-party political system, as it is tough enough unearthing a first-rate team comparable to Singapore’s founding fathers, said Minister Mentor Lee Kuan Yew yesterday.
Calling the People’s Action Party (PAP) Old Guard Cabinet ‘the A Team’, he noted that there have been calls for political liberalisation, but also reminded that Singapore’s 3.7 million resident population lacked the talent to support a two-party system.

‘Many people say, why don’t we open up, then you have two big parties and one party always ready to take over. I do not believe that for a single moment.

‘We are not Israelis, you know. They can afford to do that. They have got any number of generals, writers, linguists, life science researchers, everything. It’s a different mix of population,’ Mr Lee said.

‘We do not have the numbers to ensure that we’ll always have an A Team and an alternative A Team. I’ve tried it, it’s just not possible,’ he added.

Speaking at a dialogue session at the Shangri-La Hotel, Mr Lee noted that, when he became Prime Minister in 1959, only two of the 10 ministers in his first Cabinet had been born in Singapore.

They were Mr Lee himself and Mr K.M. Byrne, who was the Labour and Law Minister in the early 1960s.

‘All the others were born and bred in Malaysia, Ceylon, India and China,’ Mr Lee said.

But now, Singapore has to pick leaders from within its borders, he said, adding that ‘it’s one thing going to the South China Sea for deep sea fishing (and) another thing going to Sentosa lagoon.’

He also cited the example of the current Chief Justice, Mr Chan Sek Keong, who was born in Ipoh.

For the next Chief Justice, however, ‘we are trawling from the Singapore pool’.

At the same time, he stressed the necessity for Singapore to have a top-notch team in charge.

‘Singapore needs an A Team in charge to work out the best solution…political leaders who are on the ball, think ahead, analyse carefully, choose the best options and sell it to the people, because you have got to carry people with you.’

He said that he had been lucky in finding an A team to replace the original one that was ‘more than equal’ in ability, integrity and capabilities.

The second A team was able to produce a third A team.

‘This present A team,’ he said, ‘is good for another two elections. If, in these two elections, you don’t see the silhouette of a fourth-generation A team, then you have reason to worry, because you need at least one term to become a really capable MP and a minister.’

In a dialogue with 900 participants at an Institute of Policy Studies (IPS) conference on the future scenarios facing Singapore, Mr Lee said that the major threat to the country was not an inability to attract talent but the loss of Singapore-born talent.

‘Our Achilles heel is that we lose too much of our own talent at the top, drawn by very attractive offers from top financial and legal institutions taking them out to China and elsewhere, and then not returning,’ he said.

He cited his own family as an example.

His two sons had both taken up government scholarships and then returned to help build the Singapore Armed Forces and the economy up.

But of his three grandsons, all outstanding students, only one had taken up a government scholarship.

The Public Service Commission had also informed him that only half of each year’s 300 top students applied for scholarships.

‘That is the challenge that I consider most critical. We win that challenge and we can keep two-thirds of our top talent, then…that settled core is firm, that spine is there, the added talent can be so many megabytes, the hard disk is there,’ he said.

Returning to the theme of political leadership, Mr Lee questioned the wisdom of supporting leaders like current United States Democratic presidential candidate Barack Obama.

He described Mr Obama as a one-term senator with manifest intelligence and a gift for getting the right pitch.

‘But you ask yourself: Is it going to be a safer world with McCain or with Obama?’ he wondered aloud, leaving the question unanswered.

IPS chairman Tommy Koh later asked Mr Lee if the PAP would allow for a human rights commission to be formed.

Mr Lee said that that was for the younger leaders to decide but added that, in his view, as long as the Singapore Government remained clean, capable, meritocratic and fair, ‘I don’t see the need for more political policemen’.

Prof Koh, however, said that he respectfully disagreed.

He pointed out that, in mature democracies such as the United Kingdom and France, there were institutions such as human rights commissions and ombudsmen which ‘act not as policemen but in order to help improve governance and fairness’.

Source : Straits Times  - 02 Feb 2008

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Both Singapore, KL will gain from closer bilateral ties: MM

Both Singapore, KL will gain from closer bilateral ties: MM

By Li Xueying

SINGAPORE and Malaysia will benefit from closer connectivity and cooperation as two growing countries, said Minister Mentor Lee Kuan Yew yesterday.
‘It is not a zero-sum game,’ he said. ‘As we grow, they will grow, and vice-versa.’

In fact, in the long term, Malaysia will stand to gain more from closer bilateral ties.

Said Mr Lee: ‘In the longer run, Kuala Lumpur has more talents and can win more than Singapore, because they have the larger critical mass.

‘They have the bigger human resource pool.’

Mr Lee was speaking to the media at the Istana to elaborate on his answer to a question posed earlier at an Institute of Policy Studies conference on Singapore’s future.

A conference speaker, Deutsche Bank chief economist Sanjeev Sanyal, had listed as one of Singapore’s challenges the need for a hinterland to become a global city.

Thus, how can Singapore become more integrated with its neighbours, including Malaysia, asked the dialogue moderator Tommy Koh.

In the media interview, Mr Lee said that former Malaysian prime minister Mahathir Mohamad had ‘wanted to compete against and reduce Singapore to secondary status’.

Today, Malaysia’s current Prime Minister Abdullah Badawi’s proposal to develop the Iskandar Development Region (IDR) in Johor in cooperation with Singapore, is ‘a move in the right direction for the two countries’.

‘Singapore will do what it can to make the IDR succeed,’ Mr Lee stressed.

He noted, however, that the business, professional, financial, academic and intellectual power of Malaysia is gathered in Kuala Lumpur and not Johor Baru.

Said Mr Lee: ‘So the twinning between Singapore and Kuala Lumpur will get the maximum value out of cooperation.’

This was Dr Mahathir’s original idea when he proposed a tunnel for fast rail between Singapore and Malaysia.

Singapore welcomed it.

But during the Asian financial crisis, then-prime minister Goh Chok Tong could not agree to a variation of the terms of a loan to Malaysia and Dr Mahathir ‘turned suddenly sour against Singapore’.

‘But the logic is still sound,’ said Mr Lee.

Be it faster air travel, budget airlines, faster road or rail travel between Kuala Lumpur and Singapore, it will be a ‘win-win’ situation for both sides.

‘But for this to happen, Malaysia must believe it is really win-win,’ said Mr Lee. ‘That Singapore will gain, but so will Kuala Lumpur, Johor Baru and Malaysia.

‘Who gains more is left to history to decide and is a secondary matter.’

In the long run, Malaysia will gain more.

Said Mr Lee: ‘But it needs a mindset change from competition and antipathy for Singapore, to cooperation and acceptance of Singapore.’

Singapore cannot push for this. If it does, it will be counter-productive, he said. Therefore, it has decided to let Malaysia set the pace for cooperation in the IDR.

Mr Lee concluded: ‘This is the signal we want to send out to Malaysian leaders that we are ready to work with you because we will grow, but so will you, and you can grow more than we can because you have the critical mass.’

Source : Straits Times  - 02 Feb 2008

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Singapore Car traders expect up to 30% dip in sales

Singapore Car traders expect up to 30% dip in sales

Tighter COE supply may cause rise in premiums and shift demand to used car market

By Christopher Tan, Senior Correspondent
BOON FOR USED CARS: The resale value of second-hand cars is likely to go up with fewer COEs available this year, leading to higher premiums. — ST PHOTO: AZIZ HUSSIN

MOTOR traders are bracing themselves for a 10 per cent to 30 per cent shrinkage in new car sales, with fewer certificates of entitlement (COEs) to be made available this year.
This could turn out to be a boon to the used car market, as climbing COE prices - a likely result of smaller supply - squeeze out marginal buyers and push up the resale value of cars now on the road.

This, in a nutshell, is how industry players read the market following changes announced by the Transport Ministry to curb congestion and shift upfront costs of car ownership to usage.

The changes include a tighter allocation of COEs and cutting of car registration and road taxes.

Mr Raymond Tang, secretary of the Singapore Vehicle Traders Association, which largely represents used car traders, said the measures will have a positive impact on car owners and some car sellers ‘in the long term’.

‘No matter how low the supply of COEs or how high the premiums, people will still want to own cars,’ he noted.

‘If COE prices don’t rise, motorists can’t sell their cars. If they can’t sell their cars, they can’t buy another one.’

Mr Neo Nam Heng, who heads the Automotive Importers and Exporters Association, whose members are parallel importers, said the market is ‘at a turning point’.

After nearly a decade of increasing COE supply, there will be fewer certificates in the next several years, he said, adding: ‘The days of abundant COEs are over.’

Motor traders are familiar with the cycle. When the COE system started in 1990, the supply was modest. Just over 250,000 cars were then on the road, half of today’s number.

The COE market boomed later that decade, as the demand for cars rose along with the humming economy. The piece of paper that gave one the right to buy a new car cost $110,000 in 1994.

Then, the Asian financial crisis hit hard towards the end of the decade. By then, the car population had grown by 50 per cent to 375,000. With a larger COE supply and a weaker economy, the premiums slid.

This prompted those who bought cars with high COEs to scrap their cars prematurely - well before the 10th year - to recoup residual taxes. All that premature scrapping triggered the release of even more replacement COEs, driving premiums lower and sending car sales into overdrive.

But premature scrapping began slowing down last year, as the car population hit a point where more than eight in 10 cars here were under four years old.

As Mr Neo put it: ‘All those which can be scrapped have been scrapped.’

Many car owners are also saddled with big loans following the deregulation of the car loans market in 2003.

Mr Tang said he did not think people would be scrapping their cars at the drop of a hat now, because ‘the loans they owe cost more than the cars they drive’.

With the slowdown in scrapping, fewer COEs will be available for release. And next year, the supply will shrink further when the cap on vehicle population growth is halved to 1.5 per cent.

Observers reckon the Government will moderate the correction to avoid sharp and sudden rises in COE prices.

Citigroup’s head of research Lim Jit Soon told motoring magazine Torque: ‘We’re entering an inflationary period. The last thing you want is to add to it.’

Mr Barry Kan, general manager of Jaguar and Bentley agent Malayan Motors, said the pressure on COE premiums to go up might be mitigated by a few factors, among them the United States sub-prime crisis, the poor performance of the stock markets and the higher costs of using a car.

He added that while the top 15 per cent of bidders ‘may not be bothered’, the sheer size of the rest of the market will dictate premiums - and that segment of the market is soft.

Mr Kan said how successfully the Government can improve public transport will shape future car demand.

Long-term trends aside, motor traders expect the new tax cuts to sow confusion at the showrooms this weekend.

A Volvo salesman said: ‘With the additional registration fee cut, customers will expect us to lower the price accordingly. But if there is a rush next month, COE prices will jump. What then?’

Another at Honda said: ‘We collected over 200 orders last weekend…All those people will come in now and ask for a price reduction.’

Source : Straits Times  - 02 Feb 2008

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