WPP leases all of Singapore Scotts Rd project

WPP leases all of Singapore Scotts Rd project

Advertising PR giant said to be paying about $8 psf monthly rental
By KALPANA RASHIWALA
(SINGAPORE) International advertising, communications and marketing giant WPP has leased an entire office development to be built on a transitional site at Scotts and Anthony roads, BT understands.
 
The transitional site: Housing various businesses under the WPP banner, such as Bates, JWT, Y&R, Burson Marsteller, Hill & Knowlton and Enfatico, at the new location will generate greater synergy 
The four-storey structure, next to Newton MRT Station, will have about 130,000 square feet of offices and 135 parking spaces. It is slated for completion in about a year.

Various businesses under the WPP banner here - such as Bates, JWT, Y&R, Burson Marsteller, Hill & Knowlton and Enfatico - will be consolidated under one roof.

But Ogilvy group, also part of WPP, is expected to continue to operate from its current premises at Ogilvy Centre in Robinson Road.

WPP is said to have signed a 14-year lease on the Scotts Road building, which is going up on a 15-year leasehold site sold this year by the Urban Redevelopment Authority.

BT understands that WPP will pay gross monthly rent of about $8 per sq ft (psf).

The deal is believed to have been brokered by Cushman and Wakefield, which declined to comment.

The project is being developed by Sun Venture (S) Investments, a subsidiary of interior design and building company DB&B (Singapore) Developments, which paid $226 psf per plot ratio for the 97,284 sq ft site in a state tender that closed in late April this year.

Sun Venture general manager Alvin Teo would say only that ‘the building has been fully leased for a full 14-year term to a global firm’, without confirming that WPP is the tenant.

The project is next to another transitional office site, also sold in April, to stockbroking firm UOB Kay Hian, which has said that it will occupy the project on the site.

The two sites are opposite a project completed recently by Scotts Spazio on the maiden transitional office site sold by URA last year. Prudential has leased all 150,000 sq ft of office space in that development under a deal arranged by CB Richard Ellis.

CBRE executive director Moray Armstrong said of the latest deal for Sun Venture’s project: ‘We understand a single end-user has been in negotiation for the -property. This demonstrates there is still an active leasing market for well-located office developments, despite the cooling business climate.’

Source : Business Times  - 23 Sept 2008

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Winners from the mega-bailout

Winners from the mega-bailout

By HUGO DIXON
UNCLE Sam’s promised toxic clean-up plan is creating lots of winners.
Top of the list is Morgan Stanley. Over the weekend, the investment bank was on the ropes. It was frantically searching for a partner as hedge funds pulled their business and its credit rating and shares were being pummelled.

In early trading yesterday, the cost of credit protection shrank 21 per cent, although it’s still high. And as confidence returned to the market, its shares rebounded. The bank may now cling onto its independence. Even if it doesn’t, it has won a breathing space and won’t be such a distressed seller.

Close behind comes Goldman Sachs. If Morgan Stanley had fallen, its bigger rival would have been the last large independent investment bank left standing. Now there is still a buffer zone between it and crisis.

The rest of the banking sector - and maybe other market participants - may also hit pay-dirt. Who does best, though, will depend critically on the details of Hank Paulson’s mega-bailout - and, at present, the plan is still extremely vague

 
Nevertheless, it seems a fair bet that US banks with big holdings of US residential mortgage backed securities will benefit. After all, it ought to be relatively easy to sell a bailout politically provided it is tied to US banks and US homes. In this category would come Wachovia, one of Morgan Stanley’s mooted merger partners.

However, as soon as one moves away from US banks and US homes, it’s harder to judge. The stocks of UK banks such as HBOS, RBOS and Barclays - which also got burnt in the US mortgage securities market - soared on Friday. Maybe that’s a sound bet. But it would involve Uncle Sam bailing out foreigners.

Then there’s the question of whether commercial mortgages will be covered by the scheme. They, too, have started to turn toxic. Heaving them off balance sheets would help financial institutions a lot. But it may be harder to sell a bailout related to offices than one related to homes.

Finally, there’s the question of whether just banks will be able to tap the new scheme. Will, for example, BlackRock or Lone Star which bought piles of toxic assets from UBS and Merrill Lynch respectively be able to put those back to Uncle Sam for a profit? Again, politically, it may be easier to defend a bank rescue than a scheme that benefits unpopular groups like hedge funds and private equity houses.

That said, it may not matter too much. Even a bailout that was narrowly focussed on US banks would indirectly benefit everybody else who had dabbled in the market. After all, as the US government hoovers up unwanted assets, that would remove an overhang from the market allowing market prices to rebound. No wonder the market is saying ‘many thanks, Uncle Sam’.

Source : Business Times  - 23 Sept 2008

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Japanese megabank buys 20% of Morgan Stanley-TOKYO

Japanese megabank buys 20% of Morgan Stanley-TOKYO
(TOKYO) Japanese megabank Mitsubishi UFJ Financial Group (MUFG) will buy 20 per cent of ailing US banking giant Morgan Stanley in a deal worth up to US$8.5 billion, the two companies said.
Welcome aboard: As part of the deal, at least one MUFG executive will sit on Morgan Stanley’s executive board 
Japan’s largest bank said that the deal would likely total between 400 billion and 900 billion yen (S$12 billion).

MUFG will also send at least one executive to sit on Morgan Stanley’s executive board, subject to approval by regulatory authorities.

MUFG said that it estimates that Morgan Stanley is worth US$31 a share based on the US investment bank’s assets as at the end of August.

A MUFG spokesman said, however, that it was still carrying out due diligence and had not determined the per share price for its deal to buy up to 20 per cent of Morgan Stanley.

Morgan Stanley has been looking for help through a tie-up with another bank as part of a major realignment on Wall Street, which has been hit hard by the sub-prime loan crisis.

The announcement came hours after Morgan Stanley and Goldman Sachs said that they were both agreeing to become holding companies, submitting themselves to more regulation to be part of a massive US government bailout.

‘This strategic alliance with Mitsubishi UFJ can put Morgan Stanley in an even stronger position as we look to realise the opportunities we see in the rapidly changing financial marketplace,’ John Mack, Morgan Stanley’s chairman and chief executive officer, said in the statement.

‘We would look forward to working closely with them to strengthen both of our businesses,’ he said.

Earlier reports said that Morgan Stanley was in talks with Wachovia Corporation and Chinese sovereign wealth fund China Investment Corporation (CIC).

MUFG was born through a merger in 2005 to become the world’s largest bank in asset terms.

Japanese banks, which recently recovered from their own crisis of bad loans, have been less hard hit by the sub-prime loan crisis than their peers in North American and Europe. — AFP, Reuters

Source : Business Times  - 23 Sept 2008

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Investors in Lehman products to get updates

Investors in Lehman products to get updates
(SINGAPORE) Financial institutions that offered structured products linked to the now-bankrupt Lehman Brothers are assessing the situation and will update affected investors as soon as information is available, the Monetary Authority of Singapore said yesterday.
Saying it is in close contact with the institutions, MAS advised investors to first contact their institution if they believe that they were mis-sold a product or a product was misrepresented to them. Institutions should handle such queries or complaints promptly under existing MAS requirements, it said.

Investors who are not satisfied with the response they get and have a legitimate grievance can approach the Financial Industry Disputes Resolution Centre, MAS said. The centre is an independent organisation that helps resolve disputes in the financial sector.

MAS will monitor how financial institutions are handling complaints. It said it expects all institutions to market and sell investment products appropriately and will hold them to account if there is evidence of a breach of laws or regulations.

MAS also urged consumers to be careful in their investment decisions, saying that it will continue to work with MoneySense to enhance financial education efforts.

 
Source : Business Times  - 23 Sept 2008

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Morgan Stanley Goldman Sachs reinvent for risk averse world

Morgan Stanley, Goldman Sachs reinvent for risk-averse world

Both opt to become commercial banks as Wall Street dumps high risk, reward model
By ANDREW MARKS
NEW YORK CORRESPONDENT
IN what could be the final transformative act of the fundamental re-shaping of the US financial sector and Wall Street itself, the Federal Reserve late Sunday approved a request from both Goldman Sachs and Morgan Stanley, the country’s last two major independent investment banks, to change their status to bank holding companies.

 
Morgan Stanley’s change cut even deeper as, in a separate development, it was announced that Japanese megabank Mitsubishi UFJ Financial Group would take a 20 per cent stake in the ailing US giant in a deal that could be worth up to US$8.5 billion.

That, however, paled in comparison with the more basic shift in the banking landscape. The change in status will subject both Goldman Sachs and Morgan Stanley to far greater regulation and oversight. But the move allowing them to create commercial banks that will be able to take deposits, is an acknowledgement that banks involved in trading and investing alone can no longer survive in the new, risk-averse world of high finance.

The new era has evolved in a period of time measured in weeks, replacing a way of doing business that had been Wall Street’s mainstay for more than 75 years, since the banking and financial crisis of the 1920s that produced the Glass-Steagall Act, which separated investment banking from commercial banking.

‘It’s the end of an era on Wall Street. What we’ve done is reverted to the pre-1929 model of the bank. There’re security laws and the Bank Holding Act to provide regulation now, but this move is like the coup de grace for the Wall Street we’ve known since the mid-1980s,’ said Charles Geisst, a Wall Street historian and professor of finance at Manhattan College.

The move comes despite the US$700 billion government rescue of financial firms being engineered by Congress and the Bush administration, and will require the two former investment banks to greatly reduce their leverage, and in the future, their returns.

Typically, investment banks have debt to capital ratios - known as leverage - of more than double that of commercial banks, which are required by law to keep capital reserves at certain levels. Recently, firms such as the now-defunct Bear Stearns and Lehman Brothers had leverage ratios of as high as 40-to-1, compared to commercial banks such as Bank of America, the new owner of Merrill Lynch, which has a leverage ratio of less than 12-to-1.

Both companies will now have access to the full array of the Federal Reserve’s lending facilities, which will allow them to avoid the fate that befell Lehman Brothers a week ago, and likely drove the investment banks to request the change in status from the Fed.

The Fed’s simultaneous announcements for both Goldman Sachs and Morgan Stanley appear to be a deliberate one, aimed at completely transforming Wall Street from the highly leveraged, high-risk and high-profit business model investors have known for the last 80 years.

‘The Fed is essentially saying the financial system that was in place as of three weeks ago cannot cope with the mounting problems that it has brought upon itself, beginning with the sub-prime mortgage crisis, and it has to be forever and fundamentally changed,’ said Prof Geisst, the author of Wall Street: A History and Undue Influence: How the Wall Street Elite Put the Financial System at Risk.

Investors reacted warily to the latest details of the US government’s mortgage bailout plan for financial companies and the news about Goldman Sachs and Morgan Stanley in the early going yesterday. The Dow Jones Industrials was falling by 86 points, or 0.76 per cent, to 11,302 shortly after the opening bell on the New York Stock Exchange.

Morgan Stanley, however, was bucking the overall negative trend yesterday morning, after Tokyo-based Mitsubishi UFJ Financial Group announced plans to buy between 10 per cent and 20 per cent of Morgan Stanley common stock, boosting the firm’s capital position. Shares in Morgan Stanley were trading up by 14 per cent.

What does this latest move mean for the future of finance in the US? From here on, Wall Street will likely have to go back to its traditional model of devising mergers and acquisitions and underwriting securities transactions that it had before this trading and high-risk, high-leverage derivatives boom began 25 years ago.

If that’s the case, Wall Street will become a much smaller place both literally, in terms of the number of firms operating and people employed in high finance in New York, and figuratively, as its influence will be greatly diminished along with its high-roller status.

The hedge funds, too, will likely diminish in importance, and analysts expect the government to take moves to increase regulation of their investments and transactions.

‘It’s hard to take in everything that’s happened in such a short time, but this move effectively means that Wall Street firms will now look more like commercial banks, with more disclosure and oversight, higher capital reserves and less risk-taking,’ said Prof Geisst.

Source : Business Times  - 23 Sept 2008

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Will the bailout succeed?

Will the bailout succeed? 

Investors need to be convinced that it is safe to put money in financial firms 
  
Will the bailout relieve US of the threats of unemployment, badly structured mortgage loans and a banking system in upheaval? Analysts believe it could be years before consumers feel flush again, especially if credit conditions remain tight. — PHOTOS: ASSOCIATED PRESS, AGENCE FRANCE-PRESSE, REUTERS
 
WASHINGTON: The best test of whether the United States government’s US$700 billion (S$1 trillion) cheque will be enough to save the US economy is how much of that money flows back to consumers and companies.

Even if the government gets congressional approval this week to buy bad debts off banks’ books, satisfying some of their cash needs, the financial sector will still need to raise money - and investors have not exactly been lining up to help.

Unless banks can find funding somewhere, they will not be eager to resume lending, and that will leave the economy sputtering.

The good news is, outside of the financial sector, Corporate America is remarkably cash-rich with some US$620 billion sitting on the books of large firms, so companies should be primed to spend once confidence is restored.

But household wealth has taken an unprecedented double hit from the real estate and stock market shocks. It could be years before consumers feel flush again - particularly if credit conditions remain tight.

US Treasury Secretary Henry Paulson argued on Sunday that opening up federal coffers to Wall Street would benefit Main Street by preventing a deeper economic downturn.

‘Last week as the credit markets were frozen, the capital markets were frozen, we had a situation where American companies were not able to borrow money,’ Mr Paulson said on ABC’s This Week. ‘This could ultimately affect small banks, loans to businesses, loans to farmers, jobs, people’s retirement.’

US companies have cut more than 550,000 jobs this year, sending the unemployment rate up to a five-year high of 6.1 per cent last month. Those figures are likely to worsen in the coming months, with or without a bailout.

The housing market is at the root of the year-long financial crisis, and some members of Congress - expressing concern that Mr Paulson was taking a roundabout route to helping homeowners - are expected to push for more direct mortgage assistance when they hammer out terms of the bailout legislation this week.

‘I have talked to Secretary Paulson, and I have told him that while his plan is a foundation and we certainly have to do something, we need changes in it relating to housing,’ New York Senator Charles Schumer said on Fox News.

Lawmakers will get the latest readings on the housing market this week as they hash out the Paulson proposal. Sales of both new and existing homes likely fell last month and the pace of transactions remains near the slowest in more than a decade.

Shoring up the housing market means ensuring that would-be buyers can get mortgages, and that means banks will have to find a way to keep lending. Credit conditions were tightening, even for borrowers with good credit histories.

‘The US banking system needs a lot more capital,’ said Mr Jan Hatzius, chief US economist at Goldman Sachs. ‘Capital infusions are needed to avert a sharp contraction in lending.’

He said three things need to happen in order to resolve the crisis. First, banks must figure out the true value of assets on their balance sheets; then they must raise more capital; and finally, home loans needed to be restructured.

The government’s bailout plan in effect addresses the first point by establishing a price for hard-to-value assets, and Congress may tackle the third issue this week. However, raising more capital will not be easy.

Lehman Brothers failed last week because it could not find investors. Getting US$700 billion in bad debts off banks’ books will certainly help, but it remains to be seen whether that will be enough to convince investors it is safe to put their money in financial firms.

If the government’s money succeeds in helping Wall Street strike a healthy balance between fear and greed, US companies are well-positioned to fund a strong recovery once they are confident that the economy is on the mend.

The Standard and Poor’s (S&P) industrials, a group of 368 large companies that excludes banks, insurers, utilities and transportation firms, held about US$620 billion in cash and short-term securities as at June 30, according to S&P analyst Howard Silverblatt.

That was roughly the same amount they had in March last year, before the financial market crisis mushroomed. Since then, companies have cut back on dividend increases, share repurchases and expansion, essentially hoarding cash because of concern about the state of the economy.

‘They have got money,’ Mr Silverblatt said. ‘They are not spending it yet.’

REUTERS

 
Source : Straits Times  - 23 Sept 2008

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Last-minute ban confuses Aussie traders-SYDNEY

Last-minute ban confuses Aussie traders-SYDNEY 

SYDNEY: Australia’s stock exchange was thrown into confusion yesterday after a last-minute ban on short-selling, aimed at saving it from an onslaught of selling by global hedge funds, also tripped up genuine investors.
The market delayed its opening by nearly one hour as fund managers, which normally lend stocks to short-sellers and had shares out on loan when the ban was announced over the weekend, wondered what to do next.

‘We’re all flying in the dark,’ said Morgan Stanley equity strategist Gerard Minack. ‘We’ve never seen a market without short-selling.’

After Friday’s close, the Australian Securities and Investment Commission slapped bans on two forms of short-selling, following bans in US and European markets to head off hedge funds eager to profit from the global credit crisis.

The ban included ‘covered’ short-selling, whereby hedge funds borrow shares from an institutional investor and sell them in the market in the hope of buying them back later at a lower price. The hedge funds then return the shares and take a cash profit.

But short-selling is also used to hedge a genuine investment, in order to protect it from sliding share prices, and many long-term investors, including pension funds, were caught unprepared yesterday when the bans suddenly took effect.

Before trade finally began yesterday, the commission ruled that short positions that had already been opened with the aim of hedging an investment would be exempt from the ban.

‘Its all new stuff for the whole market. We have never seen anything like it before.’ Mr Andrew Gluskie, a fund manager at White Funds Management said.

REUTERS

 
Source : Straits Times  - 23 Sept 2008

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Hefty penalties for naked short selling

Hefty penalties for naked short selling
 
More disclosure to be made to maintain orderly market
 
By Lee Su Shyan , ASSISTANT MONEY EDITOR 
  
SGX’s curbs on short-selling follows bans by the US, Britain and Australia. — PHOTO: AGENCE FRANCE-PRESSE

THE Singapore Exchange (SGX) has moved to put the brakes on short-selling shares although it has stopped short of imposing the draconian bans seen in Britain, the United States and Australia.
Short-sellers aim to capitalise on falling prices with investors borrowing shares in the hope of buying them back at a lower price.

The SGX announced last night that it will disclose more details about shares that have been sold short without the same number having been borrowed in advance - known as naked short-selling.

The additional transparency will give traders a clearer idea of what shares are in play and at what price.

It will also crack down hard with hefty penalties on the practice of naked short-selling. This differs from normal short-selling as it involves traders selling stock without having even borrowed the shares in the first place.

Traders face a penalty of 5 per cent of the failed trade, starting at a minimum of $1,000. Another penalty kicks in at $50,000.

The move takes effect from Thursday.

To illustrate the new rules, it is useful to see how the system works now.

Take a case where a trader does naked short-selling, which is selling shares he does not own without buying them within the same day. The SGX will step in after three days and buy the stock on the trader’s behalf in what is called the buying-in market.

But it will buy at two bids higher than the last-transacted market price. This penalises the short-seller as the price will likely be higher than the price he sold at. The trader also pays a $30 per contract processing fee.

The new rule also slaps the trader with a minimum $1,000 fine.

Another new penalty will hit those short-selling in the buying-in market, although market observers say this would be rare.

Traders could be slapped with a penalty of $50,000 and face disbarment from participating in the buying-in market.

Another move announced yesterday will see SGX improving the disclosure of such trades, although it maintains that despite the market turbulence, trading has been orderly and settlement has been timely.

With effect from 11am today, the SGX will publish, daily, the list of stocks in naked short-sales and the amount that is required to be bought in.

‘This will make dissemination of information more efficient than the current practice of having the information relayed through brokers who participate in the buying-in market,’ the SGX said yesterday.

On the following day at 8.30am, the SGX will publish what has been bought in, the volume and the value.

Dealers said the SGX’s move sends a clear signal to the market that naked short-selling will not be allowed.

Another dealer speculated that there could be some relief for penny stocks which have been severely sold down. One analyst said ‘this could offer temporary relief for the banks’.

The measures will be reviewed after a month.

Short-selling has been blamed for driving down the prices of the financial institutions in the US and Britain to the point of near-collapse.

Bans on short-selling financial stocks were introduced in the US and Britain last week while Australia yesterday banned the short-selling of all shares.

 
Source : Straits Times  - 23 Sept 2008

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Singapore MAS tells banks to give priority to worried investors

Singapore MAS tells banks to give priority to worried investors
 
By Fiona Chan & Francis Chan 

BANKS and finance companies should make it a priority to deal with worried investors holding structured products tied to the now-bankrupt Lehman Brothers, the Monetary Authority of Singapore (MAS) said yesterday.
In its first specific comments on these precarious investments, MAS said that investors who ‘consider that they were mis-sold a product or that a product was misrepresented to them’ should first contact the financial institution they dealt with.

‘MAS expects the financial institutions concerned to give priority in dealing with such queries and handle complaints promptly, in accordance with existing MAS requirements,’ it said in a statement yesterday.

The central bank also suggested that investors with a ‘legitimate cause of grievance’ who are not satisfied with the response they get can approach the Financial Industry Disputes Resolution Centre (Fidrec).

As for the financial institutions concerned, MAS said it expects them to have ‘proper procedures’ in place to ensure that investment products are ‘marketed and sold appropriately’. ‘Where we have clear evidence in the current matter that a financial institution has breached our laws or regulations, we will hold the financial institution to account,’ it added.

MAS’ comments come amid an outpouring of grievances from fretful investors who, anxious for updates on their investments, are calling for regulators to take more pro-active action. These investors bought the Lehman-linked Minibond Series 3 and DBS Bank’s High Notes 5 series.

Investors who bought the Minibonds, which were arranged by Lehman, are in a lurch since bankruptcy proceedings are such that a long line of parties will first be paid before Minibond noteholders can get anything. Investors in DBS High Notes 5, which dangled a 5 per cent annual payout, may lose a large part of their stake.

‘What really frustrates me is the subdued response from MAS. As the financial watchdog, I think it has been extremely reactive and it has so far distanced itself from blame,’ said Mr Peter Lim, a Minibonds investor. He wants to know how MAS evaluated the products before approving them and if it knew how they really worked.

‘Has MAS obligated all banks and financial institutions to adequately train their staff and mandate them to highlight all the risk areas to potential investors? This has been a sore discussion point among retail investors here,’ he added.

A High Notes 5 investor, who wanted to be known only as Ms A, said she had informed MAS of her plight but ‘they do not seem to have acted at all’. ‘My question for them is, should they have even allowed the product to be sold? And what are they going to do about it now?’ she asked.

Mr Tan Kin Lian, former chief of insurer NTUC Income, has also urged the authorities to investigate financial companies that sold retail investors these structured products, and take them to court if necessary.

‘The MAS should look into whether these bank officers gave bad advice to investors, and whether they broke the law by giving inappropriate advice,’ he told The Straits Times yesterday.

 
Source : Straits Times  - 23 Sept 2008

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