Aberdeen seeks Asia edge with Credit Suisse deal

Aberdeen seeks Asia edge with Credit Suisse deal

By Gabriel Chen

ABERDEEN Asset Management believes its proposed £250 million (S$520million) purchase of parts of Credit
Suisse’s regional operations will give it significant extra clout in the Asia-Pacific.

Aberdeen managing director Hugh Young said the deal would add about US$10billion (S$14.6 billion) in new assets to the US$30billion the firm manages in this part of the world.

The stake in the Zurich-based bank’s Global Investors business would also give Aberdeen the opportunity to achieve greater scale in Asian markets.

‘We’re already one of the biggest in Asia-Pacific and now we’ll be bigger,’ Singapore-based Mr Young said.

‘We’ll certainly be increasing our presence with the acquisition and that’s a good thing.’

Aberdeen, Scotland’s largest independent money manager, is regarded as among the top five independent asset managers in terms of Asian assets under management. But it is still considerably smaller than the likes of Fidelity International, which is estimated to have over US$100billion in Asian assets managed.

‘It’s profitability that matters, so there isn’t a sort of target (assets) per se,’ Mr Young said.

The stake being offered by Credit Suisse includes assets under management of about 75 billion Swiss francs (S$102billion) and divisions in Europe, the United States and Asia, the bank said on Wednesday.

Credit Suisse will get a stake of about 25 per cent in Aberdeen and a board seat.

Aberdeen has based its regional hub here, where it employs 130 people, including fund managers.

Global Investors, the Credit Suisse unit, has a presence in all major investment centres worldwide, with about 40 employees here.

Industry watchers see the proposed sale as a good ’strategic move’ for both Aberdeen and Credit Suisse, whose asset-management division posted pre-tax losses of 359 million Swiss francs in the first nine months of last year.

While Credit Suisse is not exiting the asset-management business - it will continue to have a presence in countries such as Switzerland and Brazil - industry watchers say the sale would let it focus resources on areas like alternative investments.

Mr Rob Shafir, chief executive of its asset-management division, has said the transaction will provide clients with access to an ‘enhanced suite of investment products’ and that it will benefit from its new partner’s ‘advantages of scale in a consolidating marketplace’.

Aberdeen will benefit financially from the deal.

‘It appears a great earnings-enhancing deal for us as we should be able to add relatively low-cost revenues to our existing structure,’ Mr Young said.

The structure of Aberdeen will not materially change, he said, as they already manage the kinds of funds they are acquiring from Credit Suisse.

He added that it was too early to say whether Global Investors’ workforce in Singapore will join with Aberdeen.

‘Once approvals are obtained, we will integrate rapidly as we will elsewhere,’ he said.

Source : Straits Times - 03 Jan 2009

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Singapore HDB resale prices could dip soon

Singapore HDB resale prices could dip soon

Economic slowdown expected to lead to people downgrading later in year

By Michelle Tay

Some buyers may choose HDB flats over private homes to limit their exposure to the uncertain market.

PRICES of HDB resale flats have continued to rise even as the economic downturn takes its toll on jobs, wages and private home prices.
But analysts warn this recent steady rise may not last long.

According to flash estimates of HDB’s Resale Price Index released yesterday, prices of flats in the fourth quarter of last year rose 1.5 per cent over the preceding quarter.

This figure is considerably lower than the 4.2 per cent increase in the third quarter, and it is the first time that growth has dipped below 3 per cent in six months, said real estate agency PropNex.

But while average prices of HDB resale flats are now at an all-time high, property analysts say that they are likely to dip some time this year.

‘Sentiment is pretty soft as many people are taking a wait-and-see approach,’ said Mr Eric Cheng, executive director of HSR Property Group. ‘If prices dip, they will do so in the second and third quarters of this year.’

Mr Eugene Lim, associate director of ERA Asia Pacific, said: ‘With the economy likely to contract further and more layoffs expected in the months ahead, home buyers have become very practical.

‘In uncertain times, home buyers go for a ’safer’ option - HDB flats - to lessen the financial burden. This is especially so for the ’sandwiched’ class that may find private housing a little too stretched for their comfort.’

Mr Nicholas Mak, Knight Frank’s director of research and consultancy, said: ‘Buyers are increasingly cautious and prefer to purchase HDB flats instead of private homes to limit their exposure to the uncertain market. A number of homeseekers are re-aligning housing requirements from aspirations to functional needs.’

He expects prices to remain flat in the current first quarter, and overall prices to drop 5 to 10 per cent in the full year.

‘At the moment, there are still people who need homes. But the economic slowdown and job losses will eventually cause some people to downgrade from larger flats to smaller ones, and only by the second quarter will we start to see a pronounced rate of decline,’ he added.

PropNex chief executive Mohamed Ismail is slightly more optimistic.

‘If the economy does not improve… there will be more downgraders and cautious home buyers in the wake of retrenchments and tighter budgeting. If more people shy away from the bigger flats above the $500,000 mark, it’s just a matter of time before prices dip.’

‘Clarity will come in the second half of the year. But we should still see overall average growth of between 3 and 5 per cent in 2009.’

What seems certain to decline, however, are cash-over-valuations (COVs).

‘The days of transactions with above $50,000 COV are over. Remote exceptions are well-renovated flats with unobstructed, panoramic views,’ said ERA’s Mr Lim.

Mr Ismail agreed: ‘Today, the bigger flats that are valued at $500,000 and above on the resale market can sit without a buyer for two to three months. The en bloc frenzy of last year has already dwindled, affecting the demand for the bigger flats.’

Added Mr Lim: ‘We are thus likely to see the COV statistics continue to decline in the coming quarters.’

Source : Straits Times - 03 Jan 2009

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Private homes continue freefall; HDB prices hold up

Private homes continue freefall; HDB prices hold up

The fourth quarter’s 5.7 per cent drop is the sharpest in a decade
By Jessica Cheam

THE deepening economic crisis sent private home prices plunging 5.7 per cent in the fourth quarter of 2008 - the steepest drop in a decade.
The dramatic fall has effectively brought an end to Singapore’s four-year property rally as prices had already dived 2.4 per cent in the previous quarter as jittery buyers flee the market.

Prices for 2008 overall are down 4.3 per cent compared with 2007, according to flash estimates from the Urban Redevelopment Authority (URA) yesterday.

This is a striking turnaround from the 31.2 per cent spike in private home prices in 2007, the peak of the boom.

But Housing Board (HDB) flats continue to buck the trend, climbing 1.5 per cent in the fourth quarter following a 4.2 per cent increase in the third.

This means HDB resale flat prices have reached a new peak since the 1996 high.

Prices rose 13.9 per cent in 2008, building on the 16.6 per cent increase in 2007.

Analysts say the gloomy economic outlook has turned home-buyers even more cautious, leading to a fall in demand even as developers begin to soften prices of new launches. Potential buyers are waiting on the sidelines in anticipation of further price cuts, said CBRE Research executive director Li Hiaw Ho.

Prices for apartments in the core central area suffered the most - down 6.3 per cent in the three months to Dec 31, while those in the rest of the central area slipped 5.5 per cent. This follows declines of 2.7 per cent and 2.4 per cent respectively in those areas in the third quarter.

But the falls in some prime projects were even more severe. CBRE’s Mr Li said the luxury segment has taken a hammering with projects under construction falling 30 to 35 per cent in prime districts 9 and 10, while those in Marina Bay and Sentosa Cove fell 10 to 13 per cent.

The URA’s website showed home prices at Ardmore Park, for example, declining around 30 per cent, from an average of almost $3,000 psf in February to March, to around $2,115 psf in December.

Prices of suburban homes fared better. They were down 4.7 per cent in the fourth quarter, following a 1.5 per cent drop in the previous three months.

ERA Asia Pacific associate director Eugene Lim said prices of such homes have already dipped to ‘very reasonable levels, due to recent launches where developers were sensitive to the poor economy’.

Mr Lim also felt that the drop in private home prices - the largest since the last quarter of 1998 - proves that ‘fire sales’ have started as sellers look to bail out and raise cash amid the recession.

Knight Frank’s director of research and consultancy, Mr Nicholas Mak, said the decline of median prices of sub-sales - 10.6 per cent in the third quarter and 7.5 per cent in fourth quarter - confirms this theory, based on his firm’s analysis.

Take Sentosa’s The Azure. The median subsale price in the fourth quarter was $1,200 psf, down from around $1,700 psf in the previous two quarters, said Mr Mak. That means a 1,300 sq ft flat that cost $2.21 million might now go for just $1.56 million.

The URA recently revealed that about 10,450 unfinished homes were sold under deferred payment, which allows buyers to postpone payments until projects are completed. This has raised concerns that such homes are at risk of default or distressed sales if prices fall more.

The URA and HDB flash estimates were based on transactions in the first 10 weeks of the fourth quarter. They will be updated in four weeks.

The head of research and consultancy at Chesterton Suntec International, Mr Colin Tan, said December’s transactions could render the final figure two to three percentage points worse than the estimate.

CB Richard Ellis predicts prices will fall 10 to 15 per cent this year and Knight Frank tips falls of 13 to 20 per cent.

Meanwhile, analysts say that most developers can hold off launches over the short to medium term if necessary.

Yet the market is not short of buyers and investors out for bargains, said ERA’s Mr Lim. ‘While the immediate future may be bumpy, we are confident there is light at the end of the tunnel.’

Source : Straits Times - 03 Jan 2009

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Dismal manufacturing numbers test Obama - New York

Dismal manufacturing numbers test Obama - New York

Key index points to the sharpest decline in US manufacturing in December in about thirty years

(New York)

MANUFACTURING in the US shrank in December at the fastest pace in almost three decades as the recession deepened and spread overseas.

The Institute for Supply Management’s (ISM) factory index fell to 32.4, less than forecast and the lowest level since 1980, from 36.2 the prior month, the Tempe, Arizona-based private group said yesterday. Readings less than 50 signal contraction. The group’s price measure fell to the lowest level in almost six decades.

Clogged credit markets, the collapse in housing and mounting job losses have hurt demand for everything from furniture and appliances to vehicles, driving General Motors Corp and Chrysler LLC to the brink of bankruptcy. The slump will extend into 2009 as downturns in Europe and Japan also depress exports.

‘Expectations for the manufacturing sector are bleak,’ Guy Lebas, chief economist at Janney Montgomery Scott LLC in Philadelphia, said before the report. ‘Foreign economies are suffering along with the US.’

The group’s gauge, which covers about 12 per cent of the economy, was projected to drop to 35.4, according to the median estimate of 57 economists surveyed by Bloomberg News. Forecasts ranged from 34 to 40 and the measure averaged 51.1 in 2007.

The manufacturing slump underscores why President-elect Barack Obama, who takes office on Jan 20, has said that his first priority will be to pass an economic stimulus plan that will invest in public works and create or save three million jobs. The package may be worth as much as US$850 billion.

Manufacturing deteriorated around the world in December, signalling a worsening global recession, other reports yesterday showed. The euro-area’s gauge fell to a record low, while industry in China contracted for a fifth month. Indicators for the UK, Sweden, Hong Kong and Australia also showed factories in decline.

Such data ‘confirm a sharp contraction in global investment, output and trade activity, consistent with the deepest global recession since at least the early 1980s,’ said Lena Komileva, head of market economics in London at Tullet Prebon plc.

The ISM’s gauge of new orders dropped to the lowest level since records began in 1948, while export demand was also the weakest since those records started in 1988. The group’s employment index decreased to 29.9 from 34.2 in November.

The gauge of prices paid fell to 18, the lowest level since 1949, reflecting the drop in commodity costs. Economists had projected that the measure, which averaged 65 in 2007, would drop to 20.

Carmakers have been among the hardest hit as November sales plunged to the lowest level in a quarter century, according to industry figures.

President George Bush announced on Dec 19 that General Motors and Chrysler will get US$13.4 billion in initial government loans to keep operating while they restructure operations to return to profitability.

The carmakers last month expanded their traditional holiday shutdowns to clear out unwanted stock. Chrysler idled all 30 of its assembly plants on Dec 17 for at least a month, while GM announced output cuts on Dec 12 that affected 20 plants.

The factory slump has spread well beyond cars as demand from abroad also weakens. Ingersoll-Rand Co, the maker of Thermo King and Hussmann refrigeration equipment, said last month that profit will fall short of fourth-quarter and full-year estimates after demand declined ’sharply’ in North America and Western Europe. — Bloomberg

Source : Business Times - 03 Jan 2009

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Q4 Singapore private home price slide is worst in decade

Q4 Singapore private home price slide is worst in decade

Some consultants notice yawning bid-ask gaps leading to distressed transacted prices

By KALPANA RASHIWALA

IN its worst showing since Q4 1998, the official private home price index slid 5.7 per cent in Q4 last year over the preceding quarter. For full-year 2008, the index fell 4.3 per cent, reversing a 31.2 per cent jump in 2007.

Property consultants are predicting a further decline of 10-20 per cent this year in the benchmark index, with upmarket homes continuing to be the worst hit, as in 2008. This sector was the most overheated during the run-up in 2006 and 2007.

‘The bid-ask gap is very high; any buyer that comes in now wants to make sure he’s buying at very attractive prices to cushion against future risk. As a result, most transacted prices are quite distressed,’ said DTZ executive director Ong Choon Fah.

BT understands buyers are looking at prices at least 20 per cent below Q3 2008 levels before they are willing to commit.

URA’s non-landed private home price index for Core Central Region (CCR) fell 6.3 per cent quarter-on-quarter in Q4, or a full-year drop of 5.5 per cent. CCR includes the prime districts, financial district and Sentosa Cove. In the Rest of Central Region, the price drop was 5.5 per cent for Q4, and 4 per cent for the full year. Outside Central Region, a proxy for suburban mass-market locations, suffered the smallest declines, of 4.7 per cent in Q4 and 1.6 per cent for the whole year.

The declines in URA’s indices were far smaller than the price drops estimated by property consultants. CB Richard Ellis said that last year, average prices of new luxury homes under construction fell 30 to 35 per cent for prime districts 9 and 10, while those in Marina Bay and Sentosa Cove eased 10-13 per cent.

URA’s price indices are weighted according to the moving average mix of transactions for the preceding 12 quarters, and this tends to make changes in the indices more muted during sharp market swings.

For this year, JP Morgan analyst Chris Gee said: ‘The critical factor that will affect private home prices in 2009 - probably more importantly than the economy and jobs market - will be banks’ financing of property. Banks seem happy to lend to the right type of buyers, but they’re more conservative on valuations and tighter on loan-to-value.’

As for developers, smaller players have already started to chop prices. ‘Among bigger developers, some are restructuring their portfolios and re-evaluating their risk positions,’ DTZ’s Mrs Ong noted.

A seasoned developer pointed to a diversity of strategies among developers, according to their financial strength, profit margin for each project and their view of when the recovery will take place. ‘Some will cut and sell; some will package things that effectively give more discounts; some will lease instead of selling; some will just sit it out and wait for better times.

‘Projects will be slowed down or delayed, stretching out the supply coming into the market, which in itself is a regulating mechanism,’ he said.

In the public housing segment, the Housing & Development Board’s (HDB) resale flat price index still inched up 1.5 per cent quarter-on-quarter in Q4 to scale a new peak. But this was slower than the 4.2 per cent rise posted in Q3.

ERA Asia Pacific associate director Eugene Lim said: ‘We’ve been seeing more transactions with decreasing cash-over-valuations (COVs). The days of transactions with above $50,000 COVs are over.’

He is predicting a sub-1 per cent rise in the HDB resale flat price index for each of Q1 and Q2 this year. ‘If the recovery takes longer, we may see the price index flatten in H2 2009 before decreasing, if the situation worsens.’

Knight Frank director Nicholas Mak predicted a 5 to 10 per cent correction in HDB resale flat prices this year, as the weakening economic conditions filter into the HDB market.

ERA’s Mr Lim noted that ‘in uncertain times, home buyers go for the ’safer’ option of HDB flats to ease their financial burden’. He estimated 30,000 to 31,000 HDB resale transactions were done in 2008 - surpassing the 29,436 in 2007.

As for the private housing sector, CBRE predicted developers may sell 5,000-6,000 units in 2009, as falling prices boost take-up. It put the figure for last year at 4,300 to 4,400 units - just 30 per cent of 2007’s record volume. Sales also slowed in the secondary market. CBRE estimated about 7,400 to 7,600 resale deals were done last year - against nearly 21,000 transactions in 2007. The 1,600 to 1,650 subsale deals it estimated for 2008 were also a far cry from the 2007’s figure of 4,863.

Source : Business Times - 03 Jan 2009

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Economy bears challenge the Ox -Singapore

Economy bears challenge the Ox -Singapore

Singapore GDP down 2.6% in fourth quarter, the sharpest fall in seven years

By ANNA TEO

THE Year of the Ox may be around the corner, but the latest gross domestic product figures have brought out the market bears in force, with the official growth forecast for 2009 now skewed towards the red.

Economists now reckon the Singapore economy could be headed for its worst quarterly contraction on record in the current Q1, and see its most severe recession this year, going by how sharply both the manufacturing and services sectors have been hit by the global downturn. Following the prime minister’s announcement in his New Year message of worse-than-expected 2008 GDP growth of 1.5 per cent, the Ministry of Trade and Industry yesterday said that it now expects Singapore’s 2009 growth to range between a 2 per cent contraction and one per cent growth.

This is down from its November 2008 forecast for the year, also a three-point range, but tilted towards growth: minus one per cent to positive 2 per cent. The global economic crisis has worsened since November, MTI said, noting that world trade volumes are expected to contract for the first time in 26 years this year. And the Singapore economy just suffered its sharpest decline in seven years - GDP fell 2.6 per cent in Q4 from a year ago, or more than what the most pessimistic forecasts expected. According to MTI’s advance estimates, based largely on only October and November data, the manufacturing sector contracted for a third straight quarter in Q4 - by 9 per cent - and by 3.7 per cent year-round.

Growth in the services and construction sectors also slowed sharply in Q4. Says market analysis firm Forecast in a report on Singapore: ‘The crux of the matter is that exports will probably continue to languish for the better part of 2009 - lagging any initial recovery that we can expect in the industrialised nations - and necessarily the manufacturing sector will share the pain.’

Most economists have largely earlier already pencilled in a full-year contraction in their forecasts of Singapore’s 2009 growth, but the latest GDP figures did prompt at least one forecaster to cut - no, slash - his estimates yesterday.

Citigroup economist Kit Wei Zheng lopped off 1.6 points from his forecast for a 2.8 per cent contraction - which would spell the biggest full-year contraction since 1964, surpassing 2001’s 2.4 per cent slump.

Citing ‘forward looking indicators’, he now thinks the first-half contraction could be deeper than expected earlier, with the Q1 decline possibly hitting 8 per cent. The biggest quarterly contractions to date in more ‘recent’ times were in the second half of 2001, when GDP fell more than 6 per cent in both Q3 and Q4. Both manufacturing output and non-oil domestic exports will likely shrink in double digits in Q1, going by leading indicators from the OECD (Organisation for Economic Co-operation and Development) economies and the US purchasing managers’ index, says Mr Kit.

Citigroup’s forecasts may seem about the most bearish in town, but they at least leave room for a Q4 rebound to positive territory. Standard Chartered Bank economist Alvin Liew, who had pared his 2009 forecast for Singapore to a 2.5 per cent contraction in mid-December, is looking at four negative quarters, year-on-year, with the economy probably at its weakest point in Q2. ‘It’s difficult to see much upside for Singapore at this point,’ he says.

DBS Bank economist Irvin Seah is staying, for now, with his forecast of a 0.6 per cent contraction in 2009 - around the midpoint of the official forecast, and which is also among the more ‘optimistic’ figures at this stage.

But the risks are on the downside, he says. Depending on how the various stimulus policy responses worldwide pan out, Singapore may get some positive spinoffs, though that will come through only later in the year, he adds.

As for any boosts from the upcoming Budget, economists expect the measures to at most provide some buffer for beleaguered businesses and stem the tide of job losses.

One ‘upside’ from the poor economic outlook is that inflationary pressures should all but disappear this year, though Citigroup’s Mr Kit thinks ‘a slide into temporary deflation cannot be ruled out’.

In its statement yesterday, the Ministry of Trade and Industry said the sharp declines in global demand, trade and investments will hit the Singapore economy across the board.

While the manufacturing, wholesale trade, transport and retail sectors get direct hits, the financial services will continue to be dragged down by weak markets and credit growth. The slowdown will in turn spread domestically to the property and business services.

Details of Singapore’s Q4 2008 and full-year economic performance will be unveiled next month.

Source : Business Times - 03 Jan 2009

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