Property issues in spotlight

Property issues in spotlight

SHARES of property developers led the market’s charge last week, on optimism that the real-estate sector will be one of the first to benefit when the economy turns the corner.
Property counters put on a solid performance last week, outperforming the benchmark Straits Times Index (STI).

CapitaLand, for example, was up over 10 per cent to $3.80 last week, compared to a 3.7 per cent gain in the STI. The stock is also up a whopping 37.7 per cent for May.

This in turn has put the spotlight on contracts issued on the developer.

One of the most actively traded contracts last Friday was a call warrant on CapitaLand issued by Macquarie Bank, which has a strike price of $3.283 and expires on Oct 2. It gained five cents to 46.5 cents with 20.46 million units traded.

Investors who are bullish on the stock can also take a look at a new call warrant to be issued by Macquarie, which has an exercise price of $3.80 and a longer-dated expiry of Nov 3.

Index warrants on the Hang Seng Index (HSI) were also in the spotlight after the Hong Kong benchmark hit an eight-month high last Friday, finishing above 18,000 points for the first time since October last year.

The HSI soared 6.4 per cent last week to close at 18,171.

The most active contract on the index was a call warrant, also issued by Macquarie, with a strike level of 17,000 and expires on July 30. It gained 6.5 cents to 79.5 cents with 10.5 million units traded last Friday.

A call warrant lets an investor buy into a stock or index at a pre-set price over three to nine months.

A put warrant lets an investor sell the stock or index at a pre-set price.

Source : Straits Times - 1 June 2009

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Private home sellers raise asking prices

Private home sellers raise asking prices

Recent stock rally may have lifted sentiment, but experts say sellers are too optimistic

By Joyce Teo, Property Correspondent

LATE FEB: Ad for RiverGate units displayed prices of $1,118 psf to $1,399 psf

LAST WEEK: Some ads offered its units at prices starting from $1,380 psf

PROPERTY market sentiment appears to have improved fast and furious, judging by the prices being asked by some individual sellers - though observers suggest they are being somewhat optimistic.
These sellers may be taking their cue from the stock market, experts said. Asking prices for some properties that have just been completed or are close to completion have jumped significantly in recent months.

The improvement follows strong data for new private home sales, which have crossed the 1,000-unit mark for three months in a row since February, after a period of severe stagnation.

Property experts said the recent strong rally in the stock market has given quite a lift to property market sentiment.

Still, lower prices have also played a part in stronger sales. Some recent launches have done well after developers finally cut their asking prices.

For instance, Parc Centennial in Kampong Java Road is now sold out, after developer EL Development relaunched the 44 remaining units at an average price of $1,175 per sq ft (psf), about 20 per cent lower than last year’s average price.

But individual sellers are tending to raise, not lower, prices. For instance, some sellers of high-floor units at Marina Bay Residences are advertising their properties at $2,000 psf or more - regarded by analysts as a key resistance level for many buyers.

Some recent classified advertisements in The Straits Times for Cosmopolitan in River Valley show asking prices of $1,380 psf to $1,395 psf, compared with asking levels of about $1,250 psf earlier in the year.

In late February, an ad for RiverGate units displayed prices of $1,118 psf to $1,399 psf. But last week, some ads for RiverGate, at Robertson Quay by the Singapore River, offered units at prices starting from $1,380 psf, with one ad even offering two three-room units at $1,900 psf.

Some sellers, with an eye to the longer term, are actually withdrawing properties from the market, sensing an uptick in sentiment. ‘We are seeing some sellers changing their minds to sell, seeing that the market is rising,’ said Savills Residential director Phylicia Ang.

HSR Property Group executive director Eric Cheng said the property market has performed beyond expectations in the past three weeks, but is starting to slow a tad as sellers retreat and wait for better prices.

A 31-year-old house-hunter, who is scouting for his first home, said two out of his three property viewing appointments near East Coast Road a week ago were cancelled almost at the last minute because the sellers decided to withdraw from the market. And over the weekend, his agent failed to get him any viewing appointments in the same area for the same reason.

Ms Ang said individual sellers face fewer risks by testing higher prices in the market. ‘If I don’t like the price, I can always withdraw,’ she said.

Still, market sentiment has moved up very fast. ‘It’s the ‘too good to be true’ scenario now,’ she said.

But one thing is for sure: There are buyers out there with cash and there is clearly demand for projects that are seen as good value, experts said.

Compared with the situation three months ago, sellers are more willing to negotiate prices today as there are more keen buyers, said Mr Cheng.

Just three days ago, a deal for a 2,150 sq ft UE Square unit in River Valley was closed nearly on the spot at slightly more than $1.8 million, as it worked out to an attractive level of below $850 psf, he said.

In general, even though there are still desperate sellers around, some sellers may be asking for about 5 per cent higher than the prices three months ago, Mr Cheng said. ‘You can see more sellers asking for a bigger premium, but no one will buy if you price your property too high. One high-price caveat does not reflect the price of the development,’ he added.

Market sentiment has improved, but it is still early days as short-term fundamentals have not exactly corrected, said PropNex chief executive Mohamed Ismail.

‘If the sellers start to increase their prices in anticipation of higher levels, they may kill the deal,’ he added. ‘We saw that in 2007 when prices were rising. Many sellers were not contented with their offers, so many deals did not materialise.’

He said sellers can ask for high prices, but the key is whether the banks are willing to match those asking prices.

‘It is no point if your own optimism is not matched by the valuation. That is the valuers’ view of the current market, taking into account the better sentiment.’

To sum up, said Mr Cheng, there are still more sellers than buyers.

Source : Straits Times - 1 June 2009

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Investors looking to key data to push stocks higher

Investors looking to key data to push stocks higher

Analysts expect more funds to enter market on evidence of stability, growth

By ANDREW MARKS
NEW YORK CORRESPONDENT

WHEN push came to shove on the final day of trading in May, investors bought into the two-month-long rally that has swept the major US stock market indexes from sickening losses into hopeful gains in the space of ten weeks, a good sign of things to come over the next four weeks for a market that has been drifting sideways of late.

‘The gains we saw were very nice, but this week was more significant for what those gains mean in terms of investor psychology and sentiment,’ said Marc Pado, market strategist at Cantor Fitzgerald.

Fund managers and institutional investors, still cautious over whether to commit to the notion that current valuations are well supported by economic data that point to a recovery by the year-end, appear to be hedging towards the bullish side of the argument, a tipping of the balance that would mean big upside for the short-term bull market.

‘Friday’s rally was about money fund managers doing end of the month fund rebalancing, which foreshadows the more significant rebalancing that takes place at the end of every quarter,’ noted Mr Pado, who believes that evidence of stability and eventual growth in the economy will convince institutional investors to get on the bullish bandwagon as the second quarter draws to a close in June.

‘Barring any major change in the way the economic data is trending, I think we’ll see more days like today (Friday), where bullish sentiment prevails than we see of days like last Tuesday, when doubts over the recovery and the rally resurfaced,’ he said.

Although some institutional money came into the market in April, at the beginning of the new quarter, most of it has been kept on the sidelines, in cash and short-term debt, says John O’Donoghue, chief equities trader at S G Cowen. ‘Most of the run-up has been due to a strong wave of buying on the retail side, with big inflows to US equity mutual funds since late March.’

Bringing institutional investors on board in more enthusiastic numbers could mean an additional 5 to 10 per cent worth of advances for the S&P 500 by the end of June, some analysts estimate.

To be sure, the bullishness evidenced in last week’s trade is far from a sure thing going into the new month. The traditional ‘Sell in May And Go Away’ psychology may still very well exert its influence as the market heads into the summer months, especially following a rally that has pushed the S&P 500 close to a 40 per cent gain since March 9.

And with an economy that is far from out of the woods yet, any significant break in the trend toward recovery in the economic data flowing in over the next few weeks could swiftly bring the bear back to Wall Street, traders said.

On Friday, the economic news continued to support the recovery scenario, as the Commerce Department revealed that GDP decreased at an annual rate of 5.7 per cent in the first quarter of 2009, less than the original estimate for a 6.1 per cent decrease, and the University of Michigan Consumer Sentiment Index increased to 68.7 from 67.9, slightly better than expectations for 68.

Investors responded by sending the Dow Jones Industrial Average up 96.53 points, or 1.2 per cent, to 8,500.33, while the S&P 500 rose 12.31 points, or 1.4 per cent, to a close of 919.14. The Nasdaq Composite gained 22.54 points, or 1.3 per cent, to end the week at 1,774.33.

For the week, the Dow advanced 2.7 per cent, the S&P 500 picked up 3.6 per cent, and the Nasdaq led the way with a 4.9 per cent rise. The strong week gave the indexes a good showing for May, with blue chips up 4.1 per cent, the S&P 500 higher by 5.3 per cent, and the Nasdaq showing a 3.3 per cent gain.

The coming week will probably start off dominated by the widely expected bankruptcy of General Motors today, but the economy will take over the spotlight by mid-week, ahead of a key jobs report on Friday.

Investors are waiting to see if the data evolves into more positive territory, from ‘less bad’ numbers to ‘on the way to good’ numbers in order to fuel the next leg up, traders said.

Personal income and spending data for May, along with the ISM manufacturing and construction data is due out today.

Last month’s pending home sales and auto sales are reported tomorrow, and Fed chairman Ben Bernanke testifies before Congress on Wednesday. Investors will be listening in for clues to the June 23-24 Federal Open Markets Committee meeting.

Wednesday also brings ISM non-manufacturing numbers, and the ADP’s private sector employment report, which traders will look on as a strong hint of the biggest data point for the week, the government’s May jobs report. Economists are expecting the Labor Department will report companies cut about 550,000 jobs in May, slightly more than the 539,000 in April.

Source : Business Times - 1 June 2009

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Property sales test price ceiling

Property sales test price ceiling

Units priced below $800,000 most in demand; resistance at higher levels

By EMILYN YAP

(SINGAPORE) Buyers have been flocking to private apartments priced below $800,000 in recent months. Some may fork out a bit more, but with the economy still in the doldrums, most start getting cold feet when prices reach $1 million to $1.5 million.

According to property consultancy DTZ, units selling for $600,000-plus to $800,000 were the most popular from January to April. In DTZ’s analysis of 4,401 caveats captured by the Urban Redevelopment Authority’s Realis system, 1,515 or 34 per cent were lodged for apartments in this price range.

Of these 1,515 caveats, 92 per cent were for units outside prime districts 1, 4, 9, 10 and 11. And 93 per cent were for units of less than 1,400 sq ft.

Projects where plenty of recently released units were in the sweet price range include Double Bay Residences in Simei, Mi Casa in Choa Chu Kang and Waterfront Waves in the Bedok Reservoir area, DTZ said.

For instance, 95 of 171 caveats lodged for Double Bay Residences (56 per cent) involved units priced from $600,000-plus to $800,000.

Savills (Singapore) has reached a similar conclusion from its own study of caveats - units below $800,000 have been most popular in the outside central and rest of central regions.

Even in the core central region, it has been possible to find smaller units for less than $800,000 - and buyers favour them. At The Mercury near River Valley, for instance, 27 of 38 caveats lodged (71 per cent) were for units priced below this level.

Anecdotally, buyers at recent launches seem to be more concerned about overall cost - smaller units with higher per sq ft (psf) prices have been selling faster than larger units with lower psf prices in some cases.

Savills’ research and consultancy associate director Priya Sengupta said tighter credit means buyers consider the affordability of units in absolute and psf terms.

‘Psf price acts as an impetus to generate interest and keenness or affinity to a certain location or a certain development, whereas quantum comes into play during the buying decision,’ Ms Sengupta said.

Based on DTZ and Savills’ studies, buyer resistance generally sets in at $1 million to $1.5 million. DTZ noted that only 16 per cent of the 4,401 caveats lodged from January to April were for units costing $1 million-plus to $1.5 million, while a mere 5 per cent were for units costing $1.5 million-plus to $2 million.

With high-end property stirring in the past few weeks, could the resistance level be on the way up? Data is not available because it takes time for caveats to be lodged and captured.

But according to Knight Frank’s director of research and consultancy Nicholas Mak: ‘It appears so because more people are exploring the market.’

Still, he laced his observation with caution: ‘This is often (due to) a bit of spillover from the stock market, which can be fairly volatile. It is also based on the expectation that the Singapore economy is going to recover year-end or so - but the government is not of the opinion.’

Announcing Singapore’s first-quarter GDP figures recently, the Trade and Industry Ministry said there are still no decisive signs of recovery.

Of course, buyer resistance is unlikely to apply as far as the ultra-rich are concerned. DTZ’s data shows 4 per cent of caveats in January to April were lodged for units worth more than $2.5 million. These include caveats for three apartments at Ardmore Park each worth more than $5 million. There were also caveats for 23 Gallop Gables units priced from $2.5 million to $4 million.

Source : Business Times - 1 June 2009

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Temasek recoups half of losses in S’pore portfolio

Temasek recoups half of losses in S’pore portfolio

Market rally boosts investments in 12 S’pore firms by $16.4 billion over 6 months

By LYNETTE KHOO

(SINGAPORE) The recent market rally has helped Temasek Holdings recoup close to half the paper losses it incurred in Singapore equities last year.

And if the market continues on its current uptrend, the numbers should improve further.

Based on estimates by The Business Times, Temasek’s investment in 12 Singapore equities put on $16.4 billion over six months between end-November last year and May this year.

It had earlier incurred an estimated $32.9 billion of paper losses in these 12 companies from March 31 to Nov 30, 2008.

For the fiscal year ended Mar 31, 2009, however, Temasek’s portfolio of 12 Singapore stocks could have seen value erosion of 37.7 per cent to about $49.89 billion. These paper losses are expected to show up in Temasek’s FY2009 annual report due out soon.

But ‘green shoots’ are now appearing on its report card. In just the last two months, the value of Temasek-linked companies listed on the Singapore Exchange increased by 27.3 per cent or $13.6 billion to $63.5 billion.

Year-to-date, the combined value of its local investments in listed companies is 27.2 per cent or $13.57 billion higher than end-2008.

Fund managers and analysts note that there is high chance of recouping the other half of the $32 billion of paper losses given the current bullish view on Singapore stocks.

Wong Sui Jau, general manager of Fundsupermart, says he is positive on local equities, which are trading at reasonable valuations, and expects blue chips to rise further as earnings improve.

CIMB-GK research head Kenneth Ng said: ‘I think it (Temasek) will recoup a good part of the loss reported in 2008 given that we are quite positive on this market rally.’

‘The public is overly obsessed with the dollar value they lost,’ he noted, adding that Temasek’s performance is better assessed over cycles - a point which Finance Minister Tharman Shanmugaratnam also raised in Parliament last week.

Since March 2003, Temasek’s portfolio had grown by a net value of $56 billion in spite of the losses posted in the last fiscal year ended March 31, 2009.

Over the six-year cycle, Temasek achieved an annualised return of slightly over 15 per cent in US dollar terms, compared with a 6 per cent annual return for global equity market indices based on the MSCI World Index.

But within a shorter period between end-March to November 2008, Temasek incurred $32 billion of paper losses in the 10 largest Singapore-listed stocks it holds.

Mr Tharman released these figures in Parliament last Thursday, and stressed that more than half of the $58 billion loss in Temasek’s portfolio in the eight months between March 31 and Nov 30, 2008 was due to the market slump.

Based on the market caps of the 12 Temasek-linked companies, Chartered Semiconductor and STATS ChipPAC, were excluded from the top 10 companies.

Temasek’s investment in these 10 companies have since regained $14.8 billion in value from end-November last year to May this year.

Quizzed by Members of Parliament over Temasek’s recent loss-making divestment of Bank of America shares, Mr Tharman also cautioned against looking at each investment in isolation. The discipline should be that of looking at an overall portfolio, studying its returns over relevant periods of time, rather than short periods of time, he said.

Steven Lim, director of Archer Capital Investment, felt that a 15 per cent annualised return is ‘a fair return given that (Temasek) is a big fund.’ For smaller funds, it’s easier to obtain a higher rate of return.

But some fund managers are circumspect about drawing conclusive assessments on the investment agency’s performance. Incidentally, March 2003, which is used as a base comparison, coincided with a low in global equities.

‘It is hard to say whether they have outperformed or underperformed … as we do not know how that would compare with other benchmarks or against other funds with similar asset allocation,’ Mr Wong said.

He also noted that a comparison across different sovereign wealth funds (SWFs) may not give a fair comparison, as different SWFs have different mandates - some invest more heavily in equities, others in fixed income.

‘Certainly, no equity fund manager can make money consistently throughout every cycle … but any outperformance should be measured against funds with similar asset allocation,’ Mr Wong said.

Source : Business Times - 1 June 2009

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