Property auctions shedding bad image

Property auctions shedding bad image

Home owners become more receptive to mortgagee sales as a way to secure a better price

By Elizabeth Wilmot

Property market watchers will likely be keeping an eye on the ‘forced-sale’ auction on June 23 of two units at Jasmine Court condominium along Upper Thomson Road.
The two units, owned by one person, will be offered as MCST (management corporation strata title) sales at the Knight Frank auction.

The last time Knight Frank offered such a sale was in April last year. A condo’s management can initiate an MCST sale if a unit owner is in arrears on monthly maintenance and service payments.

Given the current downturn, there has also been talk that the number of mortgagee sales - when owners are unable to refinance their home loans - may increase.

Mr Shaun Poh, DTZ’s senior director for investment advisory services and auction, said, however, that in the short term ‘maybe (in the) next three to six months, I will not expect any increase in the number of mortgagee sales’.

He said banks this time round are quite prepared.

‘That’s why I think there is no panic repossession or foreclosure. The banks are not pulling the plug and are more prepared to talk to borrowers about restructuring their loans,’ he explained.

Colliers International’s figures show that the number of mortgagee sales across all auction houses has not seen a large jump in the first five months of the year.

The highest number of mortgagee-sale auctions was 21 - in February - while the lowest was 15 - last month.

Ms Grace Ng, Colliers’ deputy managing director and auctioneer, said: ‘I think the banks prefer to give the owners time to manage the property on their own.’

She said, however, that the number of mortgagee sales might rise in the third or fourth quarter of the year.

‘Normally, there is a lag time between when the bank repossesses the property and when it puts it on the market.’

Colliers’ data also showed that some $18.5 million worth of properties were sold across all auctions - forced sales or otherwise - last month.

‘Owners are now quite receptive to putting properties up for auction. They have more or less accepted it as an acceptable mode of sale, compared to maybe a decade ago, when mortgagee sales had a bad image,’ said Ms Ng.

Ms Mok Sze Sze, the head of auction and sales at Jones Lang LaSalle, said some good deals were transacted during her firm’s last auction last month.

An example, she said, was a semi-detached house in Namly Garden. It was withdrawn in an auction in January at the highest bid of $2.8 million. Last month, it was sold for $3.7 million.

‘With the recent improved market sentiment, we are seeing more owners’ sales coming on board, with some owners looking at auctions as a way to attain the desired optimum price within a definite timeframe,’ she said.

Perhaps another sign of the improved times is the confidence the owner of a colonial bungalow, in the choice Belmont Road area, has in getting an optimum price.

He will put his property, with a whopping land area of 32,627 sq ft and an indicative price range of $850 to $1,000 per sq ft, up for bidding at Knight Frank’s auction next Tuesday.

Ms Mary Sai, the executive director of Knight Frank, said: ‘Bungalows are hardly put up for auction. It’s basically very rare property.’

Source : Straits Times - 14 June 2009

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Expect more nuke bombs, says N. Korea

Expect more nuke bombs, says N. Korea

It is defiant in face of fresh UN sanctions; threatens military action if US and allies isolate it

Seoul - A defiant North Korea vowed yesterday to build more nuclear bombs and to start enriching uranium for a new atomic weapons programme after the UN Security Council imposed sanctions on it over its nuclear test.
The threat prompted Washington to demand that Pyongyang stop its ‘provocative’ actions.

North Korea also threatened military action if the United States and its allies were to try to isolate it.

The United Nations Security Council approved a resolution last Friday which banned all weapons exports from North Korea and most arms imports into the state.

It authorised UN member states to inspect North Korean sea, air and land cargo, requiring them to seize and destroy goods shipped that violate the sanctions.

In Washington, a US State Department official said: ‘(North Korea) needs to cease provocative actions and rhetoric, and return unconditionally to the six-party process.’

The six-party nuclear disarmament talks involve the two Koreas, the US, Russia, Japan and China.

In Lecce, Italy, finance ministers of the Group of Eight wealthy countries said they were ‘committed to the effective and timely implementation of financial measures against North Korea’ as set out in the Security Council resolution.

The North, describing Friday’s sanctions resolution as a ‘vile product’ of a US-inspired campaign, said it would never abandon nuclear weapons and would treat any attempt to blockade it as an act of war.

The hard-line communist state, in a Foreign Ministry statement reported by its official news agency, said all new plutonium it extracts would be weaponised.

One third of used fuel rods from the Yongbyon reactor have so far been reprocessed into weapons-grade plutonium, it said.

‘Secondly, we will start uranium enrichment,’ it said in its first admission that it has such a programme - a second route to a nuclear bomb.

In 2002, the North denied US claims that it was operating a secret uranium enrichment programme in addition to its admitted plutonium-based operation.

The plutonium-producing plants were shut down under a 2007 disarmament deal. But Pyongyang vowed to restart them after the Security Council in April condemned its long-range rocket launch.

‘It has become an absolutely impossible option for the DPRK (North Korea) to even think about giving up its nuclear weapons,’ the statement said, adding that any attempted blockade would be considered an act of war, ‘and met with a decisive military response’.

US intelligence officials believe Pyongyang will respond with a third atomic test, according to sources quoted by American TV networks.

The claim to have developed uranium enrichment technology is alarming, said Professor Yang Moo Jin of Seoul’s University of North Korean Studies.

‘If this is true, the world would face a very disturbing situation,’ he said. ‘The North has abundant natural uranium of good quality which, if combined with technology and facilities, would result in a great nuclear arsenal.’

AFP, Reuters

Source : Straits Times - 14 June 2009

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Investors should be aware of what could cause the trend to bend

Investors should be aware of what could cause the trend to bend

By R SIVANITHY

SINGAPORE - Two weeks ago, this column was headlined ‘The trend is your friend - until it bends’ in which the view expressed was that there was still scope to play the market as if the recovery would be ‘V-shaped’, ie punters should expect Wall Street and related markets to continue reacting positively because the economic data would, in all likelihood support the ‘green shoots’ view of the world. As a result, staying long was probably the right thing to do, but it would be advisable to keep in mind that there were mounting reasons to remain sceptical of the benign worldview that the markets were buying into.

The reasoning was simple - liquidity, momentum and US economic data were all in favour of a continued upswing, but the day of reckoning should come sooner or later, especially since all that’s occured US data-wise is that the pace of the declines has tapered off. As noted in Saturday’s column, markets are for now buying into the ‘less bad is good’ scenario and should continue to do so for the immediate future.

Interestingly, last Thursday and Friday’s sessions saw both liquidity and momentum take a turn for the worse, and given the Straits Times Index’s inability to pierce convincingly through 2,400 despite repeated attempts, you’d have to wonder if the trend is now starting to bend.

As always, much depends on Wall Street where investors appear to believe that because the pace of declines has moderated, then the only direction forthwith is up.

In this regard, it’s interesting to note that the source of the world’s problems, the collapsing US real estate market, shows no signs of bottoming yet, notwithstanding what the bulls would have everyone believe.

According to data from the Mortgage Bankers Association, overall mortgage delinquency for the first quarter rose to a new high of 9.12 per cent from 7.88 per cent in Q4 2008, sub-prime delinquencies rose to 24.95 per cent from 21.88 per cent in Q4 2008 and prime deliquencies rose to 6.06 per cent from 5.06 per cent in the previous quarter.

There have also been rumblings that the US commercial real estate market has only just started to slide while US mid-to upper residential property has not yet undergone the implosion in the sub-prime arena. So although it’s possible that the US property market is deteriorating less badly than before, it is still deteriorating nonetheless and investors here should take note of this when reading ‘green shoots’ reports.

One of the more interesting reports issued in the past couple of weeks comes courtesy of CLSA Asia-Pacific Markets’ Russell Napier, who in his June Global Macro Strategy said the current bounce is simply a rally in a long bear market.

‘It is not a bull market: valuations did not reach rock bottom in March and interest in equities remains far too high,’ wrote Mr Napier.

‘Long-term valuations suggest this long-term bear market will not be over until the S&P 500 index nears 400 (versus Friday’s close of 946).

‘There was no revulsion against equities in March needed for a great bottom. Creative destruction was once again halted by the (US) government, so the creative destruction of government credit will be the catalyst for the great bottom.’

He did however, qualify this downbeat view by saying the uptrend could last for a few years yet.

As far as the local market goes, Credit Suisse (CS) ranks among the bulls who have consistently stayed bullish over the past month - a view which has paid off handsomely - when it last week said that if the Straits Times Index was to trade at its 5-year average price/book, this translates to almost 2,700. With a third consecutive month of earnings upgrades forecasted, CS maintained it’s ‘overweight’ on Singapore.

The view for the week ahead therefore remains the same as it’s been for many weeks now - liquidity and momentum are in the bulls’ favour but investors should stay alert for signs that could cause the trend to bend because there are actually many if you look hard enough.

Source : Business Times - 14 June 2009

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World’s biggest asset manager is born

World’s biggest asset manager is born

BlackRock buys Barclays Global Investors for US$13.5b to vault ahead of rivals

By NEIL BEHRMANN
IN LONDON

BLACKROCK’S agreement to buy Barclays Global Investors (BGI) for US$13.5 billion, equally in cash and BlackRock shares, will create by far the world’s largest asset manager.

MR DIAMOND
The Barclays president stands to gain around US$26 million from the deal
The deal alters the multi-trillion asset manager rankings and is likely to presage further consolidations in firms that were damaged in the global bear market that lasted from October 2007 to March 2009. BlackRock Barclays Investors, as the new firm will be called, will manage an awesome US$2.7 trillion, about 3-5 per cent of the global asset management industry, Barclays said in a press conference. It is a giant step forward for BlackRock, a 21-year-old company which relied heavily on acquisitions to grow from a one-room bond investment firm into the largest publicly traded US money manager.

The new entity will be well ahead of rivals State Street Global, Allianz Group, AXA Group and Fidelity Investments, which, following the bear market, manage assets well below US$2 trillion. More importantly, it will give BlackRock global reach as BGI has operations in 15 countries.

According to a presentation to investors, North and South America account for two-thirds of BlackRock Barclays assets under management; Europe, Middle East and Africa a quarter; and Asia-Pacific 8 per cent. Asia-Pacific accounts for 13 per cent of 9,000 employees worldwide. Barclays executives said that Asia was a growth area and the merger was unlikely to result in layoffs there.

For Barclays, which had earlier refused government assistance despite rocky times that saw investors such as Temasek Holdings sell their stake, the deal is a god-send. It will strengthen its balance-sheet and expects a net gain on sale of US$8.8 billion. Barclays president Robert Diamond will not do too badly from the deal himself, and stands to gain around US$26 million.

The combined group manages a vast array of products from fixed income, equities, hedge funds, private equity and real estate and commodity funds. It will be especially strong in the fast growing Exchange Traded Fund (ETF) product and index range which account for US$526 billion or about a fifth of total assets, according to a BlackRock presentation. These low-cost funds are very popular with retail investors who have become disenchanted with higher cost mutual funds that lost money in the bear market.

Institutional clients such as pension funds, insurance companies and sovereign wealth funds account for around US$2.2 trillion.

BlackRock, predominantly in institutional business and fixed income products, benefits because of Barclays wider retail base. Its rival, Pimco, is now at a disadvantage because of the BlackRock entry into ETFs. BlackRock and BGI have a strong offering of hedge funds which is a lucrative money spinner for asset managers because of their high fees.

BlackRock has expanded rapidly via acquisitions - three years ago, it purchased Merrill Lynch’s fund unit for US$8.6 billion.

The deal exceeds an earlier agreement of Barclays Bank to sell just the iShares exchange-traded-fund business of BGI to private equity group CVC Capital. Unless CVC, a private equity business, can come up with a better offer, it will receive a break fee of around US$180 million from Barclays, a director said.

Instead of fully owning BGI, Barclays Bank will now have a 19.9 per cent stake in the enlarged business.

The money received from the deal substantially improves Barclays Bank’s capital base to take pressure off an institution which lost considerable amounts from non-performing assets. It will boost the bank’s tier 1 capital ratio, a key measure of a bank’s ability to pay debts of all types, to 8 per cent.

Such was its plight last year that its shares collapsed on concerns that the UK government would take a major stake in the bank.

Barclays’ Mr Diamond added that the sale would allow the group’s Barclays Capital investment banking arm to do more business with the fund manager. Previously, Barclays Capital had been restricted in the deals it could do for BGI because they were part of the same group, he noted.

Barclays fell 1.6 per cent in morning trading yesterday, having soared by around 17 per cent in recent days. BlackRock’s stock is up by 15 per cent since the start of the month and 36 per cent since the beginning of 2009.

BlackRock chief executive Laurence Fink said that the combined companies’ market capitalisation would be about US$34 billion.

Source : Business Times - 13 June 2009

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