Property developer Sunrise Bhd said it will go ahead with the launch of two projects in Malaysia and one in Canada next year, worth a combined RM2.5 billion, despite concerns over cooling property prices.
The projects were supposed to be launched from December this year, but were deferred by a few months due to weak market sentiment.
They comprise a RM970 million maiden project in Richmond, Canada, featuring five residential blocks with some commercial elements; 28 Mont' Kiara, a six-star condominium development worth around RM900 million; and Solaris Towers, featuring two office blocks worth about RM600 million.
"There is a financial crisis but we will get ready and launch (the projects) when the market is better. We will hold the launches for a while partly because we want costs to come down," executive deputy chairman Datuk Allan Lim Kim Huat said after the company's shareholders meeting in Kuala Lumpur yesterday.
Lim did not rule out selling Solaris Towers en bloc.
As for the Richmont project, which is a modification of Mont' Kiara but with smaller built-ups of 600 to 700 sq ft, Lim said Sunrise will grow from there as margins are similar to its projects in Malaysia.
As for lower margins due to higher cost of raw materials, Lim said the easing of commodity prices will stabilise earnings.
He hopes Sunrise's net profit and revenue will do better this year, given that it has RM1.36 billion of unbilled sales with 32 per cent gross margins that will be realised over the next 30 months.
For its fiscal year ended June 30 2008, it achieved a 119 per cent growth in net profit to RM147.8 million from 2007's RM67.5 million. Revenue was higher by 22.9 per cent to RM685.8 million.
Sunrise's unbilled sales are one of the highest among local listed property firms and will soon touch RM1.49 billion as it gears up to sell 19 completed bungalows worth RM130 million.
"We hope to improve our performance this year. The next two to three years will not be an issue for us as by 2010, we expect to launch the (mix development) project at Wisma Angkasa Raya (opposite Petronas Twin Towers) in Kuala Lumpur, which is in the planning stage now," Lim said.
While the global economic slowdown will put some downward pressure on property prices, Sunrise hopes to maintain the pricing of its products which are targeted at the medium to high-income groups.
Sunrise's remaining 32ha in Mont'Kiara, with an estimated gross development value of more than RM3 billion, will continue to be the cash cow for the company over the next six to eight years.
It also has 160ha in Mersing, Johor, 80ha in Seremban, Negri Sembilan and 22ha in Serdang, Selangor for future launches.
By New Straits Times (by Sharen Kaur)
Wednesday, October 29, 2008
Sunrise is confident RM1.3bil in unbilled sales can sustain performance over three years
KUALA LUMPUR: Despite softer conditions in the property market, Sunrise Bhd expects to perform well in the next two to three years due to its high unbilled sales of RM1.36bil.
Executive deputy chairman Datuk Allan Lim Kim Huat said the sales were equivalent to about 2.6 times its average annual income over the past three years.
He said these sales came from four ongoing projects, namely 10 Mont’ Kiara (MK10), 11 Mont’ Kiara (MK11), Solaris Dutamas and The Residence.
“With these projects as well as three new projects in the pipeline, I think we will do fine in the next two to three years,” he told reporters after the company’s AGM yesterday.
Unbilled sales are similar to order books of construction companies; both refer to sales secured from customers but not yet booked as revenue in the profit and loss account.
As at July,Sunrise had sold 93% of MK10 units, 45% of MK 11, 92% of Solaris Dutamas, 9% of The Residence Phase 2B, 90% of Mont’ Kiara Meridin, 95% of Mont’ Kiara Banyan, and 100% of Kiara Designer Suites-Kiara Walk.
“We are quite busy constructing and delivering to buyers units in the ongoing projects.
“Although things are a little uncertain due to the economic slowdown, the next three years will be a busy period for us,” he said.
Lim added that Sunrise foresaw the pressure on margins easing given the recent plunge in commodity prices.
However, the company plans to defer the launch of its three new projects in view of weaker demand.
The three projects are a six-star condominium development called 28 Mont’ Kiara, two office blocks at Solaris Tower in Kuala Lumpur, and the first phase of a residential development in Vancouver, Canada.
“We are not under pressure to launch any project, as we want to launch them at the right time and at the right price,” he said.
Although there is a slowdown in demand, Lim does not see any major financial problems for the buyers.
“It is just that they are more careful making investments and have a wait-and-see attitude,” he said.
Originally, Sunrise had planned to launch the two office blocks and 28 Mont’ Kiara by year-end while the Canadian project was expected to be launched by February or March 2009.
Lim said all new launches would depend on market conditions.
He added that it might launch the Vancouver project, next year. The project has an estimated gross development value of C$350mil .
By The Star
Executive deputy chairman Datuk Allan Lim Kim Huat said the sales were equivalent to about 2.6 times its average annual income over the past three years.
He said these sales came from four ongoing projects, namely 10 Mont’ Kiara (MK10), 11 Mont’ Kiara (MK11), Solaris Dutamas and The Residence.
“With these projects as well as three new projects in the pipeline, I think we will do fine in the next two to three years,” he told reporters after the company’s AGM yesterday.
Unbilled sales are similar to order books of construction companies; both refer to sales secured from customers but not yet booked as revenue in the profit and loss account.
As at July,Sunrise had sold 93% of MK10 units, 45% of MK 11, 92% of Solaris Dutamas, 9% of The Residence Phase 2B, 90% of Mont’ Kiara Meridin, 95% of Mont’ Kiara Banyan, and 100% of Kiara Designer Suites-Kiara Walk.
“We are quite busy constructing and delivering to buyers units in the ongoing projects.
“Although things are a little uncertain due to the economic slowdown, the next three years will be a busy period for us,” he said.
Lim added that Sunrise foresaw the pressure on margins easing given the recent plunge in commodity prices.
However, the company plans to defer the launch of its three new projects in view of weaker demand.
The three projects are a six-star condominium development called 28 Mont’ Kiara, two office blocks at Solaris Tower in Kuala Lumpur, and the first phase of a residential development in Vancouver, Canada.
“We are not under pressure to launch any project, as we want to launch them at the right time and at the right price,” he said.
Although there is a slowdown in demand, Lim does not see any major financial problems for the buyers.
“It is just that they are more careful making investments and have a wait-and-see attitude,” he said.
Originally, Sunrise had planned to launch the two office blocks and 28 Mont’ Kiara by year-end while the Canadian project was expected to be launched by February or March 2009.
Lim said all new launches would depend on market conditions.
He added that it might launch the Vancouver project, next year. The project has an estimated gross development value of C$350mil .
By The Star
YTL buys Singapore REIT
Portfolio worth S$2.2b includes prime properties on Orchard Road, and in Japan and China
INFRASTRUCTURE conglomerate YTL Corp Bhd yesterday thrust itself into the heart of Singapore's Orchard Road prime property belt when it took control of the Macquarie Prime REIT (MP REIT) and its management company Prime REIT Management Holdings Pte Ltd (PRMH) for S$285 million (RM678 million).
MP REIT also has other prime properties in Japan and China. Altogether, it has a property portfolio worth some S$2.2 billion (RM5.24 billion).
MP REIT holds 74.2 per cent of total strata lots in Wisma Atria on Orchard Road and about 27.2 per cent of the total strata lots in Ngee Ann City.
Together, the holding offers the longest stretch of street level frontage along the bustling upmarket Orchard Road.
YTL Corp's latest investment is an addition to its other projects in Singapore, including the Sandy Island and Lakefront developments on Sentosa Island, and the Westwood Apartments on Orchard Boulevard.
YTL Corp managing director Tan Sri Francis Yeoh was in Singapore yesterday to finalise the agreement with the REIT vendors.
The sale to YTL Corp involved 247.1 million units of MP REIT at S$0.82 (RM1.95) a unit.
Speaking to Business Times, Yeoh said the 49 per cent discount to the REIT's net asset value per unit was possible amid the current global market turbulence.
The price is, however, a 17 per cent premium over its 30-day volume weighted average price and a premium of 52 per cent over the units' last traded price.
The acquisition of 50 per cent of PRMH, together with the units, allows YTL Corp to control the REIT.
The units also provide an attractive 2009 yield of about 9.4 per cent based on a Bloomberg forecast.
MP REIT had a market capitalisation of about S$516 million (RM1.23 billion) as of October 24 2008.
Merrill Lynch (Singapore) Pte Ltd acted as exclusive financial adviser to YTL Corp on the proposed acquisitions.
There are firm plans to rename the REIT as Starhill Global REIT and the property manager as YTL Pacific Star REIT Management Ltd and YTL Pacific Star Property. Yeoh will then be appointed the REIT manager executive chairman.
"The proposed acquisitions provide the YTL group with an opportunity to globalise our Starhill brand," Yeoh said.
YTL Corp's Starhill brand now encompasses several prime properties in Kuala Lumpur's Bukit Bintang area.
MP REIT was listed on the main board of the Singapore Exchange Securities Trading Ltd on September 20 2005 at an initial public offering (IPO) price of S$0.98 (RM2.33) with the year's projected dividend yield of 5.12 per cent.
The IPO was oversubscribed by 35 times.
By New Straits Times (by Mustapha Kamil)
INFRASTRUCTURE conglomerate YTL Corp Bhd yesterday thrust itself into the heart of Singapore's Orchard Road prime property belt when it took control of the Macquarie Prime REIT (MP REIT) and its management company Prime REIT Management Holdings Pte Ltd (PRMH) for S$285 million (RM678 million).
MP REIT also has other prime properties in Japan and China. Altogether, it has a property portfolio worth some S$2.2 billion (RM5.24 billion).
MP REIT holds 74.2 per cent of total strata lots in Wisma Atria on Orchard Road and about 27.2 per cent of the total strata lots in Ngee Ann City.
Together, the holding offers the longest stretch of street level frontage along the bustling upmarket Orchard Road.
YTL Corp's latest investment is an addition to its other projects in Singapore, including the Sandy Island and Lakefront developments on Sentosa Island, and the Westwood Apartments on Orchard Boulevard.
YTL Corp managing director Tan Sri Francis Yeoh was in Singapore yesterday to finalise the agreement with the REIT vendors.
The sale to YTL Corp involved 247.1 million units of MP REIT at S$0.82 (RM1.95) a unit.
Speaking to Business Times, Yeoh said the 49 per cent discount to the REIT's net asset value per unit was possible amid the current global market turbulence.
The price is, however, a 17 per cent premium over its 30-day volume weighted average price and a premium of 52 per cent over the units' last traded price.
The acquisition of 50 per cent of PRMH, together with the units, allows YTL Corp to control the REIT.
The units also provide an attractive 2009 yield of about 9.4 per cent based on a Bloomberg forecast.
MP REIT had a market capitalisation of about S$516 million (RM1.23 billion) as of October 24 2008.
Merrill Lynch (Singapore) Pte Ltd acted as exclusive financial adviser to YTL Corp on the proposed acquisitions.
There are firm plans to rename the REIT as Starhill Global REIT and the property manager as YTL Pacific Star REIT Management Ltd and YTL Pacific Star Property. Yeoh will then be appointed the REIT manager executive chairman.
"The proposed acquisitions provide the YTL group with an opportunity to globalise our Starhill brand," Yeoh said.
YTL Corp's Starhill brand now encompasses several prime properties in Kuala Lumpur's Bukit Bintang area.
MP REIT was listed on the main board of the Singapore Exchange Securities Trading Ltd on September 20 2005 at an initial public offering (IPO) price of S$0.98 (RM2.33) with the year's projected dividend yield of 5.12 per cent.
The IPO was oversubscribed by 35 times.
By New Straits Times (by Mustapha Kamil)
YTL ventures into S’pore REIT
PETALING JAYA: YTL Corp Bhd is making inroads in Singapore’s real estate sector with its proposed acquisition of about 26% in Macquarie Prime REIT (MP REIT) and 50% of Prime REIT Management Holdings Pte Ltd from Macquarie Bank Ltd for S$285mil.
Prime REIT is the holding company of Macquarie Pacific Star Prime REIT Management Ltd, the REIT manager of MP REIT, and Macquarie Pacific Star Property Management Pte Ltd, the property manager of MP REIT’s Singapore properties.
Merrill Lynch (S) Pte Ltd is financial advisor to YTL Corp on the proposed acquisitions.
YTL Corp said in a statement yesterday the group would acquire 247,101,000 units in MP REIT at S$0.82 each, which was a 49% discount to MP REIT’s net asset value per unit, a 17% premium over its 30-day volume-weighted average price and a premium of 52% over its last traded price.
The proposed acquisitions will be financed by internally generated funds.
The acquisitions, which would provide a yield of about 9.4%, would allow YTL Corp to control the REIT. MP REIT had a market capitalisation of S$516mil as of Oct 24 and owns over S$2.2bil worth of prime retail and office properties in Singapore, Japan and China.
Its asset portfolio include 74.23% of total strata lots in Wisma Atria and 27.23% of total strata lots in Ngee Ann City.
YTL Corp said upon completion of the transaction, it intended to rename MP REIT, the manager and the property manager companies to Starhill Global REIT, YTL Pacific Star REIT Management Ltd and YTL Pacific Star Property Management Pte Ltd, respectively.
As Starhill Global REIT will be a key vehicle of YTL Corp, the group planned to appoint managing director Tan Sri Francis Yeoh as the REIT manager’s executive chairman.
“Our vision and investment track record will enable us to add value to MP REIT through our sponsorship as we focus on re-branding and growing the REIT through yield accretive acquisitions of prime regional assets,” Yeoh said.
Since its listing on the Singapore Exchange in September 2005, MP REIT has added eight retail properties to its portfolio through the acquisitions of prime assets in Japan and China.
An analyst with a local brokerage said YTL Corp, with its war chest of more than RM10bil, was in a good position to pick up some quality assets at depressed prices following the global financial meltdown.
“With the price at a 49% discount to the net asset value, the proposed acquisition of MP REIT will provide stable earnings and good upside potential. By having a REIT in Singapore, YTL will be well placed to tap the city-state’s expanding real estate sector and promote its Starhill brand in the international market,” she added.
By The Star (by Angie Ng)
Prime REIT is the holding company of Macquarie Pacific Star Prime REIT Management Ltd, the REIT manager of MP REIT, and Macquarie Pacific Star Property Management Pte Ltd, the property manager of MP REIT’s Singapore properties.
Merrill Lynch (S) Pte Ltd is financial advisor to YTL Corp on the proposed acquisitions.
YTL Corp said in a statement yesterday the group would acquire 247,101,000 units in MP REIT at S$0.82 each, which was a 49% discount to MP REIT’s net asset value per unit, a 17% premium over its 30-day volume-weighted average price and a premium of 52% over its last traded price.
The proposed acquisitions will be financed by internally generated funds.
The acquisitions, which would provide a yield of about 9.4%, would allow YTL Corp to control the REIT. MP REIT had a market capitalisation of S$516mil as of Oct 24 and owns over S$2.2bil worth of prime retail and office properties in Singapore, Japan and China.
Its asset portfolio include 74.23% of total strata lots in Wisma Atria and 27.23% of total strata lots in Ngee Ann City.
YTL Corp said upon completion of the transaction, it intended to rename MP REIT, the manager and the property manager companies to Starhill Global REIT, YTL Pacific Star REIT Management Ltd and YTL Pacific Star Property Management Pte Ltd, respectively.
As Starhill Global REIT will be a key vehicle of YTL Corp, the group planned to appoint managing director Tan Sri Francis Yeoh as the REIT manager’s executive chairman.
“Our vision and investment track record will enable us to add value to MP REIT through our sponsorship as we focus on re-branding and growing the REIT through yield accretive acquisitions of prime regional assets,” Yeoh said.
Since its listing on the Singapore Exchange in September 2005, MP REIT has added eight retail properties to its portfolio through the acquisitions of prime assets in Japan and China.
An analyst with a local brokerage said YTL Corp, with its war chest of more than RM10bil, was in a good position to pick up some quality assets at depressed prices following the global financial meltdown.
“With the price at a 49% discount to the net asset value, the proposed acquisition of MP REIT will provide stable earnings and good upside potential. By having a REIT in Singapore, YTL will be well placed to tap the city-state’s expanding real estate sector and promote its Starhill brand in the international market,” she added.
By The Star (by Angie Ng)
China, S.Korea must do more to avoid property crash
HONG KONG/SEOUL: China and South Korea have moved to prop up their frazzled housing markets but probably need to do much more to avoid major price slides that could ruin developers, damage banks and threaten the region’s economies.
A share price collapse this week for Chinese property developers such as Guangzhou R&F and China Overseas Land suggests that many investors believe a housing market bust is on the cards, despite a policy U-turn by Beijing.
“Investors might just be throwing in the towel,” UBS analyst Eric Wong said of the sharp drop, which saw some stocks lose as much as 35 per cent of their value over Monday and yesterday.
The Chinese government, fearing a price bubble, was in market cooling mode only a year ago, squeezing developers with a clampdown on loans and hatching moves to stamp out speculation.
New home prices then slumped by up to 40 per cent in the southern cities of Guanzhou and Shenzhen as sales dried up, and property firms began slashing prices across the country to keep cash flowing in.
The outlook grew even dimmer as the global credit crisis began to buffet Asia and batter its financial markets, stalling the region’s once-roaring economies.
So last week Beijing unveiled cuts in taxes, mortgages and down payments on homes in an effort to breathe life into a property industry that accounts for about 10 per cent of gross domestic product (GDP) in the world’s fourth-largest economy.
But the country’s biggest developer, China Vanke Co, reported yesterday a 13 per cent decline in net profit and a nearly 30 per cent drop in sales volume, in another reminder of how deep-seated the problems are.
If the housing market fails to perk up, analysts say policy makers will probably resort to macro-economic measures to spur demand, such as cutting taxes and interest rates.
“The usual monetary cocktail is a blunt instrument but it’s longer lasting,” said UBS’s Wong, adding that Beijing might also raise export subsidies and hike pay at state companies.
On the property side, the government could reel back on its measures to dissuade people from buying apartments as investments and tell banks to start lending to developers again, Wong said.
TOO WEAK, TOO LATE?
In South Korea, where around half the country’s personal wealth is tied up in property, the government pledged 5 trillion won (US$3.4 billion) last week to buy unsold homes and land from developers to prevent mass bankruptcies in the industry.
An interest rate cut of 75 basis points followed on Monday as policy makers tried to keep the global financial storm at bay.
The steps are a reaction to slowing economic growth and a steep climb in the number of unsold new homes on the market, which rose 43 per cent to a record 160,595 units in July from the end of 2007, according to government data.
Just as in China, the government had a hand in slowing the market in early 2007, tightening restrictions on mortgages and buying second homes.
Analysts believe freeing up finance for homebuyers is the answer, not just taking homes off the market. Apartment prices in the most expensive districts in Seoul and in satellite towns have fallen up to 20 per cent from their peaks in 2006.
“The measures came too late and are too weak,” Daiwa Institute of Research analyst Hyo Yim said of the government’s action to shore up the property market.
The government should loosen rules on mortgage lending and cut back taxes on owners of two or more homes, Yim said.
Mortgage debt in South Korea is still only a quarter of GDP, compared to 61 per cent in Australia, and 105 per cent in the United States, according to CLSA. In China, home loans equal only 12 per cent of GDP.
“The government cracked down on so-called speculative buyers, but people won’t buy homes if they don’t expect prices to rise,” said Yim, adding that the housing market would probably not recover before 2010.
Many of South Korea’s 12,000 builders face a cash crunch as credit dries up and home sales slow, with 88 firms defaulting in the first nine months of 2008, up 17 per cent from a year earlier.
Even top developers are not immune to such worries, with shares in GS Construction, Hyundai Development and Samsung Engineering tumbling between 37 and 50 per cent in the last month.
But some analysts are suggesting that South Korean construction stocks may have bottomed thanks to the government’s actions, with valuations at historical lows and at a 30 per cent discount in price/earnings terms to the overall stock market.
BNP Paribas analyst Jae Rhee has a 12-month target stock price for Hyundai Development that is double its current price. And the potential upside for GS Construction and Samsung Engineering is about 70 per cent, he wrote in a report last week.
Chinese developers are now trading at near 70 per cent discounts to net asset value, and at 7.4 times forecast 2008 earnings, according to Citigroup analyst Oscar Choi, who believes the stocks have been sold off “indiscriminately”.
And Beijing will do all it can to stop a property market crash, said CLSA analyst Nicole Wong, who has a buy rating on New World China Land and Agile Property.
“Policy is very supportive; basically they’re underwriting a put option on market,” she said. “For sure the government will take further steps if the downward spiral doesn’t stop.”
By Reuters
A share price collapse this week for Chinese property developers such as Guangzhou R&F and China Overseas Land suggests that many investors believe a housing market bust is on the cards, despite a policy U-turn by Beijing.
“Investors might just be throwing in the towel,” UBS analyst Eric Wong said of the sharp drop, which saw some stocks lose as much as 35 per cent of their value over Monday and yesterday.
The Chinese government, fearing a price bubble, was in market cooling mode only a year ago, squeezing developers with a clampdown on loans and hatching moves to stamp out speculation.
New home prices then slumped by up to 40 per cent in the southern cities of Guanzhou and Shenzhen as sales dried up, and property firms began slashing prices across the country to keep cash flowing in.
The outlook grew even dimmer as the global credit crisis began to buffet Asia and batter its financial markets, stalling the region’s once-roaring economies.
So last week Beijing unveiled cuts in taxes, mortgages and down payments on homes in an effort to breathe life into a property industry that accounts for about 10 per cent of gross domestic product (GDP) in the world’s fourth-largest economy.
But the country’s biggest developer, China Vanke Co, reported yesterday a 13 per cent decline in net profit and a nearly 30 per cent drop in sales volume, in another reminder of how deep-seated the problems are.
If the housing market fails to perk up, analysts say policy makers will probably resort to macro-economic measures to spur demand, such as cutting taxes and interest rates.
“The usual monetary cocktail is a blunt instrument but it’s longer lasting,” said UBS’s Wong, adding that Beijing might also raise export subsidies and hike pay at state companies.
On the property side, the government could reel back on its measures to dissuade people from buying apartments as investments and tell banks to start lending to developers again, Wong said.
TOO WEAK, TOO LATE?
In South Korea, where around half the country’s personal wealth is tied up in property, the government pledged 5 trillion won (US$3.4 billion) last week to buy unsold homes and land from developers to prevent mass bankruptcies in the industry.
An interest rate cut of 75 basis points followed on Monday as policy makers tried to keep the global financial storm at bay.
The steps are a reaction to slowing economic growth and a steep climb in the number of unsold new homes on the market, which rose 43 per cent to a record 160,595 units in July from the end of 2007, according to government data.
Just as in China, the government had a hand in slowing the market in early 2007, tightening restrictions on mortgages and buying second homes.
Analysts believe freeing up finance for homebuyers is the answer, not just taking homes off the market. Apartment prices in the most expensive districts in Seoul and in satellite towns have fallen up to 20 per cent from their peaks in 2006.
“The measures came too late and are too weak,” Daiwa Institute of Research analyst Hyo Yim said of the government’s action to shore up the property market.
The government should loosen rules on mortgage lending and cut back taxes on owners of two or more homes, Yim said.
Mortgage debt in South Korea is still only a quarter of GDP, compared to 61 per cent in Australia, and 105 per cent in the United States, according to CLSA. In China, home loans equal only 12 per cent of GDP.
“The government cracked down on so-called speculative buyers, but people won’t buy homes if they don’t expect prices to rise,” said Yim, adding that the housing market would probably not recover before 2010.
Many of South Korea’s 12,000 builders face a cash crunch as credit dries up and home sales slow, with 88 firms defaulting in the first nine months of 2008, up 17 per cent from a year earlier.
Even top developers are not immune to such worries, with shares in GS Construction, Hyundai Development and Samsung Engineering tumbling between 37 and 50 per cent in the last month.
But some analysts are suggesting that South Korean construction stocks may have bottomed thanks to the government’s actions, with valuations at historical lows and at a 30 per cent discount in price/earnings terms to the overall stock market.
BNP Paribas analyst Jae Rhee has a 12-month target stock price for Hyundai Development that is double its current price. And the potential upside for GS Construction and Samsung Engineering is about 70 per cent, he wrote in a report last week.
Chinese developers are now trading at near 70 per cent discounts to net asset value, and at 7.4 times forecast 2008 earnings, according to Citigroup analyst Oscar Choi, who believes the stocks have been sold off “indiscriminately”.
And Beijing will do all it can to stop a property market crash, said CLSA analyst Nicole Wong, who has a buy rating on New World China Land and Agile Property.
“Policy is very supportive; basically they’re underwriting a put option on market,” she said. “For sure the government will take further steps if the downward spiral doesn’t stop.”
By Reuters
Asian wealth funds eye home turf
SINGAPORE: Asian sovereign wealth funds may become more visible shoring up markets closer to home as emerging economies look to their deep pockets to steer around the damaging effects of global market turmoil.
The shift will come after funds’ risky bets on Western banks such as Citigroup and UBS, where they pumped in billions of dollars during the early phase of the credit crisis, show little signs of paying off.
Wealth funds from Singapore, China and South Korea may instead look to invest growing cash piles in more defensive sectors such as Asian utilities and infrastructure firms, while keeping an eye on distressed property and financial assets in Western markets.
State funds, following their counterparts in Russia and the Middle East, could also pump cash into local banks to support domestic financial systems, and take part in private equity or debt deals to help firms refinance billions of dollars of debt.
“There has been another round of de-risking from assets like stocks in emerging markets over the last few days, but the SWFs are in for the longer haul,” said Jan Randolph, who covers sovereign funds at London-based consultancy Global Insight.
“I think they’ll still be looking for opportunities now that everything is a lot cheaper.”
Asian sovereign wealth funds, which Deutsche Bank estimated manage around US$1 trillion, or 29 per cent of the assets held by global funds, have become more influential in financial markets, but began building cash piles after the credit crisis worsened.
The fallout from the collapse of the US subprime mortgage market is now hurting the ability of the corporate sector to raise capital, forcing firms to look for state help.
According to Morgan Stanley, Asian sectors facing refinancing risks are banks, especially those dependent on markets for funding in South Korea, Australia, India and Hong Kong, as well as select property stocks in China, India and Australia, and some Australian utilities and infrastructure stocks.
In the corporate bond sector alone, US$17.2 billion worth of bonds mature next year, led by companies in South Korea, Thailand and Taiwan, according to Thomson Reuters data.
The Government of Singapore Investment Corp (GIC) gave evidence of such deals when it agreed to buy US$250 million in convertible debt of Australian property trust GPT, raising its presence in a country that accounts for just 2 per cent of its portfolio.
“The convertible bond space is offering unprecedented opportunities right now,” said Kirby Daley, senior strategist at Newedge Group in Hong Kong.
“If you have capital you can take full advantage of that — the opportunities are far better than getting in on the equity side of a lot of these companies.”
Several investment grade sovereign and corporate bonds now give a yield of around 15 per cent and present opportunities for long-term investors, said Liew Tzu Mi, head of GIC’s global emerging markets team for fixed income, currencies and commodities.
But Liew told a seminar last week it was hard for investors to buy now as the cash market for many bonds has dried up.
GIC, which has over two-thirds of its investments in the United States and Britain, said recently it has been increasing its emerging market exposure in North Asia and the Americas.
DEFENSIVE
The sea of liquidity among wealth funds was illustrated by Singapore’s GIC when it disclosed 7 per cent of its portfolio was in cash — over US$20 billion out of an estimated US$300 billion.
Korea Investment Corp (KIC), which has received US$30 billion from the South Korean government, said it expects to be defensive in a falling market by diversifying.
“In addition to such traditional assets as equities and bonds, a gradual increase in the proportion of alternative assets can diversify investment risks,” it said in a recent report.
But the crisis has not totally derailed SWFs’ appetite for big deals in the West, as shown by an Abu Dhabi state-owned venture capital firm’s move to invest US$2.1 billion in a manufacturing joint venture with Advanced Micro Devices.
And despite China Investment Corp’s (CIC) initial losses on its investments and recent concerns among regulators about overseas investments, the Chinese state fund went ahead to raise its stake in private equity firm Blackstone.
CIC still holds 90 per cent of its around US$200 billion of assets in cash. With the outlook uncertain for financials, these state-backed funds may also look to battered real estate markets and funds.
Property consultant CB Richard Ellis Group said allocations by sovereign funds to the commercial property sector could rise to 7 per cent of their portfolio over the next seven years, with the focus on markets such as Britain and Japan.
Steffen Kern wrote in a Deutsche Bank report that sovereign funds’ investment in the troubled financial sector may have peaked after they injected US$92 billion in the last 18 months.
“With a view to portfolio diversification, they may now be looking to other sectors for future investment opportunities,” Kern said.
By Reuters
The shift will come after funds’ risky bets on Western banks such as Citigroup and UBS, where they pumped in billions of dollars during the early phase of the credit crisis, show little signs of paying off.
Wealth funds from Singapore, China and South Korea may instead look to invest growing cash piles in more defensive sectors such as Asian utilities and infrastructure firms, while keeping an eye on distressed property and financial assets in Western markets.
State funds, following their counterparts in Russia and the Middle East, could also pump cash into local banks to support domestic financial systems, and take part in private equity or debt deals to help firms refinance billions of dollars of debt.
“There has been another round of de-risking from assets like stocks in emerging markets over the last few days, but the SWFs are in for the longer haul,” said Jan Randolph, who covers sovereign funds at London-based consultancy Global Insight.
“I think they’ll still be looking for opportunities now that everything is a lot cheaper.”
Asian sovereign wealth funds, which Deutsche Bank estimated manage around US$1 trillion, or 29 per cent of the assets held by global funds, have become more influential in financial markets, but began building cash piles after the credit crisis worsened.
The fallout from the collapse of the US subprime mortgage market is now hurting the ability of the corporate sector to raise capital, forcing firms to look for state help.
According to Morgan Stanley, Asian sectors facing refinancing risks are banks, especially those dependent on markets for funding in South Korea, Australia, India and Hong Kong, as well as select property stocks in China, India and Australia, and some Australian utilities and infrastructure stocks.
In the corporate bond sector alone, US$17.2 billion worth of bonds mature next year, led by companies in South Korea, Thailand and Taiwan, according to Thomson Reuters data.
The Government of Singapore Investment Corp (GIC) gave evidence of such deals when it agreed to buy US$250 million in convertible debt of Australian property trust GPT, raising its presence in a country that accounts for just 2 per cent of its portfolio.
“The convertible bond space is offering unprecedented opportunities right now,” said Kirby Daley, senior strategist at Newedge Group in Hong Kong.
“If you have capital you can take full advantage of that — the opportunities are far better than getting in on the equity side of a lot of these companies.”
Several investment grade sovereign and corporate bonds now give a yield of around 15 per cent and present opportunities for long-term investors, said Liew Tzu Mi, head of GIC’s global emerging markets team for fixed income, currencies and commodities.
But Liew told a seminar last week it was hard for investors to buy now as the cash market for many bonds has dried up.
GIC, which has over two-thirds of its investments in the United States and Britain, said recently it has been increasing its emerging market exposure in North Asia and the Americas.
DEFENSIVE
The sea of liquidity among wealth funds was illustrated by Singapore’s GIC when it disclosed 7 per cent of its portfolio was in cash — over US$20 billion out of an estimated US$300 billion.
Korea Investment Corp (KIC), which has received US$30 billion from the South Korean government, said it expects to be defensive in a falling market by diversifying.
“In addition to such traditional assets as equities and bonds, a gradual increase in the proportion of alternative assets can diversify investment risks,” it said in a recent report.
But the crisis has not totally derailed SWFs’ appetite for big deals in the West, as shown by an Abu Dhabi state-owned venture capital firm’s move to invest US$2.1 billion in a manufacturing joint venture with Advanced Micro Devices.
And despite China Investment Corp’s (CIC) initial losses on its investments and recent concerns among regulators about overseas investments, the Chinese state fund went ahead to raise its stake in private equity firm Blackstone.
CIC still holds 90 per cent of its around US$200 billion of assets in cash. With the outlook uncertain for financials, these state-backed funds may also look to battered real estate markets and funds.
Property consultant CB Richard Ellis Group said allocations by sovereign funds to the commercial property sector could rise to 7 per cent of their portfolio over the next seven years, with the focus on markets such as Britain and Japan.
Steffen Kern wrote in a Deutsche Bank report that sovereign funds’ investment in the troubled financial sector may have peaked after they injected US$92 billion in the last 18 months.
“With a view to portfolio diversification, they may now be looking to other sectors for future investment opportunities,” Kern said.
By Reuters
Steel imports solution in sight
PETALING JAYA: The construction industry is in the final stage of discussion with the Government to iron out hitches in steel import procedures.
Effective May 12, the Government liberalised the prices of steel bars and allowed the import of steel bars free of tax. However, there has been some confusion at the Customs level.
Master Builders Association Malaysia (MBAM) president Ng Kee Leen said the discussion with the Government on the final details was expected to be completed soon.
“After four months of discussion, we have received a letter from the Customs Department agreeing that Malaysian standard MS146 is equivalent to British Standard BS4449. The confusion was one of the reasons for the steel bar import hitches,” he told StarBiz yesterday.
MBAM and the Real Estate and Housing Developers Association are leading the industry players in the discussion.
Since the Government lifted the ceiling price on steel bars and allowed the import of all steel bars that met the MS146 standard five months ago, there has been confusion on the ground as to the types of steel that can be imported tax-free.
“The Malaysian Customs did not realise that BS4449 steel bars were actually equivalent to the MS146. Thus, many international steel bars that met the BS4449 standard were not allowed to be imported just because of the different steel bar code,” Ng said.
“In addition, some Customs officers asked for import duty and import licence even though the Government had fully liberalised the steel market.
“The message of liberalisation was not understood by the Customs officers who worked on the ground. Hopefully, after this discussion is completed, the procedures and process of importing steel would be clear to all parties.”
Ng said the “full liberalisation” would be a positive move for the construction industry, as it would lower domestic steel prices to match those of neighbouring countries, which are about 10% to 15% lower. Currently, Malaysian steel bars cost about RM3,200 per tonne.
A source said that domestic monthly steel consumption had plunged to below 100,000 tonnes from about 200,000 tonnes in July in anticipation of the “full liberalisation” of steel imports.
Meanwhile, in a statement yesterday, Ng urged manufacturers, trading houses, distributors and Tenaga Nasional Bhd to adjust their prices accordingly, given that fuel prices had fallen recently. This would ensure that the benefits would be passed down to contractors.
“When the fuel prices increased in June, nearly all building materials’ prices jumped by 15% to 30%. The increase in diesel prices also caused transportation and machinery operation costs to rise tremendously by between 30% and 40%. All this happened in June.
“However, when world crude oil prices fell below US$65 per barrel and local fuel prices were adjusted downwards twice, transportation rates remained the same. Input prices have fallen but nearly all of the construction materials have yet to be reduced in price,” he said.
By The Star (by Law Kai Chow)
Effective May 12, the Government liberalised the prices of steel bars and allowed the import of steel bars free of tax. However, there has been some confusion at the Customs level.
Master Builders Association Malaysia (MBAM) president Ng Kee Leen said the discussion with the Government on the final details was expected to be completed soon.
“After four months of discussion, we have received a letter from the Customs Department agreeing that Malaysian standard MS146 is equivalent to British Standard BS4449. The confusion was one of the reasons for the steel bar import hitches,” he told StarBiz yesterday.
MBAM and the Real Estate and Housing Developers Association are leading the industry players in the discussion.
Since the Government lifted the ceiling price on steel bars and allowed the import of all steel bars that met the MS146 standard five months ago, there has been confusion on the ground as to the types of steel that can be imported tax-free.
“The Malaysian Customs did not realise that BS4449 steel bars were actually equivalent to the MS146. Thus, many international steel bars that met the BS4449 standard were not allowed to be imported just because of the different steel bar code,” Ng said.
“In addition, some Customs officers asked for import duty and import licence even though the Government had fully liberalised the steel market.
“The message of liberalisation was not understood by the Customs officers who worked on the ground. Hopefully, after this discussion is completed, the procedures and process of importing steel would be clear to all parties.”
Ng said the “full liberalisation” would be a positive move for the construction industry, as it would lower domestic steel prices to match those of neighbouring countries, which are about 10% to 15% lower. Currently, Malaysian steel bars cost about RM3,200 per tonne.
A source said that domestic monthly steel consumption had plunged to below 100,000 tonnes from about 200,000 tonnes in July in anticipation of the “full liberalisation” of steel imports.
Meanwhile, in a statement yesterday, Ng urged manufacturers, trading houses, distributors and Tenaga Nasional Bhd to adjust their prices accordingly, given that fuel prices had fallen recently. This would ensure that the benefits would be passed down to contractors.
“When the fuel prices increased in June, nearly all building materials’ prices jumped by 15% to 30%. The increase in diesel prices also caused transportation and machinery operation costs to rise tremendously by between 30% and 40%. All this happened in June.
“However, when world crude oil prices fell below US$65 per barrel and local fuel prices were adjusted downwards twice, transportation rates remained the same. Input prices have fallen but nearly all of the construction materials have yet to be reduced in price,” he said.
By The Star (by Law Kai Chow)
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