Published June 5, 2009

Ripples in developer sales lift secondary market

817 resale units change hands in April, compared to 853 in Q12009

By KALPANA RASHIWALA

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THE recovery in private home purchases in the primary market (developer sales) has rippled over to the secondary market.

The number of resale private apartments and condominium units that changed hands in April this year alone was 817, almost the same as the 853 resale units sold in the first three months of this year.

Subsale transactions of non-landed private homes also gained momentum with 275 caveats in April, nearly 70 per cent of the Q1 2009 volume of 404 units, according to DTZ's analysis of URA Realis caveats information as at May 29.

The Q1 caveats for condos/apartments bought in the subsale and resale markets already represented quarter-on-quarter increases of 52 per cent and 20 per cent respectively.

Subsales and resales are secondary-market transactions. Subsales involve projects that have yet to obtain Certificate of Statutory Completion (CSC) while resales relate to projects that have received CSC. Typically, a project obtains CSC three to 12 months after it receives Temporary Occupation Permit (TOP).

Putting things in perspective, DTZ's head of SEA research Chua Chor Hoon recalled that the pick-up in primary-market transactions began with the launches of Caspian and Alexis condos in February. By April, the action had spilled over to the secondary market, where buyers have prospects of picking up a completed property for immediate occupation or for leasing.

Says DTZ executive director Ong Choon Fah: 'During the initial stages of the volume recovery, individual sellers were not that aggressive in pricing. It's only when the buying momentum developed that they got bolder in asking prices.

'For some owners, if they don't get their price, they'll probably lease out the apartments for now.'

Knight Frank executive director (residential) Peter Ow reckons that if owners jack up prices too fast, buyers may pull back and this could lead to slower activity again in the secondary market. Potential buyers may then prefer to shop for homes in the primary market.

'Developers generally do not increase their prices too much for their project launches, as they have more stock to sell, compared with individual owners trying to offload one or two units in the secondary market,' he added.

But market psychology may be hard to predict and some potential buyers may sense an urgency to buy for fear of missing the boat again, he added.

DTZ's data showed that median subsale price of City Square Residences, One Amber and The Centris eased 2 to 5 per cent in Q1 over the preceding quarter, smaller declines compared with drops of 3 to 14 per cent in Q4.

However, for upper mid-tier projects, there were double-digit quarter-on-quarter declines in prices. Median prices of The Sail @ Marina Bay and Rivergate both slipped 15 per cent to $1,321 per square foot (psf) and $1,200 psf in Q1. In Q4, median subsale price of The Sail slipped 9 per cent while that of Rivergate, which is near the Singapore River, appreciated one per cent.

Resale prices of private homes in the prime districts were more resilient, with an average price fall of 3 to 4 per cent in Q1 2009.

DTZ's analysis also showed that subsales accounted for 14 per cent of non-landed private residential deals in Q1 2009, down from 18 per cent in the preceding quarter and the lowest subsale share since Q1 2007. The fall in subsale proportion in January to March 2009 was due to a bigger quarter-on-quarter jump - in fact a tripling - in caveats lodged for apartments/condos bought in the primary market in Q1.

The highest subsale activities were registered for projects that had been granted TOP since Q3 last year or are likely to obtain TOP this year. There were 43 subsale deals for City Square Residences at Kitchener Road from January to March 2009, making it the top subsale project in the period, followed by The Centris in Jurong with 40 subsales, One Amber in Katong (23 deals), and the The Esta and The Sail @ Marina Bay (19 units each).

Looking ahead, CB Richard Ellis executive director Joseph Tan said Rivergate is likely to top the subsale charts in Q2, when about 100 units owned by entities linked to Ferrel Asset Management were put on the market at about $1,300 to $1,600 psf. The units are said to have been substantially sold.

DTZ's Ms Chua reckons that interest in the subsale market will continue given that about 11,000 new private homes are slated for completion this year according to government data.

'Investors who don't want to be tied down with financial commitments upon TOP of the projects, especially those who bought on Deferred Payment Scheme, will choose to sell their units as the flagging rental market will further weaken their holding power,' she added.

Published June 5, 2009

Malaysia's April exports down 26.3%, more than analysts expected

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(KUALA LUMPUR) Malaysia's exports shrank by 26.3 per cent in April from a year ago, falling considerably more than the 22 per cent analysts had expected.

Economists said yesterday that a significant improvement will only take place in the second half.

Exports fell to RM41.12 billion (S$16.9 billion) in April on an annual basis, the government said.

Only a relatively smaller fall in exports to China at 9.4 per cent prevented a worse outcome, while electronics exports, the mainstay of Malaysia's economy dropped by 23.2 per cent from a year earlier.

'This number is a bit disappointing. There should be an improvement in the second half,'said Kit Wei Zheng at Citibank. 'The question is how fast it improves and nobody expects the improvement will be in a straight line.'

Economists said the sharp decline in April exports was largely due to a high base from strong commodity prices last year.

'It also reflects continued contraction in external demand, especially in the US, where they are still building precautionary savings, resulting in reduced spendings,' said Lee Heng Guie, chief economist at CIMB Investment Bank.

'Although we have seen some signs of stabilisation in the global economy, and firm commodity prices, we will still not be able to escape double-digit declines in exports going into the third quarter. We may see single-digit declines in the fourth quarter. In summary, exports will contract 20- 25 per cent for the full year. It was definitely a weak start to the second quarter.'

Malaysia is Asia's third most trade dependent economy after Hong Kong and Singapore relative to the size of its economy and the April trade data, after surprisingly muted falls in recent months, showed the country was finally catching the full force of the global economic downturn.

'This kind of deterioration in the trade position is something we have been expecting for months and had almost given up hope of seeing. It is a key reason why our foreign exchange analysts are relatively bearish of the ringgit,' said Robert Prior-Wandesforde, an economist at HSBC.

South Korea reported earlier this week its May exports fell 28.3 per cent compared to expectations of a 23.2 per cent drop.

Malaysia's imports in April were down 22.4 per cent from a year earlier to RM33.76 billion compared to a forecast of a 27.4 per cent decline.

The trade balance showed a surplus of RM7.36 billion against economists' projection of RM12.1 billion. -- Reuters 

Published June 5, 2009

PAS quashes talk of pact with National Front

But it signals more aggressive stance within Opposition

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(KUALA LUMPUR) Malaysia's Islamist party yesterday ruled out forming a pact with the government and signalled that it would take a more aggressive stance within the three-party Opposition - a move that could cause friction.

Leaders of the Pan Malaysia Islamic Party (PAS) told its annual assembly they would turn down approaches from the National Front coalition to form a unity government - a move that would have killed Opposition leader Anwar Ibrahim's hopes of wresting power in polls due by 2013.

PAS and the United Malays National Organisation (Umno), the main party in the coalition that has ruled Malaysia for 51 years, held talks last year over Islam and Malay unity, creating concern that PAS could quit the Opposition.

'The party leadership never had any intention to join Umno or the National Front . . . we will instead strengthen and consolidate the People's Alliance,' PAS deputy president Nasharudin Mat Isa said late on Wednesday to cheers, when opening the party's youth wing meeting at the nation's capital.

Umno is still struggling to recover from big losses in elections last year. It and PAS are locked in a battle to win over the majority Malay Muslims who make up more than half of the country's 27 million population.

While PAS is the second largest political party in Malaysia in terms of mass membership, it is the smallest of the three Opposition parties that form the People's Alliance bloc in Parliament with just 24 seats out of 83 held by the Opposition.

The rainbow coalition embraces Mr Anwar's reformers and an ethnic Chinese party, and differences between PAS and the Chinese party over issues such as Islamic law have in the past threatened to split the alliance.

Analysts say that PAS now has more to gain from chasing the Malay Muslim vote than from running after mixed seats which contain large numbers of ethnic Chinese and Indian voters.

'In discussing the future of the People's Alliance, we must realise that we are not just competing with the ruling National Front but also with our other partners in the People's Alliance,' said Kamarudin Sidek, representing the central state of Malacca.

Prime Minister Najib Razak's father, Malaysia's second premier Abdul Razak Hussein, roped in the Islamists into the ruling National Front coalition in 1974. The marriage was short- lived with PAS pulling out acrimoniously four years later.

The cooperation issue is a controversial topic for PAS's assembly as well as its internal party elections this year.

Party delegates split in a vote for the youth wing yesterday, picking six conservatives and six reformers for the 12-member PAS Youth executive council, while the top two posts in the wing, which were uncontested, were secured by conservatives.

Nasharudin is being challenged by party vice- president Husam Musa, who leads a reform group bitterly opposed to cooperating with Umno.

A cleric, Mr Nasharudin enjoys the backing of the party's conservatives and was among the PAS leaders who led talks with the government after the 2008 polls to jointly govern the economic powerhouse state of Selangor and the northwestern state of Perak. -- Reuters 

Published June 5, 2009

Bursa M'sia says higher trading to boost earnings

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(KUALA LUMPUR) Bursa Malaysia Bhd, operator of the nation's stock exchange, expects a surge in trading volume in the second quarter to have a 'very positive' effect on earnings, chief executive officer Yusli Mohamed Yusoff said.

'Volumes are more than double what they were in the first quarter, so that's a good sign,' Mr Yusli said in an interview with Bloomberg Television in Hong Kong yesterday.

'As trading activity picks up, we do expect our revenue numbers and our profit and loss numbers to improve accordingly.'

The key Kuala Lumpur Composite Index has risen 22 per cent in the past three months, reflecting gains in Asian stock markets amid optimism the global recession is easing. The measure fell 39 per cent last year, the biggest decline in more than a decade.

'The market rally has surprised everyone, nobody expected it to rebound so strongly and this has been a positive surprise for Bursa and for investors,' said Jason Chong, who helps oversee US$1.6 billion of UOB-OSK Asset Management here.

'The big question is whether the momentum is sustainable. That will very much depend on the recovery in the global economy.' - Bloomberg

Published June 5, 2009

Most sectors in M'sia turn in lower Q1 profits

Consumer, utilities, telecommunications industries are exceptions

By PAULINE NG
IN KUALA LUMPUR

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THE steeper than expected contraction in the first quarter of the Malaysian economy was reflected in corporate earnings with declines posted across most sectors, consumer, telecommunications, and utilities being noticeable exceptions.

Nearly two-thirds of Maybank-IB's 72-stock universe suffered lower sequential quarterly net profits, with 24 per cent surprising on the downside.

Bar one or two stocks, all other counters in the sectors of gaming, oil & gas, property, Reits, construction, building materials, semi-conductors, plantations and tolled roads, saw a drop in quarterly sequential earnings.

The consumer sector escaped largely unscathed, the net profits of the sector falling by a slight 2.6 per cent, quarter-on-quarter, but strong brand franchises British American Tobacco, JT International, Carlsberg and Nestle, managed to post better quarterly profits.

Another sector which proved resilient was rubber gloves. Compared to the same time last year when manufacturers were grappling with high fuel and latex costs, glove makers are enjoying a good run, their combined quarterly profits growing nearly 12 per cent in the first three months of the year after expanding 16 per cent in the previous quarter.

Maybank-IB observed that the aggregate recurring net profit of stocks in its universe fell by only 3.5 per cent q-o-q - a fact it attributed to the skewing of results by the five large cap stocks of Telekom, Tenaga, Axiata, Petronas Gas and AirAsia. Three of the firms were monopolies, it noted, while Axiata and AirAsia had experienced an earnings collapse in earlier quarters and their profit recovery had distorted the picture.

Excluding the five, the q-o-q profit drop was closer to 14 per cent, a rate of decline that might have in part prompted the stockbroker to set its year end target for the Kuala Lumpur Composite Index at 990 points - some 7 per cent lower than the KLCI's current level of 1,063 points.

CIMB agreed the corporate results season had been poor, but believes there were sufficient bright spots to indicate an upswing ahead. 2009 core net profit forecasts had been relatively stable and had started to inch up on a monthly basis, it observed.

'The raising of earnings forecasts estimates is more pronounced for 2010, which indicates that analysts are increasingly confident that earnings prospects will improve next year,' said the broker, which has seen fit to raise its year-end target to 1,220 from 1,060.

Its preferred sectors are mainly 'cyclical' ones such as construction, property, and oil & gas. Construction - and building materials - is expected to benefit from the RM60 billion (S$24.85 billion) stimulus package since about a third worth is targeted at infrastructure projects.

Given the sharper than expected contraction in the real economy in the January to March period, coupled with the minimal rise in government consumption of 2.1 per cent y-o-y compared to an increase of 12.7 per cent in the fourth quarter, analysts consider the government's fiscal policy impact had yet to kick in.

'The silver lining is that the government is now under greater pressure to implement its fiscal stimulus plans quickly,' Maybank-IB commented, adding construction and building materials are two to three quarters away from improved revenues.

This however assumes that pump priming would intensify in the second half, and is effectively executed - a concern some analysts believe remains given that politicking has yet to abate.

Published June 5, 2009

Beware of the pendulum swinging back

By SIOW LI SEN

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THE stocks of Singapore's three local banks - seen as proxies for the economy - have been rebounding since March in line with global euphoria over what has been hailed as a 'green shoots' recovery. But market sentiment appears to be more cautious lately - a good time for investors to take stock of the situation.

There seem to be a few signs that the Singapore economy may have seen its worst, but it must be noted that the bad news is still piling up.

The purchasing managers index (PMI), a key indicator, rose two points to 51.2 last month - its first expansion after eight months of contraction. The good news is that overall production output expanded for the second month on the back of higher imports and inventory levels. But there was still a sting: overall hiring sentiment remains poor. Manufacturing and electronics employment continued to contract, said Janice Ong, executive director of the Singapore Institute of Purchasing & Materials Management. She added that local manufacturers remain cautious in managing their business activities and they continued to clear their stocks at very low prices last month.

Further indication of poor business sentiment comes from bank loans data; business loans continued to fall, according to the latest official figures. Total bank lending dipped again in April after a slight increase in March, as loans to businesses shrank for the sixth straight month, and lending to the building and construction sector stalled. Loans to businesses fell 1.1 per cent in April to $154 billion, the sixth consecutive monthly decline. From last November to end-April, loans to businesses contracted $92.3 billion - some 5.7 per cent.

Rating agency Standard & Poor's (S&P) in its latest global fixed income report said that corporate defaults in Asia-Pacific so far this year already match 1998's record high.

Meanwhile, the number of downgrades has risen sharply, dominating rating actions for 10 months in a row. S&P said even though Asian companies came into this downturn with generally lower leverage than their Western counterparts, severe disruptions to exports continue to pose stark profitability challenges, particularly in manufacturing and other cyclical sectors. 'We expect record levels of defaults in the coming months as the global recession continues to take a heavy toll on the region's export-led economies and leveraged sectors, with ripple effects on capital spending and consumer expenditures,' said the rating agency.

The government continues to warn of more layoffs with the prime minister this week cautioning against being hasty in thinking the global recession has bottomed. But the stock rally of the three local banks appears to suggest that investors have turned their backs on a relentless diet of bad news because of 'negativity fatigue'.

There is no question that the local banks are well run and, while vulnerable to the contracting economy, their rising levels of non-performing loans are not expected to reach Asian financial crisis levels. Still, investors should remain nimble - because when the pendulum swings back, the effect could be devastating. 

Published June 5, 2009

Keppel Corp shares hit by Skeie news

Counter recovers to end 2.75% lower as market waits for developments

By NISHA RAMCHANDANI

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SHARES of Keppel Corporation took a beating yesterday on news that one of its customers could be facing bankruptcy if a proposed restructuring fails to take off.

Keppel shares dropped to as low as $6.90 in intra-day trading before ending at $7.08, but still 20 cents, or 2.75 per cent, down. More than 14 million shares changed hands.

The customer, Skeie Drilling and Production (SKDP), currently has construction contracts for three N-Class jack-up offshore drilling rigs with Keppel Corp's subsidiary Keppel Fels, valued at about $1.7 billion in total.

On Wednesday, Keppel Fels had said that it is supportive of and is participating in the restructuring exercise.

'We believe that there is a high likelihood that either banker or Keppel will take control of the rigs and put them up for sale,' said CIMB-GK Research in a note yesterday. CIMB went on to point out that not all units may be sold, given the tough jack-up market.

'Earnings loss is about 4 per cent to Keppel 2010 earnings if two units are sold and 9 per cent if one unit is sold,' CIMB said.

In a sector report in April, CIMB estimated that 5 per cent of Keppel's order book has a high risk of cancellation and 25 per cent is of medium risk.

DMG & Partners said in a report that SKDP could 'possibly be the final remains of potential order cancellations as Keppel's remaining customers are financially strong and macro environment turns for the better'.

The share price is likely to be pressured in the near term, it highlighted, until further clarification is obtained.

To avoid filing for bankruptcy, SKDP was trying to get 'irrevocable pre-acceptances' from majority of its bondholders by 8pm yesterday (Oslo time). Details were not available at press time.

CIMB has maintained its 'underperform' rating on Keppel with a $7.20 target price.

Published June 5, 2009

Maybank plays the cash rebate card

Its cardholders get up to $1,000 a year in $6m programme

By SIOW LI SEN

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(SINGAPORE) What credit cardholders want most of all is cold, hard cash. The latest to give it to them is Maybank Singapore, which is offering to pay cardholders up to $250 each quarter for spending on its plastic. This follows a successful promotion which gave money to new customers.

Back in October, Maybank gave new credit card sign-ups a 10-year fee waiver and a $100 cash credit which helped increase its card base by 20 per cent, said the bank's head of consumer banking Helen Neo.

The bank is believed to now have about 200,000 card members, making it a mid-sized player.

The Malaysia-owned bank this week decided to follow up with a cash back programme in an effort to entice spending on its cards.

Not only have recession-wary consumers cut back on spending, the industry is saturated with 6.4 million cards in circulation for a population of 4.8 million.

Although not a new strategy - Citibank was the first to offer cash back via its Dividend card - Maybank claims its latest campaign gives more money back.

Under its programme which is not tied to any merchant or specific card, Maybank card members can earn up to $1,000 a year or 200,000 points. The bank is spending $6 million on the programme.

'All card members will reap the benefits no matter which Maybank card they hold as this Rewards Infinite Value loyalty programme is also not tied to any specific card,' said Ms Neo.

Other credit card issuers which offer cash rebates restrict it usually to certain cards or at specific outlets.

DBS offers cash rebates on two cards, the POSB Everyday card, and its DBS CapitaCard Visa Platinum Card, which gives up to 20 per cent instant cash rebates at 12 CapitaLand malls.

United Overseas Bank points out that its rebate programme, UOB SMART$, has no restrictions on the amount earned for card members.

'Card members have been enjoying rebates of up to 10 per cent off at household retail brands such as Shell, Best Denki, Metro,' said Gan Ai Im, regional and Singapore head, cards and payment products, United Overseas Bank.

'Our top rebate earners exceed several thousand per annum,' she added.

Maybank's cash rebates apply to spending in many categories but not for travel. Big-ticket jewellery purchases will qualify for the cash rebate though, said Ms Neo.

Citi said that its Dividend card has no restrictions but it pays up to $800 per year.

Citi is also the only issuer which gives the cash back in the form of a cheque to customers, a popular option.

Maybank said its year-on-year billings growth has consistently outperformed the industry.

Ms Neo said that its credit card billings in March grew 4.66 per cent year-on-year while the industry's was down 3.21 per cent.

Published June 5, 2009

HDB upgraders have their say in muted market

They comprised more than half of those who bought private homes in Q1

By KALPANA RASHIWALA

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(SINGAPORE) The first quarter of this year saw a major trend reversal. HDB upgraders bought more private homes than those already living in private properties.

Fifty-six per cent of caveats for private home purchases in Q1 were lodged by buyers with HDB addresses, up from a 43 per cent share in the previous quarter. The last time this figure breached 50 per cent was in Q3 2002, when it was 52 per cent.

Market watchers note that the pick-up in HDB upgraders' share in Q1 came amidst the launch of mass-market projects like Caspian near Jurong Lake and Double Bay Residences in Simei as well as the relaunch of The Quartz in Buangkok. Such entry-level 99-year leasehold condos cater to HDB upgraders.

Property consultancy DTZ highlighted this trend in its analysis of caveats from URA Realis as at May 29. The reason behind this could be the pent-up demand from this segment of buyers who had been priced out of the private residential property market during the bull run in 2007.

Another important factor was the narrowing price gap between public and private homes, which resulted in private properties becoming increasingly within reach of HDB upgraders. 'With cash proceeds from the sale of existing HDB flats, the upgrader needs to borrow only about 50-60 per cent of the value of the new private property,' estimates DTZ's head of SEA research Chua Chor Hoon.

Knight Frank executive director (residential) Peter Ow also credited the rise in proportion of HDB upgraders to developers offering a combination of attractive pricing and interest absorption schemes (IAS) for projects. 'IAS helps tide these buyers until their new condo is completed and when they can sell their existing HDB flat,' he explained.

'At Double Bay, which we marketed, we saw many buyers in their 40s currently living in HDB flats nearby,' Mr Ow added.

DTZ's analysis showed that the highest proportion of buying (in URA Realis's 14-year caveats database) by HDB upgraders was in Q2 2002, at 81 per cent.

Generally, HDB upgraders' share of private home purchases tends to be higher when private residential prices are falling and come within their reach. And when property prices are shooting up, their share of purchases ebbs.

During the 1998 Asian Crisis, for instance, HDB upgraders' share hovered between 51 and 65 per cent per quarter, against a much lower share of 33-40 per cent in 1995 when prices were spiralling up.

Again, during the recent property bull run in 2007, their share was pretty low at 21-23 per cent, before starting to rise again last year when the property slump began.

DTZ also compared some buying preferences of HDB dwellers and private property owners who bought private homes in Q1. Some 88 per cent of total purchases by those with HDB addresses were under $1 million. In contrast, 40 per cent of buyers with private addresses invested in homes that cost $1 million and above. HDB upgraders also bought mostly smaller apartments.

Some 92 per cent of private homes that HDB dwellers bought in Q1 were outside prime districts 9, 10 and 11. And for those HDB dwellers who did pick up private properties in prime districts, 68 per cent were for units below 1,000 sq ft. Based on caveats lodged in Q1, the most popular projects for those with HDB addresses include The Caspian, The Quartz, Alexis and Double Bay Residences.

HDB dwellers accounted for 57 per cent of the total 227 caveats lodged for Alexis and for 75 per cent of the total 458 caveats for Caspian.

DTZ's Ms Chua reckons HDB dwellers' share of private home purchases may ease in Q2, when sales activity permeated to the mid/upper-mid segments where more buyers have private addresses.

Knight Frank's Mr Ow said the proportion of HDB upgrader buying will vary depending on the profile of property launches or relaunches in the months ahead.