Wednesday 19 December 2007

Lee Shau Kee Revises Market Target

5 comments:

Guanyu said...

Lee Shau-kee picks stocks pretty well for a 79-year-old grandpa who spends his mornings in massage and meditation. And Mr Lee says the market isn't going to climb quite as fast as he once thought.

As he has done with increasing frequency, the Henderson Land Development chairman has again changed his targets for the market, now predicting the blue-chip index will hit 30,000 around the Lunar New Year and 33,000 in the autumn. He toned down his predictions after the monetary tightening and credit crisis tripped up the market. His earlier targets were 30,000 by year end and 33,000 by the Lunar New Year.

This is his seventh market prediction since August, and while his accuracy has made him a favourite with the punters he also allows himself the flexibility to move the target when market sentiment is clearly running against him.

Mr Lee, popularly known as Uncle Four (he's the fourth son), made his new forecasts as today's edition of Next Magazine named him their Man of the Year for the second year running. And why not, given that the property tycoon has become a star stock-picker whose predictions are eagerly awaited by investors and can spark a market rally.

Mr Lee's latest favourites are companies focused on energy and finance, namely CNOOC, China Shenhua Energy, China Merchants Bank and China Life Insurance.

And you can be assured Mr Lee made those picks while clear of mind and free of stress. Company sources say the tycoon spends six hours on massage, exercise and meditation every morning before going to work in the afternoon, leaving him healthy and full of energy late into the night.

Mr Lee emerged as a market sage after he launched his private investment firm Shau Kee Financial Enterprises in 2004. Starting with HK$50 billion in the market, his investment has now grown to HK$200 billion, according to a company source.

Anonymous said...

Singapore Property Stocks Slow as Tax Rise Curbs Boom (Update1)

By Chen Shiyin

Dec. 19 (Bloomberg) -- Singapore's property companies may lag behind Asian real estate developers for a second straight year in 2008 as government limits on speculation cool the housing market.

CapitaLand Ltd., Southeast Asia's largest developer, is suffering its biggest quarterly decline in more than six years after the government raised development taxes by as much as 58 percent. The Singapore Property Equities Index dropped 19 percent so far this quarter, the most since a 35 percent plunge in the third quarter of 2001.

International buyers, who accounted for more than 40 percent of real estate purchases in 2006, bought 38 percent fewer properties last quarter as capital-market gridlock caused by rising U.S. subprime mortgage defaults curbed borrowing worldwide. The supply of new homes for sale next year may almost double by value compared with 2006, weighing on prices, according to CLSA Ltd.

``We can find better propositions elsewhere in the region, where there's more growth and value to be found,'' said Leslie Phang, who helps manage $1 billion at Commonwealth Private Bank in the city. He doesn't own local builders and prefers Hong Kong developer Sun Hung Kai Properties Ltd.

The decline in Singapore's property gauge compares with a 10 percent drop in the Bloomberg Asia Pacific Real Estate Index, which tracks 164 companies. The Bloomberg World Real Estate Index has slipped 8.9 percent this quarter. Singapore's property index climbed 1.3 percent today, the biggest rise since Nov. 29.

Banks Hiring

Singapore's home price index increased 8.3 percent in the three months ended September from the second quarter. That matched the June quarter's pace, the first time the growth rate failed to rise since mid-2005.

Demand for apartments grew this year as banks hired more expatriates. New York-based Morgan Stanley, the No. 2 securities firm by market value, said in February it would open a local prime brokerage office servicing hedge funds. Citigroup Inc., the biggest U.S. bank by assets, followed with its own prime brokerage office in March.

About 19,200 jobs were created in financial services through September this year, government data show. Foreigners accounted for about 43 percent of total purchases in 2006, up from 14 percent in 2005, according to CLSA, the Asian investment-banking arm of Paris-based Credit Agricole SA. Singapore home prices rose 13 percent last year, beating all other Asian markets, according to Global Property Guide, a Manila-based researcher.

The number of foreign purchases fell 38 percent to 2,073 last quarter, from a record high of 3,332 in the three months ended June 30, according to DTZ Singapore, the local unit of DTZ Holdings Plc, a London real-estate brokerage.

`Policy Risk'

The government scrapped a program on Oct. 26 that allowed buyers of planned apartments to pay 10 percent of the asking price and defer the remainder until completion. Builders face higher fees on new developments after the government raised charges by 58 percent for apartment projects and by 42 percent for commercial properties, starting Sept. 1.

``There are still a lot of policy risks in this segment,'' said Daphne Roth, vice president of equity research at ABN Amro Private Banking in Singapore. ``The government doesn't want home prices to go up too much, too quickly and the policy changes introduced so far have already impacted the market.''

CapitaLand has slumped 25 percent in Singapore stock exchange trading during the fourth quarter, set for its biggest quarterly drop since a 47 percent plunge in the three months ended September 2001. It has lost 29 percent after reaching a record high on April 26, even though third-quarter profit more than doubled from a year earlier.

Cheaper Than Peers

City Developments Ltd., controlled by billionaire Kwek Leng Beng, declined 18 percent since the start of this quarter and plunged 23 percent from its all-time high on June 19.

The selloff has left local property shares cheaper than their regional peers. The Singapore Property Index is valued at 11 times earnings, less than a third of its high of 38 times in March 2006. The Bloomberg measure of Asian real-estate stocks is valued at 19 times, while the global index is at 17 times.

Thue Isen, who helps oversee $1 billion at Bankinvest Group in Singapore, including shares of CapitaLand and City Developments, said the decline is a chance to buy local developers, which he finds more attractive than those in Hong Kong and China.

``People's expectations for the property market here have definitely dampened, which justifies some of those declines,'' he said. ``If you look at economic and income growth and new offices starting up, the fundamentals haven't changed that much, so the pullback looks a bit excessive.''

Forecasts Cut

CIMB-GK Research Pte, based in Singapore, cut its price forecasts in a Dec. 10 note. Properties costing at least S$1,200 ($831) a square foot may climb 8 percent in 2008, compared with an earlier forecast of 15 percent. Overall home prices will rise 15 percent from a previous estimate of a 25 percent increase, said Donald Chua, a Singapore-based analyst.

The brokerage, a unit of CIMB Bank Bhd., Malaysia's largest investment bank, also cut its rating on the industry to ``underweight'' from ``overweight,'' citing slowing growth. The firm lowered its recommendation on CapitaLand to ``neutral'' from ``outperform.''

Price increases in other Asian cities continue to accelerate. The cost of Hong Kong's luxury homes jumped 12 percent in the third quarter from the second, the most since 2004, according to Los Angeles-based commercial property broker CB Richard Ellis. Prices in 70 major Chinese cities rose 9.5 percent in October, the fastest since 2005.

Worst Performance

The city-state's real estate benchmark has gained 7.8 percent this year, its worst annual performance since 2002. It jumped 65 percent last year and 39 percent in 2005. The Singapore All Equities Index has increased 20 percent this year.

The Asian property index has risen 28 percent in 2007, after climbing 32 percent and 26 percent in the previous years.

CLSA forecasts that as many as 12,000 new homes under construction could be up for sale in the next year to 18 months in the most expensive residential districts, driving up supply and hurting prices. The ``unprecedented'' inventory is worth S$21 billion, almost twice the S$11 billion invested in real estate in 2006, according to Yew Kiang Wong, a CLSA analyst in Singapore.

Increased regulation and the spread of U.S. subprime mortgage defaults are denting home purchases. The Business Times newspaper reported on Dec. 3 that the value of sales of private properties plunged to S$2.9 billion so far this quarter, less than 20 percent of the S$15.6 billion for the previous three months.

``There's just too much negative news out there right now, with the government regulations and concerns over subprime,'' said Nicole Sze, Singapore-based investment analyst at Bank Julius Baer, which manages $350 billion. ``We're unlikely to see the same kind of broad-based rally that we've had.''

Anonymous said...

S&P Downgrades ACA to Junk Status

By Stephen Bernard
19 December 2007

NEW YORK (AP) -- A major insurer of bonds was downgraded to "junk" status on Wednesday, a move that could potentially cost banks and local governments billions of dollars.

Credit rating agency Standard & Poor's slashed its credit rating for bond insurer ACA Financial Guaranty Corp. to a non-investment grade "CCC" from investment grade "A." S&P said ACA's capital cushion of $650 million is still $2.2 billion short of what it needs to cover potential losses.

S&P, in downgrading ACA and placing warnings on four other insurers, cited concerns about increasing claims from defaults on mortgage-backed bonds, and the risk that those claims could drain the bond insurers of needed capital. The agency also acknowledged its actions could change the way bond insurers do business from now on.

The downgrade led S&P to cut ratings on bonds issued to fund everything from schools to sewers and prisons to parks. The move makes it unlikely ACA could insure any more bonds and could spark a municipal borrowing crisis, according to Peter Schiff, chief executive of Euro Pacific Capital.

"Many municipalities get high credit ratings because their bonds are insured," said Schiff. "Higher borrowing costs for cities will force them charge higher property taxes, which will increase the strain on consumers. And some cities may be shut out of the credit markets."

The new strain on civic funding comes at the same time that a weak housing market threatens to drain local coffers of property taxes. Many cities have been banking on higher property taxes, but now homes are being valued lower and this also reduces funds available to the cities, he said.

Jeff Doss, executive director of the Northeast Public Sewer District in the St. Louis suburb of Fenton, Mo. said he didn't foresee any effect from the ACA downgrade. His agency recently refinanced its $15 million in bonds, but he said some people were still at risk.

"It's the people whose bonds are aged enough that the holders can call them back in that could be in for a world of hurt," Doss said. Some bonds carry provisions that let their holders demand immediate repayment after a period of time if some conditions are met.

Rebecca Floyd, general counsel for the Kansas Development Finance Authority, said she didn't expect problems after a $4.3 million health care facility bond her agency worked on was downgraded to junk.

"It's hard to project at this point," Floyd said. "We know the problems are out there and we're vetting the insurers ourselves. Where I see people getting pinched is the smaller borrowers who look to raise their credit rating."

In cases where the municipality provided its rating as the backstop for a bond insured by ACA, S&P cut the bond's ratings to match those of the municipality. Ratings for bonds ACA insured, but which were not backed by a municipality's underlying rating, fell to "CCC" to match ACA's rating.

Bonds cut to "CCC" because there is no other underlying rating can be resubmitted for review, S&P said. In that case, a municipality could potentially have the bond upgraded to match its credit rating.

Downgrades of bond insurers can also lead to losses at the companies who use them. Only minutes after S&P's downgrade of ACA, CIBC World Markets said insurance for $3.5 billion in securities it holds backed by subprime mortgages may no longer be viable.

The S&P action on ACA comes amid reports investment banks, including Merrill Lynch & Co. and Bear Stearns Cos., were in talks to bail out the struggling bond insurer. ACA and Merrill Lynch were not immediately available to comment.

Bear Stearns declined to comment on any bailout speculation, though a spokesman said the investment bank was a small creditor of ACA and thus has little exposure to the bond insurer.

As part of a mass review of the bond insurers, S&P also placed Financial Guaranty Insurance Co. on negative credit watch. FGIC currently carries a "AAA" rating. A negative watch means there is a one-in-two chance the rating could be downgraded in the next three months.

Ambac Financial Group Inc., MBIA Insurance Corp. and XL Capital Assurance Inc. -- all more highly rated and larger than ACA -- were placed on a negative outlook by S&P, though their ratings remained unchanged. A negative outlook means there is a one-in-three chance ratings will be cut in the next two years.

Anonymous said...

Manpower costs in construction industry to go up by 10%: Yongnam

Yvonne Cheong, Channel NewsAsia
19 Dec 2007

SINGAPORE : Manpower costs in the construction industry are set to rise by 10% over the next year, according to construction firm Yongnam Holdings.

The company took on a S$100 million loan on Wednesday to finance its expansion plans.

ION Orchard is just one of several significant projects on Yongnam's list this year.

To build its arsenal during this boom period, the company signed the S$100 million financing package with nine financial institutions on Wednesday. S$45 million will go towards refinancing existing loans.

Yongnam said about S$10 million to S$15 million will go towards funding its purchase of about 20,000 tonnes of steel struts, which are temporary support structures for construction and considered part of its capital equipment investment.

If fully utilised, the 20,000 tonnes of steel struts can support a project of S$40 million. Steel prices have been spiking, but Yongnam said it is unfazed.

"In fact, the rising steel cost will benefit us on the strutting division, because we own more than 60,000 tonnes of steel now. If the steel price rises, we will have a competitive edge because the newcomer will have to pay more money," said Seow Soon Yong, CEO of Yongnam Holdings.

Yongnam, however, expects manpower costs to go up by 10% over the next year, due to the current shortage.

The industry also faces price pressures in other raw materials during the boom.

However, it is positive about its earnings outlook, saying it expects revenue to jump by 50% year-on-year in the next two years.

Part of the latest loan will go towards funding the construction of a new fabrication factory at Nusajaya, Johor.

"The factory is timely for us because of the buoyant Singapore market and the Middle East market. We need to boost our capacity to go to the Middle East," said Seow.

The Middle East will contribute 30% of Yongnam's revenue this year and next year, with the Dubai Metroline as one of its key projects. - CNA /ls

Anonymous said...

Are Asian Markets Strong Enough to Withstand a Protracted U.S. Slowdown?

Notes from Dr. Enzio von Pfeil’s upcoming appearance on News Asia:

December 19, 2007

Enzio, some say China has become more dependent on exports to the US and Europe. Do you agree? Is China vulnerable to a slowdown in the US economy?

● Without a doubt, China is very dependent on her exports to America and to Europe.

● So, in the short term, China is affected by slowdowns in America and Europe by way of exporting less to these places. Besides, if the US market crashes, then expect that to affect the psychology of ALL investors: we don't buy the myth of de-coupling, at least in the short term.

● However, does this make her “vulnerable”? I am not so sure. The key is that private consumption accounts for 2/3 of China’s economy, and a large part of this is driven by fixed asset investment and urbanization. Of course, China grows less quickly if her exports slow, but with the domestic part of demand increasing strongly, and especially ahead of the Olympics, I would not subscribe to the word “vulnerable”, at least in the longer term.

Can China offer extra momentum to offset US economic weakness?

● No. It is a myth that China, with one fifth of America’s per capita income, can offset the power of the American and indeed European economies.

● A case could be made that strong Chinese growth, as well as a stronger RMB make imports from the USA with her weakening currency more attractive, but I am not too gung-ho on this “the only thing that drives trade is the exchange rate.”

● If the yuan keeps rising too fast, then exporters will be hurt by costing more to overseas customers and by a worsening of The Economic Time in America and in Europe.

● So they would do better by priming the fiscal pump, as in: urban renewal, build up for the Olympics. Their monetary policy is loose enough.

Some economists point out that Chinese companies might try to make up for a shortfall in exports by selling their products locally. That, in turn, will reduce demand for Asian exports. Are you noticing this trend too?

● Export markets differ strongly from domestic ones: the demand structures often are very different.

● Also, why raising domestic sales reduces demand for exports to overseas countries beats me.

● On a macro level, of course, companies that previously relied on exports can try to sell more domestically – but the economics of this are vastly different.

Are Asian economies fundamentally strong enough to withstand the effects of a protracted U.S. slowdown?

● The Economic Time™ is pretty good in places like Korea, India, Hong Kong and China. But we advise clients NOT to buy these markets until the US stock market has cracked.

● Yes, all are fundamentally strong enough – in the longer term – to withstand a US slowdown. However, as we mentioned above, in the short term, any US slowdown will hit the psychology in the “real” exporting economy, as well as in the financial markets. At least in the short term, then, "things" are not so different this time.

What about the more open economies like Hong Kong and Singapore?

● Singapore’s problem is always that it’s the nice house in the bad neighborhood. Witness the political undulations returning to Malaysia… li Clearly, we in HK are the water skier attached to the back of the Chinese speed boat, one that we think will continue racing along, thus dragging us with it.

In your view, is there room for domestic policy response in Asia to counter the effects of any slowdown?

● Yes. You can loosen monetarily by pushing the foreign exchange rate down and selling more domestic currency into the market. Or on the fiscal side you can cut taxes or increase spending.