DAILY MARKET UPDATES 30th September 2008

Short-term interest rate spikes
Short-term interest spikes spell bad news for some home buyers but better news for those with cash in bank deposits. Local banks have tightened their credit to each other and to corporate clients, making money harder to borrow. The three-month Singapore Interbank Offered Rate (Sibor) has jumped in response, up by 100 basis points in just a month to 2 per cent. The one-year Sibor rate has also been rising, though not as fast as its shorter variant. It moved from 1.75 per cent last month to about 1.875 per cent now. The rising Sibor has also meant higher deposit rates for some savers. Standard Chartered expects the three-month Sibor to decline early next year to just below 1 per cent and remain around that level for most of next year.
- The Straits Times, B20
Thomson collective sale back on track after SLA appeal
The collective sale of five small estates in Thomson Road is back on track after getting stalled two months ago. An appeal by buyers Mergui Development has been granted by the Singapore Land Authority (SLA), to reduce the price of a 1,000 sq m section of a road needed for redeveloping the project. Developer KSH Holdings, the parent company of a firm in the Mergui Development consortium, said that the SLA had cut the land premium payable from $16.74 million to $8.37 million. Owners at the five estates - Norfolk Court, Mergui Lodge, Northern Mansion, Mergui Court and The Mergui - were said to be considering walking away with the 10 per cent deposit of $12 million because buyers had failed to complete the sale. Both sides have agreed on a deadline extension until November, but this involved paying a further $3 million deposit to the 88 sellers. The strip of land is needed so the five estates near Rangoon and Moulmein roads can be combined and developed into one project. This will give a land area of 74,355 sq ft and a gross floor area of 208,196 sq ft. It will allow a high-rise block with about 140 luxury flats each measuring 1,250 sq ft on average.
- The Straits Times, B19
Brokers’ take: Office Reits – Credit Suisse
The focus of the office sector has always been on supply, but actual demand is hurting (H1 2008: 0.24 million sq ft versus consensus' 1.2 million-1.5 million sq ft per annum), and the US economic woes could strain it further. Factoring in a revised GDP growth forecast of 2.8-3 per cent for 2009-10, expected demand of 0.4-0.7 million sq ft is at recession lows, and results in a demand-supply disparity high of 3.3 million sq ft for 2010 (expected). Credit Suisse believes construction delays and committed supply will provide little relief. Credit Suisse expects rentals to peak earlier in 2008, and fall 50 per cent to $9.18 psf per month in 2011, prompted by a peak vacancy rate of 16.5 per cent in 2010.
- The Business Times, P6
(also see The Straits Times, B16, “S’pore in for biggest office space excess in 20 years”)
UK August mortgage approvals fall to lowest since 1999
UK mortgage approvals slid in August to the lowest since at least 1999 as the global credit squeeze prompted banks and building societies to curtail credit. Lenders approved 32,000 loans for house purchases, down from 33,000 in July, the lowest since comparable data began nine years ago. The value of those loans fell to £143 million (S$370 million), the lowest since April 1993. The worst house-price slump in at least a quarter century and a tightening global credit squeeze threaten to push the economy into its first recession since 1991. UK house prices fell by an annual 6.2 per cent in September.
- The Business Times, P30
CapitaLand chiefs defend strategy
Amidst downgrades by analysts and a slump in the company's share price, CapitaLand's top brass have defended the group's strategy. Asian real estate markets have started to tank but CapitaLand maintains that Asian economies and real estate will outperform western economies, citing strong demand fundamentals. In the Asian context, the buying power and source of funds through capital markets or other sources is still not as seriously affected as in USA. The Arabs also have money. CapitaLand said German core funds and North European funds have also raised their allocation for Asian real estate over the years.
- The Business Times, P32
Europe scrambles to fight financial fires
Central banks in Asia and Europe pumped in huge amounts of liquidity into their financial systems yesterday to persuade financiers to lend to each other. The MSCI All-Country World Index of 48 nations lost as much as 4.4 per cent, the steepest plunge since the Asian financial crisis 11 years ago. The FTSEurofirst 300 index of leading European shares ended unofficially down 4.95 per cent at 1,050.12 points - its lowest since January 2005. The benchmark index also notched up its biggest one-day percentage fall since Jan 21 this year. News of the takeover of the US Wachovia Corp's bank operations by Citigroup and the part nationalisation of two major European banks battered banking stocks.
- The Business Times, P1
Japanese banks warned about overseas buys
Bank of Japan urged Japanese banks and financial institutions to be careful as they look to acquire assets overseas in the wake of a financial turmoil that has driven prices down sharply. His comments came amid claims that some Japanese companies are overpaying for acquisitions in their eagerness to diversify away from dependence upon their sluggish domestic economy.
- The Business Times, P20
US investment income here rises 24%
Income from US investments here jumped 24.3 per cent from 2006 to a whopping US$18.32 billion last year, giving a 22 per cent (income divided by investments) rate of return. This was the highest return in four years and better than the 15.4 per cent average for US investments in the Asia-Pacific region as a whole. US investments in Singapore rose 5.3 per cent to US$82.62 billion last year.
- The Business Times, P10
India, S-E Asia seen slowing
South-east Asian economies will probably expand 5.4 per cent this year, down from a previous estimate of 5.6 per cent, Morgan Stanley economists said. Growth may cool to 4.1 per cent next year, less than an earlier prediction of 5.1 per cent. Asian policymakers are predicting a slowdown in their economies as demand from the US, Europe and Japan weaken. Singapore will probably slip into a recession this quarter for the first time since 2002, DBS and United Overseas Bank said. Morgan Stanley cut its forecast for India's economic growth next year to 6.4 per cent from 6.9 per cent, saying that the credit squeeze would crimp consumption and business spending. In South-east Asia, capital inflows are slowing, commodity exports are easing and domestic demand is faltering, Morgan Stanley said. Singapore's property projects have cooled, and Thailand and Malaysia lack the political stability to spur economic growth.
- The Business Times, P17
Raffles Edu to invest in new Tianjin college
Raffles Education Corporation plans to invest three million yuan (S$628,000) in a new college in Tianjin over the next five years. The new school - a collaboration with its Tianjin University of Commerce Boustead College in China - will offer advanced diplomas in fashion design, interior design, visual communication, and multimedia design, among others. The first intake is expected in January 2009.
- The Business Times, P7
India to overshoot borrowing target by almost one-fifth
India will overshoot its borrowing target this fiscal year by almost a fifth as the government spends more to win voters before elections. Asia's third-largest economy will sell more bonds and bills than planned to honour commitments to pay higher salaries, guarantee new jobs, write off farm loans and subsidise energy costs, according to a Bloomberg News survey of 10 traders and economists.
- The Business Times, P19

¯ ST Index change 2,361.34 (-50.12)
SIBOR (3 mths): 2.00000 (S$)
SWAP (3 mths): 1.93791 (S$)