DAILY MARKET UPDATES 18th October 2008

Bank deposits get govt seal of guarantee
The Singapore government will, with immediate effect, guarantee all Singapore dollar and foreign currency deposits of individual and non-bank customers in banks, finance companies and merchant banks. The guarantee would be in place until Dec 31, 2010, and will be backed by $150 billion of government reserves. The government's guarantee will cover deposits in any currency held in savings accounts, fixed deposits, current accounts and under the Supplementary Retirement Scheme. But it does not include any structured deposit and any deposit which is pledged, charged or secured as collateral. It will also be extended to deposits placed with credit cooperatives registered with the Registry of Cooperative Societies. Currently, there are 41 credit co-ops with more than 200,000 members. Also covered are all depositors, big and small, corporate and individual, including those under the current Deposit Insurance Scheme administered by the Singapore Deposit Insurance Corporation, which will now enjoy protection on the full amount of their deposits.
-The Business Times, P1
OCBC: S'pore economy least risky
Singapore has been rated the best-equipped of more than 50 economies worldwide to overcome a serious economic crisis in an OCBC report. The report looked at risk levels and awarded Singapore full marks for its long-term economic fundamentals. Assessed according to seven indicators of economic health, the Republic received a point in every category to top the list as the least risky of 50 economies and the Euro-zone. The broad categories used to track a country's economic health are the ability of a country to cushion itself in a downturn, its level of leverage or debt, and its debt to income level. Countries with large savings rather than debt, access to usable reserves and which run a fiscal surplus generally fared better on the list. OCBC economists said that Singapore passed all the indicators that are deemed important in determining the medium- to long-term economic fundamentals.
-The Straits Times, B23
Serviced office centre opens at One Fullerton
The Regus Group, the world's largest provider of serviced offices, opened a centre in One Fullerton yesterday, confident that demand will stay high despite the financial crisis. Regus has been on an aggressive expansion drive in the Asia-Pacific and aims to open more facilities in the region. Regus One Fullerton, which occupies 20,623 sq ft, has 327 fully furnished workstations. Rates at the One Fullerton centre start from $9,000 a month for a 16 sq m office, which can fit three workstations. There is an opening promotion rate of just over $6,000 a month for the same space. Recent CBRE data shows that office rents have stabilised, with Grade A levels unchanged in the third quarter at $18.80 psf per month while prime rents were stable at $16.10.
-The Straits Times, B11
A black mood seizes markets worldwide
Stocks in Asia went into free-fall yesterday as gloom replaced hope and more banks in Europe turned to governments for funding. UBS received nearly US$60 billion in support from the Swiss government, while Credit Suisse raised 10 billion francs (S$12.9 billion) from other investors including Qatar's sovereign wealth fund. Japan's Nikkei-225 index was the biggest loser in the region yesterday, plummeting 11.4 per cent by the end of trading. The Straits Times Index finished 108.19 points, or 5.25 per cent, lower at 1,951.20. Interbank lending rates in most major economies in Asia and Europe fell for the fourth straight day, a reassuring sign that the trillions of dollars committed by governments to support the banking system is restoring confidence among financial institutions.
- The Business Times, P2
No Asian fund, says World Bank
The World Bank said it does not anticipate the setting up of a special fund for Asia, even as it stands ready to help the region deal with the challenges arising from the current financial turmoil. The Washington-based lender issued the statement in a clarification of remarks by Philippine President Gloria Arroyo which suggested that an Asian bailout fund with an initial US$10 billion (S$14.7 billion) was in the works. The bank said it stood ready to help East Asian countries deal with the turmoil and was prepared to raise lending, take equity stakes in companies and help in safety net programmes.
- The Straits Times, A6
Brokers’ take: Property Sector – OCBC
Launches and transaction volume of non-landed properties (NLPs) recovered month-on-month (m-o-m) in September. The recovery in transaction volume was pale in comparison to the increase in new launches, up by 24 per cent m-o-m to 365 units. Transactions in the Rest of Central (RCR) region was the most active in September, driven by new launches. New launches in the Core Central Region (CCR) jumped almost five-fold m-o-m in September to 240 units. With an uncertain economic outlook, the increase in launches of CCR properties could be an attempt by developers to clear stocks in the CCR in anticipation of further weakness in the property market. For some older projects, developers had started to cut prices to move their unsold inventories. Floridian had seen its median transacted price fall 16.8 per cent from $1,735 psf in January to $1,443 psf in September, leading to eight units sold in September, after registering no sales since February. Increase in new launches and weak take-up rate in September saw the number of launched but unsold properties increase by 10.1 per cent m-o-m to 3,903 units. Coupled with the weak macro-outlook and tighter credit condition, OCBC expects more developers are likely to follow suit with price-cutting.
- The Business Times, P6
CapitaLand's Gulf sales hit $1b
Sales for CapitaLand's Middle-Eastern residential ventures have crossed the $1 billion mark as 849 residential units have been booked. At the time, 96 units of the integrated development at Raffles City Bahrain - comprising three residential towers with 641 apartments, sky villas, retail, food and beverage facilities and five-star serviced residences - were snapped up. Sales have now hit 115 units at an average price of about $6,627 per sq m. This is a 29.6 per cent premium over the prices of other quality residential apartments in Bahrain. In Abu Dhabi, CapitaLand has Rihan Heights, part of an integrated development called Arzanah. It will comprise five residential towers, leisure and sports facilities and retail space. CapitaLand said that 85 per cent - or 734 out of 868 - of Rihan Heights' residential units have been booked since the launch last month. The average sale price achieved ranged from $9,717 to $10,514 per sq m. Raffles City Bahrain is expected to be ready in the fourth quarter of 2010, while Rihan Heights is slated for completion in early 2011.
The Straits Times, B23
Falling rents may take shine off S-Reits
Singapore-listed real estate investment trusts, or S-Reits, are finding favour with analysts. UOB Kay Hian upgraded the S-Reit sector from market weight to overweight due to the attractive yield spread. Some Reits are seen to be sources of stable, visible and recurrent income in uncertain times. But rents will fall and office trusts will be among the first to be hit. The upheaval in the banking system means that financial institutions are unlikely to continue with expansion plans. Other businesses will have reduced access to bank credit and scale back expansion plans. With a reduced appetite for space and new office supply coming onstream in 2010, landlords are losing their bargaining power and rents will fall. Kim Eng Research expects prime Grade A office rents to fall by up to 15 per cent by the end of 2009.
- The Business Times, P10
Asia better prepared since '97 crisis: economists
Rreforms launched amid the 1997-1998 Asian economic downturn have put Asia in good shape to weather the crisis now gripping global markets, economists said. In contrast to 1997, most Asian economies would ride out the current storm with relative ease. But countries which export heavily to the United States and Europe, such as Singapore, the Philippines and Hong Kong, may be exceptions.
- The Business Times, P20
14,400 franchising jobs by 2013
The franchise industry here is on a roll and is projected to create 14,400 jobs by 2013, estimated the Franchising and Licensing Association (FLA). Deputy Speaker of Parliament Ms Indranee Rajah said that last year, Singapore's 30,000 franchisees brought in near US$3.8 billion (S$5.6 billion) in revenue. She added that Singapore’s strategic location, extensive air and sea networks, state of the art business banking, telecommunications and logistics infrastructure allow business to expand into the booming Asia markets.
- The Straits Times, B27
STALLED: Property sales in China
The 'wait and see' behaviour of would-be buyers has stalled China's property market, raising fears of collapsing prices and a real estate meltdown similar to the one that put the United States in recession. Housing sales in major Chinese cities last month were down 64 per cent year on year, with prices falling by 4 per cent from August, according to Goldman Sachs. The house price index for 70 major cities rose 7 per cent in July from a year earlier, the lowest increase yet this year. When adjusted for inflation, house prices rose by a mere 0.7 per cent over the same period. Some developers had begun to offer rebates of up to 10 per cent. Some 17 municipal governments had tried to boost sales by introducing measures like lower transaction levies, direct subsidies and tax incentives. In Shanghai, the authorities raised the ceiling on mortgage lending to households by 20 per cent to as much as 600,000 yuan (S$130,000). The Nanjing city government is offering a subsidy of 0.5 to 1 per cent of the purchase price to house buyers. In Hangzhou, the municipal government rolled out a package of 24 measures, including subsidies for property transaction taxes.
- The Straits Times, B27
STALLED: Mega projects in Malaysia
The Malaysian government will review and shelve some projects, including those in the economic corridors, in view of the economic slowdown. The five economic corridors were all launched with the aim of accelerating growth and wooing foreign investments. The Prime Minister assured investors that only government projects would be affected and not those financed by private companies.
- The Straits Times, B27
Chinese chamber members feel pinch of credit crisis, high costs
Singaporean businesses are feeling the pressure to reduce business costs more than ever, according to a survey of Singapore Chinese Chamber of Commerce and Industry (SCCCI) members. A majority of 89 per cent also felt that this is not a short-term crisis and is unlikely to be resolved within six months. Up to 80 per cent felt that the current crisis is more severe than the Asian financial crisis, and some 73 per cent felt there would be a financial impact on their business. But most respondents felt that their headcount would not be affected. SCCCI said the respondents represent a 'broad spectrum of members from various industries. The survey was conducted between Sept 25 and 30.
- The Business Times, P12
Managers pessimistic in Oct survey
A survey of fund managers reported pessimism in terms of the extent of cash overweights and equity underweights. Merrill Lynch said that its October fund manager survey is one of the most pessimistic. Institutional fund managers believe that the world is in recession; that monetary policy is too restrictive; and that companies should use what cash flow they have to rebuild balance sheets. Fund managers have lost faith in global growth, commodities, China's economy and emerging markets.
- The Business Times, P8
India funds sell 77b rupees of debt as investors pull out cash
Indian mutual funds have sold a net 77.2 billion rupees (S$2.3 billion) of debt this month, the most this year, to meet redemptions from investors worried by the impact of the global credit crisis and a slowing domestic economy. Funds pulled out 32.1 billion rupees from bonds on Oct 14, the highest this month, the Securities & Exchange Board of India (Sebi) said. Mutual funds had placed a net 646.2 billion rupees in bonds in the January- September period. Foreign funds, who bought a record US$17.2 billion of equities last year, have pulled out US$11 billion since January, triggering a 46 per cent slide in the benchmark stock index and driving the rupee to a near record low.
- The Business Times, P17
China's small banks face tough times
Concerns are growing that the country's banks may be ill-equipped to handle a drop in the Chinese economy. Corporate collapses and defaults, together with a tightening interbank lending market, show that China's banks are hardly in the clear when it comes to the global turbulence. Some of the country's financial groups have the benefit of government ownership and relatively small exposure to the West's sub-prime mortgage mess. The main concern is focused on smaller commercial banks, whose regional concentration makes it harder to withstand a downturn than the larger, more diverse state-run banks.
- The Business Times, P8