DAILY MARKET UPDATES 28th October 2008

S'pore River light-up gets glowing feedback
Completed in August, the multi-coloured lights festooning the bridges, underpasses and trees on the river and its banks are part of an ongoing project by the STB to beautify the river. The works are also aimed at turning a tourist spot with patchy success into a bigger draw for visitors. Boat Quay and Clarke Quay attracted only 7 per cent of visitors in 2006, dismal against Orchard Road's 73 per cent. Visitor numbers at the two quays went up marginally last year to 8 per cent. The STB is now moving into the second and final phase of the project, when it will bring similar lighting improvements to the stretch from Robertson Quay to Kim Seng Bridge. This phase is expected to be completed in March.
- The Straits Times, B5

Hotel business still healthy but economic cloud dims outlook
Singapore's rapid increase in average room rates (ARR) over the last few years may have priced itself out of the market, noted Citigroup economist Kit Wei Zheng. In a research note dated Oct 17, DBS Group Research noted that RevPAR (revenue per available room) in August was down 10 per cent from April's peak of $210, but that FY08 RevPAR should finish off with a 20 per cent rise year on year, on the back of a stronger first six months. For FY09, DBS Research is predicting RevPAR to worsen, chalking up a 15 per cent year-on-year fall, before strengthening 3 per cent in 2010. Tourist arrivals contracted 4.1 per cent in June, a further 3.8 per cent in July and then as much as 7.7 per cent in August.
- The Business Times, P3

Australian school to expand again
Barely three months after the Australian International School opened an extension for its preschoolers, it is making plans to expand with a new wing to house senior students. The $33 million project at its Lorong Chuan campus will create space to take in another 600 senior students when it is ready by April 2010. The new wing will add at least 50 places to each level in the secondary school, enabling the school to take up to 200 children per level from Year 7 to Year 12. 'The average stay has gone up from an average of 21/2 years to about four years. People have a longer term view on what it means to work offshore now, plus there are good educational choices for high levels available in Singapore,' Principal Bond said. The school, which now has about 2,150 students, will see another 200 joiners come January. It expects to reach its capacity of 3,000 in the next five years.
- The Straits Times, B3

Murkier outlook for construction sector
Steel rebar prices have dropped from $1,700 a tonne in July to about $1,300 a tonne recently. Manpower and other costs relating to contract requirements remain high. But rental prices of equipment such as cranes could soften next year after suppliers finish recovering their capital cost. The latest forecast for Singapore's construction demand this year is at a whopping $30 billion, above an earlier forecast of up to $27 billion and last year's $24.5 billion.
- The Straits Times, B18

US moving firm eyes inroads into Singapore
At present, Two Men and a Truck has more than 200 franchise locations - in the US, Canada, UK and Ireland. The company is also seeking master licensees in Brazil, Chile, Australia, New Zealand, and Malaysia. 'We're looking at markets with a growing middle class who are more likely to move and pay to move,' Mrs Bergeron told BT. For now, it is aiming at English-speaking markets to facilitate the training and marketing support that franchisees are offered. For her company, this means only roping in 'Movers who Care'. That tag- line, adopted to differentiate it from copycat companies, reflects how its customer service includes pre- move planning, independent feedback gathering and little extras like a box of games to occupy children during family moves.
- The Business Times, P8

Book values offer no support for stocks
The plunge in investors' risk appetites has led to a massive sell-down in stocks and driven a number of counters below their book values. The worst-hit counters include those from the technology and property sectors. As for real estate plays, the main concern is that tighter credit and declining capital values in all sectors may force firms to write down their assets and make provisions for land acquired at high prices.
- The Business Times, P1

World markets slump as Nikkei hits 26-year low
Tokyo's Nikkei 225 index closed down 6.4 per cent to 7,162.90 - the lowest since October 1982 - with exporters such as Toyota Motor Corp and Sony Corp hit hard. The losses came despite a report that the government was considering massive capital injection into struggling banks in a bid to calm financial markets. Even Japanese banks that have avoided the worst of the losses that are weighing on their Western counterparts are now struggling as the value of their stock portfolios is hammered. Mitsubishi UFJ Financial Group, one of Japan's largest lenders, it would seek to replenish its capital, raising billions of dollars by selling new shares.
- The Business Times, P1

G-7's warning fails to halt yen's surge
G-7 finance ministers and central bank governors yesterday took the unusual step of singling out the yen in an emergency statement in which they warned about the dangers of wild swings in exchange rates. Japanese Prime Minister Taro Aso instructed ministers yesterday to consider emergency measures to stabilise the Tokyo stock market, including possible government purchases of shares and relaxing rules on recapitalisation of banks. Three major banks are seeking to raise cash to offset stockmarket losses, Japanese media reported. The government has already announced a plan to make up to 2 trillion yen (S$32.5 billion) of public funds available to banks, but this is aimed mainly at regional banks.
- The Business Times, P2

(See also, The Straits Times, A1 – “Stock jitters spark Asian fall”)
This may be worse than 1998 Asian crisis, warn economists
OCBC economist Selena Ling is expecting private consumption, which grew 10.5 per cent in 2007, to ease to 3.3 per cent growth in 2008 and 1.5 per cent in 2009. Higher refinancing costs and declining home values are also putting home owners at risk of negative equity when the value of their property is less than the loan taken to finance it - a plight that home owners landed in the years after the Asian crisis. Economists reckon that the impact on Singapore this time will depend on the severity of slowdown in other Asian countries like China and India, and the policy responses from governments to assuage the downturn.
- The Business Times, P3

S Korea’s record rate cut fails to impress
South Korea yesterday cut interest rates by a record 75 basis points and pledged more spending and tax cuts next year to try to keep the global financial storm at bay but the measures failed to convince investors. The rate cut comes on top of measures this month aimed at protecting the economy from the global crisis, including a US$135 billion government rescue package to underpin banks that are struggling to secure funds and a construction sector confronted with a slowdown in activity. President Lee Myung- bak tried to encourage a sense of hope. He told parliament in a budget speech that the government would spend more next year and cut taxes. It stood ready to inject liquidity into the financial system until markets calm, he said.
- The Business Times, P4

MM marvels at China's rapid growth
Minister Mentor Lee Kuan Yew yesterday described China as an 'unusual country', for its phenomenal growth in the past three decades. Mr Lee was the guest of honour at the inauguration ceremony of Raffles City here, which is owned and managed by government-linked company CapitaLand. Mr Lim Ming Yan, chief executive officer of CapitaLand China, said that he remained confident about the projects in China despite the economic downturn. 'Our strategy is a long-term one. Even if there are movements in the market in the short term, we continue to look far ahead,' he said. 'Our projects are all very well funded, with excellent locations which are very hard to replace.' Raffles City in Beijing is located at the Dongzhimen MRT station, which has a direct express line to the airport. The complex, which includes a shopping mall, residences and offices, is slated for a soft opening in the second quarter of next year.
- The Straits Times, A11

China property stocks slide despite aid
Chinese property stocks plunged to near all-time lows yesterday, with Guangzhou R&F sliding 25 per cent and China Overseas Land down 13 per cent, despite government steps unveiled last week to prop up the housing market. Official data released last week showed new home prices fell an average of 0.3 per cent in September from the previous month, but prices in the southern cities of Shenzhen and Guangzhou slid 5.6 per cent and 1.4 per cent respectively. Roughly 10 per cent of China's gross domestic product is directly affected by the real estate sector.
- The Business Times, P27

Tokyo residential property set for full-blown decline
Tokyo residential property prices may be poised for a major decline because of excess housing supply and flagging demand, said Minoru Mori, chairman of Japan's biggest privately held developer. 'We foresee full-blown drops in residential property prices,' Mori Building Co's chairman said in an Oct 25 interview in Shanghai. Condo supply in Tokyo fell 24 per cent for the first six months of the year from the same period a year earlier. The number of new condos put up for sale in Tokyo, which stayed above 80,000 units since 1999, fell to 69,194 units in 2007 because sales declined and inventories rose. Commercial real estate is holding up better than residential property, said Mr Mori.
- The Business Times, B27

UK house prices fall 7.3% y-o-y in October
English and Welsh house prices fell by 7.3 per cent in the year to October, with the pace of decline accelerating to take prices back to their lowest since March 2006, property consultancy Hometrack said yesterday. Average house prices fell by 1.3 per cent to £163,200 in Hometrack's October survey, faster than the one per cent drop recorded in September. Forecasters from London's Centre for Economics and Business Research predicted in a separate report yesterday that British house prices would fall by 25 per cent from their peak in the third quarter of 2007 to a likely trough at the end of 2009. This would take property prices to below 2004 levels. Homes took an average of 11.9 weeks to sell, up from 11.5 weeks in September, and buyers paid just 89 per cent of sellers' asking prices, down from 90 per cent last month.
- The Business Times, P27

German business confidence falls to five-year low in October
German business confidence fell to the lowest level in more than five years this month as the deepening financial crisis dimmed the outlook for economic growth. The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, fell to 90.2 from 92.9 in September. Economists expected a drop to 91, the median of 23 forecasts in a Bloomberg News survey showed.
- The Business Times, P13

MUFG to raise US$10.6b via new shares
Mitsubishi UFJ said in statements filed with the Tokyo Stock Exchange that it planned to raise up to 990 billion yen (S$16.1 billion), with up to 600 billion of that in common stock and 390 billion in preferred shares. The preferred shares will not be convertible to common stock, MUFG said. The terms of the common stock issuance have yet to be determined, as do the recipients of the preferred shares, the bank said. Mitsubishi UFJ rivals Mizuho Financial Group, Japan's second-largest bank, and third-ranked Sumitomo Mitsui Financial Group, are both looking to raise as much as 500 billion yen, newspapers reported yesterday. Both lenders said in statements that they had made no decisions regarding their capital plans.
- The Business Times, P16