Straits Times: Firms resort to bank loans amid jittery bond market

Oct 1, 2007
Firms resort to bank loans amid jittery bond market
Plunge in funds raised through bonds in wake of sub-prime crisis
By Lee Su Shyan, Assistant Money Editor

SINGAPORE firms in need of funds might have to keep turning to bank loans until jitters over less traditional forms of credit clear.

The tightening of credit conditions and the increasing number of risk-averse investors in the wake of the United States sub-prime crisis, mean firms must offer better pricing to get people to buy bonds.

Those needing funds may have to turn to bank loans instead.

The result: The local bond market has been clobbered by the global financial turmoil of recent weeks, according to Thomson Financial’s figures.

A record US$3.7 billion (S$5.5 billion) was raised by Singapore firms in the bond market in the three months ended June 30, but this fell to US$533.8 million in the latest July to September quarter.

One casualty was convertible bonds. These usually pay the holder interest, but they also give buyers the option to exchange the bonds for shares in the company.

One mainboard-listed firm said it decided against a convertible bond issue. This was because the premium that had to be offered to bond holders was so attractive that they could have ended up owning 40 per cent of the company at the end of the exercise.

Some of the largest convertible bonds this year include a US$655 million one from CapitaLand and GuocoLand’s US$456 million instrument, both handled by JPMorgan. These formed part of the record US$1.5 billion raised from convertible bonds in the second quarter.

But in the third quarter, only US$110.4 million was raised from two convertible bond deals. These took place in July – property developer SoilBuild Group Holdings’ $60 million, four-year issue and KS Energy Services’ five-year, $96.8 million zero-coupon convertible bond.

There were no convertible bond issues recorded for August – when the force of the sub-prime panic was first felt – or for last month. Golden Agri-Resources postponed a US$400 million convertible bond issue last month.

Mainboard-listed Pine Agritech announced a 2.3 billion yuan (S$456.6 million) convertible bond issue in July, but Thomson Financial did not include this as the firm is classified as a China business.

Mr Philip Lee, the chief executive of JPMorgan’s investment banking unit in South- east Asia, said: ‘For the first six months of this year, volumes have been extraordinarily high. The market seems to be taking a breather and a ‘wait-and-see’ attitude.

‘Even though August is traditionally a slow month, the credit market conditions and the volatility had a further impact on volumes.’

But the issue does not seem to be a lack of funds.

DBS Bank head of fixed income Clifford Lee said: ‘General bond issuances have been put on hold due to the lack of price
transparency in the market, not for a lack of available funds, especially in Asia.’

He added: ‘The loan market in Asia is more insulated from the credit market volatility as the banks in Asia are still cash-rich and under-lent in the region.’

Mr Lee also said companies ‘are backing off until it becomes clearer where credits will be re-priced to’.

Bankers say the next few weeks will shed more light on the prospects. JPMorgan’s Mr Lee said: ‘Hopefully, the credit market conditions will stabilise in October and the volumes will make a return.’

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Straits Times: Home loan growth hits 29-month high

Oct 1, 2007
Home loan growth hits 29-month high
By Grace Ng

HOME loans shot up at the fastest pace in over two years as more en bloc sellers bought existing properties and foreigners opted to buy instead of rent.

Home loans in August expanded 2.6 per cent compared to the previous month, and grew 10.7 per cent from the same period a year ago, according to monthly data released by the Monetary Authority of Singapore (MAS).

The 10.7 per cent rate is the fastest in 29 months. This is the first time in over two years that it has entered double-digit
territory. July’s growth figure was 8.1 per cent.

Bankers noted that one big factor driving mortgage growth was the growing number of borrowers who, having cashed in on en bloc deals, snapped up replacement properties, especially on the outskirts of the central part of Singapore.

One local banker noted that the average size of mortgages taken out in August dipped, possibly because some borrowers flush with cash from en bloc sales were taking out smaller loans or had downgraded to smaller homes.

Another group of borrowers were foreigners who had previously leased properties but were now opting to buy their own homes, given how high rentals have climbed.

Foreigners ‘are still interested in buying properties in district 9, 10, 11 and the central area’, said Standard Chartered Singapore general manager for mortgage and auto loans Elaine Heng.

But some, such as Chinese and Indian nationals, have shown more interest in district 15 (Katong, Joo Chiat and Amber Road area), as well as other areas on the outskirts of the city, she added.

The amount of home loans held by banks grew by $1.77 billion in August, making up a total of $69.1 billion of mortgages on their books.

Total lending for August grew 10.8 per cent compared to a year ago, as stronger mortgage and credit card growth offset a decline in building and construction loans.

Analysts expect home loans growth to pick up further in the third quarter of this year and beyond. They point to more home buyers on deferred payment schemes taking up loans, as the date of completion of their developments draws near.

But bankers say that the robust home loans growth is currently driven more by secondary market sales of existing properties, which make up about 60 per cent of total transactions.

Stanchart’s Ms Heng said monthly home loans growth could continue at this 10 per cent rate in coming months provided market sentiment remains positive.

But some investors and potential home buyers may adopt a ‘wait-and-see attitude’ from how the United States sub-prime mortgage crisis pans out, she added.

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Sunday Times: Prices and rentals rising fast in Upper East Coast

Sep 30, 2007
Prices and rentals rising fast in Upper East Coast Spillover demand from nearby districts and rumours of collective
sales push prices up By Fiona Chan, Property Reporter

THE buzz in the property market these days is all about the price recovery in the suburban areas.

Cheaper private homes on the outskirts of town are seeing a rebound in prices and rentals, as the strong market sentiment at the top end filters down.

Homebuyers have started turning out in force for these entry-level condominiums. Many have sold en bloc and are seeking replacement units.

Apart from the central Orchard Road area, a popular collective sale district is the East Coast, which has seen nearby Upper East Coast Road become one of the biggest hot spots for home seekers.

Some projects in the district, which stretches from Upper East Coast Road to Bedok North Avenue 4, have rocketed in price, by up to 65 per cent, since January.

Figures from consultancy Savills Singapore show that overall home prices in the area climbed by 20 per cent to 65 per cent between January and August, depending on the specific street.

This compares with a rise of about 10.3 per cent for all suburban areas in the first six months of this year, according to the Urban Redevelopment Authority.

But Savills’ director of business development and marketing, Mr Ku Swee Yong, was quick to add that some of the Upper East Coast projects have seen such large jumps in price because of ‘collective sale rumours’.

‘The general price increase is nowhere near 65 per cent overall,’ he said.

Rentals in the Upper East Coast have also soared, supporting the price increases. Average asking rents jumped 13.7 per cent in July and August, on top of a 4.7 per cent rise in the previous three months, said Savills. They average $3.07 per sq ft (psf), or about $3,000 for a 1,000 sq ft unit.

Mr Ku noted that the Upper East Coast is benefiting from a spillover in demand from nearby Districts 14 and 15, which include Marine Parade, Katong and Telok Kurau.

Several estates there have gone en bloc, forcing the sellers to seek new homes. Many of them have been priced out of the increasingly expensive East Coast properties, so they have shifted their focus to cheaper homes further east.

This situation is similar to that in town, where city-fringe areas such as Newton and Novena have benefited from the record number of collective sales in the Orchard Road area and its surroundings, said Mr Ku.

He added that even more developments in the vicinity are expected to go en bloc soon. These could include Ocean Park, Rich East Gardens, Bagnall Court and the two Eastern Lagoons.

Apart from the collective sale draw, Mr Ku noted that the Upper East Coast profits from its proximity to Changi Airport and East Coast Park, as well as various golf courses, including Tanah Merah Country Club and Laguna National Country Club. All these are attractive to ‘mobile professionals’, he said.

He predicts that by the end of next year, new benchmark prices will be achieved for the area. These could go up to $1,100 psf for the Bedok South Avenue 3 and Bedok Camp areas, and up to $1,700 psf from Siglap Centre to Bedok South Avenue 1.

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Sunday Times: Cabby, take me to ‘Coo-tee-the-zoo’ condo! (It’s French lah)

Sep 30, 2007
Cabby, take me to ‘Coo-tee-the-zoo’ condo! (It’s French lah)
Foreign condo names trip up local tongues but add a veneer of ‘class’ By Nur Dianah Suhaimi & Melody Zaccheus

BUSINESSMAN Kelvin Ong has lived at the Cote D’Azur condominium in Marine Parade for five years and he still does not know how to pronounce its name.

Like many of his neighbours, Mr Ong, 42, tells taxi drivers to head for ‘the condominium beside Parkway Parade’.

‘It’s a French name. Not everyone knows how to say it,’ said Mr Ong a little sheepishly. When prompted, he called it ‘coat-dee-ah-zoo’. It was incorrect. But Mr Ong is not the only one getting it wrong. Others have called it ‘coo-tee-the-zoo’. The condominium’s moniker, taken from a popular seaside resort in France, should be pronounced ‘coat-dar-zur’.

When it comes to naming condominiums, developers these days seem to prefer foreign or fanciful names such as the Soleil@Sinaran in Novena and THR3E THRE3 Robin.

The Sunday Times tested 10 foreign-sounding condominium names on 100 people and found that the majority failed the pronunciation test. Their tongues tripped over names such as Cote D’Azur and Levelz in Farrer Road. Only 33 could pronounce at least half the names on the list.

After mispronouncing Cote D’Azur, retiree Henry Ang, 67, said: ‘One of the big bosses at the developers probably went on holiday there and came back thinking it is such a great name.’

Graduate student Joanne Tan, 25, who got six out of the 10 names right, said: ‘What’s the point of having a fancy name if no one can say it properly? Developers need to cater to the Singaporean tongue when choosing names.’

Housewife Pauline Toh, 48, who lives at The Shaughnessy in Yishun, admitted that her friends think the name of her condominium is ridiculous. ‘To make it easy for them to remember, I tell them it’s like the cognac Hennessy, you know?’

Cabbies interviewed were especially exasperated with fancy condominium names which are hard to pronounce. Mr Goh Kim Teck, 60, who has been driving for 30 years, said: ‘I’m Chinese-educated so it’s hard for me to catch funny-sounding condo names.’

When cabbies cannot make out the condominium name, they ask passengers for the road name or a nearby landmark.

Although Street and Building Names Board guidelines advise against choosing names which are difficult to pronounce or associated with famous places, developers have a relatively free hand in naming their condominiums.

Frasers Centrepoint Homes, which developed Cote D’Azur and Soleil@Sinaran, said Singaporean home buyers are more well-travelled and informed. A spokesman said: ‘We believe that these Singaporeans…will certainly favour names that are associated with desirable attributes. After all, names do connote and represent a certain identity and personality.’ ‘Soleil’, for example, is the French word for sun.

Keppel Land said it chose the name The Elysia because its root word, ‘Elysium’, means bliss and tranquillity in Latin.

Architect Lim Kheng Chye, who sits on the Street and Building Names Board, said Singaporeans tend to think that foreign is always better. ‘It has all got to do with marketing the property. If you’re a buyer, would you buy a condo named Ah Huat or one called Martin Luther?’

Sociologist and Associate Professor at the National University of Singapore Paulin Straughan said a name ‘can convey many things, be it class, prestige or social status’.

‘Developers hope to convey the message that their condominiums are a cut above the rest and to tie the public to mental images of scenic views, lush gardens and cultural icons through that one name,’ she said.

Mr Ong, who lives at Cote D’Azur condo, agrees. Even though he cannot pronounce the name of his condominium correctly, he thinks that the name ‘makes my condo sound more high class than others with normal English names’.

‘There’s no way I’d trade the name for a simpler one,’ he said.

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