Investment outlook STI 23rd Nov 2007
November 23rd, 2007 by ALVIN SOONG
MM Lee had previously given a talk at ASEAN conference, that Singapore economy would not be affected too much by US impending signs of recession, and would be going fine. Asian market still looks good. Our singapore equity and enhanced funds despite the march recorrection, Aug sub -prime and recently oil crisis, still managed to give a returns up to 28% and 23% respectively.
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US sub-prime woes ’should not deter Asian bond growth’
ASIAN bond markets must continue to grow and develop, even though it was their relative lack of sophistication that spared them from the worst of the United States sub-prime crisis.
A conference on regional bonds in Singapore yesterday heard that the highly complex financial products used by American and European banks are still not that prevalent in the Republic. Yet it is these same products that are at the heart of the credit mess now.
This has led some observers to ask if Asia should slow the pace of innovation in its bond and credit markets.
But Mr Ong Chong Tee, deputy managing director of the Monetary Authority of Singapore, said: ‘It is important to avoid the mistake of planning only based on the last crisis.
‘Each financial crisis or shock will bring with it unique circumstances and lessons. But in and by themselves, they should not become reasons to dampen market development and growth.’
He was echoing Senior Minister Goh Chok Tong’s remarks at the Barclays Asia Forum earlier this month.
Mr Goh had urged Asian institutions to press on with efforts to develop capital markets and create robust and efficient systems.
Developed financial markets across the world have been shaken by problems in the US housing market, with big-name American and European banks reporting billion-dollar losses on investments linked to poor-quality home loans.
By contrast, banks in the region have been largely unscathed as their exposure, if any, to these complex instruments has been small, said Dr Lee Jong Wha, who heads the Asian Development Bank’s (ADB’s) regional economic integration office.
But Mr Ong stressed that bonds and other capital market products are good alternatives to bank loans for firms.
The heads of the fixed-income sections at various banks told the seminar, which was organised by The Asset magazine and the ADB, that growth momentum has eased for more complex instruments but deals have not dried up.
Standard Chartered Bank’s capital markets global head, Mr Brad Levitt, said Asian currency-denominated bonds have outgrown issues in the US dollar, euro and yen
STI drops to 3-month low, inching to 3,300 mark
(This is indicative of a low price at a good time to buy in)
WHILE Americans were preparing their Thanksgiving turkeys yesterday, a flock of headless chickens seemed on the loose in the Singapore market, with the Straits Times Index (STI) going this way and that before slumping to its lowest level in three months.
Investors know the causes by heart now: the United States sub-prime crisis, US recession fears and rising oil prices.
The subdued, nervy mood led to a quiet session with only 1.79 billion shares worth $2.05 billion traded. Last week’s daily average was around 2.09 billion shares valued at $2.43 billion.
The STI fell 34.32 points to 3,312.88 - precariously close to the 3,300 mark, which is starting to look like the edge of a cliff to some investors.
‘It seemed a directionless market as the US bourse would be closed for the Thanksgiving break. In the end, we mirrored Hong Kong,’ said a dealer.
The Hang Seng Index rose initially before being dragged down after lunch by a slide on the Chinese bourse, leaving it 2.3 per cent down at 26,004.92 - its lowest close since Sept 21.
There were similar wild swings in Singapore: The market hit its intra-day low of 3,306.53 in mere minutes after opening but then responded to Hong Kong’s good start and revived, only to take a post-lunch retreat.
Bank stocks finished mainly lower, with DBS Group Holdings losing 20 cents to $19 and OCBC Bank dropping five cents to $8.20. United Overseas Bank was flat at $19.
Shipping and marine-related stocks tumbled, as investors locked in their year’s gains and became more risk-averse amid volatile times.
Keppel Corp was among the day’s top losers, dropping 30 cents, or 2.4 per cent, to $12.40, while Cosco Corp fell 20 cents to $5.90. SembCorp Marine dipped 18 cents to $3.84.
Chinese stocks listed in Singapore were mildly insulated from a sharp 4.4 per cent plunge on the Shanghai Composite Index. The PrimePartners China Index, which tracks 25 such counters, fell 2.4 per cent to 256.48.
While blue chips dipped, investors salvaged some joy from the rise of penny stocks. The UOB Sesdaq Index, which tracks small-cap shares, rose 3.22 points to 206.75.
Analysts warned of continued volatility due to the US housing crisis but, with Wall Street closed for the Thanksgiving break yesterday, nasty surprises will have to wait until Monday.
Asian debt deals stalled by credit crunch:
Stanchart 20 issuers put plans on hold; debt sales slump, mainly those by property trusts
STANDARD Chartered (Stanchart) said yesterday that about 20 Asian asset-backed securitisation deals, worth at least US$300 million (S$434.4 million) each, have been delayed till next year because of the turmoil in the credit markets.
Issuers from countries such as China and South Korea have stayed away from the debt securitisation market, but would return next year when bond yields are likely to stabilise, according to Mr Warren Lee, the bank’s head of asset-backed securitisation in Asia.
‘The spread has widened by maybe 50 per cent in Asia, but not as much as in the United States, where it has widened by three to four times,’ he told Reuters in an interview.
‘In Asia, let’s say yield spreads were 25 basis points; now they are 40 basis points in that range,’ he said.
South Korea’s Kookmin Bank has withdrawn plans to sell as much as US$1 billion in residential mortgage-backed debt, and several commercial-backed debt deals in Singapore and South Korea have been postponed, bankers have said.
However, Mr Lee said that, despite the pricing issue, markets such as Singapore and China were still flush with funds and investors were looking to invest their money.
He said local currency deals, which are normally small in size, could still go ahead despite the credit turmoil.
Dealogic data showed that sales of debt securities backed by assets in Asia, excluding Japan, have eased to US$9.2 billion this year, from around US$13 billion for the whole of last year.
Deals have slowed sharply since August, when the effects of the US sub-prime mortgage crisis started to be felt across global markets.
Commercial mortgage-backed securities (CMBS) - which are issued mostly by real estate investment trusts (Reits) to finance projects - have been especially hard-hit.
Only one CMBS deal, worth US$174 million, was completed this year, against seven deals in 2006 valued at US$1.4 billion, Dealogic data shows.
Mr Lee said property trusts have stayed away from the securitisation market since sharp gains in their share prices made raising equity cheaper than issuing debt.
‘The share price in Singapore has gone up a lot, so if you calculate the equity yield that they pay to investors, it is like 3 per cent,’ he said.
In contrast, larger Singapore Reits have average borrowing costs of over 4 per cent, bankers said.
But Mr Lee said he expects issuers to return to the market because many of these Reits will have to refinance maturing CMBS issued three to five years ago.
‘Property trusts are still keen to buy assets, which would require debt raising,’ he added.
Straits Times 23rd Nov 2007
