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Chairman cites lack of revaluation gains this year

Capitaland said yesterday its 2008 earnings were unlikely to match last year’s $2.8 billion due to a lack of revaluation gains.

The firm should, however, perform better at the operating level, chairman Richard Hu said in response to shareholders’ queries at the firm’s annual general meeting (AGM).

About $1.1 billion of CapitaLand’s profit last year was from gains in the value of properties and investments it still holds.

The other $1.7 billion came from selling apartments, trading properties, rent and managing real estate funds.

The developer will report its first-quarter earnings today.

According to an average estimate of three analysts polled by Reuters, CapitaLand’s net profit likely fell 59 per cent to $247 million compared with the first three months of 2007, when earnings received a boost from divestments.

The smaller bottomline will also reflect slowing apartment sales in Singapore due to a global economic slowdown and government measures to cool the city-state’s property market.

For the whole of 2008, the firm is expected to post a net profit of $1.04 billion, according to a Reuters Knowledge poll of 19 analysts.

‘CapitaLand will probably continue to book some revaluation gains this year, but most of the increments would already have been booked in 2007,’ Kim Eng property analyst Wilson Liew said.

CapitaLand’s chief executive Liew Mun Leong told shareholders at the AGM that the firm will be able to weather the current economic uncertainties as it is well diversified geographically and can still raise funds amid tight credit markets.

The company made inroads into Vietnam, India and the Middle East last year and it successfully raised $4 billion in the first three months of 2008, he said.

‘Because we are well capitalised, we are ready to capitalise on opportunities that arise,’ he said.

Singapore property firms have so far reported disappointing earnings for the quarter ended March 2008, partly due to slower sales in the local market.

The city-state’s number three developer Keppel Land posted a 3.5 per cent fall in net profit, while GuocoLand and Allgreen reported earnings declines of 93 per cent and 65 per cent respectively. — Reuters

Source : Business Times - 30 Apr 2008

Thanks to a turnaround in its joint ventures, MCL Land yesterday reported a first-quarter net profit of US$5 million, up from just US$1 million in the year-ago period. Earnings per share rose to 1.36 US cents from 0.27 US cents.

Revenue for the three months to March 31 was US$365,000 - compared with US$393,000 for the year-ago period.

However, the property firm was helped by contributions from joint ventures which stood at US$4.94 million, against a loss of US$355,000 a year earlier.

The firm said its Q1 revenue arose primarily from rental income from its investment properties.

Also, the underlying profit for the period was US$5 million, compared with US$0.2 million in the first three months of 2007. ‘This improvement was due mainly to the completion in March of The Grange, the group’s joint-venture project in Singapore, and the sales of the remaining 12 shops at the Kuala Lumpur Suburban Centre in Malaysia.’

MCL added that construction work on its development projects is progressing well. ‘The Grange obtained its Temporary Occupation Permit in March 2008, and The Esta and Mera Springs are expected to complete in the second half of the year.’

The group secured a 99-year leasehold land parcel in Yishun Avenue 1 in March. Its purchase of another site - Casa Nassau at Upper East Coast Road - is expected to be completed in July.

Looking ahead, MCL said financial market uncertainties and the global economic slowdown could affect the residential property sector here in the short term.

‘However, favourable economic fundamentals should mean that the longer term prospects remain positive. The expected completion of Mera Springs and The Esta in Singapore should benefit MCL Land’s overall performance in 2008.’

Its shares rose 5 cents to close at $1.98 yesterday.

Source : Business Times - 30 Apr 2008

Paulson denies US economy is facing threat of 1970s-type stagflation

(WASHINGTON) US Treasury Secretary Henry Paulson said on Monday that he was focused on getting economic stimulus payments to consumers quickly to boost the economy and had no interest in a second stimulus plan.

‘The whole idea was doing something that will make a difference this year and there’s no doubt that putting money in the hands of people very quickly who can spend it will make a difference,’ he said on Fox Business Network.

In response to questions, he said the US$152 billion stimulus plan could create 500,000 jobs this year but rejected suggestions from Democratic critics that a second stimulus plan may be necessary.

‘We’re not supporting a second stimulus plan,’ he said, adding that if the current rebates programme was any larger it might make it harder to get the government’s budget into balance.

Mr Paulson said the US economy was facing ‘headwinds’ in the form of rising oil prices and commodity costs, but insisted its long- term economic fundamentals remained sound.

He said strong demand from emerging countries and tight supplies were the main cause for rising prices rather than speculators.

‘I think there’s a concern that supply is tight, could get tighter and there’s a potential for disruption down the road,’ he said.

He denied that there was any sign of 1970s-type ’stagflation’ threatening the economy, in which growth slows and prices shoot up simultaneously.

‘We are seeing nothing like that today,’ he said, ‘Core inflation is well contained.’

He said the economy will regain its footing.

‘We have economic weakness right now but the long-term economic fundamentals of this economy are very solid today and I don’t think it’s fair to compare it to what existed 30, 40 years ago.’

In response to questions about what he will do when the Bush administration ends next January, Mr Paulson indicated scant interest in staying on if he was asked to do so.

‘I’m going to go 100 per cent right up to the end and then I’m really looking forward to the next stage of my career,’ he said, adding that it has been ‘a rather wrenching decision’ to come to Treasury in 2006 from Wall Street.

‘I’m glad I’ve done it but I really am looking forward to being able to take some time and think carefully about what I might do in the future,’ he said, adding ‘I haven’t had the opportunity to do that in a long time.’ - Reuters

Source : Business Times - 30 Apr 2008

It is one of the options to address financial markets’ liquidity problems

(WASHINGTON) The US Federal Reserve’s Board of Governors will hold a closed meeting today to discuss paying interest on bank reserves, one of a number of options officials have been mulling to address liquidity problems in financial markets in case measures taken to date fail to gain traction.

The Fed announced the meeting on its website on Monday.

The meeting does not necessarily mean that the US central bank is poised to take that step, which would require congressional action. But Fed officials have identified that measure as among a menu of options that the central bank is considering as it copes with persistent problems in credit markets that are weighing on US economic growth.

Congress in 2006 granted the Fed authority beginning in 2011 to pay interest on bank reserves. At the time, the central bank assigned staff to study the implications that such a move could have on its operations.

The staff report is now ready and will be presented to the Fed during the regularly scheduled meeting of its interest rate setting panel, a Fed official added, declining to comment further on whether the presentation is pegged to any imminent steps to boost liquidity.

The information is timely because it comes as Fed officials seek to thaw frozen credit markets with a series of liquidity offerings to banks and financial institutions. Despite offering more than US$400 billion in funding through cash and Treasury securities, banks and financial institutions continue to be wary about lending to one another.

Fed officials have been concerned recently that credit markets remain clogged in spite of extensive liquidity measures.

Paying interest on reserves would allow the Fed to separate interest rate policy from liquidity and financial stability policy, JPMorgan economist Michael Feroli said.

‘In particular, when the central bank pays interest on reserves, it effectively sets a floor under overnight interest rates,’ he said.

‘In so doing, it frees up open market operations to aggressively provide market liquidity without concern that such actions would push down overnight rates.’ - Reuters

Source : Business Times - 30 Apr 2008

In a twist to the usual cliche, the US central bank’s policy-makers may demonstrate this week that more than ever, they are caught between a rock and a ’soft’ place.

And if, indeed, we end this week with more confirmation of a wait-and-see stance on their part, the most vulnerable currencies could once again prove to be the greenback’s non-Asian counterparts.

Based on the week’s tech signals from our charts at least, we are talking in particular about erstwhile safe refuge alternatives like the euro, Swiss franc, gold and the yen - as well as the high-yielding New Zealand dollar.

Gold, for example, was one of the week’s largest losers, retreating almost 4 per cent. The euro did record a fresh US$1.60 high, but then reversed course rather sharply too - hurt as well by a nasty-looking German business sentiment report, rumours of fresh losses for its banks, and a reversal of hawkish ECB remarks.

On the other hand, as highlighted here last week, the greenback’s more favoured Asian alternatives - like the Chinese yuan, Singapore dollar and Malaysian ringgit - have continued to look far more resilient.

Although the greenback has bounced back close to 3 per cent versus the Swiss franc (recall our breakout signal at 1.02 francs last week), it has failed to make any headway versus the Chinese yuan and has rebounded less than one per cent in Singapore dollar terms.

In the bigger picture, however, shorter-term sentiment has certainly swung in favour of the US dollar over the past week, with a broader-based US dollar index recovering almost 2 per cent.

This, in turn, has been mostly credited to a growing belief that the US central bank’s policy-makers are expected to hint this week that they want to take a step back - after cutting rates by another expected 0.25 per cent.

Caught between rock-solid commodity prices (the rock) and a US economy which may already be in recession (the soft place), a good number of Fed-watchers believe that it now wants to see the effects of past cuts and imminent fiscal initiatives work their way through to end-users before acting again.

Starting this week, the US Treasury is also scheduled to send out tax rebate cheques that will eventually total a massive US$117 billion.

And just to make policy decisions more complicated for the Fed and financial markets, America’s second-richest man - the highly respected Warren Buffet - warned this week that the US recession may prove ‘longer and deeper’ than most expect, notwithstanding the fact that real US interest rates have now slipped into negative territory.

But in the event we do see some fortuitous assistance for the greenback from the data front this week, the most important of which is April US jobs due for release this Friday, here’s a chart-based update for the US dollar’s most soft-looking counterparts at the moment.

Versus the Swiss franc and Japanese potential, our charts allow the American currency to consider further upside advances towards ultimate objectives which may be as ambitious as 1.05 francs and even 110 yen.

The euro, meanwhile, faces heavy chart pressure on at least two fronts, based on our charts.

Yesterday, it plunged through the base of a bearish descending triangle formation to hit two-month lows versus the Singapore dollar too.

More losses threaten - perhaps all the way down to S$2.08 - if the euro cannot quickly recover above the S$2.12 - S$2.13 area.

And against the normally unpopular pound, the euro was starting to face down a possible test of important support in the region of 78.5 pence as well.

The New Zealand dollar, too, is in all kinds of trouble.

For a start, it’s coming dangerously close to our key support level in the region of 77.5 US cents.

The Australian dollar, meanwhile, has scaled five-month highs of NZ$1.20, and looks like it wants to make a run for NZ$1.25.

And, closer to home, S$1.02 lows threaten if it cannot quickly recover above S$1.06.

Source : Business Times - 30 Apr 2008