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Economists now expect NODX to stay in the red well into first half of 2009

Even as economists look to find out on Friday just how much the economy contracted in the third quarter, the first signs of Q4 weakness are in.

Poor external demand hit with a vengeance last month, splashing red ink across the October trade report, with exports recording the sharpest plunge in more than six years.

Non-oil domestic exports (NODX), the headline trade indicator, fell 15.3 per cent last month as shipments of both electronics and chemicals met with sharply lower demand in all the key markets.

NODX have now fallen for six straight months, but the 15.3 per cent October decline - against consensus forecasts of an 8 per cent decrease - is the steepest since March 2002.

Against September, NODX fell a seasonally adjusted 7.4 per cent last month, the biggest drop in five months.

Electronic shipments, notably, fell for a 21st consecutive month in October, by 15 per cent, with another big plunge (more than 53 per cent) in consumer electronics.

Even an anticipated rebound in pharmaceutical exports failed to materialise - instead, pharma shipments were down almost 40 per cent last month. And with pharma output having picked up in September, ‘the risk is that the extra production will end up in inventories and production will again slump in this sector’, said HSBC economist Robert Prior-Wandesforde.

Economists now see NODX falling by more than the official forecast range of 2-4 per cent in 2008, and likely staying in the red well into the first half of 2009.

They also read in the October trade figures ominous early signs of a Q4 gross domestic product (GDP) slump - and further evidence of the impact of the global economic crisis.

The Ministry of Trade and Industry will release on Friday the Q3 GDP results. Flash estimates available early last month show a 0.5 per cent year-on-year contraction, and an adjusted 6.3 per cent fall from Q2.

Barring upside surprises in services or construction, the Q3 flash estimates are unlikely to be significantly revised. A Q4 GDP contraction would then spell a full-blown classical recession, on top of the ‘technical’ one that has already set in.

The global slowdown will continue to be a drag on the Singapore economy in the next 6-12 months, said Citigroup economist Kit Wei Zheng. The bank’s forecasts see the Singapore economy contracting 1.2 per cent in 2009, ‘with the key uncertainty around the magnitude, rather than the probability of an economic contraction’.

Source : Business Times - 18 Nov 2008

But govt considering IRs’ requests to open in phases

MARINA Bay Sands (MBS) and Resorts World at Sentosa (RWS) may be allowed to open in phases but will not be allowed to open as stand-alone casinos.

Senior Minister of State for Trade and Industry S Iswaran told Parliament yesterday the Singapore Tourism Board (STB) and other government agencies are considering requests by MBS and RWS to phase the opening of the integrated resorts (IRs).

‘If the requests are allowed, they will also be subject to various terms and conditions,’ he said. ‘Even as we do so, our expectation remains that each development will open as an integrated resort, and not just a stand-alone casino.’

Mr Iswaran’s comments are the clearest indication so far that even though MBS and RWS will be allowed to apply for casino licences upon spending at least 50 per cent of committed investment capital and building at least 50 per cent of committed gross floor area, this does not mean either will necessarily be allowed to open in phases.

According to the Request for Proposal for Marina Bay, if the IR is developed in phases, the public attractions at the Bayfront Promontory, the Waterfront Promenade, Event Plaza and infrastructure work must be completed in the first phase.

In response to NMP Eunice Olsen’s question on when the IR’s boost to the GDP can be achieved and whether the Ministry of Trade and Industry (MTI) anticipates the financial crisis affecting business prospects, Mr Iswaran said he expects, ‘there may be some impact’.

In 2006, when it was announced that Las Vegas Sands had won the Marina Bay site, MTI said that based on its simulation, visitor arrivals and tourism revenue from MBS could add $2.7 billion to Singapore’s GDP by 2015, or about 0.8 per cent of the GDP at that point.

When Genting International won the Sentosa site in the same year, its chairman and CEO Lim Kok Thay said RWS was expected to generate $15 billion in revenue by 2015, accounting for half of the $30 billion tourism revenue target set by STB by 2015.

Mr Iswaran said yesterday: ‘It is premature to try to ascertain in quantitative terms what the exact impact (of the global financial crisis) will be, given the volatile economic conditions.’

He was, however, more upbeat on the longer term prospects of the IRs, saying he believes they will still add as many as 40,000 jobs by 2015. This is on top of the 20,000 direct jobs created by the IRs.

Source : Business Times - 18 Nov 2008

Compiler seeking more data from portfolio managers

The Investment Property Databank (IPD), a global provider of real estate investment indices, is calling for more support from property fund managers in Singapore to develop a national index.

‘An IPD Singapore Index would bring an internationally recognised property benchmark to the regional property sector, enhancing market transparency . . . and would, for the first time, facilitate property derivatives trading in Singapore,’ said IPD yesterday.

IPD has been compiling publicly available data since the first quarter of this year to determine returns from the local real estate sector last year. But because data is incomplete, it is urging property fund managers to provide more specific information on their portfolios. IPD has written to the managers to garner support and outline the steps required to create the index.

‘With the cooperation of the Singapore property market, IPD is confident it could produce the first definitive set of returns for 2007 early (next year),’ said IPD director and head of Asia-Pacific Kevin Swaddle.

According to Dr Swaddle, the proposed IPD Singapore Index will measure the return on capital employed in each period, not just the change in property values. This makes the index different from price indices already available in Singapore.

He also cited Trade and Industry Minister Lim Hng Kiang who said in a speech last year: ‘A key criterion to develop the property derivative market in Singapore would be the existence of transparent, reliable and well-followed direct property indices, which serve as reference points or benchmarks for structuring of property derivative products.’

Source : Business Times - 18 Nov 2008

Completion of stock and warrant offering provides it US$1.2b

(NEW YORK) Las Vegas Sands Corp said yesterday that doubts about its ability to continue as a going concern have been removed after the completion of an offering of common stock, preferred stock and warrants provided about US$2.1 billion of additional capital.

The Las Vegas-based casino operator’s independent accountants, PricewaterhouseCoopers LLP, said in a filing with the Securities and Exchange Commission (SEC) that the actions taken on Friday have helped to erase worries about the company’s ability to continue to operate.

Las Vegas Sands also said it reissued 2007 financials and now feels it has enough liquidity and capital resources to fund ongoing operations and fulfil its new development plans.

On Friday, Las Vegas Sands said it sold 200 million common shares for US$5.50 apiece for US$1.1 billion, which included 18.2 million shares purchased by the underwriters. The company also sold 5.2 million units consisting of one share of preferred stock plus a warrant to buy stock at US$6 a share. The units sold for US$100 each.

Founder and chief executive Sheldon Adelson and his wife also purchased roughly 5.25 million shares of preferred stock and warrants at the same terms as the public offering. The warrants included in the public offering and sale to the Adelsons could raise an additional US$1.04 billion.

In addition, the couple converted US$475 million in notes they purchased last month into 86.4 million common shares at a conversion price of US$5.50 apiece.

Las Vegas Sands did not seek shareholder approval for its financing plan, claiming an exception in New York Stock Exchange rules, even though it more than doubles the number of outstanding shares and significantly dilutes shareholder value.

The company warned that any delay caused by getting shareholder approval ‘would seriously jeopardise the ability to complete the offerings as well as the financial viability of the company’.

Las Vegas Sands said it planned to use proceeds to help fund construction and development projects, which it said would be significantly slowed down.

On Nov 10, the company said it would suspend construction at its US$600 million St. Regis condominium tower in Las Vegas and two sites on the Cotai Strip in Macau.

Several other casino operators have scaled back or abandoned development plans due to economic and credit conditions.

Las Vegas Sands is also looking to address some in-house concerns, disclosing in an SEC filing last week that its board created a committee to evaluate the company’s decision-making and resolve disputes between Mr Adelson and other senior managers.

The filing said the committee was formed to address ‘a loss of confidence’ by managers in how the company is being run. — AP

Source : Business Times - 18 Nov 2008

112 new private homes sold as sales dip to lows last seen in 2003 Sars period

A MERE 112 new private homes were sold by developers last month, the lowest figure since monthly data was made public amid the boom in June last year.

The October figure is sharply down from 376 units sold in September, according to the data released yesterday by the Urban Redevelopment Authority.

Developers launched just 159 units last month, down from 767 units in September and a 12-month average of 559 units.

Analysts suggest last month’s very thin sales are comparable to the first quarter of 2003 when the Sars outbreak crippled economic activity. Developers sold just 427 units of new private homes then.

In the first three quarters of this year, sales of private homes slumped to 3,890 units, a far cry from 14,811 for all of last year.

‘The fall in the number of units launched was largely due to an obvious weakening in economic conditions, and Singapore’s entry into a technical recession,’ said Knight Frank’s director of research and consultancy Nicholas Mak.

‘In October, all major stock markets globally suffered their worst performance in decades. Singapore was not spared. In the face of such massive losses in the bourses, both sellers and homebuyers retreated to the sidelines, resulting in the low launch and sales volume.’

Things were so bad last month that some projects - among them a 59-unit landed project Watten Residences - recorded no sales at all.

Since monthly data was made available, last month was the first with not a single sale of a non-landed private residential unit at above $2,500 per sq ft (psf), Mr Mak said. In the high-end market, two condo units were sold at $2,306 psf and $2,407 psf.

There were a few quirks in the figures. For instance, a mass market condo, Lakeshore in Jurong West, sold for a relatively high $1,038 psf, said Savills Singapore’s director of marketing and business development, Mr Ku Swee Yong.

Two posh 99-year leasehold bungalows at Sandy Island at Sentosa Cove were sold for a high $2,033 psf and a possible record price of $2,169 psf, or above $13 million each.

CBRE Research executive director Li Hiaw Ho said such deals last month seemed to show prices have remained fairly stable in the past two months.

‘However, it is very likely that the persistent thin volume will have a downward effect on prices.’

Overall, the only project that did well was a 12-unit cluster housing development, Jewel, near Serangoon New Town, which caught the market in time. All 12 units were sold from $286 psf to $342 psf, or $1.3 million to $1.4 million each.

Over 60 per cent of the 159 units launched were landed properties, marking the first time that landed supply has exceeded non-landed supply but demand was far weaker, said Jones Lang LaSalle.

‘In this current market, pricing is a great determinant of demand,’ said its local director and head of research for South-east Asia, Dr Chua Yang Liang.

Chesterton Suntec International’s head of research and consultancy, Mr Colin Tan, said: ‘The stand-off is continuing as there are still many unrealistic sellers out there taking their cues from the quarterly price index.’

The index, which has showed only a small drop, seemed to suggest the market is still in fairly good shape.

‘If the correct market signals are not given, the stand-off between buyers and sellers will likely continue with prices edging down very slowly,’ he said.

‘At the end of the day, sellers may not sell until they are forced to. This will occur when there is panic selling… The sharp correction will affect confidence.’

Property consultants are expecting the sluggish sales momentum to last the rest of the year and possibly through to Chinese New Year in late January given economic and job market uncertainties.

‘It may well be that the fourth quarter will see a total sales volume of around 500 units, a level that was last seen in the first quarter of 2003,’ said CBRE’s Mr Li.

Savills’ Mr Ku believes that transaction levels of new homes will remain roughly around 150 to 200 units for the next six months, with possibly 500 to 700 sub-sales and resale deals per month.

‘The average number of monthly transactions for the last 10 years is about 1,300 per month, so we should be seeing lower than average transaction volumes.’

HIT BY STOCK MARKET BLUES

‘In the face of such massive losses in the bourses, both sellers and homebuyers retreated to the sidelines, resulting in the low launch and sales volume.’

Knight Frank’s director of research and consultancy Nicholas Mak

Source : Straits Times - 18 Nov 2008