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News Update!

 

 

Stick to picking Singapore property leaders: DBS

  Do you know why CMA, GLP and Capitaland remain the most attractive stock choices?

  Despite a demand uptick in mid- to mass-market segments, there are still risks that will be best weathered by these niche leaders, said DBS in its new research report on property companies.

  On a broader assessment, the high-end market continues to struggle as seen in tepid response to offerings in projects like 26 Newton and Suites @ Newton.

  Here's more from DBS:

Ground checks. Our visit to Bartley Residences as well as two higher-end show flats showed that interest in the upper end of the housing spectrum continues to be lacklustre.

Over the weekend, Bartley Residences saw additional units taken up, bringing sales to 161 to date, of the 180 units launched or 23% of total 702 units. Of this, the larger sized units – 3 bedrooms and above, were fairly popular, accounting for a third of transactions, while the two bedders made up another third, and the one bedders accounted for a slightly smaller share of about 30%. Buyers were mostly locals, with about half the buyers intending the units for owner occupation and the remaining for investment, indicating a greater composition of ‘real’ demand compared with other projects.

Response to higher end projects more muted. Meanwhile, our forays into 2 projects along Newton Road – 26 Newton and Suites @ Newton showed a more cautious response. 26 Newton comprises 180 units of which 40% are one-bedders of < 500sf each, 50% of 2-bedders less than 800sf each. ASP average about $2,300psf for the 1 and 2 bedders. Response during this soft launch phase remains muted.

Adjacent to this, Suites @ Newton consists 68 units of which 63% are two bedroom units of > 770sf and 30% are 1-bedders of less than 630sf each. The development was launched since CNY and to date, about 25% have been taken up. ASP ranges from $1,950-$2,150psf. The response to both developments continues to highlight a more cautious tone within this segment of the market.

Preferred picks – CMA, GLP and Capitaland. Whilst our latest channel checks do point to better activity in the mid and mass market housing projects, policy overhang will remain amid continued strong take up in the sector. We continue to adopt a stock picking strategy and remain selective. Our top picks are CMA, GLP and Capitaland with a leadership niche in their respective markets.

 

Currency Briefing - what you need to know for Thurs March 1, 2012

  Singapore dollar showed resilience and avoided a steeper decline.

  IG Markets Singapore said:

The Singapore dollar held its ground last night as money flooded back into the US dollar as expectations of QE3 eased. Quantitative easing in the US economy, while good news for equities, would dampen the value of the greenback.

But QE3 isn’t currently on the agenda as the US economy is slowly recovering on its own merits with no immediate need for cheap money. This has boosted the US dollar which edged up to 1.2515 breaking through the 1.25 level of resistance.

But the Singapore dollar has proven resilient and could have faced a steeper drop. It was helped by upbeat Korean factory output which increased confidence in Asian economies.

The European Central Bank’s second tranche of LTRO funding also saw a big take-up among European banks which has helped restore confidence in the eurozone, and the global economy in general.

A strengthening US economy, which saw GDP growth above expectations of 3% in Q4, is good news for risk assets like Asian currencies.

  RBS, on the other hand, reported:

The 3-year LTRO came in line in line with our expectations, which we expect to be EUR-negative (the estimated net liquidity addition 314bn). Our fair value model implies that this take-up, holding other variables such as the 5-year swap spread and equity prices constant, would shave 1.5 cents of EUR/USD.

During US hours, the bigger driver of FX markets was the reaction to the Bernanke semi-annual testimony – expectations for Bernanke to signal additional QE appear to have been much larger than we expected.

The USD strengthened sharply and US rate support increased after Bernanke did not signal additional easing. We wrote about this scenario aiding USD strength, particularly vs. the EUR, in Global Currency Weekly on Tuesday.

We still narrowly favour additional Fed QE at mid-year, but the continued improvements in economic data likely complicate the decision to embark on more asset purchases. Finally, the MoF / BoJ announced that they did not intervene in the FX markets during February.

  GFT meanwhile noted:

Thanks to Fed Chairman Ben Bernanke, the U.S. dollar soared against all of the major currencies outside of the Canadian dollar. Although the Fed Chairman believes that monetary policy needs to remain extremely accommodative, he made it clear that there is no immediate need for QE3.

Over the past few weeks we have seen consistently better U.S. economic reports and these improvements are finally resonating with the central bank. Bernanke acknowledged the positive developments in the labor market by saying that unemployment is falling at a more rapid pace than expected.

Combined with the rise in stocks and the acceleration in manufacturing activity, there is very little need for additional stimulus.

 

Brace for even higher freight rates: CIMB

  Container freight rates are climbing and will reach mid-year peaks before crashing in 2H11.

  From Asia to Europe, freight rates have gone up by up to 18%, a marked uptick that CIMB believes will persist for the first half of the year now that market leader Maersk seems determined to stick to its rate increases.

  Here's more from CIMB:

Maersk made two important announcements recently: 1) that it is planning a US$400/teu increase on AE from April 1, and 2) that it continued to expect its liner arm to register losses in 2012. While seemingly contradictory, we think that Maersk hit the nail on the head.

Container freight rates should rebound strongly in 1H11, but rates will peak in mid-2012 and decline in 2H11 as competition returns. Freight rate momentum on Asia-Europe seemed quite powerful last week, with rates rising 16-18%. Maersk has announced a US$400/teu rate increase from April 1, in addition to the US$775/teu increase from March 1. Big brother’s commitment to rate restoration means that half the battle is won.

Furthermore, NOL said last week that its customers are now prepared to accept the rate increases. However, the industry’s self-destructive tendencies are reflected in Maersk’s cautious guidance for 2012. We also notice that Middle East and Australia trades have so far not benefited from the recent rise in the spot AE and TP rates, suggesting that the impact from cascading is still a major issue.

A host of carriers including Maersk, NOL, CSAV and HMM have reported poor 4Q numbers, providing each carrier with a strong impetus to carry on with its freight restoration programme.

Maersk has announced a US$400/teu rate increase from April 1, in addition to the US$775/teu increase from March 1, which took the market by surprise. The big brother also reaffirmed its commitment to using more slow steaming and may reactivate lay-ups in order to “improve market balance”. With the market leader now determined to see through rate restoration, other carriers will take its cue and follow with more announcements of the same. We expect the AE trade to experience fairly dramatic rate increases until mid-2012.

Bulk rates rose last week in relatively lacklustre volumes, while tanker rates corrected due to excess supply. The issue with bulk shipping remains with China’s growth slowdown, while tanker uncertainties revolve around the potential disruption to the oil trade in the Middle East.

 

Singapore Markets Morning Briefing - what you need to know for Thurs March 1, 2012

  There was retreat on Wall Street amidst the STI's mini-recovery.

  OCBC Investment Research said:

The retreat on Wall Street overnight is likely to spook the local bourse to a negative opening this morning but the strong Nikkei start (up 1.3% now# could limit the damage.

Following the rebound on Tuesday, the STI continued inching higher yesterday after a 0.4% higher opening, the index recovered further to a 0.8% gain at the close.

With today's tone likely to turn a tad more downside biased, the index is likely to remain capped at below the 3000 psychological resistance in the near term. Beyond this immediate resistance, we see the subsequent obstacle at the 3031 recent peak.

On the downside, we see the immediate base at the 2947 recent trough formed, followed by the subsequent support at the 2900 key resistance-turned-support region.

  IG Markets Singapore, on the other hand, reported:

The STI has enjoyed healthy gains as it stages a mini-recovery back towards 3,000 and will see its resolve tested today as traders react to an action-packed night of news from the global economy.

US and Europe went into overdrive last night with cheap money flooding one continent while being held back in another. This led to some clear winners #the US economy and European banks# and big losers #US equities and notably gold#.

First up was Ben Bernanke, whose comments can move the markets like no other. And he had a lot to say as he gave a testimony to US Congress. Oil prices may cause a spike in inflation, the jobs market is improving faster than expected and quantitative easing is unlikely to happen anytime soon.

This last point had a huge impact on the markets, not least gold which slipped almost 5% as signs of a strengthening US economy reduced its need as a safe haven. Also some of the expected QE3 cash would have made its way into the precious metals markets.

US equities took the brunt of the disappointment with the Dow Jones Industrial Average slipping 0.4% back below 13,000. The S& P 500 dropped 0.5% while the NASDAQ fell 0.7%.

  RBS meanwhile noted:

After the much anticipated LTRO came and went as expected, investors turned their attention to the US data and Chairman Bernanke's testimony. The combination of the two sent yields higher, equities lower, commodities lower #though energy rebounded into the close#, and the dollar higher.

The way I saw the combined moves was as follows: with the second LTRO operation behind us, there is no third. Bernanke did not quash hopes of QE3, but he also did not trumpet QE3 as much as some apparently hoped.

Thus, markets reacted in a way that reflected investors' realization that while there is plenty of liquidity in the system #and central bank balance sheets are large#, there are no liquidity adding operations on the horizon.

So perhaps it is time to dial back on liquidity fuelled positions. So the typical " printing press" hedges were in retreat, with often nasty intraday moves #for example, Gold fell ~$50 in a few minutes alone#.

Equities and the Euro/the dollar traded in a similar fashion and in the bigger picture, this may not be unreasonable considering the healthy run " risk assets" have had since the first LTRO on December 2nd, all the way into today's second LTRO.

Also, while this summary reads like a day yields had large sized moves, 10yr yields rose approximately 5bps close-to-close. So despite a very interesting day in global markets, good old 10yr notes closed once again just a few bps off our familiar mid-point of the November-February range of 1.95%.

 

 

 

 

 

 

Bernanke: Economy, job creation likely to stay sluggish for several years

Federal Reserve Chairman Ben S. Bernanke warned on Wednesday that, despite bright spots in recent economic reports, unemployment would likely stay high and the nation’s recovery remain slow for the next several years.

In prepared testimony to Congress, Bernanke acknowledged that the unemployment rate--which now stands at 8.3 percent--has come down faster than anticipated. But he said several factors are likely to weigh on the economy. (The Labor Department will release numbers on February unemployment at the end of next week.)

Bernanke noted that wages are flat, that borrowers are having trouble getting loans, state and local governments are still laying off workers, and financial problems are causing crisis abroad, particularly in Europe.

The challenges, the Fed chief said, “have weighed on financial conditions and global economic growth, and problems in U.S. housing and mortgage markets have continued to hold down not only construction and related industries, but also household wealth and confidence.”

Bernanke also noted that gas prices have jumped since the spike in global oil prices. Those high pump prices, he said, will probably push up inflation temporarily “while reducing consumers’ purchasing power.” Over the long term, he said, inflation is not likely to be a major concern.

Late last month, the Fed announced it would keep interest rates extraordinarily low through 2014, expecting that unemployment would not drop low enough to truly boost growth. Bernanke reiterated Wednesday that the Fed does not expect the jobless rate to decline much more than it already has this year and that it will “edge down only slowly” in coming years.

Bernanke expressed some surprise that the unemployment rate has come down as quickly as it has, given other signs of weakness in the economy — in particular, relatively sluggish economic growth. “Continued improvement in the job market is likely to require stronger growth in final demand and production,” he said.

The Fed chairman highlighted the housing market as a heavy burden on the economy. While homes cost much less than they used to -- because real estate prices have declined and mortgage rates are low — he said, “unfortunately, many potential buyers lack the down payment and credit history required to qualify for loans.”

Others, he said, “are reluctant to buy a house now because of concerns about their income, employment prospects and the future path of home prices.”

Bernanke said pointed to Europe’s financial crisis and its effects on the U.S. economy. He applauded European leaders’ recent steps to contain their debt crisis as “constructive,” he said there’s more work to do.

He also expressed concern about Europe’s reliance on harsh austerity measures for troubled nations as a way to get a handle on their debt. “Further steps will also be required to boost growth and competitiveness in a number of countries,” he said.

As for the United States, he said that the recovery is continuing but has been “uneven and modest by historical standards.”

 

Bernanke stands by plan to keep record-low rates

 

Path to an all-time high for Dow will be bumpy

Now that the Dow Jones industrial average has closed above 13,000, an all-time high is in sight — just 1,160 points away. But the path won’t be smooth for the stock market or the economy.

The Dow’s final push above the milestone came from a report that Americans feel better about the economy than they have in a year.

But other economic data Tuesday were more grim: Orders for big-ticket factory goods dropped by the most in three years, mainly because the government withdrew a key tax subsidy. And home prices are stuck at 2002 levels.

“I don’t think 13,000 guarantees 14,000,” said John Manley, chief equity strategist for the Wells Fargo funds group. “I do think there still is a lot of skepticism about the short term.”

Market futures were up early Wednesday. Dow Jones industrial average futures added 20 points. Standard & Poor’s futures gained three points, and Nasdaq composite futures rose six points. Markets were also higher in Europe, following gains in Asia.

The next big test comes March 9, when the government releases the number of jobs added by the country in February and updates the unemployment rate.

For a day, though, Wall Street could savor something it hadn’t seen since May 2008, before the bailouts, bank failures and millions of layoffs of the Great Recession — Dow 13,000.

The Dow last closed above 13,000 on May 19, 2008, almost four months before the fall of the Lehman Brothers investment bank triggered the worst of the financial crisis.

On Tuesday, it just cleared the mark — 13,005.12, up 23.61 points for the day.

“I think it’s a momentous day for investor confidence,” said Jack Ablin, chief investment officer at Harris Private Bank. “What this number implies is that the financial crisis that we were all losing sleep over, it never happened, because now we’re back.”

The milestone comes at a time when Americans are feeling better about the economy than they have in a year. The Conference Board, a private research group, said its consumer confidence index was 70.8 for February, up from 61.5 in January.

The report came out at 10 a.m. and lifted the Dow above 13,000. It stayed there most of the day.

“Two months ago, we were talking about a double-dip recession. Now consumer confidence is growing,” said Ryan Detrick, senior technical strategist for Schaffer’s Investment Research.

He said the Dow’s milestone “wakes up a lot of investors who have missed a lot of this rally.”

The average first pierced 13,000 last Tuesday but fell back by the close. It floated above the milestone again on Friday and Monday, but slipped below both days. A strong rally for stocks this year seemed stalled as worry built on Wall Street about climbing prices for oil and gasoline.

Tuesday’s gain puts the Dow 1,160 points below its all-time high of 14,164.53, set Oct. 9, 2007. The Great Recession began two months later.

The milestone could draw some fence-sitting investors back into the market and add to the gains, said Brian Gendreau, market strategist at Cetera Financial Group.

“Already here in the first two months, we’ve blown past the consensus expectations for the entire year, and that certainly gets people’s attention,” he said.

The Dow started with its best January since 1997 and has added to that gain. The index is up 6.5 percent for the young year.

Other averages have fared even better: The Standard & Poor’s 500 is up 9 percent, the Russell 2000 index of smaller stocks is up 11 percent, and the Nasdaq composite index, dominated by technology stocks, is up 14 percent.

The other major indexes sit at multi-year highs as well. The S& P closed Tuesday at its highest level since June 2008, and the Nasdaq has not traded so high since December 2000, during the bursting of the bubble in technology stocks.

Just last August, the Dow dropped 2,000 points in three frightening weeks. Investors were worried about the European debt crisis, gridlock in Washington over the federal borrowing limit, a downgrade of the U.S. credit rating and the threat of another recession.

After Labor Day, the recession fears melted away. Since then, the stock market has been engaged in a tug-of-war between optimism over the improving American economy and fear that crisis in Europe would derail the U.S. recovery.

The optimists have been winning.

The Dow cruised to 13,000 the old-fashioned way, riding the economy higher. The unemployment rate has come down five months in a row, the first time that has happened since 1994.

The economy added 243,000 jobs in January, one of the three best months since 2006. Gains were surprisingly robust in industries across the economy, including the strongest hiring in manufacturing in a year.

In the stock market, the improving economy has translated to slow, steady gains — about 20 points a day for the Dow, averaged over the eight weeks. The index has gained more than 100 points on only three days, and it has not fallen 100 points on any day.

On Tuesday, seven of the 10 industry groups within the S& P 500 index were higher, with information technology and consumer discretionary stocks leading the way. Utility stocks, traditionally solid investments in a weak economy, were lower.

Microsoft led the 30 stocks in the Dow with a gain of 1.7 percent for the day. Johnson & Johnson had the biggest price change. It gained 73 cents and was responsible for 5.52 points of the Dow’s gain, enough to clear the 13,000 level.

The S& P 500 gained 4.59 points for the day and closed at 1,372.18. Technical traders said it was a breakthrough because the S& P has been hemmed between 1,100 and 1,370 for months.

The Nasdaq gained 20.60 and closed at 2,986.76.

Prices for U.S. Treasurys were little changed. Besides the consumer confidence figure, investors wrestled with a Commerce Department report that businesses cut back on machinery and equipment in January.

The price of the 10-year Treasury note dropped 12.5 cents for every $100 invested. The yield edged up to 1.94 percent from 1.93 percent late Monday. Shorter-dated Treasurys were nearly all unchanged.

The euro rose against the dollar a day before the European Central Bank is expected to give banks in the region another round of loans. A jump in U.S. consumer confidence also pushed traders to buy the euro.

The Dow first cracked 13,000 on April 25, 2007, when the unemployment rate was 4.5 percent, far below today’s 8.3 percent, and the economy was growing at a relatively healthy clip.

From there, it was a quick ride to the Dow’s all-time high. The average crossed 14,000 in July 2007, then peaked at 14,164.53 on Oct. 9, 2007. Concerns about weak corporate earnings and tighter credit were already haunting the market, though.

The trip back down to 13,000 was less pleasant. It took little more than a month. Ten months later came the fall of Lehman Brothers and the financial meltdown. The Dow hit bottom on March 9, 2009, at 6,547.05.

Analysts say the stock market has grown accustomed to lingering threats this year, including a debt crisis in Europe and an economic recovery in the United States that is still not as strong as economists would like.

The price of gasoline has emerged as the latest worry. A gallon of regular costs $3.72 on average. The price has risen 21 days in a row. Economists worry whether gas will climb high enough to cut into consumer spending in the rest of the economy.

“It’s important to remember that the stock market is not the U.S. economy, and the U.S. economy is not the stock market,” said Dan Greenhaus, chief global strategist for the brokerage BTIG. “Most people are likely to say, ‘Dow 13,000. So, where’s my job?”

The consumer confidence reading of 70.8, while much stronger than the 63 that economists were expecting, is still far below the level of 90 that indicates a healthy economy. It was above 110 in mid-2007, before the recession.

Still, Greenhaus said, while 13,000 is just a round number, “it’s a round number that’s likely to make many Americans feel better about the economy and the stock market. It’s another sign that things are getting better.”

———

AP Business Writers Matthew Craft and Christina Rexrode in New York contributed to this report.

Follow Daniel Wagner at www.twitter.com/wagnerreports .

 

Apple market value hits $500B, where few have gone

 

Budget surplus will be challenging - Wong

RETURNING the budget to surplus will be challenging, but Finance Minister Penny Wong believes it is the right thing to do in the current economic climate.

The federal Government has forecast a $1.5 billion surplus in 2012-13 after an expected 37 billion deficit in the current financial year that ends on June 30.

Senator Wong has told Sky News achieving a budget surplus will be challenging, but it is the right call, given that the economy continues to grow at trend, and particularly after the strong result in the latest employment figures.

Meanwhile, a verbal stoush's erupted over the opposition's apparent stance over the new parliamentary budget office, which Treasurer Wayne Swan has described as an economic circus and a spokesman for the treasurer accusing the opposition of having a trio of positions.

 

Japan says it may cancel F-35 order if prices rise

 

Durable goods orders drop by most in 3 years

 

Oil near $107 after mixed US demand signs

 

Sunita Sue Leng: Budget 2012 not bold enough

IN AN EFFORT to build a fair and inclusive society, this year’s Budget has increased social protection for the elderly, low-income families and people with disabilities. This is a move in the right direction. Notably, healthcare has received a boost, with annual spending to double to about $8 billion over the next five years. This will see the number of beds in acute hospitals rise by about 30% and the capacity of long-term care services doubled. The government is also raising coverage of Medishield, the national insurance scheme for serious illnesses and prolonged hospitalisation, from age 85 to 90.

 

However, a broad swathe of Singapore is smarting from aggressive growth policies that have contributed to a growing chasm between the bottom strata of its society and the well-off. At the same time, its population is grappling with the rising cost of ageing. While the government is making a greater effort at redistribution, the moves so far are modest for a country with among the highest official reserves on a per capita basis in the developed world. Here is a closer look at two new enhancements to the social safety net.

 

Medisave top-ups. Two top-ups were announced to Medisave, the medical savings scheme run by the Central Provident Fund. The first is a one-off top-up for all Singaporeans on Medishield. This ranges from $50 to $400 and is designed to help meet the higher premiums that come with expanding insurance coverage to age 90. The second is part of the new Goods and Services Tax (GST) Voucher scheme. This puts an extra $150 to $450 annually into the Medisave accounts of less well-off Singaporeans aged above 65, depending on the value of their homes and how old they are.

 

While welcomed, the reality is that these distributions do very little to help ageing Singaporeans meet their rising healthcare costs. Let’s not talk about serious diseases such as cancer. A couple of visits to the doctor for ailments that the elderly are prone to, such as high blood pressure, or an accidental fall, could result in medical and drug bills that would wipe out these Medisave top-ups.

 

Compared with other developed Asian countries such as South Korea and Taiwan, out-of-pocket expenditure on healthcare by patients in Singapore is much higher. As our society ages, it is the government, rather than the individual, that is better positioned to reap the benefits of risk-pooling in healthcare. Moreover, many Singaporean women may not have enough in their Medisave for old age. On balance, women tend to earn less than men and at retirement, have less than half of the CPF savings that men have, according to a study by AWARE, a gender equality advocacy group, and the Tsao Foundation for Successful Ageing.

 

GST Vouchers. The government has introduced a permanent scheme to help low-income Singaporeans with the GST. This is an improvement over the temporary offset credits that were given when the GST was hiked from 5% to 7% in 2007. Those GST Credits expired last year. The new GST Vouchers have three components: a cash payout for those whose incomes fall in the bottom 40%, and who live in HDB flats or the bottom 15% of private properties a Medisave topup (as mentioned above) and a USave rebate to help ease utility bills for those in HDB flats.

 

The GST Vouchers are a big part of the government’s redistribution efforts. For FY2012, they form almost half of its budgeted outlay for Special Transfers (excluding top-ups to endowment and trust funds). However, many people in the middle-income bracket do not qualify for these vouchers and the GST remains a regressive tax on them.

 

More than that, the government’s Special Transfers have so far not gone very far in addressing Singapore’s inequality problem. The GINI coefficient, a standard measure of inequality, has climbed steadily over the last decade (see Chart 1). However, even after government benefits and transfers, the adjusted GINI number only went down by about 0.02 points. In Organisation for Economic Co-operation and Development countries, where welfare programmes are much more generous, such transfers lowered the GINI number by a full 0.16 points in the mid-2000s, according to analysis by Citi Investment Research (see Chart 2).

 

 

 

The Singapore government is careful not to overspend. This year, it is working towards a budget surplus of $1.27 billion. However, maintaining a small government means a continued reliance on market forces to allocate resources as well as risks, and sometimes, those risks end up with individuals who are not best equipped to cope with them. Without doubt, individual responsibility should remain a central pillar of Singapore’s socio-economic fabric.

 

But there is a case for further loosening the purse strings and spending that money optimally, so that as many Singaporeans as possible get the help that they need.