Oil prices near US$82

Straits Times Singapore, January 6, 2009, Wednesday
Oil prices near US$82
Freezing weather in northern hemisphere

Continuing weakness of the greenback
Economic upswing boosting outlook for fuel demand
Strong investor appetite for commodity assets
By Jessica Cheam

OIL prices almost topped US$82 (S$114) a barrel yesterday as freezing weather in much of the northern hemisphere and the economic upswing boosted the outlook for fuel demand.

The price rally, which took the commodity to a 14-month high, began with prices soaring by more than US$2 in early trading on Monday as sub-zero temperatures in the United States and parts of Europe triggered expectations of looming high demand.

The continuing weakness of the greenback and strong investor appetite for commodity assets further buoyed the price rise, say analysts.

New York’s main futures contract – so-called light sweet crude for delivery next month – gained 31 cents to US$81.82 a barrel, reported wire agency Agence France-Presse.

This level is the highest seen since prices hit US$86.59 on Oct 9, 2008.

Analysts say market makers are already counting on future rises and that this is adding to the bull run.

Positive economic data from the US and China – the top two oil consuming nations – is giving the oil rally further impetus.

Fresh data from the US shows that its manufacturing sector is experiencing its strongest pace of activity since April 2006. The Institute for Supply Management’s manufacturing index climbed to 55.9 last month, marking the fifth month of expansion.

And a recent survey highlighted that Chinese manufacturing continued to expand last month as new orders received by factories rose for the ninth month in a row.

Concerns raised a few months ago that oil price rises would derail a fragile global economic recovery now seem to have faded, with market watchers coming round to the view that the economic rebound is sustainable.

Credit Suisse economist Joseph Tan, who predicts that oil prices will reach US$90 to US$95 in a year’s time, said: ‘We’re not expecting a double-dip scenario. Even though the second half of the year may not be as strong as the first, it is unlikely to tip us back. And, as the broader economy recovers, oil prices will remain strong.’

A double-dip – also known as W-shaped – recession refers to an economy pulled out of recession by a short period of growth, only to slide back into negative territory.

Ernst & Young’s oil and gas co-leader for Asia, Mr Sanjeev Gupta, however, anticipates a price correction and sees the recent price hikes as temporary, owing to lower trading volumes because of the Christmas holiday period.

‘There may be a correction in 2010 as market participants resume business and liquidity returns to normal,’ he said.

Mr Gupta views this year as a possible ‘transition year’, bridging the gap ‘between the demand-side weakness in 2009 and a return in 2011 to supply-side tightness when economies are expected to recover fully’.

Mr Dominick Chirichella of the US-based Energy Management Institute noted that data for the fourth quarter of last year indicated that oil inventories were finally entering a destocking mode.

He is cautiously bullish on crude in the short term.

‘I believe heating fuels will likely lead the market over the next week or so,’ he added.

Closer to home, rising oil demand is leading to higher pump prices, which have risen by three to four cents a litre at most petrol stations over the past couple of months.

A litre of 92- and 95-octane petrol now retails at $1.747 and $1.807 respectively, while diesel costs $1.273 a litre.

Although dearer, such prices are still far lower than those seen during the last peak in July 2008, when oil hit US$147 a barrel. Then, the litre price of petrol and diesel reached all-time highs of $2.36 and $2.033 respectively.

The inherent volatility of oil prices was underlined by Mr Gupta who, referring to recent reports that Russia had cut supplies to Belarus, pointed out that geopolitical factors could well continue to dominate energy markets this year.

How realistic is $8,000 income ceiling for flats?

Straits Times Singapore, January 6, 2009, Wednesday
How realistic is $8,000 income ceiling for flats?

THERE has been much debate on the $8,000 monthly income ceiling for the purchase of new HDB flats and the ever-increasing prices of resale flats.

The income ceiling is said to be in place to ensure that public housing subsidies are available to those who are unable to afford other forms of housing.

But how realistic is the $8,000 ceiling today? If two graduates have been in the workforce for five or six years, it is almost certain that their combined income would have reached $8,000.

Many of us would have taken on the bread-winner’s role in the family, and thus, would not have much cash savings to afford a resale flat where a 5 per cent cash down payment is required and, on top of that, a hefty cash-over-valuation amount.

We are Singaporeans but we do not enjoy any housing grant, even when we find a place to live that is just across from our parents.

Yvon Lim (Miss)

Big discount on Toyota cars causing a stir

Straits Times Singapore, January 6, 2009, Wednesday
Big discount on Toyota cars causing a stir
Borneo Motors bucks trend with $6k discount; rivals loath to follow suit

By Christopher Tan, Senior Correspondent
The $6,000 discount has been in effect since Christmas and will be reviewed after the results of today’s COE tender. — ST PHOTO: DESMOND LIM

TOYOTA distributor Borneo Motors has astonished competitors by offering whopping discounts of up to $6,000 on its bestselling Corolla Altis and Vios models.

The cut amounts to a discount of around 9 per cent for the Corolla and 11 per cent for the Vios, and has raised eyebrows in the motor industry as the quanta are close to the car’s profit margins.

With the cut, the Toyota Corolla Altis 1.6 now sells for $62,488. According to Singapore Customs, the car’s pre-tax cost is close to $18,000.

After registration taxes, Goods and Services Tax, Certificate of Entitlement (COE) and ancillary costs such as commission for the salesman, the car costs just over $60,000, giving Borneo Motors little profit, if any.

When asked if the promotion – its most aggressive in more than 10 years – would be profitable, Borneo Motors commercial director Gavin Yeo said: ‘It really depends on how much the COE costs.’

Motor traders are divided on where COE prices are headed, but most are banking on rates staying stagnant because of a sluggish car market – despite the traditionally busy Chinese New Year buying period around the corner.

Citigroup economist Kit Wei Zheng agreed that demand for cars might dip. He said that while the overall consumer sentiment should improve this year on the back of a better job market, there are other factors that might offset the demand for cars.

‘Home prices have been rising faster than income, so people will have less to spend on other big ticket items,’ he said.

He added, however, that COE prices would rise on the back of shrinking supply.

Borneo Motors’ move bucks an industry trend. By and large, motor firms have maintained prices for the past month in case COE prices should rise.

Some have trimmed prices, offering discounts ranging from $1,000 to $3,000, while others are relying on indirect incentives.

Nissan agent Tan Chong Motors, for example, is staging a lucky draw that offers customers the chance to win up to $28,888.

When asked if they would try to match Borneo Motors’ discounts, its rivals baulked.

Cycle & Carriage general manager (Mitsubishi) Alvyn Ang said: ‘If we match them, we’d be losing money.’

Tan Chong general manager Ron Lim said: ‘At the end of the day, we still have to watch our bottom line.’

Trade observers see Borneo Motors’ price cuts as a move to recover lost sales.

They point out that last year was a rough year for Japanese car brands. The spiralling yen made Japanese cars expensive at a time when currencies such as the American dollar, euro and South Korean won dipped, making vehicles from those countries cheaper.

As a result, Japanese cars made up less than 60 per cent of new sales here last year, down from 75 per cent in 2008.

Still, Borneo Motors fared better than most. It sold 12,248 Toyota cars, securing its pole position for the seventh year running, even though the overall figure was 20 per cent down from the 15,249 cars it pushed out in 2008.

So why the $6,000 discount, which has been in effect since Christmas and will be reviewed after the results of today’s COE tender?

Borneo Motors’ Mr Yeo said it was in response to a weak market as well as increased competition from South Korean and European brands.

Industry watchers added that it could also be a way for Borneo Motors to collect bookings ahead of another possible cut in COE supply from April.

‘It gives them a head start,’ one said.

Those in the market for a car are hardly complaining.

Retiree Ho Yin Hin is among those who have snapped up Borneo Motors’ offer. The 62-year-old paid $32,000 for an off-peak Toyota Vios over Christmas.

‘I was looking around for a car and I noticed that the $6,000 discount was the best around,’ he said, adding that the car’s price was comparable to that of some South Korean models.

STINews: Investors’ risk appetite slowly returning: Poll

Straits Times Singapore, January 5, 2009, Tuesday
Investors’ risk appetite slowly returning: Poll
Markets’ stability lends optimism but there is also greater caution now

By Gabriel Chen

THE financial market rebound has put a spring in the step of Singaporeans. They are now showing a greater willingness to take risks with their money.

Investors who had sought refuge in cash and steady yield products like bonds are now looking for higher returns and ways to better grow their wealth, according to a new Citibank survey.

It found that 44 per cent of people who stopped investing in the midst of the economic crisis have now either resumed investment activity or are open to it once the right opportunity arises.

A further 36 per cent of the 400 respondents to the online poll conducted in October last year said they stayed invested throughout the meltdown, while around 20 per cent continue to hold their savings in cash.

The survey findings indicated that for current investors or those open to investing, there appears to be a return in risk appetite.

Shares were the preferred investment for this group, with 54 per cent opting for stocks as part of their portfolios while 28 per cent picked mutual funds or unit trusts.

Lower-risk instruments such as bonds and fixed deposits attracted 19 per cent each. About 20 per cent indicated they had considered buying an investment property.

‘With confidence and stability returning to markets, there is a discernible increase in willingness amongst investors to assume a little more risk,’ said Mr Shrikant Bhat, Citibank Singapore’s head of wealth management.

At the same time, the willingness to invest was also balanced with greater caution, the survey found.

About 40 per cent of respondents said they were a lot more cautious while 42 per cent indicated they were a little more cautious in their investment decisions.

Mr Bhat noted that investors are asking a lot more questions about the products they buy and are making more informed investment decisions.

‘They are also more likely to view their investments within the framework of a holistic portfolio over a longer-term horizon,’ he said.

Financial advisers say the survey bears out what they are seeing on the ground, with investors turning more positive with the better economic outlook.

‘We are getting more calls from clients who are looking to invest,’ said Mr Sani Hamid, director of wealth management at Financial Alliance.

The return of risk appetite is, however, gradual. ‘There is still a lot of retail money sitting on the sidelines which has not come back yet,’ Mr Sani added.

Ms Carol Seah, chief executive of Wynnes Family Office, said some clients are now more cautious, while at the same time more active in their investments because they are becoming ‘more aware’ of what is going on in the aftermath of all the volatility during the financial crisis.

The Citi Fin-Q Survey also showed that the top three financial concerns of Singapore residents are rebuilding their savings, meeting monthly expenses and greater retirement savings.

STINews: Too early for US govt to end stimulus

Straits Times Singapore, January 5, 2009, Tuesday
COMMENTARY
Too early for US govt to end stimulus

NEW YORK: The next employment report could show the US economy adding jobs for the first time in two years. The next gross domestic product (GDP) report is likely to show solid growth in late 2009.

There will be lots of bullish commentary – and the calls we are already hearing for an end to stimulus, for reversing the steps the government and the Federal Reserve took to prop up the economy will grow even louder.

But if those calls are heeded, we will be repeating the great mistake of 1937, when the Fed and the Roosevelt administration decided that the Great Depression was over, that it was time for the economy to throw away its crutches. Spending was cut back, monetary policy was tightened – and the economy promptly plunged back into the depths.

This should not be happening. Both Mr Ben Bernanke, the Fed chairman, and Dr Christina Romer, who heads President Barack Obama’s Council of Economic Advisers, are scholars of the Great Depression. Dr Romer has warned explicitly against re-enacting the events of 1937. But those who remember the past sometimes repeat it anyway.

As you read the economic news, it will be important to remember that blips are common even when the economy is mired in a prolonged slump. In early 2002, for example, initial reports showed the economy growing at a 5.8 per cent annual rate. But the unemployment rate kept rising for another year.

And in early 1996, preliminary reports showed the Japanese economy growing at an annual rate of more than 12 per cent, leading to triumphant proclamations that ‘the economy has finally entered a phase of self-propelled recovery’. In fact, Japan was only halfway through its lost decade.

Such blips are often, in part, statistical illusions. But even more important, they are usually caused by an ‘inventory bounce’.

When the economy slumps, companies typically find themselves with large stocks of unsold goods. To work off their excess inventories, they slash production; once the excess has been disposed of, they raise production again, which shows up as a burst of growth in GDP. Unfortunately, growth caused by an inventory bounce is a one-shot affair unless underlying sources of demand, such as consumer spending and long-term investment, pick up. This brings us to the still grim fundamentals of the economic situation.

During the good years of the last decade, growth was driven by a housing boom and a consumer spending surge. Neither is coming back. There cannot be a new housing boom while the nation is still strewn with vacant houses and apartments left behind by the previous boom, and consumers – who are US$11 trillion (S$15 trillion) poorer than they were before the housing bust – are in no position to return to the buy-now-save-never habits of yore.

What is left? A boom in business investment would be really helpful right now. But it is hard to see where such a boom would come from: Industry is awash in excess capacity, and commercial rents are plunging in the face of a huge oversupply of office space. Can exports come to the rescue? For a while, a falling United States trade deficit helped cushion the economic slump. But the deficit is widening again, in part because China and other surplus countries are refusing to let their currencies adjust.

So the odds are that any good economic news we hear in the near future will be a blip, not an indication that we are on our way to sustained recovery. But will policymakers misinterpret the news and repeat the mistakes of 1937? Actually, they already are.

The Obama fiscal stimulus plan is expected to have its peak effect on GDP and jobs around the middle of this year, then start fading out.

That is far too early: Why withdraw support in the face of continuing mass unemployment? Congress should have enacted a second round of stimulus months ago, when it became clear that the slump was going to be deeper and longer than originally expected. But nothing was done – and the illusory good numbers we are about to see will probably head off any further possibility of action.

Meanwhile, all the talk at the Fed is about the need for an ‘exit strategy’ from its efforts to support the economy. One of those efforts, purchases of long-term US government debt, has already come to an end. It is widely expected that another, purchases of mortgage-backed securities, will end in a few months. This amounts to a monetary tightening, even if the Fed does not raise interest rates directly.

Will the Fed realise, before it is too late, that the job of fighting the slump is not finished? Will Congress do the same? If they do not, 2010 will be a year that began in false economic hope and ended in grief.

NEW YORK TIMES

STINews: Taxman, spare a thought for housewives

Straits Times Singapore, January 5, 2009, Tuesday
Taxman, spare a thought for housewives

AS A graduate housewife, I feel that I am unappreciated by the tax authorities. It is as though giving up everything to raise the next generation is unimportant.

Whenever tax breaks are rolled out for working mothers, housewives get nothing. And when we try to earn a little income through part-time work, we lose some tax relief immediately.

The tax relief for spouse is $2,000. And, according to the Central Provident Fund Board’s website, a taxpayer ‘can enjoy an additional tax relief of up to $7,000 per calendar year if you use cash to top up for your siblings, spouse, parents or grandparents’. To qualify for that, the spouse ‘must have earned $2,000 or less in the preceding year’.

This means a spouse can make a maximum of only $166.67 per month in order not to exceed the limit so that her husband enjoys the tax relief.

One incentive may be the Workfare Income Supplement of $200 for the $2,000 earned. But my husband would lose a tax relief of $2,000 plus $7,000. That means $765 in additional tax (based on 8.5 per cent that my husband paid in the previous year).

This is unfair.

Chong Yuen Foong (Mdm)

STINews: Resale HDB flat prices hit new high

Straits Times Singapore, January 5, 2009, Tuesday

Year’s total increase amounts to 8%; private home prices too are up

By Jessica Cheam

HOUSING Board (HDB) resale flat prices continue to climb ever higher, with prices in the fourth quarter of last year setting a new record.

Flash estimates released by the HDB yesterday show prices rose by 3.8 per cent in the fourth quarter, bringing last year’s total price rise to about 8 per cent – a surprise outcome for many property experts who had predicted price falls at the start of last year.

The Resale Price Index (RPI) hit 150.7 in the fourth quarter, up from the third quarter’s 145.2 and far beyond the previous peak of 136.9 achieved in the fourth quarter of 1996.

HDB flat prices have risen almost 40 per cent over the past three years.

Private home prices put on an even more impressive 7.3 per cent rise in the fourth quarter of last year compared to the third. This came on top of a 15.8 per cent gain in the third over the second quarter.

Urban Redevelopment Authority estimates released yesterday showed private home prices rose about 1.7 per cent over the whole of last year.

Analysts say the skyward rise in prices is down to demand outpacing supply.

A quicker-than-expected economic recovery during the year and a booming immigrant population, with many new families and expatriates relocating to Singapore post-economic crisis, contributed to the strong demand.

PropNex chief executive Mohamed Ismail said that permanent residents easily made up 20 per cent of his agency’s total HDB sales.

At C&H Realty, this group of buyers account for as many as 50 per cent of all HDB resale transactions, revealed managing director Albert Lu.

Mr Patrick Grove, executive chairman of online portal iproperty.com.sg, said an interesting trend to emerge was the increase in foreigners interested in Singapore properties.

The portal’s traffic from foreign countries grew by up to 20 per cent month-on-month during the second half of last year. This compares to 5 per cent to 10 per cent growth for Singapore-originated searches.

‘There’s more demand for homes now that the worst of the economic crisis is over. Low interest rates are also a key factor, as it’s more affordable than ever to buy a property,’ added Mr Grove.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak pointed out that continued recovery in private home prices meant some home buyers were being priced out of this market, and had to turn to HDB resale flats.

‘As long as the prices of suburban condominiums remain relatively high, there will be space for resale flat prices to expand,’ he said.

Analysts do not see any end in sight to the increase in HDB values. They are predicting price rises in the range of 8 per cent to 15 per cent for HDB flats for 2010.

Mr Lu reckons prices will rise about 3 per cent each quarter. But PropNex’s Mr Ismail predicts a slowdown in the rate of increase – to about 2 per cent during the first quarter of the year.

Despite further flat supplies set to come onstream during the year, Mr Mak expects prices to gain another 8 per cent to 15 per cent this year.

HDB yesterday moved to address supply concerns by announcing it would launch more build-to-order (BTO) flats this year if there was ’sustained demand for new flats’. It would, it added, ‘ensure that there is an adequate supply of flats to meet prevailing housing needs’.

Some 1,300 new flats are to be launched for sale today by HDB in Choa Chu Kang and Hougang.

As an indication of the red-hot demand for homes, there was an overwhelming response to a recent launch by HDB of BTO flats at Dawson, where some flats were more than 11 times oversubscribed.

Industry observers are unsure whether BTO flat supply will have a significant impact on the current high level of demand, given that such flats typically take three to four years to complete.

‘BTO flats do not provide immediate roofs over heads, so resale flats will continue to be in high demand. But the supply of new flats will go towards stabilising HDB resale price increases,’ said Mr Ismail.

STINews: Private home prices surge 7.3 per cent

Straits Times Singapore, January 5, 2009, Tuesday

Fourth quarter’s rise brings increase for last year to 1.7%; mass market the star
By Joyce Teo

PRIVATE home prices shot up 7.3 per cent in the final three months of last year, allowing 2009 to finish in positive territory after a horror start.

Yesterday’s flash estimates indicated that prices overall increased by 1.7 per cent last year and it was all down to the final, frantic six months.

The 7.3 per cent jump in the October to December period built on a stellar 15.8 per cent surge in the third quarter – the biggest quarterly rise in 28 years and one that ended 12 dismal months of price decline.

‘In a bad year, we still managed to show a 1.7 per cent rise in prices. There’s certainly optimism in the Singapore property market,’ said Cushman & Wakefield managing director Donald Han.

That low overall figure is a stark reminder of how last year shaped up as a year of two halves, with dire results early on and a surge in the second six months.

Mass market housing was the star segment with record levels reached.

The Urban Redevelopment Authority (URA) data yesterday showed that non-landed home prices in the suburbs edged up 5.8 per cent in the fourth quarter. This is far lower than the 16.1 per cent climb in the third but it brought the full-year increase to 11.2 per cent.

‘If you want to go for deep discounts, you can’t find them now in the mass market,’ said Mr Han.

HDB resale prices – up 8 per cent last year to a new high – are helping to support mass market prices, experts said.

Prices of non-landed homes on the city fringes rose 9.5 per cent in the fourth quarter and were up 3.1 per cent overall for the year.

But prices for non-landed city centre homes were down 2 per cent for 2009 although the 7.1 per cent increase for the fourth quarter points to a recovery.

CBRE Research executive director Li Hiaw Ho said the good response to selective high-end projects launched in the fourth quarter, such as Marina Bay Suites, Cyan and Parvis, had fuelled the price rise.

The robust estimates from the fourth quarter last year have boosted confidence for this year, among the experts at least.

Ngee Ann Polytechnic lecturer Nicholas Mak said the 7.3 per cent rise, while smaller than the third quarter’s, was still ‘quite significant’, indicating that there is still sufficient momentum in the market to push prices higher this year.

The Shore Residences in Katong – launched on Jan 1 after a late December preview – did relatively well, selling 183 units out of 338 units that were released.

Overall, experts believe that by the end of the year, prices may have surpassed the previous peak.

Private home prices may rise by about 10 per cent to 12 per cent this year, with a slightly lower increase in the mass market segment and better upside in the high-end segment, experts forecast.

CBRE Research tips a smaller overall rise of 5 to 10 per cent.

PropNex chief executive Mohamed Ismail said prices will head up as more developers will be launching smaller units at higher prices on a per sq ft basis, especially from the second quarter.

While rises are tipped from every quarter, most agree that prices will moderate this year.

Much of the pent-up demand has been satisfied, said DTZ head of South-east Asia research Chua Chor Hoon.

‘There will be less panic or euphoric buying in view of the price increases…in 2009 and the possibility of more government measures if prices run ahead of economic fundamentals.

‘Affordability is a constraining factor in the mass market segment and any price increase in this segment will depend on the job market.’

STINews: Caution…outlook still unclear

Straits Times Singapore, January 4, 2009, Monday
Caution…outlook still unclear
Firms will face challenges in generating new business as govts end stimulus spending

By Robin Chan

CORPORATE leaders will be glad to see the back of 2009 after a rollercoaster 12 months that squeezed margins and made survival the key issue for many.

While 2010 looks likely to be more stable, the year ahead poses challenges of a different form as companies look for opportunities amid a still tenuous recovery.

‘For 2010, everyone seems quite comfortable about the first and second quarters, but beyond that there is no consensus,’ said Mr Teng Theng Dar, chief executive of the Singapore Business Federation (SBF), which has a membership of more than 15,000 companies.

Economists believe the second half of the year could pose challenges as governments in major economies end their stimulus measures.

This is when the support for the global economy will shift from government spending and replenishment of inventories to new private demand.

The Singapore Government is slowly phasing out measures like the Jobs Credit scheme and Risk-sharing Initiative over the next year, a further sign, say analysts, of the uncertainty looming over 2010.

What this all means is that companies are going to approach this year with much caution, and there will not be an immediate surge of business activity.

Mr Teng said: ‘We won’t see a big rally in that sense. It will be ‘watch and then you go’. Hopefully by the end of the first and second quarters, we will begin to see a clearer picture.

‘That is the reality in the marketplace right now. We can’t see a horizon that is very far away.’

The Singapore Indian Chamber of Commerce’s chairman, Mr Vijay Iyengar, said it will be a time for companies to continue projects and plans that they put off last year.

‘But I think they will still wait for the first quarter to see how it pans out first.’

He said there is also concern that some sectors may have recovered too fast. ‘A lot of our members are in commodity markets, where the recovery has been fairly swift. But the question is whether these markets have got ahead of themselves,’ said Mr Iyengar.

For serviced apartment provider Ascott Group and Sembcorp Industries, the year will be one of expansion and seizing opportunities.

Ascott chief executive Lim Ming Yan said: ‘The recovery may not be as fast as we hope to see. But given that the situation has stabilised, I think companies are coming back to the market to look for opportunities.

‘They may not make a commitment immediately, but…it means that business activities like corporate travelling will pick up again.’

Ascott plans to launch 12 new properties this year.

Sembcorp Industries’ group president and chief executive, Mr Tang Kin Fei, said: ‘Backed by our sound balance sheet, we also plan to capitalise on opportunities that may present themselves in the new year.’

Corporate leaders have no doubts that it is Asia, and China, where opportunities lie.

Mr Lim said: ‘Companies are making investment decisions in China which will, in turn, generate opportunities for other players in the market.’

Smaller companies too are eager to expand and raise their topline next year, said the president of the Association of Small and Medium Enterprises, Mr Lawrence Leow.

‘Last year was a year of cost-cutting, everyone just trying to stay afloat, minimise exposure to the crisis and keep jobs.

‘This year, hiring has already started and companies are looking to expand overseas because that’s the only way to grow revenues,’ he said.

But the challenges are just as plentiful as the opportunities.

Mr Teng noted that in a recent SBF survey of over 1,000 firms, more than 80 per cent of respondents saw the ability to attract new orders as just as much a problem as the uncertain economic recovery. ‘It would be very prudent for companies to see how they can improve their customer and market development,’ he said.

Mr Leow said that getting financing for overseas expansion was also an obstacle for small and medium-sized enterprises.

STINews: Top of the stocks

Sunday Times Singapore, January 3, 2010, Sunday
Top of the stocks
Stock investors endured a dizzying ride in 2009 with the Singapore benchmark Straits Times Index (STI) plunging to a low of 1,457 in March before nearly doubling to hit 2,897.62 on Thursday. Senior Correspondent Lorna Tan polled three financial experts and a retail investor on their views of the market.

Ms Janice Chua, DBS Vickers’ head of research

What were 2009’s highlights?

First, our contrarian positive view for equity markets to recover in April with Asia leading the way came true.

Second, the Singapore Government’s bold and innovative fiscal package that included the Jobs Credit scheme, the special risk-sharing initiative, the 1 percentage point cut in corporate tax rate and the 40 per cent tax rebate initiative for commercial and industrial properties in response to the sharp but brief global recession.

Third, announcement of measures to cool the property market by increasing land supply and removal of interest absorption scheme to keep speculation in check.

How do you see 2010 panning out?

For the first time in history, Asia will unseat the United States as the largest global demand driver. The V-shaped recovery in recent months will slow down to exhibit more gradual growth by early this year due to both demand and supply constraints as well as monetary tightening policies.

Our Singapore economist expects 6 per cent growth this year. And our currency strategist sees the Singdollar strengthening to 1.34 against the US dollar from the current 1.39 by the end of the year.

We see the STI heading to around 3,000 in the first quarter of but a temporary top is seen in line with a potential peaking of year-on-year economic growth. Rate hike concerns could also start to weigh on the market, leading to a correction.

Temporary hiccups aside, we believe 2010 will be a year where equity markets will gradually grind higher, interrupted by periods of volatility. Our 12-month target for the STI is 3,200.

What are the sector/stock picks for 2010?

We favour oil and gas, and property stocks. We think that the cyclical backdrop for most commodities should be more favourable this year compared to last year, especially for energy and agriculture.

Our house view is for oil price to range between US$70 and US$90 per barrel, averaging at US$80. This means that at the current level of US$70, there is room for trading opportunities among the oil and gas plays.

We like Sembcorp Marine, Swiber and PEC for a potential resurgence in orders. We also like Ezra Holdings and Mermaid for their potential growth through acquisitions.

We prefer property stocks focused on the high-end market such as SC Global and Ho Bee over the mass market.

The reasons are the widening valuation gap between Singapore and Hong Kong high-end properties and the opening of the two integrated resorts.

In addition, the impact of policy risks affecting the high-end segment is lower and this segment is less sensitive to an expected rise in interest rates.

Among the real estate investment trusts (Reits), we favour the hospitality and retail sectors for their healthy organic and acquisition growth potential. The expected rise in tourist numbers with the opening of the integrated resorts is also an important plus point. We like Ascott Residential Trust and CDL Hospitality Trust.

What’s your tip?

Be vigilant and selective because the easy money has been made. Still, this could be the start of Asia’s decade and the long-term rising trend remains intact, interrupted by periods of volatility. Make use of corrections to accumulate. Buy on fear, sell when euphoric.

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