TLC sold US$65m art piece for “peanuts”.

US$2.3m, was what CapitaLand’s subsidiary, Raffles Holding, a painting for in 2005. Now it’s worth US$65m and rumoured to be heading to The Museum of Islamic Art, Doha, Qatar.

A work by Zao Wou-Ki (1920-2013) that hung in Raffles City for years and yrs (commissioned by I M Pei the architect of the place and of the Doha Museum) was sold by Raffles Holdings, a subsidiary of Capitaland, via Christie’s HK for US$2.3m in May 2005.

Same work sold at a world record price of US$65m (a record for a ZWK painting) on 30 Sept via Sotheby’s HK.

But before Chris K gets worked up on CapitaLand’s or scholars’ incompetence, the piece was sold by public auction both times. The art buyers voted with their wallets both times round.

But somehow, I don’t think that this fact will register with the anti-PAPpies, sane or nutty. So wait for Phillip Ang, the cybernuts go-to financial expert to KPKB about Ho Ching’s, CapitaLand’s or scholars’ incompetence or worse. (Btw, whatever happened to his and Lim Tean’s sue CPF class action? They raised money and then kept quiet? CPF class action: Phillip Ang’s “reply’ to fellow cybernut.Related post: Will Lim Tean & Phillip Ang help out fellow cybernut?)

Whatever, it would be nice if we had retained the art piece in one of our public galleries: after all it hung in a public space in Raffles City. But I’m sure the anti-PAP Tamils and Malays would say it’s “Too Cina”. And that it that shows the PAP’s Chinese chauvinism and bias against minority races.

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S’pore Inc: Ownself pay ownself

CapitaLand Commercial Trust Singapore’s First and Largest Commercial REIT 8 – 9 November 2016 Presentation for investor meetings in Hong Kong

Click to access 20161107_172614_C61U_P2DBY8KUFMS4XEEF.1.pdf

Slide 14 showed that Top 10 tenants contribute 36% of monthly gross rental income

From the perspective of Ownself Pay Ownself

3rd was GIC — 4%

5th was StanChart — 3%

6th was CapitaLand — 3%

10th was EDB — 1%

For the record Temasek owns 40% of CapitaLand and CCT, and about 20% of StanChart. But be be fair HSBC is the second biggest tenant of CCT contributing 4%.

Property prices: Valuations are irrelevant/ It’s all about credit

The availability of credit, or is the case, now, the non-availability of credit.

And it’s not Heart Truths screaming this out loud; Roy Ngerng sadly prefers to teach anti-PAP S’poreans to suck eggs in ever more complicated ways.. It’s the constructive, nation-building local media that are screaming it out loud that it’s credit that matters.

Private home price decline accelerates as curbs bite (Today 26 April)

... in the first three months of the year, with finalised data from the Urban Redevelopment Authority (URA) confirming that the price decline had picked up pace amid persistently weak sentiment.

Private home prices slipped 1.3 per cent in the first quarter of the year from the previous three months, unchanged from the preliminary estimate released earlier this month and accelerating from the 0.9 per cent fall in the fourth quarter of last year, the URA said yesterday,

 Analysts said the multiple sets of property market cooling measures introduced by the Government, especially the Total Debt Servicing Ratio (TDSR) framework imposed last June, have been effective in curbing demand and runaway prices.

They expect the measures to remain for now, suppressing demand and probably leading to further weakness in home prices in the following quarters.

“Market exuberance for private homes was very much tempered by the existing property cooling measures and the TDSR … The various government measures have effectively curtailed demand from most groups of home buyers,” said PropNex Realty’s chief executive Mohamed Ismail.*

Shophouse deals continue to languish (14 April)

Shophouse transaction volumes continued to languish for the third consecutive quarter, as demand took a hit following the introduction of the Total Debt Servicing Ratio (TDSR) framework in late-June last year. However, prices have continued to hold – due to a limited supply of shophouses and most owners taking a longer-term horizon and having holding power.

CBRE’s analysis of caveats data shows that 26 shophouses changed hands for a total $118.4 million in the first quarter of this year, down from $149.3 million in Q4 last year and $197.2 milion in the preceding Q3. In Q1 and Q2 last year the figures were $463.7 million and $458 million respectively, reflecting the buoyant market pre-TDSR. CBRE’s analysis covered only shophouses on sites zoned for commercial use.

Shophouse transactions weakened to $346.5 million in the second half of last year from $921.7 million in the first half – resulting in a full-year figure of $1.27 billon, down from $1.38 billion in 2012.

Besides TDSR, which has tightened lending for property purchases across the board, another key reason for the sharp slowdown in shophouse transaction volumes is that prices have risen in the past few years to levels beyond the affordability of most potential buyers, said Knight Frank executive director Mary Sai.

It’s all about the Total Debt Servicing Ratio (TDSR) introduced last June.

Why did it take so long to introduce this measure? Heart Truths should be asking this question

So now you know why

Some are giving big discounts, while others are going on marketing blitzes — property developers are pulling out all the stops to boost sales which have been hit by cooling measures.

Statistics from the Urban Redevelopment Authority (URA) on Friday showed a 1.3 per cent decline in prices in the first quarter of this year. It is the largest drop since the second quarter of 2009, when prices fell by 4.7 per cent.

The Interlace condominium was launched in 2009 and some residents have since moved in.

However, the project by CapitaLand still has 183 unsold units as of March 2014.

Over at Whampoa East Road, the Eight Riversuites condominium has 205 unsold units. However, the 862-unit project was one of the top sellers last month, when it sold 44 units.

It was the project’s highest sales volume in a single month since June 2013, when the government tightened property loan rules. Under the Total Debt Servicing Ratio framework, home buyers can only loan up to 60 per cent of his or her income.

The units were sold at a median price of about S$1,100 psf — almost 20 per cent lower compared to when the project was first launched some two years back, when it was sold at S$1,340 psf.

Property watchers … said developers may be under pressure to cut prices in order to boost sales.

Nicholas Mak, executive director at SLP International Property Consultants, said: “If a certain residential project has been launched for quite some time and still has substantial unsold units, and this project is quite near to its completion date, the developers may be under some pressure to increase sales.

“Because if let’s say the development is completed and there is still quite a number of unsold units, they (the developers) could also be facing competition from other developments that could be newly-launched in the vicinity.”

Jones Lang LaSalle’s national director of research and consultancy Ong Teck Hui said: “Since the TDSR was introduced in June 2013, the number of unsold units in launched private residential projects has increased significantly by 19 per cent from 5,243 units in Q2 2013 to 6,247 units in Q1 2014.

“This is reflective of the slower take-up of units at new sales launches, resulting in the build-up of unsold units.”

Besides cutting prices, developers are also trying other tactics.

Sales for the Sky Habitat project at Bishan Street 15 picked up in April, after a marketing blitz. In a statement issued on Friday on its first quarter earnings, developer CapitaLand said 106 units were sold in April — after more than six months of single-digit sales volume, according to URA’s figures.

“Another strategy that some developers may embark on is to increase the sales commission for agents,” Mr Mak added.

“For example, a one percentage point reduction may not be that attractive to buyers. However, if developers were to raise the commission by one percentage point of the price, that absolute amount will give a lot more incentive to the property agents to work harder in attracting buyers.”

The competition is expected to intensify with close to 15,000 units, including executive condominiums, to be completed for the rest of the year. This brings the total number of units to be completed in 2014 to almost 20,000 — higher than the some 14,400 units in 2013. (CNA 28th April)

——-

* More: Both the primary and secondary markets suffered sharp slowdowns in buying activity. Developers launched 1,964 new private homes from January to March and sold 1,744 units, fewer than the 2,631 launched and 2,568 sold in the previous three months. In the resale segment, transactions dropped from 1,206 units to 899 homes, the URA said.

Prices fell across all segments of the private housing market in the first quarter, with condominiums in the Rest of Central Region (RCR), or city fringes, leading the decline at 3.3 per cent. Those in the Core Central Region (CCR), or city centre, dipped 1.1 per cent, while the Outside Central Region (OCR), or suburbs, registered a slight 0.1 per cent fall.

Ms Christine Li, head of research and consultancy at property agency OrangeTee said the bigger declines in the CCR and RCR could be due to developers focusing on trying to sell houses from previous launches.

“Most of the homes sold in the first quarter are from existing property launches, where prices could be more attractive as developers have dangled more incentives and discounts to move sales in a slow market,” she said.

Ms Li added that prices in the RCR could see some support in the second quarter as more “attractively located” projects are expected to be launched during this period.

“Three of the highly anticipated projects — Commonwealth Towers, The Crest and Highline Residences — are expected to be launched in the current quarter. These projects are also expected to fetch a higher median price than what’s been achieved in the first quarter.”

And while prices of mass market homes are likely to stay relatively stable, the odds seemed to be stacked against the high-end CCR segment, analysts said.

Ms Chia Siew Chuin, director for research and advisory at real estate consultancy Colliers International, said: “Domestic demand has been weakened by the loan curbs while interest from foreigners, who traditionally form a large demand base for high-end properties, has diminished in view of more favourable investment options in the recovering foreign markets.

“On the supply side, developers of high-end properties may feel the heat to meet the Qualifying Certificate deadline.”

The analysts estimated that overall prices could fall between 4 and 8 per cent by the end of this year, as the property measures are likely to remain.

“As long as borrowing costs stay low, the Government is unlikely to reverse the earlier anti-speculation measures … Under such an environment, we expect price weakness to persist,” said Mr Ismail.

 

Commodity prices are close to the bottom of the cycle?

FT reported on April 3 that traders in an annual commodities seminar are getting bullish.

And this appeared earlier this yr

GROWTH has slowed in China, the destination of most of the world’s exports of iron ore, copper and other metals, as well as increasing quantities of oil and corn. Many analysts have declared that the China-driven commodities “supercycle” has run out of steam. But that may be premature. While global population growth is slowing, the number of people added each year is still increasing. Similarly, China’s economy will be 65% bigger in 2014 than it was in 2008. Macquarie, a bank, reckons that the growth of global demand for steel will slip to 3.1% a year between 2012 and 2018, compared with 3.3% in the previous six-year period, but that in absolute terms it will go from 45m tonnes a year to 50m tonnes a year. The same trend will apply to copper, aluminium, nickel, lead, zinc and tin. In terms of its impact on demand, Chinese growth of 7.5% today is the equivalent to 12% growth in 2008. On top of this there is growth from other Asian economies and the recovery of the American economy. The pace of increase in commodity prices may not match that of yesteryear, but the next upward climb looks set to start in 2014. See full article.

Related article:

Materials (Sector Equity)

• The materials sector has fallen out of favour with investors in 2013, with the MSCI AC World Materials Sector index gaining just 0.3% (in SGD terms) last year.
• Similar to the situation with the global financials sector in 2008/2009, massive write-downs have been undertaken by the sector; while this has reduced net asset values of resource companies, it also makes valuations (on a PB basis) more conservative.
• As a beneficiary of a global economic recovery, we believe the conservatively valued materials sector may emerge as a “dark horse” this year.
• Our recommended fund for global resources equities: First State Glb Resources

https://secure.fundsupermart.com/main/article/Idea-Week-Capture-Investment-Opportunities-2014-9073

SunT sometime back (sometime last yr) had a bullish piece. http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={27464576-17202-5110879539} Either ahead of the the curve, too early or clueless. LOL. What do you think?

If palm oil, rubber and energy cheong gd for Indonesia, M’sia and Thailand (rubber), and for some SGX counters. Think Olam, Noble and the plantation stocks for starters. And think property developers: think esp CapitaLand. Exposure here and in China.

Chinese financial sector: there be storms and shaols

(Backgrounder: Temasek has biggish stakes in three out of the four major  Chinese banks: doesn’t have shares in Agricultural Bank and CapLand is big and bullish on China).

Credit issues in Pearl Estuary region:  http://blogs.reuters.com/breakingviews/2013/03/27/chinese-credit-alarms-sound-in-the-east/

And New rules will force mainstream lenders to cap their exposure to some of the riskier off-balance sheet products they have sold to customers – in particular, those that are effectively repackaged corporate debt. That limits a big source of risk for banks, but creates a new one for the Chinese economy.

http://blogs.reuters.com/breakingviews/2013/03/28/china-shadow-bank-curbs-attack-symptom-not-cause/

The junk bond market in China took off this year. Although the deals still account for a small share of the global total, Chinese companies have sold $8 billion of high-yield bonds to overseas investors since January. That’s up from $2.3 billion during the same period a year earlier, according to figures from Dealogic … the Chinese market has its own set of potential problems, and some analysts worry that investors aren’t being properly compensated for the added layer of risks.

he bulk of the high-yield bonds in Asia this year — roughly half — come from Chinese real estate companies. The fear is that the housing market, which has been booming, is a bubble that will eventually burst.

Mainland China’s domestic bond market remains largely off limits to foreign buyers. So most investors buy offshore Chinese bonds, which are issued through holding companies headquartered in places like the Cayman Islands.

The bonds tend not to be backed by the actual businesses and underlying assets in mainland China. That means foreign bondholders may have little legal recourse if a company defaults on its debt, especially if local banks or other Chinese creditors make claims.

Bondholders are now facing such difficulties with the bankruptcy of Suntech Power.

http://dealbook.nytimes.com/2013/03/28/as-pace-of-chinas-junk-bond-sales-grows-so-do-worries/?nl=business&emc=edit_dlbkpm_20130328

Test needed to ask questions at co. meetings

(Or “Shume really stupid shareholders” or “Why SGX shld pay Mano Sabnani to conduct courses on asking sensible qns at AGMs and EGMs”)  

Sometime back, the media reported that some daft shareholders (same people as those who complained at DBS AGM that DBS paid 50% premium over Bank Danamon’s share price to get controlling stake? I mean these people never ever heard of a premium needed to secure a controlling block?) abt CapitaLand’s China exposure and share price since 2008 or 2007 at its AGM.

Don’t they read the int’l media?

Example from BBC Online:”China has, thus far, avoided the much-feared hard landing,” said IHS Global’s Ren Xianfeng.

“Expect no major property meltdown or construction bust. Expect no deflationary spiral or banking crunch.”

Analysts said that given the steadiness of the property market, policymakers were likely to continue to ease their policies to boost growth.

Ting Liu of Bank of America-Merrill Lynch forecast that China’s economy was likely to grow at an annual rate on 8.5% in the second quarter, up from 8.1% in the first three months of the year.

And on the share price: don’t they realise that equity markets have had a choppy ride since 2008. And that China-related stocks have been the target of bear raids and that CapitaLand is an obvious target to short given that the stock is liquid and shares can be easily borrowed

In case anyone doesn’t understand the reference to Mano, he asks vv intelligent questions at AGMs and EGMs. Only one I can bitch abt is at K-Reit EGM when he queried the price paid for Ocean Towers from its parent. Shumething like Ocean Towers seldom gets sold at mkt price, except perhaps in distressed sale. Kanna pay premium.

CapitaLand: Reason for CEO interview in ST

Two fridays ago, ST has a whole page devoted to an interview with CapitaLand’s CEO. He was trying to explain to CapitaLand was not a China play, and that it was not a financial engineer pretending to be a property developer. It had been until recently playing up that it was a China play, and that it was asset light, using financial egineering, rather than owning assets.

I tot, “Wow, co must be worried abt share price.” Still I was that surprised when late last week, it announced a year-on-yearn 83% drop in its third quarter net profit to S$80.2 million.

Moral of story: Whenever a usually publicity-shy CEO “opens up”,  be wary, very wary.

Property: What weed are these people smoking?

I am amazed that any broker can call the Singapore real estate sector “Overweight”. But RBS did it on 16 August 2011

The valuation gap between developer stocks and physical properties widened over the past eight months. We expect it to narrow as home sales remain robust. Strong household and developer balance sheets should support prices and cooling measures may prove ineffective in quelling real demand. We upgrade our view on the sector to ‘overweight’ from ‘neutral’.

Developer stocks’ premium to NAV narrowed to just 4 per cent from 33 per cent in January, despite robust primary home sales of 11,197 units (up 13 per cent year on year) in the first seven months of 2011 and a 4.3 per cent half-on-half increase in home prices in H1 2011. The sector also underperformed the STI by 11 percentage points in the last eight months. Policy risks seem as low now in view of heightened global uncertainty. We think any policies to cool the market would prove ineffective as we believe there is virtually no speculation now. We expect mass-market homes to continue to be undersupplied in 2012 to 2013.

Growth in total stock averages 2.3 per cent a year from 2011-12, below the long-term average of 3 per cent, while occupancy rate is at 98 per cent. Hence, we expect the healthy churn of mass properties to persist. We stress-tested the household balance sheet and found that a 30 per cent drop in home prices would bring the debt-to-asset ratio to 18.6 per cent, slightly higher than the long-term average of 18 per cent but below the high of 21 per cent in the 1997 and 2001 booms.

Gearing of larger developers is low at 34 per cent vs 41 per cent during the pre-crisis level of 2008 while that of smaller players halved to 103 per cent. Given their low land bank, developers will not cut prices even if there is a recession, in our view.

RBS expects the economy to grow 6 per cent in 2010 and 5 per cent in 2012. We expect an equilibrium in the office sector, in the light of higher visibility of supply and likely slower demand. Hence, we moderate our office rental growth assumptions to 5 per cent in both 2011 and 2012.

Overall, retail rents may soften in view of an oversupply but quality malls owned by seasoned operators should continue to do well. We like hotels on a structural growth story in Singapore tourism. Capital values of commercial assets should also hold up in view of persistently low rates.

We are most positive on City Developments, which we believe could benefit from a lifting of policy risks and continued strength in the residential market. Hence, we upgrade the stock from a ‘hold’ to ‘buy’, for its large exposure to the residential sector which accounts for 39 per cent of its RNAV.

We maintain our ‘buy’ ratings on Keppel Land, OUE and UOL as these commercial stocks look undervalued, trading at 30 to 50 per cent discount to RNAV. We maintain our ‘hold’ rating on CapitaLand as we believe that the stock may lag in stock price performance in view of its complex shareholding structure.

CIMB on property sector

We remain ‘neutral’ on the sector, remaining negative on residential and positive on the commercial/hospitality segments.

Our top picks are Keppel Land (‘overweight’, TP: $4.73); Fraser and Neave (‘overweight’, TP: $7.34); and CapitaLand (‘overweight’, TP: $3.62).

Hard to argue with the bearish stance on residential and bullish on retail and commercial.

CapitaLand: The peril of being a China play?

CapitaLand is trading below its FY2010 NAV per share of S$3.32. This has not been seen since September 2009 to May 2010. CapitaLand is currently in a position of balance sheet strength (FY2010: S$7.2 billion cash, 0.18 net gearing), and has balanced exposure to diversified property segments across different geographical regions. DBS Sec

Moreover, the market has assigned no value to any accretion from an expected S$6 billion in capital deployment this year. We update assumptions and maintain a ‘buy’ rating with a fair value of S$4.05 at parity to RNAV.

Me: Nothing to do with balance sheet strength or profitability. Investors are concerned with its large China exposure. And I hear hedgies are shorting it as a proxy bet against Chinese property.

Temasek, CapLand: What abt these Chinese property charts?

Courtesy of this blog. And look at the money supply charts too.

No wonder China’s banking regulator told lenders last month to conduct a new round of stress tests to gauge the impact of residential property prices falling as much as 6o% in the hardest-hit markets. Banks were instructed to include worst-case scenarios of prices dropping 50- 60% in cities where they have risen excessively. Previous stress tests carried out in the past year assumed home-price declines of as much as 30%.

Expectations seem to be for a sharp decline in Chinese property prices over the next two years, with some, and perhaps significant, impact on Chinese banks.

Some time back it was reported that Temasek had emerged as one of the top 10 acquirers in the Greater China region,

after doing six deals worth US$1.47 billion since 2005. According to a market M&A report commissioned by Deloitte, Temasek is ranked No 9 – after Morgan Stanley and Goldman Sachs, which are No 7 and No 8 respectively. The report

DBS: Another FT goof

Now it’s the Islamic Bank of Asia. Reading between the lines of the MSM spin, clear that its Islamic bank foray ran into serious problems. It now wants to focus on investment banking and become more active in private equity while remaining committed to growing its Islamic banking franchise in this region. And cutting back on financing because of losses when financing Gulf cos.

Sounds a bit like Aztech and Novena: having failed in what they were doing, they tried something new. “So easy meh?”

Why can’t Temasek exercise its prerogatives as controlling shareholder and get rid of the FTs. I mean the locals at CapitaLand are doing a gd job in Islamic financing. Juz being an FT doesn’t mean the right to “Fail, try again, fail harder” ; misuse of a misquote of Samuel Beckett.

Temasek itself is hiring locals in senior positions, ignoring the “FT is best policy” .

OK maybe I’m hard on the FTs at DBS https://atans1.wordpress.com/2010/05/14/dbs-how-to-solve-the-ft-problem/

But at the very least, they do not have the luck that Napoleon expected his generals to have. He expected his generals to be brave, competent and leaders as given in his meritocratic army: but luck was different.

Backgrounder on Islamic Bank of Asia

DBS owns 50 per cent plus one share in IB Asia’s capital of US$500 million.

The rest was contributed by investors from the Gulf Cooperation Council countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

IB Asia said at the time [of its establishment] that it would offer commercial banking, corporate finance and capital market and private banking services, acting as a bridge for capital flows between Asia and the Middle East. (From BT)

Founding CEO retired last December. I’m not sure before or after Dubai World declared a debt moratorium causing problems for other Gulf companies.

China: Command & Control

As the loan officers for a regional branch of a major Chinese bank were preparing to issue more loans their computer screens froze. It was not a system failure due to Vista problems, rather the bank’s intranet network had been deliberately shut down to stop new loans being made. Full article

The purpose of the above is to illustrate that if the authorities feel the need to control the property market, they can be ruthless.

China must tackle its property bubble for the sake of economic health and social stability, even if the market feels some short-term pain in the process, an official financial newspaper said on Thursday.

Monetary tightening, along with steps to control housing demand and expand supply, are the right policy choices for the government, the China Securities Journal said.

The front-page commentary adds to the impression that officials are determined to make a success of their latest crackdown on property speculation. Previous attempts to cool prices have been tempered by a fear of over-tightening because the property sector is a pillar of the economy. Reuters/ NYT report

So investors in S’pore property counters with big exposures in China, be warned.

https://atans1.wordpress.com/2010/02/03/capland-what-price-the-mega-china-deal/

I’m sure Temasek and its group cos are aware of how brutal the Chinese authorities can be.

https://atans1.wordpress.com/2010/02/08/tlcs-in-china-groupthink-or-mastermind-at-work/

But based on the Merrill Lynch/ BoA fiascos, who knows?

Understanding the mentality of China bulls

Reading this, I think I can understand the thinking of CapitaLand and other China property bulls. “Everyone agrees China is in the middle of a spectacular real estate boom. The question is whether it is in the middle of a rapidly growing real estate bubble.”

There’s serious money to be made in the short-term.

And a very reputable economist and China watcher, Nicholas R. Lardy at the Peterson Institute for International Economics in Washington, say the housing boom is being propelled by a huge urbanization push that is creating premium-priced houses. He is not the only economist to say this. And CapLand said this yesterday.

So if China is a core market, you really don’t have a choice. You got to double, triple yr bets, and pray hard that you get out in time.

Relevant posts

https://atans1.wordpress.com/2010/02/03/capland-what-price-the-mega-china-deal/

https://atans1.wordpress.com/2010/02/08/tlcs-in-china-groupthink-or-mastermind-at-work/

CapLand: Time to buy?

I read in the media yesterday that Credit Suisse analysts are saying that China’s property stocks, trading at the cheapest level among Asian peers, may be “worth another look”. Today reports that they “have underperformed the MSCI China Index by almost 30 per cent since July and are trading at a 7-per-cent discount relative to the region based on a model that values companies’ net assets and return on equity,” quoting Credit Suisse.

As CapitaLand’s 11% fall from its January highs can be attributed to its mega China deal coming just before China tightened its credit policies; since the US$2.2bn deal giving it seven sites located in Shanghai, Kunshan and Tianjin, takes the group’s Chinese portfolio to 36% of assets from 28%; and since it wants to increase its China exposure to 45% of assets:  Shouldn’t CapitaLand be on the buy list of China- property bulls?

Why my “obsession” with TLCs in China

No, I’m not a member or covert supporter of Dr Chee’s SDP, always looking to run-down S’pore.

I try to be a “special situations” investor: looking for situations where the conventional wisdom is wrong. At present, the conventional wisdom on China is “Short-term bear, long-term bull”. So CapitaLand is punished by the market for their US$2.2 billion deal while, the seller, OOIL’s share price is stable in a weak market.

But CapitaLand and DBS already big in China, want to be bigger: and KepLand are rumoured to be thinking of doing a big( S$186 million) property deal. Temasek have big direct investments too. They are big investors in several private equity funds and have big holdings in two Chinese banks: 4% of Bank of China and 6% of China Construction Bank*.

They are going against the consensus view that the least one can do is to be cautious in China.

If the listed TLCs get China right, they could be 20-baggers.  Hence my interest in whether they are right. As for Temasek getting it right, Temasek, as its CEO says, belongs to us S’poreans.

——————————————————

Additional tots — 15 Feb 2010

But what are the odds of them getting it right?

Adam Smith (the economist. not the great US financial commentator of the 80s) wrote, “the chance of gain is by every man more or less overvalued”.

This more or less explains why great investors (defined here to include traders) like Buffett, Soros, Paul Johnson, Jim Rogers, Peter Lynch, Anthony Bolton and the old Kuwait Investment Office are so rare. They are better at judging the odds of getting things right.

And why the smart people in Temasek and GIC make mistakes. They are just like the other ordinary smart people managing money in SWFs, endowments, collective funds, pension funds, insurance companies and other institutional investors.

And why the smart people in CapLand and KepLand could be wrong. They could be like the smart managers in Time Warner that decided to merge Time Warner with AOL, or the managers at Sembcorp when they decided to go into property and Delifrance.

———————————————

Incidentally, a BBC Online article examines what is driving the  Chinese property market:

Demand for housing

Louis Kuijs, an economist at the World Bank in Beijing, says China still needed more houses, despite several years of fast-paced building, “In a rapidly growing country like China that still has a low stock of housing, there is a fundamental demand for new homes.”

Developers looking for sites

“In Beijing the search is still on for new sites for development.”

People still buying hses as an investment

One man  says he has accepted an offer to relocate. He already has two apartments in Beijing and he is going to use the compensation to buy a third.

Full BBC online article

CapLand (and KeplLand?) could be right abt China.

*’We work really closely with Sasac, the state-owned enterprise regulator in China, and there are literally trillions and trillions of renminbi of frankly defaulting loans already in China that no one is doing anything about,’

Neil McDonald, a Hong Kong-based business restructuring and insolvency partner with Lovells LLP, said at an Asia-Pacific Loan Market Association conference last week. ‘At some point, there’s going to be a reckoning for that.’ — quote from BT.

TLCs in China: Groupthink or Mastermind at work?

“The property investment arm of Morgan Stanley is in final talks to sell a Chinese apartment complex to a unit of Singapore’s Keppel Land … The overall value of the luxury apartment property is estimated at about 900 million yuan (S$186 million) and Morgan Stanley has owned it for about five years,” from a BT report last week.

So KepLand are super bullish on China, just like fellow-TLC CapitaLand.

And DBS is  ranked among the top three foreign banks, in terms of assets (2009 KPMG Research China Banking Industry), said DBS CEO Piyush Gupta. The bank expects to open 12 more branches over the next five years in China, he added. It currently has eight branches and seven sub-branches in eight cities across China.

One wonders if  groupthink is at work in the Temasek group. In addition to the investments of these two property companies, and DBS, Temasek are big in China.  They are big investors in several private equity funds and have big holdings in two Chinese banks: 4% of Bank of China and 6% of China Construction Bank.

Talk of a mega bet on China if all these are aggregated.

Or could there be a mastermind directing that investments be made in China? Temasek and the government have consistently denied that the government direct Temasek’s actions and that Temasek direct the actions of the companies where they have controlling interests.

Still the many S’poreans (I’m not one of them) who are  conspiracy theorists  or who practice the art of guessing what is going on behind the scenes — dietrologia in Italian, literally “behindologypoint” –would say, “They would say that, wouldn’t they?

And point to three pieces of “evidence” that there is a controlling brain that wants to bet big in China.

One is that in the late 1990s, when the government exhorted Singapore cos to go abroad, SingTel and DBS made very expensive acquisitions in Ozland and HK respectively.

Then there is MM Lee’s remark when asked why he intervened in an SIA dispute between its mgt and pilots. He is reported to have said,”We own it,” or words to that effect.

Finally, PM, SM, MM and other cabinet ministers are bullish on China.

CapLand: “But is he lucky”?

Napoleon had many good officers. So when he was appointing generals, he asked, “But is he lucky?”. He knew the importance of chance in his success and at his last battle, Waterloo, his luck ran out. But as one of the generals who defeated him said, “It was a near-run thing”.

The question buyers of CapLand on Tuesday should be asking is whether the mgt of CapitaLand are lucky? Two days after anncing a US$2.2bn China property deal, https://atans1.wordpress.com/2010/01/19/capland-getting-it-very-right-or-very-wrong/the Chinese authorities ordered a serious of credit tightening measures including ordering some commercial banks to stop lending for the rest of January. Global equity markets fell.

CapLand mgt could be lucky. Markets have a habit of shrugging off China fears. Remember the recent falls and recoveries?

But for the moment the seller’s mgt must be considered “lucky”.

CapLand: Getting it very right or very wrong

CapitaLand is obviously not a bear on China.

CapitaLand has done a deal in China spending more than the  S$2.7bn (US$1.9bn)  it raised in November through an IPO of CapitaMalls Asia, its shopping centres subsidiary. (I had tot then lowering China exposure was the unstatedreason for the IPO.)

It bought for US$2.2bn seven sites located in Shanghai, Kunshan and Tianjin, taking the group’s Chinese portfolio to 36% of assets from 28%. It wants to increase its China exposure from 28% of assets to 45%. Hong Kong’s Orient Overseas International  shipping group was the seller.

Funnily, this at a time when even the Chinese government is talking of a property bubble in China what with residential prices in the 70 main cities accelerated in November to the fastest pace in 18 months.

“Qi Ji, China’s vice-minister of housing and urban-rural development, has told the Financial Times that house prices have reached levels that were “obviously too high”, particularly in large coastal cities,” reports the FT.

Yes, yes:  I know CapitaLand is into commercial space, offices and malls (Apartments are tagged on on the top). But recent US experience shows that the damage in the residential sector can affect the commercial sector.

Note that China super bull, Jim Rogers, is avoiding recommending property to investors: in 2008 he was negative about Chinese property.

Hedgies, make a bet that CapitaLand is wrong?

Temasek’s exposure to Dubai (Part 2)

For those S’poreans who hate Temasek, forever gloating, whenever Temasek messes up, the pickings from Dubai are slim. The TLCs have tiny exposures there even CapitaLand and DBS, S’pore’s national champs active in the area.

Even Standard Chartered’s exposure to the part of Dubai World under restructuring, is according to the FT,  US$350m: peanuts.

Gd work Singapore Inc.

The TLCs went to where the $ were Abu Dhabi.