Saturday, June 15, 2013

Biz News Snippets Worth Following

I read, almost religiously, my favourite business magazines, in order of preference ... International Business Week, Fortune and Bloomberg Markets. I do read Forbes now and then but its such a slanted Republican thingee its like Harakah. I think to see how people from various sides and various places look at and view business and investments help to broaden our perspective no end. 

Since my almost weekly sojourn to Singapore, its also fun to read what the little island's papers are saying about business and investments.


The mood is good for Iskandar. They highlighted how well Affiniti Residences sold last weekend, noting that the price was RM850 to RM1,000 psf. They compared that to 1Medini which as launched in January 2012 and sold for just RM450 psf. Hmmm... whetting yand stirring up Singaporeans to further look at Iskandar as a great investing or flipping hotpot. They seemed focused on the Medini or rather the E&O branding, and they also seem to like Puteri Harbour.

Over the next 3-5 years there will be another 13,500 condos to be sold or built in Iskandar. Compare that to just 8,000 units launched between 2000 and 2012, you get what I am saying. Obviously, the powers to be in Singapore have tacitly approve of Singaporeans to invest big into Iskandar or else you won't be getting big spreads with lovely pics in the papers there. Possibly that is to quell the over investment into Singapore properties, which is already way out of the hands of most Singaporeans.

The supposed mulling over a special property tax by Johor state government seems to have little effect. Its not just Singaporeans though, a Japanese investment fund just bought an entire tower of 285 units at Medini at Iskandar Residences ... somehow I don't think they will be staying there. I wonder, how many will?

My view is that all is well and good for at least the next 12 months when big guns start to launch their flagship property projects. It is the sub-sale and resell or flipping that goes on that is the crux. Will there be people buying on the resale market for 20%-30% higher than the launched price just 6 months ago? It will be very hard to see that happening because of the number of projects that are coming on board. If all are pricing higher at RM900 and upping them to RM1,100 psf because of anticipated demand ... and we are not talking of just 5 or 10 extra condo developments... we  are talking about 30 to 40 a year ... its a tough ask to see it snowballing much further. I suspect RM1,300-1,500 psf would be the peak as people will start comparing with prices in Penang and KL.

The optimists will say look what Singaporean and foreign buyers can do to Sentosa property prices. Well, yeah, do you know how big is Iskandar compared to Sentosa?

The Real QE Poser

Why is the probable end of QE frightening markets? It has to do with interest rates. The selling now has largely been in REITs and dividend yield plays (which include a lot of blue chips). As rates rise from near zero, the yields of these counters will be reassess

ed relatively to the higher risk free yield. What we are seeing is the global portfolio rebalancing. Many funds are reducing their holdings in the above counters appreciably. The other side of the coin is that big banks should benefit from better net interest margins as they usually have a large pool of inert savings, which will not be so easily or swiftly adjusted in the rates. However, we are not seeing a proportionate flow of funds into big banks yet, although it should happen very soon.

We are not going to see a massive correction, in fact, we are already correcting. The markets are discounting all that ahead of time. Markets has to discount what it can forsee or roughly anticipate. In fact, higher interest rates will force funds out of dividend yield plays and into riskier instruments. All said, it is also May June July we are talking about, remember Sell In May Come Back In August ... actually its also summer holidays for a lot of people in the investing field although I doubt that will be as true as the markets are getting more and more global, not US or Europe centric.