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outwitthe wiliest investment wolves this Year of the Sheep
rise of the
hipster shops is it daily deals
+
or no deals?
R a n kings
accounting engineering architecture MICA(P) 244/07/2011 KDM No: PPS1645/3/2008
Developers’ debt
binge headache
a journey to the west
mr and mrs singapore
under pressure
FROM THE EDITOR In this issue, we give you 15 smart ideas to outwit the wiliest investment wolves this Year of the Sheep. We talked to a diverse pool of financial guides and came up with 15 investment ideas from which you can choose. Find out where best to put your money in 2015. On the economic front, we found out that the labour crunch and restructuring pains are keeping a lid on Singapore’s growth. Expats, however, choose to weather the headwinds under the belief that these are all temporary and Singapore is still the best place in the world for foreign professionals. In the tourism sector, we take a look at the wanderlust of the mainland Chinese, the burgeoning wallets of their middle class and where their droves have been heading in recent months. Singapore and Hong Kong are losing touch with this big niche of tourists, and the two have to think of innovative tourism strategies before the Chinese completely slip away on other escapades. Meanwhile, the hipster coffee shop next door may be overtaking your nearest Starbucks branch, as Singapore sees a new breed of entrepreneurs in their unique, artisan restaurants. Find out if they will eventually take a huge bite out of the F&B pie. Finally, this issue offers three rankings for your taking. Discover Singapore’s largest architecture, engineering and accounting firms based on staffing strength.
Tim Charlton Singapore Business Review is available at the airport lounges or onboard the following airlines:
Singapore Business Review is available at the following clubs and hotels: American Club Hollandse Club Laguna National Orchid Country Club Raffles Country Club Raffles Town Club RSYC Seletar Club Sentosa Golf Club Singapore Cricket Club Singapore Island Country Club Swiss Club The Tanglin Club The China Club The Legends Fort Canning Park The Pines Club Tower Club Singapore Fullerton Hotel Grand Plaza Park
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SINGAPORE BUSINESS REVIEW | JANUARY 2015 1
CONTENTS
insight Singapore’s economic pains 24 Economic
STORY 28 CoVER 15 smart ideas to outwit the wiliest
ANALYSIS Rise of the Chinese: All hail 44 REGIONAL the Mainland traveller
investment wolves this Year of the Sheep
FIRST
ANALYSIS
REGULAR
08 Mr and Mrs Singapore
26 In Singapore, all is fair in love
under pressure
09 A journey to the west 10 Developers face debt-binge headache
32 What factors are keeping expats
“modest and gradual” policy
amid oversupply and falling rents
in Singapore
16 Check out Singapore’s 10 most
expensive hotel suites 18 Looking for a ‘smart’ way to have your clothes washed?
20 Sembcorp power plants need spark
Published Bi-monthly on the Second week of the Month by Charlton Media Group #06-09 E, Maxwell House 2 20 SINGAPORE BUSINESS REVIEW | JANUARY 2015 Maxwell Road
rooted in Singapore?
40 Legal Briefing 42 CMO Briefing
46 Why MAS chooses to maintain its
12 Foreign buyers return to Singapore 14 Rise of the hipster shops
and jewellery war
22 Financial Insight
RANKINGS
PROFILE 48 BBC CEO Jim Egan
34 Singapore’s accounting rules
squeezing smaller firms
36 Singapore engineers burn out as
services boom
38 Should we really go vertical for
‘ageing’ cities?
For the latest business news from Singapore visit the website
www.sbr.com.sg
5
Things Buying ThingsYou You Should Should Ask Ask Your Your Developer Developer When When Buying aa Condominium Condominium in in Cebu Cebu
Cebu, industry in in the the Visayas Visayas region region of of the the Cebu,the thesecond secondlargest largestcity cityin inthe thePhilippines, Philippines, isis the the center center of of commerce, commerce, trade, trade, education, education, and and industry country. Its prime location, rich history and tourism, and highly urbanized population has made it attractive for both investors and home country. Its prime location, rich history and tourism, and highly urbanized population has made it attractive for both investors and home buyers, and the choices for real estate investments in this city abound. buyers, and the choices for real estate investments in this city abound. Rockwell that every every consumer consumer should should ask ask their their RockwellLand, Land,one oneof ofthe themost mosttrusted trustedreal-estate real-estate developers developers in in the the Philippines, Philippines, gives gives us us 55 things things that real-estate shares indicators indicators of of quality quality that that every every home home real-estatedeveloper. developer.With Withits itsfirst firstregional regionaldevelopment, development, 32 32 Sanson, Sanson, rising rising in in Cebu, Cebu, Rockwell Rockwell shares buyer and investor should look out for. buyer and investor should look out for.
11
Where Whereisisthe theproperty propertylocated? located? Will my surroundings Will my surroundingsbe bepeaceful? peaceful?
ItItisisaareminder remindercommonly commonly heard heard when when talking talking about property – location, location, about property – location, location, location. location. But Butititisistime time buyers buyers went went beyond beyond just just looking looking atatthe convenience of the property’s location the convenience of the property’s locationand and its its surrounding surrounding establishments, establishments, and and took took into into consideration considerationthe theconditions conditionsof ofthe theenvironment environment asaswell. well.
At At 32 32 Sanson Sanson by by Rockwell, Rockwell, more more amenities amenities than than usual are available for its residents’ usual are available for its residents’ relaxation relaxation and and recreation. recreation. Two Two swimming swimming pools, pools, two two clubhouses, a function room, a game clubhouses, a function room, a game room, room, children’s children’s play play area, area, lawn, lawn, multi-purpose multi-purpose court, court, gym, and jogging path, provide gym, and jogging path, provide generous generous spaces spaces for for quality quality time time with with family family and and friends. friends.
3
How How many many units units are are there there in in the the development? development?
While Whileliving livingamidst amidstaabusiness businessdistrict districtmay maymean mean easy access to retail and office spaces, peace easy access to retail and office spaces, peace and and quiet quietare areoften often compromised. compromised. ItIt isis advised advised that that consumers consumerschoose chooseaaproperty propertythat thatisisconveniently conveniently located yet preserves the exclusivity located yet preserves the exclusivityand andserenity serenity ofofits surroundings. its surroundings.
The The number number of of units units and the density in each development is vital development is vital in in the privacy and comfort of its residents. The of its residents. The higher the density of the development, development, the the more more crowded and less comfortable the living comfortable the living experience is for its occupants. occupants.
Strategically Strategicallylocated located on on Sanson Sanson Road Road in in Lahug, Lahug, 32 32 Sanson Sanson by by Rockwell Rockwell isis accessible accessible by by major major roads roadsand andisisonly onlyaafew fewminutes minutesaway awayfrom fromCebu’s Cebu’s Business Business District, District, prominent prominent schools, schools, exclusive exclusive villages, villages,and andretail retailand andservice serviceestablishments. establishments.At At the thesame sametime, time,the theproperty propertyisisset setin inaaresidential residential districtand andremains remainstranquil tranquiland andcalm. calm. district
32 32 Sanson Sanson by by Rockwell Rockwell features only around 350 units units over over aa sprawling sprawling 3.2 hectares of land and 70% 70% landscaped landscaped space, space, making it a low-density development development that that provides provides its community with space space and and freedom. freedom.
22
4
How safe safe and and secure secure is the How development and and its surroundings? development
Safety and and security security is is a non-negotiable when Safety purchasing any any property. property. It is vital that a purchasing consumer ensure ensure that that his investment or his new Amenities inin any any development development must must be be wellwell- consumer Amenities home, along along with with is is occupants, occupants, is safe from any maintained and and clean. clean. While While amenities amenities are are home, maintained form of of harm. harm. meanttotobe beshared shared among among neighbors, neighbors, itit isis also also form meant important that that they they are are not not overcrowded overcrowded and and important True to to the the Rockwell Rockwell standard standard of safety and thatyou youare areable abletotouse usethem thematatyour yourown ownleisure. leisure. True that security, reliable reliable and and efficient efficient fire response security, Whatamenities amenitiesdoes doesititcome comewith? with? What
and closed closed circuit circuit television television monitoring monitoring and systems will be in place at 32 Sanson, while systems will be in place at 32 Sanson, while security personnel vigilantly watching security personnel vigilantly watching the property property guarantee guarantee the the safety safety of of the the the surroundings. Subterranean roads, a unique surroundings. Subterranean roads, a unique feature at at 32 32 Sanson, Sanson, divert divert traffic traffic below below feature ground and give residents additional privacy ground and give residents additional privacy as they they freely freely walk walk around around the the development. development. as
5
developer behind behind Who is the developer the project?
name or or flashy flashy branding, branding, More than a popular name have years years of of experience, experience, a developer must have portfolio, and and aa proven proven a veritable project portfolio, delivering as as promised promised and and reputation for delivering service to to clients. clients.Buyers Buyers providing committed service credibility of of the the developer developer should look at the credibility ensure that that your your future future home home of the project, to ensure of guaranteed guaranteed quality qualityfor for or investment will be of years to come. decades in in property property With almost two decades Rockwell Land Landhas hasbuilt builtfor foritself itself development, Rockwell a solid reputation in the the high-end high-end and and upperuppermid residential markets. markets. After After delivering delivering quality in its flagship project project in in key keycities citiesin inthe the capital of the Philippines, Philippines, itit now now ventures ventures to to Cebu with yet another another exceptional exceptional residential residential community, 32 Sanson Sanson by by Rockwell. Rockwell. In looking for your next next investment investment or or your your family’s new home, itit is is important important that that you you read between the lines lines and and ask ask what what other other buyers will not. Ensure Ensure that that you you are are investing investing in quality and getting the the best best deal. deal.
Forinquiries, inquiries, call call +65 +65 8132 8132 7290 7290 or email inquire@rockwell.com.ph For
SINGAPORE BUSINESS REVIEW | JANUARY 2015 3
News from sbr.com.sg Daily news from Singapore most read
FINANCIAL SERVICES, HR & EDUCATION
Singapore’s ultra-rich residents control 17% of the country’s wealth A report reveals that Singapore’s ultra-high net worth population controls US$180 billion in assets, representing a staggering 17% of the entire country’s wealth. Wealth X and UBS’ World Ultra Wealth Report 2014 revealed that there are 1,395 UHNW individuals living in the island, up from 1,335 UHNW individuals in 2013. It stated that over 20% of these individuals are engaged primarily in finance, banking and investment.
ECONOMY, FINANCIAL SERVICES
Here’s the real deal behind Singapore’s escalating household debt In the Monetary Authority of Singapore’s annual Financial Stability Report, the central bank stated that highly leveraged Singaporean borrowers bears close watching. The household debt-to-income ratio has risen from a low of 1.9 times in 2008 during the Lehman crisis to 2.3 times in 2013. These households are weighed down by high monthly debt service commitments.
RESIDENTIAL PROPERTY, stocks
Developer stocks to rally on back of massive property price cuts in 2015 Developers will be the first to blink in their drawn-out battle with policymakers and prospective homebuyers. Nomura says developers are likely to roll out massive price cuts next year, which will cause developer stocks to rally. While most developers are still adopting a wait-and-see approach, this strategy is going to change as 80% of uncompleted inventory in the Outside Central Region is subject to the ABSD rule.
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FIRST Bank on a bonus
Financial services professionals in Singapore are confident about receiving an annual bonus again this year, but fewer are expecting bumper payouts compared with last year. According to a survey by eFinancialCareers, almost 3 in 4, or 71% of financial services professionals, believe they will receive bonuses this year, a number that has remained stable from last year. The majority of the 696 banking and finance professionals polled expect their bonuses to increase compared with last year, however this figure (42%) is down compared with last year, when half (50%) of professionals working in financial services were expecting a bigger bonus. A further 36% are expecting their bonus to match last year’s and just under a quarter (22%) are anticipating a smaller bonus. A strategic bonus pot George McFerran, sales and marketing director at eFinancialCareers, says that the results from the survey indicate that professionals have more realistic expectations when it comes to this year’s bonus payout, whereas there has often been a mismatch in the past. Looking at salaries across the industry, 3 in 4 respondents (75%) reported that their base salary has increased over the past year, of which nearly 3 in 10 (29%) expect their bonus will decrease as a result. “We are seeing companies taking an increasingly strategic approach to splitting the bonus pot, as they have come under considerable scrutiny in recent years. Top performers are heavily prioritized and a number of employers have also significantly increased basic salaries for front office revenue generating staff,” McFerran adds.
8 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Pushing past less needed grocery items?
Mr and Mrs Singapore under pressure
V
ibrant economic growth has not come without drawbacks for Mr and Mrs Singapore. Price inflation has driven the Red Dot to be the world’s most expensive city, independent brokerage and investment group CLSA has concluded in its latest survey of life in Singapore. According to the Economist Intelligence Unit, over the past decade, the price of bread has risen by 13%, a bottle of wine by 89%, a pack of cigarettes by 102% and a litre of petrol by 151%. “When we compare a basket of grocery items, we find Singapore is 33% more expensive than Hong Kong, 53% more than Kuala Lumpur and 59% more than Jakarta. Moreover, the collection of consumer items in our 2009 Mr & Mrs Survey is up 83% over five years,” says Jonathan Galligan, head of Singapore research at CLSA. Galligan adds that Singaporeans are worried about higher costs above anything else, and are also worried that their jobs might not be enough as a result.“It is no wonder that 41% of our respondents mentioned the rising costs of living as their primary financial concern. This is also having an impact on Mr & Mrs Singapore’s views on jobs, which remain a major concern despite unemployment at
Fears over rising costs were particularly high for respondents under the age of 30.
just 2%,” he says. Furthermore, Galligan mentions that 7% of respondents said income declines were their biggest financial worry and that fears over rising costs were particularly high for respondents under the age of 30, with 52% mentioning it as their top financial concern. On top of rising costs, immigration remains an issue, with 83% of respondents believing there are too many foreigners in Singapore. This view is largely affected by the sight of too much congestion (35%), job losses (20%) and higher costs of living (19%). Only 9% of respondents believe foreigners should be allowed to work in white-collar jobs. Moreover, there is a surprisingly high correlation between positive views of the transport sector and positive opinions of foreigners. Feeling the pinch According to the Economist Intelligence Unit, Mr and Mrs Singapore now live in the world’s most expensive city. But it’s not just the prices of food and imported items that are expensive. Owning a car in Singapore is now three times more expensive than in New York. Singapore is the third-most expensive city globally for utilities, and the most expensive in which to buy clothes. Most surprising is the speed at which costs have increased costs over the past decade. “What has been particularly stunning has been just how quickly Singapore has got expensive. Over the last 10 years, it has gone from 18th in the Economist Intelligence Unit’s 2004 survey to the most expensive city in the world by 2014,” says Galligan.
Singapore headline and core inflation
Source: CLSA, CEIC
FIRST Office space pipeline
Source: URA, CBRE, OSK-DMG
How about a second CBD, Singapore?
A journey to the west
S
ingapore has many outlying business and technology parks but only one central business district. That is set to change, with Jurong Lake district about to become Singapore’s second CBD. Just what makes a central business district as opposed to a business park is a matter of connection, but the opening of a new 550-room hotel by Genting early in 2015 will see the area offer everything it takes to be a self-contained CBD. Other business parks, such as Changi and Tampines, may have their own office buildings, but they don’t have hotels. The plan is for
Jurong is now increasingly being accepted as a key activity hub, as well as a conducive environment to reside in.
the area to eventually have 2,800 hotel rooms, according to Chia Siew Chuin, director of research & advisory at Colliers International. “The labelling of Jurong as only a polluted industrial area in the past has been dropped. It is now increasingly being accepted as a key activity hub, as well as a conducive environment to reside in,” adds Chia. But what will really make Jurong Lake a true CBD is the likelihood that the Singapore leg of the KL bullet train route will stop in or near it. Chia notes that the hint of a possible site for the High Speed Rail
Network has elevated its status to that of a premier suburban town. Much has changed in Jurong over the last two years, with the openings of two large retail malls adding over 1m sq ft retail space. In addition, Singapore’s largest warehouse retail facility, Big Box, will be opening soon. The Big Box is a $320 million EDB-approved Warehouse Retail Scheme project. The scheme allows industrial land to be used for retail and warehousing. The key differentiating factor for the S$320 million mall vis-àvis its competitors in the vicinity, according to Ivan Looi, an analyst with OSK-DMG, is a drive-through option for shoppers to pick up goods ordered online “within five minutes.” Unlike most other malls which function on a landlordtenant basis, Big Box will have a single vendor, with the aim of increasing retail volumes and passing cost savings on to shoppers.
The Chartist: SINGAPORE NEW HOMES TO skyrocket in FY15-17 Analysts fear that the government’s efforts to scale down residential supply may not be enough to avert a looming oversupply in 2015-2017. According to Barclays Research, the vacancy rate could hit 9.9% by 2016, assuming an annual demand of 15,500 units. “The reduced future supply will be ‘added to the existing large pipeline supply of more than 90,000 private residential units” adds Barclays. OCBC adds that there are 49,700 new homes to be completed in FY15, following 50,000 completions in FY14. OCBC warns that the level of unsold pipeline held by developers is currently at 36,000 units, considerably lower than the historical 10-year average of 41,000 units and not excessively onerous.
HDB housing completions
Source: HDB, Minister for National Development blog, HSR Research
Singapore private homes’ vacancy rate by 2016
Source: URA, HDB, Barclays Research estimates
SINGAPORE BUSINESS REVIEW | JANUARY 2015 9
FIRST
Developers face debt-binge headache
Survey
HR disconnect
S
ingapore’s property developer investors are getting worried by reports that the sector has too much debt, which needs to be repaid quickly. Just how valid are these concerns? For the 42 developers listed on SGX, total short term borrowing jumped 45% y/y to a 10-year record S$13.7bn in June 2014, from S$9.4bn in June 2013, while the average net gearing was up to 32% from 27% in June 2013. Despite the increasing short term debt, the percentage of short term borrowing of total borrowings appeared reasonable at 22%, in line with the average level of 23% in the past ten years, notes Barclays analyst Tricia Song. As for gearing, developers’ net gearing ratio has been gradually improving from 57% ten years ago, excluding the 2009 spike. Nevertheless, it started to climb from 2011 and has now reached the highest level since 2011. Currently, the net gearing is at 32% as of June 2014, below the 37% historical average. “We believe that the developers, especially those which rely most on the Singapore residential market, could face more funding pressure than before, due to the slower residential
More funding pressure than before
market. Private home prices are down 3.9% since their peak in 3Q13 and volumes are down 52% y/y YTD,” notes Ms Song. According to URA’s data, the private residential price index was down 0.7% q/q in 3Q14, taking home prices 3.9% below the peak in 3Q14. For the full year 2014, Song estimates that developers could sell about 9,000 private residential units, which would be 40% below the 14,948 units sold in 2013. “We expect fundamentals to deteriorate towards the end of 2015 and prices could fall a further 15% as peak supply and an interest rate hike coincide.” Testing times indeed.
Private home prices are down 3.9% since their peak in 3Q13 and volumes are down 52% y/y YTD.
survey
What conduct risk are you talking about? High profile financial scandals have pushed financial services companies to focus on conduct risks and the resulting impact on customers, products and conflicts of interest. Conduct risk, or the risk to customers of banks’ controls and operations failing, is the new buzzword in the financial services industry. However, its bearing on business is somewhat elusive to a lot of business owners. A survey by specialist recruitment firm Robert Half reveals that 7 in 10 organisations in Singapore do not have a clue as to the relevance of conduct risk to their business. In Singapore, 9 out of 10 CFOs confirmed that the current regulatory focus on conduct risk was having a significant (20%) or moderate (71%) impact on their business operations and practices. However, when asked if their company had a clear view of conduct risk, only 1 out of 4 said yes.
10 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Singapore mid-sized firms have the clearest view about conduct risk in their business at 44%. On the other hand, small firms have the lowest clarity at 19%. Only 1 in 4 senior financial services leaders of large firms said their organisation is very clear on conduct risk. “Small firms often lack the expertise and the resources to fully understand how conduct risk impacts them. Large firms engage in more complex dealings so you would expect their senior business leaders to have a tougher time getting a handle on conduct risk. Mid-sized firms have enough resources to manage the risk, so there are lesser areas for conduct risk to occur.” says Stella Tang, managing director of Robert Half Singapore. “The survey found 59 per cent of Singapore firms intend to hire more permanent staff to deal with conduct risks while 63 per cent will hire additional interim staff,” adds Tang.
Like a doting parent trying to relate to a teenager, Singaporean companies are still struggling to understand what motivates their employees and what it would take to keep them. Two surveys released by global professional services company Towers Watson reveals that employee engagement and retention levels in Singapore continue to be a challenge as companies struggle to understand and effectively address the issues important to their staff. The 2014 Global Workforce Study revealed that only 35% of Singapore employees are highly engaged while 52% are either completely disengaged or detached. Keep them close Furthermore, the study showed that as many as 34% of Singapore employees expect to leave their organisations within two years, compared to the global average of 26%. Just 28% suggested they expected to stay – significantly less than the global rate of 46%. Amrita Prasad, practice leader of organisational surveys & insights in Singapore for Towers Watson, says, “Our research reveals that highlyengaged employees are more than three times likely to stay with their employers, which emphasises the importance that organisations need to place on sustainable engagement programmes.” In addition, the 2014 Global Talent Management & Rewards study positively revealed that hiring sentiment is not a concern in Singapore, with 58% of employers admitting their desire to bring new staff on board has increased.
CO-PUBLISHED CORPORATE PROFILE
Top tutor brings economics theories to life Anthony Fok of JCEconomics.com deviates from usual teaching methods and uses funny analogies to help students remember Economics concepts.
W
hen Anthony Fok resigned as a Ministry of Education (MOE) teacher to pursue his PhD, he had no idea that he would soon become Singapore’s most sought-after economics tutor. The 30-year old tutor had been teaching economics for several years, after graduating with honours in Accountancy from Nanyang Technological University, before he set up JCEconomics.com in 2012 at Bukit Timah and Tampines. He earned his Master of Education from Monash University in Australia. Specialising in “A” level Economics, the center has since been known to produce students who not only ace their examinations but also have a solid grasp of the subject. Through his work, Fok was able to author Economics textbooks, including the GCE “A” Level Economics ten-year-series sold in bookstores in Singapore and Malaysia. “I believe my popularity as a top Economics tutor in Singapore comes from more than merely imparting Economics knowledge,” Fok says. “I motivate the students to love the subject and to look beyond the academic grades. I teach values and life lessons that will be valuable to them even after graduation.” He points out that his lessons “shorten the learning process” and “bridge the gap” of school lectures and topics tackled in national examinations. Fok says his students enjoy his lessons as much as he enjoys teaching them. “I am lucky to be able to find great satisfaction in my work,” he adds. Tuition obsession Singapore households now spend around $820 million on centre- and home-based tuition, almost double of that spent a decade ago. With Singapore being in the midst of a “minor national obsession” with tuition, Fok cautions that parents shouldn’t think that splurging on tuition will guarantee success. He believes tuition should be viewed as a
How about some stories on Game Theory?
supplement to a child’s education, and not an integral part of the education system or an obligatory pathway to success. “The role of tuition should be to fill in the gaps of knowledge. Unfortunately in today’s competitive society, this is not the case. Many parents view tuition as a necessary means to scoring distinctions in examinations and getting ahead of the academic race,” he mulls. Practical lessons Deviating from the usual teaching methods of some teachers, Fok says he uses “funny and interesting analogies” to help students remember Economics concepts. “I have many personal stories to link up the different Economics theories together so that it won’t be boring. Many of my students tell me that they look forward to tuition because of my stories!” he says. He explains that everyone is affected by economic issues and that students only need to see the link between theories and real life.“Once they can do that, learning Economics will be such a breeze!” he says. Many students find the GCE “A” level examination challenging becuase they are being tested on their higher order thinking skills such as application, analysis, synthesis and evaluation.“Students need to be able
“His lessons shorten the learning process and bridge the gap between school lectures and topics tackled in national examinations.”
to explain current economic events in terms of economic principles learnt and also construct a coherent line of argument and reconcile conflicting ideas,” he adds. Listening ear To keep his students motivated, Fok says he does not mind befriending them. “Lending them a listening ear when they need support and encouraging them along the way,” he says. “The Junior College (JC) students are generally motivated to learn as most of them signed up for tuition on their own accord, without much pressure from their parents. They know that the stakes are high and come in order to secure their distinctions to qualify for top local universities,” he adds.
CONTACT Branch: Bukit Timah Shopping Centre Phone Number: +65 8251 3684 Branch: Block 201E Tampines Street 23 Phone Number: +65 9861 0186 Website: http://www.jceconomics.com/
FIRST
Foreign buyers return to Singapore amid oversupply and falling rents
T
here is one number worrying Singaporeans residential real estate investors, and it’s not the additional buyers stamp duty. It is the vacancy rate, already at an 8-year high of 8.3% and seemingly heading higher. With new apartments coming onto the market and a near zero increase in employment pass holders in Singapore over the last 4 years, fears of an oversupply and falling rents are making the market jittery. A massive supply of new homes – 63,000, of which 6,038 are unsold – could tip the balance in 2015 as household formation tapers off. This new supply coming onto the market over the next three years is as much as the total new supply over the last seven years. And despite the additional buyer stamp duty, foreigners now form a greater part of the market – even with permanent residents not classed as foreigners. Foreign buying was volatile in the last decade, correlating highly with market sentiment. Since 2006, the eve of the take-off of the last property upcycle, annual foreign purchases have exceeded their long-term average of 1,882 units in seven of the nine years, notes Maybank Kim Eng analyst Ng Wee Siang. Since 2004, the demographics of foreign
buyers has changed; PRC Chinese are now the largest group of purchasers in Singapore, especially after the GFC. They accounted for 28.2% of all foreign buying in 9M14. Eugene Lim, key executive officer at ERA Singapore, says Chinese and Malaysian buyers each account for about 30% of the non-landed units purchased by nonSingaporean buyers. Approximately 60% of the buyers from China are Singapore permanent residents, while about 80% of the Malaysian buyers are Singapore PRs. Demographic shift Lim adds that about 40% of the transactions by these purchasers are from new launches; and about 60% of the units they buy are from the resale market. “Some 40% of the units bought by Chinese and Malaysian buyers are below $1 million, while some 30% of the units purchased are between $1 million to $1.5 million. Units priced $1.5 to $2 million make up about 12% of their purchases, while units priced $2-3 million comprise some 10% of their purchases. “Only 8% of their purchases are between $3 and more than $5 million,” he adds, noting that there are proportionately more Malaysians buying properties priced below $1 million and more Chinese buying $1-$1.5 million properties.
A jittery residential market is no big deal
“They are naturally more price sensitive because as SPRs, they have to pay an ABSD of 5% on the purchase of their first residential property and 10% for the second and subsequent residential properties. If they are foreigners, the ABSD is 15% for every residential property they purchase,” notes Lim. Many of these buyers may be taking a long term view, but with rents falling and interest rates almost certain to rise, even foreign buyers may find the buy to rent market challenging.
OFFICE WATCH
Check out General Motors’ new headquarters American multinational corporation General Motors (GM)’s new Singapore headquarters occupies more than 28,000 sq. ft. of space. The building is Greenmark Gold certified and GM is currently applying for Greenmark Gold rating for its interior, as it aims to be resource-efficient with an emphasis on indoor environment quality. GM has adopted an open office concept for its main areas. The Townhall area is an intentional open space for staff recreation and informal meetings. These spaces are intended to foster collaboration, while the whiteboards and clean desks are meant to promote creativity. The cross-functional teams from GM including Real Estate, Human Resources, Facilities, Security, GMI’s President Office, Design, Marketing and Branding groups were involved in coming up with the new office design ideas.
12 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Open space concept in main areas
Townhall area
Townhall area
Collaborative area
SINGAPORE BUSINESS REVIEW | JANUARY 2015 13
FIRST NUMBERS
CANDIDATE EXPERIENCE
ANDIDATE CANDIDATE XPERIENCE CANDIDATE EXPERIENCE OM HIRING TO EXPERIENCE NBOARDING ANDIDATE XPERIENCE APAC M HIRING TO CANDIDATE OARDING APAC EXPERIENCE APAC TO FROM HIRING ANDIDATE ONBOARDING Is hipster the new mainstream? XPERIENCE FROM HIRING TO ONBOARDING
IN SINGAPORE
ONLY 42%
% % 45 45%
ONLY 42%
were satisfied with their recent experience when applying for a job.
APAC
FROM HIRING TO ONBOARDING
AFTER THE AFTER THE FIRST DAYS FIRST 90 90 DAYS AFTER THE ONTHE THE JOB ON JOB FIRST 90 DAYS AFTER THE IN SINGAPORE ON THE JOB FIRST 90 DAYS IN SINGAPORE ON THE JOB AFTER THE IN SINGAPORE FIRST 90 DAYS ON THE JOB AFTER THE IN SINGAPORE FIRST 90 DAYS ON THE JOB
were satisfied with their recent experience % when applying for a job.
ONLY 42
45%
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OF NEW RECRUITS COME AWAY WITH A GENERALLY POSITIVE IMPRESSION AFTER JOINING THE ORGANISATION
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14 SINGAPORE BUSINESS REVIEW | JANUARY 2015
1
to submit applications. 40% SOMEWHAT POSITIVE
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Spoon, which has 20 outlets, what frustrates them most is that organisation. Australia was the least likely (51%). (used by less than 1 in 10 applicants). CHINA they have had to raise personnel 3–5 DAYS are the most likely (77%) to have Approximately half agree that three to five a planned approach to guide their new salaries despite productivity daysEmployers is an acceptable timeframe for hearing in and assimilate them into the RÉSUMÉ RÉSUMÉ TYPE back on the status ofTYPE their application. not improving, just to keepemployees staff organisation. Australia was the least likely (51%). CHINA When submitting an application, When submitting an application, numbers steady. are the most likely (77%) to have electronic methods areare now almost electronic methods now almost Casual staff (91% in APAC and 83% Singapore). a universal planned approach to guide their new universal (91% in APAC and 83% in in Singapore). Casual staff costs have risen from Social and video résumés still employees and assimilate them into the Employers inmedia Social media and video résumés areare still costs have S$6/hour to S$12/hour in the past in their infancy as recruitment tools RÉSUMÉ TYPE organisation. was tools the least likely (51%). in their infancy asAustralia recruitment CHINA (used by less than 1 10 in 10 applicants). (used by less than 1 in applicants). When submitting an application, risen from five years and, more significantly, are the most likely (77%) to have electronic methods are now almost S$6/hour to a planned approach to and guide their government levies for S-pass universal (91% in APAC 83% in new Singapore). employees and assimilate them into the SocialRÉSUMÉ media and video résumés are still TYPE S$12/hour in workers (those paid S$2,000-2,200) was thetools least likely (51%). inorganisation. their infancyAustralia as recruitment When submitting an application, have risen over 10x from S$50 the past five (used by less than 1 in 10 applicants). electronic methods are now almost per month to S$550 in the past 10 (91% inyears universal APAC and 83% in Singapore). and, Social media and video résumés are still years. The Soup Spoon part-timer RÉSUMÉ TYPE government in their infancy as recruitment tools When submitting application, (used than 1 in 10 applicants). scheme pays S$1,400/month for aby less an levies for electronic methods are now almost five-day work shift betweenuniversal 5pm(91% in APAC and 83%workers in Singapore). S-pass Social media résumés are still and 11pm. But even the SMEs are and video have risen in their infancy as recruitment tools struggling to fill positions. (used by less than 1 over in 10 applicants). 10x.
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Source: Kelly Services Source: CLSA, Singapore Yearbook of Manpower Statistics 2014
CO-PUBLISHED CORPORATE PROFILE
Nuts ‘N’ Co. eyes strong presence abroad
Owner Jasmond Heng says the company wants to expand the business and take a few cracks at Indonesia and Hong Kong.
Nuts ‘N’ Co’s variety of products
W
ith increasing demand for Macadamia nuts and related products in Asia, award-winning company Nuts ‘N’ Co. is set to conquer the market not only in Singapore but also in neighboring countries. It is not surprising that demand for macadamia nuts have started to boom, especially since it is associated with health, beauty and wellbeing. Today’s consumers are more health-conscious than ever, something that Nuts ‘N’ Co. wants to take advantage of. Healthy snacks “Over the years, the business has expanded and is now one of the leading suppliers of macadamia nuts and healthy oils in Singapore. We aim to proffer its merchandise with utmost quality, at reasonable prices, so that more people can reap the health benefits of its products,” Jasmond Heng, owner and managing director of Nuts ‘N’ Co., says of their imported, Australian-manufactured snacks. Macadamia, which is indigenous to Australia, has been cited for being delicious and nutritious because of its minerals, vitamins and antioxidants. It is also a rich source of energy and is glutenfree, which is especially important for the growing number of people diagnosed with celiac disease and wheat gluten allergy. Macadamia oil, on the other hand, is good for the skin and the hair.
Owner Jasmond Heng receives SME award
The company has come a long way since starting out as a pushcart vendor in 2009. Today, Nuts ‘N’ Co. distributes its macadamia nuts products and edible purity oils to retail stores and major supermarkets. Among the products it sells are raw macadamias, flavoured roasted macadamia (unsalted, salted, wasabi, abalone and honey), cold pressed purity oils (almond oil, avocado oil, flaxseed oil and macadamia oil, olice oil, walnut oil and sunflower oil), and Walters handmade honey nougat (macadamias, almonds, cranberry with almond, dark chocolate with cranberry, and milk chocolate with almond). A couple of months ago, it released macadamia mooncakes with lotus paste, a sign that Nuts ‘N’ Co. knows its customers and how to make them consider macadamia nuts as part of their culture. Expansion It’s not surprising that the company set up a packing facility in Batam, Indonesia to maximize productivity. With a keen sense for business and taste, Nuts ‘N’ Co. received an SME Award and a Singapore
“With a keen sense for business and taste, Nuts ‘N’ Co. was nominated and received an SME Award and a Singapore Prestige Award for 2014.”
Prestige Award for 2014. Heng points out that the company has been receiving recognition for banking on innovation and selling highest quality products. This in turn ensures customer satisfaction. “Our Batam factory was halal-certified and endorsed by MUI and BPOM Indonesia (National Agency of Drugs and Food Control). Our upcoming plans will be focusing on Indonesia and Hong Kong and slowly into other countries,” Heng adds. But expanding operations is not enough.“We are also looking at other tree nuts to extend our product range as well as other special, unique and aromatic products which suit local taste,” he says. For now, the brand has been making the rounds in culinary expos and forums in the region. Heng says they really want Nuts ‘N’ Co. to achieve something bigger. It wants to dominate the market in Singapore and eventually the world. “We hope to position our brand not just in Singapore (but also in the) regional and even international market. We want to become the number one brand in all of our product lines,” Heng shares.
CONTACT NUTS ‘n’ CO. PTE LTD 62 Ubi Road 1, #07-06 Oxley Bizhub 2 Singapore 408734 Tel: +65 6734 4325 Email: sales@nutsnco.com.sg Website: www.nutsnco.com.sg SINGAPORE BUSINESS REVIEW | JANUARY 2015 15
FIRST 5 Presidential Suite, Grand Hyatt Singapore; $8,930 Located on the 16th floor of the Terrace Wing, this magnificent 252 sqm suite offers panoramic views of the city. Indulge in their king-sized soft goose down bed with spacious attached bathroom, fitted with whirlpool and sauna facilities.
Check out Singapore’s 10 most expensive hotel suites
H
ere are the best places to blow thousands on a place to sleep, to take a shower, and to store your belongings while you go about your day. Compiled by Singapore Business Review from a survey of luxury hotels in town, this list consists of suites with sizes ranging from 195 sqm to 629 sqm and with a onenight-stay cost of $5,500-$20,000. 1 Chairman Suite, Marina Bay Sands Singapore; $20,000 Experience ultimate luxury in this 629 sqm suite. The Chairman Suite at Marina Bay Sands Singapore comes with your choice of black-and-granite or gold-andearth colours. Set high on levels 53 and 54, the suite offers unobstructed views of the picturesque Singapore city skyline or the lush Gardens by the Bay from three bedroom balconies. Guests are entitled to privileges including access to the worldfamous Marina Bay Sands swimming pool in the SkyPark, entry to the Banyan Tree Fitness Club, and The Club at Marina Bay Sands.
Presidential Suite, St. Regis Singapore; $13,410 Found on the penthouse floor, this 335 sqm suite offers sophisticated living. Each room is embellished with the most intricate details, lined with gold, and accented with precious metals such as brass, onyx, and silver. Sharing residence are some of the world’s most prized art 2
16 SINGAPORE BUSINESS REVIEW | JANUARY 2015
works by masters such as Marc Chagall, Mark Tobey, Le Pho and Sam Francis. Guests are entitled to complimentary return airport transfers in limousines, and access to privileged rates for the St. Regis Continental Flying Spur Bentley or luxury limousines during their stay. Extreme Wow Suite, W Singapore Sentosa Cove; $13,000 This 195 sqm suite designed by HBA/ Hirsch Bedner Associates and New Yorkbased design firm AvroKO, allows you to step through floor-to-ceiling sliding glass doors onto the stone terrace for rejuvenating breezes and panoramic vistas of the South China Sea and Quayside Isle. The suite showcases innovative, experiential design combining the visionary expertise of HBA with AvroKO’s evocative, ingenious style. The suite at W Singapore is designed to offer an unparalleled sensory journey, surprising and intriguing guests at every turn. 3
4
Presidential Suite, Raffles Hotel Singapore; $10,310 The two 260 sqm presidential suites on offer at the Raffles Hotel are the Sarkies Suite and the Sir Stamford Raffles Suite, named in honour of the founder of modern Singapore. Featuring antique artwork and furniture, the presidential suites are styled after traditional colonial bungalows, and comprise a parlour, dining room, two bedrooms, and private balcony.
6 The Ritz Carlton Suite, Ritz Carlton Millenia Singapore; $7,800 The 218 sqm suite is located on the highest floor of the hotel, Level 32, with continuous wrap-around waterfront and cityscape views of the Marina Bay. The suite is equipped with museum-quality art pieces and has a spacious living area. It is ideal for intimate gatherings or entertaining, with plush sofa seating and armchairs. 7 Presidential Suite, Four Seasons Singapore; $7,230 ‘Perched high above Singapore’, this 199 sqm suite is located on the 19th floor. It features an elegant residential ambience with breathtaking city skyline and pool views. It comes with one full marble bathroom in each bedroom, with double vanity, separate shower and tub, private WC and bidet. 8 Presidential Suite, The Fullerton Hotel Singapore; $6,880 This 199 sqm suite was formerly the card room of the elite Singapore Club. It is furnished with a baby grand piano and has a private elevator for discreet access. The living and dining room extends out to a spectacular glass-enclosed verandah graced by 20-foot Doric columns. 9 Valley Wing Shangri-La Suite, Shangri-La Hotel Singapore; $6,165 Located on the 17th level, this 348 sqm suite is served by a private entrance and elevator. It comes with a large balcony that offers a panoramic view of the lush gardens around the hotel and the surrounding cityscape. 10 Presidential Suite, Mandarin Oriental Singapore; $5,500 This 242 sqm suite offers a spacious living room and a private balcony to enjoy the beautiful views. Embellished with elegant Asian figurines and artwork touches, the suite’s décor highlights both its oriental heritage and the hotel’s location, from the carpet to its furnishing.
SINGAPORE BUSINESS REVIEW | JANUARY 2015 17
startups
Looking for a ‘smart’ way to have your clothes washed?
F
or many busy professionals, finding time to do the laundry and waiting in line during business hours to drop off or pick up clothes at a laundry shop can be painful. To make laundry matters a bit more problematic, 24/7 laundry and dry cleaning services in Singapore are very hard to find. This is the problem that former investment banker at Macquarie Group Derrick Wu and three other entrepreneurs in their 30s tried to solve. They founded a laundry business with a breakthrough locker concept, My Laundry Box, called Lockerfellas.
Inspired by a laundry locker service that founders came across in San Francisco, My Laundry Box has pioneered several ‘firsts’ in Singapore. Launched in March this year, it bills itself as the first service of its kind in South East Asia. It offers a combination of the use of a smartphone app and a proprietary collection and distribution system. The app allows customers to specify to their laundry specialists about their washing preferences and determine the turnaround time. With the My Laundry Box app, customers can even pay the laundry bill directly from their mobile phones. My Laundry Box is also the first laundry and dry cleaning service that does not feature a physical shopfront; instead, it has a bank of secure lockers. The Lockerfellas team went through a competitive pitch process with ACE (part of SPRING Singapore) and awarded a startup grant for innovation. They also topped it up with a high five-figure sum each. Currently, Lockerfellas has total funding exceeding $360,000 – a combination of shareholder equity and loans from the founders’ pockets.
It’s the independent designers’ time to shine number of designers who have been invited to join has more than doubled. This does not include more than 1000 brands that have approached the company for representation. Debra claims that they are one of the few places where customers can readily try products from more than 60 different independent designers from the APAC. Another thing that Asia Pacific may be home to a lot of differentiates them is their online independent designers with global + offline strategy, as they also appeal, but startup Inverted Edge offer a real world styling service at believes that it is lacking a distribution their showroom in Lavender, where mechanism to reach stylish consumers customers can come to shop. around the world. To fill the gap, it The company has raised a total built an online shopping platform for of US$1.6million. Incuvest Asia has independent designers. Launched helped Inverted Asia raise money in April 2013, it aims to help these from NRF through the Technology designers share their creative vision. Incubation Scheme. The team also Founder and CEO Debra Langley secured investment from Accel-X, and shares that since launching, the from four private investors.
18 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Adding music to photos in a snap
To satisfy his desire of exploring the possibilities of not just photo sharing, but photography as a form of communication, 28-year old Boon Chin Ng, together with computer programmer Vincent Dupont, 38, created Ubersnap. Ubersnap, is a photo sharing site where photographers create photos that come with sound. Boon claims that they are going against the conventional wisdom of what a photo is by providing a photo sharing experience that is both visual and aural. Boon believes that there has been very little innovation in photo sharing, despite the number of applications out there. “100 years ago, sound brought a whole new dimension to silent film. We believe it can do the same for photography by providing an additional layer of context and interpretation to photos,” says Boon. Through Ubersnap, adding sound to photos became possible. After you upload a photo, you can record a sound which will play when the photo is viewed. According to Boon, for the first time, people were curious when browsing through photos. They would see a photo and wonder what kind of sound came with it, making them click on the photo. Research shows that more than 80% of participants find still images with sound more entertaining. “We realised that most people just wanted to add music to their photos, so we are releasing a new and ridiculously simple way for our users to do that. With 1 click, you can add a soundtrack to go with your photo. We are working with a large digital distributor of music, so copyright is fully respected,” explains Boon. Ubersnap started out with a beta version of the site, which was built over 3 months and launched in March 2014. The website was launched with a minimal marketing budget, and most of the growth has been organic. The startup, which was initially self-funded, has taken $50,000 from the iJAM scheme under MDA with QuestVC as its key investor. Boon graduated with an Engineering degree from NUS. He is an alumnus of the NUS Overseas Colleges program, where he worked as business developer for a year in Stockholm. Vincent is a superstar programmer from France, who has worked in organizations like NYSE-EURONEXT. He has a Master’s degree in Computer Science, and brings with him vast experience and knowledge in building software.
FIRST The Analysts’ call
What will drive the company’s growth?
The short term may remain subdued
Sembcorp power plants lack spark
W
new capacities come onstream, growing overseas contributions can offset this weakness on the home front, says Low Pei Han, research analyst at OCBC. NonSingapore utilities might even exceed Singapore utilities, which currently forms slightly more than half (54%) of utilities net profits, says DBS’ Tan. Analysts are hopeful about Sembcorp’s overseas power plants – the latest being the Unit 1 of the 1,320MW Thermal Powertech Corporation India Ltd (TPCIL) project in India, which is on track to come online before the end of the year. Sembcorp Industries will count on an increase in pool prices to protect its profitability in 2015 as it tries to wean Over-expansion by power prohigh-margin vesting contracts ducers in Singapore could lead to a sup- off in the next two years, says Lim Siew ply glut and crimp power prices. Khee, research analyst at CIMB. He expects pool prices to remain steady at S$135-140/MW for the first half of 2015 (1H15), with a possible slight 2014, accor ding to Tan Ai Teng, research increase by the end of that year. analyst at DBS, and this will likely erode For investors looking at Sembcorp electricity margins for Sembcorp Industries’ Industries, Lee paints a more pessimistic key utilities market. “Over-expansion by power producers in view: “It may require an oil price recovery Singapore could lead to a supply glut and or earnings surprise at Sembcorp Marine, crimp power prices,” concurs Lee Yue Jer, or reduced competition in the Singapore analyst at OSK-DMG. utilities space to offset the negative Sembcorp Industries’ utilities segment has sentiment, neither of which looks likely in not yet felt the earnings pinch as short-term the short term.” If there is a bright spot for the company, it contracts and new income from the Banyan is in the rising demand for infrastructure in cogen plant in Singapore propped up its emerging countries, which will pave the way bottom line in 2014, says Tan, although he for further expansion. Lee says rig renewals expressed doubt on whether these contracts can be sustained for long. and heightening deepwater exploration and Even as Sembcorp Industries faces production activities could boost rig orders pressure in its Singapore power spreads as for Sembcorp Marine. hile Sembcorp Industries might not be cowering before its rivals in the Singapore power sector, the increased aggressiveness of local competitors could make it break into a sweat, as analysts predict that domestic margins will tank in the coming months. Sembcorp Industries is crossing its fingers that rising overseas contributions can pick up the slack and that pool prices will rise to swing margin momentum in its favour. Around 30% more power capacities were planted in the industry in the second half of
20 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Tan Ai Teng – DBS Group Research Power spreads in Singapore are pressured by new capacities coming onstream. We expect overseas contributions to offset Singapore weakness. Going forward, we expect earnings of its non-Singapore utilities to exceed Singapore utilities, which currently forms about 54% of utilities net profits. Substantial landbank within urban development offers growth over medium to long term. SCI has close to 4,000 hectares of land available for sale. Of this, 64% is in Vietnam, 21% in China and 15% in Indonesia. Lee Yue Jer – OSK-DMG While we expect decent earnings growth from the new Indian power plants in FY15F, it may require an oil price recovery or earnings surprise at SembMarine, or reduced competition in the Singapore utilities space to offset the negative sentiment, neither of which looks likely in the short term. Demand for infrastructure in emerging countries will give rise to expansion opportunities. Rig renewals and heightening deepwater exploration and production activities could boost rig orders for the marine unit. Low Pei Han – OCBC Research Spark spreads in Singapore continued to remain under pressure. Competition in the Singapore power market ‘continues to be intense’ and is expected to affect the performance of the utilities business. However, overseas operations, which accounted for about half of utilities net profit in 9M14, are expected to grow. As for the urban development business, it is expected to deliver a comparable performance in 2014, underpinned by land sales in China.
abacus
aurally assaulted by the wailing sirens of an infomercial for rodent control devices, then struggling to see over a countertop stacked Pasir Malam high with goods no one would really want such as Abalone and iPhone speakers. At least the counter staff were not asking me if I’d like a tin of abalone with my western union payment. Thankfully those days are Find out why F&N is finding that business in the over and the good folk at the Burmese state can be fraught with difficulty. local post office can get back ruled that the US$246 million yanmar may be the to doing what they are best at, offered by MEHL was grossly great new frontier which is taking and delivering for Singaporean listed inadequate. our mail. The question now is How grossly undervalued is companies, but at least one of can the post office execute an the takeout offer from MEHL? them is finding that business e-commerce turn to compete With F&N worth $4.25 billion in the Burmese state can be with the major courier firms and the brewery accounting fraught with difficulty. F&N, and e-commerce specialists like for a third of earnings, that which owns a majority 55% Alibaba and Rakuten? would suggest at a minimum stake in Myanmar Brewery, They are certainly giving something in the order of $1.5 thought it could look forward it a shot with a new $182m billion. to years of steady profits from e-commerce logistics hub F&N will need an inordinate a great beer franchise in a fast to cater to its expanding amount of good luck and growing market. e-commerce logistics business Afterall, Myanmar Breweries negotiating skills to get a and the fast-growing good price out of MEHL for controls around 80% of the ecommerce market. The its stake and in the meantime beer market in Myanmar and three-storey hub in Tampines all shareholders can do is who doesn’t like a drink? LogisPark will be the first of wonder how on earth this could its kind in SE Asia and will be What F&N didn’t take into have been overlooked in the consideration was a right of ready in late 2016. takeover deal. Its another lesson first refusal on its stake in Worldwide B2C e-commerce not only to always read the fine are sales to hit US$1.5 trillion Myanmar Breweries to its minority partner, Army backed print, but to be careful in doing this year in Asia Pacific, purebusiness in Myanmar. MEHL, which was triggered click internet retailers are by ThaiBev’s takeover of F&N. leading the online market, The postman clicks twice The upshot of this is that one with China-based Tmall, of F&N’s fastest growing units, SingPost has finally ended its Japan-based Rakuten and which posted earnings growth awful experiment with in-store South Korea-based Gmarket. of 44% last year and accounted retail in favour of e-commerce In Singapore e-commerce is for 30 % of earnings, is now set delivery, and not before time still immature and accounts to be forcibly divested after an too. Waiting in line at the for less than 1% of retail sales Tanjong Pagar branch was adverse arbitration finding. compared to 15% in the US an ordeal for your Singapore About the only bit of good and Europe. Business Review correspondent, news was that the arbitrators So there may be room
Why 2014 is Myanmar’s year of drinking dangerously
M
for growth, but then again that would remove one of the favourite pastimes and pleasures for the weekend shopping. Jumping on the data centre bandwagon When Keppel Data Centres Holdings saw Amsterdam to be a strategic hub for first tier data centres in Europe, it quickly grabbed the opportunity and wanted to acquire a data centre in the city. KDCH, a 70-30 joint venture between Keppel Telecommunications and Transportation and Keppel Land, is yet to disclose the amount for acquiring Almere Data Centre 2 in Almere, the Netherlands, from the Reggeborgh Group and VolkerWessel Group. The centre, according to OCBC analyst Eli Lee, is a purpose-built shell and core data centre facility located on freehold land adjacent to Almere Data Centre 1, a fully occupied data centre acquired in 2013 by Securus Fund, and will comprise more than 5k sqm of data centre space. He adds that Almere Data Centre 2 will be fitted out to Tier III standards with a minimum N+1 redundancy for power and cooling, and power density of up to 1.5kW psm with scalability to 2kW psm. According to HIS Technology, there has been robust demand in the European data centre market to date with colocation take-up rising 12.3% YoY.
SINGAPORE BUSINESS REVIEW | JANUARY 2015 21
FINANCIAL INSIGHT: PRIVATE EQUITY
Who is taking the lion’s share of the pie?
Can Asian private equity outgrow the west?
With its swelling size and influence, the Asian private equity market may leap into a leadership position sooner than later.
I
f you asked investors and private equity (PE) managers a couple of years ago what they thought of Asian PE, some would have dismissed it as a fledgling market fraught with risk. And yet its potential has bloomed amid this supposedly bust period and it will continue to mature fast to challenge Western markets as the likes of Singapore, India and the Southeast Asian region open the doors to high-return investment opportunities. Resilient Asian PE As a testament to its resiliency, not even the downturn in recent years could douse investor interest in Asian PE. The number of Asia-focused funds currently in market has risen to 353, seeking an aggregate capital of $113 billion, says Mark O’Hare, chief 22 SINGAPORE BUSINESS REVIEW | JANUARY 2015
91% of Asia-based investors believe that PE is becoming increasingly important to their portfolios.
executive officer at Preqin. In fact, among emerging marketsfocused PE, Asia-focused funds have consistently taken the lion’s share of capital raised, accounting for nearly three-quarters each year since 2008. “The past two years two to three years have been challenging for emerging financial markets,” says O’Hare, citing the way limited partner (LP) appetite for Asia waned in that period as investors refocused their interests on North America and Europe. “But despite the macro headwinds, private equity in Asia is clearly continuing to mature and grow.” The resilience and expected resurgence in LP interest can attributed to the impressive performance of Asia-focused PE funds which has closely matched that of US and European funds
over the long term. Preqin data suggest strengthening commitment and confidence in Asian PE, with around threefourths or 74% of Asia-based investors expect to commit the same amount of capital or more to PE in the next year compared to last year. Also, 91% of Asiabased investors believe that PE is becoming increasingly important to their portfolios. In five years, O’Hare expects the Asian PE growth momentum to create a competitive Asian PE firm that can break into the top 20 global rankings in terms of dry powder, an exclusive club currently filled with firms from North America and Europe. The Western dominance in global PE should also become contested as Asian LPs look to expand their portfolios outside their local regions and raise their relatively small market share of 5-10%. “The overall conclusion must be that Asia is a core part of the global PE story; it has a vital role to play in putting capital to work in the region; it has a vital role to play in diversifying the portfolios
FINANCIAL INSIGHT: PRIVATE EQUITY of global LPs; and Asian LPs will have an increasingly vital role to play in funding PE’s global development,” says Mark O’Hare. Singapore stands out Which countries will drive Asian PE growth? Consider first and foremost Singapore, seen as the gateway to region with its rocksolid operating environment that has helped attract investors and firms, says Daniel Yong, director at Stamford Law. He says that managers appreciate the accessibility Singapore offers into the rest of the region, along with its extensive DTA network, and strong reservoirs of financing, PE professionals and tax incentives. It is estimated that Singapore houses at least 115 general partners serving the entire spectrum of strategies from venture capital through growth capital to buyout. Assets managed by Singapore-based PE managers grew 33.6%, markedly above the 11.6% average asset growth rate of Singapore-based managers. Looking forward, the Singapore government is looking to further expand the market for incubator and early stage venture capital funds focusing on the information technology and life sciences sectors. Southeast Asia attracts attention PE firms are also starting to take notice of Southeast Asia, with their number mushrooming in the past half-decade by roughly 25% to 127 firms in 2011-2013 from 96 firms in 2009-2011, according to a Bain & Company report in May. Investors’ interest has been piqued by a set of unique drivers, namely attractive market characteristics, significant amount of available dry powder, an environment where they can exert more control over deals, and a track record of successful exits, says Bain. Bain adds that this combination of factors has made LPs confident that they can achieve superior returns in Southeast Asia, with
68% expecting net returns of 16% or greater from 2012 vintage funds. This is compared with only 54% expecting such returns from similar funds from China, Latin America (52%) and India (38%). But as more investors flood into the Southeast Asia PE market, the stiffer the competition and there will be a fallout where only the fittest can survive. “The region is poised to breakthrough, but only a subset will emerge as winners,” says Bain. For GPs, the competition will be defined by who can corner a sweet spot for plays and differentiating fast enough in the dynamic and relatively erratic market to leave rivals in the dust. Among the Southeast Asian countries, Vietnam and Indonesia are particularly attractive, ays Eric Marchand, vice president at Unigestion and responsible for the company’s Asian private equity investments. Investors looking to break into these lucrative markets will need to identify managers well equipped to source and manage deals locally, says Marchand. They must also prepare to withstand potential geopolitical risks like in Thailand where he says recent political upheavals have impacted investor sentiment. Yong adds that sellers and investees in less sophisticated PE markets like Southeast Asia are often unwilling to relinquish control. Many do not fully appreciate the benefits that PE investors can bring to their business. This combined with the availability of other financing options such as bank lending, capital and debt markets, sellers and investees have a harder time warming up to PE offers. India and China disappoint Discussions about Asian PE will always include India and China, but analysts express disappointment at their recent performance, where returns have not met expectations. In India’s case, investors have spent the past decade pouring
Daniel Yong
Eric Marchand
Mark O’Hare
Krishna Ramachandra
significant amounts of capital in to its PE market, which appeared promising on paper. But time and again, investors have been shortchanged on returns, partly due to a softening macroeconomic situation and a lack of exits, says Marchand. This has kept capital tied up and tanked fundraising prospects. But the situation could improve soon as new trends could help renew interest in Indian PE. “Firstly, the new government under Prime Minister Narendra Modi has developed reforms which should greatly improve the country’s economic perspective,” says Marchand. “Secondly, PE managers are under pressure to exit deals, thereby creating opportunities for investors with fresh capital to buy assets at attractive prices off firms keen to generate liquidity,” adds Marchand. PE investors in China have had a similar experience where the returns paled in comparison to projections despite sustained growth over the past decade. “When benchmarked to more mature markets such as North America or Europe, these returns do not necessarily justify taking the additional risk. This negative arbitrage and China’s softening growth has adversely impacted investor appetite,” says Marchand. This is not to say that PE managers cannot strike gold in the market. Rather, firms will need to work much harder to earn desired returns by mainly driving operational change within their investee companies.
The APAC PE market declined for the second consecutive year and LPs are not backing new funds
Source: AVCJ; Preqin
SINGAPORE BUSINESS REVIEW | JANUARY 2015 23
economic INSIGHT: SINGAPORE’S RESTRUCTURING are finding it hard to fill up openings, explaining the moderate pace of job creation despite the sustained rise in vacancies. “This gap follows from the curb on foreign labour supply. With increasingly tighter restrictions on the hiring of foreign workers, many employers are finding it hard to fill these job openings. At times, even high wages is not enough to entice the locals to take up these jobs since these are jobs that Singaporeans shunned in the first place. Increasingly as companies continue to struggle with the labour crunch, business activities will be affected,” Seah explains.
When will manufacturing experience a turnaround?
Singapore’s economic pains
Halfway through the country’s economic restructuring program, one of the key questions is whether there have been significant gains.
T
he Singaporean economy is bearing the brunt of its restructuring program meant to lift the country’s productivity growth and raise the median income over a decade. With the program reaching its halfway mark, the city state is on track to achieving its goals, but not without the expected short-term pains. Singapore’s gross domestic product showed signs of deceleration in the second quarter of 2014 after posting a robust growth in the previous quarter. Tight labour market “This slowdown is a side effect of the economic restructuring and corresponding curbs on foreign workers, which are begetting tight labour market conditions and higher labour costs,” says Joseph Incalcaterra of HSBC. Irvin Seah of DBS Group Research says beyond incentives to increase productivity, restructuring involves a series of broad-based curbs on foreign manpower. Job vacancies continued 24 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Employers are finding it hard to fill up openings, explaining the moderate pace of job creation despite the sustained rise in vacancies.
to rise in the city-state, with vacancies soaring to 63,900 as of the second quarter of 2014, 23 percent higher than the same period a year ago. The ratio of vacancies to unemployed has also risen to a relatively high level of 1.36 in the second quarter. Total jobs created in the second quarter has tempered to 27,700 from the 33,700 a year ago. Vacancies continue to outstrip job creation, with the difference hitting a multi-year high of 36,200 in the second quarter of 2014. Employers Labour crunch
Source: DBS Group Research
Employment issues Unemployment has hit 1.9 percent on average since the restructuring began, lower than the natural rate of unemployment in Singapore which is widely regarded to be at 2 percent, Seah says. With the jobless rate at such level, the Singaporean economy is at full employment, highlighting the tightness in the labour market. He adds that apart from impacting the bottom line of companies and stoking a labour crunch, tighter manpower supply has raised the cost structure of the economy. Higher employment costs are another challenge confronting business, and it’s not just about the wages. For example, the increase in government rates and fees has been the fastest rising cost component in the manufacturing sector. The spike in this particular cost component coincides with the hikes in foreign worker levies in terms of timing and degree. “For example, the levies for work permits for the manufacturing sector rose on average by about 65 percent
economic INSIGHT: SINGAPORE’S RESTRUCTURING since 2010. While the actual wage cost component hasn’t increased much since the tightening, the levy, which is essentially a form of taxation on hiring foreign workers, adds to the overall costs of employment,” Seah says. With this scenario, Seah says it is likely that the business will pass its costs to the consumers, which will consequently raise the cost structure of the economy overall. Contracting exports Aside from headwinds facing the labour market, exports are also taking a hit, with the electronics sector contracting for more than two years. The government is expecting a decline in the non-oil domestic exports (NODX) in 2014, in contrast to the relatively robust export momentum seen in countries such as Korea and Taiwan, Incalcaterra adds. Industrial production has been flat in recent months, while the purchasing managers’ index has been around the waterline. “Singapore is a small and open economy where export performance is key to growth,” says Seah. NODX have been lacklustre this year, down by 1.4 percent over the first eight months of 2014 compared to the same period the previous year. The sector has posted eight consecutive quarters of declines. “The risk is that NODX could post another full year contraction after a 6-percent drop in 2013. Note that NODX has never fallen in two consecutive years except during the global financial crisis in 2008 to 2009, when sales fell by 8 percent and 10.5 percent respectively,” he says. Seah adds that although exports elsewhere in Asia are little better than Singapore thanks to weak global demand, the deterioration in Singapore’s export competitiveness
is bound to spell trouble down the road. “There will be significant downside risks to GDP growth if NODX registers another year of contraction in 2015,” he says. Effects on inflation Singapore’s policy-induced volatility has also claimed another victim in the form of the economy’s consumer price index. “This time around, the culprit seems to be the enhanced medical subsidies distributed as part of the Pioneer Generation Package (PGP),” says Incalcaterra. The PGP is intended to give assistance to the baby boomer generation, especially those at the lower- and middle-income levels. The policy came to force in September 1, 2014, and entails generous subsidies at Specialist Outpatient Clinics and polyclinics. “The new subsidies imply at least an additional 50 percent off already subsidised services, as well as subsidies for general practitioners and dental clinics. It seems that this is limited to a one-off negative sequential impact on CPI, while the year-on-year numbers will be slightly impacted over the course of the next 11 months until the base effect wears off,” he says. Incalcaterra says there was also a mixed effect on services costs outside of the medical and dental components. The communication sector saw a strong uptick in price momentum, while deceleration was seen in education and stationery and recreation and others. Outside of core inflation, private transportation costs have posted a rebound, but accommodation prices have sequentially declined, in line with the trend of softening property prices feeing through to lower rentals. Incalcaterra says that while core
Singapore losing competitiveness versus regional peers
Source: DBS Group Research
Growth will likely be knocked off trend in 2014 and should come in at 3.1 percent yearon-year.
inflation does seem to have lost some steam over the recent months, it will likely see resumed moderate upward pressure in the near future as higher wages feed through to prices. The Monetary Authority of Singapore pegged inflation within the 2 to 3 percent range in 2015 due to its expectations concerning future strong wage pressures on prices. The restructuring program The Singaporean government’s restructuring program is already approaching the halfway mark and has already brought significant economic pain with the labour crunch, higher costs, decline in competitiveness and potentially poorer export and growth performance. The first phase of restructuring has largely focused on broad-based tightening in foreign labour policies and schemes to help companies raise productivity. However, as the policy enters its second phase, Seah says the policy measures are likely to become more targeted and somewhat less painful. “Attention will be paid to help companies leverage on the existing productivity enhancement measures to improve take-up rates. Some tweaking in the foreign manpower policies may also be made. Industry-specific moderation of earlier tightening, including marginal adjustments to the (foreign worker levies), may be on the cards,” Seah says. “In sum, growth will likely be knocked off trend in 2014 and should come in at 3.1% year-onyear. But it should accelerate modestly to 3 to 5% year-on-year in 2015 as the base effect from electronics exports wears off and the NODX returns to growth,” Incalcaterra adds.
GDP growth 2014
Source: MTI
SINGAPORE BUSINESS REVIEW | JANUARY 2015 25
ANALYSIS: JEWEllery
Not all that glitters is gold
In Singapore, all is fair in love and jewellery war
Jewellers square off as Singapore’s women fall for their pieces.
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hen Purusharth Agarwaal plans his travelling appointments each year, the New Delhi-based gemologist and jewellery exporter makes sure to squeeze in two visits to Singapore, which has fast become one of the hottest markets for his diamond-encrusted Victorian designs. “Women in Singapore are very confident, beautiful, and know how to carry their jewellery. With so much love for jewellery, Singapore is definitely one of the most lucrative places to sell,” says Agarwaal, one the many jewellers flocking to the island, despite the presence of well-known international brands. Relatively newer brands take on the risks of entering Singapore’s highly competitive market, lured in by the soaring demand for bespoke pieces crafted from gold and precious stones. Sometimes,
26 SINGAPORE BUSINESS REVIEW | JANUARY 2015
A rising concern is the proliferation of fake and substandard jewellery amid the rising cost of precious stones.
the payoff can be worth it. “Singapore has been very kind to me by acknowledging my work and designs and has helped me build a niche for myself,” says Agarwaal, who is certified by the Gemological Institute of America and a fourth generation scion in a family of jewellers that operate the 150-year-old Ivory Mart Jewellers in New Delhi. He created his own brand in 2006 called Dezire D’ Jewels that exports his diamondencrusted designs influenced by Victorian jewellery, and has found an enthusiastic customer base in Singapore. With its high-earning population and rising number of women who feel compelled to own fine jewellery, Singapore offers an enthralling mix of perks and pitfalls for jewellery businesses. On the plus side, the island is a nexus of luxury in the region.
“Given its competitive advantage in geographical location and excellent infrastructure, Singapore is the regional hub for luxury in South East Asia: a top global destination for tourists to shop for luxury items such as watches and jewellery,” says Ho Nai Chen, president of the Singapore Jewellers Association and managing director at On Cheong Jewellery, noting that Singapore has emerged as a major regional trading hub for precious metals. But Ho says jewellery retailers in Singapore need to be prepared for strong competition from international brands and the high operational expenditure, particularly in rental and manpower costs. Another rising concern is the proliferation of fake and substandard jewellery amid the rising cost of precious stones, according to Agarwaal, especially when one erring jeweller can create a negative impression of the industry as a whole. He says customers have always been affected by the fluctuation in metal prices as well as those of diamonds and other precious stones. Some who cannot afford the high-quality options will look for jewellers that provide cheaper options. “Branded jewellery has become very expensive due to these hikes. People have started buying fakes as well as silver jewellery with semi-precious stones. As customers want cheaper, they would rather pay cheaper and get something which has no authenticity. This thinking has to change,” says Agarwaal. “The right mindset is to sell to customers without any cheap profit in mind. You cannot lie, you have to sell truthfully and being truthful to yourself is also important.” Singapore jewellers looking for long-term success need to differentiate themselves either through bespoke designs or by providing a unique shopping experience for their customers.
ANALYSIS: JEWEllery Adaptability to the evolving market is a must, says Ho. “In my 20 or so years of designing jewellery, both bespoke and for stores, I have seen a significant shift in the client’s perception of design and the acceptance of the unique resulting in the increase of bespoke clientele,” says Marilyn Tan, who owns a jewellery business under her name. She admits that price is still a sensitive issue, but there is a greater acceptance of design in the innovative sense and of local designers. If independent local jewellers hope to make it in Singapore amid the crush of big-name global brands, Tan says there is little choice but to learn how to compete internationally. It helps that institutional support from Spring and the Textile and Fashion Federation has been forthcoming, she says, and jewellers that do manage to survive the steep learning curve will be rewarded with better designs and a stronger business model. Highly valued heirloom and gift Why are Singapore women going gaga over fine jewellery? They do so for the promise of owning a stylish accessory with heirloom quality. “While fashion trends evolve quickly through the seasons, the jewellery world moves at a more composed pace. Trends do emerge, but they’re not always as obvious as the ‘out with the old’ drama of fashion,” says Andrew Quake, Singapore and Malaysia general manager at
Andrew Quake
Marilyn Tan
Pamela Seow
Purusharth Agarwaal
Ho Nai Chen
Aspire Lifestyles. “Moving ahead, we anticipate that we will continue to receive requests for bespoke, timeless jewellery pieces that are befitting of the ‘heirloom’ status, and which feature rare and unusual stones from around the world.” The allure of passing on or gifting a piece of jewellery to a loved one and expecting it to retain their beauty through time drives the popularity of gold jewellery in Singapore, says Pamela Seow, marketing and communications manager at Poh Heng, a pioneering 65-year-old jeweller brand that crafts high karatage gold into fine jewellery pieces. “Gold jewellery has always been timeless, as it is widely appreciated and passed down from generation to generation. Many customers decide to purchase high karatage gold jewellery as these aesthetically pleasing pieces are also full of intrinsic value,” she says. “Because of gold’s intrinsic value, it is greatly treasured by Asians for the purpose of gifting. Asians have a deep-rooted culture of gifting gold jewellery for major milestones in a person’s life.” Seow says the gift of gold jewellery is important and significant for all major stages or milestones of a person’s life. In Singapore, high karatage gold jewellery is especially popular as gifts for weddings, birthdays and Valentine’s Day. When bought for personal wear, fine jewellery serves as a reflection of the wearer’s wealth and standout beauty, two qualities that more Singaporean women yearn to
project through statement pieces. “Gold jewellery is a symbol of wealth and prosperity,” says Seow. “Commodity gold prices help the consumer perceive high karatage gold jewellery as being extremely valuable. This is reflected in the correlation between commodity gold pricing and the immediate value of high karatage gold jewellery purchases.” Symbol of wealth and beauty The influence of Hollywood and the international fashion scene has also contributed to raising gold jewellery to must-have fashion pieces, says Soew. “The appeal of gold among young stylemeisters has steadily increased and gold has increasingly been appreciated for its beauty as well inherent intrinsic value.” To develop new products that appeal to this emerging demand demographic, Soew says Poh Heng has taken to studying fashion trends and changing consumer purchasing habits. This allows Poh Heng’s team of designers and craftsmen to conceptualize original and unique pieces that enhance customer individualism and personality while still offering high intrinsic and aesthetic value. In Singapore, Agarwaal observes that jewellery purchases are deeply emotional and personal decisions. “Endless love and fascination for jewellery are one of the most and obvious reasons for the growth. Social gatherings have become a source to wear and show off one’s jewels.”
SINGAPORE BUSINESS REVIEW | JANUARY 2015 27
COVER STORY
Keeping close watch on the ticker board?
15 smart ideas to outwit the wiliest investment wolves this Year of the Sheep Japan equities, 5-year US treasuries, gold, or oil – find out where best to put your money in 2015.
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015 is the Year of the Sheep based on the Chinese zodiac, and fittingly, one of its main investment themes is the flock mentality. There is a strong consensus on where investors should, on paper, put their money, such as equities, but there will be plenty of opportunities to break away from the herd and cash in on lucrative market opportunities. Compiled from our diverse council of financial guides, these top 15 smart investments in 2015 represent some of your best bets for a safer and more profitable investment year. 1. Japan equities Experts are bullish on Japan equities in 2015 due to a number of supportive factors such as Bank of Japan’s (BoJ) promise to expand its qualitative and quantitative easing, increasing emphasis on shareholder value, continued pension reform, and room for further stock market rallies. “The divergent monetary policies between the US Federal Reserve and the BoJ will almost certainly continue to put downward pressure on the Japanese yen (JPY) against the US dollar (USD). This is very bullish for equities as the correlation between the USD/JPY exchange rate and the equity market is higher than 90%,” says Hans Goetti, head of investment Asia at Banque Internationale 28 SINGAPORE BUSINESS REVIEW | JANUARY 2015
à Luxembourg’s Singapore branch. He adds that share buyback momentum is strong and due to a similar high correlation, will represent a very positive development for Japan equities. Japanese equities also have scope to rise further despite a strong rally in the stock market, according to Simon Cox, investment strategist, Asia-Pacific at BNY Mellon Investment Management. Japanese corporate earnings have already bounced back strongly from the depths of the financial crisis – they are 280% higher than they were at their lowest point in 2009 based on most recent Ministry of Finance data – but share prices have yet to fully reflect this recovery. “The TOPIX still has some catching up to do,” says Cox. 2. Developed Asia equities Other developed Asian equity markets are also looking good. In particular Korea, Taiwan and Singapore seem especially promising and could benefit from the strengthening US economy, says Robert Rountree, global strategist at Eastspring Investments. “The developed Asian markets, having been ignored in 2014, now look attractively valued. Any uptick in export orders or a strengthening of world growth could lead to renewed attention on these markets.”
“The developed Asian markets, having been ignored in 2014, now look attractively valued.”
COVER STORY Among these, Korean equities may be one of the most attractive investments in Asia for the first half of 2015, says Dr Ekkehard J. Wiek, managing partner at Straits Invest. He says the Korea market holds an unusually high number of stocks with a very low valuation paying high dividends which have started to rebound from their recent drawbacks, with especially attractive picks in the small and mid caps segments. “Investors who use the current weak market sentiment and systematically filter stocks with high intrinsic value should be able to benefit from this situation.” 3. China equities Investors may be wary of China equities due to low valuations and several years of underperformance amid worries about slowing growth and other macroeconomic concerns, but Rountree argues that the opportunities exist for those looking at a longer view. “China looks very attractively valued. This value may not be priced out until more clarity appears in the macroeconomic data. Again, one to watch; when it does bounce back, it could be far, fast and furious.” He points out that Korean companies are increasing their China investments in anticipation of a forecasted upswing driven by rising consumer demand. “Slowing growth, concerns about over-indebtedness, a seemingly out-of-control housing market, opaque local government finances and the lack of a meaningful policy response have contributed to this malaise. Yet there are reasons to be more optimistic about Chinese equities,” says Daniel Murray, chief economist at EFG. He believes that, even though China’s gross domestic product growth has slowed to around 7.5% from previous double-digit highs, this is part of a “natural maturing” of its economy and is still a stronger growth pace compared with most other countries. China also boasts relatively low levels of central government debt, and the government is rolling out a stream of fiscal and monetary stimulus measures that, when combined, can provide a large supportive effect.
Ekkehard Wiek
Shrikant Bhat
Hans Goetti
Robert Rountree
Jim Swanson
compared to the A-shares market, according to Quam Asset Management. The launching of the Shanghai-Hong Kong Stock Connect, which should boost investor access, together with better corporate governance, will likely trigger re-ratings in these sectors. Investors might also consider dipping into the slew of Chinese companies that are expected to list on the Hong Kong Stock Exchange due to its lower financing cost, better liquidity and more efficient fundraising platform. 5. US financial, tech and consumer sectors Given a forecasted acceleration in the global economy, US equity markets should deliver a respectable performance, with especially attractive picks in the financial and information technology sectors, according to Shrikant Bhat, managing director, head of wealth management at Citibank Singapore. He says the US financial sector offers earnings momentum in line with the rest of the market, but valuations are well below. Meanwhile, the IT sector scores well on free cash flow and balance sheets of firms that remain strong. Investors in the US market may also want to take a long position on the consumer discretionary sector, one of the worst performing sectors in 2014, whose fortunes may start to turn around in 2015. As of mid-November, the S&P500 Consumer Discretionary index was up a mere 3.6% compared with 10.4% for the S&P500 in aggregate and 21.0% for the top-performing S&P500 Health Care sector index, yet there are signs that the fundamental backdrop is improving, argues Murray. Steady improvements in the US labour market, which have been reflected in rising consumer confidence despite lacklustre wage growth, along with recent declines in energy prices combine to support higher discretionary consumer spending in 2015. 6. US large cap stocks Among the investment options in 2015, US large caps represent the dependable picks with excellent operating leverage that can deliver profit in spite of sluggish end
4. Hong Kong stocks Over in Hong Kong, investors should look into the Pharmaceutical, Green and Telecommunications, and Media and Technology sectors, which are trading at discounts The rally in Japan’s share prices has yet to match the recovery in corporate profits
Source: Ministry of Finance, Tokyo Stock Exchange, via Thomson Reuters Datastream. Last data point Q3 2014(Topix)
Amid globalization, Asian equities are still on top
SINGAPORE BUSINESS REVIEW | JANUARY 2015 29
COVER STORY markets in Europe and China. Large cap multinationals have also managed to raise their profit even as the rest of the US economy shrank in the first quarter of 2014, showing their earnings resilience. “The forward P/E for US large caps is lower than the broader market, so valuations are reasonable,” says Jim Swanson, chief investment strategist at MFS Investment. “Their operating leverage is being driven by low unit labour costs, which are much lower than those in Europe and Japan.” 7. Canadian equities Asian investors focused on the US market would do well to look further north to Canada, which despite requiring a bit more research work, holds a wealth of attractive undervalued stocks ripe for the picking. “We find plenty of attractive undervalued stocks from all industries,” says Straits Invest’s Wiek. “Canada stocks for the next couple of months will make up the highest weighting of all countries in our global equity portfolio,” he adds, explaining that the Canada market is still some 20 % below its 2008 high. 8. European equities Across the Atlantic, European equities –especially those with a large proportion of overseas sales – should be a priority for investors, says EFG’s Murray. Investors are advised to shake off their fears and consider taking a long position on underperforming European equities as euro weakness translates to better results when overseas revenues are translated back to euro. “Combining the lagged impact of a weaker euro with improved competitiveness in many of the countries that have experienced the most extreme economic malaise over the past few years should result in improving overseas sales volumes in the first half of 2015,” says Murray. Europe may be grappling with a battery of macroeconomic concerns but policy action from the European Central Bank (ECB) will be a key catalyst for the region, which is why Bhat is also remaining optimistic on Eu-
Albert Cheng
Cedric Tinguely
Simon Cox
Vasu Menon
ropean equities. “The resulting improvement in macro backdrop and weaker currency should fuel companies’ earnings results.” Bhat expects further price gains notwithstanding the re-rating of stocks measured through the increase of price-earnings ratio from 10x to 17x. He says this outlook is driven mainly by earnings growth and supported by what he foresees as an improving regional economy and liquidity. Bhat cites how the year-on-year growth rate for 12-month forward earnings had turned positive for the first time since 2011, and he believes the Euro Area nominal gross domestic product should continue improving over the next 12-18 months. “It’s difficult to be bearish on corporate earnings based on this economic outlook,” says Bhat. “Within Europe, we suggest investors consider sectors like Financials and Construction, for exposure to both attractive valuation and positive relative earnings trends.” 9. Unit trusts With most analysts preferring equities, investors seeking a more diversified exposure may consider buying gradually into unit trusts, says Vasu Menon, vice president, wealth management Singapore at OCBC Bank. “It’s best to buy gradually over several months next year instead of trying to time markets as volatility could increase once markets get wind of an imminent rate hike by the US Federal Reserve.” 10. Asian and US high yield bonds For investors chasing income, Asian and US high yield bonds will remain a strong option in 2015. Rountree says the expected increase in rates will unlikely be strong and leaves the door open for bonds as an option. “While US rates will likely nudge higher in 2015, it will unlikely be so strong as to undermine the income story.” Menon believes bonds will allow investors looking to retain a semblance of prudence to balance out their portfolios, which could tend to be bulky in equities. He believes high yield bonds are superior to investment grade ones because of their wider credit spread which will cushion the impact of higher interest rates in 2015. 11. 5-year US treasuries The end of the aggressive US Federal Reserve balance sheet expansion will signal a rise in interest rates, and Developed Asia looks attractive
Confidence on US economy improves
30 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Source: Eastspring Investments, MSCI and IBES from Datastream, 3 November, 2014. Note that the “Z” valuation is a composite measure giving equal weighting to the variation of the historical price to book ratio from its long-term trend and the variation of the prospective price earnings multiple from its long-term trend. The two outer dotted lines represent the limits within which around 70% of all values lie. The middle dotted line indicates the 10-year average.
COVER STORY based on past rate hiking cycles, will lead to a flattening of the yield curve, most likely from shorter duration maturities, says Murray. “Although the yield at the long end of the US government curve is low in absolute terms, the slope of the curve is relatively steep. This suggests that the flattening is likely to come from shorter duration maturities,” he says. “As confidence in the robustness of the US economy improves and expectations about policy normalization begin to solidify, so we expect the belly of the curve to sell off and the five year yield to rise.” 12. Low cost index funds and exchange-traded funds While most analysts are bullish on global equities and global bonds, more risk-averse advisers point to low cost index funds and exchange-traded funds as viable alternatives. These investment options are “excellent ways to minimize cost and obtain broad diversification” in any investor’s portfolio, says Rodney Comegys, principal, head of investments at Vanguard Asia-Pacific. Based on his firm’s forward-looking projections, Comegys points to a median ten-year forecast of around 8% return for global equities and 3% for global bonds, both below their respective longer-term averages. Given this low-return environment in the next decade, investors are better off paying lower fees in lower cost funds – especially as, according to Comegys, they outperform higher cost funds over time. 13. USD against euro Consensus is bullish on the USD against various currencies, but will be especially strong against the euro as the future actions of the ECB will likely be “too little too late,” according to Cedric Tinguely, chief trader at Bordier & Cie (Singapore). “When the US Federal Reserve did all their quantitative easing, it did work well because they were ahead of other central banks, therefore the stimulus and liquidity they injected into their economy provided its full effect,” he says. “Even if Mr Draghi announced his willingness to increase the ECB balance sheet to where it was at the beginning of 2012, by roughly 1 trillion Euro, they will do it overtime and will probably reach full speed only by the end of 2016.” Factoring in the added stimulus to the Japanese economy, Tinguely feels Europe might have to do more
than targeted longer-term refinancing operations and buying of asset-back securities. 14. Gold For more prudent investors, gold remains a solid investment choice and remains a fundamental part of any long-term wealth preservation and asset diversification strategy, argues Albert L. H. Cheng, Managing Director, Far East, World Gold Council. “The accessibility of the gold market along with its size and liquidity provide attractive benefits for investors in gold, particularly as a complementary asset alongside equities and fixed income securities,” he says. “The diversity of gold-backed and gold-related products means that gold can be used to enhance a wider variety of individual investment strategies and risk tolerances.”
“Investors are better off paying lower fees in lower cost funds since they outperform higher cost funds over time.”
15. Oil Oil prices have been coming down over the past few months due to reduced US reliance on oil imports amid rising domestic shale activities, among other factors, but they are unlikely to dip much further below $70 a barrel, says Murray. Investors are advised to take a long position in the commodity as he expects the price price of West Texas Intermediate (WTI) crude oil, which has been down more than 30% over the past few months, is unlikely to dip much below US$70 a barrel.
Gold hasn’t lost its shine yet
Listed European stocks: internal and external sales
Fed likely to raise interest rates in 2015
Source: Factset, EFG calculations
Source: Bank of Singapore
SINGAPORE BUSINESS REVIEW | JANUARY 2015 31
Analysis: expats in singapore learning to accept lower yearly salaries and a shorter list of benefits than what would have been offered years ago. “High remuneration and benefits packages for expatriates are no longer the norm,” says Richard Farmer, director of specialised recruitment at Randstad Singapore. “In Singapore the growing trend is for expatriates to be hired on local packages in line with their local counterparts.”
Welcome to the professional’s dream destination
What factors are keeping expats rooted in Singapore?
Expatriate salaries and benefits may be declining, but few other places in the world promise terrific career growth, family safety and work-life balance.
I
f you ask Alexander Knight and his expatriate colleagues if they regret moving to Singapore amid the rising cost of living and shrinking compensation packages, they would tell you with a begrudging smile: not like there’s a better place we can live in. Singapore is now the second most preferred country by expatriates looking for a wellbalanced, high quality lifestyle, according to the latest HSBC Expat survey, and this promise of a modern working paradise has kept expatriates loyal to the island despite more lucrative offers in other parts of Asia. “Singapore is a place that multinational corporations know is more or less a dream destination for an expat,” says Knight, an advertising director who has been assigned to Singapore for eight
32 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Ooi Boon Jin
Anthony Coundouris
years. “Many of the people I know complain about the cost of living, but are happy to pay the low taxes.” A low tax regime, along with a low crime rate and its status as a regional hub that can open doors to lucrative career opportunities combine to make Singapore a top pick among expatriates, particularly those at the senior level and those with kids. Expatriates in Singapore might receive inferior compensation packages compared with their counterparts in China or Hong Kong – it ranked behind both countries in ECA International’s latest MyExpatriate Market Pay Survey – but they soldier on because relocating could lower their household’s security and quality of life. Expatriates who choose to move to and stay in Singapore are
Lower expatriate packages The full expatriate package that includes salary, housing allowance, children’s international school fees, travel and transport allowances are rare these days and almost only offered to executives at senior levels, typically for C-suite or senior vice president roles, says Mark Hall, vice president and managing director at Kelly Services Singapore. For less prestigious expatriate hires, the packages are being toned down. “Companies that use the host-based approach usually provide less generous housing and education assistance, as well as a reduction in transport allowance,” says Hall. “The expatriate may have to choose to live in apartments further from city centre and expensive expat areas, where rent is high.” Knight recounts that some expatriates are not even getting paid for their children’s school fees or rent. “Company cars seem to be off the menu entirely.” But even with tapering perks, advertising directors like himself can still demand competitive salaries in the range of S$150,000 to S$180,000 per year, with a potential rental grant of S$60,000 per year. Companies can still put together a lavish expatriate package that includes a sixdigit signing bonus, and generous housing and education allowance, says Hall. “We have recently placed a banker who was
Analysis: expats in singapore offered a S$100,000 sign on bonus. Some of the other typical benefits include a housing allowance in expensive expatriate locations such as Sentosa Cove and Holland Village, and international schooling fees for children.” Only those being courted for regional management and senior executive roles in Singapore can expect higher salaries and comprehensive benefits due to the importance of these positions, says BJ Ooi, partner, head of global mobility services at KPMG in Singapore. “As global companies set up businesses in Singapore, creating regional headquarters in Singapore have became a necessity to compete in their respective markets. Arising from this phenomenon are regional management and specialist positions that require expatriates to be based in Singapore.” Exceptional living standards While Singapore expatriate packages might be a shadow of their former glory, their translated value soars after factoring in the low tax regime and exceptional living standards in Singapore. The personal income tax rate remains among the lowest, notes Hall, which starts at 0% and is capped at 20% for local residents and 15% for non-residents. The island nation is also lauded for being one of the cleanest, safest and
most orderly countries in Asia, which contributes to the holistic work-life balance that most expatriates seek. “The Singapore authorities have been continuously investing in infrastructure and public services. Singapore has an excellent health service, hospitals are modern, well-equipped and doctors are highly qualified,” says Godelieve Kroonenberg, ASEAN business leader at Mercer. He adds that the education and childcare infrastructures are one of the best in the world. Singapore dominates the top of both our general and personal safety rankings, in particular. “The reason why foreigners come to Singapore is not only the attractive package. For some it is an experience to start exploring Asia, for others it is a comfortable and safe base to work in other Southeast Asian countries. Many seasoned expatriates will find a comfortable lifestyle in Singapore,” says Kroonenberg. Singapore vs Hong Kong? Analysing what makes Singapore such a hit among expatriates, it is easy to argue that a competing offer in Hong Kong, among all the other countries, will make the decision quite difficult. “Singapore and Hong Kong are both regional business hubs, and are great bases for multinational companies, with established infrastructure, a high
Expat in Singapore
Source: HSBC Expat Explorer Survey 2014
The personal income tax rate remains among the lowest which starts at 0% and is capped at 20% for local residents and 15% for nonresidents.
standard of living and low tax rates,” says Farmer. Both are also experiencing the same scalingback of expatriate packages outside of C-suite positions. Singapore’s advantage is that the government makes the application process for a working visa fairly straightforward and efficient. Meanwhile, Hong Kong has an edge for having a low tax environment for both base salaries and bonuses. “Singapore has clean streets and the people are polite. It has excellent roads, lots of greenery and clean air, and an organized airport. I was sold,” says Anthony Coundouris, trade finance evangelist at ApexPeak and a seasoned expatriate in Singapore, weighing in on the comparison between regional hubs. “Hong Kong has more waterscapes and higher quality produce. You really cannot compare them,” says Coundouris.
EXPERT OPINION: singapore trumps hong kong FOR EXPAT EDUCATION In general, while the salaries are higher in Singapore, the expats may receive higher payouts due to additional benefits such as housing and children’s education. Expats would rather stay in Singapore because Hong Kong residential real estate is more expensive. Hong Kong is perceived to be difficult when it comes to securing a place in international schools, where in Singapore the waiting lists (for certain schools) tend to be shorter. Quality of living is
also better in Singapore which is based on the 2014 Mercer Quality of Living survey. The current political scenario in HK poses a risk to HK’s attractiveness to senior-level expatriate professionals, at least in the immediate term. Qualification in the local pension scheme is an issue in Singapore, as the Central Provident Fund limits mandatory participation to foreigners with Singapore Permanent Residence status. That is one disadvantage. Godelieve Kroonenberg, ASEAN business leader information solutions, Mercer
The range can be very wide depending on a lot of factors such as position and tenure. However, Hong Kong expatriates generally get 15 to 20% higher remuneration to compensate for the higher cost of living in Singapore. Consumer prices are higher for the latter whereas in Hong Kong food and rents are generally cheaper. On the other hand, expats are choosing Singapore over Hong Kong because of a number of reasons. Firstly, Singapore tops it in both political
and economic stability. Secondly, expats have more varied choices in Singapore when it comes to education. For expats with families, Singapore offers a wide selection of international schools for the children., where it is also easier to get a placement than getting one in Hong Kong. Another major consideration would be air pollution. Air pollution is worse in Hong Kong than in Singapore, thus making the city less conducive for expats with families to live in. Mark Hall, vice president and managing director, Kelly Services Singapore
SINGAPORE BUSINESS REVIEW | JANUARY 2015 33
Singapore’s top 25 ACCOUNTING firms their limited resources to put in place internal controls like closer monitoring of partner rotations,” concurs BSL Group. Ng adds that while regulators introduce or finetune rules and regulation that govern financial reporting, other key stakeholders in the chain, such as management and prepares, still need to diligently discharge their responsibilities to truly raise public confidence in such financial information.
How can one raise the bar higher for all?
Singapore’s accounting rules squeezing smaller firms Can the firms with fewer partners keep up with stringent requirements?
W
hen ACRA put forth new rules that require Singapore’s public accountants and accounting entities to adhere to a stricter code of conduct and ethics by February 2015, smaller firms began feeling that size does matter. Having fewer partners means being hardpressed to meet more stringent requirements to rotate partners and impose cooling off periods. Analysts believe this will raise the quality of, and confidence in, audits–but also increase costs and compliance challenges for firms. Raising industry standards The changes help bring Singapore rules one step closer to those set by the International Ethics Standard Board for Accountants code of ethics, says Ng Kian Hui, audit partner at BDO LLP. ACRA set higher independence
34 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Having fewer partners means being hardpressed to meet more stringent requirements to rotate partners and impose cooling off periods.
standards and extended them to all audit and review of all public interest entities, large charities and large institutions of public charter. “This will likely enhance the overall public confidence in financial information whether they are audited or reviewed,” says Ng. A new requirement to identify a Key Audit Partner (KAP) will ensure quality control and make key decisions and judgments on significant audit matters, says a BSL Group spokesperson, although it should also add more costs. Complying with the new rules Ng says new requirements meant to raise KAP safeguards such as implementing partner rotation and observing cooling off periods, may pose problems for relatively smaller audit firms due to having fewer partners. “Smaller firms will face more challenges due to
SBR’s list of top 25 PwC Singapore and EY toppled last year’s largest accounting firm KPMG based on total staff. Data compiled by Singapore Business Review based on company surveys show that as the two increased numbers in 2014, KPMG maintained its 2400 staff strength. PwC, previously second, boosted numbers by 9% to 2500. EY grew by 16% to 2436. This year welcomes new entries UHY Lee Seng Chan & Co and Prudential PAC. The former was missed out in the previous lists but data provided by the firm placed it in the 17th spot both in 2013 and 2014. Prudential PAC, ranked 25th, hired 6 more staff this year. Incorporated in March 2014, Prudential PAC formerly practiced under the the partnership firm Rama & Co for the past 28 years. All in all, Singapore’s 25 largest accounting firms employed 8% more this year to 12, 719. RT LLP, ranked 16th, downsized its number by 42%. Ravi Arumugam, RT’s CEO & managing partner, explains that the downsizing is due to carving off sections of operations to facilitate the RT network plan, billed as the first Singaporeheadquartered Asian Network in accounting and business advisory services. “We’ve reorganized our various service provisions into audit, non-audit, specialized services etc. This is to facilitate our expansion regionally,” says Arumugam.
Singapore’s top 25 ACCOUNTING firms
25 largest accounting firms in Singapore Company Name
2013 Ranking
2014 2013 Total Staff Total Staff
2014 Accounting Professionals
Managing Partner
1
PwC Singapore
2
2500
2300
<2500
Yeoh Oon Jin (Executive Chairman)
2
EY (Ernst & Young)
3
2436
2100
2193
Max Loh
3
KPMG
1
2400
2400
<2400
Tham Sai Choy
4
Deloitte & Touche
4
2000
1800
<2000
Philip Yuen
5
RSM Chio Lim
5
858
775
<858
Paul Lee
6
BDO
7
380
320
345
Frankie Chia
7
Foo Kon Tan Grant Thornton
6
350
350
<350
Kon Yin Tong
8
Baker Tilly TFW
8
220
200
190
Sim Guan Seng
9
Moore Stephens
8
200
200
180
Mick Aw
10
Nexia TS PAC
11
180
180
180
Henry Tan
11
Crowe Horwath First Trust
13
160
120
<160
Tan Kuang Hui
11
Mazars
12
160
150
140
Denis Usher
13
HLB-Atrede
14
92
90
82
Andrew Tan
14
Lo Hock Ling & Co.
15
90
86
73
Pearlyn Chong
14
PKF-CAP
18
90
70
<90
Sajjad Akhtar
16
RT
10
80
190
<80
Ravi Arumugam
17
BSL Group
16
77
75
67
N Vimala Devi/Lim Siow Jane
17
UHY Lee Seng Chan & Co.
-
77
72
70
Mr Lee Seng Chan
19
Cypress Singapore PAC
19
69
62
67
Lok Lai Cheng
20
Kreston David Yeung PAC
20
60
60
50
David Yeung
20
Heng Lee Seng
20
60
60
55
MIchael Heng
22
Adept PAC
25
52
37
46
Mr. Yin Kum Choy
23
CPA TRUST PAC
23
50
48
42
Paul Tan
24
K.G.Tan & Co.PAC
24
48
40
34
Tan Khoon Guan
25
Prudential PAC
-
30
27
11
Rahul Raj
Data provided by companies
Total
12,719
11,812
SINGAPORE BUSINESS REVIEW | JANUARY 2015 35
Singapore’s top 15 ENGINEERING firms
Overworked and underpaid?
Singapore engineers burn out as services boom Rising workplace demands may be stunting manpower growth.
W
hen you hear Singapore engineers complain about their employment situation, it may be hard to take those gripes seriously given their industry’s rosy prospects. The engineering services sector’s contribution to Singapore gross domestic product is expected to grow by 5% to 6% annually until 2020, according to the Singaporean-German Chamber of the Industry and Commerce. The forecast comes with expectations of higher salaries and stable employment but as practice conditions reach highly stressful levels, engineering firms are finding it harder to retain staff. This trend is reflected in Singapore Business Review’s second year of ranking the largest engineering firms, which reveals a minimal increase in the number of employed professional
36 SINGAPORE BUSINESS REVIEW | JANUARY 2015
While innovation has greatly improved the industry, it has also created a distressed labor force.
engineers. Total employment of the 15 largest firms this year reached 360, only five higher than the 355 reported in 2013. Surbana International Consultants, which once again led the pack, has added 8 to their headcount, but most of the rest have either retained or decreased their numbers. This slow staff expansion can be partly attributed to high engineer burnout. Efficiency and efficacy Our channel checks with major players have found that, while innovation has greatly improved the industry, which now accounts for around 35,000 jobs in Singapore, it has also created a distressed labour force. Engineers are faced with the enormous challenge of constructing both efficiently and effectively, says Teh Hee Seang, chairman of the T.Y. Lin
International, a firm which retained its 19 headcount. Even beyond construction, in the built and infrastructure industry, engineers buckle under the pressure due to challenging practice conditions, says Tan Shao Yen, managing director at CPG Consultants. The total engineering staff strength in CPG Consultants remains robust with an approximate increase of 20% from 2013 to 2014, although the number of registered professionals has reduced due to employee turnover. Engineers of today are facing greater challenges due to more stringent building regulatory requirements, an increasing complexity of projects and the rapid changes in technology. Some may regard these factors as setbacks and thus perceive the profession to be very challenging. However, we do recognise that these aspects are necessary to ensure the progression of the industry. Competition for talent On top of the higher rates of work burnout, engineering firms also have to grapple with intense talent competition within the industry. Shao Yen says the resulting high rate of worker turnover dampens the quality of skilled labour in the industry. “The increased demand for infrastructure projects have also led to the industry ‘cannibalizing’ its own talents, leading to a ‘merry-go-round’ of engineers within the industry. The rapid and high turnover of staff will always post obstacles to institutional knowledge retention and management. However, we are not alone to be plagued by such challenges as it appears to be a common phenomenon that affects mature economies.” “If we aim to participate in meeting Asia’s urbanization development demands, the shortage in experienced engineers will pose a serious constraint,” he says.
Singaporeâ&#x20AC;&#x2122;s top 15 ENGINEERING firms
15 largest engineering firms in Singapore ENGINEERING firms
2013 Rankings
No. of registered Engineers Mechanical 2014 2013
Civil
Electrical
Key executive
1
Surbana International Consultants
1
55
47
8
41
6
pang yee ean
2
AECOM Singapore
2
42
40
2
36
4
Peter C.S. Lee
3
Parsons Brinckerhoff*
3
34
39
10
20
4
Guy Templeton
4
Arup Singapore
5
29
28
4
23
2
Peter Hoad
5
Meinhardt Singapore (including Meinhardt Infrastructure)
8
26
22
4
19
3
Dr Shahzad Nasim
6
Beca Carter Hollings and Ferner (S.E.Asia)
6
25
24
9
10
6
Lee Chuan Seng
7
CPG Consultants
4
21
31
5
13
3
Khew Sin Khoon
8
Mott MacDonald Singapore
11
20
14
2
13
5
Keith Howells
9
T.Y.Lin International
10
19
19
3
15
1
Teh Hee Seang
9
WorleyParsons
6
19
24
3
14
2
Andrew Wood
11
Jurong Consultants
9
17
21
2
12
3
MAO WHEY YING
11
J.M.Pang & Seah
11
17
14
4
0
13
Lee Wai Meng
13
CH2M HILL Singapore
13
12
11
5
7
0
Jacqueline Hinman
13
Squire Mech
-
12
10
6
0
6
-
15
Rankine&Hill (Singapore)
13
10
11
2
4
4
Tan Peck Khoon
358
355
69
227
62
Total Data provided by companies *Sourced from Professional Engineering Board. Latest data as at September 25, 2014.
SINGAPORE BUSINESS REVIEW | JANUARY 2015 37
Singapore’s top 15 Architecture firms
The directors of DP Architects
Should we really go vertical for ‘ageing’ cities? What architectural designs are fit for an ageing population?
W
ith economic progress causing intensified urbanization and, to a certain extent, population ageing, urban planners and architects in countries like Singapore are hard-pressed to deliver solutions that cater to both of these issues. Going vertical is no longer their only option and traditional solutions are being unearthed again and reconsidered. “As cities become denser and demographics shift, the makeup of our urban fabric has to evolve to adapt to more complex social and economic demands,” Tony Ang, Aedas Global Board Director, says. Citing data from UN-Habitat, Ang says more than 400 cities in the world have a population of more than one million and this number will continue to grow. By 2050, 70% of the world’s population will be living in urban areas given the rapid pace of growth at the present. “At the same time, popula38 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Apart from going vertical, recent trends in architecture have also been about ensuring universal accessibility for inclusive cities.
tion ageing has been pervasive and globally, the number of older persons has grown exponentially,” he explains. Tania Wee, director at DP Healthcare, a subsidiary of DP Architects (DPA), also notes the recent focus of policy makers and developers on the issues of ageing and urbanization. “City and population growth are increasing at astounding rates. In land-scarce Singapore, the simple solution seems to be going vertical,” she says. Ang says it is crucial to create an “accessible environment” for more inclusive societies. Aedas has been leaning towards “transit-oriented developments” as they help reduce travel time of citizens. With innovative designs, a variety of programmes can be incorporated into a single development to create a “vibrant, focused and sustainable urban hub”, as in the case of The Star in one-north designed by Andrew Bromberg of Aedas. Wee agrees, saying new solutions
also involve access and connectivity to nature and facilities. “Apart from going vertical, recent trends in architecture and planning have also been about ensuring universal accessibility and designing for inclusive cities. If ageing populations can live in an environment that allows their ongoing productive engagement in society, they might be considered a valuable societal resource instead of being inevitably dependent,” she says. Wee adds that the Singapore government had already instituted various programs to address the challenges of an ageing population, including senior activity centres and neighbourhood polyclinics. The elderly can also avail subsidized home modification services like slip-resistant flooring and grab rails. Tan Shao Yen, Managing Director of CPG Consultants, on the other hand, posits the idea of developing smaller satellite cities and towns, in addition to megacities. Echoing Wee, he says that the Housing and Development Board has been constructing and upgrading estates that are barrier-free since the 1990s. “Such preparation needs to be underpinned by long range planning, social stability and sound economic development,” he says. Who made it to SBR’s list? DPA has once again topped Singapore Business Review’s ranking of the15 largest architecture firms in the city based on total number of registered architects. Data compiled from individual company surveys and accessed from the Board of Architects show that DPA is ahead of its closest competitor Aedas in staffing numbers by only two local registered architects. Aedas’ employment of registered architects however has grown faster than DPA. Aedas’ employed registered architects grew 45% to 84 after adding 26 more this year. DPA’s only grew by 13% to 86. P&T Consultants, which climbed its way up five ranks, reported the most impressive growth in staff numbers. It nearly quadrupled its pool of registered architects to 71, from only 19 last year.
Singaporeâ&#x20AC;&#x2122;s top 15 Architecture firms
15 largest architecture firms in Singapore architecture firms
2013 Rankings
No. of registered architects Local foreign 2014 2013 architects architects
Key executive
1
DP Architects
1
86
76
86
-
Francis Lee
2
Aedas
2
84
58
19
65
TOny ang and Kevin Jose
3
P&T Consultants
8
71
19
21
50
Choy Meng Yew
4
CPG Consultants
3
63
49
50
13
Khew Sin Khoon
5
Surbana International Consultants
4
43
43
43
-
Pang Yee Ean
6
ONG&ONG
5
37
31
31
6
Ong Tze Boon
7
RSP Architects Planners & Engrs*
6
30
29
30
-
Albert HongÂ
8
ADDP Architects
7
29
25
29
-
-
9
WOHA Architects
10
24
11
14
10
Richard Hassell & Wong Mun Summ
10
Architects 61*
9
19
16
19
-
Michael NGU King Teng
11
MKPL Architects
-
15
5
7
8
Siew Man Kok
12
SAA Architects
10
12
11
12
-
Yeo Siew HaiP
12
Jurong Consultants
12
12
9
8
4
mao whey ying
14
DCA Architects
14
11
7
11
-
koo tin chew, vincent
15
Design Link Architects
13
8
8
8
-
Cheng Jian Fenn
458
321
302
156
Total Data provided by companies *Sourced from Board of Architects Latest data as at September 25, 2014. **(-)indicates firms that do not keep track/record the figure for foreign registered architects.
SINGAPORE BUSINESS REVIEW | JANUARY 2015 39
legal briefing
Clamping down on copyright infringers Amendments give copyright owners an easier route to target ‘flagrantly’ infringing websites.
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f there was one criticism Singapore faced as Asia’s purported paragon of copyright protection standards, it was the slow and complicated way in which copyright owners could stop websites that were distributing or carrying infringing content. They basically had to sue the internet service providers (ISPs) before the latter would be forced to comply with the request to take down the infringing websites. But recent amendments to Singapore’s Copyright Act provide more direct and less expensive recourse against infringing websites and online pirates. How do the new measures help in the fight against online piracy? The new measures enable copyright owners to more effectively disable access to websites that flagrantly infringe copyright, says Jonathan Kok, head of intellectual property and technology practice at RHTLaw TaylorWessing. Rights holders will be able to apply directly to the courts for an injunction directing the network service provider to block websites that flagrantly infringe copyright without having to first establish that the network service provider is liable for copyright infringement. “This judicial process is expected to be more efficient and avoids implicating the network service providers unnecessarily,” says Kok. “Rights owners will be handed a nuclear weapon
“A major strength of the new measures is that the blocking order can be made against an infringing website.” to obliterate entire sites,” says Adrian Tan, director at Stamford Law Corporation. “Flagrant infringers will be blocked from direct access to the Singapore market. Overnight, the balance of power will have shifted. It will be faster and easier to fight pirates.” How will the courts determine whether a website is ‘flagrantly’ infringing? In deciding whether to impose a blocking order, courts will refer to a non-exhaustive list of factors like whether the website’s primary function is to commit or facilitate copyright infringement, whether the owner of the website demonstrates a disregard for copyright or whether the website contains directories or indexes to facilitate the committing of copyright infringement, says Lau Kok Keng, head, intellectual property, sports & gaming at Rajah & Tann Singapore LLP. 40 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Cheah Yew Kuin
Dedar Singh
Lau Kok Keng
Jonathan Kok
Adrian Tan
What are the strengths of the new measures? A major strength of the new measures is that the blocking order can be made against an infringing website regardless of where it is hosted, according to Lau. And if the copyright owner is not in a position to identify the owner of the website, this will not be a bar to granting the order. Another positive aspect of the new measures is that they balance the interests of the affected parties, says Dedar Singh Gill, managing director, intellectual property department at Drew & Napier. Notice will be given to the website owner and the ISP, and these parties are also given the right to be heard in the application for a Blocking Order, and to appeal against, or apply to vary or revoke such an order. What are the weaknesses of the new measures? The new measures may have set a high standard for determining whether a website is a “flagrantly infringing online location” and put a large number of pirate websites beyond reach of the blocking order, says Cheah Yew Kuin, local principal, intellectual property practice group at Baker & McKenzie.Wong & Leow. Many infringing websites also have mirror sites which makes it easy for tech-savvy users to overcome the blocking efforts. “The ultimate effect therefore may be to make it more inconvenient to download copyright infringing material, but it is unlikely to make it impossible,” says Lau. Also for websites which are found by the courts to be not flagrantly infringing copyright, rights holders must proceed under the current copyright regime. This means taking infringement action directly against the persons who make the infringing content available through the website. “Often, such persons are not easily identifiable and located,” says Kok. Another weakness is that non-exclusive licensees or sub-licensees are not entitled to make the application for a blocking order, relying instead on the copyright owners or exclusive licensees to make the application, says Gill. How will businesses cope with the new measures? Businesses with substantial amount of third party content must be careful. “If they don’t vet the legitimacy of their sources, they may find their entire site shut down,” says Tan. Cheah expects ISPs to be most affected by these new measures, possibly increasing costs with increased implementation of site-blocking orders and “shifting the economic burden of copyright enforcement to the ISPs.”
SINGAPORE BUSINESS REVIEW | JANUARY 2015 41
CMO Briefing
So, is it daily deals... or no deals?
The marketers’ verdict on Daily Deals and how to use them to your advantage (or disadvantage).
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hen Foodpanda launched a Daily Deal promotion through Facebook, the company saw an average uptake in sales of around 9% daily. When the company launched the same campaign through its e-newsletter, it saw a brisker uptake of 22% daily. This is just one illustration of why many marketers see Daily Deal promotions as a crucial part of the marketing plan. In an increasingly fast-paced world, where target markets are more mobile than ever, no brand can survive without striking a tough and hard bargain with their customers, who plainly have too many options to be forgiving. Merchants such as Groupon or SG Deals, who are popular for their Daily Deal models, have indeed given traditional advertisers a run for their money. No marketer who knows what they’re doing will be unfamiliar with a Daily Deal. After all, a Daily Deal is just one of the many modern innovations that have made it all the more difficult for marketers to grab, and keep, attention for their brands. But despite all the flak, using Daily Deals as part of a marketing campaign have proven crucial to some brands. However, on the other hand, when used incorrectly, it could equally prove to be problematic to margins, and ultimately the brand’s or the business’s long term health. When should a marketer start promoting through Daily Deals, and when is it time to stop? Are daily deals good kickstarters? Although there is some debate among seasoned marketers as to the optimal life of a Daily Deal promotion, there is definitely a consensus on one thing: Daily Deals are a great addition to 42 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Daily Deals as part of a marketing campaign have proven crucial to some brands.
a marketing campaign’s front line. The aim of most marketing campaigns, first and foremost, is to attract the market’s attention. According to Cassandra Ong, marketing manager at Foodpanda, Daily Deals are a great tool for attracting substantial attention. “From a business point of view, Daily Deals are effective as they engage customers and allow Foodpanda to remain top of mind,” says Ong. The effectiveness of Daily Deals as attention grabbers is due to a simple but broad-based characteristic that is present in any typical customer: risk aversion. No matter your value proposition, the average customer will not be willing to try it without some cushion. After all, who would want to pay the full price for something that has not been tried and tested? In the eyes of the customer, the bargain brought by a Daily Deal provides this needed cushion–so they can find comfort in the fact that they were at least able to save, if it turns out that they don’t prefer the product after all. The effectiveness of a Daily Deal promotion is not black and white. Its effectiveness as a marketing tool varies in accordance with how it is executed. “The effectiveness of the campaign is also determined by how the campaign is being broadcasted,” shares Ong. In the experience of Foodpanda, as an example, broadcasting the deal via Facebook versus an e-newsletter spelled a 13 percentage point difference in take-up sales. Dennis Toh, owner of The Influencer Network Communications, and Feet Haven, shares another ingenious way of maximizing the Daily Deal. Apparently, these deals can be used to manage a company’s yields, especially during periods of low retail uptake. What roles do daily deals play in marketing? Aside from the fact that Daily Deals are effective attention grabbers, there is another consensus among marketing professionals: the returns of a Daily Deal diminish with use. This is why most marketers do not recommend Daily Deals to remain a central part of any marketing campaign. “Merchants who are keen to embark on a Daily Deals system should understand that the engagement is a one-off – tactical rather than strategic,” shares Toh. The resounding opinion of marketers is that Daily Deals should only be done in conjunction with other strategies. “Long-term strategic planning is key to success through a multi-faceted marketing plan,” says Sherrine Tan, marketing manager of Hotel Clover Group. Ultimately, overusing a Daily Deal promotion will have a negative, not neutral, net effect. “The long term ramifications would be an erosion in brand equity,” advises Toh, adding that, “consumers are conditioned to believe that the brand is synonymous with cheap deals.”
SINGAPORE BUSINESS REVIEW | JANUARY 2015 43
Regional Analysis: asean tourism outbound expenditure reaching US$102 billion in 2012. China looks to break the 100 million mark this year based on early data, driven primarily by the rising affluence of the growing middle class who have more inclination to travel overseas, with longer holidays and to spend more on their trips with their larger disposable incomes, according to Abhiram Chowdhry, Vice President and Managing Director APAC of the Hotels.com brand.
Sitting on top of the tourist world
Rise of the Chinese: All hail the Mainland traveller Hotels in Asian countries are scrambling to cater to their whims.
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hen Chinese travellers step into a hotel these days, they are pampered with customized services such as free room Wi-Fi, local payment options like Alipay, and Mandarin-speaking staff at their beck and call. Hoteliers are rolling out the figurative – sometimes literal – red carpet for Chinese travellers, as more than half have seen an increase in Chinese guests in the last year, and a third believe that Chinese tourists will be the key to their hotels’ near-term success. Should they choose to travel in Asia, Chinese travellers also hold the upper hand as neighbouring countries compete for their travel spending dollars. An enviable selection of affordable flights and tour packages are offered to Chinese travellers, and countries are constructing multimillion-dollar attractions in order to lure them to 44 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Last year, the total number of outbound trips organized for Chinese tourists rose to 97 million, up 14 million from 2012.
their shores. Analysts say this deluge of perks for Chinese travellers comes at a time when they are beginning to usurp Western tourists as the most desired visitor market among hotels and Asian countries due to their fastgrowing numbers and wallets. The outbound tourism segment saw the largest growth in China’s tourism and travel industry in the last decade, rising at an annualized rate of 17.1% during the period, says Hak Bin Chua, ASEAN economist at Merrill Lynch (Singapore). Last year, the total number of outbound trips organized for Chinese tourists rose to 97 million, up 14 million from 2012, overtaking the United States as the world’s largest outbound market, according to data from the Tourism Administration of China. Chinese outbound tourists also overtook Germans and Americans as the world’s biggest spenders on international travel, with total
Hotel pampering Hotels have long been cognizant of the growing Chinese outbound travel market, but now it is almost impossible to ignore if a hotel hopes to stay competitive. Sharing research from an extensive Hotels. com survey of hotel brands around the world, Chowdhry reveals that hotels remain the most popular type of accommodation amongst Chinese travellers, with 84% choosing it as their preferred option. More than half (53%) of the hoteliers surveyed say that they had seen an increase in the number of Chinese guests in the previous 12 months while more than a third (36%) of hoteliers believe that the influx of Chinese tourists is one of the factors that will have the most impact on their business in the next year or two. With palpable demand, hotels are tailoring their services the Chinese traveller’s most pressing accommodation needs. Chowdhry says free Wi-Fi moved up to join Chinese payment methods like Alipay at the top of the list of most important individual products and services they look for in a hotel, both chosen by 59 per cent of travellers. In-house Mandarinspeaking staff was in third place, selected by 50%. “On the whole, hoteliers have recognized and are responding well to the needs of their Chinese guests in many areas. For instance, more than two-thirds (70%) already offer free Wi-Fi, the number one service requested,” says Chowdhry. Like hotels, Asian destinations are also refining their tourism
Regional Analysis: asean tourism strategies to better attract the increasingly picky Chinese traveller with an ever expanding budget. For Hong Kong, whose tourism and retail sector lives and breathes on the 40 million or so Mainland visitors annually – they accounted for 89.2% of total tourist spending and 34.2% of total retail sales last year – the challenge is to reinvigorate visitor interest and spending amid brewing local discontent. Mainland visitors, at least in the near term, are turning away from the territory due to reported tightening of Mainland visas and entry permits to Hong Kong, the continued Occupy Central protests and vocal grievances among Hong Kong residents about the large influx of Chinese tourists clogging the transport systems. Similarly, Singapore is facing an uphill battle to keep Chinese travellers coming in droves mainly due to the rising cost of living and strengthening Singapore dollar, says Jonathan Galligan, head of Singapore research at CLSA. “Consumer prices have risen. Strong Singapore dollar has appreciated against the renminbi by 4% over the past five years.” These macroeconomic trends compound the negative impact of China abolishing ‘zero- dollar’ tours that had helped make Singapore a preferred destination for Chinese travelers. Galligan notes that in the first five months of the year, overall tourist arrivals have declined by 2% to 6.3 million, and Chinese arrivals
in the same period dropped by 27% “with few signs of correcting.” “It is clear how much the retail space can be at risk with declining tourist numbers,” he adds. Singapore hopes to reverse the visitor bleed with a strong infrastructure expansion plan. It recently opened Sports Hub to host the Rugby World Cup 10s last June. It will also host various sporting events and concerts. It also recently introduced a River Safari, Pinacotheque Museum, the National Gallery Singapore and Madame Tussaud’s on Sentosa Island. But Galligan believes Singapore faces increasing regional competition for Chinese tourists as other destinations will soon begin to offer similar attractions. He cites Bangkok as likely hosting an F1 night race by 2015, South Korea opening its version of Universal Studios, and Japan possibly opening new integrated resorts in the medium term. Southeast Asia enters the ring As Hong Kong and Singapore lose some of their lustre, Southeast Asian countries are emerging as part of the Chinese traveller’s priority options due to their proximity, low travel fares, and improved infrastructure systems. Prospects for inbound mainland tourism remain bright for Southeast Asian nations, says Marcella Chow, emerging Asia economist at Bank of America Merill Lynch (Hong Kong). She says China tourists account
Number of outbound mainland continued growing in the past few years
Source: CEIC, HSBC Source: CEIC, BofA Merill Lynch Global Research
Averaged over 2001-12, tourists from China grew 14.7%, even faster than those from ASEAN (+7.1%) and Australia (+7.1%)
for a bulk of increase in tourism among ASEAN countries over the past decade, tripling from 1.9 million in 2001 to 10.1 million in 2013 (or 12.4% of total). Averaged over 2001-12, tourists from China grew 14.7%, even faster than those from ASEAN (+7.1%) and Australia (+7.1%). “The rising tourism tide will unlikely recede, boosted by affordable air travel, increasing connectivity, a growing middle class and a rising and more affluent China,” says Chow. 2015 promises even more enticing options for Chinese travellers with ASEAN’s 2015 “open skies” initiative and further investments in transport infrastructure, adds Chua. And although certain unfortunate events may have set back the region – the Bangkok shutdown, the missing Malaysian Airlines MH370 plane and natural calamities in the Philippines– these will likely be short-term headwinds to a structural ASEAN tourism boom.
EXPERT OPINION: how has the drop in chinese tourist arrivals affected retailers? In response to new travel regulations barring tour companies from organising free trips abroad, Chinese arrivals have begun falling y-o-y since October 2013, well before the MH370 incident in March. However, after the missing aircraft event in March, the decline of Chinese visitor arrivals it took on greater intensity with April’s statistics registering a 44.5% decline and then followed by a 51.6% decline in May. However, the rate of decline has been slowing and as of
August, it has almost halved to a 28.2% fall. Retailers have nonetheless felt this as Chinese shopping dollars are a great help in a market where domestic consumption is being lured away by the internet and budget travel expenditures. Unfortunately, the strength of the Singapore dollar has not been helpful to tourist expenditures in general as it still could not offset domestic supply chain cost push pressures. These come in the form of rents, wages and transportation costs. There are a couple of ways which retailers are coping with this. For the weak holders, they
simply close down and try their hands at entrepreneurialship some other time again. For the stronger ones with a chain of shops, they would probably close up those which register negative cash flow and set up in other areas in the hope that these new outlets will be cash flow positive. For the industry in general, it would be the continuing trend where tenants, in trying to lower overheads, give up some space by sub-letting to another use. Retailers will be thinking even hard and more out of the box to survive as a host of factors seek
to draw away consumers. For landlords, there is comparatively little they can do other than be more flexible in their sub-letting policies to permit struggling retailers to breakup the space and seeking out possibilities to allow more F&B users to come into their malls. However, for the short term, it is still better to be a landlord as the retailers are fighting the front line battles for them. For 2015, we expect rents in prime Orchard and suburban malls to be flat and registering almost full occupancies. Alan Cheong, senior director, Savills Singapore
SINGAPORE BUSINESS REVIEW | JANUARY 2015 45
analysis: mas policy statement
Maintaining vigilance against inflation
Why MAS chooses to maintain its “modest and gradual” policy The overall tone of Singapore’s MAS is slightly less optimistic than previous policies.
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n maintaining its policy of a modest and gradual appreciation of the SGD NEER, there are no big surprises in the latest monetary policy decision. The MAS maintained the slope, width of the band and the level at which it is centred. HSBC estimates the slope of the SGD NEER appreciation at +2%, while the width of the band is estimated at +/- 2%. The monetary policy statement, however, provides insight into how the MAS views the current global economic environment, and overall the tone can be described as slightly less optimistic when compared with April’s text. However, HSBC believes that at this juncture there is relatively small probability that the MAS will switch to a more dovish stance in the near future. At the end of the day, the sticky core inflationary outlook trumps what the MAS still sees as a 46 SINGAPORE BUSINESS REVIEW | JANUARY 2015
“The MAS narrowed its core forecast for 2014 to 2-2.5% from 2-3% previously.”
short-term deceleration in growth due to cyclical external factors, coupled with the short-term side effects of the economic restructuring – which it expects to be a relatively drawn-out process. Inflation: A domestic story From an inflation perspective, MAS’ assessment is little-changed from before. The MAS narrowed its core forecast for 2014 to 2-2.5% from 2-3% previously, given the expectations that core is unlikely to accelerate into the top half of the former range in the next few months, according to recent trends. However, the MAS still sees core in the 2-3% range for 2015, in spite of expectations for a continued downtrend in headline CPI, a result of soft property prices and declining CoE premiums. The MAS expects 2015 headline to only come in at 0.5-1.5%. The central bank remains con-
cerned by the continued pressure on core inflation due to tight labour market conditions, a side-effect of the economic restructuring. This process – which seeks to boost productivity and turn Singapore into a global intellectual property hub – is in line with Singapore’s competitive advantage and its labour and land constraints. However, curbs on foreign labour have pushed up unit labour costs, while productivity has yet to catch up – in fact, labour productivity declined 1.3% in 2Q. The MAS continues to expect higher wages to filter through into prices, with strong price momentum in early 2015 before easing in the latter part of the year. HSBC thinks that the high core inflation range is also a result of MAS expectations that the restructuring will go on for some time, which is why the onus will be on the forward-
analysis: mas policy statement “Aside from FX policy, the SGD’s broader fundamentals should make it less exposed to external developments.”
All things are looking up for Singapore’s MAS
looking central bank to remain vigilant against inflation. Monetary policy implications Given the current balance of a relatively subdued GDP growth environment and steady core inflation that is expected to move higher, there is ostensibly little scope to change policy settings. The current GDP print – though above consensus and a sequential improvement from the soft 2Q reading – is mostly a story of positive catchup from the manufacturing sector. Growth in the dominant services sector slowed, while the construction sector registered its second consecutive contraction. The MAS’ outlook on growth sounds slightly less positive compared with the April statement. For example, the text shifts from “The Singapore economy is expected to grow at a moderate pace in 2014, supported by the cyclical uplift in the industrialised economies…the level of economic activity should stay on a broad upward trajectory for the rest of the year,” to a less optimistic, “the economy is projected to grow at a moderate pace for the rest of 2014 and in 2015, as the expected cyclical uplift from external demand will be tempered by domestic supply-side constraints.” Nonetheless, the MAS remains broadly optimistic concerning the global recovery, which in the end is
very important for Singapore’s highly open economy. The MAS’ decision to maintain a path of modest and gradual appreciation of the SGD NEER over the coming six months should provide ongoing support to the currency relative to other currencies in Asia from an FX policy perspective. More supportive FX policy has been evident, not only in the fact that the MAS has maintained the current 2% appreciation path for the SGD NEER for the past five meetings, but also in the behaviour of the SGD NEER within the band. With core inflation forecasts (the most important indicator for future policy) for 2015 at 2-3%, there is little to suggest that the MAS will look to move onto a less hawkish bias at its next meeting. FX policy therefore remains largely supportive for the time being. Aside from FX policy, the SGD’s broader fundamentals should make it less exposed to external developments – such as an intensification of negative market sentiment or the end of the Fed’s balance sheet expansion – over the medium term. These strong fundamentals largely come down to Singapore’s strong external balances and net asset position. The current account surplus remains the largest in Asia (as a percentage of GDP) while overseas assets – particularly of shorter-term capital such as portfolio holdings – are also much larger than
most peers. These factors have allowed the SGD to hold up better than others during past Fed tightening cycles – something that is likely to be repeated this time around as well. Rates strategy The MAS’ decision to maintain a modest tightening stance is expected to keep short-dated SGD swaps low relative to HKD and USD equivalent. This has already been evident as the 3-month implied volatility of 2-3yr SGD swaps has been relatively lower than that of HKD and USD swaps. The volatility at the front-end of the yield curve in SGD, HKD and USD markets has broadly increased over the past few months in anticipation of tightening by the Fed next year. However, the SGD SOR fixing, a key determinant of short-dated SGD swap rates, is not only dependent on Fed tightening expectations but also on currency expectations. But in the current environment the policy stance by the MAS of modest currency appreciation reflected in implied FX forwards partially offsets any rise in USD Libor. All else equal, a decline in USD/SGD forward points on the back of currency appreciation expectations drives SOR lower while any increase in USD Libor leads to higher SOR. The jump in 6-month SOR fixing mid-September was led by expectations of a weaker currency, but this has already reversed. In the bond market, HSBC remains constructive on long-dated Singapore Government Securities (SGS), given house view that 10-year US Treasury yields will be at 2.1% at the end of 2014 and 2.5% at the end of 2015. by Joseph Incalcaterra and Paul Mackel, HSBC Global Research
Core inflation remains sticky in spite of falling headline CPI
Source: CEIC, HSBC
SINGAPORE BUSINESS REVIEW | JANUARY 2015 47
PEOPLE PROFILE
“I don’t have a profit maximizing target, have an editorial maximizing target.” BBC World News CEO Jim Egan told Singapore Business Review’s editor-in-chief Tim Charlton about the group’s Asian plans, push to digital and why America is still a prime market for the british broadcaster.
Jim Egan Chief Executive Officer BBC Global News The decision to set up in Singapore was made a long time ago– before China’s major meteoric rise. Are two main Asian broadcasting centres needed? No, not from a TV production point of view. We’re pretty set on Singapore being our Asian hub and colleagues from BBC worldwide have increasingly based themselves here. The Chinese story is obviously a very, very big one. But Singapore is where we’re set up currently and China is obviously still a difficult market for us as well. BBC World News is restricted to International Hotels and Foreign Employee Compounds and so on. The one big growth area from China is a Chinese brand wanting to advertise to global audiences. So from a commercial point of view we’ve got a bigger sales presence both in HK and also in Beijing, but as far as production is concerned– both digital and TV production– Singapore is where it’s at. What are the new things that you’re doing to attract more viewers on mobile devices? 48 SINGAPORE BUSINESS REVIEW | JANUARY 2015
Mobile is one of the three biggest trends right now so we have a relatively familiar approach to mobile, where we have both an unlimited app strategy and a mobile browser approach. We have news and sports apps for two major platforms. And for a couple of years now we’ve been working in a responsive design technology on the mobile browser, which basically means from the desktop all the way through to the small screen of the smart phone we have a single site which is just rendering and presenting itself in a way that fits the device that people have. So we’re not choosing between a browser-based or app-based approach, we’re doing both. What we’re seeking to do is to integrate more videos into our mobile presence because the one thing that’s growing faster than mobile is video streaming. Are there plans to do more regional-specific features for the website or mobile? Not huge plans. I mean we have this constant model of the extent with which we present a global agenda for a global audience. I think what we’re seeking to do is to make global news reach the relevant audience rather than having half a dozen different and distinctly contact-differentiated editions so we are doing more with our Asian news home page. Can you disclose any of the figures in terms of your TV audience and revenues that come from Asia? I think for TV, about 30% of the audience is from Asia, including India. On the digital side, it’s lower at around 20%. The US is by far our number 1 market, so
more than half of our digital traffic comes from the US. Canada is the number 2 market, but then Australia and India are numbers 3 and 4. So 30% for the TV and 20% percent for digital. The revenue is about a third as well. Digital revenues are now bigger than TV revenues. We turnover about a hundred million pounds a year. There are money-making, profit-maximizing, properties for the BBC such as Top Gear and Dancing With The Stars. The news department is commercially funded, so we have to live by commercial means. But I don’t have a profit-maximizing target. I have an editorial-maximizing target.
We’re pretty set on Singapore being our Asian hub and colleagues from BBC worldwide have increasingly based themselves here.
If you get more revenues coming in, where would you like to deploy those funds? Well the US is still the biggest market for us. On the TV side, there are about 110 million TV households in the US. Over the last years we’ve got 6 million to 30 million households and we’re finding the US to be quite an interesting market for us, one that’s opening up a little bit. So if we had more money I’d be interested in expanding what we do in the US. At the same time, Asia is a big growth market for us and it will continue to be in the future. I’d like to push harder on that theme of continuing to provide a global editorial agenda where people come to us to find out the most important and the most interesting things happening in the world right now. But we’re changing our presentation in that it becomes more regionally relevant for people in very heterogeneous regions like Asia where audience interests and demands aren’t the same in India, Indonesia, and Australia.