Singapore Business Review (April - May 2018) by Charlton Media Group

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Art appreciation is on the rise, but commercial success has been slow.

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MICA(P) 244/07/2011 KDM No: PPS1645/3/2008

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Manit Sriwanichpoom, Pink Men vs. Pink Buddha, 2007. Mixed media Image courtesy to ART STAGE, Lucas Schifres.

FROM THE EDITOR About Us

Welcome to Singapore Business Review’s annual Art issue. Our channel checks with industry experts revealed that Singapore’s art sector has continued to receive a lot of support from government agencies and the public’s interest is undeniable, but translating this into commercial success is still a challenge for many players.

AUDITED CIRCULATION: 22,265 ONLINE READERSHIP: 215,000 monthly uniques through Google Analytics The Singapore Business Review is the highest circulating and best read business magazine in Singapore. Our online readership has an average of 215,000 unique viewers, according to Google Analytics. We won the Business Trade Media of the Year Award at the 2017 MPAS Awards. Do reach out to us if you would like us to tell your story to our readers via print & online advertising or events. Publisher & EDITOR-IN-CHIEF Tim Charlton production editor Genelie Sta.Ana-De Leon GRAPHIC ARTIST Elizabeth Indoy ADVERTISING CONTACT Rochelle Romero rochelle@charltonmediamail.com

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Meanwhile, it was a banner year for mergers and acquisitions (M&A) activity in Singapore last year, as estimated fees for completed M&A deals in 2017 totaled $236.8m, up 80.8% compared to a year ago, and the highest annual fee volume since records began in 2000, according to Thomson Reuters data. Notably, overall M&A activity involving Singapore reached an alltime high as deal value climbed to $95.3b in 2017, up 11.4% from a year ago, beating the 2014 record of $93.2b. We also looked at what’s happening in Singapore’s hotel and serviced residences sector. Interestingly, both are adapting a man-lean model: lesser human workers, more bots. Some of the innovations currently in place in the region include robots that can cook eggs, pick up laundry and linens. Enjoy the issue!

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Tim Charlton

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CONTENTS

Cover Story 30 Growing pains in Singapore’s art scene

FIRST

Financial insight M&A deals reach an all-time high in 2017

ANALYSIS Residential Property: value opportunity in a richly priced world

FIRST

REGULAR

08 Singapore retailers push

14 Are we heading into

28 Economy Watch

42 Legal Briefing

for premiumisation

a housing bubble?

09 Siri, what’s my bank balance?

44 CMO Briefing

10 Retail giants knock

on Singapore’s door

Industry Insight 16 Meet Singapore’s

12 Singapore could be the first casualty

26 No bank is an island: Beating

34 ‘Smart hotels’ are on the rise

38 Foreign housing demand kept

of a looming global trade war

RANKINGS

cryptocurrency czars trade finance challenges

Published Bi-monthly on the Second week of the Month by Charlton Media Group 101 Cecil St. #17-09 Tong Eng Building 2 SINGAPORE SingaporeBUSINESS 069533 REVIEW | MAY 2018

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News from sbr.com.sg Daily news from Singapore most read

Residential property

SHIPPING & MARINE

RESIDENTIAL PROPERTY

Rental volume of HDB flats and private condos crashed in February

Sembmarine could build US$1.36b Energean vessel

Nearly half of home buyers anxious about price hikes this year

The rental volume of private condos in Singapore crashed by 20.4% MoM from 4,242 units in January to 3,376 units in February, the Singapore Real Exchange (SRX) revealed. On a yearly basis, rental volume was lower by 19.2% than 4,176 units last year. According to preliminary data, rents rose by 1% in February. Rents in CCR, OCR and RCR increased by 2.3%, 0.2%, and 0.7% respectively.

Sembcorp Marine has the potential to bag its first major contract for the year, DBS Equity Research said. Mediterranean firm Energean Oil & Gas (Energean) has handed out a contract worth US$1.36b for the floating production, storage and offloading (FPSO) unit for its proposed Karish gas field development off Israel to TechnipFMC, a report said.

Almost half (46%) of Singaporeâ&#x20AC;&#x2122;s home buyers anticipate prices to rise further this year, leading to dissatisfaction in the residential market, PropertyGuruâ&#x20AC;&#x2122;s 2H2017 Consumer Sentiment Survey revealed. This is the highest number in four years. Satisfaction levels in the Singapore residential market have gone up (37%), unsatisfaction levels are still higher (42%).

How small Singaporean business can cope with disruptive technology BY JACKY TAN It was during one fine day in my trip at East Coast Park, when I decided to use a bike sharing app for the first time. I thought I was a loyal customer to a local bicycle rental kiosk at the park where I would pay $8 for a two-hour ride. However, I was not. The bike sharing app offered me 10 free rides with no time limit. Well, simple maths will tell me to sacrifice customer loyalty to 10 free rides. Right? So, I took the bait.

2019: The age of mobile agility and the effects on the PR and advertising industry BY CHARLES OGILVIE Mobile agility allows consumers access to information no matter where they are. Singapore is inherently unique in that the connectivity permeates across the island at both higher speeds and availability levels as it does in other places with more land mass. Either way, this technology makes it possible for consumers to go everywhere and do anything with the help of connected apps and IoT devices.

MOST READ COMMENTARY What will be the impact of a Sibor rate hike on homeowners and businesses? BY PAUL HO The Federal Reserve has raised rates 3 times in 2017 to 1.25%. The federal reserve has hinted at 3 rate hikes in 2018 and 2 more rate hike in 2019. Is that to be taken seriously? If the rates were to be raised 5 times and each time is expected to be 0.25% to 0,5%, that means that the rate will likely end up at 1.25% + 1.25% to 2.5%.I think we have to treat the rate hikes seriously or at least prepare for it.

SINGAPORE BUSINESS REVIEW | MAY 2018

2018

International Basic Compliance & Ethics

ACADEMIES FROM THE SOCIETY OF CORPORATE COMPLIANCE & ETHICS

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The Society of Corporate Compliance and Ethics International Basic Compliance & Ethics Academies® provide three and a half days of classroom-style training in the fundamentals of compliance and ethics management. Apply to take the optional Compliance and Ethics ProfessionalInternational (CCEP-I)® exam at the end of the academy. Topics addressed at an academy include: - Monitoring, auditing, and internal reporting systems - Response and investigation, discipline and incentives - Anti-Corruption and Bribery - Trade Sanctions - Risk assessment - and more

corporatecompliance.org/academies Questions: lizza.catalano@corporatecompliance.org

Agenda PEOPLE | PLACES | SERVICES | OPPORTUNITIES

OPPORTUNITIES

Seamless The second edition of Automechanika Ho Chi Minh City will open its doors once again from 25 – 27 April 2018, with an even more ambitious show planned following a successful first year. The three day fair has now become Vietnam’s leading regional trade fair for the automotive service industry, which is complimenting the country’s position as a frontier for growth within the sector. Automechanika Ho Chi Minh City 2018 is expected to house 360 exhibitors and welcome 8,500 visitors at the Saigon Exhibition and Convention Center in Ho Chi Minh City, Vietnam.

SERVICES

Seamless

OPPORTUNITIES

SCCE Join The Society of Corporate Compliance and Ethics at the Singapore Academy 9-12 July for three and a half days of classroomstyle training in the fundamentals of compliance and ethics management. Learn everything from understanding risk, and setting policies to training and investigations. Learn more and register URL: http://bit.ly/2q8l7nR

SINGAPORE BUSINESS REVIEW | MAY 2018

OPPORTUNITIES

EASB

TAFEP The Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP) organises a series of clinics on the Tripartite Standards (TS) to assist organisations understand what the TS initiative is about, so as to help them adopt and implement the various standards that have been launched to date. For more information about the Tripartite Standards Clinics, visit tafep.sg or email ts@tafep.sg.

Seamless is the key meeting place for this brave new world of commerce. It is a new event built on 20 years of experience – a seamless continuity from Asia’s largest and longest running conference focussed on cards and payments, to a dynamic summit and large-scale exhibition bringing together the converging worlds of ecommerce, retail, and payments.

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FIRST Higher pay rise foR niche skills in 2018

One in two employers in Singapore plan to give paycheck bumps of 3-6% in 2018, but they might go beyond the average for in-demand skills and candidates. Hays Asia Salary Guide reports that better salaries will be up for specialised roles in sales, IT & accountancy and finance, where there is a huge talent shortage. Lynn Roeder, managing director, Hays Singapore, said that candidates would be better-off knowing their value in the market. On the other hand, Roeder added that employers also have a responsibility to discuss the process of salary hikes, to avoid confusion.“For employers, communicating to staff about the process behind salary increases will be even more important in 2018, particularly if the economy continues to show the strong improvements we seen in 2017 and likely to see in 2018, creating the perception that there should be more budget for salary increases,” Roeder said. A select part of the labor force will be lucky enough to get more than 6% salary increase in the coming year, as 14% of the respondents expressed that they are feeling extra generous this year. However, one in three employers plan to give pay hikes of up to 3% only, and an unlucky lot will receive no increases from 5% of the respondents. Amongst all the five markets that Hays surveyed, Singapore had the largest number of employers (89%) who awarded staff benefits. Malaysia, Japan, Hong Kong, and China churned up an average of 83% of employers who said that they give benefits to their employees. Amongst the many types of benefits, the most popular benefits in Singapore are health and medical benefits (93%), car allowance (43%), and life assurance (36%). “Of the candidates surveyed in Singapore, 54% are unhappy with their current level of compensation, but 64%did not ask for a pay rise during their last review,” Roeder added. 8

SINGAPORE BUSINESS REVIEW | MAY 2018

Johnnie Walker’s by invitation only private suite

Singapore retailers push for premiumisation

hen Diageo’s scotch whiskey brand, Johnnie Walker, thought of making a stronger splash in Singapore, it opened a by-invitationonly private suite called Johnnie Walker House where selected guests could sample limited-edition whiskies from some of the rarest distilleries of Scotland. The space is the first in Southeast Asia and one of 26 suites in the world, and was a strategic move to tap into Singaporeans’ rising demand for premium products and consumer experiences. “As consumers become more discerning, they are also actively seeking out access and rare experiences,” said Praveena Sivanesarajah, general manager, Emerging South East Asia at Diageo. BMI Research noted that Diageo’s strategy takes advantage of the big opportunity for brands to provide premium products and services in Singapore, especially amidst intensifying e-commerce competition and rising discretionary spending amongst Singaporeans. Other brands are likewise choosing

One key driver of the premiumisation trend is climbing total household spending per capita in Singapore, which BMI Research expects to reach $28,443 in 2022.

to deliver the premiumisation strategy through their physical stores. Spanish winemaker Gik, for example, is planning to sell its popular blue-colored wines via Blue Willow, a blue-themed cafe where Singaporeans can savour the drink and take Instagram selfies. There are also cafés inspired by movie or cartoon characters springing up across the island, such as Miffy, Powerpuff Girls and Gudetama, noted BMI Research. “Singapore’s traditional bricks and mortar retail sector is fairly saturated, but the country offers opportunities for companies with a premium focus,” the research firm said. One key driver of the premiumisation trend is climbing total household spending per capita in Singapore, which BMI Research expects to reach $28,443 in 2022, the highest in Southeast Asia and will be more than three times that of secondranked Malaysia’s spending per capita of $9,333. Singapore is following in the footsteps of developed states, where preference is shifting towards spending on “shareworthy” experiences and other leisure activities. This trend is being driven by the millennial age group, which is expected to reach 1.6 million and will account for 27% of Singapore’s total consumer base by this year. The focus on physical store “experiences” is catching on outside the food and drink sector as well. Healthcare and beauty chain Watsons revamped its Bugis Junction shop to feature an open plan layout, a hot pink runway, and retail staff wearing jeans and casual wear in an effort to cater to millennial shoppers, said Tricia Song, director and head of research at Colliers International.

Watsons revamped its Bugis Junction shop

FIRST

In 2018, OCBC rolled out its voice-enabled banking services

Siri, what’s my bank balance?

all centers are out, Siri is in. Gone are the days when a Singaporean has to dial a call center to do his bank transactions. OCBC bank recently launched a completely voice-enabled service for day-to-day banking and cashless payment transactions for their retail clients, which it said was a first in Singapore. The innovation — which the bank coined as “voice-enabled conversational banking” — responds to their clients’ rising use of voice assistants on mobile devices and

follows the rollout of a similar service to business banking clients, the bank said in a statement. A bit of setup is required though before commanding Siri to perform these common transactions: Users must update their iPhone devices to at least iOS 11 software, download the latest versions of OCBC’s Mobile Banking App or OCBC Pay Anyone App, and learn a few of the command keywords required to activate Siri’s processes. To conduct a bank balance check, for example, a client can ask “Hey Siri, what’s my balance?”, or “How

Clients can also transfer funds by telling Siri whom to send the money to and how much to send.

much money do I have in my bank account?” The client then needs to authenticate the transaction through fingerprint or facial recognition, depending on the user’s device and preference, after which the virtual assistant proceeds to deliver the requested banking information. When it comes to e-payments, OCBC Bank said the voice-enabled service can be made instantly to any bank account in Singapore, including bank accounts not linked to PayNow, a nationwide peer-to-peer funds transfer service that enables funds transfers using mobile or NRIC numbers. Aditya Gupta, head of e-business Singapore at OCBC Bank. noted that they plan on adding more voice-enabled banking transactions in the future such as bill payments, money management and other common servicing requests.

OCBC’s net profit rose 19% S$4.15b

Source: OCBC

The Chartist: Property sector picks up in 2018 Home vacancy rates in Singapore are dwindling and new home sales are picking up, thanks to a continued cyclical upturn in the city’s property market. Derrick Heng, analyst, Maybank Kim Eng said that with unsold delivery at just 1.6x annual sales, there is a possible scope for developers to raise prices in 2018. A smaller net supply of only 4,900 units in 2018 is expected to greet buyers, on the back of the demolition of 3,000 units for redevelopment. Heng added that it is too early to worry about an oversupply from increased enbloc deals, as each unit taken out will be replaced by 3-4 units in the redeveloped project. According to him, there is an estimated 11,000 units average net supply per year after the completion of redevelopment, a number below the five-year average absorption rate of 13,200 units.

Inverse correlation between rents and vacancy rates of private homes

Source: URA, Maybank Kim Eng

Net supply of private homes to fall in 2018

Source: URA, Maybank Kim Eng

SINGAPORE BUSINESS REVIEW | MAY 2018

FIRST Ambassador briefing FINLAND

Her Excellency Paula Parviainen

When current Finnish Ambassador in Singapore Paula Parviainen was appointed to the position in 2015, her arrival could be seen as a a sort of homecoming. Two decades prior, she had landed in Singapore for her first diplomatic assignment and stayed for five years before moving to various posts in New York and Paris, and most recently as deputy head of mission in Beijing. Having returned to Singapore, Parviainen noted the robust progress in the trading and investment relations between Finland and Singapore. “It was good to come back and see the big positive change that has taken place,” she said. Total trade between the two nations in 2017 reached €400 million, she said, with trade, excluding services, being “pretty much” balanced. She added that the trend of business and exchange between the two nations “very positive”, and said she wanted more business and investment growth. Around 150 Finnish companies operate in Singapore, many of which do business in the wider Asia Pacific or Southeast Asian regions.“All big Finnish companies, such as Nokia, Kone, Neste, Wärtsilä, Cargotec and Konecranes have been present here for a long time already,” said Parviainen. “Now, more and more startups and SMEs are coming because they find the business ecosystem here quite appealing and easy for foreigners as well.” As for Singaporean companies looking to expand in Finland, Parviainen pointed out three key opportunities despite the European country’s relatively small market size. “Market access to Northern Europe, Finnish products and services based on a long history of science-based innovation, and good availability of cost-competitive top talent are the main reasons for foreign companies, including Singaporean ones, to partner invest in Finland.” Photo courtesy: Marica Salokangas

SINGAPORE BUSINESS REVIEW | MAY 2018

Retail giants knock on Singapore’s door

hen Japanese discount chain Don Quijote opened its first store in Singapore last November, it was the first step in its campaign to conquer the rest of Southeast Asia. More retail and e-commerce brands are establishing a base in Singapore from which they can eventually stage their expansion to the fast-growing and spend-happy consumer populations in Southeast Asia. “We see the relatively low taxes in Singapore to continue being a factor that will drive the entry of retail and consumer companies in Singapore, as a means to break into Southeast Asia.” said Nainika Singh, consumer & retail analyst at BMI Research. Aside from Don Quijote, which plans to use Singapore as a regional headquarters to sell its products ranging from fresh produce to luxury watches, fellow Japanese retailer and fashion mall operator LUMINE opened in Singapore in December last year. The company also said Singapore will serve as an important entry point to the Southeast Asian market and pivotal in positioning the brand on the world map. Meanwhile, Regina Lim, head of capital markets research, Southeast Asia at JLL noted that as e-commerce

Japanese retail giant Don Quijote opened its first Singapore store in November

continues to grow in Southeast Asia, more technology and business services firms supporting the sector will set up shop in Singapore. “In the last five years, these companies have been a strong contributor of office take-up in Singapore, in contrast to the dominance of financial institutions historically.” The world’s top e-commerce players such as Amazon, Alibaba, and Tencent have recently set up in Singapore, said Singh. E-commerce sales in the country is projected to reach $5.6b in 2018, rising up to $6.7b by 2021, on the back of high 3G/4G penetration and a large affluent population. Despite a government budget Singapore still initiative to raise the goods and service tax to 9% from 7% between 2021 has a lower and 2025, Singapore still has a lower value added tax than South value added tax than South Korea Korea (10%), (10%), Australia (10%), and New Zealand (15%), and this according Australia to Singh will cement Singapore’s post (10%), and New Zealand as a springboard for international companies to break into Southeast Asia. (15%

Mobile App Watch

No more long queues with new tax refund app Tourego allows tourists to complete the tax refund process and get their money back without the need for the manual input of passport information. Users of the app just have to scan a QR code in order to get a digital eTRS ticket. Scanning the eTRS barcode at self-help kiosks in the airport will then complete the tax refund. Tourego founder and chief executive officer Tan Tie Wee says the tax refund platform has even been recognised by various Singaporean government agencies.“Having gotten our licence from Inland Revenue Authority Of Singapore, we are working with other government agencies to roll out the full suite of our planned features to enhance the full tax refund experience for tourists – from shopping at the stores to completing the tax refund process at the airport,” says Tan. Tourego promises to make the issuance of the eTRS ticket more efficient.

Tan Tie Wee, CEO of Tourego

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FIRST

Singapore could be the first casualty of a looming global trade war In March. US President Donald Trump issued hefty tariffs of 25% on steel and 10% aluminium imports that raised the possibility of a trade war should other countries raise their own rates in retaliation. As a heavily export-dependent economy, Singapore stands to lose as much as $22b in the case of a full-blown trade war which could smash financial markets and hit domestic manufacturing sectors in the citystate, according to analysts. “Trade war could trigger the risk of a recession. Risk assets will likely to be depressed for an extended period, until a ceasefire is reached, and typically when the economic losses are significant for all parties involved,” Bank of Singapore senior investment strategist James Cheo said in a report. The city’s promising growth prospects are also marred by the possibility of a global trade war, which was revealed by the Monetary Authority of Singapore (MAS) in its survey of professional forecasters. “The possibility of a global trade war scenario present significant concerns for a large proportion, or 88%, of respondents. This is more than double that in the December survey,” MAS noted. However, such a massive loss would only

occur in the worst case scenario, said Sian Fenner, lead economist at Oxford Economics. In an interview with Singapore Business Review, she noted that this would only occur if the Western superpower defaults on its trade obligations and pulls out of the North American Free Trade Agreement and imposes blanket trade tariffs on China, South Korea and Taiwan, prompting the countries to retaliate. “This would hit world trade and global financial markets adversely affecting Singapore’s domestic manufacturing sectors and export-dependent services such as transport and storage,” said Fenner. Worst case scenario This could lead to as much as $22b loss in end-2019 GDP to the extent that the the central bank would have to intervene to avoid subsequent market shocks. “In the event that this worse scenario played out the MAS could loosen monetary policy by adopting a depreciation bias or at the very least maintain its current zero appreciation bias in SG$NEER into 2020,” she added Against this bleak outlook, economic growth will inevitably slow down to 1.8% in 2019 from 3.6% in 2017 because even if tariffs are not imposed directly on Singapore,

Singapore stands to lose as much as $22b in the case of a full-blown trade war

exports would still reel from lower Chinese and regional trade. “Being a small, open, and trade dependent economy, Singapore will likely be negatively affected should a trade war erupt. This could weigh on exports, with exports accounting for a significant part of the economy of 173% of GDP in 2017,” Chia Shuhui, senior analyst at BMI Research. Alicia Garcia Herrero, chief economist at Natixis echoes this sentiment, “Although the directed impact on Singapore maybe more muted thanks to FTA, the reality is that Singapore is really an entrepot so it is affected by reduction in demand for goods of neighbouring countries. In addition, the war that the US is conducting is not only a trade war but also an investment word (Broadcom has become one of the first victims) as well as currency war, talking down the USD.” However, Fenner noted that the likelihood of such an extreme scenario remains low, estimating the probability of a full-blown trade war at only 12%.

OFFICE WATCH

Check out Oracle’s new digital hub in Singapore A quick exploration of Oracle’s Digital Prime Hub, located in Mapletree Business City, will show an office fitted with multicultural decor and comfortable amenities fit for a global-minded, digitally-powered enterprise. One section of the Digital Prime Hub houses birdcages and a motif resembling a peony to depict Chinese culture. Another section features a wall motif of wayang calls drawn from Indonesian or Balinese culture. Guided by an interior design team from BBFL Design, Oracle constructed the Digital Hub not only with attractive design in mind, but also practicality and productivity. Ergonomic chairs, adjustable- height desks, and communal seats fill the office space.“Abuzz with the creative energy of a startup, the hub draws on the latest collaboration tools, techniques and technologies to transform the buying experience. This new space reflects Oracle’s strong commitment to better serving the SMB market,” said François Lançon, senior vice president at Oracle Japan and Asia Pacific 12

SINGAPORE BUSINESS REVIEW | MAY 2018

Prime Wall

Sitting area

Intricate wall display

Lounge

Co-published corporate profile

CorpPass to be the only login for businesses by the 3rd Quarter of 2018 Over 230,000 businesses now use CorpPass to access more than 130 government digital services.

hen Kelvin Tan first used CorpPass, he realised how convenient it is to have a single account for all his transactions with government. CorpPass’ easy-to-use interface was a relief for Tan, who works in a family-owned SME which handles bottled food products. “The basic setup is user-friendly, and I have even managed to guide my original equipment manufacturer client through it with the help of a demo on Facebook. It helped that resources were readily available in the form of online materials and public briefings,” he says. From the 3rd Quarter of 2018, CorpPass will be the only login method for businesses to transact with government agencies online., Serving as a single corporate digital identity, CorpPass creates opportunities for even more Government services and transactions to be provided online conveniently and securely. Need for a Single Corporate Digital Identity Businesses currently conduct business transactions through multiple digital identities such as SingPass and EASY. For instance, employees who go on leave tend to share their personal SingPass IDs and passwords with colleagues to help carry out business transactions like filing corporate tax, or applying for permits and licences.

Having separate login IDs for corporate and personal matters will therefore better protect information of both businesses and employees. Having a single corporate digital identity for each user will also make it more convenient for each user to transact with multiple government agencies, as they no longer need to handle multiple login IDs for different services. In addition, CorpPass will allow businesses to have greater control, as they can grant and manage employees access to each government digital service. Register for CorpPass Now Developed in consultation with industry partners and pilot users, CorpPass has been rolled out since September 2016. More than 130 government digital services are now using CorpPass as a login method. More than 90% of businesses are already using CorpPass. Businesses that have not registered for CorpPass should do so as existing login methods, such as SingPass and EASY, will cease by the 3rd Quarter of 2018. For a step-by-step walkthrough, visit www.corppass.gov.sg. The CorpPass Helpdesk can also be reached at (+65) 6643 0577 or support@corppass.gov.sg. If you haven’t gotten started on setting up your CorpPass, here’s a quick guide:

“More than 90% of businesses that have regular transactions with the government started using CorpPass.”

SINGAPORE BUSINESS REVIEW | MAY 2018

FIRST NUMBERS

Expats in Singapore

476 foreign nationals surveyed in Singapore

In 2017, the property market was abuzz due to record-high bids.

Are we heading into a housing bubble?

Source: Survey conducted by YouGov between March and April 2017 on behalf of HSBC Expat

SINGAPORE BUSINESS REVIEW | MAY 2018

alf a decade has passed since Singapore’s last housing bubble in 2010-2013. In 2017, the property market was abuzz due to record-high bids such as Stirling Road site’s $1b bid from a Chinese consortium. As prices are expected to trend even higher this year due to higher land cost, stronger economic growth, and higher housing demand, many may wonder if a housing bubble is forming now. OrangeTee Research and Consultancy head Christine Sun thinks the soaring prices are not likely to spark a housing market collapse soon. “The overall transaction volume in 2017 and January-February 2018 is still much lower than the previous peaks. Various pre-emptive measures like the TDSR (Total Debt Servicing Ratio) and Seller’s Stamp Duty are in place to stabilise the market whilst factors that fuelled the property bubbles in 2007 and 2010 are notably absent – high volume of sub-sales (an indicator of speculative activity), many overstretched borrowers, and influx of foreign buyers,” she said. Sun said in a report that whilst the overall prices have escalated in recent months, the number of transactions remained low as compared to the high volume seen in 2007 and 20102013. “2,357 caveats (451 CCR, 837 RCR, and 1,069 OCR) were lodged in the first two months of 2018,

lower than the last 10-year average of 2,542,” she added. The analyst added that it is also much lower than the average 4,143 units seen between 2010 and 2013. Further, only 1.6% of the total transactions in Jan-Feb 18 were sub-sales, much lower than the last 10-year average of 8.7%.

Prices have only risen by 0.7% in 3Q2017 and 0.8% in 4Q2017 since the residential market bottomed in mid-2017.

Improving housing affordability JLL Singapore Research and Consultancy national director Ong Teck Hui concurred with Sun and said there is no sign of a housing bubble in Singapore. “Firstly, prices have only risen by 0.7% in 3Q2017 and 0.8% in 4Q2017 since the residential market bottomed in mid-2017, based on URA’s residential property price index. This is a relatively mild and gradual increase.” Moreover, Ong noted that in 2007 and 2009, sub sales accounted for 13.6% and 11.9% of total private residential transaction volume respectively. These “were indicative of strong speculative activity in the market. In 2017, only 1.5% of total transactions were attributable to sub sales, due to the deterrent effect of the Seller’s Stamp Duty,” he said. Thirdly, housing affordability has improved. “Between 2013 and 2017, residential property prices fell about 12% whilst average resident household income rose by about 12%,” Ong added.

Weâ&#x20AC;&#x2122;ve helped over 10 0 leading global food and beverage brands build market share. In the food distribution business, Auric is a leading player in Singapore and Malaysia. With our extensive warehousing and distribution penetration, Auric has a direct network of over 8,500 customers and over 100 principals/suppliers. More than just a goods distributor, Auric is involved in a diverse range of businesses, which include food manufacturing, marketing and retailing, as well as food court management. Auric has its own arsenal of iconic consumer brands. This includes SCS, Singapore and Malaysiaâ&#x20AC;&#x2122;s No. 1 selling butter brand; Sunshine, the first commercially baked bread in the region, with a history spanning over 85 years; Buttercup, Singapore and Malaysiaâ&#x20AC;&#x2122;s No. 1 selling blended spread; Food Junction; one of the earliest branded food courts in Singapore; and Delifrance, known in Southeast Asia to be the first to introduce cafe-style dining.

auricgroup.com

INDUSTRY INSIGHT 1: CRYPTOCURRENCIES

In 2017, SBR’s biggest ICOs raised a total of US$381.42m.

Meet Singapore’s cryptocurrency czars What do these former bankers, doctor and magazine publisher have in common? One, they ditched their hefty paying jobs to venture into the world of cryptocurrency. Two, they are now multi-millionaires.

n our last issue, Singapore Business Review rounded up the biggest ICOs of 2017 rasied in Singapore. Based on our compiled list, these major deals amounted to US$381.42m in funding, with average funding around US$25.43m. In this issue, we 1.

QUOINE , $105m

Providing next generation financial services through blockchain technology, QUOINE started out in 2014 through Quoine Exchange (QUOINEX), one of the largest bitcoin exchanges in the world by transaction volume. According to QUOINE, they may have cracked the liquidity code, probably one of the biggest problems of cryptomarkets, through its QASH and LIQUID platforms. Co-founder and CEO Mike Kayamori started QUOINE after finding inspiration from the innovative disruptions that blockchain brings. Previously Senior Vice President at SoftBank Group, Mike has 22 years in global experience from the US to Japan and India. With a combined 40-year experience in all things business and IT, Mike and his co-founder Mario Gomez Lozada pack a punch in terms of their global expertise on the field. Lozada, now the CTO of the group, was previously Japan CIO and head of fixed income IT Asia at Credit Suisse. 16

SINGAPORE BUSINESS REVIEW | MAY 2018

present you with the people behind the whopping numbers. We’ve rounded up the most promising crptocurrency-backed startups, and we give you a glimpse into the lives of these cryptocurrency kings. For feedback, you may reach us at research@ charltonmediamail.com 2.

TenX, $80m

Imagine a digital card that you may use to spend your crypto-assets anywhere in the world, online or offline, without the burden of forex or transactions fees. Thanks to TenX, financial and geographical boundaries blur as the company strives to make multiple virtual currencies instantly spendable anytime anywhere. Founded by Julian Hosp, Toby Hoenisch, Michael Sperk, and Paul Kitti and a graduate of the PayPal startup incubation program, TenX boasts of its one-of-a-kind TenX card, which can be used through the TenX mobile wallet in almost 200 countries and 36 million points of acceptance online and offline. And guess what? They raised $80m in their first token sale. A former doctor and professional kitesurfer, Hosp decided to capitalise on digital revolution and become an entrepreneur. According to Hosp, he and his colleagues toyed with an idea in 2015 and went full speed in 2016, aiming to bring cryptocurrency into the real word and make it easily spendable.

industry insight 1: CRYPTOCURRENCIES 6.

3. KyberNetwork , $48-50m When cryptocurrencies started to gain traction, users found it difficult to send a token to recipients who wish to receive the payment in another token, all in a single transaction. KyberNetwork found the right solution by coming up with a decentralised exchange that facilitated instant conversion between crypto-assets, allowing the company to raise $60m in in just 24 hours during its initial coin offering. Co-founder Loi Luu has been involved in blockchain for as long as he can remember and previously developed Oyente, a security analysing tool designed for executable distributed code contracts (EDCCs). Also heavily into research, Luu works on studies of cryptocurrencies, smart contract security and distributed consensus algorithms, focusing on improving security to enhancing the scalability and usability of public cryptocurrencies. 4.

Everex, $26.70m

With more than 2000 mobile network operators around the world, users have become increasingly limited in terms of communication outside of their home country. Raising almost $19m during its initial coin offering, Qlink aims to construct an open-sourced public chain dedicated to the telecom industry, underpinning all internet or data access-related scenarios. Cofounded by Roger Lim and Susan Zhou, Qlink benefits from a combined 30 years experience of its founders in the IT and investment banking domains. Lim was co-founder and former CEO of Webvisions, one of the leading hosting companies in Singapore. Lim and Zhou expect to achieve 10 million dApp users worldwide and support at least 50 project developments within the next five years. In 2018, Qlink will launch the public chain and base station and provide SDK and API for other projects. 7.

The remittances space is probably one of the most outdated areas of financial services, at least according to the founders of Everex. CEO Alexi Lane and CTO Alex Kakunov founded Everex in 2015, with the goal to operate a fast settlement and cost-efficient blockchain payments system for money transfers. With $26m raised in their initial coin offering, Everex has grown to 10,000 registered users today. Lane said that their solution is unique to other blockchain companies, as what they offer lies outside of the cryptocurrency space and is designed for the mainstream financial industry. The cash-heavy remittance industry consumes great amounts of time and resources for the end user, thus preventing users from breaking the existing financial inclusion barriers. Everex is headquartered in Singapore with offices in Bangkok. 5.

Bluzelle, $19.5m

Twenty-four hours may not look much to many, but for Bluzelle, it meant giving buyers a chance to invest in what could be a pioneering solution in data storage and management systems. The company’s three-day initial coin offering (ICO) in January raised $19.5m in fresh funding from 165 million tokens made available. Founder and CEO Pavel Bains capitalised on his expertise as co-founder of Storypanda, a digital book platform that published titles by various independent authors and mediabrands such as DreamWorks and Warner Bros. According to Bains, Bluzelle solves the great need for data storage and management systems that are flexible enough to allow fast and simple data queries on the decentralised internet. “Selling out the crowdsale is a huge milestone in the growth of our company and our journey to deliver a product that will be a key component of the new, better Internet,” he said.

Qlink, $19m

Qtum, $15.6m

Qtum’s core technology combines Bitcoin Core, an account abstraction layer for multiple virtual machines, and proof-ofstake consensus aimed at tackling industry use cases. Having raised $15.6 in in its initial coin offering, Qtum plans to be the public blockchain for business. Founders Patrick Dai, Neil Mahi and Jordan Earls believe that the combine technology will allow smart contracts and decentralised applications to run on a single familiar foundation whilst offering a robust environment for developers. For Qtum founder, combining the UTXO model and the account abstraction layer offers all the gains of both interoperability and simplicity. Further development of Qtum may allow it to penetrate as far as the telco, counterfeit protection, logistics, and manufacturing industries. 8.

Aptoide , $15m

Step aside Google Play and Amazon--Aptoide has just raised $18m in its initial coin offering in Singapore, officially the first app store to use blockchain. Founded by Álvaro Pinto and Paulo Trezentos in Portugal in 2011, Aptoide has accumulated a total of 1.5 billion downloads and 50 million monthly active users with 315,000 apps on offer. What makes Aptoide unique? App developers and brands on the platform can actually create and manage their own customised stores and channels within the platform, and gives them, OEMs, and telco companies access to a worldwide competitive revenue share model. Pinto and Trezentos previously ran another IT company, with Aptoide being just one of the many projects in the company. After realising that the app market is getting more attention than anticipated, the founders decided to develop Aptoide, thanks to a US$1m seed investment from Portugal Ventures. SINGAPORE BUSINESS REVIEW | MAY 2018

INDUSTRY INSIGHT 1: CRYPTOCURRENCIES 9.

Enjin Coin , $12m

12.

Hubii, $6.56m

From payments to creation of virtual goods to real-time subscription, Enjin Coin packs several functionalities into a single coin. When founders Maxim Blagov and Witex Radomski launched Enjin Coin in 2009, they aimed to solve several pain points: high fees by credit card companies and Paypal, payment fraud, slow transactions, lack of virtual ownership, and no open standards. Blagov and Radomski bring a total of 25 years of technical engineering and creative direction expertise to the digital floor, with Blagov specifically working on content & strategy development and Radomski on software design, security and testing. In the payments space, Enjin Coin provides users with minimised fraud, faster settlement time, and lower transactions cost. What more, users can also create and manage virtual goods by issuing custom tokens, unique items, or privilege tokens.

A spare time project--that’s what founder and CEO Jacobo Toll-Messia called Hubii back in 2010. Eight years later, the startup that began with a focus on news content has now grown to a fulltime job for Toll Messia, having racked up $6.56m in its initial coin offering last year. Toll-Messia’s extensive background in investment banking, oil & gas, and telecommunications has paid off, as Hubii’s lean team of five boasts of a distribution network reaching up to 50 million users everyday. In fact, Hubii now has 560 publishers and syndication partners around the globe, built on a seven-year interaction with blockchains and industry partners.Inspired by the deluge of information, Toll-Messia and his team aim to create a new Ethereum-based decentralised content marketplace without the need for middlemen and with the help of blockchain.

10.

13.

Indorse, $10m

“Indorsing” is a new buzzword in the blockchain space, thanks to Indorse’s social network that verifies whether personal claims made are true. Racking up $10m in funding during its initial coin offering last year, Indorse utilises blockchain technology for users to verify and “indorse” a certain users’ skills. In turn, Indorse awards users for endorsing the skill sets of other users. Co-founder and CEO David Moskowitz said that for instance, if someone is an expert in NodeJS, they put up a claim and attach proof such as their GitHUb repos. Afterwards, other members in the same domain on Indorse verify the claim through “indorsing” or “flagging.” Moskowitz added that the token sale has helped Indorse gather traction for their pioneering idea.“Token sales allow ventures to reach out to and directly build their community,” he said. 11.

Aditus, $7m

Substantial growth in his publication business led Oliver Burlot to co-found Aditus, a decentralised online platfrom bridging the needs of luxury merchants and crypto-affluents. Aditus is Burlot’s response to the need of luxury brands to access new wealth through cryptocurrencies and at the same time connect crypto-affluents with these luxury brands. With Aditus in tow, Burlot raised US$7m in an initial coin offering. Publisher of Elle magazine in the 1990s, Burlot co-founded publishing company Adkom in 2001 and eventually sold the business to Singapore Press Holdings in 2008. After five years, Burlot acquired Heart Media Pte Ltd in 2013 with Julian Peh, growing the company to a total of 20 publications in Singapore, Malaysia, and elsewhere in Southeast Asia. In 2015, they acquired luxury portal Luxuo, which helped them focus on consumer goods. 18

SINGAPORE BUSINESS REVIEW | MAY 2018

Digix, $5.56m

Three years ago, Kai Cheng and Anthony Eufemio, both full-time employees, met in New York with Shaun Djie, then an exchange student, and toyed with the idea of a gold asset tokenisation business. Now, the team has recently hit their Q12018 release of their gold token. Focused on tokenising physical assets on the blockchain, Digix created DGX, gold tokens backed by physical gold from LBMAapproved refiners on a 1:1 and fully allocated basis, with 1 token by 1g of gold. Cheng, Eufemio, and Djie, now the CEO, CTO, and COO respectively, run the business from Singapore and Seattle. According to them, Digix did not do an ICO, but rather crowdsale for the creation of Decentralised Autonomous Organization (DAO). DigixDAO funders sent 465,000 ethers into the crowdsale contract (around $5.56m) in return for DigixDAO tokens (DGD). 14.

MegaX, $2m

Backed by iFashion Group, MEGAX’s MGX token aims to provide cryptocurrencies that can be used in retail transactions targetting millennial-facing brands. The founders, all in their late 20s and early 30s, boast of years of experience in e-commerce, retail, marketing, manufacturing, space management, events, and brand and product development. This has enabled them to succeed where other companies fell short due to a lack of retail experience. Currently spendable on more than 30,000 products, the MGX token gathered $2m during its ICO. When investors saw a four to five-fold growth on their investments, it resulted in more purchases in the recently launched MGX mall.“MEGAX will create much more than just a new, innovative product. We will create a movement fashioned and wired specifically for the millennial,” Jiawen Ngeow, co-founder, MEGAX said.

startups

SpherePay raises US$10 million after funding round

pherePay, a homegrown mobile payment app from Singapore, has completed a US$10 million funding round from unnamed investors. The capital infusion comes after the OPG Asia Pte Ltd-developed app announced it is seeking to expand to Indonesia and Thailand last December 2017. Now, with the completion of the funding round, SpherePay says it will rapidly expand its services to cover the Philippines, Vietnam, and Cambodia by the second quarter of 2018. SpherePay, in December 2017,

forged a strategic partnership with oBike, which saw its number of users spike to over 5 million. “Our completion of the recent fundraising, coupled with the strategic partnership with oBike, are testament to the commitment and rapid development of SpherePay. This partnership with oBike saw an immediate acquisition of over 5 million users in Southeast Asia and we are putting together new features that will bring even greater benefits to all our users,” said SpherePay chief executive officer Joseph Chen. For SpherePay, this means being able to support all of oBike’s services, including its geofencing feature and crowdsourcing delivery service, oBike Flash, in its app. With the recent developments, SpherePay is in a good position to be one of the top payment platforms in Southeast Asia. “Since our inception last year, we have been making good progress to ensure that SpherePay will be one of the most highly utilised mobile payment apps in the region,” added Chen.

Anapi offers protection for digital startups

Using its smart API platform, Anapi allows any business to easily add relevant insurance to their digital services. Anapi founder and chief executive officer George Kesselman said insurance needs to be designed differently for the digital world. “We partner with leading insurers and deliver tailored protection via our smart API platform,” he said. Launched last November 2017 Kesselman said, Anapi solves a fundamental problem in the insurance industry, in which insurance firms have drifted into a more grey territory of helping themselves to make profits first before helping their customers. He explained that digital startups usually find themselves with no 20

SINGAPORE BUSINESS REVIEW | MAY 2018

protection because insurance companies do not understand their businesses. “The common painful theme kept coming up. There’s no relevant option to protect ourselves and our customers in digital,” said Kesselman. “Many of the startups had spoken to insurers and felt that insurers either didn’t understand or weren’t interested to help them.” At the heart of Anapi’s services is technology that drastically simplifies insurance, making it a frictionless experience for both startups and their users. “Whilst API is the heart, Sanya is our Reinforcement Learning AI Engine. Sanya is quickly learning about all kinds of things people and businesses are worried about and the best ways to protect them,” explained Kesselman. In the past four months, Kesselman said 10 digital startups have already expressed interest in being part of Anapi’s insurance pilot. Kesselman said they are optimistic Anapi’s initial round of funding will fuel the firm for the next 18 months.

Insurtech startup Vouch incentivises safe drivers

Singaporean startup Vouch’s “No-Claim Rebate (NCR)” feature lets drivers receive up to 15% cashback on their annual premiums if they do not make a claim at the end of their policies. Vouch founder and chief operating officer Chean Yujun said the company partnered with major insurers, NTUC Income, Sompo, and Tokio Marine Insurance Singapore to basically pay safe drivers for not making a claim. Vouch’s new cashback feature is on top of the insurtech’s No-Claim Discount (NCD). The NCR system works by grouping drivers with similar driving profiles together. Vouch, then, sets aside 15% of each driver’s policy for the NCR. “During the policy period, if any member makes an own-damage claim, part of this claim is deducted from the rebate pool, and the remainder of the pool is split amongst the members at the end of their respective policy period,” explained Yujun.“If the pool runs out, there is no negative impact to customers, as everyone is still covered by their respective insurance company. If the group stays accident-free, everyone receives 15% cashback on their premium,” he added. Vouch also allows drivers to form private “communities” with friends and family or other safe drivers to maximise their cashbacks. “This breakthrough is possible because our insurers have committed to return part of their profits in the event that claims by drivers are low. As such, the NCR cashback feature not only promotes a safe driving culture, but it is also a fairer insurance experience,” he said. Safe driving culture Vouch aims to disrupt the insurance industry by giving safe drivers a choice on how they influence their premiums. Aside from being entirely digital, the insurtech firm rewards drivers who contribute to a safe driving culture in Singapore. Yujun lamented that new car owners are “penalised” into paying high premiums even when they demonstrate safe driving skills. “Whilst car insurance is mandatory, only 15% of drivers make claims annually. That meant that many safe drivers were paying higher premiums in order to cover the risks of less-safe drivers. This came across as unfair and inefficient,” he explained. The Vouch COO said he was surprised insurers were quick to latch on to their NCR idea. “We had positive response from them across all levels. I think that’s because people in the industry are consumers as well, and they have seen how things have changed so quickly in various sectors,” he said.

Transforming ANDMARKS Beyond acumen and foresight, it takes vision to boldly transform a familiar landmark into a hub of vibrant possibilities. At OUE, the corporate philosophy is driven by Transformational Thinkingâ&#x20AC;&#x201D; an approach that views every development as an opportunity to unlock its value and transform its potential. 2017 sees OUE celebrating key milestones, one of which is the opening of OUE Downtown, a newly transformed mixed-use development that will be the unrivalled destination to live, work, shop, dine, and play in Singaporeâ&#x20AC;&#x2122;s Central Business District.

One Raffles Place

OUE Downtown

OUE Limited is a diversified real estate owner, developer, and operator with a real estate portfolio in prime locations in Asia and the United States. OUE consistently grows its business by leveraging its brands and proven expertise in developing and managing assets across the commercial, hospitality, retail, and residential sectors. With its core strategy of investing in and enhancing a stable of distinctive properties, OUE is committed to developing a portfolio that has a strong recurrent income base, balanced with development profits, to enhance longterm shareholder value.

OUE is the sponsor of OUE Hospitality Trust and OUE Commercial Real Estate Investment Trust. In March 2017, OUE acquired International Healthway Corporation, a listed integrated healthcare services and facilities provider. For more information, visit www.oue.com.sg.

FINANCIAL INSIGHT: MERgers and Acquisitions

Deal #1: Lazada’s warehouse. One of 2017’s major deals is Alibaba’s $1B stake in Singaporebased ecommerce platform Lazada

Deal #2: In 2018, Uber officially bowed out of Southeast Asia when Singaporean ride-hailing firm Grab acquired its operations.

M&A deals reach an all-time high in 2017 The market was dominated by several big ticket M&A transactions, with deal values far in excess of US$1b per transaction making 2017 a record-beating year for M&A transactions.

t was a banner year for mergers and acquisitions (M&A) activity in Singapore last year, as estimated fees for completed M&A deals in 2017 totaled $236.8m, up 80.8% compared to a year ago, and the highest annual fee volume since records began in 2000, according to Thomson Reuters data. Notably, overall M&A activity involving Singapore reached an all-time high as deal value climbed to $95.3b in 2017, up 11.4% from a year ago, beating the 2014 record of $93.2b. “Singapore-based organisations were targeted for M&A last year like never before, with record-high volume and the highest activity since the global financial crisis,” said Chunsek Chan, head of M&A research at Dealogic, with such deals ring sharply to $50b across 481 deals, led by the Global Logistics Property (GLP) acquisition. The resulting volume saw a 36% increase over the previous record set in 2012 of $36.8b across 422 deals. Total Singaporean deal value in 2017 rose to $36b in 2017, up 7% from a year ago, whilst average M&A deal size went up to $54m from $48m, said Harsha Basnayake, managing partner for the Asia Pacific transaction advisory services practice of EY, noting that deal values were driven by sizable transactions by investment funds GIC and Temasek Holdings, with the two top Singapore outbound deals in 2017 made by the former investing in the European market. Melissa Ng, partner at Clifford Chance, Singapore, 22

SINGAPORE BUSINESS REVIEW | MAY 2018

Deal value climbed to $95.3b in 2017, up 11.4% from a year ago, beating the 2014 record of $93.2b.

noted that the market was dominated by several big ticket M&A transactions, with deal values far in excess of US$1b per transaction making 2017 a record for M&A transactions. Real estate sector roared Elaine Tan, senior analyst, deals intelligence at Thomson Reuters said that the real estate sector took the lead and accounted for 45.5% market share worth $43.4b in 2017, up 204.9% from 2016, the highest-ever annual period for the sector in terms of value, surpassing the 2014 record. Aside from the real estate sector, other major deals include Alibaba Group Holding Ltd of China raising its interest in Lazada South East Asia Pte Ltd, a Singapore-based online retailer for $1b. An investor group lead by Didi Chuxing Technology and SoftBank Group plans to acquire an undisclosed minority stake in Grab Taxi Holdings Pte Ltd, for an estimated $2.5b. Meanwhile, a much talked about deal in early 2018 is Grab’s has acquisition of Uber’s Southeast Asia operations. Uber will take a 27.5% stake in Grab and Uber CEO Dara Khosrowshahi will join Grab’s board. Moreover, Grab is now backed by DiDi Chuxing and Uber, in addition to leading global investor SoftBank. Technology transactions also topped Singapore’s M&A market in 2017, with $7.6b worth of deals, said Basnayake, “reflecting the country’s drive to become a smart nation and attract foreign investors.” He added that Alibaba’s

FINANCIAL INSIGHT: MERgers and Acquisitions boosting of its stake in online retailer Lazada shows confidence in Southeast Asia’s growing online shopping market. “Power and utilities also proved to be an attractive sector in Singapore with growing interests in renewable power as governments throughout Asia seek alternatives to fossil fuels to meet energy demand and reduce pollution,” added Basnayake. He noted the year’s biggest deal in Singapore — and the largest renewable energy generation acquisition in history — came in October, when independent renewables producer, Equis Energy, was acquired for $5b by a consortium comprising of Global Infrastructure Management LLP, Public Sector Pension Investment Board - PSP INVESTMENTS, and China Investment Corp. For Ng Jiak See, corporate finance advisory leader at Deloitte Singapore and Southeast Asia, logistics, real estate, financial services and food and beverage were the most dominant sectors in terms of transactions in the large-cap space. In the mid-market, high value-add and intellectual property-based business services and technology sectors commanded the most interest. “The increase in M&A activity in 2017 was likely to have been supported by relatively easy access to liquidity amongst acquirers to fund acquisitions through a mix of reasonably-priced debt and strong equity capital,” said Edmund Leong, head, group investment banking at United Overseas Bank. “Other factors driving this increase included a stable economic outlook with slower inflation growth, accommodative central bank policies and less market volatility.” Online disruption “One of the major key trends that emerged for M&A in 2017 and will potentially continue to drive activity for 2018 is the rise of online disruption,” said Tan, expecting this theme to drive M&A across various sectors such as in real estate, especially logistics and warehouse businesses; retail, particularly shopping malls; and technology, media, telecommunications. The recent $16.4-billion acquisition of Global Logistic Properties Ltd by Nesta Investment Holdings Ltd of China, a consortium of Chinese investors, from GIC Pte Ltd is currently Singapore’s largest deal on record, and Tan said this underscores the increasing interest in logistics and warehouse business driven by demand from e-commerce companies such as Amazon, Alibaba Group, and JD.com. Top five target market industry

Source: Thomson Reuters

Chunsek Chan

Harsha Basnayake

Elaine Tan

Melissa Ng

With a population of more than 600m and a rising middle class with ample disposable income and a propensity to connect online, Southeast Asia is emerging as the next big e-commerce mecca. 2018 will see continued growth in M&A in the Southeast Asian market especially in the new disruptive economy and digital space, artificial intelligence and medtech space, said Marcus Chow, partner at Bird and Bird ATMD. “With the growth of e-commerce and the growth of data as the ‘new asset’, due diligence processes in M&A involve a lot more emphasis on payment systems modalities, data protection and cybersecurity,” he noted. Outlook Leong said the dealmaking momentum from 2017 will likely continue into 2018given an abundant liquidity and demand for quality Asian companies, in particular companies in Singapore with an established regional presence. Dealmaking confidence remains robust, as reflected in EY’s recent Global Capital Confidence Barometer which found that more than half, or 57%, of corporate executives surveyed in the region intend to actively pursue deals within the next 12 months, and will look to expand their M&A pipeline. “Singapore continues to be the driving force for dealmaking in the Association of Southeast Asian Nations, or ASEAN, region, especially in outbound deals,” said Basnayake. “In 2018, M&A for Singapore is likely to be boosted by growing interests from private equity and venture capital investors in the ASEAN region in general, but for Singapore in particular. Singapore is an attractive destination for China investments, in both technology and investment, relating to the Belt and Road initiative.” “It is hard to envisage any major challenges for the M&A landscape” in Singapore, he added, citing supportive factors such as the level of liquidity in the free market and the relatively low cost of debt. Ng Jiak See reckoned that for outbound M&A, it should continue to be dominated by Singapore’s increasingly sophisticated REIT and real estate sector, as seen in Mapletree Investments’ $1.6-billion acquisition of the student housing portfolio of U.S.-based Virtus Investment Partners. “Six of the ten largest outbound deals this year targeting real estate and we expect this trend to continue,” she added. “Private capital markets continue to gain depth so we expect to see regional private equity funds provide liquidity to both private and Singapore Exchange-listed companies, particularly those with low trading volume,” said Ng Jiak See. “We also see a few deals in the oil and gas services sector and the manufacturing sectors where assets are trading at attractive prices and have been bought out with purchasers hoping for a recovery or correction in the near future.” “We have seen a strengthening in the economies of various Southeast Asian jurisdictions, which has led to continued inbound investment in consumer-related sectors, driven by the growing middle class with a SINGAPORE BUSINESS REVIEW | MAY 2018

FINANCIAL INSIGHT: MERgers and Acquisitions disposable income for consumer goods and services, technology, healthcare, and education,” she said. She noted an upswing in private equity, real estate and infrastructure funds seeking investments in Southeast Asia, with private equity buyout activity in 2017 more than tripling in value as compared to the past year. Stiff competition for quality assets in the market has pushed up price tags, sometimes above $1b. Belt and Road catalyst China’s ambitious Belt and Road initiative — a plan to build sprawling infrastructure projects that will connect the country with the rest of Asia and other regions — also promises to be a major driver of cross-border M&A transactions this year, although potential interest rate hikes and the rise of protectionism could quickly cool dealmaking interest. Leong expects the Singapore market to benefit if China takes a more accommodative stance to outbound investments in light of its Belt and Road agenda.“Singapore continues to be the hub for investment into Southeast Asia, with China continuing to be one of the largest investors, in line with its Belt and Road investment policy,” said Melissa Ng. “We expect Chinese outbound M&A activity to Southeast Asia to increase in line with the Belt and Road investment policy,” added Melissa Ng. “Despite a global fall in China outbound M&A in 2017, as compared to 2016, China outbound investment into Southeast Asia has remained fairly buoyant.” There should be a continued flow of outbound investment from China, especially in industries aligned with the Belt and Road initiatives such as infrastructure, resources, agriculture, trade and logistics, according to Chow, whilst warning that the rise of protectionism and nationalism have the potential to limit cross-border investments and also sour dealmaking sentiments. Tan said an increase in interest rates, market corrections and regulatory scrutiny stand as potential headwinds for M&A in 2018. “Rising interest rates are likely to result in higher funding costs which would in turn impact the ability for potential acquirers to access attractively-priced debt,” said Leong, adding that “the uncertainty around the geopolitical dynamics between the U.S., North Korea and China; the impending Brexit; and increasingly protectionist sentiments globally may have implications on Singapore’s M&A activity.” Aa range of challenges such as local protectionism and regulatory uncertainty will also hound M&A activities in the region, said Melissa Ng. “In addition, many jurisdictions have foreign investment restrictions which present challenges in structuring cross-border M&A transactions and may act as a disincentive to foreign investors,” she added, citing the Negative List in Indonesia, the Foreign Business Act in Thailand, and land ownership restrictions in the Philippines. She also flagged the rapid expansion of competition laws, with more Southeast Asian jurisdictions beginning to implement merger control regimes which require M&A transactions that meet a specified threshold to receive clearance from competition authorities. 24

SINGAPORE BUSINESS REVIEW | MAY 2018

hong kong view

Hong Kong M&A activity picks up

Ng Jiak See

Edmund Leong

Marcus Chow

M&A activity involving Hong Kong totaled $211.0 billion in 2017, up 46.7% from a year ago, and the highest annual period since deal value reached a record high of $269.4 billion in 2015, Thomson Reuters data revealed. Meanwhile, overall announced M&A activity in 2017 rose by nearly half from a year ago, whilst Hong Kongtargeted M&A volume posted its second-highest level on record with soaring deal sizes, according to analysts. Real estate emerged as the top sector in deals involving Hong Kong based on market share, followed by industrials and financials. According to Elaine Tan senior analyst, deals intelligence at Thomson Reuters, Hong Kong’s property tycoon Peter Woo has completed its plan to spin off six properties of Wharf Holdings into a new commercial entity, Wharf Real Estate Investment Company Limited, in a deal valued at $23.3 billion. “Like Li Ka-shing’s reorganisation in 2015, an increasing number of corporate divestitures were witnessed in the region this year to enable companies to focus on core businesses,” she said. Hong Kong-targeted M&A volume amounted to $68.3 billion in 2017, the second-highest full-year volume on record after $129.7 billion in 2015, said Chunsek Chan, head of M&A research at Dealogic. Real estate was the most promising sector, accounting for $32.5 billion via 32 deals, or roughly half of all Hong Kong-targeted deals last year, including four of the ten largest deals, such as the $19.5 billion acquisition of Wharf Real Estate Investment. Harsha Basnayake, managing partner for the Asia Pacific transaction advisory services practice of EY noted that the increase in deal value was driven by mainland firms buying into Hong Kong companies, as well as Hong Kong companies expanding overseas. “The most popular investment destinations for Hong Kong investors in 2017 were China, Australia and Canada.”he said. 2017 was a year dominated by cross-sector deals, with 82% of Hong Kong investors looking cross-sector to transact, said Basnayake. He noted that aside from two deals by Li Ka-shing - a joint venture backed by the Hong Kong business magnate acquired Germany’s Ista International GmbH for US$6.5 billion in July 2017; he also acquired Reliance Home Comfort, which leases and services water heaters, furnaces and air conditioning units in Canada - there was also Chow Tai Fook Capital’s investment of US$3 billion into Australia’s power and utilities sector.

Hong Kong targetted M&A

Sources: Dealogic

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INDUSTRY INSIGHT: Trade Finance

Banks such as UOB get help to digitise trade finance

No bank is an island: Beating trade finance challenges Banks build alliances to tread tricky waters of technology and regulation.

hen United Overseas Bank (UOB) partnered with the Monetary Authority of Singapore and Singapore Customs to create the National Trade Platform (NTP), working together made sense given the scale of the industry-wide digitalisation task at hand. Other banks have also chipped in to make NTP a one-stop trade information management system that enables the sharing and reusing of digital data for trade-related transactions amongst businesses, and with the Singapore government. Banks involved with the project seem to have realised that cooperation will not only move the industry forward but also benefit them individually. Adopting a collaborative mentality seems to have become a necessity for banks, at least when it comes to solving the complex technological and regulatory challenges in the trade finance sector. 26

SINGAPORE BUSINESS REVIEW | MAY 2018

To encourage and establish higher adoption rates of FinTech-based solutions, governments, regulators and banks are working together to standardise processes.

The beauty of the NTP is it lets traders re-use permit data already uploaded to its system to apply for trade financing, effectively speeding up transactions and advancing the digitalisation of Singapore’s trade finance industry, said Ng Poh Yee, executive director and head, corporate trade sales/financial supply chain management, group transaction banking at UOB. The NTP is also an open innovation platform, which means businesses and value-added service providers can create new digital solutions and applications that can support any new needs of the end-to-end trade finance cycle, she said. However, the NTP initiative continues to be the exception rather than the rule in Asia. The region faces a huge trade gap and poor implementation of financial technology solutions to reach underbanked areas, according to a

recent ADB annual survey. Ng reckoned the two key challenges affecting wider use of emerging FinTech-based solutions for trade finance are the low rate of industry-wide adoption and the high cost of making technology investments. “This is because FinTech-based solutions require the digitisation of documents, especially those related to the transfer of title of goods, custom certification and clearances,” she said. “As digitisation processes are still under development, they do not cover all cross-border transaction types and this limits market adoption.” To encourage and establish higher adoption rates of FinTech-based solutions, governments, regulators and banks are working together to standardise processes such as ‘Know Your Customer’ requirements, customs clearance and, in the case of NTP, the legal acceptance of digital trade data, said Ng. Technology partners Over in Australia, banks have been collaborating with technology partners since last year to overcome challenges in implementing FinTech

INDUSTRY INSIGHT: Trade Finance solutions, with themes around data and blockchain as focus points, said Adnan Ghani, head of trade finance at Westpac Institutional Bank. Westpac, ANZ, and IBM, for example, have teamed up to create a proof of concept for the application of blockchain technology to streamline and digitise the issuance of bank guarantees for commercial property contracts with Scentre Group, owner of Westfield Group. “Currently, large volumes of applications and manual processes that underpin the issuance of these instruments lead to longer lead times and higher risks of error, relatively speaking,” said Ghani. “Using a streamlined solution that takes advantages of blockchain technology - and the transparency it brings - as a substitute to existing practises, will help businesses issue and change guarantees quickly in the midst of a stressful relocation move, or a property title change-over.” Following the proof of concept exercise, Westpac and its partners plan to build an industry solution. Ghani said Westpac’s alliances with fintechs provide it with the nimbleness and agility to get solutions to market quickly. But he noted that whilst there are plenty of opportunities to digitise and streamline in the trade finance environment, everyone will need to ride the fintech trend of such solutions with a subpar impact. “The major issue that hampers fintech solutions is the overall trade community making the shift towards technology,” said Krishnakumar Duraiswamy, head of trade finance, transaction banking group at Abu Dhabi Commercial Bank. “As trade involves several counter-parties, unless everyone in the environment adopt fintech solutions, supply chain is still going to be affected.” “Banks have to come together with other stakeholders of trade namely shipping companies, freight forwarders, chambers of commerce, inspection agencies, customs, amongst others, to start a new journey towards fintech,” he said, adding that whilst small blockchain pilots will always be successful, the key challenge moving ahead is to

bring all counter-parties into single platform. ICOs still far off The development of industry solutions that not only standardise protocols but also clear regulatory hurdles takes some time. The emerging realm of cryptocurrency, which some believe holds the potential for shaping the future of trade finance, is one prime example. Amidst moves by regulators in South Korea and other countries to tighten oversight on the use of cryptocurrencies, the near-term prospects of using initial coin offerings, or ICOs, for trade finance is remote. “It is still early days to see ICOs for trade finance in Asia or any other part of the globe,” said Duraiswamy, citing the lengthy regulatory process that the sector would need go through before such a trend could catch on. “Regulation takes much longer time to evolve and in the area of cryptocurrencies it would take much longer as it can potentially change the entire landscape on how counterparties exchange value with each other.” Duraiswamy reckoned no major changes will occur in this area between 2018 and 2020 despite a pressure to shift from entities with vested interests to see the trend flourish, mainly due to banks having their hands full with compliance in anti-money laundering, or AML. “Financial institutions are still trying to cope with regulations and compliance to global AML standards and hence moving into a new world will be difficult.” Pockets of opportunities In 2018, the ability to master technological adoption in key industries and deftly moving with regulatory changes will determine the winners and losers in trade finance, as banks forecast a trade acceleration. This year, commodity prices will rebound and help fuel a pick-up in the global economy, Ng said, with UOB holding a cautiously optimistic global trade outlook in view of modest 2018 gross domestic product forecasts for key trading

Ng Poh Yee

Adnan Ghani

Krishnakumar Duraiswamy

economies including China, Hong Kong, Japan, US and Europe. But pockets of opportunities exist. “Investments in the TMT industry continue to be on the rise in many countries as governments roll out or sustain their initiatives on automation and productivity, and logistics and telecommunication connectivity in line with their national planning objectives,” said Ng. The construction and infrastructure sectors, especially within the ASEAN region, are notably attractive as well. Ng said UOB will be on guard for any potential rise in U.S. trade protectionism in 2018 and any negative effect on trade flows with key partners like China, India, Japan and South Korea. Whilst U.S. trade protectionism is a risk factor, Duraiswamy said the major one will be coming from the U.S. rates, which have been rising in 2017 and are expected to rise further in 2018. He foresees trade margins to be hampered as a result of additional rate hikes, affecting the overall growth in trade. Still, those looking for new opportunities will find them in Africa, Middle East, and Europe. “Banks will have to diversify and be part of the growth in other geographies,” said Duraiswamy. “You will see more of the mix happening between various geographies that will help in trade during 2018.” Duraiswamy also noted that Asia is going to be a mixed bag with countries like Thailand that are focused on infrastructure growth, and those like Vietnam with growing GDP in 2018 to likely see increased trade flows. “Opportunities would be there in trade. Technology and efficiency will be the key to capture these opportunities.”

Multiple growth opportunites for banks like ADCB

SINGAPORE BUSINESS REVIEW | MAY 2018

economy watch could slow down manufacturing growth for this year,” he said. BMI Research also projects a slower rate of manufacturing expansion in 2018 as export demand will likely moderate slightly due to the slowing of the technology cycle, the wearing off of base effects, and a possible rise in global trade uncertainties. Latest government data shows what could be the onset of the manufacturing slowdown.

BMI Research projects a slower rate of manufacturing expansion in 2018.

Singapore’s manufacturing momentum to cool down

The manufacturing sector should remain Singapore’s key growth driver, but the recovery of domestic-oriented sectors will open the path for growth.

n 2017, Singapore relied on robust manufacturing growth to fuel its fastest economic expansion in three years, but 2018 should see the country hit a speed bump as its top-performing sector loses some of its dynamic momentum. Singapore’s manufacturing growth is set to decelerate this year due to a high base, sluggish semiconductor sales, and global trade uncertainties, according to analyst and government forecasts. Despite this expected cooldown, the manufacturing sector should remain Singapore’s key growth driver, but the recovery of domestic-oriented sectors will open the path to more broadbased expansion in 2018. Slower manufacturing growth will be driven by a high base effect, as well as the decline in Asia-Pacific semiconductor sales, said Francis Tan, economist at UOB. “Singapore’s semiconductor players are plugged tightly into the global electronics supply chain and any moderation in sales would probably mean slower growth rates in our semiconductors output this year,” he said, expecting the semiconductor production’s double-digit growth to slow to single 28

SINGAPORE BUSINESS REVIEW | MAY 2018

Semiconductor production has been key in bolstering manufacturing sector activity and galvanising Singapore’s GDP growth in 2017 to reach 3.6%, its fastest annual pace since 2014’s 3.9%

digits in 2018. Semiconductor production has been key in bolstering manufacturing sector activity and galvanising Singapore’s GDP growth in 2017 to reach 3.6%, its fastest annual pace since 2014’s 3.9%. Factoring in the projected sharp fall in semiconductor production, Tan forecasts the Singapore economy to expand at a slower 2.8% pace, similar to the Ministry of Trade and Industry’s official estimate of slightly above the middle of the forecast range of 1.5% to 3.5%. “We continue to be cautious, especially since semiconductor sales growth had peaked in 2017, and Constructions remains the laggard

Source: BMI, Bloomberg

Signs of moderation Whilst Singapore’s industrial production figures remained in expansion in November 2017, it fell considerably from the previous month. Notably, semiconductor industrial production also showed signs of moderation, although the research firm expects certain segments like precision engineering to remain buoyed by strong demand. “Whilst electronics demand is likely to slow, we believe that the precision engineering sector will likely continue to benefit from a steady expansion in global growth,” which should come in at 3.1% in 2018, BMI Research said, whilst echoing concerns on the negative impact of trade uncertainties to Singapore growth. What Singapore does have to support growth in 2018 are sound economic fundamentals and a positive business environment, BMI Research said, citing the country’s retention of its second-place ranking in the World Bank’s 2018 Ease of Doing Business report. “We expect ongoing efforts to strengthen the already positive business environment to ensure that the republic remains an attractive investment destination over the coming years,” it said.

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Igniting New Performance Across Asia 29

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Manit Sriwanichpoom’s Pink Men vs. Pink Buddha installation was shown at Art Stage Singapore in January. Image courtesy to ART STAGE, Lucas Schifres

Growing pains in Singapore’s art scene Art appreciation is on the rise, but commercial success has been slow. Is Singapore’s contemporary art scene losing ground to its art rivals in Hong Kong and Southeast Asia?

ith more than a thousand events across the island in January, as part of or coinciding with Singapore Art Week 2018, art lovers were spoilt for choice. These events included an inaugural visual arts festival featuring outdoor artworks and public programmes, an Instagram-worthy festival of light art in the Civic District, and a night-owl party at Gillman Barracks. More than 9,000 people attended Gillman’s Art After Dark programme, many slowly crawling through the 12 crowded galleries, as well as exhibitions by NTU CCA and Supermama. First organised in 2014 by the National Arts Council to create additional interest around Art Stage Singapore, the 12-day event has come to eclipse the flagship art fair. Art Stage Singapore started with much fanfare in 2011 as an answer to Art Basel Hong Kong (called Art HK at the time) but it has lost momentum in recent years with attendance dropping from a record 51,000 in 2015 to 26,500 this January and the number of exhibitors seen dropping from 170 at the peak in 2016 to 84 this year, with big guns like White Cube, Paul Kasmin Gallery, Galleria Continua, or Pearl Lam no longer present. At the same time, despite several years of low foot traffic and weak sales, the Gillman site has slowly but steadily seen increased attention averaging 500 visitors a day, according to the National Arts Council, and open house events usually drawing over 4,200 visitors — almost double the 30

SINGAPORE BUSINESS REVIEW | MAY 2018

Singapore’s art sector has continued to receive a lot of support from government agencies and the public’s interest is undeniable, but translating this into commercial success is still a challenge for many players.

number visiting such events in 2015. Singapore’s art sector has continued to receive a lot of support from government agencies and the public’s interest is undeniable, but translating this into commercial success is still a challenge for many players. “On the positive side, I do believe we have a wonderful set of collectors for our population size. Singaporeans have the capacity to buy a lot of art when it’s well priced, and they can be quite broad-minded about what they collect as well. And, unlike say Hong Kong, our market is no longer dependent on expats for sales, so the base is there, and not going anywhere. But the main problem is that Singapore is too small! There is only so much a collector can buy before their walls get filled up,” noted Pwee Keng-Hock, owner of the long-established Utterly Art gallery. Growing pains As the art sector has developed some galleries and event organisers may have been overambitious, sometimes leading to commercial failure. Pwee describes much of the art at Gillman as having been “too contemporary and expensive, and often irrelevant to the local collector” and points out that even on its more modest scale Art Stage may be “too big for every gallery that takes part to go home happy, rather they head home smarting with the bill and unfulfilled expectations.” Art Stage is just one of the local events that have faced

ASIAN ART REPORT difficulties in recent years. The Singapore International Photography Fair and the Singapore Art Fair, both launched in 2014, never returned after disappointing inaugural editions, whilst the Singapore Contemporary Art Show, launched in 2016 only enjoyed a two-year run. Even the well-established Affordable Art Fair, which had ambitiously moved to two editions in 2014, has decided to revert to just one edition this year. “This decision was not taken lightly but we feel strongly that it is what the local market needs right now,” says Affordable Art Fair’s director, Camilla Hewitson adding that reverting to the once-a-year format will allow for a more closely curated experience for visitors and also “encourages a sense of urgency to buy.” Meanwhile, the state-led initiative of Gillman Barracks, which saw a cluster of 13 hand-picked galleries open in the former military compound in 2012, has had mixed success, with only six of the initial galleries remaining. One of the main problems at Gillman Barracks has been its decentralised location. However, Angie Chan, co-owner of home-grown gallery Chan + Hori, which recently relocated to Gillman from the now closed Raffles Hotel Arcade, has been positively surprised to find higher foot traffic at the new location. “It is mainly from tourists, which doesn’t necessarily equate to sales,” she said, “and whilst collectors would often visit the old location at lunchtime or after work, that happens less at Gillman Barracks due to its location.” Yet Chan remains undeterred and is committed to help make Gillman the go-to arts destination in Singapore. In collaboration with the National Arts Council, Chan +Hori launched the nine-month-long DISINI festival, replete with funky outdoor artworks and an activity program that included moonlight yoga, action parties, and break dancing. “We hope this kind of event will help develop the next generation of art collectors, making art more accessible to the millennials,” she explains.

A recent art installation at Chan + Hori in Gillman Barracks. Courtesy: Chan + Hori

Strong infrastructure All art market players acknowledge that the government has worked hard to raise the profile of the arts in Singapore in their efforts to make it a viable art hub. In a bid to transform the once much derided “cultural desert” into a modern-day ‘Renaissance’ city, the state has invested heavily in its art and culture infrastructure from the S$600

Last November, the Affordable Art Fair welcomed 11,000 visitors who spent SG$3.7 million. This compared with SG $3 million the year before for 12,000 visitors. Courtesy Affordable Art Fair

million Esplanade Theatres on the Bay to the creation of the Asian Civilisation Museum and the most recent unveiling of its crown jewel, the S$530 million National Gallery Singapore. Currently, the Singapore Art Museum is also undergoing an extensive S$90 million renovation that will add “double-volume” spaces to the former school in order to house larger installations, as well as enhancing facilities for technologically demanding multimedia works. According to the Singapore Cultural Statistics 2017 report, government funding for arts and culture rose from S$280.6 million in 2010 to S$412.8 million in 2016, whilst the total nominal value-added by the visual arts represented S$628 million in 2015, compared with S$505.5 million in 2010. “Over a relatively short time, Singapore has managed to develop a commendable artistic patina. It’s a postmodern experiment in the making, but all of this—meaning creating an artistic infrastructure from the ground up—is a huge endeavour. The problem is, we live in a world of instant gratification, where we’ve become conditioned to see results immediately,” remarks gallerist Sundaram Tagore of Sundaram Tagore Gallery. “Although some might say that Singapore has been slow to realise a financial return on its investment, I would argue that an endeavour of this magnitude takes time,” Tagore adds. A Southeast Asia role Whilst Hong Kong has now become firmly established as the premier commercial art hub in Asia—thanks to its concentration of auction business, premier art fair Art Basel Hong Kong, and growing influx of international art galleries—art market players in Singapore believe the city-state can maintain its position as a commercial art hub for Southeast Asia, notwithstanding rising competition from neighbouring countries. “When it comes to the contemporary art markets of Singapore and Hong Kong, I think the common narrative is to compare the two, framing both markets as working in competition, but as a dealer in both cities, I don’t tend to think of things that way. It’s not a zero-sum game, from my perspective. When Hong Kong wins, it doesn’t mean that Singapore loses—market growth in these two regions SINGAPORE BUSINESS REVIEW | MAY 2018

is not mutually exclusive. Both cities have tremendous strengths, just as they both have areas that require some improvement,” says Tagore, noting that Hong Kong may have a more established foothold when it comes to blue chip or name-brand artists, but Singapore is a strong player in the Southeast Asia market. Stephanie Fong, owner of FOST Gallery says that, at least for now, Singapore remains a leader in the Southeast Asian region for art (mainly trade, scholarship), “simply because things work in Singapore and people are still willing to pay the premium.” However she warns, “if our neighbours catch up, and they are catching up, and simultaneously, if we get too expensive, I am afraid that would really not bode well. We need to really capitalise on this lead time we have.” Lorenzo Rudolf, the founder and art director of Art Stage Singapore and Art Stage Jakarta, points out “Singapore still has advantages over its neighbours: it is multicultural, it has the infrastructure and the money to invest. But all the other Southeast Asian countries are starting to catch up; and most of them have a much more vibrant and sustainable artist scene; and now they are also building up their infrastructure, all based on private initiatives. The danger is there, if Singapore is not waking up and acting quickly, it will earlier or later also be overtaken by them.” Meanwhile, Jasdeep Sandhu, owner of Gajah Gallery, points out that from a commercial point of view Singapore retains many advantages over its neighbours. He mentioned its very efficient customs system that allows art to come easily through Changi Airport, as well as the support from art auxiliary businesses, such as art

Sundaram Tagore Singapore during Singapore Art Week 2018 Courtesy Olivia Kwok/Sundaram Tagore Gallery

SINGAPORE BUSINESS REVIEW | MAY 2018

The danger is there, if Singapore is not waking up and acting quickly, it will earlier or later also be overtaken by them.

insurers and highly professional art handlers that can be trusted: “This is a very important link in an international art fair scene.” Sandhu also points out that Singapore is a preferred selling platform for a diverse group of artists. “Most important, outside of each artist’s (home) country in Southeast Asia, I dare say that the next best city to sell your artwork would be Singapore. A Filipino or Indonesian artist has more chances of selling in Singapore than in Shanghai, Tokyo, or Beijing. We have a decent-sized base of collectors that not only collect Singaporean art but are willing to consider artist from around the region. “Singapore’s main problem for the moment seems to be its high costs. In relation to the region and this will be a factor against it.” Sonia Kolesnikov-Jessop

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Hospitality industry survey

M Social Singapore’s AUSCA restaurant has a robot that can cook perfect eggs.

‘Smart hotels’ are on the rise The industry is shifting to a man-power lean model: less humans, more bots.

he iconic Marina Bay Sands Hotel retained the top spot on this year’s Singapore Business Review’s Hospitality Industry Survey with the number of rooms at 2,561. The world-renowned hotel complex also had a stellar performance in its meetings, incentives, conventions, and exhibitions front, having exceeded their target of 3,000 event per year with more than 3,500 events hosted at the Sands Expo and Convention Centre in 2017, and collectively drawing over 1.4 million delegates to Marina Bay Sands. “2018 already looks to be a promising year ahead,” said Ian Wilson, senior vice president of non-gaming operations at industryleading Marina Bay Sands. “Guided by our ongoing strategy to evolve our offerings and enhance guest experiences, Marina Bay Sands is well-positioned to attract and welcome the growing number of tourists that Singapore expects to draw in the years to come.” Total number of rooms in the hotel segment of Singapore’s hospitality industry, meanwhile, slightly grew by 0.1% to 30,604 rooms in 2017 from 30,572 rooms in 2016. This accounts for the completion of some hotels that concluded their renovation operations over the last 12 months. 34

SINGAPORE BUSINESS REVIEW | MAY 2018

M Social Singapore offers robot butler service and its AUSCA restaurant has a robot chef that cooks perfect eggs.

Rounding out the top 5 of the list are Hotel Boss with 1,500 rooms; Swissôtel The Stamford at 1,261 rooms; Mandarin Orchard Singapore with 1,077 rooms; and Carlton Hotel Singapore with 940 rooms. Positions of the top five hotels in the list remained unchanged from their 2016 rankings. Wilson, however, noted that whilst the industry is looking at a brighter 2018, with the next 12 months riding on the momentum of the strong tourism performance over the last quarters, evolution and innovation—in all aspects—is needed for the industry to cope up with client demands and global trends. Robo-butlers at your service “As the hospitality industry moves toward a manpower-lean model, we are witnessing a rise in the number of ‘smart hotels’ in Singapore,” Wilson explained. “In this sector, technology primarily serves as a tool to enhance productivity, improve resource allocation, and replace low value tasks, but never to replace the human touch.” Some of the innovations currently in place in the region include robots or kiosks allowing for automated check in the case of Japan or artificial intelligence apps and tools to handle

the customer service and room service offerings of hotels such as ordering of food or other services like massage or housekeeping. In late 2017, Hotel Jen Tanglin Singapore introduced Jeno and Jena, robo-butlers who can do deliveries, ride lifts, and enter hotel rooms. M Social Singapore offers robot butler service and its AUSCA restaurant has a robot chef that cooks perfect eggs. Meanwhile, Park Avenue Rochester Hotel has a robot bellhop and housekeeper duo. Yotel Singapore and Sofitel Singapore City Centre were also reported to be fielding interactive robots with delivery and butler functions in the near future. For Marina Bay Sands, the technological revolution is happening both in external operations as well as behind-thescenes to improve productivity and efficiency. Some of these initiatives include a housekeeping technology system, called Optii Keeper implemented in June 2013, allowing room attendants to obtain real-time information on room statuses at a glance through a handheld service. The drive for innovation is not just fuelled by the enthusiasm of the private sector, however, with the government, led by the Singapore Tourism Board, also doing its part. The Singapore Tourism Board announced on November 2017 partnerships with different hotels and solution providers in the citystate to accelerate the adoption of robotics in the hotel and hospitality industry. Some of the early examples included GTRIIP Global’s check-in, room access, and in-room control mobile app platform; a laundry and linen inventory and delivery service powered by Laundry Network in collaboration with Republic Polytechnic and StarHub; as well as robotic food preparation by Kurve. With the rise of coworking spaces in Singapore, several new concepts are popping up like Tribe Theory, which fused the idea of coworking spaces, with the ambiance of a hostel, and the openness of an incubator of entrepreneurial ideas. Charging about $26 a night,

Hospitality industry survey

Jeno and Jena can do deliveries in hotel rooms

capsule beds in Tribe Theory’s flagship hotel in Singapore provide the communal atmosphere of a hostel with the standards of a hotel and the entrepreneurial environment of a coworking space, compared to the $100 or more a night for the traditional five-star hotels in the city-state. Plus, clients can pay in cryptocurrency like bitcoin and Ethereum.

business, with competition all over the Asia and Pacific region also rapidly heating up. A report by Savills Singapore shared that this dampening of spirits by some hotel owners early last year were caused primarily by the city-state’s declining revenue per available room (RevPAR)—a performance metric used in the hotel industry that shows how well a hospitality establishment is filling Rosy outlook its rooms and the rate it charges the Singapore hotel owners can breathe customers—from its peak of $224.85 a sigh of relief and look forward to in April 2012 to $199.73 in 2017, the next 12 months with optimism representing a decline of about 11% and a promise of a resurgence as in just five years. This consistent and the city-state’s brightening tourism drawn out decline year after year has outlook and increased infrastructure caused commensurate pain for hotel drive look set to rejuvenate the sector. owners and institutional investors For instance, comprehensive data who have shareholders to answer to from the Singapore Tourism Board each quarter. estimates that actual international However, actual performance for tourist arrivals in the Lion City 2017 has some of the early concerns reached over 17.4 million for 2017, of hoteliers and hospitality business a 6.2% increase from the previous owners taken off their shoulders. year. Tourism receipts—expenditure Wilson said that Singapore’s charm or money spent by international as a tourist and relaxation destination inbound visitors including their has remained intact over the past payments to national carriers for year. international transport—in Singapore, “Singapore’s tourism sector charted meanwhile, grew 5% to reach $20.3b a strong performance in 2017, by from January to September last year. attaining record highs in tourism This was amidst concern in receipts and visitor arrivals for the early 2017 of analysts and industry second consecutive year,” he said, observers that Singapore’s tourism noting the need for industry players and hotel industry may face a dip in like his employers to continue performance. Whilst Singapore has being committed in driving quality remained as one of Southeast Asia’s tourism growth for the city-state. For top tourist draws and one of the top instance, Marina Bay Sands’ average spots around the world for meetings, hotel occupancy rate remained high seminars, and conferences, experts at 95.6% throughout last year, with suggest that the local industry will majority of overseas guests visiting have to innovate and evolve in order from Japan, China, Indonesia, South to retain its charm in the hospitality Korea, and Australia.

Hotel room revenue was estimated at $2.8b for the first three quarters of 2017, a 3.3% year-on-year increase, whilst average occupancy rate increased by 1.4 percentage points to 85%.

According to the Singapore Tourism Board, the healthy growth of tourist arrivals last year—which translates well to the local hospitality industry—was mainly on the back of higher expenditure across most major components including Shopping, Accommodation, Sightseeing, and Entertainment & Gaming, amongst others. Gazetted hotel room revenue was estimated at $2.8b for the first three quarters of 2017, a 3.3% year-on-year increase, whilst average occupancy rate increased by 1.4 percentage points to 85%. Cause of optimism Savills Singapore noted several factors that will continue to give the tourism and hospitality industry players a cause of optimism for the rest of the year. According the report, “Approximately, a quarter of all international arrivals are for business purposes which is why the health of the economy has a significant impact on hotel performance, especially for those properties that are located in close proximity to the commercial centres.” This is something that industry players like Marina Bay Sands would like to leverage on for the rest of the year. “To cater to the growing number of business and leisure visitors, Marina Bay Sands is focused on reinvesting and refreshing our programming to encourage new and repeat visitation,” explained Wilson. “One of the milestones we had in 2017 was the completion of a three-year long hotel refurbishment for our 2,561-room hotel.” There is also the growing market of international tourists within Singapore’s native Southeast Asian region, with the city-state poised to become one of the region’s premier transport and connectivity hubs with its advanced infrastructure like the world-famous Changi Airport. To paint a picture, international tourist arrivals in the Asia and Pacific region grew by 9% to 308 million arrivals, accounting for 25% of global arrivals—and this is expected to grow more as Southeast Asia’s consumer base become increasingly middle-income and offerings of cheaper flights by the fiercely competitive Southeast Asian airline industry continues. SINGAPORE BUSINESS REVIEW | MAY 2018

Hospitality industry survey 2018

Hotel

2017

Marina Bay Sands Hotel

Hotel Boss

3 4 5

GENERAL MANAGER/ HEAD OF HOTEL OPERATIONS

2017

2561

Ian Wilson

1500

Charles Goh

Swissôtel The Stamford

1261

Marcus Hanna

Mandarin Orchard Singapore

1077

Danny Wong

Carlton Hotel Singapore

940

Mark Bulmer

V Hotel Lavender

888

Edmund Yip

Shangri-La Hotel, Singapore

792

747

Bipan Kapur

Pan Pacific Singapore

790

Gino Tan

Fairmont Singapore

769

Marcus Hanna

Grand Hyatt Singapore

677

Willi Martin

Orchard Hotel Singapore

656

Tina Sim

JW Marriott Hotel Singapore South Beach

634

654

Stephane Fabregoul

Furama Riverfront, Singapore

615

Kent Law

The Ritz-Carlton Millenia, Singapore

608

Peter Mainguy

Peninsula Excelsior Hotel

600

William Wong

Grand Mercure Singapore Roxy

576

Klaus Gottschalk

Marina Mandarin Singapore

575

Melvin Lim

Grand Copthorne Waterfront Hotel

574

Cheong Hai Poh

Hotel Jen Tanglin Singapore

565

Vathsala Subramaniam

Genting Hotel Jurong

557

ibis Singapore on Bencoolen

538

Ben Patten

PARKROYAL on Kitchener Road

532

Benny Chung

Mandarin Oriental Singapore

527

Christian Hassing

Holiday Inn Singapore Atrium

512

Tuncay Bockin

Royal Plaza on Scotts

511

Patrick Fiat

Conrad Centennial Singapore

512

507

Heinrich Grafe

Hotel Jen Orchardgateway Singapore

499

Hervé Duboscq

Hotel Chancellor@Orchard

488

Danny Koh

Swissotel Merchant Court, Singapore

476

Rainer Tenius

Hotel Michael

461

Shangri-La’s Rasa Sentosa Resort & Spa, Singapore

454

Tane Picken

Festive Hotel

447

Furama City Centre, Singapore

445

Jovian Hun

Holiday Inn Express Singapore Clarke Quay

442

Sandra Kloprogge

Park Hotel Alexandra

442

Angeline Tan

Regent Singapore, A Four Seasons Hotel

440

Peter Draminsky

Oasia Hotel Novena, Singapore

428

Chai Khye Yeien

Hilton Singapore Hotel

421

Peter Webster

Sheraton Towers Singapore Hotel

420

Steven Long

M Hotel Singapore

415

413

Jacqueline Ho

Concorde Hotel Singapore

407

Karl Muir

York Hotel Singapore

407

Jessie Tan

Days Hotels Singapore at Zhongshan Park

405

Tony Cousens

InterContinental Singapore

403

Michael Martin

Novotel Singapore Clarke Quay

403

Alan Burrows

The Fullerton Hotel Singapore

400

Cavaliere Giovanni Viterale

Singapore Marriott Tang Plaza Hotel

393

Simon Bell

Village Hotel Bugis

393

Gill Ishwinder

Orchard Parade Hotel

388

Brett Walker

Village Hotel Changi

380

Gill Ishwinder

30,604

30,572

TOTAL

Number of Rooms 2018

SINGAPORE BUSINESS REVIEW | MAY 2018

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2:56 PM

Service Residences survey

Serviced residences are providing guests with mobile phones with 3G/4G capabilities.

Foreign housing demand kept serviced-residences running This is despite tougher competition against sharing economy-rooted services.

reat World Serviced Apartments, considered the largest, tallest, and one of the most comprehensive serviced apartments in Singapore, has retained the top spot of Singapore Business Review’s Serviced Residences Survey, with 304 total number of serviceable units in 2017. Great World Serviced Apartments, managed by GWC Serviced Apartments Pte Ltd and a member of the Kuok Group of Companies which also handles Shangri-La Hotel & Resorts, has been leading in the serviced residences sector in the city-state for a number of years. It is owned by Robert Kuok, considered the richest person in Malaysia and the second richest in Southeast Asia with a $12.2b net worth in July 2017, according to Forbes. Rounding out the top developments of SBR’s serviced residences list are Oakwood Premier OUE Singapore with 268 number of units, followed by Fraser Suites Singapore and Orchard Parksuites with 255 and 233 total number of units, respectively. Treetops Executive Residences and Ascott Orchard Singapore are tied at fifth

SINGAPORE BUSINESS REVIEW | MAY 2018

Total number of serviced residences unit in Singapore fell by 1.8% to 5,735 units in 2017 from 5,843 in 2016.

place with 220 total number of units each. Despite the relative strong showing of the sector, the total number of serviced residences unit in Singapore fell by 1.8% to 5,735 units in 2017 from 5,843 in 2016. Average number of rooms registered at 130 rooms this year compared to 127 rooms last year. Foreign housing demand Roy Liang, general manager of Oakwood Premier OUE Singapore, shared that there has been a noticeable trend in the serviced residences in the city-state over the past year, with clients and travellers alike preferring these types of accommodation than traditional hotels.“Generally, we have noticed a shorter duration for corporate travels, but with an increasing preference towards staying in serviced apartments instead of traditional hotels,” he said, adding the emergence of a specific client segment—millennials and travellers with millennial mindsets that prefer accommodations fusing concepts like design, functionality, price point, and location. Singapore remains one of the

most attractive cities in the world to work in, especially in business and finance, prompting many international companies and financial institutions to set up shop in the city-state. According to the Global Serviced Apartments Industry Report for 2016 and 2017, Singapore is ranked third as the top destination for professionals and travellers alike, after Hong Kong and London. According to the report, 88% of major corporations are expecting increases in the international assignment of their staff, whilst multinational companies are likely, on average, will have assignees and expatriate employees in 33 different countries, as predicted by PwC. This global mobility prompted by business has risen the need for serviced apartments to house these mobile international employees, with an estimated 826,759 apartments now in existence worldwide in 2016-2017, up by 10.5% just over a year before. Addressing tech needs Liang shared that this spells a brighter short-term future for the sector, but industry players like Oakwood would have to continuously—and voraciously— innovate if they want to stay ahead. “Technological advancements have also greatly enhanced the hospitality scene in Singapore, with many serviced residences opting to use technology to streamline processes not just for the property but for the guests as well,” he said. Some of these early technological advancements in the hospitality industry, particularly in the serviced residences sector, include providing guests with mobile phones with 3G/4G capabilities, giving them the flexibility and peace of mind of staying connected to the internet from the moment they arrive at the apartment, instead of going to the local mobile store to purchase a sim card and paying for mobile data. Another form of technological advancement that is taking the hospitality industry of Singapore by storm is robotics, and the push is coming from all sides—from

Service Residences survey There is also the threat and rise of sharing economyrooted services like Airbnb and Couchsurfing.

One bedroom suite

both the public and private sectors. For instance, the Singapore Tourism Board announced on November 2017 partnerships with different hotels and solution providers in the city-state to accelerate the adoption of robotics in the hotel and hospitality industry. Enter the robots “Robotics has played an enlarged role in the hospitality industry in the second half of 2017 with hotels especially leading the charge with robots that cook eggs or help with housekeeping,” Liang noted. “I believe this trend will continue into the years, especially as manpower needs arise.” Liang also cited Oakwood Premier OUE Singapore’s efforts on this front, having developed a specially curated app that allows guests who stay at the property to check out information on the property and its neighbourhood, as well as information on where to go in Singapore, helping them plan their stay before they arrive. The app can also be utilised as a form of a service app, allowing clients to order in-room dining, request for additional in-room amenities, or even shop for online groceries, The Singapore Tourism Board estimated that over 17.4 million people visited the city-state in 2017, a 6.2% increase from the previous year. Liang, however, noted that the main challenge for serviced residences to be able to remain competitive with traditional hotels is to stand out in its offerings.“It boils down to product differentiation, and making sure what you’re offering stands out,” he said, explaining that in the case of Oakwood Premier OUE Singapore, the main objective is to provide

corporate travellers with quality accommodation that feels the same, or even better, than home. The steady stream of visitors also means better visibility of the demand and supply, allowing these properties to better and more accurately tailor their amenities and strategies with the concurrent trend. Threats There is also the threat and rise of sharing economy-rooted services like Airbnb and Couchsurfing, where individuals can rent or offer their living spaces, apartments, and condominium units for a fee. Some travellers have opted for these options for the price and the chance to get an authentic feel of how locals live, with some owners also acting as guides for clients. Liang noted that the rise of all these alternative forms of accommodation

reflect an increasing reliance on technology and demand for a “homelike” experience. “More importantly, it proves that there is a growing market and it is then up to the individual brands to carve out a segment, capitalise on the opportunities, and leverage on trends for sustained growth,” he said, adding that another key challenge for the sector in the years ahead would be manpower—attracting and retaining exciting new talent. “There are so many new serviced residences that have recently opened in Singapore, each with their unique value proposition,” Liang said. “This is great for the industry as it inspires healthy competition and the drive to want to do more and do better for our guests instead of simply resting on our laurels.” There will also likely be a trend towards environmental and social consciousness in the business operations of these serviced residences and properties, with efforts to reduce carbon emissions becoming a trend globally. Liang said that many serviced residences are gradually incorporating technology in more areas to ensure efficiency like employing renewable energy like solar power. In the case of Oakwood Premier OUE Singapore, the constant demand for innovation is making results in all of its operations, and this is likely applicable for the rest of 2018 given the projected increase in tourists in Singapore in 2018.

Oakwood Premiere OUE Singapore’s outdoor infinity pool

SINGAPORE BUSINESS REVIEW | MAY 2018

Service residences survey Minimum Stay

304

GWC Serviced Apartments Pte Ltd

7 Nights

268

Oakwood

7 Nights

255

Frasers Hospitality

7 Nights

223

7 Nights

Treetops Executive Residences

220

Ascott Orchard Singapore

220

Far East Hospitality Management (S) Pte. Ltd. Edmund Tie & Company Hospitality Management Services Pte Ltd The Ascott Limited

Orchard Scotts Residences

204

Far East Hospitality Management (S) Pte. Ltd.

7 Nights

Somerset Liang Court Singapore

197

The Ascott Limited

7 Nights

Orchard Grand Court Singapore

186

203

Orchard Grand Court

7 Nights

Wilby Bukit Timah

180

Wilby Estate International

Pan Pacific Serviced Suites Beach Road

180

Pan Pacific Hotels Group

90 nights 3 nights on weekdays 2 nights on weekends

Fraser Place Robertson Walk, Singapore

164

Frasers Hospitality

7 Nights

Citadines Mount Sophia Singapore

154

The Ascott Limited

7 Nights

Park Avenue Clemenceau

150

Park Avenue Hotels and Suites (United Engineers)

7 Nights

Ascott Raffles Place Singapore

146

The Ascott Limited

1 Night

Oasia Residence, Singapore

140

Far East Hospitality Management (S) Pte. Ltd.

7 Nights

Far East Plaza Residences

139

Far East Hospitality Management (S) Pte. Ltd.

7 Nights

Wilby Central

138

Wilby Estate International

7 Nights

Village Residence Clarke Quay

127

Far East Hospitality Management (S) Pte. Ltd.

7 Nights

Central Square

127

BridgeStreet Global Hospitality

1 week

Shangri-La Serviced Apartments

127

Shangri-La Hotel Limited

7 Nights

Pan Pacific Serviced Suites Orchard, Singapore

126

Pan Pacific Hotels Group

7 Nights

Park Avenue Rochester

121

161

Park Avenue Hotels and Suites (United Engineers)

1 Day

Serviced Residence

2017

Great World Serviced Apartments

304

Oakwood Premier OUE Singapore

268

Fraser Suites Singapore

Orchard Parksuites

7 Nights 1 Night

Fortville

109

E. Millennium Investments and Fontainebleau (ISA) Forthavens Pte Ltd

Winsland Serviced Suites by Lanson Place

109

Lanson Place Hospitality Management

7 Nights

Somerset Bencoolen Singapore

107

The Ascott Limited

7 Nights

Redwood West Apartments

106

Redwood Residences

6 months

Oakwood Studios Singapore

Oakwood

7 Nights

PARKROYAL Serviced Suites, Singapore

Pan Pacific Hotels Group

7 Nights

LMB Housing Services

<90

106

LMB Housing Services Group of Companies

1 Month

International Service Apartments

115

102

1 Month 7 Nights/days

Regency House

Far East Hospitality Management (S) Pte. Ltd.

7 Nights

8 on Claymore Serviced Residences

Royal Plaza

7 Nights

The Club Residences by Capella Singapore

Capella Hotel Singapore

7 Nights

Park Avenue Changi

Park Avenue Hotels and Suites (United Engineers)

1 Day

Village Residence Hougang

Far East Hospitality Management (S) Pte. Ltd.

7 Nights

Darby Park Executive Suites

Sime Darby Hospitality

7 Nights

Fraser Residence Orchard, Singapore

Frasers Hospitality

6 Months

Village Residence Robertson Quay

Far East Hospitality Management (S) Pte. Ltd.

7 Nights

Shangri-La Residences

Shangri-La Hotel Limited

6 Months

Village Residence West Coast

Far East Hospitality Management (S) Pte. Ltd.

7 Nights

Citadines Fusionopolis Singapore

7 Nights

Alocassia Serviced Apartments

7 Nights

The Forest by Wangz

The Ascott Limited " Edmund Tie & Company Hospitality Management Services Pte Ltd" WANGZ Hospitality

Park Avenue Robertson

Park Avenue Hotels and Suites (United Engineers)

5,735

5,843

TOTAL

Total number of units 2018 2017

GENERAL MANAGER/ HEAD OF HOTEL OPERATIONS

2018

SINGAPORE BUSINESS REVIEW | MAY 2018

7 Nights 7 Nights

SINGAPORE BUSINESS REVIEW | MAY 2018

Legal briefing

Payment Services Bill to boost e-payments The bill seeks to expand the scope of regulated payment activities to include virtual currency services.

fter the establishment of the Payments Council in August 2017, the Monetary Authority of Singapore (MAS) officially closed the second consultations on a payments regulatory framework for the proposed Payment Services Bill. The proposed Payment Services Bill will streamline the regulation of payment services in Singapore under a single legislation given that currently, the city-state’s payments services industry is regulated by two policies: Payments Systems (Oversight) Act and the Money-Changing and Remittance Businesses Act. The proposed bill also seeks to expand the scope of regulated payment activities to include virtual currency services and other innovations, and calibrate regulation according to the risks posed by these activities by adopting a modular regulatory regime. Kim Kit Ow, partner at Bird & Bird AMTD also mentioned that the proposed bill is in line with ensuring that Singapore’s laws and regulations remain relevant and adequate to enable operations in a safe environment. Given this, the proposed legislation will also empower MAS to regulate payment services for money-laundering and terrorism financing risks, strengthen safeguards for funds belonging to consumers and merchants, set standards on technology risk management, and enhance interoperability of payment solutions across a wider range of payment activities.

A retail payment service provider already regulated under the bill would only need to secure a single licence to conduct any or all regulated activities. The proposed legislation puts forward suggestions on two parallel regulatory frameworks, which include a licensing framework focused on retail payment activities facing consumers and merchants, as well as a designation framework that focuses on payment systems whose disruption could pose financial instability or affect the financial system in Singapore negatively. Who will likely benefit from the proposed bill? Given the proposed bill’s goal of streamlining and combining the two existing policies into one unifying legislation, the most likely beneficiary of this efficiency and effectiveness are the retail payment service providers in Singapore. Under the proposed single regulatory framework, Adrian Ang, partner at Allen & Gledhill, noted that a retail payment service provider already regulated under the bill would only need to secure a single licence to conduct any or all regulated activities. Ow mentioned that the intention is to only require licensing for payment activities that face customers or merchants, process funds or acquire transactions, and pose 42

SINGAPORE BUSINESS REVIEW | MAY 2018

The new framework will also regulate domestic money transfers.

Kim Kit Ow

Adrian Ang

relevant regulatory concerns, making it more efficient and less bothersome for payment service providers. The new framework will also expand the scope of regulation to include domestic money transfers including transferring money through payment kiosks, merchant acquisition, for example, through a point-of-sale terminal or online payment gateway, and the purchase and sale of virtual currencies. Licensees offering payment services will be grouped into three categories, which will include money-changing licence, standard institution licence, and major payment institution licence. On the demand side, clients would also likely benefit from the proposed bill given that they will have a better payments services industry to transact and deal with. How will this affect digital payments? It is not a new thing now that technology has been a big part of the financial industry, especially in Singapore with the rise of digital payment, virtual currencies, and online retail. The move by MAS in proposing the bill is partly due to the rise in technology in the financial sector and how best to integrate that tool to benefit the sector, clients, and the economy, noted Ow. “The advent of technology and the fast-paced developments in the payment services world have clearly presented new activity and along with it, new risks that may no longer be sufficiently protected under the [two old legislations],” said Ow. Once implemented, the bill will likely provide a more organised and streamlined process for payment service providers, both old and new, in Singapore who would like to start or expand their business operations in the city-state. According to Ow, “[This] in line with the MAS’ usual regulatory outlook in not over-regulating but adapting to what is required and balancing that against any developmental interests, especially in the virtual currency space at this time. Taking a risk-based and activity-based approach may be said to be very enlightened in the circumstances.”

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marketing Briefing

How SG’s Budget 2018 tapped Instagram 2018 will see the rise of 90-second video campaigns that target the younger, more tech-savvy audience.

data. Marcus Loh, Vice President Marketing & Corporate Communication of PSB Academy, explains personalisation will be the key to a successful mobile marketing campaign. This includes the adoption of more predictive attribution platforms. “Today, with mobile devices dominating the total minutes spent online spreading across a diverse pool of users, mobile marketing is no longer a mere tool, but an overall, targeted experience. This experience is constructed based on the brand’s understanding of their consumers’ habits and needs,” says Loh.

ow do you engage millennials on something as technical, and dare we say “boring” as the national budget? The Singaporean Ministry of Finance (MOF), to show that it wants to involve the younger generation in government processes, tapped 50 social media influencers on Instagram to put the spotlight on the 2018 budget deliberations. The MOF, together with marketing firm StarNgage expected to reach 225,000 users on Instagram via the campaign. Whilst the campaign will reap positive rewards still remains to be seen, the MOF’s Budget 2018 campaign shows how vital mobile marketing is today. Strong connectivity This is especially true in Singapore where strong connectivity is widely available. Soumita Roy Choudhury, head of Mobilewalla Asia Pacific, says good internet infrastructure has enabled advertisers to push out more data heavy content to users without interrupting their experience. “Smartphone adoption rates in Singapore also remain high, and with so many opportunities to reach out to consumers, the mobile marketing system here is now also increasingly competitive,” said Choudhury. For Firefly Photography Marketing Manager Benny Chow, mobile marketing will thrive with rise of smartphone usage. “Mobile optimised marketing is now mandatory, by adopting modern marketing methods and channels, allowing your business to adopt voice, AI chatbox and even VR gives you an edge as a modernly advanced business that stands out above the rest, the challenge is for marketers to think of a system to adopt that,” said Chow. He also emphasizes the effectiveness of mobile-optimised video content. “Ninety seconds or less video, marketers called it consumable content for the modern attention span. Video optimised for mobile viewing, text that is strategically placed in the video that has good readability,” says Chow. Mobile marketing insights in 2018 is expected to move from being retrospective to being able to produce real-time

The MOF tapped 50 social media influencers on Instagram to put the spotlight on the 2018 budget deliberations

SINGAPORE BUSINESS REVIEW | MAY 2018

Mobile optimised marketing is now mandatory, by adopting modern marketing methods and channels, allowing your business to adopt voice, AI chatbox and even VR gives you an edge as a modernly advanced business. Benny Chow

Soumita Roy Choudhury

Marcus Loh

Digital outpaces TV Marketing strategy and forecasting firm Magna Global predicts advertisers will continue to spend more on digital ads than television, with mobile marketing getting a lion’s share of the revenues. In 2017, US$209b was spent on digital ads, outpacing TV ad spending for the first time. Mobile ad spending is expected to overtake TV ad spending by 2020, with the growing population of the Asia Pacific region on the forefront of the digital market. But with mobile marketing’s growth comes its own set of challenges including the prevalence of ad fraud. Examples of ad fraud include fake users and bots, fake locations, problematic source media and IP addresses. To combat fraudulent data, mobile marketers are expected to adopt artificial intelligence and machine learning to maximise revenue. Content is king Another problem mobile marketers have to contend with is the saturation of the mobile ecosystem with all kinds of ads. New changes on Facebook’s Newsfeed algorithm will also have a big effect on mobile marketing. “Recent changes to Facebook’s Newsfeed will scale back on brand content in favour of posts from users’ friends, family, and groups,” says Choudhury. But he says the right content will still rise on top.“This means mobile marketers must now cut through the noise in the online ecosystem to deliver content and messages that will resonate most with the audience they hope to reach out to,” says Choudhury. “To maximise campaign effectiveness, they will need to leverage data to ensure the right messages are being delivered to the most relevant audiences.”

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ANALYSIS: Residential property

Singapore residential property: value opportunity in a richly priced world Housing affordability in the city-state is at its best in the past twenty years. Analysts believe that one feature of this nascent housing bull so far is that it has been driven by mostly domestic buyers.

he Singapore housing sector has recently rebounded after a four-year bear cycle, emerging as an attractive opportunity in an investment universe that is increasingly challenging to find value. As home prices fell 12% over the last four years, housing affordability has improved meaningfully to their best levels in 20 years. In contrast to major peer cities â&#x20AC;&#x201C; including Hong Kong, Tokyo, Sydney, London and San Francisco â&#x20AC;&#x201C; where home prices have instead increased and housing affordability has worsened over the same period, we believe Singapore now presents attractive relative value. One feature of this nascent housing bull so far is that SG private housing affordability has improved to best levels in 20 years

Source: JLL, Bloomberg

SINGAPORE BUSINESS REVIEW | MAY 2018

With the bull cycle still in the early innings, we expect Singapore home prices to rally 3% - 8% in 2018.

it has been driven by mostly domestic buyers, but going forward we believe the return of foreign buyers seeking relative value could kick the upturn into a higher gear, particularly in the prime residential segment. With the bull cycle still in the early innings, we expect Singapore home prices to rally 3% - 8% in 2018. This will be supported by a recovery in housing rentals which are forecasted to increase 5% - 10%. A buoyant en-bloc market and the governmentâ&#x20AC;&#x2122;s neutral regulatory stance should provide further momentum. Whilst rising rates may partially offset fundamental tailwinds, the overall impact will be limited with domestic mortgage rates forecasted to only increase 100 to 150 basis points from now to end 2020. Notwithstanding their healthy performance over the last two years, Singapore developers have not fully priced in the bull cycle, in our view, and we expect the share price uptrend to continue in 2018. We like City Developments (CIT SP) and UOL (UOL SP), both with significant domestic landbank and poised to benefit from stronger home sales for their launch pipeline ahead. In addition, we also like CapitaLand (CAPL SP) which is on track to achieve its elevated 8% ROE target through active asset recycling. A housing bull market will also

ANALYSIS: Residential property In contrast to major peer cities, Singapore housing-to-income ratio has decreased since 2010

Source: URA REALIS, Singstat, Bank of Singapore estimates

provide a favorable backdrop for the group to seek accretive land-banking opportunities. Compelling value versus major global cities Due to falling home prices over the last bear cycle and rising household income, housing affordability in Singapore has improved meaningfully since 2010, with the private home price-to-income ratio falling to 20 year lows. This stands in contrast to major peer cities, such as Hong Kong, Tokyo, Sydney, London and San Francisco, where home prices have instead increased and housing affordability has worsened over the same period. We believe Singapore residential property now presents attractive relative value. Re-emergence of foreign buyers A feature of the Singapore housing recovery so far is that it has been mostly driven by domestic buyers. In 2017, there were only 1.6k transactions attributed to foreign buyers, markedly lower than the long term average of 2.2k transactions per year and the last bull market (2010 â&#x20AC;&#x201C; 2013) average of 3.6k per year. In terms of percentage of total transactions, only 5.6% of transactions in 2017 were attributed to foreigners versus a long-term 18-year average of 8.7%. As the housing upturn gains further momentum ahead, we see the re-emergence of a larger set of foreign buyers becoming a meaningful tailwind and kicking the bull market into a higher gear. Whilst the significant additional buyer stamp duties (ABSD) of 15% for foreigners remain in place, the Singapore authorities were ahead of the curve in implementing them over 2011-2013. We believe these measures now appear less onerous relative to key peers such as Hong Kong and China, which have incrementally caught up in terms of tightening housing market regulation. For instance, in late 2016, Hong Kong raised its residential stamp duties to 15% for all residential purchases, except for first-time buyers who are permanent residents. Before that, in Hong Kong, the highest levy for residents was 8.5% whilst foreigners were already subject to a 15% stamp duty. After a four-year bear market, Singapore housing prices bottomed out only late last year, after declining some 12% from the last

Vacancy rates climbed three percentage points from 5% in 2013 to 8% in 2017.

peak in 2013. We believe the Singapore housing market is in the early stages of a bull cycle and forecast for Singapore housing prices to increase 3% - 8% in 2018. We also expect private primary sales volume to rise in tandem to 12k-15k units, up from 10.6k units sold in 2017. Recovery The housing upturn will also be supported by a recovery in rentals, which are expected to hit bottom and rise 5% 10% in 2018. Rentals have been on a downtrend since late 2013 due mostly to physical over-supply in the market. Over 2014 to 2016, new units coming into the market rose to around 50k units per year, which exceeded the rate of household formation. Accordingly, vacancy rates climbed three percentage points from 5% in 2013 to 8% in 2017. This situation will reverse in 2018. Due to fewer launches in recent years, the annual rate of housing completions will decline by around 40% over 2018-2020. This level will be below the needs of population growth based on the governmentâ&#x20AC;&#x2122;s projections. In response, vacancy rates will drop, driving a rebound in rentals. Buoyant en bloc activity Total en-bloc sales in Singapore increased 7x year-onyear to S$8bn in 2017. The rising trend in collective sales can exert powerful trickle-down effects on demand and supply. After an en-bloc transaction, the process to vacate the original estate and complete the redevelopment typically takes four to seven years. Over this time, the physical stock of homes available for occupancy in Singapore suffers a reduction as a result. In the initial years of a rising collective sales cycle, more homes are taken out of the physical stock by en-bloc transactions than those added back in, exerting downward pressure on vacancy rates and boosting residential rentals. At the same time, those who sold their homes to developers through an en-bloc often enter the property market rapidly to re-establish their exposure, flush with new cash and borrowing headroom. This adds buyers into the market and increases demand. In addition, developers typically launch new units

Only 1.6k transactions with foreign buyers in 2017 versus last bullmarket (2010-13) average and peak of 3.6k and 5.8k, respectively

Source: URA REALIS, Bank of Singapore

SINGAPORE BUSINESS REVIEW | MAY 2018

ANALYSIS: RESIDENTIAL PROPERTY for sale one to two years after the en-bloc. Whilst there are usually more units in a redevelopment project than an original estate, these units will be sold at significantly higher prices per square foot, which tend to drive up property valuations in the area. Looking back at history, collective sales activity had similarly risen sharply at the turning points of the last two property cycles in 2004-2007 and 2009-2011. Neutral authorities’ legislative stance One cannot be certain about the trajectory of housing measures ahead, but we believe there is a meaningful likelihood that the worst of regulatory headwinds is behind us, now that existing curbs have successfully stabilized the market and private home prices have fallen by double digit percentages from the last peak. In March 2017, the Singapore authorities partially relaxed some property cooling measures related to the seller’s stamp duty (SSD) and the total debt servicing ratio framework (TDSR). The SSD holding period is cut down from four years to three years, with the SSD rates lowered by 4% in each tier. With regards to the TDSR, the 60% threshold will no longer apply to mortgage equity withdrawal loans with loan-to-value (LTV) ratios of 50% and below. High-end residential segment showing stronger relative value versus mid-tier and mass-market In our view, the timing of these reversals was not a complete surprise. The Singapore government has over the last three cycles a nearly unbroken record of actively reviewing property legislations against its goals of price stability. Historically it would begin reversing curbs after home prices had dipped between 8%-17% from the previous peak. Reflecting the same approach in the current cycle, the accommodative adjustments to the SSD and TDSR were put in place after a 12% decline from the last peak in 2013.

Foreign buyers constitutes 5.6% of all transactions in 2017 versus LT average of 8.7%

Source: URA REALIS, Bank of Singapore

Assuming the 3M SIBOR rises by 150bp to 2.7% by 2020, monthly mortgage payments for an owner of a second home in Singapore worth $1mn will rise from approximately $2.1k to $2.6k.

Rising rates to pose headwinds We expect domestic benchmark rates (short-term SIBOR/ SOR) for mortgages to broadly rise 100 to 150 basis points from now to end 2020. In early stages of bull-cycle; SG home prices forecasted to rise 3% - 8% in 2018

Source: URA REALIS, Bank of Singapore estimates

SINGAPORE BUSINESS REVIEW | MAY 2018

Rising rates will partially offset fundamental tailwinds but we believe the overall impact will be capped given the magnitude of the rate increase from a low base. To illustrate, assuming the 3M SIBOR rises by 150bp to 2.7% by 2020, monthly mortgage payments for an owner of a second home in Singapore worth $1mn will rise from approximately $2.1k to $2.6k, under a 60% LTV ratio and 30-year loan tenor. This is a step-up but unlikely to lead to distress across the board. For investment home owners, the anticipated recovery in housing rentals ahead will also alleviate the pressure on rental carry from higher rates. In our view, the deepest relative value can be found in the high-end segment (Core Central Region or “CCR”). The high-end residential segment - being the most dependent on foreign demand - has suffered the brunt of existing curbs, particularly the additional buyer’s stamp duties (ABSD) of 15% upfront imposed on foreigner home purchases. As a result, the premium of high-end (CCR) median psf prices over the mass-market (Outside Central Region or “OCR”) is now 62% - near a 10-year low and more than one standard deviation below the average level of 82%. As this premium normalizes over the recovery ahead, we expect high-end home prices to outperform those in the mid-tier and mass-market. Expect rally to continue in 2018 Notwithstanding healthy share price performances over the last two years, Singapore developers have not fully priced in the bull cycle, in our view, and we expect the share price uptrend to continue in 2018. The price-to-book ratio of the FSTREH Index (the Straits Times Real Estate Holdings & Development Index) currently stands at 0.71x. This is up significantly versus the 2016 trough of 0.56x but still almost one standard deviation below the long-term average of 0.82x. Looking ahead, we believe stronger sales performance at new launches, firmer buyer sentiments driven by higher prices and rentals, and the potential re-emergence of a larger set of foreign buyers to be key catalysts for developer share prices. From SG Residential Property: Value Opportunity in a Richly Priced World, Eli Lee, Head of Research, Bank of Singapore, January 2018

RECOGNISING MOST OUTSTANDING LISTED, INTERNATIONAL and LOCAL the

COMPANIES in SINGAPORE For more informaï¿½on, contact:

ELEONOR JOY ANGELES eleonor@charltonmediamail.com +65 3158 1386 ext 209

SINGAPORE BUSINESS REVIEW | MAY 2018