BLUE chips have had their run and now it appears to be the turn of the others, including second and third-liners. Several companies have announced possible takeovers, tie-ups and large asset sales over the past few weeks, but the Straits Times Index (STI) has stagnated.

Trading yesterday reflected the buzz among the non-blue chips, when SingPost, whose shares jumped in high volume twice in the past month including on Tuesday, announced the entry of China Internet giant Alibaba Group. In an announcement issued after trading in its shares was halted in the morning, SingPost said Alibaba will invest $312.5 million to buy into SingPost, eventually owning 10.35 per cent.

" This strategic business cooperation will also tap into other e-commerce opportunities in Southeast Asia and beyond by providing amongst other things, greater access to SingPost' s international logistics capabilities, infrastructure and delivery networks, and as well as end-to-end solutions to Alibaba Group customers and merchants," said SingPost.

The company' s shares on Tuesday jumped 4.5 cents to an all-time high of $1.55 on volume of 20.9 million, more than twice the 8.4 million done on Monday. It was not queried by the Singapore Exchange (SGX) neither was there a query a month ago on April 28 when the counter rose three cents to $1.425 on volume of 13.9 million, five times the average of the previous week.

 

THE Straits Times Index finished 8.82 points lower at 3,274.06 yesterday, weighed down by declines in the banks and Olam International. Hong Kong closed marginally weaker and Europe opened slightly firmer.

Turnover amounted to 1.5 billion units worth $1.2 billion. Excluding warrants, there were 227 rises versus 194 falls.

Among the standout performers was RH PetroGas, whose shares jumped 7.5 cents or 8.4 per cent to 96.5 cents with 49 million shares traded. Last week, the company was queried by Singapore Exchange (SGX) after its shares rose sharply. It replied that its controlling shareholders were in takeover talks with an investor.

Another company in takeover talks that was also recently queried by SGX is STATS ChipPAC, whose shares added half a cent to 51.5 cents with 26.8 million shares traded

 

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The data, compiled from the Monetary Authority of Singapore' s (MAS) website, suggests that the value of households' holdings of HDB flats could be reaching an inflexion point, after rising 6.8 per cent in 2012, 11.5 per cent in in 2011 and 14.5 per cent in 2010.

The dip in the value of households' housing assets should not worry the majority of households that have paid off their mortgages, say market watchers.

Housing assets make up close to half of households' assets and 58 per cent of their total net wealth here, unlike in the United States and Japan where financial assets account for about 60 per cent of households' portfolio. For the majority of households, HDB flat values have the biggest potential impact, with 82 per cent of Singapore residents living in HDB flats.

The fall in the value of households' holdings of HDB flats came despite the continued increase in HDB dwellings last year by 2.4 per cent to 961,800 units, and a slight increase in ownership of HDB homes to 91.8 per cent from 91.7 per cent, with the remaining proportion renting.

On the whole, Singapore' s household holdings of residential assets grew the slowest in eight years with a 1.8 per cent rise in 2013, compared with a 7 per cent growth in 2012 and 10 per cent increase in 2011. This came as the property market continued softening. Resale HDB prices have begun to soften even in mature estates such as Bishan and Queenstown. Both private homes and resale HDB flats have seen weakening prices respectively, in the past two and three quarters.

The household balance sheets data from the Department of Statistics looks at all household units including Singaporeans, permanent residents (PRs), foreigners and unincorporated enterprises while its data on housing dwellings factors in only residing Singaporeans and PRs.

SLP International executive director Nicholas Mak noted that the growth in overall household assets in 2013 was slower than even during the property market trough of 2009 amid the global financial crisis.

HDB values have " reached an inflexion point" , engineered by a large supply of build-to-order (BTO) flats, stricter mortgage rules and a three-year waiting period for newly minted PRs to buy resale flats, he said.

But Mr Mak noted that most HDB flat owners hold their units for the long term, so short-term fluctuations in HDB prices may not trouble them. " Only those who want to sell their HDB flats now will be concerned," he said.

It should also not be worrying to a majority of households that have paid off their mortgages. In fact, many HDB dwellers are still sitting on paper gains from the uptrend since 2006, market watchers say.

Resale HDB prices have surged some 95 per cent between 2006 and 2013 while households' holdings of public housing assets grew a compounded annual rate of 11 per cent over the past eight years.

R' ST Research director Ong Kah Seng pointed out that despite the recent decline in resale HDB prices, prices are still at near-record highs.

However, property experts are expecting a further softening of resale HDB prices amid new flats being released under HDB' s BTO and Sale of Balance Flats schemes. Buyers of newly completed private housing may also decide to let go of their HDB units. This could have further implications on household balance sheets.

" Our projection is for resale HDB prices to soften by 5-8 per cent over the whole of 2014," said ERA Realty key executive officer Eugene Lim. " Lower resale prices will lead to lower valuation prices."

While the risk of households falling into negative equity is now remote, further declines in asset prices could hurt those who have pledged their assets for loans - an area where there is no clear picture as no data is available.

Citi economist Kit Wei Zheng is questioning if older individuals have pledged their private property assets to obtain more leverage, since data from MAS and the Credit Bureau showed rising debt burdens among those in their 30s to 50s.

" We suspect that the surge in debt levels with age may provide circumstantial evidence of increasing prevalence of asset-based (as opposed to income-based) borrowing amongst older borrowers," he said in a recent report.

" Given the earlier entry point of this age group into the property market at lower price levels (and greater proportion of mortgages repaid), it is also likely that this group has a larger share of overall housing equity in the economy, which it has likely tapped to obtain more personal loans," he added.

Mr Kit noted that such practices, if prevalent, " could exacerbate the feedback loop between falling asset prices, falling net worth, forced deleveraging, and further declines or volatility in asset prices" .

DBS Group economist Irvin Seah reckons that those who have over-extended themselves in mortgage loans are still the minority.

The total debt servicing ratio (TDSR), which caps the total debt obligations of borrowers at 60 per cent of gross monthly income, has significantly reduced risk of households over-stretching themselves in mortgage loans and prevented borrowers from pledging their assets for loans, he said.

BT understands that banks have been undertaking stress tests on their exposure to the property market as required by MAS.

The burden of deleveraging will likely cause households to cut down on discretionary spending, Mr Kit said.

" With over 70 per cent of mortgages for owner-occupation and average loan-to-value ratios of 47.5 per cent, the risk of a substantial rise in NPLs (non-performing loans) is probably limited in our baseline scenario of a fairly tight labour market, even if house prices fall 10-15 per cent."

 

 

[SINGAPORE] The sharp run-up in the share prices of transport operators, ahead of changes announced recently to the public bus framework, has led to a police report calling for investigations into potential insider trading.

Blogger and activist Ravi Philemon made a police report last Saturday, requesting that the Monetary Authority of Singapore (MAS), the Commercial Affairs Department and the Singapore Police Force investigate whether any shareholders in SMRT and ComfortDelGro had engaged in insider trading ahead of the announcement.

In his report, he pointed to a news article which said that the land transport operators' stocks had risen substantially on May 20, a day before the government unveiled sweeping changes to the public bus system.

The Business Times understands that the police are looking at his report.

In response to queries from BT, a police spokesman said: " It is inappropriate to comment on investigations, if any."

An MAS spokesman said it does not comment on ongoing police investigations.

Transport operators SMRT and Comfort did not respond to queries from BT yesterday.

On May 20, all three transport stocks made significant gains ahead of the restructuring announcement, which some analysts described as a positive move for the companies.

SMRT rose 14.5 cents to hit $1.475 ComfortDelGro was up seven cents to $2.38 and SBS climbed 7.5 cents to $1.40.

But SMRT' s counter also saw a strong pick-up last month, jumping by as much as 21 per cent to a high of $1.24 in intraday trading on April 24 and prompting a trading-activity query from the Singapore Exchange. SMRT had said then that it was not aware of any reasons for the unusual activity.

Yesterday, ComfortDelGro gained four cents to close at $2.35, while its unit SBS closed at $1.58, down half a cent.

Shares in SMRT lost 1.5 cents to close at $1.45.

In a shake-up which overhauls Singapore' s bus industry, the Land Transport Authority (LTA) announced last Wednesday that it will do away with the existing privatised model, and make the transition to a government-contracting model from the second half of this year.

Currently, bus operators SBS and SMRT own their buses and keep all fare revenue.

Under the new system, the government will own the buses and the bus infrastructure, and will contract out bus routes in 12 packages through a tender process to both local and foreign players. Operators will be paid a fee to run and maintain the services, while the government retains all fare revenue.

The idea is to introduce greater competition, boost service standards - new, higher standards will be built into the contracts - and create a more flexible system which can better address changing commuter needs