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Global economic slowdown induced by Covid-19 may render Singapore safe haven no more

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5 years ago

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In an opinion piece by South China Morning Post written by Nicholas Spiro, the author assessed the current status of Singapore as a safe haven for investors in the current midst of market turmoil due to the Covid-19 outbreak.

Note: This write-up provides a summary of the opinion piece.

The flight to safety is rampant now in the global capital markets. Due to the growing concerns over the economic impact brought by the Covid-19 outbreak, safe-haven assets like government bonds are experiencing a surge in demand from investors as they look to hedge themselves from recessionary risks as well as preserve their capital.

The investment transaction volumes had shrunk sharply in Q4 of 2019 in Asia’s commercial property markets, coupled with the steep worsening of sentiments.

CBRE, the commercial real estate services and investment company, highlighted in a new report that the Covid-19 spread is “prompting many investors to postpone investment decisions and adopt a wait-and-see approach”.

The global real estate services company JLL, estimated in its report in February the decline in transaction volumes in the first of half of 2020 as “likely to be sharply lower year-on-year as investors re-examine investment pipelines and deployment”.

The factors underscoring Asia’s real estate markets such as record volumes of capital to be deployed across the region and the historically low interest rates will remain as they are. Central banks in the region may lower rates further in order to combat the impact of Covid-19. In light of this, investors still flock to highest-quality assets in the most resilient and stable markets as they defensive strategies.

Singapore is a country that has long had the reputations as a safe haven. A few factors, such as economic and political stability, well-regulated and liquid real estate market, and the success in attracting foreign investment, have earned the country the status as a sanctuary during times of heightened risk aversion.

Based on the report in January by JLL, it described Singapore as an “an oasis of safety” in a late-cycle property market. In the next five years, capital values and office rents in the city’s central business district are predicted to increase 20 per cent, becoming “amongst the strongest of any global city in Asia”.

Last November, a survey conducted by Urban Land Institute and PwC ranked Singapore first in real estate investment prospects for 2020. This ranking is above places like Melbourne, Sydney, and Tokyo. Hong Kong, on the other hand, was not in the top 20 places.

In 2019, Singapore was one of the few markets who saw an increase in transaction volumes as well as a rise in office rents in the second half of the same year. Data from CBRE also recorded that average rental values for the region fell.

Singapore, being an export-oriented economy, is dependent on global trade and demand for its growth prospects, and thus is vulnerable to the developments of the Covid-19 spread. Even prior to the spread of the virus, Singapore recorded the slowest growth in 10 years, with growth expanding at a minute 0.7 per cent in 2019. ING released a note on Thursday (5 March) cautioned that recession may be inevitable due the bleak survey figures since the past several months.

The author suggests that Singapore will fall prey to its own success.

The country’s commercial property market attracted record levels of investment in 2019 primarily as a result of the larger role played by cross-border capital inflows.

According to data from CBRE, transaction volumes in 2019 are made up of 30 per cent by foreign investors, which was an increase from approximately 10 per cent in the years after the global financial crisis.

This higher reliance on foreign capital has now become a liability. Cross-border investors are sterner with regards to the impact from Covid-19, especially for Asia which is more vulnerable to supply chain disruptions, the author opined. In addition to this, the author added that the whole merger and acquisition market has been dragged into turmoil, with investors not being able to inspect assets and travel.

Due to the thickening fears surrounding the duration and severity of the impact from the virus, even Singapore, as a traditional safe haven, is becoming highly vulnerable.

The scope of financial market implications from the virus need yet to be fully comprehended by Asia’s property investment markets, especially the threat to funding markets.

The impacts from Covid-19 is looking to be progressing to a more dangerous stage, as evidenced by the sudden crash in oil prices, with US corporate bonds suffering the worst last Friday (6 March) since 10 years ago due to concerns about firms’ cash flows. A full-blown credit crisis is not impossible given the current mounting stresses and fears, the author opined.

The previous several weeks of collapsing sovereign bond yields have made higher-yielding real estate more attractive to investors, increasing the weight of capital targeting the sector. However, investors still need to reconsider which sectors and countries in the Asian real estate are the safest haven in the midst of the Covid-19 assault on the economy.

AEW, a real estate investment advisors company, released a report in February which recommended that targeting “commercial assets with tenants focused on serving domestic markets” to curb external headwinds is the right strategy. These assets include the Australian state capital central business districts and the e-commerce-driven logistics sector.

The author stressed that political stability and a well-regulated property market are no longer a guarantee of a market being a safe haven from the viral impact.

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Hotel Properties Limited suspends trading ahead of Ong Beng Seng’s court hearing

Hotel Properties Limited (HPL), co-founded by Mr Ong Beng Seng, has halted trading ahead of his court appearance today (4 October). The announcement was made by HPL’s company secretary at about 7.45am, citing a pending release of an announcement. Mr Ong faces one charge of abetting a public servant in obtaining gifts and another charge of obstruction of justice. He is due in court at 2.30pm.

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2 hours ago

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4 October 2024

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SINGAPORE: Hotel Properties Limited (HPL), the property and hotel developer co-founded by Mr Ong Beng Seng, has requested a trading halt ahead of the Singapore tycoon’s scheduled court appearance today (4 October) afternoon.

This announcement was made by HPL’s company secretary at approximately 7.45am, stating that the halt was due to a pending release of an announcement.

Mr Ong, who serves as HPL’s managing director and controlling shareholder, faces one charge under Section 165, accused of abetting a public servant in obtaining gifts, as well as one charge of obstruction of justice.

He is set to appear in court at 2.30pm on 4 October.

Ong’s charges stem from his involvement in a high-profile corruption case linked to former Singaporean transport minister S Iswaran.

The 80-year-old businessman was named in Iswaran’s initial graft charges earlier this year.

These charges alleged that Iswaran had corruptly received valuable gifts from Ong, including tickets to the 2022 Singapore Formula 1 Grand Prix, flights, and a hotel stay in Doha.

These gifts were allegedly provided to advance Ong’s business interests, particularly in securing contracts with the Singapore Tourism Board for the Singapore GP and the ABBA Voyage virtual concert.

Although Iswaran no longer faces the original corruption charges, the prosecution amended them to lesser charges under Section 165.

Iswaran pleaded guilty on 24 September, 2024, to four counts under this section, which covered over S$400,000 worth of gifts, including flight tickets, sports event access, and luxury items like whisky and wines.

Additionally, he faced one count of obstructing justice for repaying Ong for a Doha-Singapore flight shortly before the Corrupt Practices Investigation Bureau (CPIB) became involved.

On 3 October, Iswaran was sentenced to one year in jail by presiding judge Justice Vincent Hoong.

The prosecution had sought a sentence of six to seven months for all charges, while the defence had asked for a significantly reduced sentence of no more than eight weeks.

Ong, a Malaysian national based in Singapore, was arrested by CPIB in July 2023 and released on bail shortly thereafter. Although no charges were initially filed against him, Ong’s involvement in the case intensified following Iswaran’s guilty plea.

The Attorney-General’s Chambers (AGC) had earlier indicated that it would soon make a decision regarding Ong’s legal standing, which has now led to the current charges.

According to the statement of facts read during Iswaran’s conviction, Ong’s case came to light as part of a broader investigation into his associates, which revealed Iswaran’s use of Ong’s private jet for a flight from Singapore to Doha in December 2022.

CPIB investigators uncovered the flight manifest and seized the document.

Upon learning that the flight records had been obtained, Ong contacted Iswaran, advising him to arrange for Singapore GP to bill him for the flight.

Iswaran subsequently paid Singapore GP S$5,700 for the Doha-Singapore business class flight in May 2023, forming the basis of his obstruction of justice charge.

Mr Ong is recognised as the figure who brought Formula One to Singapore in 2008, marking the first night race in the sport’s history.

He holds the rights to the Singapore Grand Prix. Iswaran was the chairman of the F1 steering committee and acted as the chief negotiator with Singapore GP on business matters concerning the race.

 

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Current Affairs

Chee Soon Juan questions Shanmugam’s $88 million property sale amid silence from Mainstream Media

Dr Chee Soon Juan of the SDP raised concerns about the S$88 million sale of Mr K Shanmugam’s Good Class Bungalow at Astrid Hill, questioning transparency and the lack of mainstream media coverage. He called for clarity on the buyer, valuation, and potential conflicts of interest.

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2 weeks ago

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23 September 2024

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On Sunday (22 Sep), Dr Chee Soon Juan, Secretary General of the Singapore Democratic Party (SDP), issued a public statement on Facebook, expressing concerns regarding the sale of Minister for Home Affairs and Law, Mr K Shanmugam’s Good Class Bungalow (GCB) at Astrid Hill.

Dr Chee questioned the transparency of the S$88 million transaction and the absence of mainstream media coverage despite widespread discussion online.

According to multiple reports cited by Dr Chee, Mr Shanmugam’s property was transferred in August 2023 to UBS Trustees (Singapore) Pte Ltd, which holds the property in trust under the Jasmine Villa Settlement.

Dr Chee’s statement focused on two primary concerns: the lack of response from Mr Shanmugam regarding the transaction and the silence of major media outlets, including Singapore Press Holdings and Mediacorp.

He argued that, given the ongoing public discourse and the relevance of property prices in Singapore, the sale of a high-value asset by a public official warranted further scrutiny.

In his Facebook post, Dr Chee posed several questions directed at Mr Shanmugam and the government:

  1. Who purchased the property, and is the buyer a Singaporean citizen?
  2. Who owns Jasmine Villa Settlement?
  3. Were former Prime Minister Lee Hsien Loong and current Prime Minister Lawrence Wong informed of the transaction, and what were their responses?
  4. How was it ensured that the funds were not linked to money laundering?
  5. How was the property’s valuation determined, and by whom?

The Astrid Hill property, originally purchased by Mr Shanmugam in 2003 for S$7.95 million, saw a significant increase in value, aligning with the high-end status of District 10, where it is located. The 3,170.7 square-meter property was sold for S$88 million in August 2023.

Dr Chee highlighted that, despite Mr Shanmugam’s detailed responses regarding the Ridout Road property, no such transparency had been offered in relation to the Astrid Hill sale.

He argued that the lack of mainstream media coverage was particularly concerning, as public interest in the sale is high. Dr Chee emphasized that property prices and housing affordability are critical issues in Singapore, and transparency from public officials is essential to maintain trust.

Dr Chee emphasized that the Ministerial Code of Conduct unambiguously states: “A Minister must scrupulously avoid any actual or apparent conflict of interest between his office and his private financial interests.”

He concluded his statement by reiterating the need for Mr Shanmugam to address the questions raised, as the matter involves not only the Minister himself but also the integrity of the government and its responsibility to the public.

The supposed sale of Mr Shamugam’s Astrid Hill property took place just a month after Mr Shanmugam spoke in Parliament over his rental of a state-owned bungalow at Ridout Road via a ministerial statement addressing potential conflicts of interest.

At that time, Mr Shanmugam explained that his decision to sell his home was due to concerns about over-investment in a single asset, noting that his financial planning prompted him to sell the property and move into rental accommodation.

The Ridout Road saga last year centred on concerns about Mr Shanmugam’s rental of a sprawling black-and-white colonial bungalow, occupying a massive plot of land, managed by the Singapore Land Authority (SLA), which he oversees in his capacity as Minister for Law. Minister for Foreign Affairs, Dr Vivian Balakrishnan, also rented a similarly expansive property nearby.

Mr Shanmugam is said to have recused himself from the decision-making process, and a subsequent investigation by the Corrupt Practices Investigation Bureau (CPIB) found no wrongdoing while Senior Minister Teo Chee Hean confirmed in Parliament that Mr Shanmugam had removed himself from any decisions involving the property.

As of now, Mr Shanmugam has not commented publicly on the sale of his Astrid Hill property.

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