Is the worst over?

The credit crunch may be over, but I dont think the worse is over. Wall Street's problems may be over but Main Street's problems may just be starting.

Problems over the past 2 months have affected the overall economy. In US, we will see more companies reporting lower profit as business slowed. There will be more layoff. Unemployment will increase, spending will be lower. This will affect business all over the world.

We are hearing reports of China getting less orders from the US for manufacturing products. This will result in China's companies reporting poorer results. When companies report poorer result, EPS will be lowered and hence price of those companies will be re rated lower.

Singapore listed companies will not be spared this problems. Over the next 2 weeks, we will be going into 3Q reporting season. You can expect many companies to report lower earning. When that happens, expect sentiment to be dampened and share prices to be lower.

It may take a few more months before business and economy pick up steam again. That will be the time when the worse is over.

Keppel Land 3Q results – Cautious outlook

CLSA take on Keppel Land

We have yet to officially cover this stock. Dhruv has gone through the results and management commentary is rather cautious on all segments, with Singapore office related comments getting more conservative now. Earlier they commented on balanced demand and supply for the next few years, now they only talk about supply being low till 2009. Also no estimate has been given on office supply demand. Outlook on Singapore and China residential has also tapered down.
We also see a slowdown in launches. As of June 30 08, 777 Singaporean units were planned to be launched in 2H08. Only 498 units have actually been launched. Marina Bay Suites and The Promont launch has been delayed to 2009 now. Within the Chinese market, the earlier target of 3,705 new units getting launched in 2009, has now been lowered to 2,796 units.

MBFC pre-let progress looks weak. As of 3Q08 end, 61% of the space at the MBFC has been pre-leased, up only 1% from 2Q08. Phase I is now 66% committed (up from 64% in 2Q08), while Phase 2 has been 55% pre-leased (flat QoQ). This means that only 32k of new space was pre-leased in the quarter, against news flow of over 230k. We need to check.

On the results: 3Q08 revenue arrived at S$185.7m, down 51% YoY and flat QoQ. Sequential revenue from residential property sales dropped 3%QoQ, but that from hotels/resort/property management business grew 40%QoQ.
Reported 3Q08 PATMI arrived at S$46.2, down 44% YoY and 12% QoQ. Excluding the on-off gains in 2Q08, 3Q08 PATMI was actually up 2%QoQ. Sequential earnings from residential property sales grew 44%, while profits from hotel operation turned negative (3Q08 registered a loss of S$10.5m, against a S$2.5m profit seen in 2Q08).
Earnings are largely below consensus as 3Q09 PATMI of S$159.1m, is about 62% for consensus full year 2009 estimates.
New residential units sales in the quarter were limited. 14 new units were sold at Reflections (S$2000psf), while 28 were sold at Park Infinia and Tresor (S$1500-1600psf).
Net debt to equity remains at 54%, no change. Only 7% of the debt is coming for refinancing in a year. Funding costs are at 2.5%, but only 15% of the company's borrowings are at fixed rates.

Market yet to reach its bottom!

The market continued to search for a bottom Wednesday, as a fresh round of disappointment over corporate earnings offered further proof that a turning point has not yet arrived.

Market analysts have been racing to call a market bottom in recent weeks as stocks have shed more than 30 percent of their value from the highs of a year ago this month.

But the emerging consensus is that a true bottom—and a subsequent turning point—won't happen until at least the early part of 2009.

Credit Crisis Hits Global Shipping-Moody's Economy

[Dow Jones] STOCK CALL: Asia's export-oriented economies facing "double-whammy" from falling consumer demand and crisis of confidence in funding, with reports of banks refusing to honor letters of credit, "the lifeblood of international trade flows," says Moody's Economy.com's Matt Robinson. Says letters of credit, essentially an I.O.U. between importer and exporter, allow exporters to load cargo for shipment with assurance of being paid; at the other end they demonstrate security of supply, enabling importers to negotiate distribution, promotion with retailers. "In short, the whole global trade production line relies on letters of credit. No letters of credit, no transactions - and no transactions mean no international trade." Robinson reckons price distortions will follow if demand, albeit slowed, outstrips supply as vessels remain stuck in home ports. Adds, consumers could also face shortages, "as shipments of foodstuffs and grain lay stranded overseas."

DBS and it wealth management products

http://swissyen.blogspot.com/2008/10/lehman-minibond-impact-on-banks.html


Among the banks, DBS price came down more than the other 2 banks. There can be 2 reasons for this sharper fall compared to the other 2 banks.

DBS High Notes, Lehman Mini Bond.
1. Recent statement by the government is having a bad impact.
2. DBS HK office may suffer from having to buy back Lehman Mini Bond from investors.

There is a JP Morgan research report on this matter, which is sent to you email. Do take a look at it.

Ezra

Many downgrades despite the good result, which was below analyst's expectation.

Alarming to see CIMB and OCBC Sec lowering their price target despite recommending buying the stock. CIMB cuts it price target for Ezra from 3.08 to 1.05, while OCBC's fair value is now 1.20 down from 3.30 previously. DMG cuts its target price from 2.30 to 0.67.

Another company in cash flow problem- Sun East

(Dow Jones)--Sun East Group Ltd. (Y35.SG) Tuesday said that it has breached certain financial covenants of a $15 million floating rate note due in 2009, making the outstanding amount immediately payable.

The Hong Kong-based beauty and cosmetics firm is currently in discussions with Deutsche Bank AG on how to settle the debt, it said in a filing with the Singapore Exchange.
The company said it hasn't been able to obtain any alternative source of financing.

What the Pros say

CNBC.com
17 Oct 2008 08:44 AM ET

Stock markets rose across the world Friday, rebounding from two days of losses. Investors have shifted their attention from the volatile financial crisis to the prospect of a global recession.
CNBC's experts weigh in on the worst case scenario and where to find safety in the yo-yoing markets.

Worst Case Scenario
If the world slips into a severe recession, global GDP could fall as much as 10% over a number of years, says Christoffer Moltke-Leth, head of sales trading, Asia Pacific at Saxo Capital Markets.

Volatility to Continue
Volatility is going continue for the rest of the year, believes Michael Yoshikami, founder, president & chief investment strategist at YCMNet Advisors.

Recession: How Long, How Deep?
We're going to definitely shrink about 2% in the current quarter, if not possibly at twice that pace. Stocks could possibly bottom sometime in the next couple of months, depending on the economy not being much weaker past the first quarter of next year, Joseph LaVorgna from Deutsch Bank predicts of the economy.

Commodities to Slump Further
The recent selloff in commodities is set to intensify and could cut another 30% to 40% from the Goldman Sachs Commodity Index, Phil Roberts from Barclays Capital told CNBC, adding oil could slump toward $50 a barrel.

History Says Don't Give In
We are in a recession and historically, when you find yourself in a recession, getting out of stocks is really a bad idea, Ernie Ankrim from Russell Investments told CNBC, although he warns investors to stay away from oil.
Treasurys don't offer too much to the upside, Ankrim added.

What Will Withstand the Turmoil?
With such wild swings seen on Wall Street almost a daily affair, how does one invest? Michael Yoshikami, founder, president & chief investment strategist at YCMNet Advisors thinks there can be good opportunities when fear and panic reign in the markets, like heavyweights Johnson & Johnson and McDonalds.

Buying into Bonds
Billionaire and investor Warren Buffett says he is getting back into American stocks, but is it the right time? Laurent Fransolet, head of European interest rates strategy at Barclays Capital still sees opportunities in the European bond market.

Still Stay on the Sidelines
The S&P 500 index is still in a downtrend for the short term, however, the Nikkei 225 Average is close to a recovery, Royce Tostrams, technical analyst at Tostrams Groep said Friday, adding that both markets are far away from buying levels.

Look for Big Names
The world's on sale right now and investors should invest in the companies with big bank accounts and big cash, like tech giants Microsoft, Oracle, Google, Dave Maney from Headwaters MB said.
Look for big names, Stefan Abrams from Bryden-Abrams Investment Management, added.

Asian Stocks Seen Rebounding Soon
The Asian stocks have already hit their bottom, thinks Daniel McCormack, equity strategist at Macquarie Securities. He tells CNBC that in the next six weeks, Asian stocks could do reasonably well.

Chinese Stocks Have Bottomed
Craig Russell, chief market strategist, China at Saxo Bank believes the Chinese stock markets have bottomed. He tells CNBC that the Shanghai Composite could trade as high as 2,500 by year-end.

Top Picks in Asia Pacific
In the Asia Pacific region, Mark Matthews, chief Asia strategist at Merrill Lynch is heavily overweight on Australia, Hong Kong and China.

Aussie Dollar to Weaken Further
The Aussie dollar could weaken against the greenback over the medium-term, predicts Richard Grace, chief currency strategist at Commonwealth Bank of Australia.


Source : http://www.cnbc.com/

Lehman Minibond impact on Banks

There will be impact on banks, if banks were to compensate buyers of Minibond. Do take this consideration into account when bargain hunting for banks........Nicholas Tan

"The Monetary Authority of Singapore (MAS) said on Friday it is probing allegations of misconduct in the sale of financial products linked to collapsed US investment bank Lehman Brothers and other institutions. The country's central bank will focus on cases of mis-selling products to "vulnerable" customers, meaning the elderly and those who are not well-educated, MAS managing director Heng Swee Keat told a news conference.

MAS does not normally comment on dealings with individual institutions, he said in a statement issued at the news conference. "However, given public interest in this matter, MAS confirms that we have been conducting formal inquiries into allegation of breaches of law, inadequate internal controls by the FIs (financial institutions) or poor sales practices by their representatives." MAS would not elaborate on its probe but said it will announce "any actions" when inquiries are complete. Heng said MAS, the de facto central bank, has told financial institutions to give priority to cases involving vulnerable investors and not to take an "overly legalistic approach to mis-selling in dealing" with them. In cases where there is sufficient evidence that the product was mis-sold, the financial institution should take responsibility, Heng said.

MAS has said that about 10,000 people in Singapore invested in products linked to Lehman Brothers and other institutions hit by a crisis in the US financial heartland of Wall Street.

Many of the Singapore investors, a large portion of them retirees who stand to lose their life savings, have said they were told they were buying into a product with low risk. A 62-year-old businessman who could lose S$200,000 in Lehman Brothers-linked minibonds, told AFP he was offered the product even though he said he was not a risk-taker. "I even signed a survey form on my profile which said very clearly that I am not a high-risk gambler, but still they offered me the product," he said.

Hong Kong banks on Friday agreed to buy back minibonds linked to Lehman Brothers at market value, an industry spokesman said. The extraordinary move came as regulators in the southern Chinese financial hub said they had referred 24 cases of possible mis-selling of the investment products to the Securities and Futures Commission."

Sources of info : http://www.channelnewsasia.com/stories/singaporebusinessnews/print/383557/1/.html

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