Asian currencies will continue to depreciate.

The Singapore dollar will continue to lose ground against the US dollar in coming months, but its depreciation will not be as pronounced as compared to other struggling Asian currencies.

A report by BMI Research showed that Asian currencies have depreciated against the US dollar by an average of 0.7% in the last month of 2016 on back of a broad-based rally in the US dollar as the US Federal Reserve signalled a more hawkish monetary policy.

“In 2017, Asia will face significant external uncertainty, which will be broadly negative for Asian FX. This is with respect to a more protectionist approach by the Trump administration and slowing growth in China, where the government is facing policy constraints as it seeks to strike a balance between ensuring economic growth and controlling a buildup of financial risks,” BMI Researchsaid

The report noted that the Singapore dollar depreciated by 0.8% in the previous month to SGD1.44/USD. BMI Research holds a largely neutral outlook for the currency over the long-term.

“On one hand, the continued depreciation of the Chinese yuan will place downside pressure on SGD, but on the other, fundamental strengths such as low inflation and a strong net international investment position will be positive for the currency,” BMI Research said.
 

Around 7,700 meters will be leased by a government agency.

Homegrown property developer Oxley revealed that it has entered into a lease agreement with National Treasury Management Agency (NTMA) of Ireland.

According to the lease agreement, NTMA will take the lease for Levels 3 to 8 of Block D1, Dublin Landings for 25 years. The aggregate floor area (excluding the car parking spaces) under the lease is estimated at 7,700 square metres.

Dublin Landings, Oxley’s first development project in Ireland, was launched in October 2016. The 2.35 hectare site is situated along Dublin’s North Wall Quay.

The lease will commence from the handover of the premises, expected to be in February 2018
 

It is set to add around 1m sq ft. of commercial gross floor area.

For CapitaLand Commercial Trust, the Golden Shoe Car Park development may be a catalyst to watch out for.

According to RHB, the trust has submitted plans to the authorities to redevelop Golden Shoe Car Park, which is expected to commence in 2H17 and completed by 2021. This is set to add around 1m sq ft of commercial GFA in Singapore's central business district once fully redeveloped.

"Based on a similar redevelopment of Market Street Car Park, we estimate total development costs (including a differential premium) to be in the range of $1.5-2b that is to say around $1,500-2,000psf. With recent Grade-A office transactions still hovering above SGD2,500psf, we believe the latest redevelopment could unlock good value for its shareholders.," RHB said.

The brokerage firm noted that its plans to sell 50% of its stake in One George Street could eliminate funding concerns for the development.

"With a flurry of capital chasing good quality office assets in 2016, we believe that there is good possibility of a sale happening. If it goes through, the sale could potentially raise $550-600m in proceeds, which in turn could be effectively redeployed for the redevelopment of GSCP without the need for any equity issuance," it noted.

Three private private equity groups are working on bids for the warehouse operator.

According to a report from Bloomberg, Blackstone Group LP is considering going head-to-head with a Warburg Pincus consortium and a Chinese group backed by existing GLP investors, the people said, asking not to be identified because the deliberations are confidential.

Since Bloomberg News first reported takeover interest in GLP, the company’s shares have soared 46%, valuing it at $11.3b including debt. At that level, a purchase of the industrial property owner would be the largest-ever buyout of an Asian company, surpassing last year’s takeover of Qihoo 360 Technology Co., data compiled by Bloomberg show. Private equity firms flush with capital have been rushing to bid for the rare opportunities in Asia that offer control. Such investors have shown a willingness to pay top dollar in recent months, beating out strategic bidders for both Hong Kong internet provider Wharf T&T Ltd. and share registry Tricor Holdings Ltd. in October.

Read more here. 

It will enjoy a higher EBIT margin of 7%.

This year marks the first full year implementation of the new bus contracting model and surely, ComfortDelGro's bus business will reap the benefits of the new model.

According to CIMB, with its cost-indexed feature and asset-light nature, it could spur a higher operating margin for the group.

"With the completed transition of the Singapore bus sector to the GCM, we are projecting a 7% EBIT margin for ComfortDelGro’s Singapore bus from FY17 onwards, higher than the business’s 4.4% margin in FY16," the research firm said.

However, the group's Singapore bus revenue is foreseen to decrease by 3% to $774m this year and another 7.2% to $718m in 2018 if the loss of certain public bus routes post transition to the GCM is taken into account.

"All above taken into account, we project the group’s FY17F and FY18F Singapore public bus EBIT to be $54m and $50m, respectively, vs. $35m in FY16F," CIMB said.
 

It secured $695m in orders for Q4.

ST Electronics has secured a total of $2.33b in contracts for 2016, its parent company ST Engineering reported.

In the fourth quarter, the group secured about $695m worth of contracts in the fourth quarter from contracts for Rail Electronics & Intelligent Transportation, Satellite & Broadband Communications, as well as Advanced Electronics & Information Communications Technologies (ICT) solutions.

Rail Electronics & Intelligent Transportation contracts of about $71m were secured from local and overseas customers, while deals amounting to $95m were received from government, telecom and enterprise users worldwide for the supply of broadband network, satellite network equipment and earth stations.

About $529m worth of Advanced Electronics & ICT contracts were clinched from both public and private sectors.

These contracts are not expected to have any material impact on the consolidated net tangible assets per share and earnings per share of ST Engineering for the current financial year.
 

Average rents in Grade A+ buildings have declined 10%.

The office market still has not felt the impact of "flight to efficiency" in the past months, as physical relocations are only slated for the first six months this year.

According to Knight Frank, the flight to Grade A+ buildings in the Raffles Place-Marina Bay district continues to make sense for many businesses, as average rents fell 10.0% over the year.

The firm noted that rents of Grade A+ spaces in the said district have fallen 16.4% from the last peak in Q1 2015, which is now at sub-$10 psf per month.

"...average rents in Grade A+ offices are now at Grade A office rent levels in H2 2015, presenting a compelling proposition for businesses rationalising their overall business cost and looking to re-balance and re-negotiate their occupancy cost," Knight Frank said.

It noted that similarly, rents in Grade A office spaces in the same district declined 10.9% over the year to reach $8.30 psf per month.

"This reflects the average rent levels of Grade B offices in the first half of 2015, after having fallen 13.3% since the last peak in the first half of 2015. Vacancy rate remains temporarily low at 3.0%, but is expected to see a significant increase by the middle of 2017 as tenants who have pre-leased in other buildings relocate," it said.

Kinght Frank furthered, "Landlords will need to work closely with tenants in the coming year, understanding their requirements and helping them meet both their business and cost needs, tiding them through the tough economic conditions with win-win lease structures before the climate picks up again."

With this, it projects prime office rents to continue to moderate by 6% to 9% over this year. 

Blame the hiring restrictions on foreign born non-resident professionals.

There was a slowdown in Singapore's job market in the previous quarter as the government ramps up efforts to limit foreign born non-resident professionals from the employment market.

According to Morgan McKinley, Singapore has seen 7% decrease in jobs and 17% decline in the number of people seeking employment in 4Q16 compared to the previous quarter.

Morgan McKinley Asia Pacific COO Richie Holliday said the hiring restrictions are a source of ongoing alarm for both employers and candidates. He noted that the restrictions mean that when organisations reach their quota, irrespective of their needs and the availability of qualified candidates, they are barred from hiring anyone but citizens and permanent residents.

More so, he mentioned that the government’s populist hiring tack is at odds with economic realities, as Singapore lacks a robust domestic market and its employers rely on their ability to hire the best from around the globe.

“We’re hearing from candidates and employers on the ground that Singapore is becoming a less attractive place to do business because of the quota system”, said Holliday.

Meanwhile, the new quota system is not the only challenge Singapore’s employment market faces. Holliday pointed out that the cost of living is growing increasingly expensive, and it is home to strong wage inflation.

"Both factors are contributing to making Singapore a comparatively less attract ive hub for the financial services jobs," he said. 

But it will perform better than its rival Hong Kong.

Another lacklustre year is to be recorded for Singapore this year as total dividends in local currency are projected to increase by 0.7%, a slightly higher rate that 0.4% a year ago, IHS Markit said.

In terms of USD, total dividends are forecast to be down by 5% to US$11.3b.

Top paying sectors banks and telecommunications, which attributes 45% of the total dividends together, are forecast to increase dividends by 1.6% and 1.3% in aggregate terms.

"However, the per-share values of the companies in the sector are forecast to remain unchanged from the previous year reflecting moderating growth expected for both sectors," IHS Markit mentioned.

More so, oil & gas is foreseen to struggle, and another year of double-digit decrease in dividends is expected to be recorded for the sector.

Singapore will do better than Hong Kong, where payouts are projected to be down 5.9% due to significant special dividends paid last year. 

They are INSEAD-Singapore and NUS Business School.

Two Singaporean institutions, INSEAD – Singapore and the NUS Business School at the National University of Singapore, are rated by research firm QS as both being outstanding for both graduate employability and academic standards.

According to the firm's latest study, QS Global 250 Business Schools Report 2017, the two schools enter the Global Elite quadrant, which contains 45 world-leading business schools. Among those who made it to the list list, only five were from the Asia-Pacific region.

The rankings noted that INSEAD Singaporean satellite campus leads the Asia Pacific region for employability while NUS Business School at the National University of Singapore tops the academic performance.

Meanwhile, Lee Kong Chian School of Business at Singapore Management University and Nanyang Business School at Nanyang Technological University achieve leading Research scores, and thus place in QS’s ‘Top-Tier Research’ quadrant.

They are exploring mobile infrastructure sharing.

Two heads are better than one, and incumbent telcos M1 and StarHub have just inked a Memorandum of Understanding to study increased collaboration in mobile infrastructure sharing.

Pooling of network resources will allow M1 and StarHub to roll out more cost effective next-generation networks, as wel as improve network coverage and capacity for the benefit of customers. Network traffic will continue to be managed independently by the companies.

The MOU was signed by Chief Executive Officer of M1, Karen Kooi and Chief Executive Officer of StarHub, Tan Tong Hai.

“When realised, this could lower our operational and capital expenditures for both M1 and StarHub, so that we can run our existing mobile services efficiently, and still be able to invest in future technologies to keep Singapore at the forefront of the infocomm industry,” Kooi said.
 

And check out two other things Singapore can do to scale up innovation.

Ahead the Budget 2017, groups have proposed different ways on how to ensure that Singapore economy can thrive even in the midst of tough times. One such proposal is for Singapore government to encourage firms to look at innovation as a source of growth.

In its wishlist, global leader in assurance, tax, transaction, and advisory services EY said there are five ways how Singapore can push enterprises to innovate. One way is by introducing a patent box scheme or similar tax regime. In recent years, a number of jurisdictions such as the UK and Belgium, has introduced patent box regimes. Such regimes usually offer preferential tax rates on income derived from intellectual property, and their key objective is to attract R&D or innovative activities into the country.

Ernst & Young Solutions LLP partner in business Incentives Advisory Tan Bin Eng said this will complement existing tax incentives that promote R&D and improve the country’s overall attractiveness as a destination to conduct R&D and commercialise the resulting IP.

“The introduction of a patent box or similar tax regime in Singapore that provides lower effective tax rate to IP-related income, and is tied to the performance of R&D activities and commercialisation of the output of these activities, can drive the proliferation of value creation activities in Singapore," she said.

Another way to encourage firms is by enhancing writing down allowance for IP rights.

Tan Ching Khee, Partner, Tax Services, Ernst & Young Solutions LLP said when a Singapore-based company acquires IP rights, such costs can be eligible for a writing down allowance only if the company acquires both the economic and legal rights to the IP. For companies that create IP in Singapore, such costs can only be deductible if they fall within the R&D criteria.

“A review and enhancement of various types of IP will go a long way in ensuring that the Singapore IP tax regime is aligned with other jurisdictions. The definition of IP can be broadened and at the same time, the government may wish to consider whether there continues to be a need to require both legal and economic ownership of IP rights before writing down allowance can be made available," he noted.

Meanwhile, Eng pinted out that MAS could introduce and administer a targeted tax incentive. She says this is to "offer a preferential tax rate of 10% or lower to promote financial innovation-related activities by financial services companies in areas such as digital and mobile payments, authentication and biometrics, block chain, cloud computing, big data or robotics.”

It’s recycling assets to seek higher returns.

Keppel Land has inked a shares sales agreement to divest its 80% effective stake in an Indonesian joint venture company, PT Sentral Tunjungan Perkasa, to PT Indadi Land.
The total consideration for the transaction amounts to approximately Rp 529 billion ($57 million).

The joint venture company holds a prime site of approximately 23,300 sm in Surabaya's central business district. The divestment will yield an after-tax profit of about S$32 million for Keppel Land.

"The divestment is in line with the Company's strategy to recycle assets to seek higher returns. Indonesia is one of Keppel Land's key growth markets and we will continue to explore opportunities to scale up our presence in Greater Jakarta," said Sam Moon Thong, President (Indonesia), Keppel Land

Expect a pullback today.

The Straits Times Index (STI) ended 7.94 points or 0.26% lower to 2993 on Thursday, taking the year-to-date performance to +3.83%.

The top active stocks were Global Logistic, which gained 3.98%, DBS, which gained 0.44%, Singtel, which closed unchanged, UOB, which closed unchanged and OCBC Bank, with a 0.54% fall.

According to OCBC, this came as U.S. stocks rebounded from a sharp morning selloff, but still closed lower, with the Nasdaq snapping a seven-day winning streak as investors paused before the start of earnings season and a lack of policy detail in President-elect Donald Trump’s first formal news conference a day ago.

Meanwhile, seven out of eleven S&P 500 industries ended lower, with Financials (-0.74%) leading the declines while Telecommunication Services (0.63%) led the gains.

"The weakness on Wall Street overnight could spark a similar correction in the local bourse today, potentially extending the pullback yesterday," OCBC said.

Here's more from OCBC:

The weakness on Wall Street overnight could spark a similar correction in the local bourse today, potentially extending the pullback yesterday.

On the upside, we peg the initial resistance at 3000, ahead of 3025. Again, the ability of the index to breach and sustain itself convincingly above 3000 is crucial. Failure which could see the STI slipping back to 2970.

While overall volume shrank 0.9% to 1.7b units traded, total value gained 3.0% to S$1.2b, and average value/unit rose 3.9% to S$0.69. 

And here's a glace at the key sectors at SGX.

Singapore Lift Company (SLC) has launched the first composite lift in the world, paving the way for the city-state to manufacture a revolutionary type of elevators in the future. Made of lightweight and durable materials used in the aerospace sector, Formula 1 racing and deep sea exploration, this new type of lift is expected to be a game-changer in the building and construction industry. Read more here.

Warburg Pincus is forming a consortium to bid for Global Logistic Properties Ltd., the Singapore-based warehouse operator, according to people with knowledge of the matter. Warburg Pincus has been speaking with banks and potential bidding partners about an offer for the industrial property owner, which has a market value of about $8.5 billion, the people said. GLP, which has assets in China, Japan, the U.S. and Brazil, has asked for first-round offers by early February, people with knowledge of the matter said previously. Click here to find out more.

While the Singapore Exchange (SGX) has a broad range of companies listed on it like most other exchanges there are some industry sectors that are represented more extensively than others. The SGX has broken down its listings into 20 main sectors. Click here to take a glance at these key sectors.

Global tech head winds will slow down manufacturing output in 1H17.

The Singapore economy received a significant boost in 4Q16 due to the rapid expansion in the manufacturing sector. According to BMI Research, both manufacturing and services recorded strong performances, with manufacturing growing by 14.6% QoQ, reversing the 8.1% QoQ contraction in the previous quarter.

Services also expanded by 9.4% QoQ, compared to the -0.4% in the previous quarter. Construction activity remained in contraction, coming in at -4.7% QoQ versus 14.8% in Q316.

However, BMI Research argued that the strong manufacturing print will not be sustained.

"We believe that the strong print for the manufacturing sector is temporary and expect the sector to face a difficult outlook over the coming quarters. The restructuring of Singapore's labour force away from a high dependence on foreign workers towards one that is increasingly based on mechanisation will continue to undermine manufacturing output in Singapore," the research house said.

It added, "In our view, the uptick in electronics growth in Q416 is unlikely to be repeated over the coming quarters as the global tech cycle winds down slowly in H117. Meanwhile, we expect the Chinese economy to continue slowing gradually as structural weaknesses such as overcapacity continue to weigh on growth in 2017.”
 

They now take up 21% of total household liabilities.

Citing data from the Department of Statistics, a ValuePenguin study noted that the average debt of a Singaporean household is about $54,285 per capita.

Most of this debt is home loans, which comprises of 74.8% of the debt. Motor loans take up 31%.

The study pointed out that the high interest debt like credit cards and personal loans have been the fastest growing debt category, now comprising 21% of total household liabilities.

"In total, household debt has been increasing at around 2.85% in 2016, which is slightly faster than 2.4% we saw in 2015. It’s important to note that this growth rate is meaningfully slower than the average growth rate of 9% that household debt growth saw from 2009 to 2014. However, despite the slight acceleration in debt growth, household balance sheet remained in a good shape as its assets and net worth (asset – liability) grew at an even faster rate," the study stated.