January 03, 2011

Alchemists and Soothsayers for 2011

Yes, the data has just come in.

Contrary to what was written by many external sources,this one is a definite departure.

Stock market sees seven months of net foreign buying

If you believe easily, then read what Kuala Lumpur-based Credit Suisse Group AG analyst Tan Ting Min has stated  in a Tuesday report about the in-flow of foreign funds in to Bursa KL. Apparently statistics has bailed her out as  foreign funds has bought RM2.6 billion worth of shares in December,rebounding from RM900 million in November following RM1.8 billion worth of purchases in October. This represents  seven consecutive months of net foreign fund inflows spurred by  a strengthening ringgit and measures by the Government to boost the economy.

“The stock market will be driven by liquidity, supported by a robust economy, rising commodity prices and a stronger ringgit,” she said.

Tan added that efforts to transform the economy to attract investments would also boost the market.

Among her stock picks were CIMB, Public Bank while Gamuda and IJM Corp were key beneficiaries
of the Economic Transformation Programme.

Tan said UEM Land, AirAsia and Axiata were also stocks to look out for.

If you are a trader,take this with a pinch of salt and head for the doors when such analysts stop saying anything good about the market!

MK Land and the Mystery Land Buyer


Yes,MK Land is selling out some prime pieces of land to raise cash.The interesting twist is not in the court of MK Land but rather who are the buyers.

Let's go on with the story.

MK Land will sell to a  little-known Foster Estate Sdn Bhd two pieces of land in Damansara Perdana, Selangor, for a combined RM130 million.

And what do you know? According to the Companies Commission of Malaysia, Sumami Kiman and Saharuddin Abdullah hold one share each in that RM2 company.

What makes its almost an Agatha Christie book is these two were also the same shareholders of Jelas Ulung Sdn Bhd, which is making the bid to buy the strategic mammoth PLUS.

Jelas Ulung was also rumoured to be the vehicle for Tan Sri Halim Saad although this was denied by people close to the businessman.

Foster Estate was set up on November 4 2010 and is based in Klang. Its core activity is property investment.

According to MK Land chief operating officer Lau Shu Chuan, proceeds from the land sale will be used to carry out existing projects and new ones over two years.

The deal is due to be completed by the end of this year. In a statement to Bursa Malaysia, MK Land said it has no immediate plan to develop the land.

MK Land is selling two parcels of land in Damansara Perdana, comprising 7.4ha and 3.3ha for RM100.8 million and RM29.2 million, respectively.

The developer had bought the land in April 2000 for RM5.9 million and RM2.4 million, respectively.

Damansara Perdana sits next to the thriving Kota Damansara township and it is also close to the new planned development of the Rubber Research Institute Land in Sungai Buloh.

So,what plans have the RM2 company for these pieces of land as it sits comfortably next the the MRCB managed Sg. Buluh giant property project?

As for MK Land, as the Chairman is vacating his seat this year,a substantial amount of his personal loans to MK Land will certainly be paid out from this land deal sale,I am sure.

I expect MK Land to turn the corner this year!

Property 2011-A Mixed Bag


Angie Ng of the STAR reviews the property market and its potential in 2011 and came away with different outlooks for different pockets of the sector.

Every one of course concur with her that 2010 was quite an eventful one for the local housing market with strong demand and record prices registered in key property hot spots that included the Klang Valley and Penang.

Concerns over potential overheating had culminated in Bank Negara’s imposition in early November of a maximum loan-to-value ratio (LVR) of 70% for third home mortgages.

Buyers of landed properties in sought-after locations have benefited from good capital appreciation, with prices appreciating by between 20% and 30% year-on-year.

Most of the home-buying activities were fuelled by cheap cost of funding and huge liquidity in the banking system.

So, what is in store for 2011? Will home sales and prices continue to strengthen or will they sustain at current levels or start to head south?

CB Richard Ellis Sdn Bhd executive chairman Christopher Boyd believes the prices of landed properties in the Klang Valley and Penang will continue to rise, supported by a strong economy, which will be spurred by heavy expenditure on infrastructure and other projects, and high commodity prices. However, the effect in Johor will be more muted because demand has not been so strong.

“I believe the root cause of the strong growth in landed property prices in the Klang Valley and Penang in 2010 was a reduction in supply which followed the global economic crisis. Developers simply turned off the tap for a while until the future became clearer, and this is supported by data from the National Property Information Centre.

“The economy and confidence soon bounced back and so the result was a temporary supply squeeze which of course will ease this year as developers increase supply,” Boyd says.

As finance is still cheap and confidence remains high, he expects landed property prices to continue to rise in value, albeit at a slower rate. However, luxury high-rise residences in the Kuala Lumpur City Centre and Mon’t Kiara localities will continue to face a challenging market in view of ample supply and weak rental demand.

“Well-located medium-cost high-rise dwellings will remain in strong demand from younger middle-class buyers and we will see a continuation of the trend towards building small affordable units close to the central business district.” Boyd does not see any material impact from the 70% LVR ruling on third mortgages but says it is nevertheless a very timely message “that one has to be careful not to over-commit because prices may level off, making it more difficult to exit.”

He says the redevelopment of the Rubber Research Institute land in Sg Buloh and the Sg Besi airport has the potential to be phenomenal success and will benchmark Malaysia’s skill in producing large-scale developments of a very high quality.

According to ECM Libra research head Bernard Ching, property sales and price appreciation are expected to moderate in 2011.

He expects slower speculative demand due to the central bank’s LVR cap. Furthermore, the intense competition among banks in the mortgage market is not sustainable as net interest margins (NIMs) have compressed to very low levels.

He believes that banks may have to raise rates and/or cease offering zero-moving cost mortgages to alleviate further pressure on NIMs. This will result in higher financing costs to house-buyers. On the outlook for the commercial property sector, Boyd says there will be further upsides in the office market, especially if the country’s economic recovery is sustainable.

“I believe that with the right planning, the office market can be easily well balanced in terms of supply and demand. The Klang Valley office space market will remain quite resilient this year in the face of only moderate new supply and quite buoyant take up.”

Boyd estimates a further 3.5 million sq ft of office space would be completed in Kuala Lumpur this year.

He says it is more of a seller’s market right now as there is not enough investible buildings around to meet demand. Given the lower entry cost, demand is getting stronger especially for office buildings that are well managed and located, have high occupancy and good yields.

“Similarly, the retail property sector is likely to strengthen slightly in 2011 with only moderate new supply and strong demographic of a young and growing workforce,” he adds.

On the interest for commercial property, Boyd says that in the aftermath of the global financial crisis, while commercial rentals fell, the capital value of commercial property held up well.

“The reason for this is that investors had become severely disillusioned with stock markets and were still prepared to pay competitive prices for income-yielding commercial property, so in fact yield expectations dropped.

“This is a phenomenon that was seen all around the globe,” he says.

So, that is the way the cookie will crumble?

Let us see the new year out for the property market.