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Good Times again soon.........................down South

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PostPosted: Mon Nov 14, 2005 10:31 pm    Post subject: Good Times again soon.........................down South Reply with quote

.....didnt want 2 hijack Sparhawk's thread..........................heres an interestin read 4 those who may have an inkling of interest on properties down south............................................

Views from either side of the fence
While stock prices have bigger mean reverting tendencies, there is a stronger trending tendency for property prices


A former head of equities research in a stockbroking firm told me not too long ago that it is not easy making a consistent return from the stocks and shares. Real estate is a better proposition, he insisted. Indeed, he's made a few smart decisions in the property sector - timing them right, and getting the right units in the right locations, namely Kuala Lumpur - that he's pocketing rental yield of more than 10 per cent a year.

Funnily, the view from the other side of the fence is the reverse.

A head of research in a property consultancy told me recently: 'Properties make for lousy investment, you can't make much money from them any more. You are better off investing in the stock market.' I had asked him for his view on whether now is a good time to buy an apartment, given the expectation of recovery in property prices in the coming few years. Again, he quoted his personal experience as an example. He had bought a relatively new resale leasehold condominium unit in 1998, near the bottom of the market after the Asian financial crisis. As of today, the price is still hovering around the same level.

So who's right? Is this a case of familiarity breeding contempt - the more one knows about a subject, the more one is disillusioned by it? Especially when it comes to the free market where prices are determined not just by the fundamentals but also by the psychology of the market participants. As an experienced fund manager said, one should approach the market with humility.

I've decided to look at property investments vis-a-vis stock investments.

Say, you bought a property way back in 1975 while your friend bought a basket of Straits Times Index stocks. Both held on till today. Based on the capital value alone, who do you think had done better?

Surprise, surprise - that would be your neighbour who held on to stocks. Based on the residential properties price index from Urban Redevelopment Authority of Singapore (URA), the price of your property would have gone up by 8.4 times. In other words, had you paid $75,000 for a property 30 years ago, its market price today would be about $705,000.

Stocks more volatile

Meanwhile, according to Thomson Financial Datastream's calculation of the STI, which goes all the way back to 1973, the index rose 10.4 times between 1975 and 2005. A $75,000 investment in the stock market 30 years ago would be worth $855,000 today.

But that's just a comparison of two points in time - 1975 and 2005. What about any two points during that period?

From the chart, you can see that stock prices are much more volatile than property prices. And one of the reasons why your neighbour's stock portfolio in the above example did better than your property investment is because of the sharp recovery in stock prices in the last two years.

Between the second quarter of 2003 and now, the STI has surged by nearly 100 per cent. During the same period, the URA property index only edged up a measly 2.8 per cent. However, to match the performance of your neighbour, the property index would only have to rise about 20 per cent from its current level.

Now, let's look at the performance of these two asset classes over three-, five- and 10-year periods.

Here we are getting a different picture. In all the three varying holding periods, the average returns of property investment is higher than those of stocks.

For example, the average return of all the three-year periods between 1975 and 2005 for property is 39 per cent. For the STI, it is 26 per cent. For a five-year holding period, property returned an average 77 per cent or 12.1 per cent per annum. STI returned 44 per cent, or 7.5 per cent a year. For a 10-year holding period, property chalked up 148 per cent (9.5 per cent a year) average return, compared with just 90 per cent (6.6 per cent) for stocks.

But it appears that the odds of earning a positive return for the various holding periods are better with stocks than with property.

Of the 111 three-year periods (using quarterly data) in the last three decades, 67 per cent of them were positive for property. This compared with 72 per cent for stocks.

Many of the negative returns in the property sector were due to the sustained correction after the market peaked in the second quarter of 1996.

There were 38 out of 103 negative five-year periods between 1975 and 2005. Twenty-five of those negative periods related to those who went into the market between 1994 and 1998.

Meanwhile, for holding periods of 10 years, property had a perfect record, up to the fourth quarter of 2003. In other words, people who invested in properties prior to 1994 all made money. The biggest jump was 441 per cent, between the second quarter of 1986 and the peak in the second quarter in 1996. Meanwhile, those who invested in properties in the second quarter of 1996 are still sitting on losses of some 35 per cent.

The last 10 years notwithstanding, it appears that property is an asset class that favours those who hold on to them over a longer term. As can be seen from the table, the longer the holding period, the higher the annualised return from property investments. It's the reverse for stocks. The longer the holding period, the lower the average returns for stocks.

This suggests that stock prices have bigger mean reverting tendencies, while there is a stronger trending tendency for property prices. In other words, those who are able to time their entry and exit from the stock market will enjoy much better returns than those who merely buy and hold on to their stocks.

As for the property market, up till 1996, those who committed to a property and held for at least 10 years all made money. The market only went one way - up.

Upside, downside

In terms of maximum upside, properties are better, while on the downside, they are not worse.

Given that most people would borrow from banks for their property investments, the upside and downside are accentuated further. For example: you forked out $100,000 cash for a $500,000 apartment, the remainder financed by bank loans. Three years later, you sold the apartment for $650,000. You would have made a return of 150 per cent on your cash, excluding interest expense. However, if you managed to sell the apartment for $450,000, you would have suffered a 50 per cent loss - more if you take into consideration interest paid to the bank.

So all in all, it would appear that up till now, properties appear to be a slightly superior asset class than equities.

The question then of course is: will we see a return of a trending market for property prices? And will the Singapore stock market shed its mean reverting tendency?
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PostPosted: Tue Nov 22, 2005 7:54 pm    Post subject: Reply with quote

...and while our friends down south have potential upside........................we possibly may have potential downside..............

KL property market turns soft
However, niche property and the upmarket segment still attract serious investors, reports PAULINE NG

(KUALA LUMPUR) For the past five years or so, the Malaysian property market has been in expansionary mode, riding on the back of a pent-up demand for real estate. Cheap interest rates have been the main driver of the housing boom but some analysts believe Malaysia's property market is already looking overbuilt.

Banks have had a good time at the party, with housing loans growing by 16-17 per cent over the boom period. But with rising inflation - officially around 3.3 per cent although private economists believe it to be more than 8 per cent in the Klang Valley - there are reports of banks already seeing a rise in non-performing loans on mortgages for houses valued between RM100,000 (S$45,000) and RM150,000, said ABN Amro in a recent report.

'The lower-end households are feeling the squeeze, as 34 per cent of their disposable income is already being used for essentials like food, and so they are more likely to slip on mortgage payments when the going gets tough,' it said.

Deutsche Bank is of the view that much of the pent-up demand for housing has already been met, and that this is reflected in the 18.5 per cent and 27.3 per cent year-on-year increase in volume and value transacted in the residential property sector last year.

Most property players concede the real estate market has turned softer. A director at an international property consultant firm agreed the property market is looking less robust. Although the banking system is flush with cash, he said Malaysians seem to be holding back on big ticket items, not entirely confident the economy will deliver.

Regroup Associates executive chairman Christopher Boyd said the residential market is only marking time. 'In the mid and lower range, competition has increased and potential buyers are taking their time to look for value for money.'

This is a watershed for the market, he said, as 10 years ago the Klang Valley had one house for seven people. By late last year, the ratio was a more 'comfortable average' of one for five as the provision of new housing reduced the backlog.

Niche property is, however, still holding its ground. The upmarket segment of multi-million-dollar condominiums in the Kuala Lumpur city centre - particularly in the surrounding locale of the iconic KLCC twin towers - has had a good run. Although prices could be peaking, the area still holds attraction for serious investors. Recently, the United Arab Emirates' diversified Al Batha group made a major real estate investment in the KL city centre vicinity, purchasing 13 luxury units in Suria Stonor for around RM26 million, or an average of RM720 per sq ft. Three years ago, property prices in the area averaged RM500 per sq ft.

Malaysian developers have begun looking to oil-rich Middle East investors as potential buyers of high-end real estate projects. Middle Eastern buyers have also caught on to the Kuala Lumpur real estate scene, perceived as a bargain compared to other regional markets. Besides capital appreciation, the current weak ringgit also offers potential currency gains.

Much of the current interest in property is now in real estate investment trusts (Reits), with a number involved in the marketing of new Reits over the next six months, said Kumar Tharmalingam, a director of Hall Chadwick Consulting.

Mr Tharmalingam said the secondary residential market is weak, but the primary bread-and-butter market of the two-storey terrace house is still attractive because developers have become more innovative in providing lifestyle products which are not so sensitive to price. In the middle market segment, house purchasers want niche developments with a lifestyle concept and are prepared to consider them even if they are located outside the city, he said.

Morgan Stanley believes the Malaysian housing market is overdone, with housing stock up 70 per cent in five years and the growing number of 'impaired properties' which could pose a burden for banks.

Malaysia has always suffered an over-built housing market owing to the government policy of reserving 30 per cent of all housing for bumiputras, observed Mr Tharmalingam. 'We also have housing by state-government-linked developers building in out of the way locations where transportation is a problem and hence the properties are not sold. New green-field developers also anticipate movement of population into the locations they are developing, but sometimes it doesn't happen.'

Mr Boyd does not think the market is overbuilt as he believes Malaysia's sell-then-build system mitigates such tendencies. 'The long-term outlook is still good. Half the Klang Valley is 27 years old or under, 20 per cent of the population is still at school, household incomes are rising and employment is still virtually full.'

An interest rate hike could further dampen the property market although it is likely to have been factored in already. The central bank has kept its overnight policy rate at 2.7 per cent, 130 basis points lower than US key rates of 4 per cent, and analysts expect the rate gap to be narrowed by the first quarter of next year. In this regard, Reit products that are coming onto the market could be hit should their yields not be competitive enough. As a comparison, Axis Reit, Malaysia's first Reit, promised yields of around 8 per cent when it was listed in July.

The coming 12 months should also see the launch of two hotels within the KLCC Twin Towers area. The Four Seasons hotel by Singaporean Ong Beng Seng, as well as the Hyatt Hotel, would further enhance the location of the Twin Towers as the premier commercial centre in Kuala Lumpur, said Mr Tharmalingam. Good condos in the area would continue to sell well, Mr Boyd added, and smaller condos close to the city which can offer some lifestyle frills would see renewed interest.

In the office market, however, he said supply is tightening and should City Hall not reappraise its freeze on new office buildings, a further flight of tenants to Petaling Jaya could be expected.
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PostPosted: Thu Nov 24, 2005 7:29 pm    Post subject: Reply with quote

Published November 24, 2005

M'sia delays sale of 5-year bond to Dec

KUALA LUMPUR) Malaysia has pushed back the sale of a five-year Islamic government bond to December from this month, the central bank said yesterday, reinforcing market talk that an interest rate increase was near.

Speculation has been growing that Bank Negara will raise official interest rates for the first time in more than seven years on Nov 30 to stem inflation and narrow a widening interest rate gap with the region.

'They probably want to postpone the issue until the market settles down after a rate rise on Nov 30. Otherwise, it'll be a bit chaotic,' said a trader with a large local bank.

Bank Negara is scheduled to release third quarter economic growth data and a monetary policy statement on Nov 30.

The central bank announced the delay of the bond sale on its website but did not give a reason.

When contacted, a central bank spokeswoman declined to comment.

Finance Ministry officials were not immediately available for comment.

The government bond auction calendar states that Bank Negara may revise the calendar due to changes in the government's financing requirements.

'It's the first time they have shifted a bond issue and we have no idea why they are doing this. It's probably because an increase in interest rate is coming,' said a trader with another local bank.

Trading in Malaysian bonds has been very light and cautious ahead of the monetary policy statement.

Central bank governor Zeti Akhtar Aziz said on Monday Malaysia would adjust its monetary policy if economic growth picked up and inflation stayed high, which analysts said was the clearest indication so far that a rate increase was near. - Reuters

another push.........................i think while we kenot say 4 certain, we'll have 2 evaluate the probabilities & the likelihood of rates going up vs rates being maintained or going down .........................would be 90-10.......

onli issue is what kind of impact the rate hike will have on an alredi soft market................
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PostPosted: Mon Jan 02, 2006 7:56 pm    Post subject: Reply with quote

a lot of opinions which may b right or wrong...only time will tell, but whats interesting is the para on interest rates......

Higher interest rates loom for Malaysia
Economic growth expected to hover around 5-5.5% this year


EXPECT Malaysia to progressively increase interest rates in the new year and its growth to remain flattish, at 5-5.5 per cent. And economics could play a greater role in shaping Malaysian politics going forward.

First the economy. Push finally came to shove in November when Bank Negara Malaysia (BNM) raised its overnight policy rate by 30 basis points, its first hike in seven years. But it's not enough: inflation in November hit 3.5 per cent, the highest in five years, while capital outflows continue to persist, courtesy of the wide (125 basis points) interest rate gap between the ringgit and the greenback.

Pity Malaysia's central bank. Having lifted capital controls on Malaysians in March, the central bank then unpegged the ringgit four months later, letting the currency loose after seven years of pegging it to the greenback. They were the right actions but they've led to the wrong outcomes.

Instead of strengthening, the ringgit is now being defended and even domestic capital is beginning to leave Malaysia's shores, attracted by better returns abroad and permitted by flexible exchange controls. In November, foreign reserves fell by RM15.1 billion (S$6.6 billion), something that Chua Hak Bin, regional economist at DBS Bank in Singapore, described as 'the largest monthly fall on record, exceeding even the RM9.3 billion drop during the July 1997 financial crisis'.

Malaysia's international reserves are still a robust US$73 billion but it's the rate of decline that's alarming. Dr Chua worries it could be a structural change and that capital outflows could be a persistent problem. Which is why most analysts think that a round of interest rate hikes - of at least 100 basis points - is not only desirable but necessary.

For the central bank, the dilemma is how to raise interest rates without derailing growth. For the last five years, one of the key drivers of Malaysia's growth has been consumer spending, fuelled by easy money. No one is sure if rising interest rates could blunt that momentum.

That should worry Prime Minister Abdullah Ahmad Badawi. Mr Abdullah, 64, came into power in November 2003 and, among other things, pinpointed fixing the budget deficit as a key priority for his administration. So he cancelled several so-called mega-projects and slashed government spending. And the deficit has come down to 3.8 per cent of gross domestic product, from 4.2 per cent last year.

In the process, however, Mr Abdullah has created powerful foes and critics. The premier's policies have hurt the construction sector which enjoyed a boom during the tenure of Mr Abdullah's predecessor, Mahathir Mohamad, but which has now been contracting for two years.

Malaysia' construction sector is politically influential: it supports thousands of ethnic Malay businessmen, many of whom are members of the United Malays National Organisation, or Umno, the country's dominant political party over which Mr Abdullah presides.

More worryingly for Mr Abdullah, Dr Mahathir has now come out openly in criticism of his policies. It was an open secret in Kuala Lumpur that Dr Mahathir was unhappy with some of his successor's policies but the former premier generally confined his criticism to closed-door meetings. Not any more. In early December, Dr Mahathir came out firing from the hip during a question-and-answer session organised by a Kuala Lumpur-based think tank.

Although he never mentioned Mr Abdullah by name, it was clear what he thought. He fretted, for example, that Vision 2020 - a Mahathir plan to make Malaysia a developed country by that time - would not be realised. For its fruition, Vision 2020 needs 7 per cent annual growth for 20 years. Dr Mahathir said that was not happening and would not happen unless 'the government spent money'.

It was an indictment of Mr Abdullah's deficit-fixing policies and Dr Mahathir went on to note sarcastically that the government had no money now 'because of my spendthrift ways. I'd spent it all'. It was a clear reminder to the current administration that he didn't like the reference to things like 'mega-projects' which are often associated with his tenure.

The tart, self-deprecating speechifying of Dr Mahathir has become a recurrent theme in his recent press conferences - and has become widely recognised as an emotion-laden dig against the government. But his latest salvo wasn't just about economic policy: Dr Mahathir didn't seem to agree with many aspects of Malaysia's trade and foreign policy as well.

Dr Mahathir's verbal salvoes may not hurt Mr Abdullah's administration much but it also isn't clear how far the former premier is willing to take it. Dr Mahathir still carries a lot of weight in Umno and is revered by many of its rank and file. The deficit-fixing criticism is also shared by other economists who point out that Malaysia's growth in much of the 1970s and 1980s was also fuelled by deficits.

Government officials concede this and say that things will change. Indeed, Mr Abdullah has his options and one would be renewed spending under the auspices of the Ninth Malaysia Plan (2006-2010). The plan, which spells out the socio-economic goals and targets for the country over the next five years, will give the premier more flexibility on government spending and could relieve some of the pressure on him.

Mr Abdullah has had a tough year. In October, his wife Endon Mahmood died after a long battle with breast cancer. It could explain his distracted behaviour over much of last year but the premier has since shown resolve and it could be manifest this year. One way could be a Cabinet reshuffle which was widely expected after Umno's party polls in September 2004 but which never materialised. But now, government insiders suggest that Mr Abdullah will move to reshuffle his Cabinet after he returns from holiday. There are good reasons for a reshuffle. Isa Samad, the minister of the federal territory and a serving Umno vice-president, resigned in September after he was found guilty of vote buying by Umno's disciplinary committee.

Quite apart from that, Mr Abdullah has yet to accommodate the winners and rising stars in Umno, those who emerged in last September's election. Political analysts also think Mr Abdullah has to crack the whip to show everyone who's boss. His mild mannered style of leadership, say analysts, seems to have emboldened government leaders and lawmakers to say and do things they would have been hesitant to try under Dr Mahathir, a notoriously sharp-tongued premier who rarely brooked any backchat from anyone.

But during Mr Abdullah's tenure, for example, there have been numerous examples of ministers clashing publicly. Reshuffling the Cabinet would also be a good way for Mr Abdullah to consolidate his grip over Umno. Most expected him to do it after his resounding general election victory in March last year. He didn't then, but he is more than likely to do it now.
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PostPosted: Thu Jan 05, 2006 5:17 am    Post subject: Hi nick1994 Reply with quote

I've just come across ur very helpful posts. I've been in the UK for 10yrs now and don't have much clue about economy and markets in m'sia. Can I ask a few questions?

How often does the National Bank change interest rates? Is there a fixed interval where they hold meetings and stuff to discuss things?

Where can I get some of this info u'v posted? Is there any dedicated financial affairs website in M'sia? Things like getting graphs and fundamental info on the stock market etc....Thanks

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