23 Oct 2013 ~ Good Morning Singapore!
Central Execution Team - The Excellence of Execution
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Global Flash: While You Were Sleeping
Source: Marketwatch
Quote for the day : Better to remain silent and be thought a fool than to speak out and remove all doubt.
- ABRAHAM LINCOLN
Singapore: The Day AheadSINGAPORE DAYBOOK : S'pore banks embrace slew of China financial pacts [SINGAPORE] Singapore will be a big winner from the raft of financial cooperation agreements inked with China yesterday, bankers said.
The asset management, foreign exchange and commodities sectors here will benefit from two investment initiatives - a 50 billion-yuan (S$10.1 billion) award for institutional investment into China's securities market; and another investment programme for Chinese investors to Singapore.
Another initiative, one of four announced yesterday, involves direct currency trading between the yuan and Singapore dollar. This will promote transparency for corporates who are hesitant about converting to yuan.
A SGD-CNY benchmark reference rate will be made available by the People's Bank of China on a daily basis, said Lum Yin Fong, DBS Bank's head of global product management, global transaction services.
"This will benefit Singapore corporate customers hedging their RMB, as it will provide them with an official benchmark to refer to," she said.
The most exciting development, bankers said, is facilitating cross-border yuan flows for Singapore companies operating in the Suzhou Industrial Park (SIP) and Tianjin Eco-City (TEC).
The idea is similar to what has happened for Hong Kong and Taiwanese companies in the Qianhai special economic zone and Kunshan cross-strait industrial cooperation experimental zone respectively, said OCBC Bank economist Tommy Xie.
Through these zones, Hong Kong and Taiwanese banks are lending offshore yuan or CNH loans to their compatriot companies.
"It's the most exciting measure as it'll mean cheaper funding," said Mr Xie.
By allowing cross-border flows between Singapore and SIP and TEC, "we believe it will be possible for companies operating in the two business zones to raise working capital in RMB directly from Singapore", said DBS' Ms Lum.
Wee Wei Min, OCBC Bank's head of global treasury advisory, said: "CNH interest rates can be one to two percentage points lower than onshore CNY."
"Among the four structural measures announced, the SIP and TEC are likely to have the most immediate impact as they could result in significant flow of RMB as long as it's related to specific projects," said Loh Boon Chye, Bank of America Merrill Lynch deputy president, Asia Pacific.
"In some ways, this can be viewed as a controlled liberalisation of this currency," he added.
The investment initiatives allow yuan deposits here to get access to the much bigger pool of China's securities markets via the 50 billion-yuan renminbi qualified foreign institutional investor (RQFII) programme.
The complaint about yuan deposits is the lack of investible instruments. Singapore had 142 billion in yuan deposits as of August.
The 50 billion yuan is significant given that London just got 80 billion yuan for its RFQII programme signed last week, said Lian Chia Liang, Western Asset Management head of investments, Asia.
London also signed a direct currency link with China. "It enhances our FX centre role," he said. Singapore is the world's third-largest forex centre behind London and New York.
Having an RQFII helps multinationals' corporate treasurers based in Singapore with their long-term financial planning as China "morphs from producer to consumer", said Mr Lian.
"From our experience and conversations with clients in Singapore, there is great interest from individuals and companies to invest in China and the RMB," said Ray Ferguson, CEO of Standard Chartered Singapore.
The RQFII programme removes currency risks for Chinese institutional investors, making offshore investments more attractive, said Beng Hong Lee, Deutsche Bank head of markets, China.
Furthermore, financial institutions here will be able to attract Chinese capital, said Guy Harvey-Samuel, HSBC Singapore chief executive.
"Capitalising on its position as a leading offshore hub for international and private banking, asset managers in Singapore will be able to advise customers in China on their investment strategy for onshore products here in Singapore," he said.
(Source: The Business Times)
MARKET SCOOP
MIT Q2 DPU up 7.9% year on year
Rickmers Maritime's Q3 net profit rises by 59%
China, S'pore to allow direct trading between currencies
China extends US$8.2b offshore yuan investment scheme to Singapore
JTC achieves S$1.3b in net surplus for FY12, capex at S$1.6b
Petra Foods in dispute with Barry Callebaut on cocoa unit sale
(Source: The Business Times)
OCBC Securities says ...
MIDAS HOLDINGS | BUY | TP: S$0.65
Midas Holdings (Midas) announced last evening that it has secured contracts to supply aluminium alloy extrusion profiles and certain fabricated parts for the manufacture of high-speed trains in China
The contracts are worth CNY167.5m in total and are awarded by CNR Changchun Railway Vehicle and CNR Tangshan Railway Vehicle
This comes as a welcome relief for the shareholders of Midas given that the long wait for Midas to win high-speed train contracts in China is finally over
The last time Midas secured a high speed train contract was in Feb 2011 (hiatus due to Minister of Railways corruption scandal and high-speed train crash in Wenzhou in Jul 2011)
This positive development is largely within our expectations as we had highlighted in
our 11 Sep 2013 report that we expected Midas to clinch high-speed contracts of an estimated CNY153m in value in 4Q13
Delivery of these supplies will take place from 2013 to 2014
Recently won international train and China metro contracts too
Last week, Midas also clinched a number of international train and China metro contracts amounting to CNY221.8m (announced on 16 Oct)
The former is for two main train projects in Europe and worth EUR17.7m (~CNY145.9m), with delivery expected between 2013 and 2017
The metro contracts from China have an aggregate value of CNY75.9m and were awarded by Midas' 32.5% owned joint-venture company, Nanjing SR Puzhen Rail Transport (NPRT), for a number of projects such as the Nanjing Metro Line 4 project
Deliveries for the various projects are slated to occur between 2013 and 2016
As a result, Midas' YTD order wins has now hit ~CNY812.6m (FY12: CNY324.9m)
We view Midas' latest high-speed train contract success as a strong rerating catalyst for its share price and believe that it may set the momentum for further such contract wins to come, given China's ambition to develop its rail transport sector
Maintain BUY and S$0.65 fair value estimate on Midas, based on 1.3x blended FY13/14F P/B
OCBC Securities says ...
CHINA ENVIRONMENT | UNRATED |
China Environment Ltd (CEL) is a provider of industrial waste gas treatment solutions in China
Headquartered in Longyan City, Fujian Province, CEL designs, constructs industrial waste gas treatment systems
Its key products include Electrostatic Precipitators (ESP), Electrostatic Lentoid Precipitators (ESLP), bag-houses, and hybrid dust collectors
At the invitation of CEL, we visited their new facility in Bengbu, Anhui Province, China, which houses 12 production buildings
We understand that it has started to use about six of them and when the facility swings
into optimal capacity, CEL can process up to 350k tonnes of steel (which management believes is equivalent to RMB2b worth of sales) from the current 80k tones
And with the completion of the facility, CEL will be able to use it as collateral to secure more bank borrowings (potentially looking at RMB200m) for working capital
We also visited one of its customers - Shanghai-listed Nanjing Iron & Steel Co (NIS) - to have a look at four dust elimination machines currently deployed in one of its facilities
CEL has built up to 15 such machines for NIS since 2004; but we understand that all these machines are due for upgrades to meet the increasingly higher discharge standards over the next few years
CEL notes that this is just from one customer and other customers will also need to upgrade their machines as most, if not all, of them will not be able to meet the higher discharge standards
Currently, CEL has an order book of RMB241m as of Sep 2013, up from RMB66.8m as of end-Jun, which it expects to deliver over the next few months
Coupled with some RMB80m raised via a share placement recently, CEL adds that it has sufficient working capacity to take on bigger jobs
We currently do not have a rating on the stock
OCBC Securities says...
FRASERS CENTREPOINT TRUST | HOLD | TP: S$1.96
Frasers Centrepoint Trust (FCT) released its 4QFY13 results last evening
NPI fell 5.0% to S$27.3m due mainly to higher property taxes and maintenance costs
However, distributable income was up 2.7% to S$21.7m as FCT benefited from lower
borrowing costs and higher distribution from Hektar REIT
In addition, S$2.9m of cash (0.35 S cents/unit) retained in 1HFY13 was distributed during the quarter
As a result, DPU jumped 10.0% to 2.98 S cents
For FY13, DPU came in at 10.93 S cents, up 9.2%
This is spot on with our DPU projection
We note that operational performance remained robust over the quarter, with portfolio occupancy maintained at a high 98.4%, while positive rental reversion of 10.8% was achieved
Noteworthy was the S$195.7m revaluation gain of its portfolio properties, which led to a
14.9% QoQ improvement in its NAV to S$1.77 and 2.8ppt drop in its gearing level to 27.6%
We will be attending FCT's analyst briefing later in the morning to get more colour on its outlook
Given the recent weakness in FCT's unit price performance, we are placing our S$1.96 fair value and Hold rating under review |
