Property prices will hold as ringgit falls to new low against USD and S$

PETALING JAYA: The depreciation of the ringgit will not lead to real estate prices crashing.

The Malaysian Institute of Estate Agents (MIEA) president Eric Kho said property remained a sound investment despite the current economic climate.

“Holding property is always better than holding cash,” he said.

Kho acknowledged that demand for primary or new developments had slowed but not as a result of weakening currency.

He said the slowdown was due to Bank Negara guidelines for banks to be more prudent when providing loans as well as increased construction cost due to the Goods and Service Tax (GST).

Kho said construction cost had increased by up to 15% and some developers were holding back on launching new properties.

He said developers who had launched projects were offering huge discounts to attract buyers.

Kho said there was also a slowdown in the secondary market and those looking to buy could expect to pay between 5 and 10% less, depending on location.

Kho, however, expected this situation to be temporary and said property would eventually appreciate.
- The Star/Asia News Network

Ringgit falls to a new low

PETALING JAYA: China’s central bank adjusted the yuan downwards for the second consecutive day, sending markets and currencies reeling.

The ringgit continued its fall against the US dollar, hitting a new low of RM4.0275, largely due to the devaluation of the yuan.

All currencies in the region also continued with their decline against the US dollar.

On a year-to-date basis, the ringgit is the worst performer among its Asian peers, and is down 13.33%. This is followed by the Indonesian rupiah, South Korean won and Thai baht at 9.88%, 8.35% and 6.99%, respectively.

Comparatively, the yuan is now down approximately 4.61%.

The impact on the ringgit is worse compared to other countries because Malaysia is viewed as a net exporter of energy and prices are depressed now – hovering below the US$50 per barrel mark.

Stock markets across the region fell with the Jakarta Composite Index leading the pack by falling 3.1% followed by Hong Kong’s Hang Seng Index which dropped 2.38%.

There was a “bloodbath” on Bursa Malaysia where about 90% of the 1,000-odd stocks listed closed lower.

The benchmark KLCI fell for the fifth consecutive day, shedding 26.8 points yesterday to close at 1609 points. Since last Thursday, the index has been down by 116 points.

On Tuesday, the People Bank of China (PBOC) moved the guiding rate for the yuan 2% downwards and yesterday it set it at 1.6% lower. The guiding rate is the band within which the yuan is allowed to trade.

The downward movement is viewed as a devaluation of the yuan and the biggest currency movement for the world’s second largest economy since 1994. Although China abandoned its currency peg in 2005, the central bank manages the yuan in a tight range.

The devaluation of the yuan has sparked concerns that China’s economic slowdown was more severe than anticipated and the central bank had to devalue the currency to export its way out of the situation.

Independent economist Lee Heng Guie said that the devaluation that has sparked a global currency war may end up with no winners.

The impact on depreciating ringgit is likely to be felt most by companies which import their raw materials, consumers and parents with children studying overseas.

BY RAHIMY RAHIM, RAZAK AHMAD, AND L. SUGANYA The Star/Asia News Network

Ringgit hits new record low of 2.9109 to Singdollar

Malaysia's ringgit hit a new record low against the Singapore dollar on Friday (Aug 14).PHOTO: AFP

SINGAPORE - Malaysia's ringgit hit a new record low against the Singapore dollar on Friday (Aug 14), after the Malaysian unit slumped to a fresh 17-year low versus the US dollar.

With the fall in oil prices increasing concerns over the country's exports, the ringgit lost as much as 2.6 per cent to 4.1180 per dollar, its weakest since Sept. 1 1998.

It recovered some ground to trade at 4.0660 to the US dollar at 2:04pm, bringing its loss this week to about 4.5 per cent.

Malaysia pegged the ringgit at 3.8000 in September 1998 and maintained it until 2005.

Against the Singapore dollar, the ringgit tumbled 1.55 per cent to 2.9109 as at 11:45am from its close of 2.8665 on Thursday. The ringgit pared its losses to trade at 2.8944 as at 2:04pm.

Better-than-expected economic data on Thursday failed to dispel the gloom with the benchmark stock index falling 1.5 per cent on Friday morning, heading for its lowest close since 2012. Fve-year government bond yield rose to 3.982 per cent, its highest since November 2008.

Oil prices fell with crude futures hitting six-and-a-half lows, exacerbating worries about Malaysia's exports. The country supplies liquefied natural gas and palm oil.

Malaysia has also had to draw heavily on its foreign exchange reserves to defend its currency amid a political scandal, a yuan devaluation and slumping oil prices. Bank Negara governor Zeti Akhtar Aziz said on Thursday the central bank will need to rebuild the reserves that have fallen below US$100 billion for the first time since 2010.

"Foreigners are still selling," said Ang Kok Heng, chief investment officer at Phillip Capital Management Bhd. in Kuala Lumpur, told Bloomberg News. "Unless the ringgit stops weakening, I don't know how long the selling will continue." - New Straits Time

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  Chinese yuan extends fall, long-term depreciation unlikely, weakening is not devaluation

  BEIJING, Aug. 12 (Xinhua) -- Chinese currency continued to fall on Wednesday after the central bank reformed the exchange rate formation...

Chinese yuan extends fall, long-term depreciation unlikely, weakening is not devaluation

BEIJING, Aug. 12 (Xinhua) -- Chinese currency continued to fall on Wednesday after the central bank reformed the exchange rate formation system to better reflect the market.

The central parity rate of renminbi, or yuan, weakened by 1,008 basis points, or 1.6 percent, to 6.3306 against the U.S. dollar, narrowing from Tuesday's 2 percent, according to the China Foreign Exchange Trading System.

The People's Bank of China (PBOC), the central bank, changed the exchange rate formation system so that it takes into consideration the closing rate of the inter-bank foreign exchange market on the previous day, supply and demand in the market and price movement of major currencies.

The International Monetary Fund (IMF) described the central bank's move as "a welcome step" that allows market forces to have a greater role in determining the exchange rate.

"Greater exchange rate flexibility is important for China as it strives to give market-forces a decisive role in the economy and is rapidly integrating into global financial markets," an IMF spokesperson said in an email on Wednesday.

The IMF said it believes the country can achieve an effective floating exchange rate system within two or three years.

However, the move still surprised the market and prompted the lowest valuation of the yuan since October 2012.

Ma Jun, chief economist at the PBOC's research bureau, attributed the lower rate to a long-standing gap between the central parity rate and the previous day's closing rate on the inter-bank market.

In a latest statement released on Wednesday, the PBOC said the rate changes are normal, as it shows a more market-based system and the decisive role that the supply-demand relationship plays in determining the exchange rate.

"This may lead to potentially significant fluctuations in the short run but after a short period of adaptation the intra-day exchange rate movements and resulting central parity fluctuations will converge to a reasonably stable zone," the PBOC said.

Ma also said the shift is a one-off technical correction and should not be interpreted as an indicator of future depreciation.

A relatively robust economy, current account surplus and the internationalization of the yuan will help the currency remain stable, the PBOC said.

Official data showed the Chinese economy maintained 7 percent growth in the first half of 2015 against challenges at home and abroad, creating sound conditions for the yuan to hold steady.

Surplus in goods trade reached 305.2 billion U.S. dollars in the first 7 months, a fundamental prop for the exchange rate.

An internationalized yuan and open financial sector have boosted the demand for the currency in recent years, which serves as momentum for the rate's stabilization, the PBOC said.

In addition, the PBOC also cited China's abundant foreign exchange reserves, stable fiscal condition and healthy financial system. The central parity rate is based on a weighted average of prices offered by market makers before the opening of the interbank market each trading day. The currency is allowed to trade on the spot market within 2 percent of the rate.

The PBOC said it will strive to further improve market-based exchange rate formation, maintain normal fluctuations and keep the rate basically stable at an adaptive and equilibrium level.
- Xinhuanet

Yuan weakening is not devaluation: central bank economist

Photo taken on March 16, 2014, shows yuan (central) and other currencies in the picture. [Photo/IC]

BEIJING, Aug. 11 (Xinhua) -- Allowing the Chinese yuan to weaken sharply against the U.S. dollar does not signify the beginning of a downward trend, a central bank economist said on Tuesday .

The yuan central parity rate announced by the China Foreign Exchange Trading System (CFETS) stood at 6.2298 against the greenback on Tuesday compared to 6.1162 on Monday, down nearly 2 percent, the lowest level since April, 2013.

The shift is a one-off technical correction and should not be interpreted as an indicator of future depreciation, said Ma Jun, chief economist at the research bureau of the People's Bank of China (PBOC).

The central parity rate is based on a weighted average of prices offered by market makers before the opening of the interbank market each trading day. The currency is allowed to trade on the spot market within 2 percent of the rate.

The PBOC said Tuesday's lower rate resolved accumulated differences between the central parity rate and the market rate, and was part of improvements to the central parity rate formation system to make it more market-based.

Ma said a long-standing gap between the central parity rate and the previous day's closing rate on the inter-bank market led to the lower rate on Tuesday.

He said China's economic fundamentals support a "basically stable" yuan exchange rate. A central parity rate closer to the market rate will provide a more stable environment for macro-economic development.

The economy has shown signs steadying and recovery, with infrastructure investment accelerating and property sales improving. Compared with some economies under strong pressure to depreciate their currencies, China is better-off, with a current account surplus, huge foreign exchange reserves, low inflation and sound fiscal conditions, he explained.

From Tuesday, daily central parity quotes reported to CFETS before the market opens will be based on the previous day's closing rate on the inter-bank market, supply and demand and price movements of other major currencies, according to the PBOC.

In July 2005, the central bank unpegged the yuan against the U.S. dollar, allowing it to fluctuate against a basket of currencies.

Making formation of the central parity rate more market-based touches on the core of reform, compared with previous steps that mainly concerned how much the yuan can fluctuate, said Guan Tao, former head of the international payments department at the State Administration of Foreign Exchange.

The yuan was at first allowed to vary by 0.3 percent from the central parity rate each trading day and the trading band gradually expanded to 2 percent in March last year. The market expects it to expand to 3 percent in the near future.

The latest reform actually increases China's flexibility and independence in foreign exchange control, as a rigid exchange rate system is open to speculative attacks, Guan told China Business News.

Two-way fluctuations will become normal for the yuan in future, he said.

- Xinhuanet

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Sorry is the hardest word for Abe

The news that the "draft of Abe's statement contains an 'apology'" made the headlines all day on Japanese broadcaster NHK on Monday. According to the report, the statement to mark the 70th anniversary of the end of World War II by Japanese Prime Minister Shinzo Abe on Friday will also include key expressions used in the 1995 statement by then-prime minister Tomiichi Murayama, including "apology," "deep remorse," "aggression" and "colonial rule." This is so far the first report released saying that Abe's speech will cover this positive content.

Yet over the past few days, a number of Japanese media have been quoting a variety of inside information saying that Abe's remarks will not include terms like "apology." As the day that marks Japan's defeat in WWII approaches, how Abe will talk about it has been placed under global public scrutiny.

Abe's statement will reflect the future path of the country. If he only reflects on the wartime past but tries to blur the nature of the war by refusing to apologize, or avoiding mention of "aggression," the nation will face serious doubts over whether it is planning to ditch peaceful development, and means to reshape the political and historical pattern that formed after the war.

Abe has always been beating about the bush, trying to lower the world's anticipation of him echoing the spirit of the Murayama Statement. Not long ago, his cabinet voted through revisions of the country's security rules, which has triggered quite a few domestic protests. His domestic support rate has tumbled sharply, causing him unprecedented pressure since he assumed office as prime minister for the second time.

Abe might compromise, and add those key words from the 1995 Statement. Yet this is not as certain as a compromise to political pressure, rather than his own moral and political responsibility. His historical revisionism is known by all, and opportunism is universally considered as his main principle to adjust strategies over historical issues. Hence, there is a good chance that he may rewrite his statement draft at the last minute.

Accordingly, instead of the real historical recognition by Abe's administration, the speech will more likely mirror Abe's scheming and calculating among all the pros and cons in the power structure of the Asia-Pacific region.

Even so, a statement that can be accepted by the international community is still worth welcoming.

Abe's political logic is weird. He should realize that the US is Japan's biggest obstacle on the path toward becoming a "normal state." But he won't let go of the rivalry with China. Some suspect that Tokyo is eager to stay in the good graces of Washington, letting its guard down and seeking a chance to get rid of its control. However, Japan is unable to make that work.

Abe will find that his ability falls short of his wishes over his strategy in the Western Pacific. We hope he will make the right choice for his statement, whatever the reasons. And history will judge him fairly.

- Global Times

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By-laws governing strata property management in Malaysia, part 2

General duties of a proprietors according to the Third Schedule of Strata Management Regulation 2015

WHILE last week's article covered the general by-laws under the Third Schedule of the Strata Management Regulation 2015, this week, we look at what is required and prohibited by the proprietor who is the house owner.

General duties of a proprietor

• Promptly pay to the management corporation the charges and contribution to the sinking fund relating to his parcel, and all other monies imposed by or payable to the management corporation under the Act;

• Promptly pay all quit rent, local authority assessment and other charges and outgoings which are payable in respect of his parcel;

• Permit the management corporation and its servants or agents, at all reasonable times and on reasonable notice being given (except in the case of an emergency when no notice is required), to enter his parcel for the purposes of:

a) checking for leakages or other building defects;

b) maintaining, repairing, renewing or upgrading pipes, wires, cables and ducts used or capable of being used in connection with the enjoyment of any other parcel or the common property;

c) maintaining, repairing, renewing or upgrading the common property; and executing any work or doing any act reasonably necessary for or in connection with the performance of its duties under the Act or the regulations made thereunder or for or in connection with the enforcement of these by- laws or additional by-laws affecting the development and forthwith carry out all the work ordered by any competent public or statutory authority in respect of his parcel other than such work for the benefit of the building or common property;

d) repair and maintain his parcel, including doors and windows and keep it in a state of good repair, reasonable wear and tear, damage by fire, storm, tempest or act of God excepted, and shall keep clean all exterior surfaces of glass in windows and doors on the boundary of his parcel which are not common property, unless the management corporation has resolved that it will keep clean the glass or specified part of the glass or the glass or part of the glass that cannot be accessed safely or at all by the proprietor;

e) maintain his parcel including all sanitary fittings, water, gas, electrical and air- conditioning pipes and apparatus thereof in a good condition so as not to cause any fire or explosion, or any leakages to any other parcel or the common property or so as not to cause any annoyance to the proprietors of other parcels in the development area;

f) forthwith repair and make good at his own cost and expense any damage to his parcel if such damage is excluded under any insurance policy effected by the management corporation and to carry out and complete such repair within any time period specified by the management corporation, failing which the management corporation may carry out such repair and the cost of so doing shall be charged to the proprietor and shall be payable on demand;

g) not use or permit to be used his parcel in such a manner or for such a purpose as to cause nuisance or danger to any other proprietor or the families of such proprietor; not use or permit to be used his parcel contrary to the terms of use of the parcel shown in the plan approved by the relevant authority; and

h) notify the management corporation forthwith of any change in the proprietorship of his parcel or any dealings, charges, leases or creation of any interest, for entry in the strata roll; and use and enjoy the common property in such a manner so as not to interfere unreasonably with the use and enjoyment thereof by other proprietors. Follow our column next week to learn of the general prohibitions of proprietors, power of the management corporation and changes to by-laws that are possible.

BY Datuk Pretam Singh Darshan Singh, a lawyer by profession, has previously worked as Senior Federal Counsel, Deputy Public Prosecutor with the Attorney General's Chambers and legal advisor to several government departments and agencies. He is currently the partner in a legal firm while simultaneously serving as President of the Tribunal for Home Buyers' Claims. Leveraging his vast knowledge and decades of experience and knowledge, he contributes articles to local and international journals, besides delivering lectures and talks in relevant forums.

Email your feedback and queries to: propertyqs@thesundaily.com

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Not wise to sell property or house to shore up ringgit Malaysia

ON Thursday, at a seminar organised by Malaysia Property Inc, the Employees Provident Fund (EPF) said it would continue to seek “opportunistic” investments abroad.

There are various reasons why EPF and the other funds absolutely need to do so if they are to provide a steady dividend stream to contributors over the longer term and to diversify risk.

As we have seen the last year or so, the ringgit has come under tremendous pressure and year to date, it has weakened against most currencies, especially the US dollar, the British pound and the Singapore dollar.

Had EPF not made forays abroad in 2009, its 14 million odd contributors would not have received dividends ranging between 6% and 6.75% between 2011 and 2014 and in the interim years of 2012, 6.12% and 2013, 6.35%.

Prior to this, EPF declared dividends of 5.8% in 2007, 4.5% in 2008, 5.65% in 2009 and 5.8% in 2010.

The Asian financial crisis in 1997/98 and the 2008 global financial crisis were costly lessons for EPF and the other funds.

Before its move to buy property abroad in 2008, less than 1% of its total funds were invested in real estate. Today, it has the mandate to invest up to 4% of its total funds of about RM700bil in local and foreign properties. It can also invest up to 26% of its available funds in non-ringgit denominated investment instruments including bonds, securities, properties and other others.

So far, EPF has invested more than £1bil in UK and more than 1bil euros in France and Germany. It also has properties in Japan and Australia.

Its core investments in Europe, excluding UK, are in the office and logistics sector. In UK, it has offices, logistics and 12 hospitals under the Spire brand. It also has a 20% stake in Battersea Power Station mixed used project. According to its head of global real estate in the private markets department Kamarulzaman Hassan, EPF would like to add retail hypermarket chain to its stable.

It is prudent and logical for EPF to seek opportunities in mature markets because although it knows the home market well, it is already in every sub-segment of the local real estate market - logistics, retail, office, residential.

As Kamarulzaman aptly said, EPF is “a big fish in a small crowded pond.” Other big fish in this small pond include Permodalan Nasional Bhd, Retirement Fund Inc (or KWAP) and Lembaga Tabung Haji, Perbadanan Hartanah Bumiputra among others.

There are several reasons why EPF has made forays abroad. It was badly hit in 1997 and 2008. Prior to this, it invested only in Malaysia. It had all its eggs in one basket.

Earlier this year, as the ringgit was weakening, certain parties in the government called on the various funds to bring their money home to shore up the ringgit. They were to curb investments abroad.

EPF subsequently sold 1 Sheldon Square, UK for £210mil (RM1.14bil), which it bought in 2010 for £156.7mi, giving EPF a net gain of £54 mil. Whether it made that decision to sell based on that call to bring the money home is a moot point. That property was tenanted out to Visa Services Europe until December 2022, with a 5.75% annual yield.

So far, KWAP and Felda have said they will not be selling their investments which gave them a good yield.

The thing is, if there is better yield to be had, and forex to earn, why dispose of them?

And why curb funds from investing abroad if they have done proper due diligence and are able to manage these investments well.

As it is, according to Kamarulzaman, London properties are so hot today that investors are willing to get 3.5% to 4% in annual yield.

Selling overseas real estate which were purchased when the pound was low, when it is offering a good yield, just to shore up the ringgit does not seem to be a wise call.

It is like killing the goose that lays the golden egg just to provide food for a day. Yes, London’s property prices are frothy now, but these property investment have long leases.

Besides, the markets it has invested in are mature markets with high liquidity. There is interest in these markets from around the world.

Because property sector is cyclical, the timing is important. EPF entered UK when the it was about RM5 to a pound. These investments came with long leases, which fit into EPF’s need for a steady income flow as it needs to pay dividends to contributors.

In short, going abroad gave it a much needed new investment platform which was not available at home.

These mature markets offer transparent legal and tax structures and clearly, governance was well established.

There is a clear exit option and this was demonstrated when it sold 1 Sheldon Square earlier this year.

UK properties have gone up in value considerably since. Whether EPF will continue to liquidate depends on various factors but to liquidate just to bring home the money to shore up the ringgit should not be one of them, especially when its investments are yielding good returns.

Property is today the biggest alternative asset class for institutional investors and forms the largest allocation for pension funds, insurance companies and sovereign wealth funds.

It is also not homogenous but in today’s volatile environment, it is more tangible than most other asset classes.

Comment by Thean Lee Cheng The Star/Asia News Network

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