Singapore Business Review (April-May 2016)

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IS A BANKING CRISIS BREWING? BUSINESSES THROW IN THE TOWEL DEBTTHREAT TO DERAIL GROWTH TOP WOMEN ENTREPRENEURS

FROM THE EDITOR About Us

Welcome to our annual Salary Survey issue.

Singapore Business Review caught up with top recruiters and discovered that most employers in the city will be hesitant to recruit more permanent hires in light of slowing economic growth.

Negotiating big pay bumps will also be tough, as more companies tighten the purse strings in anticipation of weaker profitability.

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In this issue, we also explored the effects of extremely high leverage on the local economy.

Analysts warn that corporate spending might take a hit as debt servicing burdens rise, while a top investor cautions that a banking crisis might happen in Singapore this year. The number of business closures also hit a record high last year, while top lenders are under threat from shaky oil and gas loans.

On the bright side, agribusiness players will flourish as drought grips Asia, while the booming service residence industry will continue to grow by leaps and bounds. Mergers and acquisitions are also expected to gain traction this year after languishing in 2015.

We have a lot more in store for you so start flipping through the pages.

Enjoy the issue!

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SINGAPORE BUSINESS REVIEW | MAY 2016 1

CONTENTS

COVER STORY

30 2016 SALARY SURVEY FIRST

28

ANALYSIS PLANTERS BANK ON DRY SPELL TO DRIVE GROWTH

20

ANALYST CALL UOB TO LOSE BILLIONS IF o&G PLAYERS SINK

RANKINGS

REGULAR

08 Corporate debt threatens growth

22 Financial Insight

36 Supply glut still hurting hoteliers

09 Business closures surge

26 Economic Insight

40 Serviced residences industry to revel

10 Here comes the new telco 12 Property market at risk 14 Banking crisis brewing 16 Top women entrepreneurs 22 Deliveroo vs Foodpanda

in demand growth

38 Legal Briefing 42 CMO Briefing

ANALYSIS 44 Is the Asian leverage cycle finally unwinding?

46 China sneezes and ASEAN catches a cold

Published Bi-monthly on the Second week of the Month by Charlton Media Group 101 Cecil St. #17-09 Tong Eng Building 2 Singapore SINGAPORE BUSINESS REVIEW | MAY 2016 069533

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RESIDENTIAL PROPERTY

Malaysians, Chinese still keen on local homes even as currencies tumble Foreign buying interest in Singapore remained resilient despite weak regional currencies, revealed a report by DTZ. In particular, Mainland Chinese and Malaysian buyers formed 54% of all foreign condo purchases last year.

Mainland Chinese buyers snapped up 998 units last year, while Malaysian home purchases remained largely flat at 954 units.

HR & EDUCATION

ENERGY & OFFSHORE

Turbulent times ahead for Singapore employment market, warns MOM Singapore workforce growth is also expected stay soft on back of demographic effects, while foreign workforce growth will remain muted. Additionally, wages are also anticipated to rise at a more moderate pace than in 2015.

The Ministry of Manpower anticipates modest overall labour demand in 2016. Redundancies are expected to accelerate in sectors undergoing restructuring.

Sete Brasil saga “about to get very ugly”: source Sete Brasil’s vendors and subvendors are reeling from the effect of massive forex losses, a confidential source told Singapore Business Review.

The source, who worked for one of Keppel’s major vendors, said that analysts are overlooking the fact that the payment rates for the contracts were locked in at rates of around 1.75 Brazilian real to 1 US dollar or lower.

Ageing gracefully with assurance

BY SHAUN WANG In anticipation of increased longevity and an ageing society, individuals need to consider three questions: When should I be saving for retirement? Where can I get protection against potential shocks of medical expenses at advanced age, especially due to critical illness? What are other important factors for a good quality of retirement life?

Firstly, when it comes to saving for retirement, the key is to start saving early and invest for the long-term.

Dealing with ambiguity: The new talent currency for Singapore professionals?

BY VIVEK KUMAR Machine learning and artificial intelligence are all around us now, from computers which identify and sort our email spams, to ‘DeepFace’ of Facebook which identifies faces with 97.25% accuracy, to self-driving cars on Singapore roads.

In such an environment, what kind of skills would a high value job of 2020 look for?

Admittedly, the answer is complex.

MOST READ COMMENTARY Work-life balance: Solution or curse?

BY JENNIFER RAHMAN The rhetoric on whether a work-life balance for Singaporeans is sustainable has been hotly debated.

In some sectors, it has leveraged better staff retention, increased productivity, and enhanced career growth but at what cost?

High stress levels, long working hours, decreased family time, and marital strife are some of the consequences highlighted by this paradigm shift in work-centric Singapore.

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OPPORTUNITIES

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FIRST financial crisis] is likely, we believe that [an economic slowdown] is, particularly as firms are forced to scale back their capex plans in order to divert more resources towards debt servicing,” Wood says. Wood estimates that corporate debt levels hover at 85.0% of the GDP, the highest on record.

In its most recent Financial Stability Report, the Monetary Authority of Singapore says that there are firms that look vulnerable should interest rates rise, or if earnings outlook weakens.

no retirement

A distressingly high number of Singaporean workers discover too late that they do not have enough funds for a comfortable retirement. A survey by Nielsen and NTUC Income shows that over 6 out of 10 Singaporeans have squirreled away just $186,040 in savings by the time they reach retirement age. This is less than half the average amount that majority expect will be sufficient for retirement, which stands at a staggering $376,270.

The survey reveals that 60% of workers start saving only at age 45, and starting late is the primary reason for the inability to retire comfortably. As a consequence, 65% of seniors feel that their savings will not last through retirement, and 35% are still working to fund their silver years.

Dwindling funds Meanwhile, HSBC’s Future of Retirement report reveals that 33% of pre-retirees—or workers aged 45 and older—believe that they will never be able to retire fully, nearly double the global average of 18%. Having insufficient savings was cited by 68% as the top reason for the inability to retire, higher than the global average of 64%.

Meanwhile, 47% said that they have dependents who rely on them, higher than the global average of 32%. Debt was cited by 26% as the primary reason for being unable to retire, compared with the international average of 22%.

“Retirement is the reward after years of hard work where people can devote more time towards family or other ambitions they are passionate about. However, the financial realities of retirement make it an elusive goal for many,” says Matthew Colebrook, head of retail banking and wealth management, HSBC Singapore.

8 SINGAPORE BUSINESS REVIEW | MAY 2016

This xxxcash is for the creditors

Steep corporate debt feared to derail growth

I

t’s payback time for Singaporean companies which have embarked on a borrowing spree in recent years. As interest rates rise, experts warn that record-high corporate debt levels will act as a big drag on Singapore’s economic growth story in 2016.

As borrowing rates start to normalise, companies might be forced to reduce capital expenditure plans in order to service their debt, which in turn will result in greater pressure for the broader economy.

“Singapore’s rising corporate debt levels will be increasingly difficult to service amid a backdrop of slowing economic growth not only domestically, but across the region.

Particularly concerning is the fact that corporate leverage rose at a very rapid pace following the global financial crisis as firms looked to lock in record-low financing rates,” says Andrew Wood, head of Asia country risk research, BMI Research.

Capex cuts await Wood highlights that the breakneck pace of debt growth witnessed in the years after the global financial crisis usually points to an upcoming economic slowdown or even another financial crisis.

“While we do not believe that [a

Corporate debt will be increasingly difficult to service amid a backdrop of slowing economic growth.

More overleveraged firms The report showed that aggregate corporate leverage has begun to stabilise after rising sharply from 95% in 2010 to 145% in 2014. However, the number of firms with debt-toequity ratios greater than 2x has increased to 7.0% of listed corporates in the second quarter of 2015, compared to just 5.7% in Q2 2014.

The number of firms with interest coverage ratios less than 2 in 2Q15 have increased to 23% of all listed corporates, compared to 21% in 2Q14. The corresponding corporate debt held by such firms increased to 11% in 2Q15.

Kit Wei Zheng, vice president, economics and markets analysis at Citigroup, says that high corporate debt could curb domestic demand at a time when tthe economy is increasingly reliant on local industries to drive growth.

“Increased stress on corporate balance sheets and cash flows are likely to slow capex plans and reduce banks’ willingness to lend to companies, with knock-on effects on domestic demand,” Zheng says.

Corporate Debt-to-GDP ratio

Source: MAS estimates, BIS, Dealogic

FIRST Singapore has the highest taxi penetration rate among peers

Source: Euromonitor stats 2012, LTA, CIMB

Driver incentives are shrinking

Speed bumps for booking apps

W

hen Jason first started using taxi booking apps Uber and Grab, finding passengers was extremely easy. The Singaporean cabbie says that in the beginning, the two apps dangled many incentives to motivate drivers to take bookings. There were also more passengers then, Jason says, but everything soon changed.

“Ever since more taxis have entered the fray, it has been very competitive to get bookings and incentives are much fewer now,” Jason notes.

Car booking apps like Grab and Uber used to pose a headache for

More ex-taxi drivers who were attracted to join by the high incentives will return to the taxi business.

incumbent transport operators, but a report by CIMB analysts Roy Chen and William Tng asserts that taxi drivers earn substantially more than Uber and Grab drivers.

The report interviewed over 30 drivers. The report notes that in the early days, incentives amounted to roughly $1,000 to $2,000 in a week.

This prompted many taxi drivers to make a switch to Uber and Grab.

However, incentives have since fallen to just $200 to $300 per week, they say, which is a sign that both apps are already satisfied with the size of their driver pool.

“We expect Uber/Grab to

continue reducing the incentives in order to seek or optimise their profits. Incentive-cutting will lead to further downsides for drivers’ earnings. We foresee more ex-taxi drivers who were attracted to join Uber/Grab by the high incentives, returning to the taxi business,” the report adds.

Grab and Uber, however, remain optimistic on their growth prospects in the region.

“Not only is there sufficient room for private hire vehicle and taxi services to co-exist, both are necessary to bring positive change to the transport industry as a whole,” says Lim Kell Jay, General Manager of Grab Singapore.

“The number of driver partners has grown exponentially in Singapore and continues to grow rapidly. Our growth in Singapore, our first city in Asia, has been phenomenal,” says Chan Park, GM Southeast Asia at Uber.

The Chartist: Business closures hit record high as outlook weakens More Singapore-based businesses threw in the towel in 2015, marking the first time since 2009 that the number of closures exceeded new business formations.

HSBC economist, Joseph Incalcaterra says that the phenomenon is a “relatively bearish” and “ominous” sign, signalling a further moderation in economic activity for the first half of 2016.

At the same time, business expectations for the services sector have been on a steady downtrend, pointing to a contraction in the first half of 2016.

Although the services sector has been a key growth driver in recent quarters, he warns that unimpressive economic data and persistently weak business sentiment indicate greater trouble in coming quarters.

Business expectations for services pointing to a contraction in 1H16

Source: CEIC, HSBC; survey published 28 January 2016. Services expectations lagged by 2 quarters in order to correspond to the proper GDP period.

Business cessations overtook formations in December, an ominous sign

Source: CEIC, HSBC

SINGAPORE BUSINESS REVIEW | MAY 2016 9

FIRST

Here comes the new telco

Survey

Battle of the sexes

W

hen the Infocomm Development Authority of Singapore (IDA) revealed that it will hold a spectrum auction for a new mobile network operator (MNO) in the third quarter of 2016, market watchers were surprised by the regulator’s decision to make it easier for a new player to enter the market.

The IDA not only slashed auction prices for the new entrant; it also decided to set aside a different bandwidth to allow the new MNO to have a more heterogeneous network rollout.

Red carpet rolled out Analysts say that the IDA’s actions will make it easier for a new player to compete in Singapore’s alreadysaturated mobile market.

“IDA’s decision was expected, except for the change in the spectrum package composition for the new entrant spectrum auction. In carrier aggregation mode, the spectrum can provide peak speeds of up to 295Mbps, which helps the new MNO compete,” says CIMB equity analyst, Foong Choong Chen.

DBS analyst, Sachin Mittal notes that the potential fourth telco will be a niche player, and that it will target consumers with high data-capacity

Move over, big three

usage at a low price. “However, its network coverage may not match the incumbents’ coverage for a couple of years. We project M1 and StarHub to lose 10% and 4% of their group revenue to this player by 2022,” Mittal says.

The spectrum auctions will be in two stages. A new entrant auction will be held in the third quarter of 2016, followed by a general auction open to incumbents and the new MNO in the third or fourth quarter of the year.

The IDA will put a total 235MHz into the auctions, including an additional 10MHz of 2.3GHz versus its initial proposal.

Mobile App Watch

Call Levels calls you when prices hit critical levels The importance of setting price alerts to avoid losses during downturns is crucial in keeping investors informed and reactive. However, despite innovations in finance, ex-finance professionals Cynthia Siantar and Daniel Chia argue that relationship managers, sales people and trade representatives still monitor price alerts for clients. Curent price alerts are sent via email, which run the risk of being overlooked or being sent to spam, or SMS, which bears a nominal fee, they add.

Frustrated with what they call ‘needlessly complex’ finance and trading apps, in 2014 they founded Call Levels, which offers a market monitoring and immediate price notification service app. Built and optimised on the mobile cloud, the founders claim that it delivers a simple but critical service; in retaining flexibility for users, matched with a wide range of assets covered - 10,000+ and growing.

10 SINGAPORE BUSINESS REVIEW | MAY 2016

Network coverage may not match the incumbents’ coverage for a couple of years.

When it comes to investing, it appears that Singaporean women are less confident than their male peers, according to the latest Global Investor Pulse Survey by BlackRock.

Although the survey shows that women can be just as financially-savvy as men, it also reveals that men enjoy managing their investments more in comparison to women.

Men also feel more wellprepared for retirement and are more comfortable taking investment decisions while building up their retirement funds, the survey shows.

The survey shows that 72% of women have investments compared to 80% of men.

In fact, 25% of women have savings only and no investments compared to just 18% for men. Women tend to hold more conservative asset classes, such as cash and insurance-linked investments.

On the other hand, over half of men hold equities compared to less than 40% of women.

Twenty percent of men hold bonds compared to 17% of women, and 18% of men are invested in foreign exchange, versus 9% of women.

The survey shows that many women lack confidence in their ability to manage finances and have a lower risk appetite. Only 37% of women feel that they are competent investors, as compared to 54% of men.

“It is interesting to find that women tend to cast more doubt over their own investment abilities than men, despite having similar investment goals.

More education is needed to shift and improve investment behaviours,”t says Kevin Hardy, country head of Singapore at BlackRock.

co-published Corporate profile

Binary options: Forex, stakes, excitement!

Options trading has become an integral part of trading on both currency and stock markets since 1998.

J

ust like any other relatively new financial instrument, binary options are still being looked at with a huge portion of skepticism by those who are used to traditional trading. However, options trading appeared in 1998 and has become an integral part of trading on both currency and stock markets.

Let us break down the definition of options. Similarly to the ordinary stock options, to which we will revert soon, a binary option is a wager on the movement of one or another asset in a certain direction. In this context, we deal with currency pairs. For example, trading a binary option, a trader puts an amount of money on either strengthening or weakening of the euro against the US dollar throughout a set period of time, such as a trading session or a day.

wind is blowing, or the trend is moving, you can increase the efficiency of your binary options trading up to 60 or even 70%. Then you are more likely to earn a substantial profit.

The process of options trading is quite simple. You choose a currency, the movement of which is easier and more convenient for you to predict. Your projection can be supported by statistical figures from the previous trading sessions, news, analytical reviews, or maybe some financial instinct. The key advantage of binary options is that there is no trading itself in the platform, which is time, effort and emotion consuming.

You only have to buy an option and wait for the option period to expire.

After that, you either win a double stake or lose the amount of money you wagered. Everything is more than simple and elementary! Being armed with information (news, analytical articles, statistics), you can make a steady income from options trading.

Many traders who got involved into binary options trading say that options trading reminds a gambling game, but the difference is that a player, or a trader, can and should influence the outcome and gain profit. Binary options are the

“A binary option is a wager on the movement of one or another asset in a certain direction.”

type of options which are actively traded on the US stock exchanges, such as the CBOE, CME, and AMEX, and they are aimed at market majors.

No way for lesser mortals Only institutional banks, funds, and financial groups have access to these options. So, there is no way here for lesser mortals. But if you are a mere mortal with the US citizenship, you can avail yourself of stock options trading on Nadex stock exchange. Do not be upset if this does not apply for you because stock options have rather significant disadvantages.

First of all, you will have to pay taxes. Second, you should qualify as an investor in order to access the stock exchange. Last but not least, deposits and withdrawals of money are available only via wire transfers - forget about electronic payment systems or e-wallets. If you are interested in options, you will easily find a reliable broker in the forex market with a set of services, including binary options trading. One of the first brokers to introduce binary options was InstaForex that still holds the leading positions in this sphere.

All kinds of binary options are available, from those on currency pairs, metals, and CFDs to expiry and intraday options.

Anyway, there are so many arguments about options that it is better to try than keep on wondering, especially, when you need only one day and a few dollars to try this financial instrument out.

Not a game of luck However, do not rush to call the options trading some kind of roulette or any other casino game, which is no more than a game of chance and luck. Of course, you can trade binary options relying blindly on good fortune, but then your chances to make profit will be equal to the prospect of losing the option (i.e. the amount of money wagered on either growth or fall). When you begin to ‘feel’ the market, understand where the SINGAPORE BUSINESS REVIEW | MAY 2016 11

FIRST

Property market under threat as market volatility rules

I

f intense volatility continues to roil global markets, analysts fear that Singapore’s already-fragile property sector will suffer as an unintended victim. Analysts say that severe losses in the stock market could trigger property default sales and cause home prices to drop much more than expected, jeopardising the much-desired soft landing for the property market.

“Sudden shocks in the equity markets tend to be a precursor of more auction listings, as owners need to adjust their financial position,” says Dr Lee Naijia, DTZ’s head of Southeast Asia research. As a result of increased volatility, Lee expects that there will be more choice homes in the market in 2016.

A page from the past A report by JLL highlights that the stock market is often a leading indicator of real economic conditions, and that the recent sharp correction in the stock market signals a more severe slowdown in the Chinese economy than what was initially reported.

This does not bode well for Singapore, considering the growing importance of the Chinese economy on the Singapore economy and the property market.

The report says that if Chinese economic conditions deteriorates further and the stock

market haemorrhage continues, it may have a negative impact on the broader economy, resulting in lower employment levels, and leading to a more severe correction in the Singapore property market.

“Looking back to the past, the residential market for example, corrected by 4% to 6% a quarter in some instances. Should the market lose footing, it is not impossible to expect a recessionary correction of this magnitude,” says Dr Chua Yang Liang, head of research, Southeast Asia at JLL. Historical data show that stock market crashes can have devastating effects on the domestic property market. During the Asian Financial Crisis of 1998, local property prices crashed by 35% to 44%, while the Straits Times Index (STI) tumbled 55% from its peak in the span of about two-and-a-half years. During the 2008 Global Financial Crisis, meanwhile, the stock market slumped 62% from its peak while property prices dropped by 11% to 25%.

Volatility to rule JLL’s report warns that market volatility will be prevalent in 2016. And as current debt levels in several Asian countries are higher than they were before the AFC, these economies are more vulnerable to a global economic slowdown.

Is a hard landing imminent?

Stock market movements typically lead property market movements by one to two quarters, JLL adds. This means that sharp declines in the Singapore stock market could signal further property price corrections in the coming quarters of 2016.

“If this scenario pans out and threatens the stability of the property market and wider economy, it may prompt the government to re-visit its property cooling measures and other macroeconomic policies including economic stimulus packages,” Chua says.

OFFICE WATCH

Bordier & Cie’s office kills the ‘closed door’ view While most people view private banking as “closed door” transactional relations, the essence of Bordier & Cie was established upon long-term relationship banking where transparency and trust are critical fundamentals.

In Asia, managing partner Evrard Bordier has taken the family business into a new paradigm of open engagements.

The transformation started with a reinvented global brand followed by a new private banking office in Singapore, at CapitaGreen, a Green Mark platinumcertified building.

Spanning 12,300 sq ft, the new office is hyper- modern, with brazen, clear glass client meeting rooms in the front office; an exquisite juxtaposition of contemporary and Asian art pieces throughout; and a motion-sensor height and light adjustable table in Evrard’s room.

12 SINGAPORE BUSINESS REVIEW | MAY 2016

Legacy and modernity

CEO’s standing desk

Utmost client hospitality

No closed doors

co-published Corporate profile

Transamerica Life Bermuda rides the rising wave of Asian wealth Transamerica’s CEO explains how the rise of young High Net Worth individuals (HNWIs) in Asia is changing the region’s life insurance landscape. outlook on business and diverse wealth protection needs.

Damiaan Jacobovits de Szeged

F

rom its offices in Hong Kong and Singapore, Transamerica Life Bermuda offers life protection to HNWIs, families and businesses throughout Asia. “Asia is expected to surpass North America as the world’s wealthiest this year, with rapid, concentrated growth of wealth especially across emerging markets,” says Damiaan Jacobovits de Szeged, CEO of Transamerica Life Bermuda and member of the Aegon Asia Executive Committee.

A surge in Asian wealth According to the 2015 World Wealth Report, wealth across Asia’s emerging markets is expected to total USD8,404 billion by 2017.

“Notably, Asia’s HNWIs have focused primarily on the accumulation of wealth and ‘getting rich’,” Mr de Szeged says. “In contrast to the US and Europe - where much of the wealth has been passed down through multiple generations - 80% of wealth in Asia resides with the first generation.”

Mr. de Szeged is confident that this presents a significant market opportunity for life insurance providers. This is especially due to the fact that only low single digits* of the region’s HNWIs have life insurance to help secure their wealth legacies.

Mr. de Szeged also notes the emergence of a new generation of young entrepreneurs with an international

Shifting needs of younger HNWIs “We have reached a point where much of the wealth that has been created in Asia’s growing markets is expected to be transitioned to a new generation of wealthy individuals who will be taking over the reins of family businesses.

“As such, the priorities and needs of Asia’s HNWIs are shifting from wealth creation to asset protection and legacy preservation. Concurrently, we are seeing increasing demand for legacy planning among younger HNWIs.” He adds that the demand for life insurance in Asia differs from counterparts in the US and Europe.

“As wealth in emerging Asia has been accumulated relatively recently, assets are typically tied up in a single business or location, with limited portfolio diversification. Life insurance can be an effective and flexible tool within the broader wealth management toolbox to diversify that risk, and ultimately to provide peace of mind. With this increase in HNWIs and the rising demand for legacy planning across emerging Asia, we expect the region to see robust annual growth in life insurance in the coming years,” he says.

Transforming underwriting standards Indeed, Transamerica Life Bermuda -

one of Asia’s leading High Net Worth insurance providers - is committed to providing life protection to its clients across Asia and beyond. As Mr. de Szeged puts it: “We work with selected partners to design products and services that address the discerning needs of Asia’s HNWIs.” Transamerica Life Bermuda has also implemented revolutionary changes in the underwriting landscape. For instance, since January 2015, the company has improved its underwriting categorisation to offer HNWIs an enhanced regional classification.

This has since been widely adopted across the industry where HNWIs in emerging markets are provided more favourable policy options.

With escalating global economic volatility, Mr. de Szeged stresses that this is a good time for clients to consider their wealth protection needs: “Whereas assets and investments can be volatile, a life insurance policy is a stable product that covers different needs, like providing wealth protection, flexibility for legacy planning, and peace of mind.”

“Ultimately, life insurance is not about the highest returns, but the safeguarding of families and loved ones during unforeseen circumstances,” he notes. *based on estimated Asian new premiums in High Net Worth insurance versus growth of HNWI wealth in 2014 (Capgemini Asian Pacific Wealth Report 2015).

The priorities of HNWIs are shifting from wealth creation to legacy preservation.

The Transamerica Pyramid – an icon of the company’s endurance SINGAPORE BUSINESS REVIEW | MAY 2016 13

FIRST NUMBERS

riskiest roadways On the road again

Fast facts on car accidents in Singapore Based on Aviva’s car insurance claim stats, Jan - Dec 2015.

? ow that...

Did you kn

1 in 10

More than accidents happen before the driver has even left the car park.

23%

Another happen on expressways.

(That’s almost 1 in 4 accidents!)

Be extra ca reful alon g these ro ads

10

The most accident-prone roads in Singapore are:

Capital outflows are a threat

Braddell Road

A banking crisis brews in Singapore

I

f China’s economy experiences a hard landing, then Singapore’s three largest lenders will suffer massive capital outflows. A hard landing in China will trigger a crisis of global proportions with Singaporean banks caught in the eye of the storm, claims Swiss billionaire investor, Felix Zulauf.

“Singapore, which has attracted a lot of foreign capital over the years because of its image as a strong-currency state, will be extremely exposed to the situation in China. Banking-sector loans have grown dramatically in the past five or six years. Singapore is now losing capital, which means the banking industry is losing deposits,” Zulauf says.

Exaggerated threat However, analysts and policymakers have panned Zulauf ’s idea, saying that the city-state’s three largest banks are wellcapitalised and should be able to survive even a severe shock in the global economy.

“We couldn’t reconcile Zulauf ’s observations with official industry statistics released by [the Monetary Authority of Singapore]. Contrary to Zulauf ’s views, our three local banks are well capitalised,” says Jonathan Koh, equity analyst at 14 SINGAPORE BUSINESS REVIEW | MAY 2016

Alexandra Road

Balestier Road

UOB Kay Hian.

In its latest Financial Stability Review, the MAS said that though there are signs of increased credit risks, banks have ample capital buffers which act as safeguards against the turning credit cycle.

“Singapore’s banking system remains resilient amid an uncertain external environment.

Banks have strong capital and liquidity buffers to withstand severe shocks but continued vigilance is warranted,” it said.

“We couldn’t reconcile Zulauf ’s observations with official industry statistics.We do not want to downplay the current slowdown in economic growth in Asia.

However, we do feel that Mr Zulauf has over-exaggerated the weaknesses in Singapore’s financial system,” Kho notes.

Bukit Timah Road Clementi Road Lornie Road Thomson Road Upper Serangoon Road Upper Thomson Road Yio Chu Kang Road

Though there are signs of increased credit risks, banks have ample capital buffers.

?

You got hit where The most common types of accidents we get into:

48% toFront rear 19% toFront side 16% Chain collision 13% Side swipe

7% While reversing Here’s your bill...

What we claim for most

62% Third-party damage 38% Own damage Who says she can’t drive?

Males are

1.4x more

likely to get into than females.

an accident

your weekend?

Rushing to start

48% of accidents on

SG bank’s new NPL formation doubled in 2H15

Fridays occur during the post work rush (5.30-8pm).

Comparatively, on Mondays, only 26% occur during the post-work rush.

Mind boggled?

Keep your eyes on the road and while you’re at it, make sure you’ve got good car insurance!

Call 6827 9953 or visit aviva.com.sg to quote and buy instantly today.

Aviva Ltd 4 Shenton Way #01-01 SGX Centre 2 Singapore 068807 www.aviva.com.sg Company Reg. No.: 196900499K GST Reg. No.: MR-8500166-8

Source: Company data, RHB

Source: Aviva Singapore

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SINGAPORE BUSINESS REVIEW | MAY 2016 15

FIRST minimise work wastage, it also focusses on a systematic way to ensure every individual’s effort is directed towards the achievement of the company’s objectives.

Masami Sato Masami is the founder of the global giving initiative, Buy1GIVE1 (B1G1). It helps businesses give back in meaningful ways - e.g. a coffee shop giving access to lifesaving water for every coffee they sell; or accountants educating a child in need for every client they serve, etc.

Since 2007, it has worked with more than 1,000 businesses from all industries creating 70+ million giving impacts.

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1

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4

5

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Singapore’s hottest female entrepreneurs and leaders to watch

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hey aren’t your typical ‘high profile’ ladies and have not been extensively covered in the media.

Yet, these women have something brewing that could potentially change the way businesses are conducted in the dental, insurance, wedding services, technology, education and food sectors.

They are arranged in no particular order.

members, is committed to practicing minimally invasive dentistry.

Believing that there is simply nothing that can fully match the functionality of your natural teeth, the team is dedicated to finding the simplest, most effective solution to a dental problem, that preserves as much tooth structure as possible.

Peiru Teo Peiru is the owner of bridal boutique La Belle Couture, an official partner for renowned hotels like Marina Bay Sands and Shangri-La. Its 3000 sq. ft. studio at Tanjang Pagar Road is considered as one of the largest photography studios in Singapore with realistic themes for brides to choose from.

4 Gina Romero Gina launched the The Athena Network in Singapore four years ago and now has a community of 2000 women. The Athena Network started in UK where Gina was a founding member. It is a platform for women to grow their business. Her next project, www.connectedwomen.org, is launching this year in the Philippines.

It’s a social enterprise with a goal to build a community of 100,000 women who want to skill up and get work-fromhome jobs as digital assistants.

1

2 Danielle Warner Danielle is the CEO and founder of insurance consulting firm exclusively for expats - the Expat Insurance. With operations in Singapore and Hong Kong, Expat Insurance is an independent broker, which means they are not bound to any insurers, but are licensed to work with all local and global insurers. That sets it apart from agents who are only allowed to work with one to three insurers.

3 Louisa Lee Louisa is the Managing Director of dental clinic, DP Dental. The team, composed of eight experienced clinicians and 22 16 SINGAPORE BUSINESS REVIEW | MAY 2016

Regina Soh Regina is the founder of InviPulse, a cloud-based software solution aimed at boosting employee engagement and minimising turnover. Incorporated in 2014, it provides a platform for employees to voice their thoughts and suggestions, and a channel for leaders to be informed about the happenings in their workplace in a timely manner so that appropriate actions can be taken to improve employee engagement and happiness. In order to 5

Khatiza Van Savage Khatiza is an Organizational Development Consultant and Coach who founded the Insightful Learning Journeys. It is aimed at empowering individuals and teams to create ‘Communities of Practice for Mindful Happiness’ by facilitating learning to reflect, innovate and reframe.

She also serves as Chief Happiness Architect.

7

Nicole Lim Nicole is working on a cool project called Animal Encounter World Tour, an online platform aimed at crowdsourcing, gathering and sharing information about animal welfare to make it easy to support those with respectable ethics.

Animal lovers are encouraged to heart, reblog and share their must-go-someday places.

8

9 Emma Heap Emma is the Managing Director of foodpanda Singapore. Since joining foodpanda, Emma and her team have invested in technology and systems to reduce the average delivery time to just 30 minutes. Under Emma’s leadership, foodpanda Singapore achieved 400% growth in 2015 and has over 500,000 active users island-wide.

10 Katherine Braha-Desbaillets As the Director and Owner of Salad Stop!, Katherine is committed to the eating wide awake movement with a desire to connect individual consumer choice and action with the wider environmental impact.

Over the past five years, Katherine and her family have grown Salad Stop!, to over 19 outlets around Singapore and across the wider region.

startups

Crowdfunding + E-Commerce platform hybrid

I

f you are looking for a place to discover unique brands or projects and interact with inspiring people from the global community, ZingoHub may be for you.

ZingoHub bills itself as a home to the world’s best emerging brands and ideas. Founded by a SingaporeanPakistani and an Indian national who grew up in Singapore, and who have known each other for 15 years, the startup was born in 2015 as the two envisioned a world without borders made possible through online commerce built on innovation and ideas. They are Haider AlyReza and Sayantan Das who met

at United World College of South East Asia in Grade 6 where they regularly experimented in various entrepreneurial ventures from the young age of 14. Billed as the first-ofits-kind crowdfunding + e-commerce platform which has operations in India, ZingoHub was launched in Singapore last March.

With the help of Nasir Alessandro Kausar, who serves as a founding president, the concept evolved as they wanted to build identities around the countless number of amazing brands, creators and innovators there are in this world. A model where a social marketplace, rewards-based crowdfunding and e-commerce platform existed in harmony, seemed like a perfect potion to dissolve barriers and give rise to a world of amazing brands, products and ideas.

Prior to joining ZingoHub, Nasir was the CEO of Infinity Partners and also held senior level positions in Societe Generale and Citigroup.

The startup currently has raised 600,000 USD funding from private investors and a Singapore-based private, Family Office. It is a full subsidiary of Singapore Company, Bazingo Inc.

Annoying ads turned to moments of joy looking on Youtube at others having an experience, then you connect emotionally and you have a far more effective and sustainable way of positively engaging audiences.

In 2013, he founded Ksubaka, which is aimed at creating ‘Moments of Joy to shoppers’. It deploys ‘playSpots’ in stores where interactive apps that leverage the language of games to tell brand stories and invite shoppers to continue the journey on their phones, re you sick to death of are launched. commercials interrupting as you Ksubaka has offices in London and cruise around the Internet. A Shanghai. Julian provided the seed Singapore startup wants to reinvent funding prior to raising US$5M from advertising in Asia by providing private investors. shoppers an experiential journey while Recently, Ksubaka announced making purchase decisions. a joint venture for an expansion in Entrepreneur Julian Corbett China with the Hong Kong-listed firm, believes that if consumers are told Fullshare Holdings, which has injected a real story, and/or if they are given S$21.2million (100M RMB) just for a real experience, as opposed to 2016.

A

18 SINGAPORE BUSINESS REVIEW | MAY 2016

Deliveroo versus Foodpanda

Competition heats up in the local food delivery sector as UK-based startup, Deliveroo enters Singapore and challenges the dominance of Foodpanda. When launched in November last year, Deliveroo had more than 150 partner restaurants and serviced five areas. In three months, it got more than 450 partner restaurants and serviced fourteen areas in Singapore. It aims to be island-wide by the end of 1st quarter. Deliveroo has grown to having 26 permanent staff members and 220 riders.

In comparison, Foodpanda, which was launched in 2012 with an initial 51 restaurants, now has 720 restaurants.

Deliveroo promises to meet the need of the current market in an average time of 32 minutes from restaurants to the customer’s doorstep. That includes the time from when the user places his order.

Deliveroo was founded by Americans, William Shu and Greg Orlowski who have been childhood friends since the age of seven. Greg comes from a technology background and William, the financial sector. The idea of a delivery service for premium food was first hatched by William Shu, when he moved from New York to London, and was surprised that it was nearly impossible to get quality food delivered. William, a passionate food lover, was determined to bring great restaurants closer to their customers. With his revolutionary concept and Greg’s technological prowess, the Deliveroo service was born.

First launched in London, Deliveroo has since charted an exponential growth, with its delivery bikes being used in over 30 towns and cities across the UK. As Deliveroo has been wanting to go big since launching in Singapore, Tristan Torres, general manager of the Singapore branch, shared that they had a massive outreach effort where they all wore kangaroo onesies and descended upon the Central Business District, delighting office workers with free cupcakes from the famed Plain Vanilla Bakery. Five thousand cupcakes were given away in four hours, each one stamped with Deliveroo’s iconic kangaroo logo.

Deliveroo raised a US$70 million in investment back in July 2015. Recently, they announced that they had raised another US$100 million Series D investment on 24 November 2015. The new investment will aid international expansion.

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FIRST The Analysts’ call

Will loan defaults rock UOB?

Asset quality is under threat

UOB at risk from O&G firm loans

W

hen United Overseas Bank reported its full-year results for 2015, analysts were concerned at the sheer size of its vulnerable oil and gas loans. UOB said that its commodities exposure amounted to $21 billion, or about 10.3% of its total loans. Loans to the struggling oil and gas sector amounted to $5b, and the bank estimated that it stands to lose over $2b if oil prices remain low.

Analysts warn that UOB will face greater asset quality deterioration this year. According to Fitch Ratings, loans to

UOB will be forced to hike provisions in coming quarters as the value of collateral is expected to drop. smaller players with fewer resources and less bargaining power are most at risk, especially those in the exploration and production sub­sector.

“We expect the credit stress to broaden and deepen if low oil prices are prolonged.

However, we expect the impact on earnings to be manageable as such exposure is moderate as a proportion of banks’ overall portfolios, and is often secured with moderate loan-­to-­value ratios, which limit the loss even with falling collateral values,” says Wee Siang Ng, senior director, financial institutions at Fitch.

UOB has not yet reclassified these loans as non-performing assets because clients are 20 SINGAPORE BUSINESS REVIEW | MAY 2016

still servicing their obligations, and specific provisions for the loans remain low because the debts are collateralised.

However, a report by Moody’s warns that UOB will be forced to hike provisions in coming quarters as the value of O&G equipment is expected to drop.

“We expect that the value of such collateral —which includes specialised oil and gas and transportation equipment—will have decreased due to weak secondary market liquidity and depressed charter rates, forcing the banks to increase provisions,” Moody’s says, adding that loan growth will also slow.

Meanwhile, DBS analyst Lim Sue Lin, warns that UOB’s loan momentum will remain soft this year. Net interest margins (NIM) are also expected to remain flat, while credit costs are expected to stay stable at 32bps. In a worst-case scenario, though, UOB’s credit costs could jump to 35-40 bps, Lim warned. “[There is] generally a modest downbeat tone for FY16 but it is not extremely bearish.

UOB still has some excess funds in its books; hence the ability for them to generate better returns from these could pose upside risks to NIM,” Lim says. However, he cautions that within the region, Indonesia is still expected to remain challenging for UOB, even though Indonesian operations make up just a mere 3% of the total portfolio.

In 2015, UOB’s non-performing loan (NPL) ratio rose to 1.4%, while overall provisions rose to $115m in the fourth quarter, compared to to $56m in the third quarter. Its full-year income stood at $3.2b.

Krishna Guha— Jefferies Singapore We agree with management that the current cycle is one of protracted credit cost normalization amidst weak growth. Concerns persist around asset quality, cost run rates and impact on capital ratios from higher risk weightings. Further, growth outlook is murky and our earlier forecast of a gradual margin increase looks iffy.

Guidance was mid-single-digit loan growth and stable margins with ample caveats. That said, valuation on a historical context and the current 5% dividend yield are supportive.

Lim Sue Lin—DBS UOB has been known for its conservative growth but we believe the market may have overlooked the lack of its fee income differentiation as well as the Greater China presence.

We believe, over time, regionalisation beyond ASEAN would need to improve and a stronger traction in non-interest income away from loan-related activities is needed to prompt a rerating for the bank. While this is not necessarily a weakness, it would remain a point of contention when peers are able to reap better contributions from overseas operations in future.

RHB Research Management is concerned about the bank’s exposure to upstream industries but believes that asset quality would remain manageable and exposures are well collateralised.

Management estimates about SGD2.0bn of exposure would be vulnerable should oil price stay low for >1 year and this would push credit cost to 40 bps. We have downgraded our FY16F-17F earnings by 10% after factoring in higher credit cost.

abacus

luring more premium passengers.

“The A350 will be a game-changer for us, allowing for flights to more long-haul destinations on a non-stop basis, which will help us boost our network competitiveness and further develop the important Singapore hub,” says Goh Choon Phong, CEO of SIA. The new A350 will first be used on Asian flights for crew training purposes. In May, it will be deployed on long-haul services to Amsterdam, Even if oil prices recover, a supply glut means that while flights to Dusseldorf will begin orders will not rebound anytime soon. in July. More A350 destinations will ransocean’s decision to delay recover, a rebound will not be enough be announced through the course of the delivery of five jackup rigs to change the fundamental problem 2016, SIA says. which are under construction of oversupply in the rig market, which From 2018, an ultra-long-range

by Keppel O&M illustrates a deeper is exacerbated by fragile drilling variant of the A350 known as the demand. malaise ailing Singapore’s largest rig A350-900ULR will be added to “Unless oil prices can rally rapidly SIA’s fleet, for the re-launch of the builders, analysts say.

The high-specification rigs, which pass the USD60/bbl level on a world’s longest non-stop flights, were ordered in 2013, were originally sustained basis, the rig market will between Singapore and New York, have to grapple with an oversupplied as well as to Los Angeles and a third scheduled to be delivered between 2016 and 2017. However, Transocean situation over the next two years,” destination in the United States.

Yeak says. decided to defer the delivery and Although the new jumbo jets will “Without a return in new orders, related payments of the five jackups allow SIA to serve more long-haul rig builders are unlikely to deliver until the first quarter of 2020, with routes with improved fuel efficiency, meaningful EPS growth but would two and three month intervals analysts remain wary about whether instead face downward pressure between deliveries. the A350 will help the flag carrier from more deferments or even Maybank Kim Eng analyst,Yeak beat its key Middle Eastern rivals. cancellations. Therefore, we are of Chee Keong says that Transocean’s “We believe the yields on SIA’s decision simply means that it does not the view that any stock price bounce key routes to Europe are still need any new rigs until 2020, which that rides purely on the notion under pressure due to intensifying implies that a meaningful near-term that an oil price rebound should competition from the Gulf carriers, drive a valuation re-rating may not recovery is nowhere in sight for the such as Emirates and Qatar Airways,” be sustained if EPS subsequently shipbuilders. says Eugene Chua, analyst at OCBC disappoints,” he notes.

“Given that jackup rigs need two Investment Research. years to construct, this may imply that Chua adds that although SIA can the rig-building industry may not see SIA banks on “game-changing” jets derive significant savings from cheap to lure premium flyers a meaningful recovery in rig orders jet fuel, savings will continue to be After waiting for almost a decade, until 2018,” Yeak warns. eroded by hedging losses. the first of Singapore Airlines’ Airbus Yeak notes that in a way, a “While we remain cautiously deferment for an extended period is A350 jumbo jets has finally been optimistic on the potential significant delivered to the flag carrier. With not much different from cancelling savings from cheap jet fuel, we think the contract and making a fresh order the arrival of the A350, SIA hopes to SIA’s hedging policy may continue regain its edge over other carriers by again much later. to reduce such savings on significant He also adds that even if oil prices launching more long-haul flights and hedging losses,” he says.

Shipbuilders in deep water as rig deferments mount

T

Capex cuts, liftboat oversupply threaten to sink Ezion More headaches await offshore support services provider Ezion in 2016, as analysts warn that the company’s balance sheet will be under pressure from deteriorating industry fundamentals.

“Ezion is under pressure from what we see as an impending oversupply in liftboats, a chronic problem that persistently affects the other sectors of the offshore and marine industry,” says Joel Ng, equity analyst at KGI Fraser.

Capex cuts by oil majors will be exacerbated by a looming liftboat supply glut, with more than 20 liftboats currently under construction in China and Southeast Asia.

This puts Ezion’s utilisation and dayrates in danger of sinking even further, Ng notes. He reckons that Ezion would need around US$700m of write-downs over the next two years to bring asset values to reflect the realities of the current market.

Low Pei Han, analyst at OCBC Investment Research, says Ezion risks impairments as the number of struggling companies in the offshore and marine industry increase.

Low notes that like many other O&G related companies, Ezion’s clients are also not paying on time.

Low notes that even payments from multinational corporations (MNCs) and international oil companies (IOCs are delayed.

“There are increasingly more cash-strapped companies in the industry, and slow payments from customers could lead to impairment of receivables; we also do not exclude the possibility of asset write-downs as we have seen in several other O&M companies so far,” Low says.

SINGAPORE BUSINESS REVIEW | MAY 2016 21

FINANCIAL INSIGHT: Mergers & Acquisitions

Deal #1: GLP’s acquisition of its US logistics portfolio for $4.5b

Deal #2: Keppel Corporation’s privatision of Keppel Land for US$2b

Deal #3: Mitsubishi’s acquisition a 20% stake in Olam International for US$1.1b

Singapore’s M&A momentum stumbles

Singapore mergers and acquisitions (M&A) activity faltered in 2015 but new catalysts are expected to galvanise deal making activity, especially outbound acquisitions.

T

he economic tumult in 2015 might have pressured Singapore companies to sit on the deal making sidelines, but 2016 could see more of them seizing opportunities that other Asia Pacific markets, including rival Hong Kong’s, have earlier identified as too good to pass up.

Singapore companies are already in great financial shape to pursue M&A deals, according to analysts.

There are also looming developments such as the unified ASEAN Economic Community and the possibility of tempered volatility that may further kindle Singapore M&A activity this year.

Singapore finds its footing Capacity to fund M&A growth is expected to rise 15% in 2016 among Singapore-based companies, says Benjamin Ong, head of mergers & acquisitions and capital advisory at KPMG in Singapore. He reckons transactional activity will be robust due to the relatively low cost of financing and the hunger for inorganic growth in the current weak economy.

“Singapore companies have maintained healthy balance sheets and have the capability to finance M&A activity to boost market share and keep up with competition in the increasingly consolidated marketplace,” says Ong. This is not to say that Singapore firms will no longer exercise caution amid the heavy pounding of external and 22 SINGAPORE BUSINESS REVIEW | MAY 2016

The bulk of the total deal value in Singapore last year is attributed to overseas acquisitions.

domestic headwinds.

M&A appetite in Singapore could still be dampened by such opposition, says Elaine Tan, senior analyst, deals intelligence at Thomson Reuters, but there are supportive factors such as the roll out of the unified ASEAN Economic Community that could temper the risk.

2016 should offer a more conducive environment for Singapore M&A than 2015, when overall activity plummeted to US$60.8 billion, a 35.9% decline in deal value from the previous year’s record annual volume.

Tan also recalls that in 2015, average deal size for disclosed deals dropped to US$106.3 million compared to US$133.4 million in 2014, as deal activity involving Singaporean companies in 2015 witnessed only eleven deals above US$1 billion compared to sixteen deals last year.

Moreover, overseas acquisitions and domestic activity declined 62% and 50% in deal value, respectively, from over a year ago. Tan says concerns over uncertain global economic growth, volatile stock markets and slowdown in China caused the decline.

Despite this, Tan says that Singapore will continue to be an attractive destination for deal activity. In 2015, Singapore inbound M&A reached US$19.6 billion and witnessed a 35.1% increase in deal value compared to 2014, making it the highest annual volume since 2012.

China, Japan and United States were the most active

FINANCIAL INSIGHT: Mergers & Acquisitions acquirors in terms of number of deals targeting Singapore, notes Tan. Industrials, energy & power and high technology were the most targeted sectors and accounted for a combined market share of 72.8% of Singapore inbound deals.

Another bright spot in the Singapore M&A scene in 2015 was outbound acquisitions, says Andrew Martin, head of corporate & securities practice group at Baker & McKenzie.Wong & Leow.

“Singapore’s corporates were active on the outbound trail with the bulk of the total deal value in Singapore last year attributed to overseas acquisitions, with US being the top destination for Singapore companies, followed by India and the UK,” says Martin.

Asia Pacific maintains momentum Singapore’s subdued M&A activity in 2015 was in stark contrast with the deal making fervor that swept across Asia Pacific. Asia Pacific deal making hit the US$1-trillion mark in 2015, says Tan, a boom fuelled by conglomerate restructurings, divestments, reverse takeovers and crossborder acquisitions overseas.

Asia Pacific also witnessed a wave of mega deals over US$5 billion – 37 of them accounting for 29% of the region’s deal making activity, the highest percentage since 2000. This enabled the region to set a new record of US$1.3 trillion value of announced M&A deals involving Asia Pacific ex-Japan companies, up 60.5% in deal value and beating the US$823.8 billion previous high posted in 2014.

“Barring a major economic collapse, we expect M&A activity to remain high in 2016, driven by themes such as a flight to scale and further technological disruptions,” says Ng Jiak See, executive director and leader of Southeast Asia corporate finance advisory services at Deloitte.

Ng reckons that the end of the commodity super-cycle has put more pressure on companies to boost revenues, and many have found consolidation appealing as a path to improved top-line growth, diversification, and profitability through cost synergies.

Meanwhile, the digital disruption that has shaped many modern industries has also compelled companies to pursue strategic acquisitions, among other M&A strategies, to avoid the death knell of obsolescence. There continues to be high interest in getting a hold of disruptive technologies that can propel companies way ahead of

Tech firms are prime targets

Andrew Martin

Benjamin Ong

Singapore M&A annual volume

Elaine Tan

Source: Thomson Reuters

Ng Jiak See

the competition. The digital disruption fever will be felt strongest among cash-flush Chinese companies.

“More Chinese companies, particularly those in the technology and industrial sectors, are expected to search for deal opportunities overseas with the hope of acquiring new technology to improve manufacturing and environmental issues,” says David Fleming, head of Asia Pacific M&A group at Baker & McKenzie.

Further zooming out, global M&A levels are expected to stay strong in 2016, with the latest edition of KPMG’s International Global M&A Predictor expecting the world’s largest businesses to show an increasing appetite for M&A transactions over the next 12 months.

Ong reckons global appetite to do deals is predicted to rise by an average of 4% over the next twelve months.

Also, the the capacity of corporates to fund M&A growth is expected to rise by 13% over the same period as companies continue to pay down debt and bolster their cash reserves.

Ong says healthy balance sheets and strong liquidity in debt markets provide a positive counter to increased uncertainty in the face of the Chinese economy cooling down, the US starting to raise interest rates and oil prices depressing the economies of oil exporting countries.

Global uncertainties and China slowdown Global uncertainties and China’s slowdown may impact activity as the year progresses, says Tan. But the slowdown is also opening up a wealth of M&A opportunities in Asia Pacific. Looking at 2015 data, more companies in the region were searching for growth through acquisitions, divesting non-core or underperforming assets, and exploring industry consolidation.

Tan says divestments in Asia Pacific for 2015 reached US$470.9 billion, a 55% increase from 2014, and was the highest annual volume since records began in 1980. China accounted for 59.1% of the region’s divestitures last year, with Hong Kong and Singapore capturing 18.4% and 3.9%, respectively.

The China slowdown continues to enable Asia Pacific’s SINGAPORE BUSINESS REVIEW | MAY 2016 23

FINANCIAL INSIGHT: Mergers & Acquisitions increased outbound activity so far in 2016, adds Tan. China outbound activity witnessed the best start to a year in 2016 with US$76.5 billion worth of deals, and accounted for 34% of the global cross-border M&A this year. Most of the Chinese companies are purchasing more assets in Europe and United States in an attempt to counter slowing domestic growth.

Martin further points out that China’s slowdown did not seem to dampen its M&A appetite for Singapore and southeast Asia as it was the largest investor in the region.

On the other hand, market volatility may have elevated uncertainty in 2015, but it too has provided great opportunities for M&A deals. Tan reckons favourable financing conditions for acquisitions and a mountain of excess cash emboldened Asia Pacific companies to push up target Asia Pacific M&A announced in 2015 to a new high of US$1.2 trillion, up 66% from 2014. And for the first time on record, Asia Pacific outpaced Europe by value and percentage of total M&A. “Short-term market volatility generally does not have long-term, meaningful consequences on M&A activity,” explains Tan. “Deal activity is often driven by long-term strategic rationale and corporates take into consideration several strategic factors in coming to a decision such as market share, branding, technology, cost synergies and new markets.”

A repeat of record 2015?

Despite the presence of supportive factors, some analysts expressed doubt over whether 2016 can surpass or even repeat the highs in Asia Pacific M&A activity last year.

“The strong momentum in 2015 may not be easy to replicate in 2016 at such a grand scale. Target Asia Pacific M&A to date are down 45% from the comparative period in 2015,” says Tan. Ryan Reynoldson, head of transaction services at KPMG China is more optimistic that Asia Pacific M&A will continue to fly high with China leading the ascent.“There are still large amounts of capital to deploy in China, along with pressure to grow in an increasingly challenging economy. We expect continued strong M&A activity as a result,” says Reynoldson.

For Ng, the year ahead should see the continued strengthening of cross-border deal flow between Asia and Europe, which in 2015 was a trend led by Chinese and Japanese companies.

Overall Asia Pacific announced M&A annual volume

Source: Thomson Reuters

24 SINGAPORE BUSINESS REVIEW | MAY 2016

Short-term market volatility generally does not have long-term, meaningful consequences on M&A activity.

hong kong view

Red-hot M&A scene to blaze further Last year, when Chinese companies were faced with a slowing domestic economy and a weakening currency, their appetite for acquisitions shot through the roof, which lent the Hong Kong M&A market a tremendous tailwind – and there are signs that more of this hunger will manifest in 2016.

Chinese companies still possess vast amounts of deployable capital and seem more than willing to splurge on M&A deals this year to build new revenue streams and slash costs, according to analysts. This bodes well for the Hong Kong M&A market, which serves as a conduit for such outbound acquisitions by Mainland firms, provided that equity market volatility does not go haywire.

Outbound Chinese acquisitions to surge “China institutions will continue to direct capital to outbound investments, and ongoing State Owned Enterprise reforms will drive further domestic consolidations. The recent market turmoil may also assist the very active private equity community, which is seeking more reasonable valuations,” says Ryan Reynoldson, Head of Transaction Services, KPMG China.

David Fleming, head of Asia Pacific M&A Group at Baker & McKenzie, says that this year more Chinese companies, particularly those in the technology and industrial sectors, will be searching for deal opportunities overseas with the hope of acquiring new technology to improve manufacturing and environmental issues.

“The weakening yuan and slowdown in the domestic market made China and Hong Kong one of the most active M&A markets in the region last year. China outbound M&A has not really shown any signs of slowing,” he adds.

Elaine Tan, senior analyst, deals intelligence at Thomson Reuters, says that Chinese companies are purchasing more assets abroad, mostly targeting Europe and United States, to elude the slowing domestic growth.

“Concerns around China’s slowdown and global uncertainties may impact activity as the year progresses. However, the slowdown is creating M&A opportunities such as companies searching for growth through acquisitions, divesting non-core or underperforming assets and possible industry consolidation,” says Tan. In 2015, the deal flurry in Hong Kong was led by Li Ka-shing’s flagship companies – Cheung Kong (Holdings) Ltd and Hutchison Whampoa Limited – as part of the reorganization of his diversified conglomerate into two new listed companies. Tan notes that overall announced M&A activity involving Hong Kong hit an all-time high as deal value totaled US$287 billion in 2015, up 64.7% over a year ago.

“Despite recent market jitters, the expectation that M&A activity will remain robust in 2016 is wellfounded based on corporates’ ample cash reserves and their desire for growth coupled with demand for quality opportunities from private equity sponsors,” says Phil Isom, Global Head of M&A at KPMG.

For speaking opportunities: If you are interested in participating either as a delegate or panelist, do contact our event organiser Dennice at dennice@charltonmediamail.com

For sponsorship opportunities: If you are a vendor and wish to sponsor/speak, please contact Rochelle at rochelle@charltonmediamail.com

SINGAPORE BUSINESS REVIEW | MAY 2016 25

economic INSIGHT: MANUFACTURING

Electronics will remain a weak spot

Manufacturing woes mount After an anaemic performance in 2015, Singapore’s manufacturing industry is still facing headwinds amidst a volatile external backdrop.

T

he future looks grim for Singapore’s important manufacturing industry, with the global rout in oil prices and other external factors not doing the country’s economy any favours.

“Business outlook in the manufacturing sector is expected to be weak in the first half of 2016, on the back of global economic uncertainties, the ongoing slowdown in China and a low oil price environment,” the citystate’s Economic Development Board (EDB) says.

According to EDB, while a weighted 7% of manufacturers expect business conditions to improve, a weighted 29% foresee deterioration. Overall, a net weighted balance of 22% of manufacturers anticipates a less favourable business situation for the first half of the year, compared to the fourth quarter of 2015.

Firms brace for further slowdown The weak business sentiment is broadbased, the state agency says, with 26 SINGAPORE BUSINESS REVIEW | MAY 2016

Firms anticipate lower levels of business activity due to the slowdown in domestic construction activities and depressed oil prices.

almost all clusters foreseeing a decline in business for the next six months ending June 2016.

In the general manufacturing cluster, EDB notes that a net weighted 18% of firms expect a less optimistic business outlook in the first half of 2016.

“This is largely led by the miscellaneous industry segment which anticipates lower levels of business activities due to the slowdown in domestic construction

activities and depressed oil prices.

On the other hand, a net weighted 5% of firms in the food, beverage and tobacco segment anticipate higher festive orders (e.g. due to the Lunar New Year),” the state agency explains.

Moreover, a net weighted balance of 18% of firms in the chemicals cluster is less upbeat about business prospects in the six months ahead.

Within the cluster, the petroleum refining segment is weighed down by excess supply of refined petroleum products in the region while the specialties segment is impacted by weaker regional demand, particularly in China.

EDB adds that in the precision engineering cluster, a net weighted 18% of firms anticipate the business situation to worsen in the six months ending June 2016. Both the machinery and systems and precision modules and components segments forecast a lower level of orders from the oil and gas and semiconductors industries.

Meanwhile, in the electronics cluster, a net weighted balance of 32% of electronics firms expects a less favourable business situation ahead.

For the transport engineering cluster, a net weighted balance of 39% of firms expects the business situation to remain challenging in the first half of 2016, particularly the marine and offshore engineering segments.

Demand for rigs and offshore conversions have been dampened considerably by persistently low oil prices.

With a number of firms expecting an unfavourable business climate, the only exception is the biomedical manufacturing cluster, where a net weighted balance of 17% of firms anticipates a positive business outlook.

Manufacturing’s share has declined since the 1970s (% of nominal GDP)

Source: Department of statistics, Singapore; Monetary Authority of Singapore

economic INSIGHT: MANUFACTURING “Both the pharmaceuticals and medical technology segments are optimistic, as there are plans to introduce new products in the former and strong export demand in the latter,” EDB explains.

Woes escalate Joseph Incalcaterra, economist at HSBC, agrees with the bleak outlook.

“Manufacturing growth is set to deteriorate further,” he says, adding that Singapore’s dominance in certain segments of offshore and marine engineering risks becoming a liability as global oil and gas capex heads for a slowdown for the second consecutive year, with rig overcapacity in China limiting any chance of recovery.

HSBC equity analysts expect a further 15-20% decline in 2016, and a sharper contraction is possible, he says.

He says Singapore’s manufacturing industry has probably seen one of the sharpest and earliest adjustments to the current cyclical slowdown.

“This is a function of three factors: the extremely high degree of export content in manufacturing; the fact that 20% of manufacturing is linked to oil prices; and the effect of economic restructuring over the past few years, which has reduced the amount of foreign workers and driven up labour costs,” he explains.

Incalcaterra says that the impact of low oil prices on manufacturing in 2016 will be more pronounced compared to 2015, as order books for Keppel and Sembcorp Marine moderate.

“Along with petrochemicals and refining, we estimate oil-related manufacturing to total 3.6% of gross domestic product (GDP). One respite for manufacturing is that Singapore’s weakening trade

Source: CEIC, Maybank-KE

pharmaceutical output may pick up in the first quarter, particularly with the new capacity installed last year, but a part of this may now be reclassified as services,” he says.

According to Moody’s, the deceleration in the manufacturing sector has hurt gross capital formation and exports. Gross capital formation dipped by 1% in 2015, while growth in exports of goods and services moderated to 2.5% over 2015 from a 4.3% rise the previous year.

“The slowdown will likely extend to 2016, given lacklustre economic conditions in most of Singapore’s export destinations,” Moody’s says.

For Alvin Liew, senior economist at UOB, it is too early to tell if Singapore’s manufacturing sector is out of the doldrums yet.

“The current downtrend in Singapore’s industrial production (IP) is the longest period of contraction (12 consecutive months of on-year drop) on record, even longer than the recession periods since the 1980’s (10 consecutive months in 1985/1986, eight consecutive months in 2001, and six consecutive months during the October 2008 – March 2009 global financial crisis),” he says.

Liew says that in terms of the annual IP performance, the 5.2% contraction in 2015 was also the steepest since the 11.6% plunge in 2001, although it remains to be seen whether a back-to-back contraction in 2016 (IP contracted 4.2% for two consecutive years in 2008 and 2009) will happen.

Singapore’s dominance in offshore and marine engineering risks becoming a liability as global oil and gas capex heads for a slowdown.

“Despite the challenging external environment, total manufacturing fixed asset investment commitments secured

by EDB in 2015 was S$8.3 billion, higher than the S$6.8 billion recorded in 2014,” the ministry pointed out.

Data from the ministry show that the manufacturing sector employed around 510,000 workers as of December 2015.

In 2015, the nominal median monthly income of full-time employed residents in the sector rose by 5.4%, from S$4,210 in 2014 to S$4,437. Over a longer six-year period from 2009 to 2015, the nominal median monthly income of full-time employed residents in the sector increased by 5.5 % on a compound annual growth rate (CAGR) basis, higher than the 5.1 % growth per annum for full-time employed residents in the overall economy, MTI explains.

“Given the need to be competitive in global markets, manufacturing firms have also seen relatively strong productivity growth in recent years despite the sluggish external environment. In particular, over the period of 2009 to 2015, real value-added per worker in the manufacturing sector grew by 5.9% CAGR, higher than the 2.2% for the overall economy,” it says.

Key pillar of the economy The MTI says manufacturing remains a key driver of the economy, and contributed almost 20% to the GDP in 2015. The sector’s share of nominal GDP increased over the past two years, from 18.5% in 2013 to 19.8% in 2015.

“It also generates well-paying jobs for Singaporeans, on top of healthy positive spillovers to the rest of the economy.

Singapore’s manufacturing ecosystem has evolved as firms incorporate more high-value manufacturing-related services,” the ministry says.

‘Still attractive’ External factors notwithstanding, the Ministry of Trade and Industry (MTI) says the industry remains attractive to investors.

Marine and offshore engineering output may decline as orders are cancelled

Source: CEIC, HSBC

SINGAPORE BUSINESS REVIEW | MAY 2016 27

Analysis: AGRIBUSINESS “The narrative for CPO planters will be better in 2016 than it has been for many years.

The complex has been heavy for about four years now, but is set to tighten in 2016 on the back of slower production growth driven by this year’s El Niño and southeast Asian haze,” Werner notes. “On the demand side, news flow around the Indonesian biodiesel mandate suggests it is finally getting off the ground.

Both catalysts have gone from brewing to bubbling,” Werner adds.

Demand will shoot up

Planters bank on severe dry spell to drive growth

Agribusiness players will flourish as El Niño grips Asia, which will result in higher palm oil prices and revive profits.

D

rought usually spells trouble for farmers across Asia, but the same could not be said for palm oil plantation companies across the region. After languishing for several quarters, analysts reckon that the fortunes of Singapore-listed planters are changing at long last.

With crude palm oil (CPO) prices expected to finally rebound this year as output drops, analysts note that investors should keep an eye on long-ignored agribusiness stocks.

Profits to flourish “We like the plantation sector for 2016 as it has a fundamental tailwind in the form of rising CPO prices. We see next year’s average CPO prices 18% higher than the 2015 average, and 30% higher than the 4Q15 average,” 28 SINGAPORE BUSINESS REVIEW | MAY 2016

The narrative for CPO planters will be better in 2016 than it has been for many years.

says Conrad Werner, managing director, equity research, Macquarie.

However, they also warn that despite a projected recovery in CPO prices, listed planters will continue to face heightened currency risks and persistently low commodity prices. These, in turn, could curb near-term growth.

Record-breaking drought Patrick Yau, head of research at Citi Singapore, says that weather experts expect this year’s El Niño conditions to be severe, rivalling the drought of 1997. “Severe El Niño conditions, accompanied by dry conditions earlier in the year, have boosted CPO and stock prices of CPO-related firms as palm oil production yields get hurt 6-9 months later,” Yau says.

Barnabas Gan, commodity economist at OCBC, notes that the El Niño phenomenon seen in late 2015 had been unexpectedly prolonged into the first three months of 2016. He notes that in 1997/1998, palm oil prices surged by 133%. And though current inventory remains elevated, Gan says that there is a “real risk” of inventories falling significantly, especially if production drops further.

“Palm oil supplies into the first half of the year is likely to fall further as the harsh weathers appear prolonged. In the same

Weak spot prices reflect high inventories

Source: Bloomberg, Macguire Research, December 2015

Analysis: agribusiness vein, palm oil demand has been healthy, and should continue to point north given seasonal factors.

Accounting these factors, palm oil prices are likely to point higher into 1H16,” Gan says.

Macquarie’s Werner reckons that the stock-to-usage will drop below the historical long term average of 18% in 2016, with 2017 poised to see further tightening. At the same time, palm oil inventories are expected to drop after hovering at record-high levels for several quarters. As a result, Werner expects palm oil prices to hit US$659 per ton this year.

Adding fuel to the fire Apart from the effects of El Niño, palm oil players will also be buoyed

by Indonesia’s biodiesel mandate, which will shore up demand at a time when supply is shrinking.

Indonesia is pushing for a 10% biodiesel blend, which could result in a demand spike.

“If properly implemented, it could make biodiesel sustainable and thus provide price support to CPO. To put this into context, the biodiesel target of 3bn litres will translate to significant increase in demand at around 3mn tons for CPO. This is equal to ~10% of the Indonesian annual CPO production and is more than the average CPO inventory in Malaysia,” Yau notes.

Apart from increased Indonesian demand, neighboring Malaysia has also rolled out a similar B10 program, which could cause utilisation to double to 1.2 million tonnes of palm oil per year.

A report by UOB Kay Hian says CPO Premium over Brent (US$/t)

Source: Bloomberg, Citi Research

Palm oil players will also be buoyed by Indonesia’s biodiesel mandate, which will shore up demand at a time when supply is shrinking.

Agricultural prices and weather extremities

Source: National Oceanic and Atmospheric Administration, OCBC Bank

that the additional demand from Malaysia will use up 24% of the current inventory of 2.63 million tonnes and act as support to CPO prices. UOB Kay Hian notes that Malaysia has a strong biodiesel mandate—its 5% and 7% blending programmes have been rolled out smoothly in previous years, which indicates that the B10 programme will also be able to live up to its promise.

“We understand there are no major technical issues in the implementation which involves stakeholders such as petroleum companies, automobile manufacturers, palm oil suppliers and relevant government agencies and this could delay the implementation,” UOB Kay Hian says.

Risks remain Although the outlook is generally bright for agribusiness players, analysts argue that there remain several factors which could negatively impact the listed planters.

For instance, Werner notes that soybean oil remains well supplied and could cap the price performance of vegetable oils overall. The fall US soybean harvest has been good and Latin America’s spring harvest is also shaping up well, though some weather risks are present in the current planting stage. Soybean oil accounts for 26% of world vegetable oil production and 16% of exports, while palm oil accounts for 39% of production and 66% of exports.

“We believe that the upside for CPO prices would be subdued due to high stockpile of competing oilseeds as well as weak oil prices, which damage biodiesel demand,” Yau says.

Another risk is a failure in the implementation of Indonesia’s biodiesel program, particularly as blending realisation has been significantly below target.

In 2014, Indonesia met less than 50% of its blending target, while the country met just 33% of its target in 2015. Apart from policy implementation failure, Indonesia’s biodiesel program might also be derailed by weak commodity prices.

“Low oil prices not only reduce discretionary biodiesel blending demand, they also raise the cost of mandated biodiesel programs like Indonesia’s. Indonesia’s program is being funded by CPO export taxes.

We would note that over half of the tax receipts are currently earmarked for an oil palm replanting program with the rest going into the biodiesel subsidies.

We see room for replanting funds to shift to the biodiesel side if necessary,” Werner says.

Weak regional currencies could also negatively impact the planters, particularly those with large exposures to US dollardenominated debt.

“El Niño severity and Indonesia’s ability to implement its biodiesel program are key risks. Planters with high gearing or large USD debt present risks, given the volatility in ASEAN currencies,” Yau notes.

SINGAPORE BUSINESS REVIEW | MAY 2016 29

SALARY SURVEY 2016

Stingier employers adopt lean manpower mindset

Negotiating a big salary increase and getting a permanent post will be tricky this year as Singaporean companies err on the side of caution.

F

or the average Singaporean employee evaluating the job market in 2016, two words will come to mind: lean and mean.

Lean because most employers will be hesitant to hire more regular staff and instead resort to temporary or contract hires, and mean because salary increases will likely be small or even be shelved this year.

There are a few bright spots worth mentioning such as more generous bonuses and better work-life balance measures, but on the whole, Singapore will be a tougher place to find and keep a job this year in the face of increased economic uncertainty.

Modest salary increases Singaporean salaries will nudge up but only by a little bit, according to analysts and employer outlook surveys.

30 SINGAPORE BUSINESS REVIEW | MAY 2016

Most industries may still see a salary increase but at a lower rate, depending on the sector and the individual’s performance.

The Michael Page 2016 South East Asia Salary & Employment Outlook, for example, says expectations of salary increases are modest with 71% predicting increases of 1-5%, while 11% of employers surveyed expect no increase at all.

The same report reveals expectations for bonuses are more positive with 88% of respondents expecting to provide bonuses as part of employee remuneration, while 53% of respondents predict providing bonuses between 6-15%.

“The regional economic uncertainty is casting a shadow over certain industries in Singapore, with recruitment and salary increases growing in a steady rather than an accelerated fashion,” says Sebastien Hampartzoumian, senior managing director, Singapore & India at PageGroup.

Aside from the tougher competitive environment and slower global growth which have put pressure on Singaporean companies, inflation rates in the country will likely remain flat, which further dampens the possibility of large salary spikes, says Toby Fowlston, managing director at Robert Walters Southeast Asia.

But Fowlston reckons that niche areas like cyber security may be able to offer significantly higher salary increases, possibly by 1020%, although this will mostly for job movers rather than as a result of salary reviews.

Staff positions for risk audit and compliance functions in banks and financial services will also be offered with more generous pay increments, says Hampartzoumian, due to the strict regulatory environment set by the Singapore government that that makes such skills highly valuable.

Beyond the salary bump This does not mean that Singaporean employers no longer reward great performance. Star performers can make a stronger case for a plump salary bump, in addition to more flexible work arrangements.

“Competitive remuneration in terms of salary increases and bonuses are still important for firms to stay competitive. Despite the uncertain economic situation this year, most industries may still see a salary increase but at a lower rate, depending on the sector and the individual’s performance,” says Foo See Yang, vice president and country general manager at Kelly Services in Singapore.

“However, to attract and retain the best talent, employers must also do more than offer traditional inducements such as competitive salaries and linear career paths, and adopt a more holistic attraction and retention strategy,” he adds.

Foo cites the latest Kelly Services’ Global Workforce Index survey which found work-life balance is increasingly important to talent. Singaporeans identified

SALARY SURVEY 2016 flexible work arrangements (70%) and having wellness programs (40%) as two elements that they consider important.

Slow hiring For job hunters, analysts reckon there might be slim pickings as recruitment will remain slow in the first half of 2016. Employers are cautious due to prevailing economic uncertainty in China and the rest of the region, but standout candidates with indemand skill sets and close-toperfect job fit can expect to be hired faster.

“With the recent Chinese Yuan devaluation, stock market volatility and fall in oil prices, many are taking a cautious approach when rewarding employees and hiring new and replacement headcounts,” says Hampartzoumian.

“Across sectors, candidates with very specific skill sets tend to be employed much faster. Employers are now more risk-averse and will only hire candidates who they feel will be the right fit for the job.

For senior level jobs, it has to be a 99% perfect fit – employers focus on candidates that are within the industry and are able to hit the ground running from day one,” he adds.

Job seekers might have better luck applying to European and Chinese companies that have set up in Singapore as a base to expand in Asia Pacific. But potential hires must bring skills suitable for the technology-driven start-up environment.

“These companies have tended to hire in fairly large Job vacancies decline

Source: Labour Market Survey, Ministry of Manpower

volumes as they need a certain amount of scale to enter the market here. This has and will create opportunities for people looking to work in a start-up and expansion environment for foreign companies. The companies, whilst varied, tend to occupy the tech space and typically their requirements are for Sales and Information Technology staff,” says Andrew Evans, chief operating officer, at Morgan McKinley in Singapore.

Even outside these hot hiring sectors, higher skills training is becoming a necessity to secure a job. Evans says the offshoring trend has led Singaporean firms to move lower skilled roles in Finance, Operations and Technology as well as call centre and client services to cheaper and emerging market locations like India, Malaysia and the Philippines.

Retaining top talent Although hiring is expected to slow in 2016, Foo cautions that the domestic job market will remain tight, thus making it necessary for employers to re-think their talent retention strategies.

“In 2016, talent retention will become increasingly challenging across the board, particularly for SMEs who will find it difficult as they compete with global brands and MNCs. Employers should do more than offer traditional inducements. By focusing on employee retention strategies, companies can achieve greater value from their existing talent pool and reduce re-hiring and retraining costs,” Foo says.

Contracting now in vogue Contracting used to be an unattractive career path for many professionals in Singapore and Hong Kong, but short-term job assignments are becoming an increasingly valuable recruitment tool for many companies in both territories.

“We are very positive about the contract market in 2016, and expect companies to offer growing numbers of contract roles,” says Toby Fowlston, managing director, Robert Walters Southeast Asia.

Whilst historically, contracting has not been seen as a viable career option, Fowlston says that the two regional financial centres are now seeing highly talented and qualified professionals becoming ‘career contractors’ in search of a better work-life balance and greater flexibility.

Apart from providing greater flexibility for employees, contract positions also allow companies to effectively manage higher workloads despite slowing economic growth.

“Contract staffing allows the flexibility for an organisation to manage their talent pool more effectively and efficiently. Despite the slowdown in permanent hires, this strategy allows the company to pursue its business goals and objectives during this uncertain time,” says Foo See Yang, vice president and country general manager at Kelly Services in Singapore.

“As a result of Singapore’s flat economy, we expect more companies to hire more contractors to help supplement their workforce during this period,” notes Sebastien Hampartzoumian, senior managing director, Singapore & India, PageGroup. He adds that contracting is fast becoming popular in the financial services industry, as contract workers offer the opportunity to quickly hire someone with specialist skills, or to bolster a department in the interim.

Popularity surge in Hong Kong In Hong Kong, contracting is growing in popularity because temporary assignments help employers to counter either cost management challenges or headcount issues, says Sharmini Wainwright, managing director, Michael Page Hong Kong.

“Back office roles, such as operations within banks, have the least growth in new permanent headcount – therefore resulting in the growth of their contracting workforce,” Wainwright says.

He adds that contracting opportunities available in Hong Kong also allow candidates with less experience to enter the field.

“Contracting will also continue to be a popular recruitment solution for financial institutions during busy seasons such as year-end closings, systems implementation and mergers and acquisition (M&A) projects,” Wainwright notes.

Dean Stallard, regional director, Hays Hong Kong, says that there is now a wider variety of contract positions available including senior contract roles.

He says that contract hiring will remain strong throughout 2016 as ongoing projects from several major players in the market require flexible hiring solutions.

“Hiring in the service contracting space will continue to grow, rather than dispatch contracting and this will eventually become the mainstream,” Stallard notes.

SINGAPORE BUSINESS REVIEW | MAY 2016 31

SALARY SURVEY 2016 ACCOUNTING AND FINANCE

Salary (SG$’000)

years of experience

3-5

5-10

10-15

15+ years

GENERAL Accounts Payable Executive

N/A

N/A

N/A

N/A

Accounts Payable Accountant

45-60

60-80

N/A

N/A

Accounts Payable Manager

70-90

90-120

N/A

N/A

Credit Controller

42-60

60-80

N/A

N/A

Financial Accountant

50-65

85-100

N/A

N/A

Group Accountant – Consolidation

42-54

50-70

70-100

N/A

Cost Accountant

50-65

65-80

N/A

N/A

Credit Analyst

50-65

65-90

N/A

N/A

Financial/Business Analyst

50-80

80-110

N/A

N/A

Finance Manager (Small/Medium Organisation)

80-100

90-120

120+

N/A

Finance Manager (Shared Services Centre)

80-100

100-120

120+

N/A

Finance Manager (Large Organisation)

100-130

130-180

180+

N/A

Credit Manager

80-100

100-130

130-150

N/A

Costing Manager

80-100

100-150

150+

N/A

Financial & Planning Analysis Manager

100-130

130-150

150-200

200+

Financial Controller (Small/Medium Organisation)

130-150

150-180

180+

N/A

Financial Controller (Large Organisation)

160-200

200-250

250+

N/A

Credit Director

130-150

150-180

180-220

220+

Finance Director (Shared Services Centre)

200-220

220-250

250+

N/A

CFO/Finance Director (Large Organisation)

220-250

250-300

300-350

350+

Credit Analyst

50-65

65-90

N/A

N/A

Pricing Analyst

60-80

80-100

N/A

N/A

Treasury Analyst

60-80

80-100

N/A

N/A

Tax Analyst

60-80

80-110

N/A

N/A

Internal Auditor

65-90

90-130

N/A

N/A

Pricing Manager

100-120

120-150

150+

N/A

Revenue Recognition

80-120

120-180

120-250

N/A

Corporate Finance Manager

90-120

120-160

160+

N/A

Treasury Manager

100-120

120-180

180+

N/A

Internal Audit Manager

100-130

130-150

150-200

N/A

Tax Manager

130-160

160-200

200+

N/A

Corporate Finance Director

200-220

220-250

250-300

300+

Treasury Director

200-220

220-250

250-300

300+

Internal Audit Director

200-220

220-250

250-300

300+

Tax Director

200-220

220-250

250-300

300+

External Audit

50-70

70-120

120+

N/A

Tax

55-75

75-130

130+

N/A

Management Consultancy

90-140

140-180

180+

N/A

Corporate Finance

90-140

140-180

180+

N/A

Risk & Compliance

90-140

140-180

180+

N/A

SPECIALIST

PROFESSIONAL SERVICES & PUBLIC ACCOUNTING

32 SINGAPORE BUSINESS REVIEW | MAY 2016

SALARY SURVEY 2016 FINANCIAL SERVICES

Salary (SG$’000) Associate

Associate Vice President

Vice president

Director/MD

AUDIT Internal Audit

60-95

90-150

150-250+

250+

IT Audit

60-95

90-150

150-250+

250+

AML (Audit Money Laundering)

60-90

90-180

180-250+

250+

MAS Compliance

60-90

90-180

180-250+

250+

Regulatory

60-90

90-180

180-250+

250+

Insurance

50-75

75-160

160-220+

220+

Market Risk

60-90

90-150

150-220+

220+

Credit Risk

60-90

90-150

150-220+

220+

Operational Risk

50-70

75-130

130-200+

200+

60-90

90-140

140-220

220+

60-80

80-130

130-220

220+

Settlement

45-75

75-120

120-180

180+

Collateral Management

45-65

65-110

110-160

160+

50-95

50-95

95-150

150-220

220+

Fund Management

50-90

90-120

120-180

180+

60-95

95-160

160-250

250+

Business Analyst

60-95

90-150

150-240

240+

Product Control

60-95

95-150

150-220+

220+

COMPLIANCE

RISK

OPERATIONS Project Management MIDDLE OFFICE Client Servicing BACK OFFICE

Valuations Quantitative FINANCE PROJECTS

HEALTHCARE & LIFE SCIENCE

Salary (SG$’000)

years of experience

3-5

5-10

10-15

15+ years

CLINICAL RESEARCH Drug Safety/Pharmacovigilence

45-55

55-80

90-150

N/A

Data Management

45-70

N/A

N/A

150+

Clinical Operations

50-70

70-90

100-120

N/A

BioStatistician

50-80

80-100

N/A

N/A

SAS Programmer

50-80

80-100

N/A

N/A

Medical Affairs

110-130

120-180

180-250

300+

Manufacturing

50-70

70-90

100-160

200+

Process Engineering

60-80

90-120

120-150

180+

Mechanical Engineering

60-80

90-120

120-150

180+

Electrical Engineering

60-80

90-120

120-150

180+

Controls/Automation

60-80

90-120

120-150

180+

EHS

60-80

90-120

120-150

180+

Validation

60-80

90-120

120-150

180+

OPERATIONS

SINGAPORE BUSINESS REVIEW | MAY 2016 33

SALARY SURVEY 2016 HUMAN RESOURCES

Salary (SG$’000)

years of experience

3-5

5-10

10-15

15+ years

BANKING & FINANCE Payroll Specialist

45-65

65-100

100-13

130+

Mobility Specialist

50-70

70-120

120-150

150+

HRIS Specialist

50-85

85-130

130-150

150+

Learning and Development Specialist

60-100

100-150

150-200

200+

Recruitment Specialist

60-100

100-150

150-200

200+

HR Generalist/Business Partner

60-110

110-180

180-240

240+

Organisational Development

60-110

110-200

200-300

300+

Compensation and Benefits Specialist

60-120

120-200

220-300

300+

Head of Human Resources

N/A

N/A

250+

300+

Payroll Specialist

40-60

60-90

90-110

110+

Mobility Specialist

50-65

65-100

100-140

140+

HRIS Specialist

50-80

80-120

120-150

150+

Learning and Development Specialist

50-80

90-135

120-160

160+

Recruitment Specialist

55-100

90-135

120-165

165+

HR Generalist/Business Partner

55-100

100-160

160-200

200+

Organisational Development

55-100

100-160

160-220

220+

Compensation and Benefits Specialist

60-90

120-180

150-250

250+

Head of Human Resources

N/A

N/A

200-300

300+

COMMERCE & INDUSTRY

LAWYERS

Salary (SG$’000)

years of experience

3-5 PQE

5-10 PQE

10-15 PQE

15+ years PQE

Private Practice (Local Firms)

80-150

100-200

200+

N/A

Private Practice (International Firms)

150-250

220-380

300+

N/A

170-250

210+

Please note: The above table includes salary data collected from leading and international law firms.

In-House Corporate (MNC)

85-130

100-190

Please note: The above table includes salary data collected from Singapore private and listed companies, and multinational corporations.

Financial Services

100-180

120-240

200-350

280+

Please note: The above table includes salary data collected from international/investment banks, local banks, insurance companies and fund/private equity/security houses.

PARALEGALS Paralegals

35-70

55+

N/A

N/A

Please note: The above table includes salary data collected from international/investment banks, local banks, insurance companies and fund/private equity/security houses. corporate secretariat Corporate Secretariat (Non ICSA-Certified)

30-60

55+

N/A

Corporate Secretariat (ICSA-Certified)

50-95

90+

N/A

N/A

Please note: The above table includes salary data collected from international/investment banks, local banks, insurance companies and fund/private equity/security houses.

PROPERTY & CONSTRUCTION

Salary (SG$’000)

years of experience

3-5

5-10

10-15

15+ years

Asset Management

45-80

80-120

120-180

180+

Portfolio Management

45-80

80-120

120-160

160+

Investment Management

45-80

80-150

150-200

200+

34 SINGAPORE BUSINESS REVIEW | MAY 2016

SALARY SURVEY 2016 Procurement & Supply Chain

Salary (SG$’000)

years of experience

3-5

5-10

10-15+

OIL & GAS/PHARMACEUTICALS Quality

50-70

80-110

120-160

Direct

50-100

100-150

150-200

Logistics/3PL

50-80

80-120

120-180

Supply Chain

40-80

90-140

150-200

Distribution/Warehousing

50-70

80-140

150-180

Planning

50-100

100-150

150-200

Indirect

50-90

95-150

160-220

LEAN/Six Sigma

50-100

100-150

160-220

FMCG/RETAIL

3-5

5-10

10-15+

Quality

50-80

80-110

120-180

Direct

50-80

80-130

130-180

Logistics/3PL

50-80

90-130

130-170

Supply Chain

55-90

90-140

150-240

Distribution/Warehousing

50-80

80-130

130-160

Planning

50-90

90-150

150-220

Indirect

50-90

90-140

160-220

LEAN/Six Sigma

60-90

100-150

160-220

TECHNOLOGY

3-5

5-10

10-15+

Quality

50-80

80-110

130-200

Direct

50-85

90-120

130-220

Logistics/3PL

50-80

85-120

130-170

Supply Chain

50-80

80-130

150-220

Distribution/Warehousing

50-90

90-130

140-170

Planning

50-85

90-140

140-220

Indirect

50-90

95-140

160-220

LEAN/Six Sigma

50-100

100-150

160-220

FINANCIAL & PROFESSIONAL SERVICES

3-5

5-10

10-15+

15+

Purchasing/Procurement Officer

50-70

60-80

75-90

75-90

Procurement Specialist

70-90

90-115

110-160

110-160

Procurement Analyst

65-75

70-90

90-110

90-110

Procurement Manager

80-100

100-140

140-180

140-180

Vendor/Supplier Relationship Manager

80-95

90-135

130-160

130-160

Strategic Sourcing Leader/Manager

N/A

105-160

170-220

170-230

Category/Commodity Manager

90-120

120-150

150-200

180-220

GM/Head of Procurement

N/A

N/A

150-200

180-250

CPO/Director

N/A

N/A

200-250

220-350+

ENGINEERING & MANUFACTURING

Salary (SG$’000)

years of experience

Engineer/Senior Eng.

Principal

Manager

Director

R&D (Hardware/Embedded)

45-65

100-120

100-120

200+

Manufacturing/Production

52-65

N/A

90-120

150+

Quality

52-65

N/A

90-120

200+

Service

52-70

N/A

105-120

150+

SINGAPORE BUSINESS REVIEW | MAY 2016 35

SINGAPORE’S 50 LARGEST HOTELS

Businessmen want cheaper rooms

Supply glut still hurting Singapore hoteliers

Hotels will be hard-pressed to improve performance and profits in 2016.

W

hile millions of business travellers and well-heeled tourists will continue to visit Singapore and book hotel rooms during their stay, they will likely do so with smaller spending allocations in 2016 than in previous years.

This poses a challenge to most hoteliers this year to defend their pricing – through exceptional service or unique offerings – at the risk of losing guests to savvier competitors.

“We expect 2016 to be another mixed year as continued global economic and political uncertainty is expected to continue to weigh on both business and leisure visitation,” says Govinda Singh, director, hospitality & gaming AsiaPacific at Cushman & Wakefield.

Singh reckons hoteliers looking to bounce back in 2016 36 SINGAPORE BUSINESS REVIEW | MAY 2016

Hoteliers looking to bounce back in 2016 should employ dynamic yield maximisation strategies and avoid further lowering their rates.

should employ dynamic yield maximisation strategies and avoid further lowering their rates, if possible.

“Further discounting will only make the market more competitive, and rates more difficult to recover in later years,” he says. “Perhaps this is also the time for attention to turn to what really matters, thus potentially minimising downward pressure on valuations.”

Silver lining Singapore hotels that can offer rooms that match the reduced spending allocations of business and tourist travellers should also gain momentum in 2016 as price becomes a more decisive factor among guests. “The bright spot will be for three-star, mid-tier hotels that have room rates – via booking channels and online portal rates–

that are about S$120-$180 per room per night,” says Ong Kah Seng, director at R’ST Research.

“In this range, visitors find that they get to stay in sufficiently comfortable hotels, and yet free up money for expenses to explore the island,” he adds.

Meanwhile, senior professionals and middle managers will increasingly opt to stay in four-star hotels with rates of around $200-$320 per room per night, instead of in five-star hotels where they might end up overspending.

“Business travellers are increasingly sensitive to corporates’ budgets allocated for them and like to opt for four-star or upper-mid range hotels when they are here for work purposes,” says Ong. Ong expects top management such as chief executive officers, senior directors and executives to continue booking 5-star hotels, albeit with an increasing ability to stay in more affordable options.

Not all Singapore hotels can and will be able to push down prices, but it is clear that the decision will be one of the most critical ones to make in 2016.

“The challenges faced by hotel operators are much focussed on the pricing mechanism, where they have to keep room rates low to attract guests, or if not, they can maintain the room rates but it is quite possible that there will be guests who opt in favour of comparable choices,” says Ong. Who made it to SBR’s list?

For the fourth straight year, Marina Bay Sands remains at the top spot with 2561 rooms while a new hotel took the second spot.

Hotel Boss, a new hotel brand to debut in the last quarter of 2015, has 1500 rooms.

Four other new hotels are included in this year’s 50 largest hotels, namely: The South Beach, Genting Hotel Jurong, Hotel Chancellor @ Orchard and Park Hotel Alexandra.

SINGAPORE’S 50 LARGEST HOTELS 2016 Overall Ranking

HOTEL

2015 Rankings

1

Marina Bay Sands

2

Hotel Boss

3 4

NO. of rooms

General Manager/ Head of Hotel Operations

2016

2015

1

2561

2561

Ian Wilson

-

1500

-

Charles Goh

Swissotel The Stamford Singapore

2

1261

1261

Tom Meyer

Mandarin Orchard Singapore

3

1077

1077

Danny Wong

5

Carlton Hotel Singapore

4

940

915

Mark Bulmer

6

V Hotel Lavender

5

888

888

Edmund Yip

7

The Pan Pacific Hotel Singapore

6

790

790

Gino Tan

8

Fairmont Singapore

7

769

769

Tom Meyer

9

Shangri-La Hotel

8

747

747

Reto Klauser

10

Grand Hyatt Singapore

9

677

677

Willi B. Martin

11

Orchard Hotel Singapore

10

656

656

Richard Ong

12

The South Beach

-

654

-

Jan Büttgen

13

Furama Riverfront, Singapore

11

615

615

Kwan Hun Fah

14

The Ritz-Carlton Millenia Singapore

12

608

608

Peter Mainguy

15

Peninsula.Excelsior Hotel

13

600

600

William Wong

16

Grand Mercure Singapore Roxy

14

576

576

Klaus Gottschalk

17

Marina Mandarin Singapore

15

575

575

*

18

Grand Copthorne Waterfront Hotel

16

574

574

Benedict Ng

19

Hotel Jen Tanglin Singapore

17

565

546

Clifford Weiner

20

Genting Hotel Jurong

-

557

-

Chow Keng Hai

21

ibis Singapore on Bencoolen

18

538

538

Mark Gaynor

22

PARKROYAL on Kitchener Road

19

532

534

Sharmini Moganasundram

23

Mandarin Oriental Singapore

20

527

527

Christian Hassing

24

Holiday Inn Singapore Atrium

22

512

508

Tuncay Bockin

25

Royal Plaza on Scotts

21

511

511

Patrick Fiat

26

Conrad Centennial Singapore

23

507

507

Mark Meaney

27

Hotel Jen Orchardgateway Singapore

24

499

502

Hervé Duboscq

28

Hotel Chancellor @ Orchard

-

488

-

Danny Koh

29

Riverview Hotel

25

476

476

Shirley Wong

29

Swissotel Merchant Court, Singapore

25

476

476

Rainer Tenius

31

Hotel Michael

27

461

470

Chow Keng Hai

32

Shangri-La’s Rasa Sentosa Resort

28

454

454

Henry Lee

33

Festive Hotel

29

447

447

Chow Keng Hai

34

Furama City Centre, Singapore

30

445

445

Jovian Hun

35

Holiday Inn Express Clarke Quay

31

442

442

Sandra Kloprogge

35

Park Hotel Alexandra

-

442

-

Angeline Tan

37

Regent Singapore, A Four Seasons Hotel

32

440

440

Peter Draminsky

38

Oasia Hotel Novena, Singapore

33

428

428

Kent Law

39

Hilton Singapore Hotel

34

421

421

Peter Webster

40

Sheraton Towers Singapore Hotel

35

420

420

Steven Long

41

M Hotel Singapore

36

413

413

Kanchan Kanwar

42

Concorde Hotel Singapore

37

407

407

Karl L Muir

42

York Hotel Singapore

37

407

407

Jessie Tan

44

Days Hotels Singapore at Zhongshan Park

39

405

405

Tony Cousens

45

Hotel InterContinental Singapore

40

403

403

Tash Tobias**

45

Novotel Singapore Clarke Quay

40

403

403

Marcus Hanna

47

The Fullerton Hotel

42

400

400

Giovanni Viterale

48

Singapore Marriott Tang Plaza Hotel

43

393

393

Simon Bell

48

Village Hotel Bugis

43

393

393

Mika Umemura

50

Orchard Parade Hotel

Melvin Lim

46

388

387

TOTAL

30,668

26,992

AVERAGE

613

600

*declineD to disclose the name of the General Manager **will be leaving on March 2016 SOURCE: Data provided by CBRE as of January 18, 2016

SINGAPORE BUSINESS REVIEW | MAY 2016 37

Legal briefing

Singapore cracks down on cyber threats The introduction of a new cyber security bill is timely, experts say.

T

he Singaporean government is pushing for the enactment of a cyber security bill in a bid to boost the city-state’s information infrastructure and fend off cyber attacks that target governments, industries and individuals.

“We will develop a national cyber security strategy to strengthen Singapore’s information infrastructure.

Priority will be given to our critical sectors of energy, water, transport, health, government, infocomm, media, security and emergency services, and banking and finance,” the Ministry of Communications and Information (MCI) says.

Among other things, the bill will provide for the allocation of at least 8% of the national budget for information technology to cyber security expenditure in the long-term.

According to the state ministry, the bill “will give the Cyber Security Agency of Singapore greater powers to secure our critical information infrastructure.”

MCI adds that the bill aims to develop the cyber security ecosystem in Singapore, and grow cyber security talent and manpower.

“We will also seek international cooperation on cyber security to overcome the transnational nature of cyber threats, and work with the private sector to raise public awareness of the importance of cyber security,” the ministry adds.

“The bill is necessary in view of the proliferation of cyber threats, especially in areas not covered by current legislation.”

Is there a need for new cyber security bill?

For Rakesh Kirpalani, director in Drew & Napier’s corporate & finance department, the bill is timely.

“The nature and form of cyber threats change every day. Cyber security is too often underappreciated as a risk because of the ephemeral nature of the internet and trust in others,” he says.

The bill comes after the introduction of the Smart Nation initiative and various programmes that promote digital transformation in Singapore, sparking a “technological revolution” in the citystate.

Are current cyber security measures adequate?

Wun Rizwi, partner at RHTLaw Taylor Wessing, says that on balance, the bill is necessary in view of the proliferation of cyber threats, especially in areas not covered by current legislation.

38 SINGAPORE BUSINESS REVIEW | MAY 2016

Rajesh Sreenivasan

Rakesh Kirpalani

Wun Rizwi

Rizwi says current laws are adequate in criminalising acts such as hacking (Computer Misuse and Cybersecurity Act) and in mandating organisations that hold personal data to have reasonable security arrangements to protect the personal data they are holding (Personal Data Protection Act). In addition, the Personal Data Protection Commission has also issued guidelines on how to protect electronic personal data.

What should be the scope of the new law?

Rajesh Sreenivasan, partner at Rajah & Tann Singapore LLP says it is possible that new categories of cyber security offences may be set out in the new cyber security bill.

“Another key feature that may find its way into the new cyber security bill would be the inclusion of a mandatory requirement to report cyber security breaches, an obligation which is not presently mandated under the CMCA unless the Minister of Home Affairs specifically requires a person or entity to do so through the issuance of a certificate,” he says.

The new cyber security bill could potentially adopt the approach taken by the Monetary Authority of Singapore (MAS) for financial institutions. Financial institutions are required to notify the MAS of, among other things, any security breaches to their IT system.

Timelines have also been stipulated such that an initial alert must be made within an hour of the discovery, with a detailed report to follow within 14 days of the incident.

Such a mandatory notification requirement may be especially relevant, given the potential adverse consequences that could result from the theft of personal data belonging to individuals and the need for the individuals to be alerted to the same in a timely fashion so as to allow the individuals to take protective measures, Sreenivasan says.

“In this regard, a mandatory notification requirement would ensure that this is the case in the event of a cyber security breach, and would prevent a situation similar to that involving China’s largest online shopping platform, TaoBao, where a cyber security breach that occurred in October 2015, in which the accounts of over 20 million users were compromised, was reported only in February 2016, leaving the users potentially unaware that their personal data, including financial information, may have fallen into the wrong hands during the interim period,” he says.

Sreenivasan adds that it is necessary for businesses to stay abreast of any developments relating to the new cyber security bill, given its potential to have significant implications, from an operational and compliance standpoint for every industry.

Plan your own learning journey for career progression All Singaporeans aged 25 and above are eligible to receive an open credit of S$500 from January 2016.

The scheme aims to encourage skills development and lifelong learning for all Singaporeans.

Scan for more information Contact us : 67498060 | cpe@isca.org.sg | www.isca.org.sg

Global Mindset, Asian Insights

SINGAPORE BUSINESS REVIEW | SEPTEMBER 2015 39

SINGAPORE’S 50 LARGEST SERVICED RESIDENCES

Serviced apartments appeal to frequent flyers

Serviced residences industry to revel in demand growth

Business travellers on-the-go seen to spur growth in niche property sector.

D

espite being a niche segment in a highly competitive sector, Singapore’s serviced residences industry is anticipated to expand further as evolving travelling habits point to increased demand for short, yet more frequent stays.

“The serviced apartment/ residences market continues to evolve towards maturity in Singapore. Increased knowledge, strong demand, flexibility of the model and higher returns for this product led to significant investment in the sector in recent years,” says Govinda Singh, director, hospitality & gaming Asia-Pacific at Cushman & Wakefield.

Jastina Balen of Frasers Hospitality shares that serviced residences have been an ideal business model in Singapore for the past few years. “The 40 SINGAPORE BUSINESS REVIEW | MAY 2016

The appeal of serviced residences lie in their ability to bridge the gap between mostly inflexible lease terms shunned by business travellers.

serviced apartment sector has proven to be resilient even in uncertain economic climates.

Serviced apartments offer a good value proposition for all types of travellers, and it is against a backdrop of austerity measures when the advantages of serviced apartments really come to the fore in meeting the needs of travellers,” she says.

For Ong Kah Seng, director at R’ST Research, the appeal of serviced residences lie in their ability to bridge the gap between mostly inflexible lease terms shunned by business travellers.

“Serviced residences fill in the best gap for foreign professionals who require some stays in Singapore of about couple of months, but find that the standard one-year residential property lease is too long,” Seng explains. Hotel rooms, on the other hand, tend to fall out

of favour as they are “are most functional for short-term stays and have high per-day room rates,” he says.

An evolving work culture that increasingly requires executives to be seconded to Singapore on a temporary basis, appears to be fuelling the rise of serviced residences in Singapore.

“There are more senior foreign professionals who are based in Singapore, but often the foreign professionals will have to travel regionally or globally and find that a standard one-year residential property lease is ttoo long for them to commit,” Ong says. “About half the time, the apartment could be vacant.”

Moving forward, “strong demand” is still expected for serviced residences as “businesses continue to explore growth opportunities across global markets, sending their executives on shorter but more frequent overseas assignments,” Balen notes. “As the serviced apartment sector grows, there will naturally be increased competition as industry players strive to strengthen their positions by expanding their footprint and enhancing their offerings.”

Challenges, if any, will lie in operators “finding suitable sites, educating owners/developers on the attractiveness of the model, and how to mitigate downside risks when corporate travel is reduced,” Singh, for his part, says.

Who made it to SBR’s list?

This year, SBR decided to remove Capri by Frasers as the largest serviced residence in Singapore since it is a special type – a hybrid of a hotel and serviced apartment. 304-unit Great World Serviced Apartments took the top spot. The list meanwhile welcomes six new entries, namely, Atas @ Orchard, Central Square, LMB Housing Services, Atas @ Oakley, Shangri-La residences, and Citadines Fusionopolis Singapore.

SINGAPORE’S 50 LARGEST SERVICED RESIDENCES RANKINGS 2016 2015

SERVICED RESIDENCE

re-ranked

NO. of units 2016 2015

Hospitality Management

Minimum Stay

1

1

Great World Serviced Apartments*

304

304

Kerry Residence (Kuok Group)

1 Week

2

2

Fraser Suites Singapore

255

255

Frasers Hospitality

7 Nights

3

3

Orchard Parksuites

223

225

Far East Hospitality

7 Nights

4

4

Treetops Executive Residences

220

220

DTZ Debenham Hospitality Management

7 Nights

5

5

Orchard Scotts Residences

204

207

Far East Hospitality

7 Nights

6

6

Orchard Grand Court Singapore

203

203

Orchard Grand Court

7 Nights

7

-

Atas @ Orchard

200

-

Atas Residence

3 months

8

8

Somerset Liang Court Singapore

197

197

The Ascott Limited

7 Nights

9

9

Wilby Bukit Timah

180

181

Wilby Estate International

7 Nights

9

10

Pan Pacific Serviced Suites Beach Road **

180

180

Pan Pacific Hotels Group

3 nights

11

11

Fraser Place Robertson Walk, Singapore

164

164

Frasers Hospitality

7 Nights

12

7

Park Avenue Rochester

161

201

Park Avenue Hotels and Suites (United Engineers)

1 Night

13

12

Citadines Mount Sophia Singapore

154

154

The Ascott Limited

7 Nights

14

13

Residences at Reflections

151

151

Keppel Land Hospitality

6 Months

15

14

Park Avenue Clemenceau

150

150

Park Avenue Hotels and Suites (United Engineers)

7 Nights

16

15

Ascott Raffles Place Singapore

146

146

The Ascott Limited

1 Night

17

16

Far East Plaza Residences

139

141

Far East Hospitality

7 Nights

18

17

Wilby Central

138

138

Wilby Estate International

7 Nights

19

-

Central Square

127

-

BridgeStreet Global Hospitality

1 week

19

18

Village Residence Clarke Quay

127

128

Far East Hospitality

7 Nights

19

19

Shangri-La Serviced Apartments

127

127

Shangri-La Hotel Limited

7 Nights

22

20

Pan Pacific Serviced Suites Orchard

126

126

Pan Pacific Hotels Group

7 Nights

23

21

Fortville

109

109

Forthavens

1 Month

24

22

Somerset Bencoolen Singapore

107

107

The Ascott Limited

7 Nights

25

-

LMB Housing Services

106

-

LMB Housing Services Group of Companies

1 Month

25

23

Redwood West Apartments*

106

106

Redwood Residences

6 months

27

24

International Service Apartments*

102

102

E. Millennium Investments and Fontainebleau (ISA)

1 Month

28

25

Le Grove Serviced Apartments

97

97

City Developments Limited

3 Days

29

26

PARKROYAL Serviced Suites

90

90

Pan Pacific Hotels Group

7 Nights

30

-

Atas @ Oxley

88

-

Atas Residence

1 week

30

27

Somerset Orchard Singapore

88

88

The Ascott Limited

7 Nights

30

27

Regency House

88

88

Far East Hospitality

7 Nights

33

29

8 on Claymore

85

85

Royal Plaza on Scotts

7 Nights

34

30

The Club Residences

81

81

Capella Singapore

7 Nights

35

31

Park Avenue Changi

80

80

Park Avenue Hotels and Suites (United Engineers)

1 Day

36

32

Village Residence Hougang

78

78

Far East Hospitality

7 Nights

37

33

Darby Park Executive Suites

75

75

Sime Darby Hospitality

7 Nights

38

34

Fraser Residence Orchard, Singapore

72

72

Frasers Hospitality

6 Months

39

34

Village Residence Robertson Quay

71

72

Far East Hospitality

7 Nights

40

36

Lanson Place Winsland*

67

67

Lanson Place Hospitality Management

1 Day

41

-

Shangri-La Residences

55

-

Shangri-La Hotel Limited

6 Months

42

37

Village Residence West Coast

51

51

Far East Hospitality

7 Nights

43

-

Citadines Fusionopolis Singapore

50

-

The Ascott Limited

7 Nights

44

38

Alocassia Serviced Apartments

45

45

DTZ Debenham Hospitality Management

7 Nights

45

39

The Forest by Wangz

38

38

Wangz Hotel

7 Nights

46

40

Park Avenue Robertson

36

36

Park Avenue Hotels and Suites (United Engineers)

7 Nights

47

41

Kembangan Lodge*

27

27

Santa Grand Hotels

1 Month

48

42

La Residenza

24

24

Millennium Hotels and Resorts

1 Day

49

43

Global Residence @ St. Thomas Walk*

22

22

Global Residence

1 Month

50

44

Redwood @ Central*

20

20

Redwood Residences

6 Months

*DATA RETAINED FROM PREVIOUS DATA **Pan Pacific Serviced Suites Beach Road’s minimum stay for weekdays is 3 nights, and 2 nights during the weekends.

Source: Publicly available data and company survey.

SINGAPORE BUSINESS REVIEW | SEPTEMBER 2015 41

CMO Briefing

free gifts, but Lazada Singapore has found that a genuine touch of customer concern can prove more effective in assuaging irate customers, and even turning them into vocal cheerleaders.

“The best way to take negative feedback and turn it into positive responses is to show customers that you care about the issue, you are working to fix their issue, and you are being honest with them about why the issue took place,” says Andrea Baronchelli, chief marketing officer at Lazada Singapore.

“Often brands attempt to compensate customers with monetary apologies, and while this can be done along with the above to help an affected customer, it should never be done so without addressing the issue they are facing,” says Baronchelli.

Managing a social media crisis

At a time when social media can make or break a brand, managers share how reputation crises can be averted.

W

hen technology company Philips stumbles upon a crisis about to brew on its social media platforms, it deploys a team of trained professionals to resolve the issue not unlike a tactical SWAT team. But instead of guns and armour, Philips crisis responders use powerful listening and responding tools to take control of any social media situation that may damage the brand.

“We have a social care team and a social care management plan which covers crisis management and immediate response around the clock. When a comment or feedback is picked up on our social media platforms, we first assess and classify the cases in accordance to the gravity of the situation,” says Winston Phua, head of brand, communications and digital at Philips ASEAN Pacific.

“Based on this assessment, we would escalate the issue appropriately based on a predefined matrix that we have defined for the market. This would then be handled by employees to resolve the issue accordingly. We would seek to control the situation by continuing to drive constant communication and to listen and respond across all channels,” he adds.

Negative to positive Philips, along with an increasing number of other companies across Asia, are developing intricate social media crisis management plans in response to the millions of customers using such platforms – and any one of those users can trigger trouble with a few taps on the keyboard.

Social media users can spark a brand crisis when they leave negative feedback in the form of scathing remarks, product criticisms and service complaints.

Many companies try to hush the negativity with

42 SINGAPORE BUSINESS REVIEW | MAY 2016

Social media users can spark a brand crisis when they leave negative feedback.

Crisis prevention strategy While having a sound crisis management plan can help companies roll with the punches when trouble hits the fan, it is also important to implement measures that prevent the crisis from happening in the first place or at least cushion the impact of a crisis.

Companies can strengthen their crisis management plans through three crisis prevention measures, says Nicholas Kontopoulos, global head of fast growth markets & marketing innovation at SAP Hybris.

The first crisis prevention measure is to invest in social media monitoring tools which help managers locate messages and insights that matter. These tools help brands understand where disgruntled customers could be coming from and craft responses that address their deeply personal concerns.

“By investing in the right tools, brands can better understand their customers on social media, gain real-time insights into the context of each customer, enabling them to anticipate and deliver customised experiences,” says Kontopoulos.

Second, there is a need to develop stronger consumer relationships so that fans and followers become so loyal that they stand behind you even in times of crisis. “Listen to your fans and followers, engage with them, and encourage conversation.

That’s going to make it easier for people to listen to you and even defend you when you run into trouble,” says Kontopoulus.

Third, companies should create social media guidelines that clearly state what the page is about and what kinds of posts are not acceptable. These guidelines should be posted quite visibly on a brand’s site to serve a warning sign to fans that plan to stir up trouble what a company will do in response to their actions.

“The important thing to note is that no crisis is the same and no plan can capture a one-size-fits-all solution. Being well-prepared with the right analytic tools, and building a strong relationship with your customers will be the way to go,” says Kontopoulos.

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analysis: debt in asia aftermath.

The question now is whether we are on the brink of another sharp and rapid deleveraging cycle. As you can see, our chart has started to level out of late.

The boom days are officially over

Is the Asian leverage cycle finally unwinding?

Experts warn that regional economies are at risk as the credit cycle turns.

T

he fuel in Asia’s tank in recent years was credit – plain and simple. As exports crumbled in the wake of the Global Financial Crisis, rising leverage kept things humming.

But, the engine has begun to sputter. First, debt saturation has set in, with borrowers and lenders alike hesitant to stretch balance sheets further. Second, spiking volatility has probably frayed the nerves of even the hardiest financiers.

Debt still expanding So, does that mean we’ve entered a full-on deleveraging cycle? No. Credit is still expanding in much of Asia: certainly more slowly than before, but given all that has happened in the past year or so – diving equities, plunging currencies, buckling confidence – lending has been remarkably 44 SINGAPORE BUSINESS REVIEW | MAY 2016

The question now is whether we are on the brink of another sharp and rapid deleveraging cycle.

resilient.

One might argue, of course, that this isn’t helpful: unless balance sheets become leaner, growth looks hardly sustainable. However, forced and rapid deleveraging isn’t a palatable option either.

So, for now, one may take confidence in the fact that there are no signs of imminent financial stress in Asia.

That, surely, must be reassuring and suggests that the region still has some time to strengthen its foundations through reforms.

Question is: will officials deliver?

In the early 1990s, the region leveraged up rapidly, only to go into reverse after the Asian Financial Crisis of 1997. Since about 2008, bank lending again rose faster than GDP, explaining the region’s extraordinary resilience in the face of the Great Recession in the West and its

Is the tide turning?

Well, it may not be quite so dramatic (yet). Looking at credit growth across the region, things appear relatively stable. That’s remarkable: despite the spike in financial volatility and frayed investor nerves, loan growth has been extraordinarily stable of late.

That’s true even if we exclude China, where credit has continued to power ahead, from our regional average. So far, no sign of a regional collapse in credit like in the late 1990s.

True, a few caveats apply. First, the fact that the regional creditto-GDP ratio has stalled largely reflects the slowdown in nominal GDP growth, rather than credit.

That might entail rising financial pressures down the road as companies’ and households’ ability to service debt gets squeezed.

Second, credit growth has slowed more rapidly in some markets than others, decelerating especially in Singapore and Hong Kong, the region’s financial centres. These two economies may be seen as financial bellwethers for the region, possibly leading the rest of Asia with respect to credit growth given their crucial role in regional finance.

So, things don’t exactly look rosy. However, one may take some comfort in the fact that a full-on deleveraging cycle hasn’t set in yet – possibly explained by still historically low interest rates despite recent financial turbulence.

Officials, however, shouldn’t rest easy: it’s high time to press ahead with structural reforms.

Luckily, there’s still a window to deliver on these and avert greater pain. Frederic Neumann, Economist, HSBC

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analysis: ASEAN SLOWDOWN

ASEAN faces a delicate balancing act

China sneezes and ASEAN catches a cold Slowing growth in the economic powerhouse will have an adverse effect on regional economies, but some countries can weather the storm better than others.

C

hina’s economic slowdown is having a significant impact on growth in Southeast Asia, in part reflecting the importance of regional trade ties. These ties have grown considerably in recent years as barriers to trade have been lowered and the region has become more closely integrated through cross-border supply chains and intra-regional foreign direct investment (FDI) flows.

In the late 1990s, for example, the US and EU together accounted for around 37% of the merchandise exports of the ASEAN-6 economies, while China took just 3% and other economies in emerging Asia accounted for 17%. By 2014, China’s Destination of ASEAN-6 merchandise exports

Source: Oxford Economics/Haver Analytics

46 SINGAPORE BUSINESS REVIEW | MAY 2016

Commodity exporters are doubly exposed due to China’s substantial impact on global commodity markets.

share had risen four-fold to 12%, the share of other emerging Asian economies had risen to 25%, while the US and EU combined share had fallen to 20%.

China is now the largest trading partner for Singapore, Malaysia and Thailand. It represents the second-largest trading partner for Indonesia and the third-largest for the Philippines and Vietnam.

Resilience under threat Different countries’ vulnerability to slower growth in China is also influenced by the nature of their exports. Countries such as Indonesia, the Philippines and Vietnam are less exposed to manufacturing sectors where China has excess capacity, and their wage competitiveness means that developments in China should not significantly constrain their continued industrialisation.

Thailand also appears well placed in the region to benefit from increased demand for consumer goods and services as China rebalances. Among the ASEAN-6, Singapore and Malaysia are likely to be more vulnerable due to their position in regional supply chains for electronic goods.

Commodity exporters are doubly exposed due to China’s substantial impact on global commodity markets. In the decade to 2012, for example, the commodity-intensive nature of China’s investment-

analysis: ASEAN SLOWDOWN led growth accounted for almost 50% of additional global demand for oil and more than 80% for steel and coal. But as Chinese demand for such commodities has slowed, this has been a major driver of declines in the global price of these commodities.

Although Singapore ranks highest on the measure of commodity exports as a percentage of GDP, this mainly reflects the country’s role as a regional trading hub. To put it another way, the resource-rich economies of Malaysia and Indonesia have a much higher share of commodities in total exports. Indonesia has at least been reasonably successful in diversifying its economy, reflected in a fall in the ‘primary sectors’ share of GDP from 31% in 2000 to 22% in 2015.

More worryingly, Malaysia has succumbed to the classic ‘resource curse’, whereby rising commodity prices force up the exchange rate, making it more difficult to successfully develop other export sectors. As such, Malaysia is more exposed to the negative shock to prices from the commodity down-cycle.

On the other hand, commodities are relatively less important for other economies in the ASEAN-6, with Thailand and the Philippines standing to benefit from lower oil prices as they are net importers of energy.

Currency and competitiveness Countries in the region also vary in terms of their exposure to potential further shifts in the Yuan exchange rate. In fact, the trade-weighted value of the Chinese Yuan (CNY) has actually moved remarkably little since mid-December, despite declining against the USD recently. But mixed signals and uncertainties regarding the path of policy in Beijing could trigger more significant moves in the future.

Owing to solid current account surpluses and fast productivity gains, we expect the CNY to weaken modestly in 2016; but our baseline forecast only sees a relatively small additional depreciation of 3.5% against the USD from current levels to 6.8 by mid-2016 and to remain around that level until late 2017.

Using Oxford’s Global Economic Model, we assessed the likely implications of a stronger depreciation of the CNY. In a scenario where the CNY weakens by 10% vs the USD to 7.5 by Q3 2016. If it remains around that level until the end of 2017, our model simulation shows that Chinese exports strengthen due to the resulting boost to competitiveness and there is a small positive effect on Chinese GDP growth (+0.3% in 2016).

But the global picture is less positive. China’s key competitors in Asia would experience the greatest impacts on GDP growth as an improvement in China’s relative competitiveness in manufactured goods sectors hurts these countries’ exports in

Commodity exporters will suffer

particular. Singapore is, by some distance, the hardest hit in this scenario. It is also worth noting that we did not include the potential for an increase in financial stress and risk accompanying the CNY depreciation in our scenario. Such an addition would, of course, result in weaker growth across the board than we report here.

The key risk is a broaderbased negative interaction of a number of variables that could lead to sustained weak economic performance.

Disinflationary forces are growing In the wake of China’s economic slowdown, and the accompanying sharp drop in global commodity prices, much attention has also been given to the risk of the ASEAN-6 countries sliding into deflation.

Deflation is defined as a sustained fall in price levels, but there are a variety of different price measures we can look at in ASEAN, which tell slightly different stories. In terms of headline consumer price inflation, there are negative readings currently in Thailand and Singapore, while inflation is also currently at low levels in Vietnam and the Philippines. That said, at least part of the weakness in consumer prices is due to falling energy costs – measures excluding energy costs generally remain positive across the region.

But it is developments in factory gate prices (wholesale prices) that are probably the main current area of concern. Wholesale prices are falling sharply in several of the ASEAN-6 countries, with year-on-year declines in manufacturing wholesale prices of more than 5% in Singapore and the Philippines. Annual wholesale price inflation is also in negative territory in Malaysia and Thailand, while it is close to zero in Vietnam. Among the ASEAN-6, only Indonesia has annual wholesale price inflation that has remained clearly in positive territory.

Wholesale price developments could point to future developments in consumer prices, although one reason for caution in interpreting in this way is that they are also influenced by collapsing commodity prices; especially lower oil prices which have led to prices of refined petroleum products (included in SINGAPORE BUSINESS REVIEW | MAY 2016 47

analysis: ASEAN SLOWDOWN manufacturing) diving sharply over the last year.

The key risk is not a temporary dip in some price levels but a broader-based negative interaction of a number of variables that could lead to sustained weak economic performance.

The threat of such a deflationary spiral unfolding is likely to be especially large in highly-leveraged economies: falling prices and asset values may create large negative balance sheet effects whereby indebted firms and individuals respond to rises in their real debt burden/ falls in their net worth by increasing saving and reducing spending. This again risks giving rise to negative second-round effects on demand and asset prices.

Japan’s experience in the 1990s shows that deflation risks can build very rapidly, given the right shocks.

What set off the deflation spiral in Japan were massive drops in asset prices that created a credit crunch which then fed back into further declines in asset prices and demand, in a classic negative feedback loop. This was exacerbated by the over-leveraged nature of the Japanese after the ‘bubble economy’ period of the 1980s.

Are there similar risks in Asia today? In terms of asset price declines, there have, of course, been sharp recent falls in stock markets, but recent equity declines are (so far) much shallower than the 50% drop in Japanese equities seen in 1990-92.

Property price falls were arguably even more important than the decline in share prices in generating deflation in Japan, with prices halving from mid-1991 to mid-1993. But there are few signs of such cataclysmic developments in Asia today; in most countries, house prices are still rising (although prices are falling in Singapore).

Rising debt burdens increase risks Compounding the risks to the outlook from disinflationary forces are high levels of personal and corporate debt in some Asian economies. While the global financial crisis (GFC) of 2008-09 was followed by a deleveraging process in most advanced economies, the low interest rate environment of recent years has contributed to a surge in debt ratios in many Asian economies.

Since 2005, the private debt/GDP ratio has risen Government balances of ASEAN economies

Source: Oxford Economics/Haver Analytics

48 SINGAPORE BUSINESS REVIEW | MAY 2016

by around 10 percentage points (ppt) in Indonesia and the Philippines, with a 20ppt rise in Thailand and more than a 40ppt rise in Vietnam and Singapore.

Surges in private debt of this sort can often end badly. In Asia there have been a number of historic examples of such debt surges being followed by significant financial distress, including the Asian crisis of 1997, the property bust in Hong Kong from 19972003, consumer debt crises in Korea and Taiwan from 2003-2006, and most recently a property market boom and bust from which Vietnam is still recovering.

Looking across the main Asian economies, there is a noticeable trend towards slower growth in consumer spending – particularly in the higher-debt countries.

For example, the pace of consumer spending has slowed in both Singapore and Thailand, compared to its long-term average.

This suggests that while financial crisis conditions are not present, the build-up of debt may already be sapping these countries’ growth potential.

The region may still expect periods of financial market volatility in the near term as it adjusts to China’s new growth trajectory.

Prospects for ASEAN economies With some recent business surveys suggesting that demand conditions in the manufacturing sector in South East Asia are beginning to stabilise, we continue to expect a moderate economic recovery to unfold over the next two to three years. But the region may still expect periods of financial market volatility in the near term as it adjusts to China’s new growth trajectory.

Best performers among the ASEAN-6 will be economies where growth is underpinned by strong domestic fundamentals and there is room for policy support.

In this respect, we believe that Vietnam, the Philippines and Indonesia have the best growth prospects among the ASEAN-6 countries, reflecting healthy domestic factors such as low debt, macrostability and wage competitiveness, which will help them to continue gaining market share in low-cost industries.

We expect a more muted recovery in Thailand this year, however, due to higher vulnerability to global headwinds which are dampening near-term growth prospects. Likewise, Singapore is facing a challenging economic environment and we do not expect growth to pick up to the long-run trend rate of around 3.3% a year until 2018.

Near-term prospects appear more worrying in Malaysia, with growth expected to slow in 2016 as it contends with a terms-of-trade shock from lower oil prices as well as a weak political environment, which is hampering domestic demand.

Other key risks include more acute financial market volatility and a tightening of financial conditions as industrialised countries normalise monetary policy, which would present challenges especially for countries in the region with high debt levels.

From Economic Insight: Southeast Asia by ICAEW and Oxford Economics

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