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THE ART ISSUE

ASIAN

ART

TO THE RESCuE Market players look to Asia for renewed growth amidst declining global art sales

PLAN FOR SINGAPORE’S ECONOMIC RESURGENCE

M&A WILL BE ABOUT CAUTIOUS DEAL-MAKING

REAL ESTATE AGENTS

TURN TO TECH MARKET CONDUCT GUIDELINES FOR FI’S

BATTLING IT OUT IN ACCOMMODATIONS

BUSINESS

GS N I NK ST RA LARGELES 50 HOT

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MICA(P) 244/07/2011 KDM No: PPS1645/3/2008

S T ES CE RG IDEN A L S 45CED RE I RV SE


FROM THE EDITOR About Us

In this issue we bring you our annual Asian Art Report, where we found out how market players are looking to Asia for renewed growth amidst declining global art sales. What’s interesting to note is that in 2016, 31% of what Christie’s sold worldwide went to Asian buyers. More interestingly, of the top 10 works sold by Sotheby’s last year, half were purchased by buyers from Asia.

AUDITED CIRCULATION: 24,794 ONLINE READERSHIP: 215,000 monthly uniques through Google Analytics The Singapore Business Review is the highest circulating and best read business magazine in Singapore. Our online readership has an average of 215,000 unique viewers, according to Google Analytics. We won the Business/Professional Media of the Year category at the 2016 MPAS Awards. Do reach out to us if you would like us to tell your story to our readers via print & online advertising or events. Publisher & EDITOR-IN-CHIEF Tim Charlton production editor Terry Gangcuangco GRAPHIC ARTIST Elizabeth Indoy ADVERTISING CONTACT Rochelle Romero rochelle@charltonmediamail.com Angelica Biso angelica@charltonmediamail.com ACCOUNTS DEPARTMENT ADMINISTRATION accounts@charltonmediamail.com

We also looked at what’s happening in Singapore’s mergers & acquisitions space, and which deals wowed us in the past year. For one of our sector reports we talked to real estate agencies and discovered how they are turning to Uber-like technology to stay in business. These days it’s all about tech tools. We also bring you our 40 & Under list where we learned a little bit more about the young and hardworking CMOs driving growth in their companies. Inside you’ll also find our lists of the largest hotels and serviced residences in Singapore. Enjoy the issue!

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Editorial Enquiries: If you have a story idea or just a press release, please email: sbr@charltonmedia.com and our news editor will read it. For a personal message to the editor, put the word “Tim” in the subject line. For Media Partnerships, please email: sbr@charltonmedia.com and put “partnership” in the subject line and it will forward to the right person. Subscriptions email: subscriptions@charltonmedia.com Singapore Business Review is published by Charlton Media Group. All editorial is copyright and may not be reproduced without consent. Contributions are invited but copies of all work should be kept as Singapore Business Review can accept no responsibility for loss. We will however take the gains. Sold on newstands in Singapore, Malaysia, Hong Kong, London, and New York. Also out in sbr.com.sg with online readership of 215,000 monthly unique visitors*. *Source: Google Analytics **If you’re reading the small print you may be missing the big picture   

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Tim Charlton

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CONTENTS

INDUSTRY INSIGHT 1

banks to be hit by 20 Singapore declining asset quality

30

COVER STORY Amidst declining global art sales, market players look to Asia for growth

FIRST 10 Are REITs still attractive? 12 How engaged are Singapore workers?

14 Startups 16 Numbers

28

RANKINGS

REGULAR 22 Economy Watch 24 Financial Insight 42 Legal Briefing 44 CMO Briefing

INDUSTRY INSIGHT 2 Real estate agents turn to Uber-like tech

34 Increasing competition puts out Singapore hotels on the edge

38 Serviced residences battle it out with disruptive players

18 Notable chief marketing officers aged 40 and under

Published Bi-monthly on the Second week of the Month by Charlton Media Group 101 Cecil St. #17-09 Tong Eng Building 4 SINGAPORE SingaporeBUSINESS 069533 REVIEW | MAY 2017

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News from sbr.com.sg Daily news from Singapore most read

RETAIL

RESIDENTIAL PROPERTY

TELECOM & INTERNET

Sheng Siong loses to NTUC FairPrice in HDB site bidding

Singapore to look into residential stamp duty loopholes

StarHub, M1 to watch out for TPG’s fibre broadband services

Sheng Siong has once again failed to secure a site during the latest Housing and Development Board commercial sites’ provisional bidding. According to RHB, NTUC FairPrice won the bid, with a rental rate of $13 per sq ft for the 5,812 sq ft of space at Bishan. In the previous biddings, Sheng Siong and other larger players were outplayed by smaller players.

National Development Minister Lawrence Wong said the concept of ownership of residential properties should be reviewed such that if a residential property is held by a corporate entity or a special purpose vehicle, and the shares of the company are transferred from seller to buyer, the normal residential stamp duties should apply. Changes will be made to amend loopholes.

According to UOB KayHian, StarHub and M1 intend to share radio access (base stations) and backhaul transmission network in a comprehensive manner across 3G, 4G, and 5G. The brokerage firm noted that StarHub may be anticipating TPG’s next move, which is the launching of fibre broadband services in 2H17, leveraging on its expertise in fixed-line network.

Here’s why these hot new startup ideas won BY VIVEK KUMAR Not to say they’ve won in real life, but they did win the Startup Weekend Singapore hackathon at Google in January. So why did they emerge top winners pitching to a stellar panel of VCs, incubators, and leaders from public and private sectors who’ve been closely involved in the startup scene? As one of the judges at the Startup Weekend Singapore, I thought it would be very difficult to choose the winners from the 21 outstanding presentations.

Crowdfunding: Protecting businesses and funders BY GETTY GOH The recent spate of negative corporate news in Singapore – bond defaults and manpower retrenchment – has led banks to become more cautious about lending. This could mean further tightening of the credit environment which is unfavourable for businesses, especially small and medium-sized enterprises (SMEs). SMEs, who are sensitive to market movements and credit flows, may find themselves trapped in a few difficult situations.

MOST READ COMMENTARY Is technology threatening Singapore’s healthcare system? BYJEFFREY KOK With state-of-the-art infrastructure and excellent medical practice, Singapore has a well-deserved reputation for first-class healthcare. It ranks second in the world providing its citizens with quality healthcare, and is also a major location for medical tourism in Asia. However, with 610,000 people aged above 65 in 2020, Health Minister Gan Kim Yong has emphasised the need for 30,000 more healthcare workers by 2020.

6 SINGAPORE BUSINESS REVIEW | MAY 2017


Agenda

OPPORTUNITIES

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SERVICES

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Seamless Seamless is the key meeting place for this brave new world of commerce. It is a new event built on 20 years of experience – a seamless continuity from Asia’s largest and longest running conference focussed on cards and payments, to a dynamic summit and large-scale exhibition bringing together the converging worlds of ecommerce, retail, and payments.​

OPPORTUNITIES

EASB East Asia Institute of Management (EASB) is a four-year EduTrust certified private education institution. We offer Diploma, Bachelor’s Degree, Master’s Degree, and MBA programmes. Major disciplines include Hospitality and Tourism Management, Business Management, Accounting, Banking & Finance, Medical Bioscience, and many more. For more information, visit www.easb.edu.sg

8 SINGAPORE BUSINESS REVIEW | MAY 2017

OPPORTUNITIES

kaplan singapore Ranked by JobsCentral as the number one Preferred Private Education Institution consecutively in 2012 and 2013, and by AsiaOne People’s Choice Awards in 2009, 2010, 2013, 2014, and 2015, Kaplan Higher Education provides full-time and part-time diplomas, bachelor’s and master’s degrees to individuals looking to pursue careers in various fields. For more information, visit www.kaplan.com.sg

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FIRST

Are REITs still attractive?

T

he past few years have been kind to investors in Singapore’s listed real estate investment trusts, or REITs. With interest rates at record lows, these lovely holding companies of shopping malls and retail and office spaces have returned a good clip to investors. But with interest rates in America rising and Singapore set to follow suit, are Singapore’s REITs still a good investment idea? According to OCBC, the sector is still worth a look but the value is no longer “compelling.” One reason investors like REITs so much is that they offer a far higher yield than Singapore Government bonds. The FTSE ST REIT Index is currently trading at 4.23% higher than Singapore Government’s 10-year bond yield. As an interesting aside, the research firm compared REITs in other markets and found that in Europe the difference was 4.15%, in Japan 3.79%, Hong Kong 3.25%, Australia 2.55%, and the United States just 2.05%. So compared to other markets, Singapore does look to offer a better margin over Government bonds which carry no risk. Nevertheless, rising interest rates will dampen income for the REITs as they will have higher borrowing costs, so investors should be selective. Meanwhile, DBS reckons that with consensus expectations for

Yield spread of various FTSE EPRA/NAREIT REIT Indices over the respective 10Y Government bond yields

Sources: Bloomberg, OIR

Singapore’s GDP growth to be revised upwards to GDP growth of 2.3%, office and industrial REITs, specifically the business parks and hi-tech segments, should do well. With the supply for both sectors easing from next year, the brokerage believes the prospects of a recovery in spot rents next year are increasing, which is supportive of its positive stance on the office and industrial space. On the other hand, the other risk to retail REITs is the imminent launch of e-commerce giant Amazon which could eat into mall retail earnings. In terms of overall S-REIT valuation, the average yield spread is at 4.1%, close to the average yield spread of 4.2% since 2010, says DBS. It notes downside risk to S-REIT share prices are limited near term, taking into consideration the risk of a very hawkish Fed receding.

The sector is still worth a look but the value is no longer “compelling.”

Mobile App Watch

En-trak provides tools for efficient energy management En-trak is an award-winning real-time energy monitoring system designed to help clients optimise energy efficiency, reduce energy costs, and enhance their green efforts. Dr Vincent Chow, En-Trak’s founder, says they take a “hardware+software+consultancy” approach. “Most energy management systems are designed only for engineers, yet performance depends on the decisions and behaviours of many,” he says. “That’s why En-trak is designed for everyone – we make energy management simple.” Its revolutionary Smart Lighting product enables companies and building owners to automate, optimise, and reduce their lighting energy consumption. The En-trak Smart Lighting app in iOS and Android allows users to wirelessly control their office lighting via any web-connected device. 10 SINGAPORE BUSINESS REVIEW | MAY 2017

Smart Lighting app

Vincent Chow, En-Trak’s founder

Journey to fitness: UFIT’s 360° approach

When UFIT founder Darren Blakeley led his first fitness boot camp in Fort Canning for 10 clients in 2008, he was sure that he would not go the traditional run of the mill operation that was all about machines and monthly memberships. As he gathered a growing band of clients, who heard about his classes by word of mouth, Blakeley met Dean Ahmad, Jeff Halley, and James Forrester, who would soon be his partners in his venture. Unlike any other startup in the digital age, what these men offer is something not really disruptive. Instead, they are going to the roots of fitness and nutrition coaching whilst at the same time employing a 360° approach in offering technical skills and experience for its boot campers. Cornerstones of healthy living “From day one the goal was to offer physiotherapy, nutrition, and fitness as these in my mind are the cornerstones of a healthy lifestyle. And we recognised our target market would want proper attention to detail; for example, not having to queue for showers,” says Blakeley. Meanwhile, Ahmad recalls, “Darren and I knew that quality was lacking in Singapore’s fitness industry and we wanted to change that. So I took my chances and went with it. We didn’t spend any money on marketing, the business just grew from word of mouth, and still today that’s how we get most of our business.” After raising capital and attracting shareholders, Blakeley, Ahmad, and Forrester, with Halley as an adviser and investor, incorporated their company and opened the first UFIT gym in Amoy Street in August 2011.


THOUGHT LEADERSHIP Article

Sustainable corporate wellness programmes

Ho Lee Yen, Chief Marketing Officer at AIA Singapore, shares with us how it’s done.

A

midst the furor earlier in the year about the company practice of penalising employees for taking medical leave, many organisations have also come forth to share their practice of rewarding staff for keeping healthy with goodies such as vouchers. This comes as no surprise at a time when employers are increasingly recognising the value of investing in employees’ health to improve productivity levels, boost employee engagement and retention, and keep staff healthcare costs low. In fact, organisations with effective wellness programmes are 50% more likely to report lower turnover rates in comparison to competitor companies, research has found.1 The challenge, however, lies in ensuring that the corporate wellness programme remains sustainable for any business to gain the returns on investments into employees’ health for the long term. A question I am often asked by companies is this: “We put in a significant investment to implement a wellness programme at work and we had some participation at the beginning. But now, the take-up rate has gone down instead of going up. What did we get wrong and how do we fix it to make this a worthy investment?” The answer is simple: Make it relevant, easy, and rewarding for staff to integrate the programme into their everyday life. Here’s how. Customised and targetted approach Just as companies use data to identify target consumer segments which informs your business strategy, data analytics can be extremely valuable to customise a wellness programme for staff because a “one size fits all” approach will not work. With data analytics, you will be able to create a targetted wellness programme by: 1. Identifying key drivers that would motivate employees to participate, whether its monetary rewards or opportunities to get to know and bond with colleagues, for example; 2. Segmenting your workforce based on factors such as health risks they are exposed to and the kind of support the company can provide; 3. Monitoring the level of employee engagement, health, and efficiency provides insights on which components of the programme staff value or those that need to be reconsidered because they are underutilised. This allows you to regularly refine the

programme to ensure its continued relevance and effectiveness for the long term. An annual survey amongst employees to seek inputs on their everyday choices, behaviours, and state of health is a simple way to collect data for analysis. To kickstart these efforts, AIA Singapore is providing this analysis to companies complementary as part of our inaugural Singapore’s Healthiest Workplace by AIA Vitality survey. Each participating organisation will receive a customised report which provides them with a deeper understanding on their organisation’s health so that they can implement effective strategies to improve employees’ well-being. Digital integration Integrating corporate wellness initiatives digitally to encourage employees to cultivate better eating and exercise habits is critical for you to get employees engaged because of how attached Singapore’s population is to their mobile devices. It’s not surprising then that about 4 in 5 (78%) individuals in Singapore check their device upon waking up and approximately 3 in 10 (26%) use their mobile phone more than five hours daily.2 One easy way to do this is by sharing simple tips with employees via their mobile phones throughout the day on how they can make healthy choices at every turn. For example, a reminder at 10am to walk to the pantry for a glass of water, and an alarm at 4pm to step away from the office desk to rest their eyes and do some basic stretching before starting work again. Another way is by making it into a game where they use their phone to track points they are accumulating for completing healthrelated tasks which are easily trackable on the device – such as completing a minimum number of steps daily – and they can redeem rewards digitally for hitting certain targets. This is evident in the popularity and success of our AIA Vitality Weekly Challenge app where AIA Vitality members are taking more than 7,500 steps daily on average to score 250 points weekly, and get rewarded with S$5. Nearly S$100,000* worth of active rewards have been earned by AIA Vitality members who completed the AIA Vitality Weekly and

Ho Lee Yen

Group Challenge a month following its launch in January. Leveraging behavioural science Countless excuses such as lack of time, lack of motivation, and high costs surface when asked why we don’t do more to take control of our health. This can be changed. Behavioural economics studies have proven that external motivators such as financial incentives can drive behavioural change. The Vitality Institute, a global research organisation, conducted a study that showed discounts on healthy foods resulted in significant increases in healthy food purchased at the supermarket, as well as decreases in less healthy food purchases.3 When it comes to wellness programmes, employers can incentivise healthy living practices that are easy to adopt, starting from the workplace. By encouraging and making it easy for staff to make healthier choices, this behaviour, done repeatedly, becomes a habit which eventually translates into a healthier lifestyle amongst staff. Implementing effective wellness programmes to meet health needs of employees and customising based on their current health is critical in ensuring the sustainability and value of investing in employees’ health. 1 Willis Towers Watsons’ 2015/2016 Staying@Work – Asia findings 2 Singapore perceive digital advancement and e-government favourably: EY 3 Vitality Data – South Africa, 2016 *Figure as at February 2017

“Make the programme relevant, easy, and rewarding.” SINGAPORE BUSINESS REVIEW | MAY 2017 11


FIRST

How engaged are Singapore workers?

I

t turns out employees in Singapore are amongst the least engaged, with the citystate’s employee engagement score falling by 4 points to 59%. According to the 2017 Trends in Global Employee Engagement Report from Aon Hewitt, Singapore’s decline is significant when compared to the 3-point increase last year. Perception scores amongst Singapore’s millennials fell by an alarming 7 points in the area of ‘Talent and Staffing’ – which refers to the talent attraction, promotion, and retention practices of an organisation, as well as its ability to allocate appropriate and adequate resources to get the job done. Perception scores also fell by 5 points in the area of Employer Brand. Employees in Singapore join their Malaysian counterparts in being the least engaged amongst major Asian markets. Engagement scores for India are 69%, followed by China (67%), Thailand (65%), Philippines (65%), Indonesia (61%), and Malaysia (59%). Overall engagement scores for employees in Asia Pacific dropped from 65% to 62% a year ago. Aon Hewitt’s analysis found regional variations in engagement are driven by regional and country-specific economic, political, and cultural differences. Aon Hewitt research shows that a 5-point increase in employee engagement

is linked to a 3-point increase in revenue growth in the subsequent year. The inverse happens when engagement levels fall – businesses experience greater turnover, higher absenteeism, and lower customer satisfaction, and ultimately, poor financial performance. Improving employee engagement Employees in the region ranked rewards and recognition programmes as a top opportunity to improve engagement. Stephen Hickey, partner and executive sponsor, employee engagement practice – Asia Pacific, Middle East & Africa, Aon Hewitt, says, “As organisations strive to fuel growth, they must understand how their workforce productivity and pay programmes – both fixed and variable, compare to market. They must educate their people on how they implement ‘pay for performance’, and recognise top contributors using a blend of financial and non-financial rewards such as development opportunities.” He adds that fairness in reward programmes and success in colleague recognition are increasingly critical to achieving a highly engaged and high performing workforce in APAC. “Taken to the extremes we see substantially different levels of employee engagement in Asia when we contrast perceptions of reward

OFFICE WATCH

BDO Singapore’s new space is far from boring

The accountancy firm is livening it up with its café-inspired office at Parkview Square. ID21 collaborated with BDO Singapore to design and build its new 30,000 sq ft home, which boasts an open layout and collaborative atmosphere brought to life by bold and colourful finishes. The office covers two floors and brings together over 400 staff from previously separate offices. Working with a dense seating plan, ID21 took inspiration from the principles of urban planning to organise distinct zones, each with its own spatial identity per department and united by a central social hub. Further, brick walls and chunky wooden tables give a lofty feel to some spaces, whilst another area evokes the outdoors with an image backdrop of a luscious waterfall. Meanwhile caféinspired doodles give the office the look and feel of a casual coffee house. 12 SINGAPORE BUSINESS REVIEW | MAY 2017

Employee engagement: APAC vs global

BDO Singapore’s new home is 30,000 sq ft

Source: 2017 Trends in Global Employee Engagement Report

and recognition with levels of employee engagement. Our 2016 Asia Best Employers research found that a successful reward and recognition programme is essential.” Asia Pacific recorded a 3-point drop this year, following a 5-point improvement seen in last year’s report. In the region, only 62% of employees can be categorised as engaged compared to 65% a year ago. Aon Hewitt notes that the drop in engagement was largely a function of decreases in engagement in four of the region’s largest markets: China (-3 pts), India (-2 pts), Japan (-2 pts), and Indonesia (-1 pt). Of the largest APAC markets, engagement increased in only Australia (+3 pts) and South Korea (+2 pts). Of the 15 dimensions measured in the study, only perceptions of Employee Value Proposition rose, and just with a meager one-point improvement.


startups

Pegaxis: An integrated solution for Singapore’s realtors

A

s the real estate sector seeks significant expansion in the past years, the demandsupply balance is constantly on the brink of putting a strain on real estate transactions. “Sourcing for quotations is highly repetitive and tedious, and could take up to three to four weeks,” shares Ted Poh Chen Wei, chief executive officer and founder of Pegaxis, a Singaporean online property management platform. “There is also a lack of transparency over the procurement process, as much of the process is done manually,” he adds. Pegaxis, which claims to be

Singapore’s first and only B2B property management marketplace, was founded by a relatively young team consisting of Poh (28), Lim Jun Roong (29), and Jacky Chong Foh Wooi (41). Starting out as a listing directory of local contractors called sgFixIt.com, the business then adopted a marketplace model, using the name Pegaxis in 2016. Pegaxis helps property managers obtain quotations for property-related services in a structured and transparent manner, and the entire procurement process is trackable. Pegaxis also provides management tools to boost efficiency. “With our procurement tools, property managers also minimise the amount of paperwork they have to create to document the procurement activities,” notes Poh. The company is now able to get three to seven quotations in under a week. With current funding of S$260,000, Pegaxis is hopeful to further grow in the next few years. Amongst its newest clients is SGX-listed LHN Group. Poh says their plan is to expand the platform offering by implementing new features and expand to more countries.

Bambu eyes making wealth manageable

Singapore’s rapid economic growth in recent years has led to robust demand for various wealth management services, particularly in the financial technology (fintech) sphere. However, most of these services were still not at par with the demands of customers and were not time-efficient, cost-efficient, universally accessible, or simple. Bambu – a B2B digital wealth 14 SINGAPORE BUSINESS REVIEW | MAY 2017

management service firm providing automated, technology-augmented, and algorithm-based portfolio management services – was established just last year to address these issues, “offering financial and non-financial firms the ability to integrate and benefit from the shift in digital wealth.” Services include digital strategy and backend integration. “Bambu provides an innovative, cost-effective, and efficient entry point into the world of investing and wealth management,” says Ned Phillips, Bambu’s founder and chief executive officer. “Based in Singapore and Hong Kong, we market our services Asia-wide,” he adds. With Phillips, Aki Ranin forms Bambu’s main leadership team as chief operating officer. They plan to aggressively build Bambu’s presence in Asia and invest in research and development. As of August 2016, Bambu has raised US$400,000 in funding from a seed round.

Kobe Global Technologies pairs influencers and advertisers

The advertising and marketing industries have relied on the expertise and prowess of so-called influencers to represent products and services. These influencers are responsible for dictating and promoting the values of the advertised items. Although these preferences may be subjective. The advertising trend is now shifting. Businesses are now looking to adopt a more democratic approach, such as the one adopted by Kobe Global Technologies, an advertising marketplace that pairs advertisers with relevant everyday influencers. With this method, Kobe Global leverages on its ability to broadcast messages to millions of users so that businesses can get represented in front of their target audience in a credible manner. “By democratising influencer marketing with aggregation and pricing algorithms, we’ve successfully made influencer marketing accessible to more businesses. Hence, our client base includes companies such as local food outlets and startup mobile apps, which are atypical to the usual companies that used influencers such as fashion and cosmetic brands,” shares Evangeline Leong, chief executive officer and founder of Kobe Global. Higher engagement with users Leong says a lack of digital advertising and marketing know-how has stymied growth amongst small businesses. “Being in the digital marketing industry focussing on small and medium enterprises for almost 10 years, we’ve seen how slow small businesses’ adoption of digital solutions had been due to unfamiliarity of digital marketing solution. Our self-serve, easyto-use platform cracks the slow moving long-tail market,” she explains. “What sets us uniquely apart is also the usage of artificial intelligence technologies for influencer profiling instead of a traditional way of one-sided submission of interests by influencers,” Leong emphasises. Under Kobe Global, everyday influencers replace celebrity bloggers in delivering better credibility and higher engagement with users. Further, influencers’ interest and psychographics are paired to advertisers on top of demographics, resulting in precisely-targetted audiences. Leong launched Kobe Global by joining accelerator programmes and securing a government grant.


Co-published corporate profile

Delivering business value through pricing and commercial excellence via digital technology

Beyond the standard pricing mechanisms, companies would benefit substantially from advanced pricing techniques such as Value Pricing.

real-time analysis of the customer’s next best alternatives with its own next best alternatives enables Acceval to optimise profitability on a deal-by-deal basis; especially for situations where the supplier (seller) faces supply constraints.

Chung Chee Kong, cofounder and managing director at Acceval

P

ricing is a major lever impacting profitability. Over the years, various reputable management journals have highlighted the importance of managing pricing in creating business value.1,2 The business benefit of achieving pricing excellence in B2B industries is significant, typically in the range of 1%-3% of revenue, i.e. US$10-30m annually for a company with US$1b per year sales. Despite the substantial potential benefits, companies that competently manage pricing as a profit driver is still in the minority. There is still general lack of awareness of the power of pricing and prevalence of high organisation inertia towards pricing capability improvement. Suboptimal level of pricing competency, maturity, and tools are amongst other organisation hurdles. Not just about product price setting However, few exceptions exist. One exemplary company which places pricing management as one of its core pillars of commercial excellence is PETRONAS. As part of its transformation initiative, Acceval’s enterprise software tool is used3. Through digital technology enablement, pricing and commercial excellence is made more actionable, practical, and sustainable. Whilst product price setting is crucial,

one area of pricing which is typically underdeveloped is active management of price realisation. This entails not only discount control. It spans the entire gamut of capabilities ranging from establishing a model to recommending customer-specific deal pricing, instituting pricing policies to reflect customer’s willingness to pay, to recover cost to serve, to align with customer pricing behaviour, determining pricing power at point of deal, to generating negotiation guidelines and deal decision analysis supported by a pocket price model. To achieve this, building a “Deal Management” process is vital. Beyond the standard pricing mechanisms – cost plus and market driven – companies would benefit substantially from advanced pricing techniques such as Value Pricing. Much has been published about the power of Value Pricing. The general misconception is that this is only suitable for companies with strong product differentiation. Acceval’s experience has shown that even when service differentiation exists (e.g. supply chain, technical/customer service, etc.), Value Pricing is still relevant in the form of relative value created relative to its “customer’s next best alternative”. At the point of deal, combining

Customer-centric commercial excellence Transforming commercial operations to a customer-centric approach requires a comprehensive framework – more than just pricing capability improvement. Central to this customer-centric approach is (advanced) customer segmentation – clustering customers according to needs, behaviour, and their value contribution to business. Such insights of customers enable unique value propositions to be developed; tailored to key accounts and segmented differentiated treatment provided to customers depending on their needs, value, and behaviour clusters. Through Acceval’s digital technology, such customer-centric and pricing optimisation approach can be executed in a practical way through conventional channels, and for the more mature companies by using e-channel. Such digital enablement creates value for companies and consistently delivers value propositions to their customers by transforming the pricing and commercial excellence processes through seamless collaboration – internally and with the ecosystem. References 1 Managing Pricing, Gaining Profit; Harvard Business Review, September-October; 1992 2. The Power Of Pricing; McKinsey Quarterly 2001, Number 1 3. Acceval transforms Petronas’ pricing and commercial excellence capability, Singapore Business Review, July 2016 Acceval is a software cum consulting company which specialises in margin optimisation through pricing and commercial excellence. The company is run by Chung Chee Kong (ck.chung@acceval-intl.com).

“The business benefit of achieving pricing excellence in B2B industries is significant.” SINGAPORE BUSINESS REVIEW | MAY 2017 15


FIRST NUMBERS

NUMBERS

ONLINE SHOPPING IN SINGAPORE

Singapore office rental rates (Grade A vs Grade B)

Sources: RHB, CBRE

NUMBERS Singapore retail rentals (Orchard Road vs suburban)

Sources: RHB, CBRE

NUMBERS Office supply pipeline (2017-2019)

Sources: RHB, CBRE

NUMBERS Office net supply vs absorption

Source: PayPal-Ipsos Cross-Border Consumer Research 2016

16 SINGAPORE BUSINESS REVIEW | MAY 2017

Sources: RHB, URA


FIRST NUMBERS

NUMBERS

VISA-FREE ACCESS

VISA-FREE ACCESS

Source: Henley & Partners Visa Restrictions Index 2017

Source: Henley & Partners Visa Restrictions Index 2017

NUMBERS

NUMBERS

5 MOST EXPENSIVE BUSINESS TRIP DESTINATIONS - ASIA PACIFIC

WHERE MILLENNIALS PREFER TO BE EMPLOYED

Source: Employment Conditions Abroad 2017, ECA International

Source: Randstad Workmonitor Q1 2017

SINGAPORE BUSINESS REVIEW | MAY 2017 17


FIRST

Notable chief marketing officers aged 40 and under

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ingapore Business Review has put together a list of ten exceptional chief marketing officers (CMOs) based on their social reach, research contribution, trends or quantifiable objectives they have set, as well as influence. Each profile includes their achievements, professional experience, and the one thing we didn’t know about them. Enjoy the list! 1 Lee Jun Wen, 26, CMO, A Better Florist Junwen is the head of product and marketing at A Better Florist. Previously, he was the head of product at Yodaa and was a UI/UX lead at CardFlight. A graduate of the NUS Overseas programme, Junwen has led A Better Florist to 20x year-on-year growth. He has been involved in this new area of marketing where optimisation, UI/UX, and CRM are key components. The young CMO, who once became a guitar instructor at Bowen Secondary and Kranji Secondary, loves to meditate. 2 Benny Chow, 30, CMO and co-founder, Firefly Photography Benny is highly experienced in strategic marketing with a strong focus on brand development, and has fostered partnerships with government bodies and big-name organisations. He believes SEO must encompass the other digital marketing strategies so as to increase online visibility for businesses. Hence, Benny has enterprised SEO strategy/implementation for his work site from scratch to 1st ranking on search engines. Before co-founding Firefly Photography, Benny was an inline-skating sports coach. 3 Roy Ang, 31, marketing and business development manager, Withers KhattarWong Roy heads the marketing team in Withers Worldwide’s Singapore and Australia offices, covering Southeast 18 SINGAPORE BUSINESS REVIEW | MAY 2017

Asia, India, and the Pacific. He oversees the planning, development, and execution of Withers’ marketing and business development initiatives. Roy has more than tripled the media mention of the firm and its partners in the local and international media within two years. He has also pioneered the digital marketing efforts in Singapore by growing the firm’s presence on platforms such as LinkedIn, Twitter, and other online legal services referral platforms to raise the firm’s profile and to grow new business opportunities. Roy has successfully doubled the number of client empanelment within 12 months. This expanded client base includes major banks, public sector agencies, and insurance companies in Singapore. In addition, he was responsible for planning and executing the Client Development Programme to cement the firm’s institutional relationship with clients in Singapore and the region. Prior to joining Withers, Roy was the deputy head of marketing with the Singapore International Arbitration Centre, and has worked in market development roles with the Singapore Economic Development Board, major financial institutions, and one of the largest human resources companies. Roy has travelled to 26 countries but he stopped counting, realising that travel is about depth and not breadth of experiences. 4 Justin Chow, 32, CMO and co-founder, Fundnel Limited Justin is the cofounder and chief marketing officer of private investment platform Fundnel. He is an entrepreneur who has founded three companies. Justin has created two successful retail brands: Jekyll & Hyde ranks as one of the top ten cocktail bars in Singapore, whilst Manicurious is voted as the best manicure bar by Style and Harpers Bazaar Magazine. He built Fundnel from the ground to create a holistic reference brand in private investments for both businesses as well as investors in the space of just one and a half years. Under his efforts, Fundnel is recognised as a specialist equity-based

digital platform that conducts and completes deals across Southeast Asia. Its syndication efforts are also particularly successful with institutional investors owing to extensive closed-loop marketing both online and offline, centralised around a core data engine developed for responsive targetting based on aggregated investor mandates. Fundnel’s success on the deal syndication front has led to a total of US$49m transacted on its platform during its first year. It was named “Fintech Company of the Year 2017” by The Asset. Justin became an amateur bespoke cocktail bartender the day he opened doors for business at Jekyll & Hyde in 2013. His head barman cut his finger, and Justin had to learn how to make tipples on the job. 5 Marcus Loh, 33, vice president, marketing & corporate communication, PSB Academy Marcus Loh is currently director of corporate communication for the Star Education Group, a holding company of Baring Private Equity Asia. He serves concurrently as vice president of marketing and corporate communication at PSB Academy. Marcus developed and spearheaded the academy’s strategic brand narrative, The Future Academy, which resulted in the academy’s pole-position in share-of-voice, digital follower-base and engagement, as well as media exposure in the private school category in 2016. The initiative also contributed to the tripling of qualified leads year-on-year and a corresponding growth in hot and warm leads. PSB Academy was awarded “Best Private Education Institution” by the Business Excellence and Research Group and the “Best Private School for Engineering” by CareerBuilder. It was also lauded for its “Overall Outstanding Corporate Reputation Programme” by the Institute of Public Relations Singapore and was conferred the PRISM Award (Merit). Marcus is proud of his ‘grand-daddy rock band’ which performs music from rock legends. He also plays the drums for the church choir and tries his best to not receive complaints from the congregation.


FIRST 6 Wong Yongjie, 33, CMO and co-founder, Qourier Yongjie is currently the CMO of Qourier, a tech company he co-founded in 2015 to provide logistics solutions using the sharing economy. He was instrumental in taking the brand from the ground up, to one that is synonymous with on-demand delivery. He was director of customer loyalty at Starbucks, where he was instrumental and successful in establishing the brand in China, a market which had a strong tea-drinking culture. Yongjie was effective in growing a crowdsourced team of delivery partners to over 5,000 Singaporeans, and was successful in developing a clientele of over 500 local and international companies. He was also part of the team that developed the disruptive Qourier Air service which aggregated industry volume to provide a cost-effective solution to ship deliveries. Yongjie was responsible for growing a network of partnerships forming the basis of a rewards programme incentivising delivery partners. He is leading a team to expand Qourier in Southeast Asia. Yongjie is an accomplished florist who sells his arrangements exclusively every Valentine’s Day.

and drive growth for brands like Unilever, Kimberly-Clark, Nestle, Kellogg’s, Rolex, Zurich Insurance, and McGraw-Hill Education. Proud to have honed her craft in agencies, she was the chief editor of Culture Vulture. Passionate about inspiring the next generation of leaders, Cat was the mentor at the 2016 Young Account Executive Academy at Spikes Asia. Her love of the industry has seen her contribute as a judge at the Asian Marketing Effectiveness & Festival of Media Asia over the years. She is a classically trained Opera singer.

8 Jordan Lai, 37, business development manager APAC, Z-Power Automation Jordan chose a less “glamourous” sector to begin his career – industrial and engineering sales. Through diverse work exposures and a passion for continuous learning, he subsequently took on more responsibilities and challenging opportunities, all towards the belief that “the only constant is change”. Z-Power Automation (ZPA)’s primary business is towards the manufacturing of low-voltage switchboard and related electrical and automation systems serving the marine & offshore industry. It 7 Cat Williamssubsequently diversified into the energy industry for onshore installations. Jordan Treloar, 35, has contributed strategically towards marketing APAC sustainability and superiority through leader, MarkyCo rebranding, organisational development, In a world of data, market analysis, new product technology, and development, and new market penetration. “shiny new thing Since being established in 2008, ZPA has syndrome,” Cat is acquired the exclusive APAC agency for championing brands hybrid solutions. to become more Jordan admires Olivia Lum, CEO of human. Launched in late 2016, MarkyCo is Hyflux, for her tenacity and innovation. an APAC CMO On-Demand service that has been partnering with startup leaders 9 Danon Gabriel The, in Singapore to grow, nurture, and satisfy 37, CMO, customers. Cat, who is also the CEO, has AsiaLawNetwork led MarkyCo to grow a solid CMO OnGabriel has managed to Demand client base across apps, media, turn a relatively quiet and FMCG. She has also led the business legal tech startup into to become a Hubspot agency partner and a highly recognisable achieved her inbound certification. Originally from Sydney, Cat has over 15 brand. He has also transformed marketing years’ experience in global and regional marketing roles based in London and now strategies online to integrate with offline marketing. With Singapore. She has partnered with teams his extensive experience and in-depth across 30 countries to enter new markets

expertise of digital marketing, the site achieved higher traction and growth. Gabriel took on something that was extremely challenging – the role of making legal easy to understand for the public – by making articles readable without compromising the high standards of the lawyers and AsiaLawNetwork’s brand. He manages all marketing and content strategies of the network for more than 1,200 lawyers in Singapore and abroad. Recently, AsiaLawNetwork presented to CodeX Stanford Law School as it is officially admitted to Stanford’s Legal Tech List. CEO Cherilyn Tan says without Gabriel, AsiaLawNetwork wouldn’t be what it is today. Gabriel is a professional portrait photographer and has been capturing vivid moments for nearly two decades. 10 Andrea Lin, 38, director/regional head, marketing, treasury, and trade solutions, Asia Pacific, Citi Andrea Lin is the CMO for Citi treasury and trade solutions (TTS) in Asia Pacific. Under her leadership, Citi’s Asia Pacific TTS marketing function underwent a marketing transformation journey from 2014 to 2016. The strategic initiative pivotted the scope and KPIs of the function, and significantly increased the value-add of marketing to the business as a key partner and advisor. With digital disruption changing B2B customers’ buying behaviour and the way they consume information, Andrea has championed Citi’s digital marketing agenda to connect the bank’s ideas and insights around the world – via email, mobile, social media, web, video, podcast, and more. In 2016, she led pioneering initiatives across Citi’s franchise that transformed client experience and sales enablement through digitisation. These include Citi’s first virtual conference, first virtual reality webcast, first podcast for international clients, and first playlist for institutional clients on YouTube. She was a recipient of the Citi Pinnacle Award in 2014 for outstanding performance and leading transformation in client experience. She was also profiled in Citi’s Progress Maker Series 2016 as an “enabler of growth and progress”. A lifelong swimmer, Andrea is fearless in water and enjoys all forms of water sports. SINGAPORE BUSINESS REVIEW | MAY 2017 19


INDUSTRY INSIGHT 1: BANKING

Banks will spend 2017 licking profit wounds

Singapore banks to be hit by declining asset quality, weakening profitability

Solvency issues are weighing heavily on the Singapore banking sector but optimists insist the worst is over, especially with banks’ solid capitalisation that is expected to keep them afloat this year.

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hen credit rating agency Fitch Ratings downgraded its sector outlook for Singapore banks to “negative” last December, it warned that softer macroeconomic conditions and a more challenging operating environment would pummel the sector in 2017. “This could place broadening pressure on asset quality and dampen earnings,” says Mark Young, head of Asia-Pacific banks at Fitch Ratings. However, Fitch Ratings maintained “stable” outlooks for Singapore banks, supported by solid credit profiles characterised by steady funding and liquidity positions, strong loss-absorption buffers, and healthy profitability. Singapore banks will be most wary of the troubled oil & gas (O&G) sector in 2017, which will likely continue to exert moderate pressure on asset quality. “Prolonged 20 SINGAPORE BUSINESS REVIEW | MAY 2017

Moody’s expects further negative pressure on asset quality in 2017 to create downward pressure on profitability due to higher credit provisions.

economic weakness could lead to broader asset-quality risks which may also affect small- and medium-sized businesses. However, we believe the downside risks to be manageable,” notes Young. Young estimates that Singapore banks’ combined exposure of S$16.1b (US$11.2b) to the distressed offshore support services sector accounted for 17% of their core equity Tier 1 capital at end-September 2016. “Asset quality continues to deteriorate across banks with weakness still coming from the O&G support services,” he says. Deteriorating solvency metrics – namely asset quality and profitability – led Moody’s Investors Service to downgrade baseline credit assessments (BCA) for the three Singaporean banks – DBS, OCBC, and UOB – last December. “The ongoing credit challenges that these banks face at home and broadly in

Asia – where around 50% of their loans are – have translated into higher problem assets this year, and Moody’s expects further negative pressure on asset quality in 2017 to create downward pressure on profitability due to higher credit provisions,” says Eugene Tarzimanov, vice president, senior credit officer, financial institutions group, Moody’s Investors Service. DBS, for example, saw its problem loan ratio rise to 1.3% at endSeptember 2016 from 0.9% a year ago, mainly due to asset quality issues from its offshore & marine sector exposures, including Swiber Holdings Ltd., a large Singapore-based services company that defaulted on its bond repayment and filed for judicial management in August 2016. Then in November 2016, DBS indicated that its remaining oil services exposures with potential asset quality weakness


INDUSTRY INSIGHT 1: BANKING had increased to 20% of its oil service portfolio, from 13% in the previous quarter. As such, DBS expects more NPLs to surface from its oil services portfolio in the coming quarters, says Tarzimanov. Problem assets in China have also been a key stress point for Singapore banks, so they are focussing on relatively less risky top-tier stateowned enterprises, large corporations, foreign investment enterprises, and short-term trade loans. Tarzimanov says that the BCAs of the banks can face further downward pressure given three scenarios. First, if new nonperforming loan formation remains elevated and points towards a material worsening of asset quality metrics. Second, if return on assets ratios deteriorates significantly due either to lower core profits or increased credit costs. And third, if capital buffers decline continuously over several quarters, indicating a deterioration in loss-absorption buffers. Ng Li Hiang, analyst at Maybank, shares the negative outlook on the Singapore banking sector especially in the face of worsening asset quality and how system loan growth continued into its 11th consecutive month of negative year-on-year (yoy) growth. As of September 2016, banks’ special mention and classified exposures continued to worsen, with system NPL ratio reaching 2.1%, a level not seen since June 2010, according to Ng. Softer profitability Aside from the declining asset quality, Singapore banks will also spend 2017 licking their profit wounds. “We expect banks’ profitability to weaken slightly in 2017, driven by higher credit costs and a subdued domestic lending environment,” says Young. “This is balanced, however, by their diversified revenue, with core noninterest income forming close to 40% of operating income – more than half of which represented recurring fee income over 2012-2015.” Young adds that banks will experience a net interest margin (NIM) uplift from higher short-term rates which tend to track the US Fed funds rate. Amongst Singapore banks, DBS has shown more resilience relative to its peers when it comes to profitability,

but has, nevertheless, been impacted as well by higher credit costs stemming from asset quality deterioration, says Tarzimanov. The bank’s return on tangible assets deteriorated slightly to 0.98% at end-September 2016, from 1.05% a year ago. Moody’s expects OCBC’s profitability to decrease slightly in 2017, due to elevated credit costs and an uncertain outlook for the net interest margin. Solid capitalisation Despite the solvency issues they face, Singapore banks have aces up their sleeves. One is solid capitalisation that will help them keep afloat despite plunges in asset quality and profitability. Long-term prospects also seem to be in favour of Singapore banks. Melissa Kuang, analyst at Goldman Sachs, reckons higher LIBOR should benefit NIM in the longer term though banks may see near-term funding pressure, with a potential Fed rate hike posting further upside to NIMs. Sue Lin Lim, analyst, Singapore research team at DBS, reckons FY1718F earnings will climb on the back of higher NIMs in anticipation of rising interest rates. “With rate hikes almost a certainty in the coming quarters, the Singapore banks are almost surely to deliver higher NIM. We have imputed 8-10bps rise in NIM for FY17F. Our sensitivity analysis suggests that every additional 25bps increase SIBOR/SOR translates approximately to a 6bps increase in NIM (ceteris paribus), and will lift earnings by another 4%,” says Lim. Kuang notes that operating expenses of Singapore banks remain well managed. Aggregate operating cost was up 3% yoy as of September 2016, with DBS performing the best at 2% yoy mainly on productivity gain. “We expect banks to continue to tighten cost control as topline growth is likely to remain weak,” says Kuang. Young, meanwhile, expects capitalisation to remain stable despite modestly higher risk-weight charges affecting the banks from the beginning of January 2017 due to healthy internal capital generation. “Our internal stress tests show that sound capital buffers should

FY17-18F earnings will climb on the back of higher NIM in anticipation of rising interest rates.

enable Singapore banks to weather a significant deterioration in credit quality. We expect Singapore banks to retain their domestic deposit franchise strengths,” Young adds. Singapore dollar LCR stood soundly in excess of 200% for the third quarter of 2016 (3Q16), and their Singapore dollar loan-deposit ratios had improved to 86% by end-September, from 88.7% in June and 87.2% in March. The banks’ all-currency LCR also averaged a comfortable 132% for 3Q16. Lingering concerns Lim says investors should lean towards OCBC, a preferred bet due to its ability to maintain lower than peers’ credit cost trends, for serving as a better wealth management play, and posing possible earnings surprises from its insurance business in a rising interest rate environment. But she warns that loan growth will likely remain sluggish, which will limit net interest income growth. Lim also believes that the bulk of NPL issues has passed, although there are still lingering concerns, especially given increased government intervention in the troubled O&G sector. The Ministry of Trade and Industry announced enhanced support measures for the O&G sector in the form of new incremental loan facilities from SPRING Singapore and IE Singapore. “We believe this has brought some relief to companies which are experiencing tight cash flow, and, hence, extend some respite to banks in terms of NPL incidences,” notes Lim. “A more sustainable earnings and growth trends to watch would be what banks can do over the longer term.”

NPL ratios have continued to rise mainly from O&G services

Source: Company data (compiled by OCBC) Sources: Company data, Goldman Sachs Global Investment Research

SINGAPORE BUSINESS REVIEW | MAY 2017 21


economy watch

Measures include frontloading $700m in public infrastructure projects

Singapore’s disciplined plan for economic resurgence

The fourth quarter of 2016 saw manufacturing bounce back, and signs point to the surge spilling over into the first half of 2017.

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hen the latest Singapore Budget was presented by Finance Minister Heng Swee Keat, it included a $2.4b allocation to implement strategies to transform the economy for the future, and showed the government’s resolve to bear short-term pain to reap long-term gain. The plan is clear: Just survive through the global headwinds and limping domestic demand that analysts believe will persist in 2017, and wait for the country’s economic restructuring investments to slowly lift its sagging sails. Band-aid measures include frontloading $700m in public infrastructure projects, which should help reduce domestic sluggishness, as well as continued support for troubled sectors like marine and offshore. Singapore faces a rough year, especially if US trade protectionism gathers full steam. Edward Lee, head, ASEAN economic research at Standard Chartered, foresees a risk that the US government will impose tariffs on Chinese imports, which can set off a debilitating domino effect on the Singapore economy. “Since his election campaign, 22 SINGAPORE BUSINESS REVIEW | MAY 2017

Over the next four years, $2.4b of the national budget will be spent on the Committee for the Future Economy initiatives ranging from nurturing corporate innovation to retraining employees.

Trump has been vocal about punishing China for what he has called currency manipulation and unfair trade practices,” says Lee. “We believe that in such a circumstance, China could retaliate with similar measures, targetting US exports to China and restricting their access to China’s services sector.” Implications for Singapore If the two major powers enter into a heated trade war, global economic growth should decelerate and dash Singapore’s efforts to recover from its slump. A fall in economic growth in the US and China will translate to a fall in demand for goods and services. This will pull down Singaporean exports to both nations, which combined account for roughly 24% of non-oil domestic exports. Singapore also stands to lose its competitive edge following a more protectionist trade stance from the US. “Should the US impose tariffs across imports from all nations, there would be a direct negative impact on Singapore as our exports to the US becomes more expensive and less competitive,” warns Lee. He also cites

the French elections as well as Brexit developments as potential risks that could lead to global weakness, and hurt Singapore’s small and tradedependent economy. Chia Shuhui, senior Asia analyst at BMI Research, reckons that a potential rise in trade protectionism is one of the most pertinent threats to Singapore’s economy this year. The country also needs to be wary of the Chinese economy’s acute slowdown. “We maintain a slightly negative view on the Singapore economy in the near term due to external and domestic headwinds,” says Chia of his country forecast for 2017. “The slowing Chinese economy will weigh on Singapore’s exports, whilst the domestic restructuring process will result in a fall in near-term productivity as firms adjust.” The local focus Singapore has recognised the need to shift from an economic engine heavily dependent on foreign labour to one powered by globally competitive domestic companies employing skilled local workers. As such, the Singapore government continues to spend more resources fast-tracking its economic restructuring than stimulating domestic activity. Over the next four years, $2.4b of the national budget will be spent on the Committee for the Future Economy initiatives ranging from nurturing corporate innovation to retraining employees. “A considerable proportion of the budget was dedicated to addressing Singapore’s long-term economic growth prospects including ensuring connectivity, encouraging innovation, and the continual development of skills, and measures have been laid out in the budget to achieve these aims,” says Chia. “These measures will help shift the economy towards one that is driven by productivity and knowledge-based gains instead of foreign labour.” Still, there has been an effort to ease the transition. Lee notes that for short-term support of the economy, one of the measures in the Singapore Budget entailed bringing forward $700m of public infrastructure projects. “The front-loading of these


economy watch projects will likely support nearterm growth and is in line with the government’s vision to build for the long term,” he says. “Some other measures in the budget include deferring of the previously proposed foreign worker levy for the subdued marine and process sectors to reduce cost pressures.” Sectors to watch out for Lee reckons the construction as well as the information and communications sectors will likely benefit the most in 2017, the former from the surge of infrastructure projects and the latter from increased government funding support for companies that innovate and digitise. As for the manufacturing sector, Lee believes this year will be a “tale of two halves.” The fourth quarter of 2016 saw manufacturing – especially the electronics sector – bounce back, and signs point to the surge spilling over into the first half of 2017. But he expressed reservations that the recovering demand for electronics will be sustained. “We are wary that the current pick-up in electronics manufacturing

and exports is on the back of oneoff hardware replacement due to operating system upgrades, as the demand within electronics does not seem broad-based,” says Lee. “Integrated chips have led the pickup in production and exports but demand for other component parts remains soft.” Manufacturing – along with other externally-oriented sectors like transport and wholesale trade – will also likely encounter challenges stemming from potential protectionist policies and a subdued global environment. Mohamed Faiz Nagutha, ASEAN economist at Bank of America Merrill Lynch, holds a more sanguine outlook following the 2016 yearend surge, revising their 2017 GDP forecast to 2.1% from 1.4% previously. The new forecasts are still at the lower end of the government’s mediumterm potential estimate of 2%-3%, but they are above the midpoint of the official 2017 forecast of 1%-3%, with the economist citing positive catalysts like brighter near-term prospects for the electronics sector and the slightly stimulatory budget. “Despite improvement, divergence

Overall business optimism score, 2014 - 2017

Source: Singapore Commercial Credit Bureau

Export growth, % y/y 3mma

Sources: CEIC, Standard Chartered Research

will be the key theme,” he says. “The divergent profiles in terms of both industries and expenditure components are expected to persist into 2017.” Edward Lee

Mohamed Faiz Nagutha

Bleak outlook for others Nagutha explains that from an industry perspective, the uplift comes largely from manufacturing, recovering in the last couple of months of 2016 after lagging behind regional peers for much of the year. But the outlook is rather bleak for the marine and offshore engineering and services sectors. Meanwhile, from an expenditure perspective, Nagutha says healthy external demand is at odds with flagging domestic demand. Exports are expected to grow stronger, but private consumption and investment are forecast to remain frail in 2017 given a softening labour market and continuously weak business sentiment, especially amongst services firms. In the fourth quarter of 2016, the unemployment rate was at 3.2%, the highest level since 2010, whilst job creation in the same period came in at its lowest since 2003.

General business outlook for next 6 months

Source: EDB

SCCB optimism index of business indicators, Q1 2016 - Q2 2017

Source: Singapore Commercial Credit Bureau

SINGAPORE BUSINESS REVIEW | MAY 2017 23


FINANCIAL INSIGHT: MERGERS & ACQUISITIONS

Deal #1: In 2016 the Qatar Investment Authority bought Asia Square Tower 1, a world-class commercial development located in Singapore’s Marina Bay business and financial district, for S$3.4b. Photo from real estate consultancy JLL.

Deal #2: French shipping company CMA CGM assumed control of Singapore’s Neptune Orient Lines Ltd last June 2016. The deal, worth S$3.38b, was the largest acquisition in CMA CGM’s history. Photo from CMA CGM.

M&A will be about cautious deal-making

Mergers and acquisitions activities in Singapore staged a late rally last year after a slow moving 2015, but whilst the sector’s outlook for 2017 remains generally positive, experts are telling cautionary tales.

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he last twelve months saw a relative revitalisation of Singapore’s mergers and acquisitions (M&A) activities as firms entered into multiple transactions in the last quarter of 2016 that saw the highest increase in the sector’s activity since 2014. Figures over the past year have also increased on both deal value and volume. With the rest of the Asia Pacific region poised to grow at a steady pace in 2017, deals involving Singaporean companies are expected not only to comprise the bulk of activities but also lead the way in dealing with fluctuations as policy changes loom. Analysts share that apart from big-ticket deals, there’s room for opportunities for relatively smaller but more realistic transactions. Gaining momentum Deal-making activity in Singapore gained momentum in 2016 when M&A transactions hit a record high worth US$93.4b, says Elaine Tan, senior analyst, deals intelligence, Thomson Reuters. She described 2016 as the “best annual period” of the sector in the last two years with the stream of deals that included sizeable increase in acquisitions involving sovereign wealth funds, amongst others. This is on top of the increase in outbound and domestic acquisitions. Overall M&A activity in Singapore in 2016 grew 14% year-on-year (yoy) compared to 2015, reaching an overall value at US$71.3b, according to a Thomson Reuters 24 SINGAPORE BUSINESS REVIEW | MAY 2017

There will be continued interest in M&A deals but valuations may be lower as acquirers need to justify the acquisitions in a slowing worldwide economy.

report. This is on the back of the surge in deals closed in the fourth quarter of 2016 as the value of announced M&A involving Singaporean companies reached US$25b, a 38.8% sequential increase from Q3 2016 and 41.5% yoy increase from Q4 2015. Preliminary findings from the report further stated that the average M&A deal size for disclosed deals in Singapore grew to US$126.2m, compared to the US$105.6m in 2015, as more transactions above US$1b were witnessed by Singaporean companies. “In the past year, Singapore companies and funds were active in outbound Singapore M&A as compared to previous years and this particularly dominated the market last year,” says Sheela Moorthy, partner at Norton Rose Fulbright’s Singapore office. Total cross-border deal activity, meanwhile, amounted to US$34.5b in 2016, an 11.3% decline from the same period in 2015 (US$38.9b), according to the preliminary figures from Thomson Reuters. Singapore’s inbound M&A activity slid 28.3% in deal value compared to 2015, although outbound M&A activity reached US$19.5b in 2016, up 8.8% in value from the preceding year. Domestic M&A activity grew to US$10.7b, up 18.3% in deal value from the comparable period last year. Some of the most notable deals in 2016 that kept Singapore’s M&A scene afloat included activities involving government-owned corporations, sovereign wealth funds, and private corporations. “Singapore’s state investment


FINANCIAL INSIGHT: MERGERS & ACQUISITIONS fund Temasek Holdings (Private) Limited and sovereign wealth fund GIC Private Limited were the biggest M&A dealmakers in Singapore,” says Lisa Theng, managing partner, Colin Ng & Partners LLP. Following these deals, she notes, were some sizeable deals buoying up Singapore’s M&A sector which include Temasek Holdings and DBS Bank Ltd’s purchase of a minority stake (16.9%) in Postal Savings Bank of China for S$10b; and GIC’s acquisition of Australian ports and rail giant Asciano Ltd for S$9.6b. “Notwithstanding so, a large proportion of M&A activity (30%) was attributed to deals in the real estate sector, which is not unusual for landscarce Singapore,” adds Theng. This is echoed by S Sivanesan, senior partner, Dentons Rodyk & Davidson LLP, explaining that these deals have been “generally good when compared to the rest of Asia – volumes and value were high, though most of the highprofile deals involved sovereign or government-linked funds and mainly in the real estate sector.” Sivanesan cites CMA CGM’s acquisition of container shipping and logistics company Neptune Orient Lines Ltd, and Qatar Investment Authority’s acquisition of Asia Square Tower 1, a commercial and office building located along the luxurious Marina View at Marina Bay, as the notable deals of the past year. This is not to mention the sensational deal, in terms of value, of Alibaba’s US$1b acquisition of a controlling stake in Singapore-based online selling platform Lazada as the Chinese online retail giant looks set to pivot and strengthen its presence and penetration in the largely untapped Southeast Asian market. Cautiously optimistic 2017 Analysts are in agreement that the next twelve months will be promising for the M&A landscape in Singapore, although policy changes and fluctuations in the international markets also pose some challenges. “The outlook for the next 12 months is cautiously optimistic with an expected increase in capital markets activities from the lower levels of 2015,” says Moorthy. “The impact of fluctuations in key international markets may well impact anticipated growth in M&A transactions from or in Singapore.” On the back of the wins in the last 12 months, 2017 will also ensure – at least for the time being – Singapore’s status as the “region’s leading dealmaker,” according to Theng. But

Overall M&A activity in Singapore in 2016 grew 14% year-on-year

Sheela Moorthy

Singapore cross-border & domestic M&A annual volume comparison S Sivanesan

Source: Thomson Reuters

Luke Pais

why are M&A transactions looking to be more attractive to firms and corporations currently? Theng reckons that business owners are now starting to recognise that in the current business climate, a trade sale often results in greater financial returns than going public. In 2016, only 16 initial public offerings were issued, compared to the thriving M&A sector. “[This] sector not only provides more flexibility for investors to seek financing sources but also onerous reporting and compliance obligations imposed by the stock exchange are avoided,” she explains. In terms of expected deals in the pipeline, Global Logistics Properties is running at auction to sell itself, according to information from Dealogic. Enterprise value including net debt is US$9.5b (US$6.9b excluding debt) of the projected transaction. Meanwhile Intralinks Deal Flow Predictor forecasts a 6% increase in the total number of M&A deals to be announced globally in the first half of 2017 compared to the same period last year, setting a new record for annual first half global announced deal count. The Asia-Pacific region, the top performing region for early-stage M&A activity with a 44% yoy growth in the fourth quarter of 2016, is expected to contribute heavily to this year’s projected growth on the back of strong performances from India, Southeast Asia, Australia, and Japan. Challenges ahead Despite the cautiously optimistic outlook for the next 12 months, experts are in agreement that there are a host of challenges remaining that can stifle the growth of M&A activity not just in Singapore and in the region, but globally. M&A activity in Singapore has broadly stumbled over the last three to four years for a number of reasons, according to Luke Pais, ASEAN M&A and private equity leader, Ernst & Young, including regional currency volatility, election cycles in various countries, Brexit, the US elections, and the more recently introduced curbs in China. This particular focus on the development in mainland China – including restriction of capital outflow – is SINGAPORE BUSINESS REVIEW | MAY 2017 25


FINANCIAL INSIGHT: MERGERS & ACQUISITIONS Any Singaporean involvement announced M&A top 5 target sector

Opportunities Given the challenges hounding M&As, experts are suggesting that there are also opportunities to be discovered. “This rejigging of status quo also creates the catalyst for new activity. For example, we see privatisations accelerating as the dichotomy between short-term and long-term valuations becomes more apparent or restructuring needs to occur,” explains Ernst & Young’s Pais. “Each sector demonstrates a set of catalysts that will drive activity, and some of these drivers will result in the need for M&A. We are also seeing the emergence of partnerships particularly as companies look to access the opportunities created by technology. Rather than building capability in-house, companies may prefer to partner with tech companies that bring specific skillsets and solutions to the table that can be rapidly deployed for value.” Meanwhile, there is also an emerging trend for smaller companies which look at smaller M&A deals and transactions as a form of business development and operations expansion. “There will be continued interest in M&A deals but valuations may be lower as acquirers need to justify the acquisitions in a slowing worldwide economy,” says Sivanesan of Dentons Rodyk & Davidson. 26 SINGAPORE BUSINESS REVIEW | MAY 2017

M&A to pick up pace in 2017 Hong Kong’s centrality and position as a financial and corporate hub for Asia and the Pacific played a huge role in the consistent sustainable showing of the territory’s M&A activities in 2016. Primary reason for this remains the rising transactions of mainland Chinese companies increasing their stakes and deals in putting their interest in the Special Administrative Region. With the rest of the region maintaining a cautiously positive outlook towards growth in deals, Hong Kong is expected to remain as one of APAC’s bastion for transactions. This is despite several factors including the looming increases in policy rates internationally, policy reforms in major markets like mainland China, and the rise in protectionism that’s currently creeping in international financial and trade markets. 2016 was good for Hong Kong’s M&A, but experts are saying 2017 may well be better if the right precautions are taken as various uncertainties abound.

Source: Thomson Reuters

echoed by Jolie Giouw, counsel, Bird & Bird ATMD. “The Chinese outbound story remains with deal flow generated by Chinese buyers in Singapore. Another trend is the rise in warranties insurance deals on both the buy and sell sides,” she says. “In the forthcoming months, it is anticipated that stricter regulatory requirements and political uncertainty brewing in London and New York will result in slightly passive and restricted market as investors become more cautious,” notes Theng. Norton Rose Fulbright’s Moorthy adds that whilst there is a potential for growth from a value and volume perspective for M&A in or emanating from Singapore, “a key challenge would be the impact and resilience against the almost inevitable impact of fluctuations and policy changes in international markets.” Some of the sectors that are expected to take an upswing in M&A activity include the technology and healthcare industry as Singapore brands and sets itself as a technology and innovation hub for the region. Shipping, banking, real estate, and e-commerce are also sectors or industries that could benefit from the increased transactions apart from the usual ones including energy and power.

hong kong view

Elaine Tan

Jolie Giouw

Lisa Theng

Positive momentum The last twelve months was a relatively positive year for M&A activities in Hong Kong despite a decline in actual growth rate compared to figures in 2015. According to Elaine Tan, senior analyst, deals intelligence. Asia-Pacific, Thomson Reuters, overall announced M&A activity involving Hong Kong-based companies totalled US$152.4b in 2016, down 44.2% after coming from a record high in 2015 at US$272.9b. But the 2016 figures, according to Tan, remains a positive and elevated one when compared to historical M&A activity in Hong Kong. In terms of average M&A deal size for disclosed deals, Tan shares that numbers also declined yearon-year to US$99.7m compared to the US$218.8m recorded in 2015 as less transactions above US$1b were witnessed involving Hong Kong-listed companies over the last 12 months. In absolute terms, the Special Administrative Region only saw 24 deals above the billion-dollar mark with only two breaching upwards the US$5b threshold compared to 2015’s stellar figures with 33 deals announced above the billion-dollar mark, three of which were “jumbo deals” above US$10b, according to Tan. She adds that the M&A deal flurry in 2015 continued its positive momentum last year.

China outbound M&A full year comparison

Source: Dealogic


We’ve helped over 10 0 leading global food and beverage brands build market share. In the food distribution business, Auric is a leading player in Singapore and Malaysia. With our extensive warehousing and distribution penetration, Auric has a direct network of over 8,500 customers and over 100 principals/suppliers. More than just a goods distributor, Auric is involved in a diverse range of businesses, which include food manufacturing, marketing and retailing, as well as food court management. Auric has its own arsenal of iconic consumer brands. This includes SCS, Singapore and Malaysia’s No. 1 selling butter brand; Sunshine, the first commercially baked bread in the region, with a history spanning over 85 years; Buttercup, Singapore and Malaysia’s No. 1 selling blended spread; Food Junction; one of the earliest branded food courts in Singapore; and Delifrance, known in Southeast Asia to be the first to introduce cafe-style dining.

auricgroup.com


INDUSTRY INSIGHT 2: PROPERTY

As the number of estate agencies and agents in Singapore shrinks, many are turning to technology to help beat the property downturn blues.

properties and can reduce the average days-on-market (DOM) of flats. The average DOM for an HDB home is 104 days, whilst for a private resale flat is 185 days as of January 2017. “Agents that make use of technology to create quality listings comprising of a V360 Virtual Tour and an X-Listing with certified valuation cuts DOM by half. A potential buyer can now fall in love with the property on the Internet before actually visiting the home, and negotiate based on a trusted selling price that is both computer-backed and valuer-backed, hence reducing the DOM,” adds Lee. Agents can also utilise technology processes such as financing, which can be made convenient through mobile platforms that deliver better interest rates, mortgage packages, and faster processing. In terms of negotiating, there are analytic tools that provide instantaneous micro and macro information and offer analysis calculators. For facilitating insurance, automated underwriting and policy delivery are now available. When it comes to sealing a deal, automated conveyancing and document collection can now also be used.

t’s not a surprise that the number of real estate agents and agencies continues to decline in Singapore after multiple rounds of cooling measures. The number of property agents shrank 8.9%, from 31,169 agents in 2011 to 28,397 as of January 2017, according to numbers from the Council for Estate Agencies. The number of real estate agencies, meanwhile, declined 13.5% from its peak of 1,487 in 2012 to 1,286 this year. Last year saw 1,189 new agents qualified whilst 3,200 left the industry. Savills, which ranked as the seventh largest agency in Singapore, saw its number of real estate agents go down from 794 in the past year to 739. The firm has noted the marginal agents are leaving the profession given the tough market. “These are the guys who fell out of the way,” says Savills Valuation and Professional Services (Singapore) Pte Ltd senior director Alan Cheong. “As a result, although the sales have gone up, it has been more concentrated on the fewer

Quantity and quality Of the ten largest estate agencies in Singapore, four saw the number of their salespersons dwindle in the past year. Bucking the trend was PropNex Realty, whose number of salespersons has been going up for the past three years. PropNex Realty CEO Ismail Gafoor says this year marks the third year of agent growth with the firm employing 5,510 salespersons as of January 2017. “Unlike other agencies that might be experiencing downward trends, PropNex has performed well with marginal upward growth year after year since 2015. This is attributed to a strong retention and recruitment programme conducted within the agency, together with the numerous initiatives and trainings laid out for its salespersons,” shares Gafoor. Singapore’s second largest agency saw transactions up 12.5% to 45,000, generating $25m in gross commission in the previous year. PropNex’s strategy is segregating

Survival of the fittest now means survival of the most tech-savvy

Real estate agents turn to Uber-like tech to stay afloat

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28 SINGAPORE BUSINESS REVIEW | MAY 2017

Ismail Gafoor

Alan Cheong

agents left in the market who are more determined and have what it takes to cut it as an agent.” Like all firms, Savills focusses on training, but unlike in previous years, Cheong notes that it would take more than just training for agents to be successful book deals. “You can’t train someone to have the motivation to pursue deals day after day, week after week. Not all people can be, regardless of education.” Technology tools For many firms, the use of technology tools has been gaining traction. There are now more tools available to agents than just a simple listing on an online classifieds site. Jeremy Lee, co-founder of StreetSine Technology Group, says using technology agents can price properties through computer valuation benchmarking and computer-aided full inspections and valuations. Virtual reality showcases are another way agents can better market


INDUSTRY INSIGHT 2: PROPERTY its salespersons into different zones of Singapore and provide them with training on the masterplans, demands, and real estate outlook for each region. Gafoor says agents are able to add greater value to clients. He also stresses the importance of special bootcamps and conventions, as these further strengthen and elicit commitment from salespersons. Knight Frank Property Network managing director Tan Tee Khoon says agent care is of paramount importance and a top priority in the industry. “The agents are like our clients – we have in place a structure of supervisory responsibility and accountability so that team leaders at every level can be accessible to their agents. They have allotted time to attend to their immediate downlines and regularly meet them for learning and development,” he says. Like PropNex, Knight Frank conducts discussions with the agents to keep them in the loop, and new entrants are given the chance to choose whether they want to take the sales or management track. Knight Frank has seen an increase in agents of almost 30% to 768 agents as of February 2017, recovering from a 21% decline in 2016. Outside the agencies, there are networks and governing bodies that Number of registered salespersons

Source: Council for Estate Agencies

Number of licensed property agencies

Source: Council for Estate Agencies

are constantly monitoring the status of estate agents and salespersons in the industry. For instance, the Singapore Estate Agents Association (SEAA), which was formed in 2014 by 24 members comprising key executive officers of estate agents, serves as a network for agencies and salespersons. SEAA CEO Wong Cheong Hong says as a body, the network focusses on raising the bar of professionalism for the salespersons. “SEAA works with member firms to train and develop agents to better understand the changing profile of the consumers in order to be more adept in providing value-added service to consumers, and is rolling out more new CPD (Continuing Professional Development) training courses and updating the existing one to equip the agents with updated, relevant knowledge and skills,” he says. ‘Upgrading’ agents On the other hand, CEA oversees the licensing and registration of estate agents and salespersons. Under the law, it is empowered to conduct investigation and disciplinary proceedings in relation to offences and unsatisfactory conduct or misconduct in relation to estate agency work. CEA director for policy & licensing Heng Whoo Kiat cites the CPD scheme, which is one of the key components of the regulatory framework to achieve higher professional standards for the real estate agency industry. “The CPD scheme ensures that property agents possess the necessary professional knowledge in estate agency work and continuously upgrade themselves by keeping abreast of the latest changes in Government policies and procedures for property transactions.” There are also efforts by real estate agencies to monitor the performance of their agents. Last year, OrangeTee launched a platform called Property Agent Bank where customers can write reviews and rate their agents. Reviews can be found on the agents’ profile pages. To prevent fake reviews, customers are required to include information such as the transaction ID found on their invoices and

Tan Tee Khoon

Wong Cheong Hong

address. Minister of State for National Development Koh Poh Koon says the system motivates agents to have a ‘customer-first’ attitude, allowing them to differentiate themselves in their level of professionalism. “These are just some of the ways a property agency is leveraging on technology in response to changing times and potentially disruptive technologies. I hope more industry players will continually review their business approach and invest in ways to raise professionalism, productivity, and client-centricity,” he says. By Kiersnerr Gerwin Tacadena

New tech for agents

T

his is how an agent can value-add to their clients using technology. The technology makes it easy for the home hunter to search the right home by sharing shortlisted properties with the agent. On the other hand, the agent fills up the home inspection checklist and helps to apply for a pre-approval loan directly with the bank without leaving the app. At all times, the buyer is kept updated via the app until he completes the purchase of the home. SINGAPORE BUSINESS REVIEW | MAY 2017 29


COVER STORY

Jehangir Sabavala’s The City-II, Courtesy: Sotheby’s

Amidst declining global art sales, market players look to Asia for renewed growth Sotheby’s latest Impressionist, Modern & Surrealist Art evening sale raised US$240.8m, a 78.5% increase from 2016 and said to be “a statement on the momentum of the global art market in 2017.”

A

After another year of sharp decline in global art sales, early auction results for 2017 have offered comfort to art professionals. On March 1, Sotheby’s Impressionist, Modern & Surrealist Art evening sale raised a record US$240.8m, a 78.5% increase from last year – thanks largely to a rare masterpiece by Gustav Klimt that achieved US$59.3m, demonstrating there was still pent up market demand for works of extraordinary calibre. This prompted the auction house to declare the result as “a statement on the momentum of the global art market in 2017.” Christie’s evening sale, a day before, also had high energy with notable biddings from Asia. Combined, the auctions achieved high sell through rates of 92% by lot and 96% by value, setting a world auction record for a work by René Magritte. Yet, there are still some clouds hanging over a market which is often seen as a bellwether of high net worth individuals’ views on the world’s economy. As stock and foreign exchange markets continue their roller coaster ride amidst the uncertainties related to the new US administration policies, many art players are also waiting to see how art sales could be impacted by China’s latest measures to stem capital outflow, including a vetting of overseas transfers above US$5m. Edie Hu, vice president, art advisory specialist at

30 SINGAPORE BUSINESS REVIEW | MAY 2017

Last year, 31% of what Christie’s sold worldwide went to Asian buyers, compared with 29% in 2015.

Citi Private Bank, notes that the ongoing tightening of regulation on overseas transfers could have an impact on the market, though she believes it is more likely to affect the lower end rather than the higher end of the market. “There are many high net worth clients who have a lot of investment outside of China due to business dealings involving overseas operations and partners, and they will continue to buy art and real estate. This is more likely to affect the affluent clients,” she says. A break in the clouds? “I think the auction houses in Hong Kong are bracing themselves for the fact that it’s going to get harder for Chinese collectors to get their money out of China. More importantly, it is also harder for them to get consignments because clients are concerned about the current uncertainties and don’t want to put their best works on the market. I think everybody is in a cautious wait-and-see attitude, but there is still some optimism. Art tends to be more about passion investing, and people can sit on their hands for only so long, and then at some point the rational side will lose to the emotional side. They will buy,” adds Hu. After a difficult 2015, when global art sales were estimated to have contracted 7% – the first annual fall


ASIAN ART REPORT since 2011 – the market’s contraction accelerated in 2016. Christie’s total sales dropped 16% to US$5.4b whilst Sotheby’s sales contracted 27% to US$4.9b. Artprice, working with Chinese partner Artron, recently estimated that global art auction sales were down 22% to US$12.5b in 2016, reflecting the sharp fall in the number of works put on the market worth more than US$10m. Amidst the gloom, China re-emerged as the market’s leading art power in 2016, having briefly ceded that place in 2015 to the United States. China (including Hong Kong) recorded US$4.8b in auction sales in 2016, representing 38% of total world sales, Artprice reported, with traditional calligraphy and painting comprising the vast majority of sales. Meanwhile, Asian buyers continued to flex their muscles internationally. Of the top 10 works sold by Sotheby’s in 2016, half were purchased by buyers from Asia. On the business side, Sotheby’s largest investor is now a Chinese: Chen Dongsheng, the founder and CEO of Taikang Life Insurance and the founder and president of China Guardian, the world’s fourth biggest auction house, announced in July that he had taken a 13.5% stake. “So far we haven’t seen much restraint from our Chinese buyers. Last year, 31% of what Christie’s sold worldwide went to Asian buyers, compared with 29% in 2015. And within that 31%, 80% were Chinese buyers, so at this stage we can’t say we’ve seen any softening in the Asian market,” says Francois Curiel, the Hong Kongbased Chairman of Asia-Pacific at Christie’s, adding cautiously “that said all these (capital control) measures were only announced at the end of last year and it’s still a wait-and-see for their full impact.”

Gustav Klimt’s Bauerngarten sold for US$59.3m

There are many high net worth clients who have a lot of investment outside of China due to business dealings involving overseas operations and partners, and they will continue to buy art and real estate.

“The Asian buyer is still here and it’s evident from the sales that we see coming in,” adds Talenia Phua Gajardo, founder and CEO of The Artling, an online art platform established in 2013 in Singapore that focusses primarily on Southeast Asian art. Hu says that amidst the economic ups and downs, Citi Private Bank is receiving more enquiries about art financing as a way to unlock liquidity from an otherwise illiquid asset. “For qualified clients in Asia who have purchased art and kept them outside of China, this is a way to fund the purchase of more art, consider other investments or pay off higher interest loans. It’s one way of getting the art to work for the client without having to sell. I do expect that there will be more people looking to do more of these deals as it gets harder to move money around,” explains Hu. The dominance of Hong Kong Recognising the importance of Asian clients, Sotheby’s and Christie’s decided to delay their traditional early February London sales to later that month to avoid conflicting with the Chinese New Year. Meanwhile, competition has been heating up in Hong Kong in the last couple of years, with new entrants in the market (Artcurial, Phillips) and a wider offering (comics, western art) that again attests to the financial muscle of Asian collectors, as well as their evolving tastes. In 2016, Artcurial’s second annual sale focussed on comic strips and street art, with the former doing particularly well – two new world records were set and the auction house stated 80% of the lots sold went to buyers in the region. Phillips also launched its inaugural 20th-century and contemporary art and design sale in Asia, and raised HK$151.97m (US$19.6m), nearly 50% more than the pre-sale estimate, thanks in large part to a 1996 monumental artwork by American Pop artist Roy Lichtenstein, which sold for HK$35.48m (US$4.57m), exceeding its high estimate. Later this year in Hong Kong, Phillips will auction 200 photographs taken by Andy Warhol during his trip to the city and Mainland China in 1982. Estimates start at HK$50,000 (US$6,439). Undeterred by the increasing competition, Curiel says, “I think the more auction houses there are in Hong Kong, the more the art market will grow and the pie will be larger. So personally, I’m delighted. Until now you had New York and London, with Hong Kong a clear number 3, but I think Hong Kong is increasingly closing the gap, in part due to the increasing presence of other auction houses.” The rise of Hong Kong as a major international art platform is also recognised in the primary market. David Zwirner, which already has galleries in New York and London and represents over 50 prominent artists and estates, including Jeff Koons, Yayoi Kusama, and Sigmar Polke, has committed to two floors in the yet to open H Queen building, believing that “Hong Kong is absolutely destined to be a major art hub in the region.” Situated in Central and due to open in the middle of this year, the building is set to transform the way highend art galleries operate, with an external gondola and SINGAPORE BUSINESS REVIEW | MAY 2017 31


COVERART ASIAN STORY REPORT curtain wall facade that allow large-scale artworks to be delivered directly to each gallery floor. Other companies that have committed to take space here include Pace Gallery, Pearl Lam Galleries, Tang Contemporary Art, Whitestone Gallery, as well as Seoul Auctions, which has operated in Hong Kong since 2008, but will now have a much more visible presence. Online potential The online market for art sales remains niche, but according to a 2016 report by insurer Hiscox Ltd, it has continued to grow strongly, “indicating that the lower end of the art market could be more resilient to a slowdown than works selling in the mid- to high-end price range.” According to Hiscox, online art market sales reached an estimated US$3.27b in 2015 and could be worth US$9.58b by 2020. Curiel noted that pure online sales at Christie’s only totalled US$67.1m last year, and though this is a small proportion of the auction house’s total US$5.4b revenue, it increased by 84% year on year. But he adds that the online platform was the point of entry for 33% of Christie’s first-time buyers, who typically migrate to traditional auctions over time. The average selling price on the platform last year was US$6,047 with the top selling lot being Irregular Curves by Sol LeWitt, which sold for US$269,000. The Singapore-based online art marketplace The Artling currently represents 100 galleries, with prices ranging from US$100 to half a million, and Gajardo says revenues have doubled year-on-year since the platform started in early 2014, but acknowledges it is “not yet profitable.” This has not been a barrier to expansion though, and in January the e-commerce platform

Christie’s does not see any softening in the Asian market

32 SINGAPORE BUSINESS REVIEW | MAY 2017

The online market for art sales remains niche, but according to a 2016 report by insurer Hiscox Ltd, it has continued to grow strongly.

secured US$1.7m in Series A funding from Edipresse Media, a European luxury lifestyle media company, using some of this investment to acquire another online platform based in Hong Kong, ArtShare.com, which helped it expand its database and offering. “We set up with a view of helping bring Asian art to people outside of Asia, but I also realised that we needed to have a big presence in Chinese art to make it really work. Acquiring Artshare really helped us save time in terms of customer acquisition,” she says. By Sonia Kolesnikov-Jessop

Zeng Fanzhi’s Mask No. 6, Courtesy: Sotheby’s


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RANKING: HOTELS up and provide creative solutions as customers continue to change and reevaluate their expectations. “Singapore faces increased competition from other tourism markets through a variety of factors which include easier access to other countries through the relaxation of visa restrictions, like multiple entry visas for Chinese visitors into Japan; devaluation of the other regional currencies, potentially making it cheaper to visit other countries compared to Singapore, e.g. a weaker Korean won and Japanese yen; and Singapore already having a high market share, e.g. Singapore accounts for 38%-39% of total Indonesian outbound travel,” explains Tan.

Marina Bay Sands remains at the top spot with over 2,500 rooms

Increasing competition puts Singapore hotels on edge

Hoteliers are worried about the lacklustre economic growth, not to mention the expected modest growth of 4% for tourist arrivals in 2017.

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s one of the world’s top meeting spots and financial hubs, it seems that Singapore is never in danger of extreme declines in visitor arrivals. Its booming hospitality industry is supported by 33,000 individuals working to provide the world’s top decision makers, foremost companies, and the city-state’s regular visitors the best hospitality services and deals. However, with the rapid growth of other cities around the world and in the region, Singapore’s hotel industry needs to keep evolving and innovating if it longs to keep its coveted spot in the hospitality business, particularly in the meetings, incentives, conferencing, and exhibitions (MICE) sector. A report by DBS Bank reveals that 2017 is going to be a challenging year for the tourism sector, with a modest growth of 4% for tourist arrivals. 34 SINGAPORE BUSINESS REVIEW | MAY 2017

Singapore faces increased competition from other tourism markets through a variety of factors which include easier access to other countries through the relaxation of visa restrictions.

“With the carryover of new hotels which were originally scheduled to open in 2016 into 2017, our earlier expectation of a more balanced market in 2017 is likely to be delayed into 2018 where the supply of new hotels drops off. The decline in new room supply in 2018 is due to the lack of new land released by the Singapore government for hotel developments over the past two years,” says Derek Tan, vice president at DBS Bank, Group Equity Research. Stiff competition exists in the hotel industry as supply increases and despite economic uncertainties in the region and beyond. According to the UNWTO Tourism Highlights of 2016, the global hotel industry remains to grow, thereby providing opportunities for local companies to amass revenue through internationalisation. With the growth of the hospitality industry, hoteliers are then expected to keep

Rethinking business Frank Sorgiovanni, head of research Asia Pacific, JLL Hotels & Hospitality Group, says that Singapore’s hotel industry is very similar to Hong Kong in that tightly held hotel stock amongst generational owners sees little investment activity. He notes that investors have begun shifting their focus to other markets like Australia. “Two of the most preferred investment markets for 2017 are Japan and Australia, followed by Thailand, Vietnam, and the Maldives. In the Indian Ocean, investor interest is expected to go beyond the highly soughtafter Maldives with a renewed focus shifting to the Seychelles and Mauritius resort markets.” The Hotel Industry for Sustainable Growth, a report by the Singapore Tourism Board (STB), mentions that the city-state’s hoteliers must be abreast of the current trends and the pressing issues in the hospitality industry in order to encourage investment. According to STB, hotels must leverage technology and analytics, reevaluate business processes and models, enhance customer experience and engagement, and create differentiated value propositions, amongst others. Across the city-state’s hotel industry, STB found impressive examples of innovation from


RANKING: hotels Hotel supply increased 4.3% yoy in 2016; expected to increase 5.9% in 2017

Sources: STB, Horwath HTL as quoted in CDLHT 4Q16 presentation, OIR

different hotels. With the rise of digital and the growing Internet of Things, hotels can look to technology to address customer demands and industry-wide concerns. Park Avenue Rochester achieved man-hour savings of up to 3.5 fulltime employees by deploying two robots to transport housekeeping linen, refuse, and bulky items for the hotel’s back of house functions. The robots helped room attendants focus on cleaning and eliminated the roles of performing tedious tasks. Amidst the digital revolution and the slow growth of hospitality workforce, automation is inevitable. Data analytics has also become one of the biggest buzzwords across all industries in the global economy. From power companies to banks and now the hospitality industry, data analytics allows executives to make decisions based on highly-detailed customer profiling. In Singapore, The Fullerton Hotels were able to automate tedious reports generation and carry out in-depth analyses across different departments. Insights generated can allow hotels to cater to the most specific tastes of customers by identifying specific services which may be developed and enhanced. Singapore’s luxury hotels will also see growth in 2017, with most of the new rooms under the Upscale and Luxury segments, says Tan. Compared to 2016, there may be more pricing discipline due to constraints by these upper-tier brands to cut room rates without affecting their brand status. As such, luxury hotels will continue to roll out new services and collaborate with well-

known brands around the globe to attract more foreign visitors. “We are delighted to be the first luxury hotel in Asia Pacific to partner with La Mer to offer the best in skincare and indulgent facial treatments. The coveted La Mer Miracle Broth™ facial will be available exclusively at The Ritz-Carlton Spa,” says Peter Mainguy, general manager of The Ritz-Carlton, Millenia Singapore. Meanwhile, Marina Bay Sands’ The Shoppes continued to expand with the addition of Kenzo Kids, Stella McCartney, and Paul Smith Junior. Ian Wilson, senior vice president, Hotel Operations, Marina Bay Sands, says the ArtScience Museum also saw a significant 83% increase in overall museum visitorship following the launch of its new permanent exhibition, Future World: Where Art Meets Science. Going forward Looking ahead to the first half of 2017, OCBC Investment Research believes the room supply injection will not be adequately matched by a growth in demand. It says 2,956 rooms are expected to be added in 1H17 and an additional 811 rooms in 2H17, against the room stock of 63,518 at the end of 2016. “FY16 visitor days were up 2.2% year-on-year on the back of 7.7% increase in tourist arrivals. Going forward, we expect leisure demand to show mild to no growth, with STB forecasting a 0% to 2% increase in tourist arrivals and a 1% to 4% increase in tourism receipts. On the other hand, corporate demand is expected to remain soft,” notes

OCBC in a report. Meanwhile, DBS says the demand and supply situation in Singapore is likely to become more balanced only in 2018, when supply pressures ease and new room inventory is projected to only increase by 2%. Data from Singapore’s Urban Redevelopment Authority shows that in the fourth quarter of 2016, 6,496 rooms were in the pipeline, 5,841 rooms under construction, and 655 were planned development.

Who made it to SBR’s list? Marina Bay Sands remains at the top spot with a total number of rooms at 2,561. The Sands Expo hosted a total of 3,500 events, including numerous newto-Singapore and returning shows. Hotel Boss and Swissôtel The Stamford both retain their top 2 and 3 spots with 1,500 and 1,261 rooms, respectively. Mandarin Orchard Singapore and Carlton Hotel Singapore placed fourth and fifth, respectively. “The hotel industry remains a key pillar of Singapore’s economic growth. In order to stay competitive, Marina Bay Sands continues to make progress as we pursue a manpowerlean business model by employing new technologies, analytics, and robotics. We strive to do our part to increase productivity within the hospitality industry,” says Wilson. Marina Bay Sands saw a 3.2% increase in its hotel occupancy, clocking in 97.3% hotel occupancy in 2016 across 2,561 hotel rooms and suites. “Our priority for 2017 is to continue sharpening our integrated resort business model by On the other enhancing our guests’ touch points hand, corporate across the property, building loyalty demand is to encourage repeat visitation, and expected to innovating to be even more efficient remain soft. operationally,” notes Wilson. AOR, ARR, and RevPAR from 2006 to 2016

Sources: STB, OIR representation

SINGAPORE BUSINESS REVIEW | MAY 2017 35


RANKING: HOTELS 2017

Hotel

2016

1

Marina Bay Sands

2

Hotel Boss

3 4 5 6

Number of Rooms

General Manager/ Head of Hotel Operations

2017

2016

1

2,561

2,561

Ian Wilson

2

1,500

1,500

Charles Goh

Swissôtel The Stamford

3

1,261

1,261

Tom Meyer

Mandarin Orchard Singapore

4

1,077

1,077

Danny Wong

Carlton Hotel Singapore

5

940

940

Mark Bulmer

V Hotel Lavender

6

888

888

Edmund Yip

7

Shangri-La Hotel, SINGAPORE

9

792

747

Reto Klauser

8

The Pan Pacific Hotel Singapore

7

790

790

Gino Tan

9

Fairmont Singapore

8

769

769

Tom Meyer

10

Grand Hyatt Singapore

10

677

677

Willi B. Martin

11

Orchard Hotel

11

656

656

Richard Ong

12

JW Marriott Hotel Singapore South Beach

12

634

654

Derek Flint

13

Furama Riverfront, Singapore

13

615

615

Chan Bee Hong

14

The Ritz-Carlton, Millenia Singapore

14

608

608

Peter Mainguy

15

Peninsula.Excelsior Hotel

15

600

600

William Wong

16

Grand Mercure Singapore Roxy

16

576

576

Klaus Gottschalk

17

Marina Mandarin Singapore

17

575

575

Melvin Lim

18

Grand Copthorne Waterfront

18

574

574

Lee Richards

19

Hotel Jen Tanglin Singapore

19

565

565

VATHSALA SUBRAMANIAM

20

Genting Hotel Jurong

20

557

557

21

ibis Singapore on Bencoolen

21

538

538

Ben Patten

22

PARKROYAL on Kitchener Road

22

532

532

Benny Chung

23

Mandarin Oriental Singapore*

23

527

527

Christian Hassing

24

Holiday Inn Singapore Atrium

24

512

512

Tuncay Bockin

25

Royal Plaza on Scotts

25

511

511

Patrick Fiat

26

Conrad Centennial Singapore

26

507

507

HEINRICH GRAFE

27

Hotel Jen Orchardgateway Singapore

27

499

499

Hervé Duboscq

28

Hotel Chancellor @ Orchard*

28

488

488

Danny Koh

29

Riverview Hotel*

29

476

476

Shirley Wong

29

Swissotel Merchant Court, Singapore

29

476

476

Rainer Tenius

31

Hotel Michael

31

461

461

32

Shangri-La’s Rasa Sentosa Resort & Spa, Singapore

32

454

454

Ben Bousnina

33

Festive Hotel

33

447

447

34

Furama City Centre, Singapore

34

445

445

Jovian Hun

35

Holiday Inn Express Clarke Quay

35

442

442

Sandra Kloprogge

35

Park Hotel Alexandra

35

442

442

Angeline Tan

37

Regent Singapore, A Four Seasons Hotel

37

440

440

Peter Draminsky

38

Oasia Hotel Novena, Singapore

38

428

428

Brian Stampe

39

Hilton Singapore Hotel

39

421

421

Peter Webster

40

Sheraton Towers Singapore Hotel

40

420

420

Steven Long

41

M Hotel Singapore

41

415

413

Jacqueline Ho

42

Concorde Hotel Singapore

42

407

407

Karl L Muir

42

York Hotel Singapore*

42

407

407

JESSIE TAN

44

Days Hotels Singapore at Zhongshan Park*

44

405

405

Tony Cousens

45

interContinental Singapore

45

403

403

MICHAEL MARTIN

45

Novotel Singapore Clarke Quay

45

403

403

Marcus Hanna

47

The Fullerton Hotel Singapore

47

400

400

Cavaliere Giovanni Viterale

48

Singapore Marriott Tang Plaza Hotel

48

393

393

Simon Bell

48

Village Hotel Bugis

48

393

393

Mika Umemura

50

Orchard Parade Hotel

Brett Walker

DATA PROVIDED BY COMPANIES. SURVEY PERIOD: JANUARY-FEBRUARY 2017 *DATA RETAINED FROM 2016 REPORT

36 SINGAPORE BUSINESS REVIEW | MAY 2017

50

388

388

TOTAL

30,695

30,688


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RANKING: SERVICED RESIDENCES arrival of major reputable brands into the sector. “The demand for serviced apartments is very closely linked to industries that rely on foreign talent and skills who require mid to long-term accommodation due to the nature of the projects that they are involved in. These industries include financial services, engineering, and IT-related projects, amongst many others,” explains Kiong.

Great World Serviced Apartments ranks first with a total of 304 rooms

Serviced residences battle it out with disruptive players

The digital revolution has brought about the likes of Airbnb, posing a huge challenge to the traditional players within the field of accommodations.

W

eak economic growth in Singapore and economic uncertainties across the globe are making it a challenging time for Singapore’s serviced residences sector. All hope is not lost, as it has consistently survived uncertain economic environments and has gained a reputation for continuous growth over the years. Despite some bright spots, the serviced residences sector needs to keep close watch amidst the moderate business outlook. Arthur Kiong, chief executive officer of Far East Hospitality, thinks that companies will be more likely to curb spending in relocation and employee mobility. As such, human resource managers are challenged to seek accommodation for foreign business travellers whilst stretching budgets. This is where the service residences sector can come in and offer its value proposition. 38 SINGAPORE BUSINESS REVIEW | MAY 2017

There’s a shift in the serviced apartment sector in response to demand for greater flexibility in room bookings and pricing.

However, on the supply side, managers and owners of serviced residences need to step up their game in the face of changing demands. The city’s labour crunch is forcing employees of the service industry to multitask within and across departments, thereby highlighting the urgency for increased digital innovation. Henrietta Chong, general manager of Great World Serviced Apartments, says that although the service industry prides itself in having a personal touch for every service it renders, a move towards automation cannot be avoided. Serviced residences have to leverage their advantages at a time of grim economic outlook. In fact, Kiong says that the demand for serviced residences has grown over the past decade. This demand is fuelled by improved product knowledge, understanding of product benefits amongst corporates, and the

Changing dynamics Business leisure – commonly called ‘bleisure’ – has become the newest trend in travel. The growing interconnectedness of markets combined with the energy of today’s young workforce have made this trend possible. Chong says that against a backdrop of austerity measures, the advantages of serviced apartments surface in meeting the needs of unique types of travellers. “There’s a shift in the serviced apartment sector in response to demand for greater flexibility in room bookings and pricing, and this has resulted in some traditional long-stay providers diversifying their target segments to include short-term guests. In Singapore, the increased supply of hotels and serviced apartments is likely to outpace demand as managed travel continues to come under pressure in a globally uncertain and volatile environment,” says Richard Tan, vice president, Serviced Suites, Pan Pacific Hotels Group. The digital revolution has also brought about the likes of Airbnb, posing a huge challenge to the traditional players within the field of accommodations. Clara Beng, general manager, Frasers Hospitality, says that it would be foolish to ignore the impact that Airbnb has made on the hospitality industry. With the rise of service providers such as this, companies are encouraged to remain competitive and rethink their entire distribution strategy. In fact, a lot of hotels are looking to merge with distribution channels to improve their online distribution. “The entire consumer landscape


RANKING: Serviced ResidenceS of instant gratification and technology advancements, as reflected in the emergence of brands like Uber and Airbnb, has kept us on our toes. It has pushed us to enhance our guests’ experience with us, be more efficient in responding to guests’ feedback, and is a good reminder that our customers are at the centre of everything we do. This is vital as customers will vote with their feet as their choices abound,” notes Beng. Furthermore, Chong says that travellers are more tech savvy and more discerning these days. With the seemingly perpetual rise of Facebook and Instagram users, companies have to catch the interest of customers, prevent negative feedback, and stay relevant to the tastes and preferences of the travelling community. “Any single negative feedback can be loaded onto any social media platform in a blink of an eye. And whatever is posted onto the Internet is there to stay forever. Our continuous effort to be a ‘green building’ helps to market us to the environmentallyconscious travellers. We are always finding ways to adapt our work processes to lessen the impact on the environment,” adds Chong. Creative solutions Serviced apartments have to keep up with the innovation game in order to meet travellers’ evolving needs and preferences. Kiong says that business travellers across all

Orchard Parksuites

Fraser Suites Singapore

industries are no longer just looking at accommodation offerings with business elements such as WiFi and a business centre, but also at options that offer activities outside of their business agenda. “Far East Hospitality has made a conscious effort to bring ‘Far More’ choices to its guests by situating properties in prime business locations such as the Orchard district, North east, and West Coast area.” According to Kiong, this allows guests to select the accommodation located closest to their offices or the hot spots they would like to explore. Kiong says that Far East Hospitality differentiates its guest experience across its brands. Oasia targets business travellers looking for wellness whilst on the road; Village caters to business travellers keen to explore the local culture; and residences in Orchard, Clarke Quay, and Robertson Quay aims for travellers with offices in Singapore’s CBD. Pan Pacific Hotels Group cites the increasing prevalence of mobile as an information and booking channel as well as the shorter lead times for online bookings. Tan says that in order to stay competitive, they are constantly looking for ways to enhance the guest experience through technology. For instance, Pan Pacific introduced handy phones to allow residents to stay connected throughout their stay with unlimited mobile internet access and complimentary calls to selected countries. Norman Lim, country general manager, Ascott Singapore, notes that they are the first serviced residence

The entire consumer landscape of instant gratification and technology advancements, as reflected in the emergence of brands like Uber and Airbnb, has kept us on our toes.

brand in Singapore to work with Fendi Casa, a top Italian luxury brand, to fit their penthouse suites in Ascott Orchard. Ascott in Singapore has more than 1,000 units across nine properties operating in prime locations. “Our decision to work with it is inspired by the property’s location in the heart of Singapore’s fashion district. Additionally, Fendi Casa’s brand philosophy of ‘elegance,’ ‘timelessness’, and ‘artisan excellence’ are in line with Ascott’s brand personality. With this, our portfolio in Singapore increases to eight, with an inventory of 995 units, providing guests who visit the Lion City more options to choose from,” says Lim. Meanwhile, Beng forecasts that there will be a rise in mergers and acquisitions, as companies aim to boost their market share. Recently, Frasers Hospitality purchased Malmaison Hotel du Vin group, allowing Frasers to double its offerings in Europe, whilst further strengthening its global expansion plans to achieve the goal of 30,000 units by 2019. Who made it to the SBR’s list? Great World Serviced Apartments, managed by GWC Serviced Apartments Pte Ltd, remains on top with a total of 304 units. Fraser Suites Singapore of Frasers Hospitality and Orchard Parksuites of Far East Hospitality maintain their respective ranks at 2 and 3. Fraser Suites and Orchard Parksuites have 255 and 223 total number of units, respectively. The properties included on this year’s list of Singapore’s largest serviced residences have a combined total of 5,740 units. SINGAPORE BUSINESS REVIEW | MAY 2017 39


RANKING: SERVICED RESIDENCES 2017

Serviced Residence

2016

1

Great World Serviced Apartments

2

Fraser Suites Singapore

3

Number of Rooms

HOSPITALITY MANAGEMENT

Minimum Stay

304

GWC SERVICED APARTMENTS

7 Nights

255

Frasers Hospitality

7 Nights

223

223

Far East Hospitality MANAGEMENT (S) PTE LTD

7 Nights

4

220

220

Edmund Tie & Company Hospitality Management Services Pte Ltd

7 Nights

Ascott Orchard Singapore

-

220

-

The Ascott Limited

1 Night

6

Orchard Scotts Residences

5

204

204

Far East Hospitality MANAGEMENT (S) PTE LTD

7 Nights

7

Orchard Grand Court Singapore

6

203

203

Orchard Grand Court

7 Nights

8

Atas @ Orchard*

7

200

200

Atas Residence

3 months

9

Somerset Liang Court Singapore

8

197

197

The Ascott Limited

7 Nights

10

Wilby Bukit Timah

9

180

180

Wilby Estate International

7 Nights

2017

2016

1

304

2

255

Orchard Parksuites

3

4

Treetops Executive Residences

4

10

Pan Pacific Serviced Suites Beach Road

9

180

180

Pan Pacific Hotels Group

3 nights on weekdays 2 nights on weekends

12

Fraser Place Robertson Walk, Singapore

11

164

164

Frasers Hospitality

7 Nights

13

Citadines Mount Sophia Singapore

13

154

154

The Ascott Limited

7 Nights

14

Park Avenue Clemenceau

15

150

150

Park Avenue Hotels and Suites (United Engineers)

7 Nights

15

Ascott Raffles Place Singapore

16

146

146

The Ascott Limited

1 Night

16

Oasia Residence, Singapore

-

140

-

Far East Hospitality MANAGEMENT (S) PTE LTD

7 Nights

17

Far East Plaza Residences

17

139

139

Far East Hospitality MANAGEMENT (S) PTE LTD

7 Nights

18

Wilby Central

18

138

138

Wilby Estate International

7 Nights

19

Village Residence Clarke Quay

19

128

127

Far East Hospitality MANAGEMENT (S) PTE LTD

7 Nights

20

Central Square*

19

127

127

BridgeStreet Global Hospitality

1 week

20

Shangri-La Serviced Apartments

19

127

127

Shangri-La Hotel Limited

7 Nights

22

Pan Pacific Serviced Suites Orchard, SINGAPORE

22

126

126

Pan Pacific Hotels Group

7 Nights

23

Park Avenue Rochester

12

121

161

Park Avenue Hotels and Suites (United Engineers)

1 Day

24

International Service Apartments

27

115

102

E. Millennium Investments and Fontainebleau (ISA)

1 Month

25

FORTVILLE

23

109

109

FORTHAVENS

1 MONTH

26

Somerset Bencoolen Singapore

24

107

107

The Ascott Limited

7 Nights

27

LMB Housing Services

25

106

106

LMB Housing Services Group of Companies

1 Month

27

Redwood West Apartments*

25

106

106

Redwood Residences

6 months

29

PARKROYAL Serviced Suites, SINGAPORE

29

90

90

Pan Pacific Hotels Group

7 Nights

30

Atas @ Oxley*

30

88

88

Atas Residence

1 week

30

Regency House

30

88

88

Far East Hospitality MANAGEMENT (S) PTE LTD

7 Nights

32

8 on Claymore SERVICED RESIDENCES

33

85

85

Royal Plaza Group

7 Nights

33

The Club Residences by Capella Singapore

34

81

81

Capella Hotel Singapore

7 Nights

34

Park Avenue Changi

35

80

80

Park Avenue Hotels and Suites (United Engineers)

1 Day

35

Village Residence Hougang

36

78

78

Far East Hospitality MANAGEMENT (S) PTE LTD

7 Nights

36

Darby Park Executive Suites

37

75

75

Sime Darby Hospitality

7 Nights

37

Fraser Residence Orchard, Singapore

38

72

72

Frasers Hospitality

6 Months

37

Village Residence Robertson Quay

39

72

71

Far East Hospitality MANAGEMENT (S) PTE LTD

7 Nights

39

Lanson Place Winsland Serviced Residences, Singapore*

40

67

67

Lanson Place Hospitality Management

1 Day

40

Shangri-La Residences

41

55

55

Shangri-La Hotel Limited

6 Months

41

Village Residence West Coast

42

51

51

Far East Hospitality MANAGEMENT (S) PTE LTD

7 Nights

42

Citadines Fusionopolis Singapore

43

50

50

The Ascott Limited

7 Nights

43

Alocassia Serviced Apartments*

44

45

45

DTZ Debenham Hospitality Management

7 Nights

44

The Forest by Wangz

45

38

38

Wangz HOSPITALITY

7 Nights

45

Park Avenue Robertson

46

36

36

Park Avenue Hotels and Suites (United Engineers)

7 Nights

TOTAL

5,740

5,405

DATA PROVIDED BY COMPANIES. SURVEY PERIOD: JANUARY-FEBRUARY 2017 *DATA RETAINED FROM 2016 REPORT

40 SINGAPORE BUSINESS REVIEW | MAY 2017


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Legal briefing

New market conduct guidelines for FIs

They may not have the force of law, but they will impact financial institutions and protect customers.

T

he Monetary Authority of Singapore (MAS) issued the Guidelines on Standards of Conduct for Marketing and Distribution Activities to emphasise expectations for financial institutions and their representatives to conduct their marketing and distribution activities at retailers and public places in a responsible and professional manner. Four lawyers share their views on what the guidelines spell for the market upon implementation in April 2017. How will the Guidelines on Standards of Conduct for Marketing and Distribution Activities issued by MAS affect financial institutions? The guidelines seek to formalise and provide greater guidance on market conduct requirements for the marketing and distribution of retail products, says Nizam Ismail, head of regulatory practice, RHTLaw Taylor Wessing LLP. “Regulations surrounding selling and distribution of retail products have come into sharp focus, especially after the Lehmans Minibonds issue.” The aim is to mitigate against the risk of misselling, suitability mismatch, customer harassment due to highpressure sales and marketing, and mishandling of funds, notes Ismail. Most financial institutions would have put in place guidelines on suitability, sales and distribution, and MAS’ guidelines seek to provide a holistic and consistent treatment across banks, insurance companies, capital markets intermediaries, financial advisers, and credit card issuers. “This also ensures consistent treatment across investment products and credit product, which were previously governed by different regulatory

The safeguard dealing with conducting callbacks or surveys for certain products and related matters would mean higher monitoring of the sales representatives by the financial institutions. regimes,” says Ismail. Amit Dhume, partner, Colin Ng & Partners LLP, meanwhile, says these guidelines are much needed for the protection of retail investors, but it may lead to some added costs for compliance and monitoring. “Whilst many financial institutions were already implementing some of the safeguards as part of their internal policies, the safeguard dealing with conducting callbacks or surveys for certain products and related matters would mean higher monitoring of the sales representatives by the financial institutions,” he says. Dhume adds that the conduct of sales representatives being influenced by commissions and other rewards leading to aggressive sales tactics has been a longstanding 42 SINGAPORE BUSINESS REVIEW | MAY 2017

ClaudiaTeo

Amit Dhume

Nizam Ismail

Sim Lin Piah

problem. Financial institutions, he says, would have to find the balance between customer protection and incentivising the sales force, with customer protection taking prominence. “The various safeguards in the guidelines essentially enable the customers to focus on the product features by seeking to eliminate practices which may distract the customers from the key issues.” Which of the safeguards do you think will have the most impact on the conduct of activities? Claudia Teo, partner and head, corporate & financial services at Harry Elias Partnership LLP, says the first safeguard in the MAS’ guidelines, which requires financial institutions to conduct callbacks or surveys for all customers during the free-look or cooling-off period, will have the most impact. “Whereas most of the other safeguards are preventive in nature, the first safeguard has an additional corrective element,” notes Teo. “A customer who experienced inappropriate conduct of misselling, misrepresentation, or pressure selling will be reminded of his right to correct the decision during the callback or survey.” From a monitoring perspective, she says, the first safeguard is also helpful in arresting any consequence of misconduct during marketing and distribution activities. Sim Lin Piah, director, corporate, banking & finance department, Tan Peng Chin LLC, shares the same view regarding the impact of the first safeguard. He adds that another safeguard that could have the most impact on the conduct of marketing and distribution activities is the requirement to conduct regular mystery shopping and site visits to monitor and ensure that practices are in line with the financial institutions’ internal standards and procedures, as well as the guidelines (which apply to the sale of all products, except where the sale is related to a product that the customer has bought). “Such safeguards are likely to be most effective for retail consumer protection, but they also appear likely to result in a considerable run-up in the costs to conduct marketing and distribution activities,” he says. What are further implications of the guidelines for financial institutions and their representatives? “The guidelines set a consistent standard for retail products, and raises the bar for sales and distribution activities across the financial centre,” says Ismail. “There will be some initial adjustment, but these guidelines generally foster a better market conduct culture across the financial industry, and fosters customer confidence.” Ismail adds that being set as guidelines (not having the force of law), there is some flexibility for financial institutions to depart from some of these requirements, depending on their specific business models. “This flexibility is a good one, as it allows departure from a ‘cookie-cutter approach,’ and allows financial institutions to take a risk-focussed approach,” he says.


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CMO Briefing

messaging across all devices. “As marketers, we are constantly looking to create a better, more compelling, and engaging experience for our customers,” he says. “Mobile marketing automation seeks to enable marketers to provide that magical dimension known as context – engaging each consumer personally and as an audience of one.” Kontopoulos says automation can come in various forms to take mobile marketing to the next level. “Technologies and capabilities like GPS, geo-fencing, and beacons can be leveraged to present marketing messages based on a consumer’s real-world location and proximity seamlessly. Coupled with the ability to contextualise, mobile marketing can elevate your brand’s ability to engage even further in 2017.”

Why mobile marketing is not a “fringe channel” Context, automation, and predictions are just some of what mobile marketing offers in this highly connected region.

A

s the mobile marketing industry has been growing at an unprecedented rate, what can marketers do to keep abreast of dynamic developments and productively engage consumers? Scott Anderson, chief marketing officer, Sitecore, says mobile marketing doesn’t only involve tablets or smartphones as much as it does the actual mobility of the consumer who’s always on the go. “The consumer is now mobile. Not only via tablets or smartphones but now travelling in connected cars, wearing fitness bands, and installing connected appliances,” he notes. “Marketers should focus less on designing for the small screen and focus more on how to maintain a smart and on-going conversation with individuals, wherever they are, on any device, at the precise moment when they require assistance.” In pursuit of context Anderson cites a survey by Sitecore and Vanson Bourne, which says 61% of consumers have a mobile device on and near them for an average of 10 hours per day, whilst a whopping 84% say they research on their mobile device before purchasing online, with 80% considering the mobile experience as a priority in the purchasing decision. “For brands, it all starts with the mobile mindset. Understanding consumer habits and preferences in a rapidly changing landscape is the starting point. Consumers want marketers to deliver what they need ‘in context’ to whatever it is they are trying to achieve right at that moment,” he says. Nicholas Kontopoulos, global vice president of fast growth markets, audience engagement marketing, SAP Hybris, reckons mobile marketing automation is empowering marketers to be smarter with content and

44 SINGAPORE BUSINESS REVIEW | MAY 2017

Understanding consumer habits and preferences in a rapidly changing landscape is the starting point.

Social media involvement There will be growth in mobile usage along with an increase of social media usage to find and share various information, shares Geraldine Wong, chief marketing officer, SEEK Asia. Social media sites have a “buy” button where purchasing occurs on those sites instead of through a third party, she notes. Mobile marketing comes in custom apps and mobile-targetted campaigns to specific customers. “Moreover, increasing usage of mobile apps will be seen as part of our daily lives. Mobile marketing will increase its popularity as it can help businesses to reach a specific group of audience more effectively as well as building better customer relationships,” explains Wong. Wendy Johnstone, VP marketing, APAC, Salesforce, notes that Asia Pacific is home to half of the world’s mobile phone subscribers and the largest number of wireless Internet connections. The online commerce landscape is dominated by the region, primarily driven by mobile devices. “By 2020, there will be 6.1 billion smartphone users in the world, with nearly 2 billion coming from Asia Pacific. Suffice to say, mobile users are a force to be reckoned with and rightfully be at the centre of a marketer’s marketing strategy and plan.” Mobile is here to stay Johnstone also cites a survey amongst marketers globally, where 79% say mobile is core to business. “Mobile as a marketing platform (such as mobile apps) and a marketing channel (such as SMS) has seen a surge in usage between 2015 and 2016, hitting a triple-digit growth within a year,” she notes. The percentage of marketers who are realising a return on their mobile investment also jumped 147% from 2015 to 2016. “Once a fringe channel, mobile marketing has become a mainstay,” stresses Johnstone. She adds that predictions will rule the future, and the marketing world, especially content marketers. “There is a paradigm shift in the way consumers want to be engaged. They expect brands and marketers to proactively engage them,” explains Johnstone. “If I bought a six-month vitamins supply, I expect the brand to send me a reminder that my supply is running out and even come to expect a loyalty discount so I make a repurchase.”


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ANALYSIS: ASIAN PROPERTY

Property transaction volume in China has strengthened significantly

2016: An active year for Asian investment Total investment volumes in Singapore were boosted by the largest single transaction in Asia last year, the landmark sale in Q2 of Asia Square Tower 1 to the Qatar Investment Authority for over S$3b.

W

hilst interest in Asian property from investors based outside the region remains modest, intra-regional investment has been very strong. Based on RCA data, aggregate intra-regional property investment in Asia reached US$69.3b in 2016, a 34% increase from US$52.9b in 2015. The statistics from RCA match the evidence from other sources that 2016 was a very active year in Asian property investment markets. Perhaps the chief point to note is that property transaction volume in China has strengthened significantly. In fact, as measured by total property transaction volumes excluding undeveloped land, China has overtaken Japan to become the region’s top country investment market. Japan’s status over many years as the Asia Pacific region’s top property investment market reflects Tokyo’s position as Asia’s largest single urban property market. However, property transaction volumes in Japan fell by 37% in 2016 to US$29b as a consequence of a sluggish economy (one of the weakest in Asia at present) and the strength of the Japanese yen last year, which deterred foreign investment. The decline in investment activity accelerated in Q4 2016, which saw a 68% drop in investment to US$4.2b. By contrast, over 2016 as a whole total property transactions in China increased by 10% to US$36.5b, thereby just exceeding the level in Japan. This strength accelerated in Q4, which saw a 32% year-on-year 46 SINGAPORE BUSINESS REVIEW | MAY 2017

Besides China, Hong Kong and Singapore enjoyed very active investment interest in 2016.

increase in transaction volumes to US$14b. For 2016 as a whole, China accounted for 28% of aggregate property transactions in the region, whilst for Q4 2016 the proportion was 35%. Strong investment interest Besides China, Hong Kong and Singapore enjoyed very active investment interest in 2016. In Hong Kong’s case, total property transaction volumes increased by 15% over the year to US$13.5b, on which basis Hong Kong ranked as the fourth largest country investment market in Asia Pacific. In Singapore’s case, total property transaction volumes increased by 38% over the year to US$8b, on which basis Singapore ranked as fourth largest country investment market in Asia Pacific. Total investment volumes in Singapore were, of course, boosted by the largest single transaction in Asia last year, the landmark sale in Q2 of Asia Square Tower 1 to the Qatar Investment Authority for SG$3.38b (US$2.43b). However, investment activity remained strong in H2, with 44% yoy growth in Q4 to US$3.2b. As an urban centre rather than a country, Hong Kong ranked as the third largest investment market in 2016 in the Asia Pacific region after Tokyo and Shanghai, whilst Singapore ranked sixth. However, perhaps the biggest surprise in the region was Seoul, which saw a 142% increase in total transaction volumes to US$9.92b, and on


ANALYSIS: ASIAN PROPERTY this basis came in fourth place. Indeed, the office property sector in Seoul was very active last year. The largest buyer was KORAMCO, which acquired eight office and retail buildings. Samsung Life Insurance, AIG, and Alpha Asset were the three biggest sellers; Samsung Life Insurance alone disposed of property assets worth about US$1b. Since Samsung Life Insurance holds 18 properties across South Korea and plans to continue shedding non-core investments, the investment market in Seoul ought to stay active this year. It is harder to predict to what extent foreign groups may participate in the activity. However, anecdotal evidence suggests that foreign interest in Seoul is increasing. Property yields in South Korea seem to have been rising, perhaps reflecting increased concerns about North Korea; and foreign investors appear to be looking at Seoul again as a market offering good value. Chinese interest set to shift to Asia Mainland Chinese investors account for a high proportion of aggregate capital deployment abroad by Asian investors. Capital outflows from China to foreign property markets were almost negligible before 2010. Since then, however, Chinese investment in foreign property has grown at great speed, reaching US$37.2b in 2016. This total was split between US$25.2b invested outside Asia and US$12b invested within it. Whilst the 2016 outcome represents a tiny 0.4% decrease from the level of 2015, it is more important to note that 2016 was the fourth consecutive year in which mainland China ranked as the largest source of capital in investment flows from Asia to the rest of the world. Since the US accounted last year for 49% of aggregate property investment outside the region by Asian investors, it is fair to say that mainland Chinese interest in US property assets has been the primary reason for the trebling of property investment outside Asia by Asian investors between 2012 and 2016. Prior to 2013, Singapore was the primary source of capital for real estate investment by Asian financial institutions and property developers outside the region. Whilst mainland Chinese groups have been investing heavily outside Asia, they have been less active within the region. The Chinese accounted for 43% of Asia-to-global property investment last year, but for only 17% of intraregional property investment. One market in which mainland Chinese developers and institutions have shown strong interest in is Hong Kong. Indeed, Chinese groups were a major force behind the 15% APAC property deals in 2016: market as % of total transaction volume

Sources: RCA, Colliers

Investors have shown particular interest in Hong Kong

Chinese investment in foreign property has grown at great speed, reaching US$37.2b in 2016.

increase in property transaction volume in 2016 that left Hong Kong as the third-ranked urban investment market in Asia. In 2016, based on the RCA data, Chinese groups invested US$6.6b in Hong Kong; and they have clearly continued to invest so far in 2017. The Chinese have concentrated on purchases of en-bloc office buildings on Hong Kong Island but undeveloped land in Kowloon, where the developer HNA Group recently made three successful bids for three large land sites in Kai Tak for residential use. In our view, there are three reasons why Chinese investors have shown particular interest in Hong Kong: Firstly, Hong Kong is on China’s doorstep, and is culturally and linguistically similar. Secondly, Hong Kong is politically very acceptable as a Special Administrative Region of the People’s Republic of China. Thirdly, the Hong Kong dollar is pegged to the US dollar. Concern about potential continued renminbi depreciation has clearly been an important factor behind Chinese foreign investment in general. Investment in Hong Kong represents a simple way to hedge against this risk. Besides being the largest source of foreign investment in Hong Kong property, mainland China was the largest source of foreign investment in Japan and Malaysia in 2016. In Singapore, Chinese individual investors invested in low to mid-end residential property, whilst Chinese developers tendered for state and private land for development, mainly in the low to mid-end segment. Some Chinese groups also bought small commercial developments, including the db2Land Building along Robinson Road and the CityVibe retail mall in the Clementi suburb. However, total Chinese investment in Singapore was only US$0.6b in 2016, or just 9% of the total for Hong Kong. As we have hopefully made clear, in our opinion perhaps the most important factor behind mainland Chinese investors’ rush to purchase property assets overseas, and in particular outside Asia, has been concern about possible further renminbi depreciation. Chinese investors have been especially interested in the US because the economy has been expanding and SINGAPORE BUSINESS REVIEW | MAY 2017 47


APAC property transaction volumes by country in 2016 (US$)

Source: RCA; Note: These totals exclude undeveloped land.

because the US dollar is the world’s most important reserve currency; and to some extent they have probably considered Hong Kong as an extension of the US due to Hong Kong’s currency peg. However, the bulk of renminbi depreciation has probably already happened. Over the three years from January 2014 to December 2016, the US dollar appreciated by 15% against the Chinese renminbi (meaning, to state the situation conversely, that the renminbi depreciated by 13% against the US dollar). We agree with the majority opinion expressed at Colliers’ CEO Breakfast in Hong Kong in January 2017, i.e. that the Chinese renminbi will depreciate modestly against the US dollar this year. However, the key word here is “modestly”. Oxford Economics predicts a US$/ RMB exchange rate of 7.15 for end-2017, compared to the rate at time of writing (26 February) of 6.87, implying 3-4% further depreciation this year. In view of the strong economic news from China, we regard Oxford Economics’ forecast as a realistic projection. Chinese real GDP growth looks set to reach about 6.3% in 2017; recent trade data have been strong, with exports posting their first increase in January in US$ terms since March last year; and China’s producer price index (PPI) grew by 5.5% in December, reaching the fastest growth rate in more than five years and continuing the recovery that began in early 2016. Whilst near-term prospects for the US economy are also improving, to state matters simply we believe that one needs to be both rather optimistic about the US and rather pessimistic about China to assume further substantial renminbi depreciation from now on. Reduced Chinese investment outside Asia There are at least three additional reasons to believe that the bulk of renminbi depreciation has already happened. Firstly, reflecting official concern about high levels of capital outflow from the country, the Chinese government began to impose new capital controls in November 2016, including strict limits on large corporate investments abroad. In the short term, the restriction will probably slow deal flows originating with mainland Chinese investors to Hong Kong and reducing the run-up in prices there. However, for companies which have already established a lending platform outside of China, the impact is likely to be much less significant. For example, a joint venture of two Chinese developers listed on the Hong Kong Stock Exchange, Logan Property Holdings of Shenzhen (Stock 48 SINGAPORE BUSINESS REVIEW | MAY 2017

Prior to 2013, Singapore was the primary source of capital for real estate investment by Asian financial institutions and property developers outside the region.

Code: 3380) and Guangzhou-based KWG Property Holding (Stock Code: 1813), set a new lump-sum sale record of HK$16.86b (US$2.17b) for a plot of residential land on Hong Kong’s Ap Lei Chau island on 24 February 2017, topping market valuations by almost 50%. This demonstrates mainland Chinese companies’ strong interest in Hong Kong’s property market under the current market and policy circumstances. Overall, we believe that the long-term trend of mainland Chinese companies investing in overseas real estate will revive once the authorities relax restrictions. After all, internationalisation of the renminbi and expanding China’s global influence are two of the priorities of the current administration. Secondly, and on a related point, we suspect that the Chinese authorities may put quiet pressure on financial institutions to moderate their investment activity outside Asia, notably in the US. This will be especially true if the new US president translates his protectionist rhetoric into concrete measures such as high tariffs on Asia and other imported goods. If political relations between the US and China start to cool down, it may become politically difficult for Chinese groups to continue their heavy investment on the other side of the Pacific. Even if political relations do not cool down, we suspect that in the long run the Chinese authorities would prefer to see a shift in investment to countries closer to home, for example “One Belt, One Road” markets in Southeast Asia and central Asia. Thirdly, quite apart from political considerations, another motivation for the Chinese authorities to press financial institutions to moderate overseas investment may well be the desire to protect them from potential big expensive mistakes. The trophy acquisitions which have been pursued recently by Chinese groups like Anbang Insurance bear more than a passing resemblance to the rash of acquisitions in the US made by Japanese companies in the late 1980s, when Mitsubishi Estate purchased the Rockefeller Centre in New York and the electronics producers Sony and Matsushita purchased Hollywood film studios. Many of these acquisitions proved highly overpriced, and resulted in large writedowns for the acquiring companies. From “2017 - the year in which Asian property capital flows reverse: Fact or Fantasy?” by Colliers International 2016 investment volume by property market segment in Asia (US billion, % of total, excluding land sites)

Source: Real Capital Analytics


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