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Monday, December 24, 2007

Bullish Asian property market

Early morning traffic in Shanghai. The roaring economy of China is expected to continue fuelling growth of the property sector in this region – AFP

The property scene across Asia is heating up, thanks to cash-rich investors looking for higher returns.

The roaring economies of China and India as well as Japan, which is recovering from more than a decade of economic sluggishness is expected to continue to fuel growth in the property sector in this region.

As Japan's economy recovers, office buildings have greatly increased in demand, sending capital values soaring in Tokyo. Because of tight supply, analysts see Tokyo office rents rising another 60% to 70% to a cyclical peak around 2010, Reuters reported recently.

Singapore's property business is also enjoying brisk business as with China and India where an influx of people and rising incomes are fuelling demand.

Thailand’s property segment however, has been slow - given its weak consumer confidence after recent slower economic growth.

Back home, residential properties, led by high-end condominiums, are experiencing increasing sales because of strong foreign demand, with Asian and Middle East buyers on top of the list.

For foreign buyers, high-end Malaysian properties are still considered a bargain with prices about seven times cheaper than Singapore properties.

The increase in crude oil prices this year turned out to be a blessing in disguise for the Malaysian economy as it led to increases in export value of crude petroleum and related products.

As demand for the commodity continues to increase, oil and gas firms and related outfits stand to benefit tremendously.

Already this year, share prices of oil and gas and related firms have been reflective of this.

Recent studies have indicated continue and robust demand for oil from Asia with experts saying the region required some 25 million barrels per day, which is 29% of the world's consumption of 86 million barrels per day.

Realising this, local oil and gas-related companies such as Petra Perdana Bhd and Scomi Group Bhd have been busy stepping up their brown field and marine services - locally and abroad.

Regionally, Singapore's Keppel Corp and SembCorp Group have also been aggressive in their set-ups of yards in major oil and gas production centres globally.

Meanwhile, industry observes are of the opinion that competition among energy players would be come more intense.

Major energy players such as China's China National Petroleum Corp and India's Oil and Natural Gas Corp are going heavy on acquisitions to remain competitive.

Likewise, Malaysia's Petroliam Nasional Bhd (Petronas) has been involved in global exploration activities since early 1990s.

One thing is for sure: Demand for oil is set to remain firm and oil and gas firms and related companies will continue to benefit for a long time to come.

Besides oil and gas firms, many regional plantation companies also delivered good financial results and share price performance this year.

Crude palm oil (CPO) prices hit new highs this year with palm oil futures on Bursa Derivatives reaching a record RM3,068 on Nov 26.

Malaysian major palm oil firms such as IOI Corp Bhd and Kuala Lumpur Kepong Bhd (KLK) recorded substantial profits as a result.

Meanwhile, Indonesia's economy has been expanding at the fastest pace since the regional financial crisis of 1997/98, thanks to soaring prices for palm oil.

India and China, the two largest global buyers of palm oil, have helped push up prices and earnings of Indonesian producers of the vegetable oil.

A wire report third-quarter profit at PT Astra Agro Lestari - Indonesia's biggest publicly traded agricultural company, had almost tripled to a record 603.34 billion rupiah on higher palm oil prices.

South-East Asia's biggest budget airline AirAsia Bhd created waves this year, launching its long-haul flight services and obtaining landing rights for the Kuala Lumpur-Singapore route.

Competition, however, is fast becoming the buzzword in the industry.

AirAsia and Indonesia's PT Lion Mentari have over 100 planes on order each even as economic growth and liberalisation boost air travel.

Tiger Airways Pte, the budget airline owned partly by Singapore Airlines Ltd this month ordered 20 Airbus planes in line with its expansion in Australia, Malaysia and India.

Asia's budget airlines, according to recent reports would have a combined fleet of 1,300 single-aisle aircraft by 2025, compared with 236 planes currently.

Asia-Pacific passenger traffic is expected to outpace the global average, Bloomberg said.

Malaysia's construction industry has been particularly robust this year with the steady rollout of Ninth Malaysia Plan projects amidst the government's push for higher economic growth.

The local construction industry is forecast to expand an average 3.5% a year over the next four to five years, compared with 0.5% in the period 2001 to 2005.

According to industry experts, growth would be spurred by spending on low-cost housing, roads, airports and railroad projects.

Testament to this is the recent Gamuda Bhd and MMC Corp Bhd 50:50 joint venture that was awarded the RM12.5bil electrified double tracking Ipoh-Padang Besar project.

Elsewhere, the industry has also experienced generally healthy growth. The construction sector in Singapore grew the most in a decade with analysts saying that the growth momentum in the city-state would continue to be underpinned by the construction and its related sectors.

By The Star (by Yvonne Tan)

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