Next year seen positive for Singapore equity and debt markets

RIDING on Asia's buoyant economies, next year will be positive for both Singapore equity and debt markets, said OCBC Bank officials on Tuesday.

The poor stockmarket turnover and pathetic IPO or inital public listings scene this year has made many observers sceptical of the attractiveness of the Singapore Exchange.

Singapore remains an ideal choice of listing destination for many corporates in the region with its robust regulatory framework and corporate governance standards, as well as a large pool of investible funds, said Tay Toh Sin, OCBC Bank head of corporate finance.

"The Singapore market is good for companies wanting to attract regional funds," said Ms Tay.

She expects to see more companies doing corporate IPOs rather than Reits or real estate investment trusts in 2015.

Singapore continues to attract listings from China, Malaysia and Indonesia, she said.

So far this year there have been 25 IPOs which raised US$2.6 billion, almost half of the US$5 billion from 24 deals in 2013, said Ms Tay.

"Last year was driven by Reits and Business Trusts," she said. Two mega IPOs - the US$1.3 billion Mapletree Greater China Commercial Trust and US$1 billion Asia Pay TV Trust - made up 40 per cent of the total, she noted.

Reits which have been a mainstay of the IPO market for the past several years may take a backseat next year if a tax exemption on foreign sourced income which ends in 2015 is not extended.

"We will see more companies doing corporate IPOs rather than Reits," said Ms Tay.

The Reit market has been slowing since two years ago and more property companies have been looking at corporate IPOs, she said.

One of the predicaments facing Singapore property companies wanting to raise funds via a Reit is the still high property prices here - making it expensive to acquire properties and pay the high yields demanded by investors.

And if the foreign sourced income tax exemption is not renewed next year, it'd be a double whammy for the Reit market.

"Some property companies are thinking of doing a corporate IPO - we've been talking since last year," said Ms Tay.

In addition to property companies, she expects IPOs to come from those in the consumer, healthcare, education and environment-related sectors.

The bond market will end 2014 up about 20 per cent with S$23.4 billion raised and the outlook for 2015 remains good, said Tan Kee Phong, OCBC head of capital markets.

"My expectations for 2015 is that it could be slightly higher than this year," he said.

Bond volumes will remain strong because Asia continues to need funding and investors' liquidity needs to be put to use, he said.

Inflation is not an issue, interest rates remain low despite the increasingly stronger jobs data reports from the US and the implication that hikes may take place earlier next year, rather than in the second half.

Investors in the past few weeks have shown in fact they are willing to go for longer tenures, as interest rates continue to fall, he said.

Rates have fallen 10-15 basis points from last month, he said.

Last week, Housing and Development Board sold S$600 million 12-year 3.22 per cent bonds. A week earlier, Sembcorp Industries raised S$150 million 12-Year 3.593 per cent notes while Indonesian telco infrastructure company Protelindo issued a S$180 million 10-year 3.25 per cent bonds.

Foreign issuers which have a quite a presence in the market is likely to increase further, he said.

"This year they made up 25-30 per cent," he said.

"The Singapore market is now on the radar of many international issuers," he said.

Asia's US dollar bond market was also very active this year, driven by China issuers, he said.

Across Asia, issuances could reach over US$200 billion for 2014, up from US$155 billion last year, he said.

For 2015, he estimates US$230-US$240 billion issuances with China remaining in the driver's seat.

Mr Tan does not expect the continued strength of the greenback to deter issuers because interest rates remain low.

"At one point the 10-year was 4 per cent," said Mr Tan. The interest rate for the US 10-year Treasury Note was 2.27 per cent on Monday.