Despite the positive signals on consumer spending, the economy faces
stiff headwinds from abroad.
The New York Fed’s “Empire State”
general business conditions index registered minus 6.16 in October — an
improvement from the prior month but less of one than was expected.
It was the third straight month
the index pointed to contraction in activity in New York state manufacturing,
and the latest sign that the cooling of the global economy is being felt at
American factories.
Economic growth has slowed around
the globe as Europe’s debt crisis has weighed on demand for manufactured goods,
including those from China.
Worries about the European crisis
and the possibility of belt tightening next year by the U.S. government have
led many companies to postpone investments. For now, at least, consumer
spending appears to be making up for some of that weakness.
SM Investments Corp
Tycoon Henry Sy-led SM
Investments Corp. has raised $500 million from the sale of overseas bonds at
one of the lowest rates snagged by a Philippine corporate issuer for a
seven-year tenor.
SMIC on Thursday said it had
priced the seven-year offshore bond issue to yield a fixed rate of 4.25 percent
a year.
The issue was “substantially
oversubscribed,” attracting subscriptions worth $3.1 billion from institutional
and private banking investors in the Philippines and across Asia and Europe,
allowing SMIC to upsize the issue from the initial indicative size of $200
million.
The bond issue is a debt
management exercise that will further lengthen SMIC’s debt profile and take
advantage of the much-improved interest rate environment.
“This exercise is also our way of
maintaining our presence in the bond market and fostering a sustainable
relationship with the international investment community,” SMIC executive vice
president and chief finance officer Jose Sio said in a statement.
Citi, Deutsche Bank and J.P.
Morgan acted as joint lead managers and joint bookrunners for the transaction.
SMIC was originally planning to
issue seven- and 10-year bonds but decided to issue only seven-year bonds to
take advantage of the low interest rates, said company investor relations chief
Cora Guidote.
Guidote said a 10-year tenor
would have been expensive to issue offshore at this time.
The conglomerate, through various
subsidiaries, is the dominant player in Philippine banking, shopping mall and
retailing businesses. It is also a fast-growing player in residential
condominium and hotel/convention center development.
The last time SMIC ventured into
the overseas bond market was in February this year, although that involved a
convertible bond issue rather than a straight bond offer. In February, SMIC
raised $250 million from the sale of offshore five-year bonds, which investors
can convert into equity. This was the first convertible bond offered out of the
Philippines this year.
Also, SMIC had a $400-million
issue and bond exchange in 2010. This was the first ever liability management
transaction by a Philippine corporate issuer.
PTT
PTT Plc, Thailand’s energy
flagship, expects to introduce US-dollar-denominated debentures worth up to
US$2 billion to take advantage of high liquidity and low interest rates in the
US.
The 10-year bond issue is
expected by the end of this month or early next month, said chief financial
officer Surong Bulakul.
Proceeds from the debentures will
finance business expansion at PTT and support the capital increase of PTT
Exploration and Production Plc. Details of the debentures will be finalised
next week.
“Now is a good time to launch the
debentures, as the US economy is recovering and China is seeing a slowdown
while the political situation in Thailand has stabilised,” said Mr Surong.
He said big flooding is unlikely
this year, and the stock market is in good shape, with the SET index closing
near 1,300 points yesterday.
Previous debentures by PTT have
an average maturity of seven years, but a length of 10 years is better suited
for the longer-term plans of the company.
Foreign investors have shown
confidence in the company’s debentures, said Mr Surong.
Bumitama
Malaysia’s palm oil output jumped
by a higher-than-expected 20% m-o-m to 2.004m MT, as returning workers
harvested uncollected fruits during the Eid festival the previous month. This
distortion was unaccounted for in our output forecast of 1.859m MT. FFB yields
in Sabah, Sarawak Johor, and Pahang rebounded by 14-28% m-o-m. Sabah FFB
yields, which until Aug12 had been 14% below last year, have now almost closed
the gap, to only 1% lower y-o-y. However, we expect Oct12 output to remain flat
m-o-m; taking into consideration the jump in Sep12 output, followed by a
seasonal peak in Oct12.
Against the higher production,
the pace of Sep12 exports had decelerated to 4% m-o-m from 11% in Aug12.
Stronger exports to India and China were partly offset by drops in shipments to
Pakistan, EU, US and Egypt. Reflecting this, end Sep12 palm oil inventory
jumped 17% m-o-m to 2.481m MT (highest on record). When examined closely, the
CPO inventory level had jumped by 35% m-o-m; while processed palm oil inventory
actually declined 5% m-o-m. Hence, despite the higher duty-free export quota,
there was a lack of CPO exports during the month.
At the current level, we suspect
CPO storage is close to the tanks’ capacity. Two things should happen: (1) CPO
exports need to be jolted with fire sale prices (2) Planters need to cut down
on harvesting to prevent wastage and to conserve cash amidst weak CPO prices.
We believe these actions should temporarily address Malaysia’s inventory
overhang. However, the refinery industry’s feedstock cost issue still needs to
be tabled to provide a more lasting solution.
Sembcorp Industries
Sembcorp Development, the
wholly-owned urban development business unit of Sembcorp Industries, is
co-developing a residential project, Gateway, in Binh Duong province, Vietnam.
A joint venture agreement has
been signed between Sembcorp Development Vietnam, a newly incorporated
wholly-owned subsidiary of Sembcorp Development, and its partner, Vietnam
Singapore Industrial Park Joint Venture Co. (VSIPJV). VSIPJV is the developer
of the Vietnam Singapore Industrial Park (VSIP) projects across Vietnam. It is a
49:51 joint venture between Becamex IDC and a Singapore consortium led by
Sembcorp Development respectively. Sembcorp Development holds an effective
47.4% stake in VSIPJV.
Under the agreement, Sembcorp
Development Vietnam and VSIPJV will incorporate a joint venture company in
Vietnam with 40% and 60% shareholding respectively to develop Gateway. The
total project development cost is estimated to be US$165 million, which will be
undertaken over several phases from 2013. The project will be built in tandem with
demand, and is estimated to be developed over eight years or more.Sembcorp
Development Vietnam’s equity investment of US$5.2 million will be internally
funded.
Gateway is part of a larger
mixed-use development within the 500-hectare VSIP in Thuan An district, Binh
Duong province, which has been operational since 1996. Gateway sits on a
4.1-hectare land plot which will be developed into a mid-market residential
project of about 163,807 square metres gross floor area, comprising 1,380
apartment units and amenities. Phase one will comprise two blocks of 250
apartment units. Gateway is part of the developer’s efforts to develop projects
that complement the functions of VSIP, delivering an integrated urban work and
living environment that enhances the attractiveness of VSIP.
The above transaction is not
expected to have a material impact on the earnings per share and net asset
value per share of Sembcorp Industries for the current financial year.
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