Grace Leong News that United States interest rates will rise only at a moderate pace sent investors rushing into riskier assets yesterday, pushing Asian currencies, gold and oil pric- es higher and the greenback down. The spark came after the US Fed- eral Open Market Committee said they now expect to raise the bench- mark rate just twice this year, down from the four hikes they previously predicted. Remisier Alvin Yong said yester- day: “The markets were taken by surprise.” It proved a pleasant surprise: Hong Kong and Shanghai rose 1.2 per cent, Shenzhen jumped 3.6 per cent, Taiwan was up 0.4 per cent and Malaysia up 0.6 per cent. The Straits Times Index soared as much as 1.4 per cent to 2,883.39 at the opening bell, but the down- grades of Singapore’s gross domes- tic product growth just a week be- fore the Budget reined in the rally. But the STI still closed up 1.26 per cent or 35.96 points at 2,880.17. Private economists polled by the Monetary Authority of Singapore tip GDP growth at 1.9 per cent this year, down from a forecast of 2.2 per cent in December and below last year’s 2 per cent. “That’s partly why (the STI hasn’t) hit 3,000 yet,” Mr Yong said. The Fed’s dovish shift reflect the difficulties many economies face amid a slowing China and the un- even American recovery. Singapore is facing growth chal- lenges after deeper-than-expected manufacturing contraction and a slowdown in the finance and insur- ance fields. “The slowdown in China is struc- tural in nature and the chance of a near-term improvement is low,” DBS senior economist Irvin Seah said. “Singapore’s manufacturing sector is already in recession, while its services sector is losing steam. A forecast of 1.5 per cent for the year implies at least one quar- ter of contraction. And the risk of a technical recession should not be discounted.” Nonetheless, Dr Ernest Kan, chief of operations for clients and markets at Deloitte Singapore, called the Fed’s move “responsible” as it helps lend stability to the global economy at a time of market volatility. An immediate effect has been to send the greenback down against a range of Asian currencies and gold up to about US$1,269 an ounce from US$1,233 on Wednesday. “Most central banks in Asia, in- cluding China, would welcome the weaker dollar, as it gives them fur- ther space to cut rates without cor- responding negative impact on the currency,” said Credit Suisse econo- mist Michael Wan. “For Singapore, it will help support the economy and consumer demand by reducing the pace of Sibor hikes. However, a more dovish Fed, if sustained over the rest of this year, will likely lower the probability of property cooling measures being removed.” The interest rates that affect busi- ness loans and mortgages here have been sliding in the wake of the de- clining greenback. The three-month swap offer rate slipped to 1.18441 on Tuesday, down nearly 33 per cent from a high of 1.76235 per cent on Jan 13. The three-month Singapore inter- bank offered rate (Sibor) is down at 1.24088 per cent yesterday, from a recent high of 1.2540 per cent on Jan 19. [email protected] Jeremy Koh A new fund focusing on water and waste-water treatment firms is looking for smaller Singapore com- panies to add to its portfolio. Tigris Water Fund, which also looks at companies treating sludge and converting bio-gas to usable forms, is aiming to invest at least 85 per cent of its capital in Asia. Launched in January, it is seeking to raise US$300 million (S$414 mil- lion) to US$400 million. It received commitments of around US$110 mil- lion in January from investors in- cluding Macquarie Capital and East- spring Investments. Mr Saud Siddique, executive chairman at Odyssey Capital, which sponsors the fund, said local firms in these sectors have an edge over regional ones. Singapore firms design more effi- cient treatment systems and have more access to the kind of advanced solutions developed by local univer- sities and companies, he said. Principal partner Daniel Yeung added that the firms also enjoy Singapore’s reputation for reliabili- ty and quality. Mr Siddique said over 90 per cent of the approximately 140 local firms in these sectors are small and medium-sized enterprises (SMEs). These firms generally do not have access to long-term bank funding to build their own treatment plants. They lack the assets that can serve as collateral for such bank loans. Such companies typically have an- nual revenue of between $10 mil- lion and $20 million and have usual- ly been in business for five to 15 years. They have remained small mainly because they provide ser- vices instead of owning plants and operating them for the long term. Tigris would help provide these companies with the capital for such projects, Mr Siddique said. “Once you start to own the assets, your revenues and size really go up by a lot.” Building a plant and operating it usually involves a contract that al- lows the firm to run the facility for up to 30 years, allowing the business to recover its capital and earn profits. Tigris provides advice on how to develop such projects – which are new to many SMEs – manage risks and structure sound agreements on operating the plant. The fund has not set a target on how much it would invest in Singapore compa- nies, but is ready to put funds in lo- cal firms with viable solutions. For local firms, the investable op- portunities outside Singapore in emerging economies in Asia alone are in the “tens of billions of dol- lars”, said Mr Siddique. An estimated 60 per cent of Asian households do not have access to clean water or sanitation. Also, only 22 per cent of waste water is treated in South Asia, and only 38 per cent in the case of South-east Asia. During the last two years, Odys- sey Capital helped a local water treatment company secure funding for a project it was struggling raise finance for as it was too small. As a result, the company was able to convince a financial institution to provide $5 million of funds to build and operate its own water treatment facility in China. The project turned out well and, because of cashflows generated, the company was able to seek more financing. The company’s annual revenues have grown by at least 50 per cent since the funding was secured. [email protected] It is looking at companies involved in water, waste-water treatment, as well treating sludge and converting bio-gas Mr Siddique (left) and Mr Yeung (far left) are looking for smaller Singapore companies to add to the Tigris Water Fund’s portfolio. ST PHOTO: TAMARA CRAIU Building a plant and operating it normally involves a contract that allows the firm to run the facility for up to 30 years, allowing the business to recover its capital and earn profits. Tigris provides advice on how to develop such projects – which are new to many SMEs – manage risks and structure sound agreements on operating the plant. GRIM OUTLOOK The slowdown in China is structural in nature and the chance of a near-term improvement is low. Singapore’s manufacturing sector is already in recession, while its services sector is losing steam. A forecast of 1.5 per cent for the year implies at least one quarter of contraction. And risk of a technical recession should not be discounted. ’’ DBS SENIOR ECONOMIST IRVIN SEAH, on the challenges Singapore faces Fed’s shift gives Asian markets surprise boost Water fund aims to help S’pore firms with liquidity Hula hoops get a round of applause once more. Find out more in mypaper.sg | FRIDAY, MARCH 18, 2016 | THE STRAITS TIMES | BUSINESS C3
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Grace Leong
News that United States interestrates will rise only at a moderatepace sent investors rushing intoriskier assets yesterday, pushingAsian currencies, gold and oil pric-es higher and the greenback down.
The spark came after the US Fed-eral Open Market Committee saidthey now expect to raise the bench-mark rate just twice this year, downfrom the four hikes they previouslypredicted.
Remisier Alvin Yong said yester-day: “The markets were taken bysurprise.”
It proved a pleasant surprise:
Hong Kong and Shanghai rose 1.2per cent, Shenzhen jumped 3.6 percent, Taiwan was up 0.4 per centand Malaysia up 0.6 per cent.
The Straits Times Index soared asmuch as 1.4 per cent to 2,883.39 atthe opening bell, but the down-grades of Singapore’s gross domes-tic product growth just a week be-fore the Budget reined in the rally.
But the STI still closed up 1.26 percent or 35.96 points at 2,880.17.
Private economists polled by theMonetary Authority of Singaporetip GDP growth at 1.9 per cent thisyear, down from a forecast of 2.2per cent in December and belowlast year’s 2 per cent.
“That’s partly why (the STI
hasn’t) hit 3,000 yet,” Mr Yong said.The Fed’s dovish shift reflect the
difficulties many economies faceamid a slowing China and the un-even American recovery.
Singapore is facing growth chal-lenges after deeper-than-expectedmanufacturing contraction and aslowdown in the finance and insur-ance fields.
“The slowdown in China is struc-tural in nature and the chance of anear-term improvement is low,”DBS senior economist Irvin Seahsaid. “Singapore’s manufacturingsector is already in recession,while its services sector is losingsteam. A forecast of 1.5 per cent forthe year implies at least one quar-ter of contraction. And the risk of atechnical recession should not bediscounted.”
Nonetheless, Dr Ernest Kan, chiefof operations for clients and marketsat Deloitte Singapore, called theFed’s move “responsible” as it helpslend stability to the global economyat a time of market volatility.
An immediate effect has been tosend the greenback down against arange of Asian currencies and gold
up to about US$1,269 an ounce fromUS$1,233 on Wednesday.
“Most central banks in Asia, in-cluding China, would welcome theweaker dollar, as it gives them fur-ther space to cut rates without cor-responding negative impact on thecurrency,” said Credit Suisse econo-mist Michael Wan. “For Singapore,it will help support the economyand consumer demand by reducingthe pace of Sibor hikes. However, amore dovish Fed, if sustained overthe rest of this year, will likely lowerthe probability of property coolingmeasures being removed.”
The interest rates that affect busi-ness loans and mortgages here havebeen sliding in the wake of the de-clining greenback.
The three-month swap offer rateslipped to 1.18441 on Tuesday,down nearly 33 per cent from ahigh of 1.76235 per cent on Jan 13.The three-month Singapore inter-bank offered rate (Sibor) is downat 1.24088 per cent yesterday,from a recent high of 1.2540 percent on Jan 19.
Jeremy Koh
A new fund focusing on water andwaste-water treatment firms islooking for smaller Singapore com-panies to add to its portfolio.
Tigris Water Fund, which alsolooks at companies treating sludgeand converting bio-gas to usableforms, is aiming to invest at least 85per cent of its capital in Asia.
Launched in January, it is seekingto raise US$300 million (S$414 mil-lion) to US$400 million. It receivedcommitments of around US$110 mil-lion in January from investors in-cluding Macquarie Capital and East-spring Investments.
Mr Saud Siddique, executivechairman at Odyssey Capital,which sponsors the fund, said localfirms in these sectors have an edgeover regional ones.
Singapore firms design more effi-cient treatment systems and havemore access to the kind of advancedsolutions developed by local univer-sities and companies, he said.
Principal partner Daniel Yeungadded that the firms also enjoySingapore’s reputation for reliabili-ty and quality.
Mr Siddique said over 90 per centof the approximately 140 localfirms in these sectors are small andmedium-sized enterprises (SMEs).
These firms generally do not haveaccess to long-term bank fundingto build their own treatment plants.They lack the assets that can serveas collateral for such bank loans.
Such companies typically have an-nual revenue of between $10 mil-lion and $20 million and have usual-ly been in business for five to 15years. They have remained smallmainly because they provide ser-vices instead of owning plants and
operating them for the long term.Tigris would help provide these
companies with the capital for suchprojects, Mr Siddique said.
“Once you start to own the assets,your revenues and size really go upby a lot.”
Building a plant and operating itusually involves a contract that al-lows the firm to run the facility for upto 30 years, allowing the business torecover its capital and earn profits.
Tigris provides advice on how todevelop such projects – which arenew to many SMEs – manage risksand structure sound agreements onoperating the plant. The fund has
not set a target on how much itwould invest in Singapore compa-nies, but is ready to put funds in lo-cal firms with viable solutions.
For local firms, the investable op-portunities outside Singapore inemerging economies in Asia aloneare in the “tens of billions of dol-lars”, said Mr Siddique.
An estimated 60 per cent of Asianhouseholds do not have access toclean water or sanitation. Also, only22 per cent of waste water is treatedin South Asia, and only 38 per centin the case of South-east Asia.
During the last two years, Odys-sey Capital helped a local water
treatment company secure fundingfor a project it was struggling raisefinance for as it was too small.
As a result, the company was ableto convince a financial institutionto provide $5 million of funds tobuild and operate its own watertreatment facility in China.
The project turned out well and,because of cashflows generated,the company was able to seek morefinancing.
The company’s annual revenueshave grown by at least 50 per centsince the funding was secured.
It is looking at companies involved in water, waste-watertreatment, as well treating sludge and converting bio-gas
Mr Siddique(left) and MrYeung (far left)are looking forsmallerSingaporecompanies toadd to the TigrisWater Fund’sportfolio.ST PHOTO:TAMARA CRAIU
Building a plant andoperating it normallyinvolvesa contract thatallows the firm to run thefacility for up to 30 years,allowing the business torecover its capital and earnprofits. Tigris providesadvice on how to developsuch projects – which arenew to many SMEs –manage risks andstructuresoundagreementson operatingtheplant.
GRIM OUTLOOK
The slowdown in China isstructural in nature andthechance of a near-termimprovement is low.Singapore’smanufacturing sector isalready in recession, whileitsservices sector is losingsteam. A forecast of 1.5 percent for the year implies atleastone quarter ofcontraction.And risk of atechnical recession shouldnot be discounted.
’’DBSSENIOR ECONOMIST IRVIN SEAH, onthe challenges Singapore faces
Fed’s shift gives Asianmarkets surprise boost
Water fundaims to helpS’pore firmswith liquidity
Hula hoops get around of applause
once more.Find out more inmypaper.sg
| FRIDAY, MARCH 18, 2016 | THE STRAITS TIMES | BUSINESS C3
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