| MONDAY, AUGUST 7, 2017 | THE STRAITS TIMES | C1

Wong Siew Ying

The brisk demand for new private homes here continued unabated, as more than half of the apart-ments at Le Quest, a mixed devel-opment in Bukit Batok, were snapped up over the weekend.

Chinese developer Qingjian Re-alty moved more than 280 of the 516 units available, with 200 of them sold within hours of launch on Saturday.

Qingjian told The Straits Times yesterday that the sales gallery will be closed from today until phase two of the sales launch, which will be announced at a later date.

Its robust sales come amid a strong pick-up in home sales this year. Developers here sold 6,039 new units in the first half, a 64 per cent surge from the 3,675 moved from January to June last year.

Last month, an executive condo-minium project – Hundred Palms Residences in Hougang – sold out all 531 apartments during its launch weekend.

Sales at the 99-year leasehold Le Quest far exceeded Qingjian’s rather-conservative sales projection of 150 units at a briefing last month.

Mr Alan Cheong, senior director of research and consultancy at Sav-ills, noted: “Not many new develop-ments are expected to launch in the area in the short term, so that is definitely a main factor in buyers’ consideration.”

The developer said average sell-ing price achieved was about

$1,280 psf. The majority of the sales ranged from studio apart-ments to three-bedroom units.

PropNex Realty, one of the mar-keting agents for Le Quest, said that most of the buyers are Singa-poreans, with a handful of perma-nent residents and foreigners.

“There was good demand for the smaller units, which appealed mainly to investors,” added Mr Benjamin Tan, senior associate dis-trict director at PropNex.

Mr Stewart Lim, who bought a one-plus-study unit for $652,000, said he was drawn to the mixed de-velopment. “I am buying partly be-cause prices may go up in the fu-ture... I may rent it out, but if rents are soft I will live in the unit,” added Mr Lim, 28, a real estate agent.

International Property Advisor chief executive Ku Swee Yong said the ample liquidity in the market has been fuelling sales at new launches.

Mr Ku noted: “Buyers of this project are betting on future capi-tal gains with the Jurong Innova-tion District and Tengah Forest Town coming up. But rentals in the Bukit Batok area remain weak in the near term.” The leasing market in that area could also become more competitive as supply from Tengah Forest Town comes on stream in the future, Mr Ku added.

Apart from the residential units, Le Quest has more than 6,000 sq m of retail space on the ground floor. The development is expected to be completed at the end of 2021.

wongsy@sph.com.sg

Annabeth Leow

Electrical, IT and furniture retailer Courts Asia is planning a $10 mil-lion revamp of seven of its 15 outlets here, starting with an overhaul of its flagship megastore in Tampines.

The firm’s new country chief executive, Mr Ben Tan, told The Straits Times of the plans after Courts Asia in June unveiled stable financial results.

He said that enhanced in-store experiences, online offerings and an increased focus on services are also in the pipeline, as the company seeks to differentiate itself in a highly competitive retail landscape.

“The market’s soft. It has not crumbled, but it’s definitely not bullish,” said Mr Tan. “Basically, as retailers, we have to make sure we focus on our customers.”

He anticipates a major renovation

of the megastore to be completed by the fourth quarter of this year, with other outlets to be redone by next March. Courts’ stores in Singa-pore include branches in Ang Mo Kio, Toa Payoh and Clementi.

Mr Tan believes in striking while the iron is hot. “We’re starting from a good base,” he said, citing its strong showing for the year ended March 31. Cash and bank balances stood at $98.7 million as at that date.

The group posted a net profit of $23.7 million , up from a restated net profit of $6.8 million a year earlier.

Revenue from the Singapore mar-ket makes up about two-thirds of Courts Asia’s top line.

Alongside the store rejuvenation, Courts (Singapore) will also unveil a new website by the end of the year .

The management said that it has realised that it needs stronger online platforms, after its website struggled to keep up with customer traffic during online promotional events such as Cyber Monday.

But inventory and delivery ser-vices will be able to meet the strain, he said. “Our logistics capability is very strong.”

Mr Tan added that the retailer is

in a “good position” to move into omni-channel sales, but has to get cracking.

He has set a goal for online rev-enue to reach 15 per cent over the next decade, up from between 2 per cent and 3 per cent now.

Another area that Mr Tan is tar-geting in his spring-cleaning of the company is an emphasis on ser-vices, with new credit packages part of his revamp plans.

In the 12 months to March, earned service charges made up 11.3 per cent of the turnover, while

5.7 per cent of revenue came from providing services such as cleaning, installation, repairs and warranties.

Mr Tan, who took over Courts (Singapore) in April this year, had previously been head of Challenger subsidiary Andios and chief operat-ing officer of Challenger Technolo-gies (Singapore).

Retail marketing expert Lynda Wee told The Straits Times that reinventing the in-store experi-ence is a savvy strategy for bricks-and-mortar stores to stay competitive.

“‘Order-getting’ is about arousing customers’ desires to buy via emo-tions and brand activation,” said Dr Wee, who runs her own consul-tancy and is also adjunct associate professor at Nanyang Technologi-cal University’s Nanyang Business School. “Hence, the stores can be a marketing and branding channel.”

She suggested that retailers “blend offline and online seamlessly” to suit how customers use their mobile de-vices and social media.

leowhma@sph.com.sg

Tan Min Lan

With economic activity percolating worldwide, the argument for maintaining ultra-loose policy is fast losing credibility among developed market central banks.

The Federal Reserve, the world’s beacon for monetary policy direction, looks set to hike interest rates later this year, the fifth time since the global financial crisis (GFC), and to start reducing the size of its balance sheet.

Nonetheless, inflation worldwide has been lower than anticipated. The withdrawal of liquidity globally will therefore be gradual and unlikely to alarm bond markets. We expect the US 10-year Treasury yield to rise moderately to 2.5 per cent over the next six to 12 months, while ageing demographics and the global savings glut should keep the 10-year benchmark yield firmly capped at 3 per cent until 2019.

Still, as one central bank after the next take steps to move away from the post-GFC era of super-easy policy, the implications for regional and worldwide assets could be profound.

Borrowing costs rising in Hong Kong and SingaporeOne consequence will be higher borrowing costs in Hong Kong and Singapore. The monetary regimes of the two city-states are strongly influenced by the Fed’s. So when United States interest rates rise, theirs typically do too. With another Fed hike on the horizon, higher three-month interbank offered rates in Hong Kong (HIBOR) and Singapore (SIBOR) are likely over the coming quarters.

But they will not follow in lockstep with the Fed: At present, both the HIBOR and the SIBOR are trading at a discount to the US dollar London interbank offered rate (LIBOR). The HIBOR discount is currently around 50 basis points. This large gulf is due to the ample liquidity conditions in Hong Kong, as money supply growth has accelerated to 15.9 per cent year on year – the fastest pace since December 2007. Such flush liquidity conditions are a result of mainland Chinese investors channelling their money into the city as a way to protect their investments from a weakening domestic currency, as well as foreign investors placing funds in the city as a conduit for investment in China.

A weaker US dollar and the Fed’s slow hiking path should preserve the HIBOR’s discount to the LIBOR. In Singapore’s case, the three-month SIBOR should rise to 1.5 per cent in six months and to 1.8 per cent in 12 months. The divergence versus the US dollar LIBOR should be relatively limited as the demand for SGD is dampened by the Monetary Authority of Singapore’s (MAS’) non-appreciation exchange rate policy, which should hinder potential gains for the currency.

MAS has indicated that it will maintain this policy for an extended period. We see the SGD

trading at around 1.38 against the US dollar for the next 12 months, making it a relative underperformer versus other currencies in the region.

For SGD-based investors, its low carrying cost makes it an ideal funding currency for a long position in the Indonesian rupiah, which has an attractive yield of around 4.5 per cent per annum. Given Indonesia’s improved current account dynamics and its significant build-up of forex reserves over the past few years, the rupiah appears well placed to withstand a gradual rise in US interest rates.

Don’t bet on further strength in Asia-Pacific currencies The US dollar’s sell-off has brought Asia-Pacific currencies close to the threshold levels of many central banks. The Reserve Bank of Australia responded swiftly to quell markets’ perception of imminent rate hikes, after the latest central bank minutes sparked a currency rally by referring to a “neutral nominal rate” of 3.5 per cent, which is much higher than the current policy rate of 1.5 per cent. The Thai central bank said that the baht has strengthened “too fast recently”, pointing to the currency’s 2.3 per cent rally in the past month. The SGD nominal effective exchange rate, meanwhile, has risen close to the upper bound of MAS’ policy band, and a further move to that level could warrant forex intervention by the central bank.

Moreover, several market indicators signal that Asia-Pacific currency strength against the US dollar could start to consolidate. Speculative net short US dollar positioning is now at around US$9.7 billion (S$13 billion), levels not seen since February 2013. Also, interest rate markets are now pricing in less than a 10 per cent chance of a Fed rate hike next

month and a 40 per cent chance of a Fed hike by December. Given such bearish sentiment on the US dollar, the risk appears skewed towards a US dollar recovery versus Asia-Pacific currencies should US economic data surprise positively.

Euro strength exceeds expectationsThe euro’s appreciation against the US dollar last month exceeded expectations, rising from 1.13 to 1.18. As the US dollar weakened across the board, the euro soared on solid euro zone economic prints and expectations of European Central Bank (ECB) tapering. The bloc’s economy has expanded for 17 straight quarters, and unemployment hit an eight-year low of 9.1 per cent in June. Attention has now turned to the ECB’s meeting next month, where an announcement about the tapering of its asset purchase programme is expected.

We expect the euro to gain even more ground against the US dollar and reach 1.2 over the next 12 months. While the euro’s swift gains in recent weeks have begun to hurt euro zone equities, the relative underperformance of euro zone stocks looks overdone. As a relatively open economy – with 50 per cent of revenues generated outside the region – the euro zone is benefiting from a synchronised upswing in global demand.

Gold – a viable insurance assetAlthough we remain overweight on global equities and do not expect a major increase in market volatility in the near term, gold’s asymmetric return payoff makes the yellow metal an interesting insurance asset.

The opportunity costs of holding gold are low as US real interest rates should continue to stay negative. Also, the absence of catalysts for US dollar strength as well as rising demand among wealthy Asian buyers should keep gold prices from falling below US$1,200 an ounce.

So, if benign macro conditions persist, gold could trade at US$1,250 an ounce, incurring minimal costs for investors in a pro-risk market.

For investors in Asia, where shifts in the local equity markets are highly correlated with shifts in the underlying currencies, gold’s insurance qualities may be even more valuable.

• The writer is the Asia-Pacific regional head at the chief investment office of UBS Wealth Management.

Retailer to also boost services, in-store experiences, online offerings, says new country CEO

Mr Ben Tan believes the group’s strong showing in the last financial year gives it a good base to work from. As competition heats up, Courts has to keep its focus on its customers, he said. ST PHOTO: KEVIN LIM

Artist’s impression of Le Quest, a mixed development in Bukit Batok. The sales gallery will be closed until phase two of the sales launch. PHOTO: QINGJIAN REALTY

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News analysis

Le Quest launch keeps brisk home sales going

Courts planning $10m revamp of 7 S’pore outlets

JOYCE TEEFROM CHILD HAWKER

TO DBS BANKER C2

How the reversal in ultra-loose policy affects investments

Singapore and Hong Kong interestrates track Libor

Source: BLOOMBERG, UBS (as of July 19, 2017) STRAITS TIMES GRAPHICS

%

July 14 July 15 July 16 July 17

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0

USD LIBOR 3M HIBOR 3M SIBOR 3M