ERA Daily Research - 15 June

Sovereign wealth funds pumping more money into real estate, alternative assets

The Business Times, 15 Jun 2021, Jun   

By Fiona Lam

SOVEREIGN wealth funds (SWFs) are injecting more capital into higherreturning alternative assets such as property, although some heavyweights fall short of their targets. Investments into real estate, private equity and infrastructure by such state-owned investment funds grew substantially over the past decade.

SWFs' cumulative actual allocations to the three asset classes more than tripled to US$717 billion last year, from US$206 billion in 2011, a report by alternative assets data provider Preqin in partnership with law firm Baker McKenzie showed.

There were also "particularly large increases" in their combined target allocations to real estate, private equity and infrastructure, with the median standing at 30 per cent of total AUM (assets under management) in 2020, up from 18 per cent in 2011.

Specifically, when it comes to capital deployed into real estate, SWFs are punching "far above their weight", the report stated.

While SWFs make up just 1 per cent of the number of property investors globally, they account for 8 per cent of real estate AUM, Preqin's fourth quarter 2020 data showed.

Average commitment sizes in this asset class are about US$136 million, which is in line with superannuation schemes and far higher than all other investor types. Together, the top 20 SWFs' combined actual allocations to real estate exceeded US$300 billion.

As these investors often focus on high-quality trophy assets in major cities, they are "uniquely equipped" to take long-term and counter-cyclical positions, the report noted.

Asked which property types may be more popular, Preqin head of research insights Dave Lowery said that SWFs' propensity to hold larger, trophy assets points towards more "core" investments, often held directly rather than within fund structures. Properties held via "core" investment strategies require little asset management and generate stable income with low risk in the long run.

"These types of assets will generally fall within the office, high-end retail or hospitality sectors, but there are also growing allocations towards data centre assets, for example, which straddle real estate and infrastructure," Mr Lowery told The Business Times. "SWFs are also targeting industrial assets through acquisitions of operating and holding companies, and through portfolio deals."

Singapore's GIC this month said it will set up an investment platform for retail-led mixed-use assets in India, under a joint venture with a mall developer. GIC's other recent investments include the acquisition of a portfolio of 45 industrial and logistics assets in Australia with ESR Cayman.

Sovereign funds are among "the most patient" of capital providers, and are "attracted to long-hold strategies in assets that bring an inflation hedge, which can help them deliver on their intergenerational ambitions", Preqin said.

However, the biggest SWFs tend to fall short of their target allocations for alternative assets. "This under-allocation relative to targets suggests that if the largest SWFs were to achieve their target allocations, capital flows to alternatives would increase significantly," the firm noted in the report.

Some of the biggest SWFs are at the lower end of their target ranges, or below their own stated minimum levels.

GIC has a current allocation of 20 per cent of AUM to alternatives, equal to its minimum target but below its maximum target of 28 per cent. Korea Investment Corporation's current allocation is 15 per cent, below its stated minimum target of 25 per cent.

Overall, real estate is the alternative asset class with the widest gap between target and actual allocations, at 3.3 percentage points.

But this does not necessarily mean a sharp increase in real estate commitments is imminent, Preqin said.

SWFs have remained below their real estate targets by an average of 3.1 percentage points in the past decade, thus "it would be presumptuous to expect the gap to close rapidly in the near term", the firm added.


Singapore GDP tipped to grow 6.5%, led by manufacturing and exports: MAS survey

The Business Times, 15 Jun 2021, Jun   

By Sharon See

THE strong global economic recovery is fuelling optimism among private-sector economists, who have further raised their full-year Singapore outlook to 6.5 per cent, the central bank's survey of professional forecasters on Monday showed.

In the previous March edition of the survey published by the Monetary Authority of Singapore (MAS), economists had predicted full-year gross domestic product (GDP) to expand 5.8 per cent. The June survey was sent out on May 25, and drew 24 responses.

"A stronger global recovery led by the US and Europe's reopening is boosting the outlook, even as Singapore and Asean are struggling with a virus variant wave," said Chua Hak Bin, senior economist at Maybank Kim Eng.

UOB economist Barnabas Gan added that Singapore, given its export-oriented nature, has benefited from the recovery of global trade seen as early as last year.

"This in turn will benefit the manufacturing sector, as a sizeable portion of manufacturing is geared towards meeting foreign demand. In the same vein, the rise in global semiconductor-related demand, coupled with the increase in digital solutions adoption - for example, 5G technology and cloud computing - around the world, are also formidable drivers that should support the overall manufacturing sector," he said.

The survey found that economists appear most bullish about manufacturing and non-oil domestic exports. The former is now expected to expand 8.3 per cent instead of 4.7 per cent in 2021, and the latter, 7.5 per cent instead of 6.9 per cent.

Construction is now tipped to grow 19.3 per cent, lower than the 22.5 per cent expansion predicted in the earlier survey. The overall optimism persists despite Singapore's recent setback with the pandemic, as a fresh wave of infections seeded by the Delta variant from India prompted tighter restrictions and border controls.

"Singapore is heavily dependent on external demand; and the strengthening manufacturing and exports outlook is cushioning the negative impact from the recent lockdown. The hardest hit segment, F&B, accounts for only about 1 per cent of GDP. Retail, which can still remain open, accounts for about 2 per cent of GDP," said Dr Chua.

Accordingly, for the second quarter, survey respondents are expecting the economy to grow 15 per cent year on year, coming off the low base during Q2 last year, when Singapore was in the middle of a "circuit breaker" or partial lockdown.

Economists are expecting headline inflation to reach 1.4 per cent, up from their earlier prediction of 0.9 per cent. Core inflation, which excludes accommodation and private road transport costs, is set to hit 0.8 per cent, up from 0.7 per cent in the March survey.

The labour market is expected to continue its recovery, with respondents expecting unemployment rate to reach 2.7 per cent by year-end, down from 2.9 per cent in the March survey.

However, a further deterioration of the Covid-19 pandemic remains respondents' most-cited downside risk, followed by geopolitical tensions and a slower-than-expected labour market.

On the flip side, effective containment of Covid-19 was the most frequently-cited upside risk to Singapore's growth outlook. More respondents also flagged the stronger-thanexpected manufacturing sector performance as a possible upside.

UOB's Mr Gan said Singapore's "rosy economic backdrop" is thus far a unique scenario when compared to its neighbours. "Moreover, Singapore commands one of the highest percentages of population that is fully vaccinated against Covid-19 across Asia at over 30 per cent as of June 2021, suggesting that the economy is poised to move on from the snares of the pandemic," he said.

As for 2022, GDP is projected to grow 4 per cent, said respondents.


Property market sees rise in spoof messages from purported agents

The Business Times, 15 Jun 2021, Jun

By Lisa Kriwangko

THE stronger property market in Singapore may have unleashed a new trend - that of text spoofing.

There has been a rise in spoofing cases, in which scammers pose as property agents asking homeowners if they want to rent out their spaces, said analysts.

Cybersecurity provider Group-IB noted that it began seeing more of such property spoof cases since mid-March, though no numbers were available.

He Feixiang, adversary intelligence research lead at Group-IB, said it coincides with recent cybersecurity breaches, including RedMart's user data breach first reported in October 2020.

"It is possible that rogue marketers purchased delivery addresses related to PII (personally identifiable information) from the dark web and picked accounts with condo addresses as business opportunities," Mr He told The Business Times.

In the case of data breach at RedMart, 1.1 million accounts registered with the online grocer had been compromised, earlier reports said.

One common practice, as observed by BT, is scammers claiming to be PropNex agents, and blasting text messages to enquire about rental. PropNex is Singapore's largest property agency, data from Council for Estate Agencies (CEA) showed. The latest available from the CEA website, dated Jan 1, 2021, listed PropNex as having 8,918 agents. 

When asked to review three spoofing messages seen by BT, Carolyn Goh, director of corporate communications and marketing at PropNex, said the messages were not sent by PropNex salespersons.

One example of the spoof messages read: "Dear landlord, tenants can begin rental in mid June for two years. Is your whole home for rent? Bernice Propnex".

Mr He and his team tried calling three phone numbers which had previously sent such messages, and found two of them inactive. The remaining number was active, but went unanswered.

BT also responded to one text message asking where the text sender got the number. It did not receive a reply.

Mr He said the best strategy is to avoid contact with the scammers. "Even replying to the scammers could give a useful signal to them, as they would know your number is active," he said.

Kerry Singleton, managing director of cybersecurity at Cisco Asia-Pacific, Japan and China, told BT that phishing attacks and other scams tend to leverage on "hot topics of interest".

Mr He said: "The property industry handles large cash transactions and sensitive PII. Both are very attractive to scammers."

While the messages sent initially do not come with clear call-to-action or attached links, that confirmation and access to a "live" number opens up an opportunity for scammers to eventually access a victim's personal data, credit card information, log-in data and other details, said analysts.

The rise in such phishing texts could be partly driven by the pandemic too, as scammers take advantage of people's fears during crises, added Cisco's Mr Singleton.

Figures from Cisco Umbrella noted the number of phishing threats grew 40 per cent last year from the year before. In the first half of last year, banking-related scams jumped more than 20-fold to 898, said the cloud security platform.

If the text is spoofed from overseas, the sender can make the messages appear to come from local phone numbers, noted Jeff Ong, principal cybersecurity consultant at Saas company Horangi.

Industry observers said that not all such messages are scams or phishing attacks; Mr He said that some cases could be instances of "rogue marketing practice", done cheaply.

Singapore's Do Not Call (DNC) Registry lets consumers opt out of marketing messages addressed to their Singapore telephone numbers.

CEA announced on its website last December that property agents are to abide by DNC provisions under the Personal Data Protection Act.

This means agents must check that the telephone number is not registered with the DNC Registry. They should also send out messages with clear and accurate information identifying themselves, as well as provide their contact details; the agent's telephone number should not be concealed when a call is being made, too.


Drop me a message

I will get back to you soonest possible!