Forum upbeat on Asian growth

Source : Business Times – 12th Sep 2009

WHAT a difference a year makes. Last year, the mood at the annual CapitaLand International Forum on the property sector was bleak as speakers surveyed a gloomy global economy. Yesterday, a year on, speakers at the same event held at the Raffles Hotel were pointing cautiously to a revival of growth and brighter prospects in areas such as real estate investment trusts (Reits) and in Asia, particularly China.

Ms Gail Fosler, president of United States-based business research organisation The Conference Board, who also spoke at last year’s event, said future global economic growth rates will be much lower than in recent times – but not unusually low.

The projection is 3.2 per cent for 2006 to 2016, compared with more than 5 per cent on average for 2004 to 2007 and some 4 per cent on average from 1996 to 2006. Virtually all global growth will be in emerging markets, she said. The notion of US consumption denting Asian growth is miscast, she said. ‘China is much more a factor in Asian growth than the US.’

Indeed, China, as an economic locomotive, is pulling up Asia and increasingly the rest of the world, said Professor Tan Kong Yam of Nanyang Technological University’s division of economics.

One factor was that China’s dependence on exports is less than 10 per cent – instead of the headline exports-to-GDP ratio of more than 30 per cent – as its exports contain a lot of imported components. ‘China is becoming like the sun. More countries are revolving around it,’ said Prof Tan.

Ms Fosler said the world is now in search of ’stores’ of value and increasingly bidding up commodities and real estate. It is thus ‘extremely important’ for Asia to be watchful on asset and price accumulation, as the risk of an Asian asset bubble and instability is greater than the risk to growth, she said.

Mr Anthony Ryan, head of real estate investment banking, Asia, at JP Morgan, said a bubble could emerge in the Asian residential property market, as he has seen ’some fairly quick rises in prices’, particularly in China and India. Still, the Asian Reits outlook is positive and new products will emerge. Singapore could look forward to two to five Reit listings in the next two years, and more mergers and acquisitions, he said.

Separately, Reuters reported that Mapletree Investments will launch a Reit when market conditions are more favourable. The proposed Mapletree Commercial Trust will have assets worth as much as $4 billion, with properties such as the VivoCity mall and PSA Building.