John, a finance worker based in Hong Kong, is not looking forward to moving to Singapore.

The expatriate, who declines to give his real name or further identifying details, says that he and his family live a “very spoiled existence” in the former British territory, which is coming under increasingly strict Chinese rule.

“I’m staring out at the ocean looking at the pool in front of me as we speak. I know we are not going to have that,” John says during a call from his current home, as he frets about the property market heating up across the South China Sea.

“We are going from a house with a pool, a tennis court, a garden, five bedrooms, to somewhere where we are looking at an apartment, basically,” he says.

Yet John feels he has little choice. He is one of many foreign workers who this year have sought to escape Hong Kong’s strict coronavirus pandemic measures. The tough rules have proved to be the final straw for many in the city who had already endured nearly a year of escalating political turbulence before coronavirus arrived in early 2020.



Although these restrictions have been gradually eased in recent weeks, a large number had already made the move. Reports earlier this year of parents being separated from their children in hospital wards brought China’s crackdown particularly close to home, pushing many families to pack their bags.

The most obvious new destination has been Singapore, another Asian finance hub where, in contrast to Hong Kong, business travellers no longer need to quarantine on arrival. Long seen by some as the Chinese city’s smaller and less lively cousin, its appeal was boosted after it started to lift Covid-19 restrictions last autumn. Curbs on holiday travel, restaurants and nightlife have all been dropped sooner than in Hong Kong.

In the first four months of this year, the number of visitors arriving in Singapore from Hong Kong increased more than 13-fold year-on-year to 13,678, according to official data. The figures include tourists as well as business travellers.



Relocating has not been simple, however. Besides the normal troubles associated with moving, expats have had to contend with rising house prices, unprecedented competition for school places and increasingly stringent visa requirements.

In March, the Financial Times reported that some of Singapore’s top private schools were receiving up to 15 applications for every one place, as parents fleeing Hong Kong battled to secure a spot. Craig Considine, chief executive of one of the city-state’s most popular international schools, Tanglin Trust School, says demand has remained “very strong” throughout the year. With places so oversubscribed, he adds, new offers will not be made until the end of 2022.

Estate agents are also being bombarded with calls. In the first quarter of this year, an index of private home rents rose 4.2 per cent over the previous period, reaching the highest level since records began, according to Singapore’s government. The authorities provided only an index, rather than raw rent figures. Private home rents in Hong Kong, meanwhile, dropped almost 2 per cent in the first quarter.

Most of the residential towers that trace the Singapore skyline are public housing, with about 80 per cent of residents living in these apartment blocks, leaving new arrivals racing to snap up the much smaller selection of private properties.

Areas favoured by affluent foreigners have become particularly competitive, according to Hari Krishnan, chief executive of Singapore property site PropertyGuru.

“If you wanted a [house] along Bukit Timah near the British school, you’re screwed,” he told the FT earlier this year, referring to a sought-after residential area near downtown Singapore with one of the city’s densest concentrations of private housing.

Leonard Tay, head of research at estate agent Knight Frank’s Singapore office, expects rents to continue rising for up to 15 months. It is “not just the guys from Hong Kong” heating up the market, he adds, pointing to a shortage of housing supply after construction was disrupted during the pandemic.



As well as Bukit Timah, Tay says the areas around the Orchard Road shopping district and near the beach in East Coast Park have seen particularly high demand.

Relocation headaches have been made more painful by recent government measures to stem the influx of foreign workers. Singapore, typically seen as one of the world’s most open economies, has long welcomed international corporations. But competition for jobs has hardened attitudes against the high-earning migrants who frequent the central business district and pricey bars along nearby Clarke Quay. The government has felt under pressure to respond.

Officials have raised the base pay required for visas on three occasions in as many years, with a new minimum salary of about $44,000 for professionals coming into force this autumn. For people in their mid-40s, that rises to more than $91,000. With companies saying they are under pressure to favour locals, not every family who might have expected to make the trip has been able to do so.

“[The government] has been very explicit they don’t want us to move more back-office people,” said the Asia head of one international bank last month. “They’re happy for us to have a bigger back-office operation as long as we hire locally.”

Daniel Beatty, who relocated from Hong Kong in September, says his wife has struggled to get a job amid the pushback against foreigners.

But the business executive himself is reluctant to hire other expats. “I’m looking at the school fees, the rental costs,” he says. “People will be demanding more pay to move here. I’m very reticent to bring even more people to Singapore.”

Westerners have been making the journey to the island cities of Hong Kong and Singapore — separated by a roughly four-hour flight — since as long ago as the 19th century, when both were British colonies. In more recent decades, foreigners in search of fortunes and warmer climes continued to travel to and from the cities’ financial districts where, instead of colonial buildings, glass offices occupied by the world’s largest banks now stand.

But, despite the two cities’ connections, those recently arriving in Singapore have found living there to be a very different experience.

The tiny city-state secured independence from British rule in 1959, decades before Hong Kong was handed over to China. Under the uncompromising guidance of its first prime minister, Lee Kuan Yew, it transformed in a matter of years from a trading outpost with scarce natural resources to a low-tax business centre.

Rainforests were razed, as were many of the city’s traditional shophouses — low-rise buildings incorporating residential and commercial spaces. Land was reclaimed from the sea to build more sleek, perpendicular towers. High state funding for housing and healthcare appeased voters, while political dissent was often swiftly stamped out.



These clampdowns have continued to the present day. In 2020, Singapore charged an activist who stood alone and held up a cardboard sign bearing a drawing of a smiley face with participating in an “illegal public assembly”.

Foreigners who avoid such demonstrations often find Singapore to be comfortable, clean and safe, while somewhat lacking the spirit suggested by its moniker, the Lion City. But after witnessing violent street protests and increasing political change in Hong Kong, some are grateful for the predictability of life in Singapore.

“Everyone goes: ‘Hong Kong, Singapore: same, same’. But actually it is not, it is really different,” says Heather Thomas, an American business owner who recently moved from Hong Kong. “The pace of life is a little slower, which is not a bad thing necessarily.”



Another entrepreneur who arrived this year says that Singaporeans are “still very cautious” about coronavirus restrictions, despite the relaxation of the rules. Like others, he was loath to speak publicly about his new home.

“In Hong Kong it is immediate,” he says of how Hong Kongers responded when coronavirus restrictions were temporarily lifted in previous years. “You open the gyms; the gyms are full.”

The adjustment to Singapore is also physical. About 2,500km south of Hong Kong, it sits just one degree north of the equator.

“It is brutal,” says the entrepreneur. “[During my first month] here I could not get enough sleep. I was always worn out from the humidity.” He adds: “You order a whisky sour and the ice cube melts in 30 seconds.”

After adapting to their more humid and docile new city, many professionals are nevertheless hopeful about their future in Singapore. Thomas, who has run a Pilates exercise business in Hong Kong for 17 years, was already considering an expansion to the city-state before the pandemic struck. The struggles her business faced subsequently pushed her to accelerate those plans and start a new life in Singapore.

“We need to diversify . . . We have been suffering on and off with closures for the last three years,” she says. “[In Singapore], there is a place for classical Pilates and there is an increasingly sophisticated clientele. There is demand [in a space] that has not been occupied yet.”

With more people like her landing in Singapore, its prospects as a hub for small businesses may be rising.

“It really does seem that [Singapore is now a better place to start a business than Hong Kong],” she says. “And it is an hour and a half to Bali. It’s great.”

Until he relocated temporarily to Singapore at the start of this year, Covid-19 had loomed large over Phil Krichilsky, who runs a consultancy for businesses in Asia. When word first began to spread of the virus in 2019, he says he was working for a manufacturing client just a two-hour journey away from Wuhan, the Chinese city where the virus was first detected. From his home in Hong Kong, he has spent much of his time since then navigating Beijing’s unpredictable pandemic policies.

Now, like many who arrived in Singapore this year, he feels liberated simply because he is able to travel freely across the border. “When I was a kid, there was a game called whack-a-mole,” he says. “You knew what was going to come up [but] you didn’t know when . . . The inconsistency [in Hong Kong] makes it next to impossible for business executives to work in the mainland or the rest of the world.” Arriving in Singapore, by contrast, he was “immediately” awed to discover that clearing customs and leaving the airport took only 20 minutes.

“I went out for a walk [and restaurants were inviting me in],” he recalls. “I thought I was going to have a heart attack, man. I thought it was so cool.”

Additional reporting by Andy Lin

Oliver Telling is the FT’s Singapore correspondent

Wong Pei Ting
1199 words
9 June 2022
Business Times Singapore
STBT
English
© 2022 SPH Media Limited

Accountancy and chemical engineering no longer the preferred tracks at local universities

INDICATIVE grade profiles at local universities suggest that Singapore's brightest young minds have had a change of heart in their preferred education or career track, and are choosing courses that will lead to hot jobs in fields such as data science and environmental sustainability.

An analysis by The Business Times found recent batches of students less inclined than before towards accountancy, chemical engineering and aerospace engineering – all courses where prospective students once faced stiff competition for places. Courses related to data and analytics, however, are rising in popularity, as are those on the environment.

Going by A-Level grades, the bar to get into accountancy at the Nanyang Technological University (NTU), for instance, has steadily declined to BBC/C last year, from AAA/B in 2012. (The first three grades are for H2 subjects and the fourth, for the H1 subject the students sat in the GCE Advanced Level examination.)

Up till 2016, at least 90 per cent of students who signed up to read accountancy at the National University of Singapore (NUS) scored straight As in their A-Levels. With the drop in interest since, ABB/B was enough to secure a spot last year.

The picture is not too different at Singapore Management University (SMU), where BBC/C was also enough to snag a spot in the once-preferred course last year. It is now more difficult to enter SMU's business course, which required at least 4 Bs last year - never the case before 2019.

Courses that run in the same leagues as law and medicine are, expectedly, those that set students up for a tech-driven career: computer science, data science and artificial intelligence (AI), and business analytics.

Straight-A students have also increasingly looked to NUS' food science and technology programme, and NTU's environmental earth systems science programme, as viable options. Between 2019 and 2021, the 10th percentile profile of grades for the NUS course was consistently 4 As; for the NTU course, the grade profile was AAA/B in 2019, AAA/A in 2020 and AAA/B in 2021.

The cut-off for NUS' environmental studies course peaked in 2016, with 4 As as the bar. This grade profile has stayed robust, with the 10th percentile student entering with AAA/C since 2017, though it dipped to AAB/B last year.

These grade profiles, coupled with an apparent decline in interest in chemical engineering (which opens up career pathways in the petrochemical industries), could be a sign of students' interest in sustainability-related fields.

Green turn

Several students The Business Times spoke to said as much. Wong Chun Hong, a 29-year-old PhD candidate in food science at NUS, said more straight-A students are entering the course due to the increased interest in alternative meats. "The younger generation are more interested in trying to make a difference to the environment and society," he said.

Yale-NUS College student Abery Lia Chan, 21, who picked environmental studies as her major based on her interest in policy-making and energy transitions, said students are looking for "a better way to live on earth".

NUS environmental studies student Willis Lau, 24, said he initially accepted the university's offer of a place in the life science course, but switched to environmental studies because it is more aligned to his interests in geography and climate change.

Now that he is graduating, he sees many doors open to him, with companies paying more attention to sustainability and ESG (environmental, social and governance), and the public sector embarking on the Singapore Green Plan 2030.

Opportunities abound in research as well, he said, as more nations are looking to investigate nature-based climate solutions and carbon accounting methods that would help them fulfil their Paris Accord obligations.

Data focus

Some straight-A students looking to make a mark in the business world have flocked to business analytics - a programme offered by NUS' School of Computing. At least 90 per cent of the more than 200 places available in the course over the past 3 years went to A-Level graduates with 4 As.

Students of this course can pick up a financial analytics specialisation relevant in fields such as investments and fund management. Courses include Analytics for Capital Market Trading and Investment, Risk Analytics for Financial Services, Mining Web Data for Business Insights, Fraud Analytics, and Compliance and Regulation Technology.

A 25-year-old NUS business analytics undergraduate who declined to be named said he hopes to join the consulting industry, and had picked the course for its combination of programming, statistics and business specialities.

He believes this combination would not have been possible otherwise, saying: "A general student from business and accountancy would be lacking the level of proficiency in programming as well as the statistical knowledge required to excel in the field such as data science."

Donald MacDonald, newly appointed as OCBC's first head of group data office on Jun 1, believes the rush to data science began in 2012, when the Harvard Business Review called it "the sexiest role of the 21st century".

OCBC's data teams work on challenges in all parts of the bank, including making stock market recommendations and helping to reduce financial crime, he said, adding that the variety is a big draw to many who join the ranks.

"Good scientists have to constantly learn to stay at the forefront of this cutting-edge field, and traditional graduate roles such as accountancy may not offer the same dynamism," he added.

Remaking accountants

Commenting in his personal capacity on the apparent decline in interest in accountancy, corporate governance expert Mak Yuen Teen, an accountancy professor at NUS, said the latest grade profiles are of some concern.

"We need to look at our curriculum, professors, value proposition, and whether our accountancy and business degrees produce students who can think, solve problems and apply (what they learned) in the real world," he said.

The drop in prestige of accountancy courses could also be due to a misunderstanding that the accounting profession could one day be replaced by artificial intelligence (AI).

Said Mak: "Maybe the profession as a whole needs to explain its value proposition in an AI world. Replacing manual work is not a bad thing at all, as accountants can move up the value chain in terms of value creation."

Already specialists in generating, analysing, interpreting and using financial information, accountants are able to use of their comparative advantage to step up and make sense of non-financial information, which has become just as important, if not more so, given the ESG push, he added.

But he also recognised that the curriculum needs some catching up.

"Just as the accounting profession is getting more involved in setting sustainability standards and this whole ESG movement, our curriculum needs to change to reflect this," he said.

"ESG-related topics should be better integrated into the curriculum, and business schools should look at new offerings or majors in such areas."

SPH Media Limited

Mindy Tan
333 words
10 June 2022
Business Times Singapore
STBT
English
© 2022 SPH Media Limited

Changi Airport Group (CAG) will be reopening Terminal 4 (T4) in September 2022 and commencing departure operations in the southern wing of Terminal 2 (T2) in October in a bid to meet the full recovery of pre-Covid-19 passenger traffic in the Northern Winter Season that begins Oct 30.

Arrival operations at T2 have commenced since May 29. Meanwhile, expansion and upgrading works in the northern wing will continue.

Passengers arriving at T2 can look forward to brand new stores by The Shilla Duty Free for beauty products and Lotte Duty Free for duty-free wines and spirits in August and September respectively. A cluster of up to 4 food and beverage (F&B) concepts will open in the arrival hall in October.

T4 meanwhile will be able to handle both departure and arrival flights come September. Engagement with airlines, airport partners and potential tenants has begun to prepare for this, said CAG. Some time will be needed to sign new leases with concessionaires and it is expected that there will be a small number of retail outlets and F&B options.

It is expected that airlines previously operating at T4 will return to the terminal and CAG is working with the airlines on the relocation details. Details on airlines to be operating at T2 will be announced.

Since the relaxation of travel protocols on Apr 1, passenger traffic at Changi Airport has recovered strongly. For the first week of June, passenger traffic reached 48 per cent of pre-Covid-19 levels.

"The fast rebound in travel demand has given us great encouragement to prepare Changi Airport for the full recovery of passenger volume back to pre-Covid-19 levels. The additional capacity offered by T4 and T2 will put Changi Airport in a good position to capture this recovery and support the business and operational needs of airlines," said Lee Seow Hiang, CAG's chief executive.

SPH Media Limited

Uma Devi
930 words
10 June 2022
Business Times Singapore
STBT
English
© 2022 SPH Media Limited

A MINORITY shareholder of Sembcorp Marine (Sembmarine) – who identifies himself as Philip Loh – is urging other shareholders to vote against the company's proposed merger with the offshore and marine arm of Keppel Corp.

Claiming to be among the 20 largest shareholders of Sembmarine, Loh has started what appears to be a website to campaign against the "highly disadvantageous" deal.

As announced on Apr 27, the proposed combination of Sembmarine and Keppel O&M is based on a 50-50 enterprise value ratio. Following the combination, Keppel will own 56 per cent of the combined entity, while Sembmarine shareholders will own 44 per cent.

Keppel will then distribute in-specie 46 per cent of the combined entity shares to its shareholders and retain a 10 per cent stake, which will be placed in a segregated account.

Loh observed on his website that shareholders of Sembmarine will end up with a smaller stake in the combined entity despite Sembmarine contributing the bulk of the assets.

According to announcements on the proposed merger, the combined entity will have S$4.7 billion in net tangible assets (NTA) – comprising S$3.8 billion from Sembmarine and S$0.9 billion from Keppel O&M.

Shareholders of Sembmarine will effectively be swapping shares in a company with an NTA of S$0.12 per share for shares in a company with an NTA of S$0.07 per share.

Loh also pointed out that Keppel O&M's legacy assets are being carved out before being combined with Sembmarine, which may have been advantageous for Keppel.

Keppel O&M's stranded rigs and associated receivables – valued at some S$4.05 billion – are being parked in a separate entity, in which Keppel will own a 10 per cent stake.

Certain "out of scope" assets held by Keppel O&M will also be excluded from the combination. These assets, which had a book value of S$300 million as at Dec 31, mainly comprise Floatel International and Dyna-Mac Holdings.

"On the other hand, Sembmarine's legacy rigs and their associated receivables will remain in its books, be transferred to the combined entity and shared 56 per cent with Keppel shareholders," Loh said.

This makes comparisons between Sembmarine and Keppel O&M's historical revenue and earnings "impossible", as one entity includes legacy assets while the other does not, he added.

Keppel O&M is also not contributing much cash to the combined entity, Loh noted.

Keppel O&M will pay S$500 million in cash to Keppel as part of its "pre-combination restructuring" for the partial redemption of certain perpetual securities. Keppel O&M has entered into a commitment letter with DBS Bank for a loan of up to S$500 million to effect this cash payment.

This issue is a sore point with shareholders of Sembmarine, because the company had announced a rights issue last year to raise S$1.5 billion at the same time that it announced plans to merge with Keppel O&M.

This rights issue came only months after an earlier rights issue that raised S$2.1 billion in 2020.

Although Sembmarine's gearing as at end-March 2021 stood at 0.74 times, this did not mean the company was under financial duress as its projects were simply delayed, Loh said.

The shareholder argued that Sembmarine's second rights issue seemed "inconsistent", and led to huge losses and dilution for minority shareholders.

Loh also raised concerns about the "unfair" comparison between the order books of Keppel O&M and Sembmarine as at end-December last year.

The timing of Sembmarine's project completion meant that the company was at a disadvantage. In H2 2021, most of Sembmarine's projects were mostly completed.

Keppel O&M's orderbook, meanwhile, was significantly higher due to the Petrobras P78 Floating Production Storage and Offloading unit deal worth US$2.3 billion.

On the issue of both companies' yards, the shareholder said, Sembmarine's yards are newer and arguably greener than those belonging to Keppel O&M. Consequently, Keppel O&M's yards could require upgrading in the near future, he added.

Sembmarine's order book is also greener and more sustainable than Keppel O&M's, the shareholder noted.

The shareholder also referenced a podcast by BT's senior correspondent Ben Paul in May which looked at the merger deal in greater detail.

In the podcast, Paul noted that there had been a drop in Sembmarine's share price immediately after the merger terms were unveiled, and that it was probably fair to say that the market was disappointed by the deal.

The shareholder agreed, saying that Sembmarine's share price could be trading closer to S$0.20 now without the overhang of the merger. He said the offshore industry's recovery is well underway.

Paul had also noted that the 2 rights issues had raised a total of S$3.6 billion for Sembmarine, but the company's market capitalisation in May stood at only S$3 billion. The difference means that shareholders could well feel that they have been treated "very shabbily" over the past 2 years and confidence is fragile.

The shareholder agreed. He said that if this is left unchecked, it would set the tone for Singapore's finance sector for years to come.

"Investors would conclude that substantial shareholders can do anything they want, even if it is vastly against minority shareholders' interests, as long as it is allowable within the legal framework," Loh said.

SPH Media Limited

664 words
9 June 2022
Business Times Singapore
STBT
English
© 2022 SPH Media Limited





IT would not be an understatement to say that all forms of content have been disrupted in the last decade.

The likes of Netflix, Spotify and even TikTok have stolen hundreds of hours of our attention away from traditional TV and radio.

Even the once holy grail of sports has felt the heat, with many fans indignant at the high prices charged to watch the English Premier League (EPL).

They have voted with their feet, with piracy and illegal streaming seemingly on the rise.

While the Asia Video Industry Association's Coalition Against Piracy (CAP) has applied to block numerous sites and domains over the years, many people have found ways to consume content for free.

Meanwhile, pay-TV subscription numbers are on the decline.

Singtel, which won the EPL broadcast rights in 2018, has seen its residential TV subscriber base decline to 356,000 as at 31 Mar, 2022, from 395,000 in 2018. TV revenue has also declined -- to S$197 million in 2022, from S$241 million in 2018.

Convoluted pricing schemes may have put people off further.

The telco had offered a limited package over its streaming app for S$49.90 per month. But subscribers to this plan have complained about frozen screens and a lack of device compatibility.

The alternative, however, was to pay S$64.90 for the mio Stadium+ package, which would include more than just the EPL matches.

The catch: subscribers were locked into 2-year contracts, and would have to continue to pay in June and July during the EPL off-season.

StarHub appears to be trying to address these complaints.

It is offering EPL matches at between S$24.99 and S$39.99, with no lock-in period.

In collaboration with the EPL, StarHub will also include interactive elements such as match statistics and rewinds.

In the off-season, subscribers can either cancel their subscriptions or dig into the EPL's library of historic games and other behind-the-scenes content.

The lower pricing and add-ons are an indication of the challenge that telcos face to monetise content.

In the past, exclusive content and bundled services were enough to drive telcos' revenues. But this business model has been eroded over time as content moved online and got cheaper.

Telcos vying for consumer loyalty will have to experiment, instead, with value-added services at affordable prices.

The interactive elements being introduced to StarHub's EPL offering are one such example.

The tech that StarHub has employed to provide interactive elements on top of matches could potentially be worked into other sports too, such as Formula 1. That might help StarHub win over sports fans.

Another possibility is in the field of gaming. StarHub hosts Nvidia's GeForce Now cloud gaming service on its data centres, which it sells to subscribers at cheaper rates.

It could improve on this offering by optimising the experience of its subscribers so that their games stream better.

That might help StarHub win over gamers.

Unfortunately for the likes of StarHub and Singtel, content is a saturated business.

As both telcos vie for attention against other streaming platforms, they will have to contend with subscriber fatigue.

Even Netflix, which has taken eyeballs away from many pay-TV platforms, posted its first net loss of subscribers earlier this year. The company saw its share price tumble 35 per cent in a single day.

The low price points for StarHub's packages also suggest that bidding for the EPL is less competitive than it once was, indicating the weakening pricing power of content providers.

EPL content is probably not the hot commodity it used to be.

SPH Media Limited

538 words
10 June 2022
Business Times Singapore
STBT
English
© 2022 SPH Media Limited

SUPER-RICH families looking to park some of their wealth in Singapore are unstopped by a more-stringent criteria to qualify for tax breaks, but may hit roadblocks on staffing and approvals.

While the Monetary Authority of Singapore (MAS) had in April raised the bar for family offices to qualify for tax incentives here -- including setting minimum requirements for capital and asset under management, as well as local investments -- industry players said family offices have not wavered in their commitment to set up shop in the city-state.

Tommy Leung, UBS's co-head of global family and institutional wealth for Asia-Pacific, said family offices understand that regulations change along with the country's needs.

"Frankly, I have not seen any changes in sentiment as a result of these changes in MAS's requirements. I think most of these family offices are very sensible," Leung said.

He was speaking at a media call on the release of the bank's third annual Global Family Office Report on Thursday (Jun 9).

Singapore's recent property cooling measures also have not had much impact on client's interest, Leung said, in response to questions from The Business Times.

"For a lot of our clients, when they set up a family office in Singapore, their goal is to diversify their wealth out of this region. So to the extent that they decide to make property investments, they tend to cast their net quite wide. They tend to invest globally. So far, I haven't really seen a lot of impact on any of these family offices, as a result of these cooling measures," he said.

However, Leung said family offices here could face staffing challenges amid the massive growth of family offices in recent years.

MAS estimates that Singapore has about 400 family offices as at the end of 2020. The authority said it had approved more than 100 applications in just the first 4 months of this year.

Hiring the right people to do the job is a challenge with the increase in demand for talent, and also because family offices are a relatively new area of development for Singapore. The number of family offices had risen 5-fold between 2017 and 2019, according to MAS.

A longer wait for approvals -- at least doubling from 4 to 8 months, according to recent media reports -- is another hurdle that applicants have been confronted with.

Jaydee Lin, managing partner and co-founder of Raffles Family Office, said his firm saw an "exceptionally high level of interest" in the weeks before MAS's tightened criteria was implemented on Apr 18.

But the interest remains.

"Any processing delays that may have been prompted by the policy change have done little to shift the steady demand for Singapore family office setup services we have experienced for several years now," Lin said.

Camilla Jiang, chief marketing officer at Prime Asia Asset Management, said: "Short-term wise, they do see some inconvenience caused by the longer waiting time and have to manage proactively but long term, there is no change in terms of their commitment."

SPH Media Limited

Tan Nai
454 words
10 June 2022
Business Times Singapore
STBT
English
© 2022 SPH Media Limited

SINGAPORE on Thursday (Jun 9) launched a governance framework for sovereign green bond issuances under the Significant Infrastructure Government Loan Act 2021 (Singa).

Called the Singapore Green Bond Framework, it establishes guidelines for green bonds issued by the public sector.

In a speech at the Singapore Sustainable Investing and Financing Conference on Thursday, Second Minister for Finance and National Development Indranee Rajah noted that the framework is aligned with internationally recognised market principles, standards and best practices.

"This ensures that the framework will serve as a benchmark for the corporate green bond market," said Rajah, who is also Minister in the Prime Minister's Office.

Under the framework, proceeds from green bonds issued should be used to finance expenditures in support of the Singapore Green Plan 2030.

This includes expenditures on renewable energy; energy efficiency; green building; clean transportation; sustainable water and wastewater management; pollution prevention, control and circular economy; climate change adaptation; and biodiversity conservation and sustainable management of natural resources and land use.

Expenditures incurred that are already financed via dedicated funding sources, including green bond issuances under statutory boards, will not be eligible under the framework.

The Ministry of Finance (MOF) will first curate a list of potential green projects, before the Green Bond Steering Committee reviews the projects based on their use of proceeds. The projects would also need to be classified as nationally significant infrastructure, and will have to fulfil additional legislative requirements under the Singa.

The Green Bond Steering Committee will then approve the eligible green projects and allocate proceeds.

The Green Bond Steering Committee, set up by MOF, comprises senior government representatives from MOF, the Monetary Authority of Singapore, the Accountant-General's Department, the Ministry of Sustainability and the Environment and the Ministry of Transport.

The government will take a portfolio approach for the allocation of net proceeds and allocate them in full within 2 years, although it may take up to 3 years in the initial years of the framework.

Noting that the public sector green bond issuances are a key part of Singapore's overall sustainability agenda, Rajah expects the investments will facilitate Singapore's transition to a low-carbon economy and advance the United Nations Sustainable Development Goals.

"Through these high-quality issuances, we hope to deepen market liquidity for green bonds, attract green issuers, capital, and investors, and catalyse sustainable financing in the region," she added.

MOF said it will issue its inaugural sovereign green bond under the Singa in the coming months, which will be used to finance nationally significant infrastructure that meet the green criteria under the framework.

SPH Media Limited

925 words
10 June 2022
Business Times Singapore
STBT
English
© 2022 SPH Media Limited

EUGENE KANG

THE debate over corporate governance has long centred on the balance of power. Corporate scandals, such as those at Enron and WorldCom, expose the dangers of powerful CEOs under weak boards. These scandals led to sweeping reforms that sought to restore trust in the governance ecosystem, including confidence in boards to monitor their CEOs.

Yet, the board not only plays an oversight role but also a value creation role. The latter function entails non-executive directors providing advice and resources that the CEO can leverage to create value for stakeholders. And an appropriate balance of power between the board and management is essential for the board to effectively perform these two roles and fulfil its responsibilities.

Board-management relationship

The Code of Corporate Governance recognises that an appropriate level of board independence and diversity in board composition is vital to enable the board to make decisions in the best interests of the company.

The definition of an independent director (ID) has been tightened over the years. From January, an ID serving beyond nine years must seek approval for continued appointment as an ID through a two-tier vote. Another key change is the requirement for IDs to make up at least one-third of the board; in the case that the Chair is not independent, IDs should make up a majority of the board.

The broader regulatory ecosystem also preserves the board's independence. The 2018 Singapore Exchange (SGX) listing rules for dual class shares (DCS) companies and the 2021 Special Purpose Acquisition Companies (SPAC) framework are recent examples.

For instance, all shares carry one vote each for the appointment and removal of IDs in firms with DCS structures. Board monitoring over a SPAC's acquisition process is also critical - SGX requires more than 50 per cent of IDs to approve acquisitions proposed by SPAC founders.

Board oversight is also important in listed firms with significant family ownership and management involvement. Independent boards bring with them substantive safeguards to protect the interests of non-family stakeholders.

Effective collaboration with management is also enabled through board diversity. SGX now requires issuers to have in place a board diversity policy that addresses gender, skills and experience, and any other relevant aspects of diversity. Issuers must disclose, in their annual report: (a) the board diversity policy; (b) targets for achieving the stipulated diversity, accompanying plans and timelines for achieving the targets; © progress towards achieving the targets within the timelines; and (d) a description of how the combination of skills, talents, experience and diversity of its directors serves the needs and plans of the issuer.

Having a range of skillsets equips boards to identify opportunities to create value and mitigate risks, while a diversity of views generates more alternatives and avoids groupthink.

Creating value for stakeholders

Recent trends and the evolving business landscape have given greater urgency to board transformation. Boards must increasingly balance the dynamics with management to create value for stakeholders.

The increasing importance of environmental, social and governance (ESG) issues is set to drive major changes in a board's agenda. Investors, regulators, and other influential stakeholders are demanding more accountability from boards on ESG performance.

SGX recently mandated that all directors must undergo a one-time training on sustainability. Growing shareholder activism and regulatory changes are driving companies to step up their game. Activist investors have been successful in changing board composition. A case in point is Exxon, whereby a relatively unknown hedge fund won enough votes to install three new directors on its board in 2021 to improve board accountability.

The digital revolution presents another trend that boards must manage.

A McKinsey & Company report on "Boards and the Cloud" in 2021 highlighted increasing board attention on digital transformations, large technology investments, and shifts to the cloud. Not surprisingly, board expertise and training at the intersection between technology and business are needed to navigate the opportunities and risks of the digital economy.

And while there are growing opportunities in the digital economy, the risks are not trivial. According to Skadden's 2022 Insights, there was a spike in SPAC-related lawsuits and continued activity in event-driven suits focused on issues of cyber security, the pandemic and cryptocurrency over the past two years. Cybersecurity Ventures predicts that ransomware risks will exceed US$265 billion (S$360 billion) globally by 2031.

These changes highlight that boards must have a broad set of perspectives and the relevant skillsets to deal with the complexities of today's environment.

Balancing act

Director independence and diversity empower boards to discharge their oversight and value creation roles. Empowered boards monitor CEOs with a firm hand and support them with resources and advice to drive value creation.

The balance of power is not a zero-sum game. There is a fine line between board control and board support, hence the common refrain of directors keeping their "noses in, fingers out". And to ensure healthy board dynamics with management, boards should put in place mechanisms before a crisis occurs.

The challenge of managing board-management relationships can be likened to the act of flying a kite; this entails investing in a good kite, understanding the wind direction, and knowing when to pull or let the line out. Similarly, empowered boards should steer their companies with competent CEOs, keep a pulse on changes in the environmental conditions, and maintain an appropriate balance between monitoring and collaborating.

The writer is a member of the Advocacy & Research and Environmental, Social & Governance Committees at the Singapore Institute of Directors.

SPH Media Limited

757 words
15 June 2022
Business Times Singapore
STBT
English
© 2022 SPH Media Limited

A SEA change is occurring in the semiconductor industry. Once notorious for boom and bust cycles that revolved around demand for a few consumer devices, the chip industry now powers most aspects of our economy. This proliferation, in our view, will smooth steep cycles and drive durable demand, even as the economy slows and recession risk increases. Yet chip stocks still trade at a discount based on the cyclicity of the 1990s and 2000s. We think this presents an attractive opportunity for investors ahead of what we believe will be a market revaluation to higher multiples as earnings prove more stable than in previous cycles.

Evolution from cyclical to secular

Historically, semiconductor manufacturing ran in boom and bust cycles correlated with global gross domestic product (GDP) growth: Insatiable demand for a consumer product -- such as PCs in the 1980s, mobile phones in the 2000s, and smartphones in the 2010s -- would lead manufacturers to aggressively expand capacity. Supply eventually exceeded demand, either through overproduction or an economic downturn -- sending prices and revenues down.

A new end product or economic recovery would reignite the cycle. Reflecting this cyclicity, equity investors have historically paid lower earnings multiples for semiconductor stocks.

But we believe these sharp peaks and valleys are a thing of the past.

Recently, semiconductors have become nearly ubiquitous, a key component in numerous industrial applications, leaving the industry far less vulnerable to single retail end markets.

Many of these new end-markets -- including autos, industrial automation, 5G infrastructure, artificial intelligence, and cloud computing -- require more chips per unit and have longer cycles than consumer electronics, lessening the industry's reliance on consumer spending and potentially smoothing revenue.

One of the fastest-growing markets is likely to be automotive. An electric vehicle (EV) currently uses more than twice the number of semiconductors compared to its internal combustion engine (ICE) predecessor, and industry experts expect this gap to widen.

The industry's supply structure too should, in our view, support more stable earnings cycles in the future. After a decade-long wave of consolidation, the semiconductor industry now exhibits an oligarchic structure with high barriers to entry and significant pricing power.

Suppliers adhere to more stringent return requirements on capital expenditures, which are increasingly funded by upfront payments and government subsidies across Asia, Europe and the US.

Amid strong demand and pricing power, the larger semiconductor companies have built solid balance sheets, with strong cash positions and little or no debt, providing resilience in an economic slowdown and higher borrowing costs.

Over the last decade, many companies have used excess cash to increase dividends and buy back stock, a trend we expect to continue.

The semiconductor sector offers an appealing combination of quality, attractive valuations and a strong earnings outlook.

Growth: We believe the sector will grow earnings in the 15-20 per cent range over the next 2 years -- well above the market -- on continued double-digit revenue growth and margin expansion. We expect secular tailwinds and shortages of production capacity to fuel strong pricing power, while dampening economic sensitivity.

Less cyclically sensitive applications seem likely to further drive industry growth, even as the economy weakens. Smart energy infrastructure, labour force automation, and EV adoption are only partly through a multi-year period of growth.

Visibility to future revenues has improved. The industry has moved towards long-term, non-refundable contracts, with capacity booked out to 2023 and, in some cases, 2024. Tight capacity promises to bolster revenues at equipment manufacturers well beyond 2022.

Valuation: As of Jun 6, the PHLX Semiconductor Sector Index (SOX) traded at 17 times forward earnings, a discount to the Nasdaq Index, which trades at a forward multiple of 23. Underneath the surface we see even larger discounts, with some companies trading at single-digit multiples. We see room for future multiple expansions, supported by the industry's more stable secular earnings outlook.

Investment implications

We favour owning a well-diversified basket of semiconductor equities across the supply chain from end-chipmakers to equipment manufactures and materials providers. This approach reduces concentration risk. We believe the sector will continue to post consistently strong earnings against a backdrop of a slowing global economy, inducing the market to recalibrate expectations in line with fundamentals -- and afford the sector higher multiples over the coming years.

The writers are from PIMCO. Geraldine Sundstrom is portfolio manager, asset allocation; Tania Bachmann is equity research analyst, and John Mullins, product strategist.

SPH Media Limited

925 words
15 June 2022
Business Times Singapore
STBT
English
© 2022 SPH Media Limited

Trust, in some form, is at the centre of all financial transactions, and technology can enable and enhance that trust.

How do we know? Because 50 per cent of retail investors and 87 per cent of institutional investors say greater use of technology in financial services has increased trust in their adviser/manager. That's among the key findings of "Enhancing Investors' Trust: 2022 CFA Institute Investor Trust Study," the fifth edition in the biennial series.

"Enhancing Investors' Trust" zeroes in on the relationship between technology and trust in finance. It demonstrates that trust in financial services is both seen and unseen: It is the ever-present backbone of financial transactions and the outward interface through which those transactions are conducted.

Greater tech integration in finance helps establish two kinds of trust that are essential to investing: "execution trust" and "relationship trust." The former refers to the knowledge that transactions are secure, accurate, and appropriately managed, while the latter describes the additive value better investing tools and product personalization create for investors.

Technology improves access to financial markets and strengthens representative equality among different market participants. It drives the development of new products and services that open up the markets to more people and counteracts the trust divide, or the trust differential among retail and institutional investors, across geographies and demographics, and between retail investors with and without an adviser.

Execution trust and fundamentals

Execution trust encourages market participation, and all market participants, regardless of demography, require it. By fostering execution trust, technology bridges the trust divide among all types of investors and helps ensure a level playing field.

As the World Bank observes: "Fintech can democratize access to finance and the world can move closer to achieving financial inclusion. . . . Fintech has the potential to lower costs, while increasing speed and accessibility, allowing for more tailored financial services that can scale."

Globally, the first point of entry to financial services is often digital payment providers. In some markets, particularly those that lack traditional banking infrastructure, they are the primary mode of transaction. As such, trust in digital payment providers -- Apple Pay, Venmo, Alipay, Zelle, etc. -- was ranked highest among all financial services industry subsectors in most markets.

Retail trading accounts and apps are further addressing the disparity in access to financial services. The survey found that 71 per cent of respondents believe these tools improve their understanding of investing. Institutional investors are equally bullish: 89 per cent say that they increase trust in financial information. These developments directly influence industry sentiment: Respondents with retail trading accounts are more than twice as likely to say they trust financial services than those without them.

Relationship trust and personalization

Relationship trust is an additive value that builds on execution trust and describes what advisers can deliver when they understand, connect, and align with a client's personal values and motivations. As with retail trading accounts, whether an investor has an adviser influences how much they trust financial services. Of those with an adviser, 69 per cent have high or very high trust in financial services compared with 45 per cent of those without an adviser.

Technology can guide the form and frequency with which advisers communicate with clients and help them adapt accordingly to provide the right information at the right time for each client. It also can facilitate the development of more tailored products. Ultimately, technology-fuelled personalization -- direct indexing, AI investment strategies, etc. -- strengthens the connection between investors and the investment industry.

Demand for such products is high. The survey found that 78 per cent of all retail investors and approximately 90 per cent of those under age 45 are interested in more personalized investment products and services.

Implications for the future

That financial technology adoption skews toward younger investors is no surprise, but as more assets are held by these "digital natives", technology integration becomes ever more embedded in the client--adviser relationship. This influences how investors participate in the markets overall. For the first time in the Investor Trust series, access to the latest technology platforms and tools was cited as more important (56 per cent) than having someone to navigate and execute the investment strategy (44 per cent).

As trust increases in financial technology, so too does the potential for new financial product and services providers to enter the market. The survey found that 56 per cent of retail investors would be more interested in investing in financial products created by Amazon, Google, Alibaba, and other large technology firms, than by financial institutions.

Of course, technology's ubiquity in financial services creates certain challenges. Data privacy is a key consideration. More than one in four respondents (27 per cent) say they are less willing to use online platforms that require inputting personal data than they were 3 years ago. Technology's behavioural effect is another concern: of survey participants with a retail trading account, 57 per cent say it increased their trading frequency, while 74 per cent say they believe acting upon digital "nudges" will improve their investment performance or decision making.

Of course, such cautions are necessary reminders that unchecked technology can have unintended consequences. That's why tech integration in finance must be approached with intent and oversight to maximize its trust-building effects on the industry.

Ryan Munson is a research program manager at CFA Institute. He is the author of several CFA Institute publications, including the Future of Work in Investment Management series.

SPH Media Limited

Yong Jun Yuan
613 words
15 June 2022
Business Times Singapore
STBT
English
© 2022 SPH Media Limited

THE recent privatisation offer for Frasers Hospitality Trust (FHT) is the latest in a long string of offers that have taken place in the local market as weakened investor sentiment creates value for founders and private equity groups.

Bankers told The Business Times that such mergers and acquisitions (M&A) activity can be expected to continue, especially as companies and funds seek to deploy capital.

"Privatisations have been the main M&A trend over the last couple of years in Singapore," said UOB head of group investment banking Edmund Leong. "With the current volatility and weak market sentiment, there is perceived under-valuation of companies, which has led to a number of listed companies exploring the privatisation option."

UOB acted for Koufu Group, Shinvest Holding and Singapore O&G in the first half of this year.

Some deals, such as the offer by Frasers Property for FHT, are being funded by founders or controlling shareholders who appear to be using this opportunity to take companies private at low valuations.

Several other deals have involved private equity groups.

The consortium that has made the offer for property group Hwa Hong Corp, for instance, includes a fund of Dymon Asia Private Equity.

Earlier this year, an offer was also made for Apac Realty, owner of the real estate agency brand ERA, by a private equity fund managed by Morgan Stanley Private Equity Asia. The fund had purchased 59.8 per cent of Apac Realty from the Singapore-headquartered private equity firm Northstar Group, and was therefore required to make an offer for the remaining shares in Apac Realty.

Credit Suisse's head of South-east Asia M&As Zi-Kuan Lim said strategic investors and private equity funds have shown increased interest in South-east Asia in light of heightened risk and volatility in other parts of the world.

"Buy-side activity continues to be driven by private equity funds looking to deploy capital after recent record fund raises, while South-east Asia corporates have been embarking on corporate restructurings, strategic review exercises and outbound M&A to improve shareholder returns," he said, adding that companies in Singapore may be seeking to drive growth and develop their companies with like-minded private equity investors.

Activity is also being driven by liquidity.

UBS head of global banking for South-east Asia, Nicolo Magni, said there was an estimated US$739 billion of undeployed capital with financial sponsors for Asia as at end-2021, up from US$580 billion as at end-2020.

"When you have this amount of capital in the hands of financial sponsors, and with the public market being less conducive year-to-date globally, naturally that does create a lot of space," he said at UBS's OneAsean Conference earlier this month.

Private equity funding is also flowing into start-ups, and there is some expectation that this could lead to IPOs next year.

KPMG deal advisory partner and head of transaction services Stephen Bates said there remains a strong appetite for private equity investments in the region, with a focus on investments in real estate, healthcare, education and financial services.

He put early-stage funding in South-east Asia at 326 deals worth US$5.61 billion year to date, comprising everything from seed to late-stage, versus 692 deals worth US$11.5 billion last year.

"We expect this to continue positioning South-east Asia as one of the largest deal markets in Asia-Pacific, which will in 2023 potentially translate to the IPO market once equity prices stabilise from their more recent declines," he said.

SPH Media Limited