Asian Hotel Investments Boom

Jones Lang LaSalle’s Hotels & Hospitality Group (JLL) has revealed that the total value of hotel transactions in Asia has increased 145% in 2013. In fact, JLL claims the industry is having “its strongest year since the global financial crisis.”

Key markets such as Singapore and Japan are responsible for the growth, according to JLL Hotels & Hospitality’s Mike Batchelor.

“Hotel trading performance in Asia has experienced significant turnaround over the past two years and nowhere more so than in Singapore,” he explained. “This quarter’s landmark transaction of the Grand Park Orchard Hotel and adjoining Knightsbridge retail podium heralded the single largest asset deal in the city’s history. Going forward, we are aware of approximately $1.3 billion in exchanged contracts that will contribute to a very strong pipeline over the remainder of the year.”

Batchelor added, “As investor confidence in the region continues to rally, the availability of investment grade hotels is becoming increasingly scarce and, as a result, we are seeing buyers turn their attention towards markets such as Thailand, Seychelles and the Maldives. The Maldives is proving a particular hot spot where contracts have just been exchanged on what will be our fourth transaction in the country in as little as two years.”

 

Asian Companies Lead Investment in IT

According to AT&T, Asian companies are leading in IT investment, surging past their European rivals.

Research that was published by Insead reveals that Asia-Pacific companies are spending the majority of their IT budgets on the newest technologies, including mobile devices and the cloud. The business school explains that investment in emerging technologies like these increases competitiveness significantly.

Insead lists three primary categories: mobile internet-connected devices like smartphones, laptops and tablets; cloud services; and collaboration tools such as conferencing and instant messaging. On the other hand, there is the more traditional side of IT which includes hardware and enterprise software.

Asian companies have revealed their plans to increase their IT budget by 30% before 2015. While European companies also intend to spend more on new technologies, they will not be able to match Asian budgets.

Still, the report warns that Asian companies “must be careful not to rush too quickly to adopt new technologies” without a platform.

AT&T regional vice president Andrew Edison added:

“Increasing productivity is one of the primary challenges facing European companies today. New technologies like cloud offer great opportunities to do this, which some high performers are demonstrating.

“However, simply adopting the newest technologies is not the answer, and is in fact a great risk. The secret is a mature platform and avoiding the creation of ‘infrastructure spaghetti’ in the rush to adopt the latest tools.”

 

Asian Investment Increases 150% in London Office Market

According to Jones Lang LaSalle, Asian investment into the London office market has increased 150% since 2010. In 2011, Asian investors were responsible for $2.2 billion of $13.9 billion in transactions in the investment market of Central London. Asian economy is on the rise despite lessening demand in Europe, as well as the festering debt crisis. Real estate industries in the region, however, are passing muster.

Jones Lang LaSalle’s International Capital Group’s Alistair Meadows said “During 2011 we have seen Asian investment into London more than double. What has been evident is the emergence of ‘new’ sources of Asian capital attracted to London ranging from pension funds like EPF & PNB from Malaysia to Ultra High Net Worth (UHNW) investors like Khoon Hong Kuok and Martua Sitorus who acquired ‘Aviva Tower’ in the City of London for 288 million euro, advised by LaSalle.

“Asian buyers were especially dominant in the City of London office market, accounting for 23 percent of annual investment volumes. Indeed, of the 3.5 billion euro traded in the City office market last year is many sizes over 100 million euro. 40% was undertaken by Asian buyers. We predict seeing a diverse range of Asian investors being very active in London in 2012 and likely to account for over 20 percent of investment volumes by year end.”

Andrew Hawkin, also from LaSalle, added: “Over the next 12 months Asian money will also continue to target the City for higher income returns, and the West Ed for long-term wealth preservation, reinforcing London’s perception as a safe haven. Already in 2012 Malaysian capital is rumored to have placed the majority of a major German portfolio under offer in the City. London’s transparency, relatively long leases and high yield spread above the risk free rate, continues to be attractive to Asian Capital seeking to diversify away from their home markets.” He noted that the trend is likely to be long-lasting.

Cutting the Asia Fund Investments

In recent financial news, Gottex Fund Management Holdings Ltd., just cut in half its Asia fund investments to improve returns.  While last year, it’s Asia fund had 45 holdings, this year it is expected to have only 22, as reported by Co-Founder Max Gottschalk.

The Switzerland-based company invests $400 million in 38 Asia-focused funds, and the numbers are likely to drop to 30 now.

As Gottschalk explained, "When investors are looking to invest in Asia, they're looking for punchier returns. Funds of funds are earning part of their keeps by providing access to some of the younger, emerging managers or smaller managers."

Gottex isn’t alone in the shift that it’s making.  They are joining companies like Pictet & Cie to shift to have newer, lesser-known managers to boost their returns.  Gottex’s plan at the moment is to change about 20% of the Asia hedge funds it invests in each year, up from 15%.

As Gottschalk explained, "There's a perception that the Asia market, due to its increased risks, should generate higher performance. Also there's no doubt that Asia, and the Chinese economy in particular, are drivers of global growth."

Asian Shares Plunge on Downgrade

Asian shares plunged today on the S&P downgrade of American debt. Chinese shares fell almost 4 percent, while the Nikkei and Heng Sang fell 2%. The Chinese hold a lot of American debt and now that it has been downgraded the borrowing will probably stop. Despite the obvious connection to the downgrade, the severe plunge in stock prices maybe also due to the weakening global economy,  most notably America’s.

When America weakens economically Asian exports tend to be hurt as one of the biggest consumers of Asian products is the USA.

 

China to Invest in Cambodia?

According to the Cambodian Ministry of Commerce, a group of Yunnan province investors (in China) has been looking into Cambodian investment opportunities and has found the possibilities most favorable there. The delegation, led by deputy chief of China International Economic Development and Cooperation Office, Cao Junde, met with Cham Parasidh, the Cambodian Minister of Commerce and Vice Chair of the Council for the Development of Cambodia. According to an article in China Daily, the Ministry said that “some of the investors have showed their interest in investing in mining, oil and gas exploration, rice mill and hydro-electricity in Cambodia.” Anyway today, China is Cambodia’s largest foreign investor, with figures reaching $8bn by the end of last year. So it seems like it’s worth the two countries developing better ties as well.

Other Chinese Investments

In other areas of China, investments are being made in Cambodia too. The country’s east Jiangsu province has been looking into investment opportunities there also. The country’s Prime Minister, Hun Sen, is currently visiting China for five days and met with the secretary of the Jiangsu Provincial Committee of the Communist Party of China (CPC), in Nanjing, Luo Zhijun. Jiangsu has a lot to be proud of, having successfully worked hard to get China out of the global financial crisis. The rapid growth of China’s economy has also been beneficial to Cambodia. As well, according to a report in China Daily, Hun Sen said that the “Hongdou Group Co., Ltd., a Jiangsu-based enterprise in clothing, tire, biological pharmacy and real estate, is building an industrial park in Sihanoukville Province, southern Cambodia.” The PM is hopeful that both parties can work together “to develop the industrial park.”

Hun Sen has been working hard to establish and develop good relations between the two countries, especially in regards to “friendly communication, bilateral exchanges and cooperation.” Of course, the PM’s visit will only lead to a further development of “mutual understanding, promote pragmatic cooperation and establish a win-win relationship between the two countries.”

Good Times Ahead for China

Property Peaks in Beijing

It looks like China is set to witness a property peak in the few months. According to experts in foreign real estate funds, this sector is due to “tighten” during this time frame. Grosvenor Asia Pacific manages $16b in assets and is setting out to raise “at least $270 million for a fund that will invest in Chinese properties as part of its expansion in Asia.” According to CEO of Savills Greater China, Raymond Lee, “a good opportunity will emerge for long-term investors in the coming six to 12 months, and what foreign real estate funds are doing now is finding a legal fund vehicle that can get their money into the country.” Indeed, substantial funding is expected to get to China before 2012 as well.

Increase in Investment

News from the Commerce Ministry is the increase in “utilized foreign investment” by 27 percent, reaching $17.8b by February 2011. Of this, $4.15b was in the real estate sector. In an effort to curb this, local authorities were ordered to “halt the approval of some foreign property investments to stop speculative purchases, it said in a Nov 22 statement.” Local authorities will have to “strengthen their reviews of foreign exchange inflows for real estate transactions and documentation for land rights.” Right now there are two principal channels for foreign capital that “flow into the Chinese mainland’s property market”: participating in development with local partners and cooperating with Hong Kong-listed real estate companies.

Real Estate Firms Future

According to President of CB Richard Ellis China, small- and medium-sized real estate firms are likely to feel an additional squeeze by June that will result in more “equity investment opportunities for foreign institutional investors.” This is due to banks making it harder to borrow money and dropping property sales. Prices of residential projects will be “more competitive.” As well, for those medium- and high-end homes which witnessed “excess short-term price growth,” are being impacted by government real estate “tightening” policies. The advice by experts thus is to avoid these sectors to protect your investment. Ultimately, even though foreign investors have expressed concern about the potential risks in China, a “clear long-term picture through the 12th Five-Year Plan” is still what’s keeping confidence high and bringing investors back to China all the time.

New Zealand New Hotspot

Chinese NZ Investment

New Zealand is becoming an increasingly more attractive to investors. This has been especially evident in China which has been purchasing more NZ bonds than ever. Recent reports show that investments from China could amount to $6b which will have an impact on the kiwi dollar that could increase to 81 cents (which would be a three year peak) “against the greenback.” According to Craigs Investment Partners market analyst Peter McIntyre, “there have been reports that the Chinese foreign exchange reserves are looking to diversify around about 1.5 percent of their assets into New Zealand denominated assets like government bonds, companies and dairy farms.”

Nice New Zealand

That is one way of describing the country. Nice. New Zealand is definitely “nice” for investors since in terms of financial security, it is very stable. There is also a “high domestic inflation rate” with large returns too. It seems to be the whole region is finding New Zealand attractive, most notably Singapore and Hong Kong which are looking into government bonds.

These changes have been happening for a few years now. Countries in Asia are boasting “very large reserves.” There is likely to be additional investments ahead too. China will see an increase in investment from BUD, the Brazilian-Belgium owned Anheuser-Busch InBev and intends to establish a “brewery to make Budweiser in the mainland by the third quarter,” according to Carlos Brito, CEO of the company. The intention is to put in “several hundred million dollars this year.”

Better Beer

The three “top-priority markets” set to “drive the volume growth of the global beer industry,” are: Brazil, China and the USA. Indeed, China alone drinks around 30 liters of beer per annum, rendering it “responsible for around 25 percent of global beer consumption.” Just last week the first brewery was launched by AB InBev in Sichuan, a southwest China province, which according to the company’s Asia Pacific president Miguel Patricio, “aims to better serve the 200 million consumers in the region.” So if you happen to be visiting the Great Wall, consider quenching your thirst with a barrel of beer.

al-Assad Meets Arab Businessmen

Last Saturday, President Bashar al-Assad met up with a whole delegation of Arab businessmen, where they discussed the “status of the Arab investments in Syria and their future in light of the comprehensive reforms witnessed in Syria.” Other topics under review included how investments are meant to help the national economy along with their participation in reform and the creation of stability. The President was extremely appreciative of the additional investments to Syria that have been made by Arabs “in spite of all the circumstances,” since such investments have “a promising future.” The investors were also pleased, especially with the reforms occurring in Syria that are said to “reflect positively on all the spheres.” Other potential problems were discussed vis-à-vis what has been making investors’ work tough and how to put into practice various methods needed to ease permits that will assist in improved growth rates while creating additional jobs for youths. The Arab businessmen were delighted with the President and his devotion to reform, especially since he was aware of all the issues that have been “hindering work.” Thus he has been encouraging moving ahead with investment projects in a job creation initiative.

Syrian Investment

There has been increased confidence in Syrian investments and that things in general are going well. Further, new procedural reforms will affect “facilitating investments” especially given the President’s “quarterly meetings with Arab investors to inform him of the problems hindering projects and progress of existing projects, adding that this made the investors very comfortable as there is a mechanism through which they can achieve their goals.” In addition, Anas al-Kezbari, (Investment in Syria Group CEO), said that President al-Assad’s meeting gave everyone much confidence in Syria’s economy and that given the reforms, any investments that are likely to “achieve economic feasibility and benefit[s] Syrian citizens” will receive “great momentum.” Further, Syria’s economy is likely to be subject to a huge “upswing in the next stage,” that will lead to further job opportunities. New investment projects will also begin, further stabilizing the economy. So in general, President Bashar al-Assad’s meeting went really well. There is a lot of confidence and now a lot of potential for the Syrian economy, as well as a real potential for improvement in the quality of life for Syrians, especially those currently unemployed.

Asia Investment Banks (IBs): Overcrowding?

It seems like Asia may be encountering a few too many IBs around at the moment, (15 altogether – nine bank-backed and six non-bank backed). But which ones are doing really well? Apparently the CIMB group has a lot to say for itself, having been described as “ambitious” in its attempts at becoming a “leading universal bank in South- East Asia, providing a full array of banking services ranging from savings accounts to large corporate transactions for fund-raising.”

Going Global

What initially prompted CIMB to become global occurred in 2005 when it acquired RM500mil of GK Goh Holdings Ltd, which apparently gave the bank access to markets in the region, as well as London. Further to that, the bank purchased the Bumiptura Commerce Bank, Southern Bank, PT Bank Niaga and Bank Thai. Acquiring a “strong balance sheet” led CIMB to greater places.

IB Growth

There has been other regional growth for some of the non-bank IBs too. For example, OSK Investment Bank has established various advancement strategies while working hard on putting itself into the “smaller and mid-cap market as well as research capabilities.” Much of its profit hails from Asia, with 30 percent of its “overseas pre-tax profit” hailing from Singapore. Currently the bank is looking to establish its presence in Thailand and Cambodia. In the former country it is doing this with the purchase of BFIT Securities public Co. and in the latter it now boasts “a full-fledged commercial bank with nine branches as well as license for stockbroking and corporate finance.” OSK IB sees the necessity now to pump up its “institutional equity capability.” If it does this successfully in Hong Kong, it will be well on its way to establishing a very solid presence throughout the Asian region since it sees this country as “one of the largest financial gateways.”

There has been significant restructuring in OSK as well as new employees in an attempt to go further in its markets and develop a presence in Europe while “exposing the Asian markets to the Europeans.” As well the company is looking into what they can do in South Korea, Taiwan and China.