Singapore Syndicated Lending Surges 91% to Record $38 Billion

December 06, 2011, 5:05 AM EST By Katrina Nicholas

Dec. 6 (Bloomberg) -- Syndicated lending in Singapore has almost doubled to a record this year, driven by demand from property developers and a surge in commodity trading.

Loans surged 91 percent to $38.3 billion this year from the same period of 2010, beating the previous record of $30.7 billion in all of 2008, according to data compiled by Bloomberg. The total doesn’t include a S$5 billion ($3.9 billion) loan sought by Temasek Holdings Pte and Khazanah Nasional Bhd., the state-owned investment companies of Singapore and Malaysia, to fund S$11 billion of hotels, apartments, offices and shops.

“Growth for the Singapore market has been boosted by a huge increase in financings for commodity sector,” said Boey Yin Chong, managing director of syndicated finance at DBS Bank Ltd., Singapore’s biggest arranger of syndicated loans. “From a $500 million base in 2007 we’ll probably hit $9 billion plus by the end of 2011.”

The economy in Singapore, home to the world’s second- busiest container port and Asia’s largest oil-trading, refining and storage center, is forecast to expand 5 percent this year after growing 14.5 percent in 2010. While slowing, that’s still better than the 1.9 percent predicted by the Organization for Economic Cooperation and Development for its 34-member nations in 2011.

Shrinking Rate Margins

Borrowing costs fell to an average 73 basis points over benchmark rates since June 30 from 105.5 in the first half of the year, Bloomberg data on 46 loans show. Average loan margins in Asia, excluding Japan, for U.S. dollar-denominated borrowings increased to 243 from 204 in the same period.

As growth in Asia outstrips Europe and the U.S., the region is becoming a more important source of funding for energy traders and suppliers of commodities such as edible oils, grains and sugar, according to Eugene Szeto, HSBC Holdings Plc’s head of Southeast Asia loans syndicate.

Syndicated loans in Europe, the Middle East and Africa fell to $120.5 billion this quarter versus $260.4 billion in the three months to Sept. 30, Bloomberg data show. Commodities have returned 4.9 percent this year versus a loss of 8.2 percent for global equities.

Singapore-based Wilmar International Ltd., the world’s biggest palm-oil processing company, increased a $1.3 billion loan signed in November 2010 to $1.5 billion in October, according to an Oct. 28 regulatory filing.

Geneva-based Vitol Group, the world’s largest independent oil trader, signed a $1.585 billion facility due in 2012 in June for its Asia unit. Vitol has tapped the Asian bank loan market for funds every year since 2006, Bloomberg data show.

Asian Growth

“If Asia is a company’s growth market it makes sense for them to raise funds and build bank relationships here as well,” said Szeto, who is based in Singapore. “Companies are also keen to tap pockets of liquidity in Asia because aside from being an additional funding source, Asian bank market liquidity is seen as relatively more stable and reliable than in parts of the western world.”

Loans to agriculture and mining companies jumped 320 percent in October from October 2010, according to figures from the Monetary Authority of Singapore released Nov. 30. Loans to manufacturers rose 52 percent while building and construction lending increased 23 percent.

As economies in Europe face possible recession, gross domestic product in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam will expand an average 5.6 percent from 2012 to 2016, the OECD said in a Nov. 29 report.

Singapore, ranked by the World Bank as the easiest place to do business, was among the top 20 destinations for international investment last year, according to the United Nations Conference on Trade and Development.

Bookrunner Rankings

HSBC is the third-largest arranger of loans in the city- state, with an 8.9 percent market share, behind DBS at 10.2 percent and Oversea-Chinese Banking Corp. at 9.9 percent, Bloomberg data show. United Overseas Bank Ltd., Singapore’s third largest by market value, is fourth at 8.6 percent.

London-based HSBC, which makes more money in Asia than anywhere else, ranks higher for banks involved in arranging loans and then selling the debt to other lenders. The top five so-called bookrunners for loans this year are DBS, HSBC and OCBC, Sumitomo Mitsui Financial Group Inc. and Standard Chartered Plc.

Bookrunners are responsible for issuing invitations, disseminating information to interested lenders and reporting to the borrower on progress. A bank with the title of mandated lead arranger isn’t always a bookrunner.

Olam, Temasek

“There’s a perception the market is dominated by Singapore banks but that’s not the case despite Singapore banks being active in arranging deals,” DBS Bank’s Boey said. “Having a robust market also means lenders are able to sell down more in syndication.”

Olam International Ltd., the commodities trader part-owned by Temasek, signed a $1.25 billion facility in August with about 30 banks including lenders from the Middle East and India, Bloomberg data show. The 10 banks committing funds to Temasek and Khazanah included Melbourne-based Australia & New Zealand Banking Group Ltd. and Japanese lenders Bank of Tokyo-Mitsubishi UFJ Ltd. and Sumitomo Mitsui Banking Corp., two people familiar with the matter said last month.

Of the $37.1 billion of syndicated loans this year, $31.4 billion have been to property, energy or resource companies, Bloomberg data show.

“Government incentives for commodity companies to open their regional offices here has helped Singapore to corner much of the market for commodity refinancing,” Boey said. “Last year there was about $5 billion done. This year it’s been double that as these global houses seek to diversify funding as well as increase their investment in the region.”

--With assistance from Shamim Adam and Jake Lloyd-Smith in Singapore. Editors: Ed Johnson, Shelley Smith

To contact the reporter on this story: Katrina Nicholas in Singapore at knicholas2@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

View the original article here

As World Millionaires Multiply, Singapore Holds Its Lead

By Venessa Wong

Singapore seems modest by some measures: Median income among working households was only about S$5,700 (about US$4,500) in 2010, according to the Singapore Department of Statistics. Yet in this small island nation of only 5 million, known for extravagant shopping, high-end restaurants, and draconian chewing-gum laws, nearly one in every six households has more than $1 million in assets, making it the densest population of wealthy households in the world, according to a new report by Boston Consulting Group.

As the financial markets improved last year, global wealth grew in nearly every region in the world. The fastest, at 17.1 percent, came in the Asia Pacific region (excluding Japan), followed by North America at 10.2 percent. "Global wealth is at an all-time high," says BCG Senior Partner Monish Kumar.

According to BCG's study, global assets under management grew 8 percent, to $121.8 trillion, about $20 trillion above the level during the depths of the global financial crisis. The number of millionaire households grew 12.2 percent, to 12.5 million, and although they represented only 0.9 percent of all households, they held 39 percent of global wealth.

BCG looked at 62 markets covering more than 98 percent of global GDP and measured assets that included cash deposits, money market funds, listed securities held directly or indirectly through managed investments, and onshore and offshore assets—but not wealth attributed to investors' own businesses, residences, or luxury goods.

Wealth in North America, the world's richest region, had the largest dollar-value gain: $3.6 trillion. The U.S. remains home to the most millionaire households—5,220,000 (up 10.7 percent from 4,715,0000 households in 2009)—although the share was only 4.5 percent of all households, BCG data show.

While China and India are driving wealth creation in Asia, Singapore also grew at a fast pace. The number of millionaire households in Singapore jumped about 38.6 percent in 2010, to 170,000, from nearly 123,000 in 2009, according to BCG data. The country has had the largest proportion of millionaire households for several years, and the share continues to grow: Singapore's millionaire households increased to 15.5 percent of total households in 2010 from 11.4 percent in 2009.

The rise is due to Singapore's expanding economy, which has grown mainly on such exports as consumer electronics and pharmaceuticals, as well as financial services. Real GDP growth averaged 7.1 percent per year from 2004 to 2007, according to the CIA World Factbook and reached nearly 14.7 percent in 2010—faster than China's 10.3 percent growth rate.

Among Singapore's well-known billionaires are Wee Cho Yaw, chairman of United Overseas Bank Group (UOB), as well as the families of the late real estate mogul Ng Teng Fong and financier and hotelier Kho Teck Phuat. Still, many of the country's wealthy are not tycoons but entrepreneurs and affluent immigrants, says Tjun Tang, partner and managing director of BCG in Hong Kong. Other billionaires include philanthropist Richard Chandler in New Zealand and real estate developer Zhong Sheng Jian in China.

City-states such as Singapore, along with other small countries and administrative regions with a high density of millionaire households, such as Switzerland, Qatar, and Hong Kong, tend to be hubs of commerce and finance and have greater economic generation within a smaller population, says Tang.

Another factor driving wealth: Singapore's investor scheme, which grants permanent residence to certain investors, says Tang. According to the website of Janus Corporate Solutions, people can "invest [their] way to Singapore permanent residence" by investing more than a certain minimum in a new business startup or Global Investor Program-approved fund or in expanding an existing business in Singapore.

With this wealthy population comes a relatively high cost of living. In a 2010 cost-of-living survey of 214 cities by consulting firm Mercer, Singapore is the 11th most expensive city in the world for expatriates, on a par with Oslo and more expensive than New York City.

Mercer also gave Singapore high scores in its 2010 quality-of-life study of 221 cities: It was the top-scoring Asian city, followed by Tokyo.

The economic trends remain a concern around the world, yet BCG expects that with strong capital markets, GDP growth, and increased savings, global wealth will grow at a compound annual growth rate of 5.9 percent through 2015. Singapore has already led with the highest proportion of millionaire households for several years. With the Asia-Pacific region's share of global wealth expected to increase to 23 percent in 2015, from 18 percent in 2010, Tang says, "the trends seem to be in Singapore's favor."

Click here to see the countries with the highest proportion of millionaires.

Wong is a lifestyle and real estate reporter for Bloomberg Businessweek.

View the original article here