SINGAPORE’S economy has been hit hard by external headwinds in recent years.
The export-dependent nation has seen its trade income collapsing, while the pain of its key financial services sector continues to deepen as default risks, driven by the oil and gas sector, have escalated.
Cognisant of the challenges facing the city-state’s economy, Singapore’s Ministry of Trade and Industry (MTI) has recently narrowed its GDP growth forecast for 2016 to 1%-1.5% from its previous forecast of 1%-2%.
MTI says sectors such as electronics, information & communications and “other services industries” are likely to continue to support Singapore’s growth, while the wholesale trade and finance & insurance sectors could continue to face external headwinds.
For 2017, Singapore’s economic growth is expected to remain modest, expanding at a pace of 1%-3%.
According to the MTI, externally-oriented services sectors such as finance & insurance and wholesale sale are expected to remain sluggish, while sectors such as information & communications and “other services industries” are likely to continue to support growth.
It points out that the country’s manufacturing and tourism sectors will likely see improvement, while the marine & offshore engineering segment and firms supporting the global oil & gas industry are expected to continue to face weak demand conditions amid low oil prices.
Looking back, amid a challenging economic backdrop, Singapore has seen quite a number major consolidations in 2016, while initial public offering and fresh fund-raising activities in the equity market were dominated by real estate investment trusts (REITs), and the debt market remains driven by government-linked institutions.
In the debt capital market, Temasek Financial (I) Ltd’s inaugural euro bond issuances, worth US$1.2bil (RM5.38bil) in February topped the list of major deals in 2016.
The dual tranche euro bond offerings – comprising 600 million 0.5% Guaranteed Notes due 2022 and 500 million 1.5% Guaranteed Notes due 2028 – were oversubscribed, with robust demand from high-quality investors.
Net proceeds from the six-year and 12-year debt papers offered by Temasek would fund the ordinary course of business of the government investment arm and its holding companies.
The joint lead managers and bookrunners were Barclays, Citigroup, Deutsche Bank and HSBC.
Coming in second place in the top deals list of Singapore’s debt market is a deal jointly managed by Citigroup, DBS, Deutsche Bank, HSBC and Societe Generale (SCGIB).
It involved the inaugural US dollar-denominated securities amounting to US$750mil by DBS Group Holdings Ltd in August.
The securities may be redeemed at the option of DBS in whole, but not in part, on Sept 7, 2021, or on any distribution payment date thereafter, subject to the prior approval of the Monetary Authority of Singapore.
DBS said it will use the net proceeds from the issue for its finance and treasury activities, including the provision of intercompany loans to DBS Bank and its subsidiaries.
Two separate bond issuances by Housing & Development Board (HDB), the statutory board of the Ministry of National Development responsible for public housing in Singapore, took the third and fourth spots in the top deals list of Singapore’s debt market.
HDB’s issuance of debt papers amounting to US$695.68mil in January had the Australia and New Zealand Banking Group (ANZ), DBS, Deutsche Bank and Industrial and Commercial Bank of China (ICBC) involved.
HDB’s issuance of debt papers amounting to US$635.84mil in November, on the other hand, had Maybank Kim Eng, ANZ, BNP Paribas, CIMB and Standard Chartered as joint lead managers and bookrunners.
In the equity market, the initial public offering (IPO) by Frasers Logistics and Industrial Trust (FLT) in June turns out to be the biggest deal in 2016.
The IPO, which raised about US$668.7mil, was also country’s biggest new listing in three years.
FLT, which is said to be the largest initial pure-play Australian logistics and industrial REIT to be listed on Singapore Exchange - issued a total of 521.7 million units, including an international placement of 441.7 million units and a public tranche of 80 million units to the Singapore public at an ofer price of 89 Singapore cents (RM2.75).
The placement tranche of FLT was oversubscribed by more than six times by institutional investors, while the public tranche was oversubscribed by 3.9 times. The deal saw DBS, Citigroup, Morgan Stanley, OCBC and UOB as joint lead managers and bookrunners.
The IPO of FLT’s REIT came on the back of Manulife US REIT’s US$469.9mil IPO in May.
Touted as the first pure-play US office REIT to be listed in Asia, Manulife US REIT’s IPO portfolio comprises three freehold office properties in the United States. The REIT aims to offer an annualised distribution yield of 6.6% this year and 7.1% in 2017.
Manulife US REIT’s debut in May was the company’s second bid at Singapore’s IPO market, after having shelved its offering for the REIT in July 2015 due to volatile market conditions and reduced investor appetite.
The succesful listing of Manulife US REIT was jointly managed by DBS, China International Capital Corp, Credit Suisse and Deutsche Bank.
In June, Singapore-listed commodity trader Noble Group Ltd secured shareholders approval for its plan to raise US$500mil in a fully underwritten one-for-one rights issue to reduce debt and improve liquidity.
The Singapore-listed commodity trader regarded the rights issue, which would see more than 6.5 billion shares issued in the exercise, as an important next step for the company.
Noble’s shares had plunged about 60% in 2015 amid allegations by Iceberg Research that it had been hiding losses and overstating its assets through the use of accounting loopholes. Noble had rejected those accusations.
Noble’s rights issue was the third-biggest equity-market deal for 2016, with HSBC, Morgan Stanley, DBS, SCCIB and ING as joint lead managers and bookrunners.
Meanwhile, Singapore saw the biggest corporate exercise of 2016 in the takeover of Neptune Orient Lines (NOL) by French container transportation and shipping company CMA CGM.
The US$5.3bil deal was completed in July, and NOL was delisted from the Singapore Exchange in early September.
CMA CGM expects the acquisition of NOL to reinforce its position as a leader in the container shipping industry, with a capacity of about 2.4 million twenty-foot equivalent units, a market share of 11.7%, a fleet of 540 vessels, and a combined annual turnover of around US$21bil.
Maybank Kim Eng, BNP Paribas, Citigroup, HSBC and JP Morgan were the bankers involved in the deal.
The second biggest M&A deal in 2016 is ExxonMobil Corp’s US$2.4mil bid for Singapore-based InterOil Corp, and this was managed by Credit Suisse, JP Morgan, Morgan Stanley and UBS.
Singapore-based InterOil, whose operations are focused on Papua New Guinea, owns a 36.5% stake in the Elk-Antelope gas field, which turn is operated by French giant Total.
The proposed acquisition of InterOil would give ExxonMobil interests in six licenses in Papua New Guinea covering about four million acres, and better position it to meet Asian demand for liquefied natural gas.
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