Following is the transcript of a First On CNBC interview with Lim Ming Yan, President and Group CEO of CapitaLand. The interview was broadcast on CNBC on 15 February 2017 at 08:10AM SG/HK Time.
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Interviewed by Bernie Lo, Anchor, CNBC and Dan Murphy, Correspondent, CNBC.
Dan Murphy: Now first and foremost I wanted to focus on the outlook as I mentioned just before, you said it was unpredictable and uncertain and I’m wondering what CapitaLand is doing to mitigate some of the risks that you might see stemming towards the rest of the year, if that is indeed the environment that you see yourself operating in.
Lim Ming Yan: When we started FY2016, the outlook was the same as what we were observed (unpredictable and uncertain). But we managed to deliver a good set of results for 2016. I think what is most important (within this set of results in 2016) is that the PATMI coming from our other operations is a significant 73 percent ($865 million) of the total PATMI ($1.19 billion). That in itself is a record year for CapitaLand since it was listed back in 2001.
So the amount of cash from the PATMI will actually help us ride through the uncertainties in the global market now. I think it was mentioned many times by many different people about the geopolitical situation. We are very glad to see that there’s a good chance the U.S. and China might build a very constructive relationship with each other.
Dan: OK. So that’s actually worrying you on the outlook. You see foreign relations potentially impacting the business moving forward – is that right?
Lim: I will say it that it largely depends on the relationship between China and the U.S. These are the two largest economies in the world. If they were to have a good trade relationship and a generally positive economic environment, I think it will go very well for businesses operating in those parts of the world.
Bernie Lo: I’m just kind of wondering – some of the comments that we’re getting are that the company expects property cooling measures by the Chinese government to have some impact on the outlook of the residential market. There’s plenty of demand and I’m wondering if it is typical for capital and maybe err on the side of caution a little bit?
I think they (the Chinese government) are trying to control that demand so that prices don’t spiral too far out of control. People ending up in potential negative equity positions and getting priced out of markets for decades to come are not socially desirable. Caution is caution, but in different forms, so I wonder if the conservatism is a little bit overstated?
Lim: Bernie, you’re absolutely right. I think the market in China is not just one single market. I think the market is underpinned by a relatively high economic growth – it’s between six to seven, six to 6.5 per cent projected FY 2017. And in addition to that I think there’s a significant increase in urbanisation that’s taking place. So we have very much been focusing on the Tier 1 and the Tier 2 cities.
Property cooling measures are just really to make sure that properties remain affordable, that’s how I look at it, at least. I think this will make it (the residential property market) a lot more resilient and sustainable over the long-term. So from that perspective, I think CapitaLand remains positive about the residential market in the first tier cities and many of the upper second tier cities.
Bernie: One of the things that CapitaLand has strived for over the years is portfolio balance. You have your defences up whenever some parts of your assets are going through softer cycles. Now, 36 percent of your total assets are in Singapore and 45 percent are in China as your core markets. You also have assets in new budding markets such as Indonesia, Malaysia and Vietnam, which you are increasingly engaged in.
In an ideal world do you think that 36 and 45 percent exposure – respectively in Singapore and China – are still a little bit too high for those two key markets? Do you see other markets, perhaps even some names, that don’t exist now but might be appearing on your plate in the near future?
Lim: Yeah, we are constantly looking at how we can rebalance our portfolio. I think that for now, given the size of the Chinese economy, China taking up the the “lion’s share” (of our portfolio) is something to be expected. For Singapore, being the home market for CapitaLand, allocating 36 percent now is something that we are comfortable with as well.
But having said that, we will constantly be looking at opportunities across different markets where we have presence in. We want to continue growing our business presence in Vietnam. We will also be looking at Indonesia. These are major markets within this region. Also, we have also been looking at markets beyond Asia in Europe as well as in the U.S, for our service apartment business.
The above is the transcript of a First On CNBC interview with Lim Ming Yan, President and Group CEO of CapitaLand. The interview was broadcast on CNBC on 15 February 2017 at 08:10AM SG/HK Time.
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