Growth in Japan and China via sour assets

By Cathy Chan  |   2008-6-14  |     NEWSPAPER EDITION

CAPITALAND Ltd, Southeast Asia's biggest developer, is looking for distressed assets in Japan and China to help its expansion in the two markets, Chief Executive Officer Liew Mun Leong said.

The developer runs two property funds in Japan and teamed up with Mitsubishi Estate Co in a Tokyo project worth as much as US$1.5 billion. It runs seven funds in China, and developed office and retail malls under the Raffles City brand in Shanghai and Beijing.

"We are always on the lookout," Liew said in an interview with Bloomberg News in Beijing on Thursday.

The Singapore developer is expanding in new markets to broaden its revenue base beyond its home market of 4.6 million people. It's also seeking distressed assets as rising energy and commodity prices and a slowing global economy add to financial stress on companies and stoke defaults worldwide.

The global default rate may rise to 5 percent by the end of 2008 and reach 6.1 percent by April 2009, Moody's Investors Service said last month. The number of corporate defaults worldwide this year has exceeded the total in 2007, according to Standard & Poor's.

Borrowers have defaulted 28 times on US$18.9 billion of debt, compared with 22 last year and 30 in all of 2006, S&P said.

CapitaLand is seeking distressed assets in China as the country raised bank reserve requirements for the fifth time this year.

Chinese banks must put aside a record 17 percent of deposits as reserves starting tomorrow, rising to 17.5 percent beginning on June 25, the People's Bank of China said.