Update 12 June on IOIPG

US stocks closed lower Wednesday as traders weighed a preliminary US-China trade agreement and new inflation data. The market’s recent run higher took a breather as major indexes ended the day near previous closing levels.

The consumer price index (CPI) rose 0.1% in May from April, less than the 0.2% estimate from economists polled by Dow Jones. Core CPI, which strips out volatile food and energy prices, also increased 0.1%, less than expected.

“Inflation in May was lower than anticipated, suggesting the tariffs aren’t having a large immediate impact because companies have been using existing inventories or slowly adjusting prices due to uncertain demand,” said Alexandra Wilson-Elizondo, global co-CIO of multi-asset solutions at Goldman Sachs Asset Management.

“As we wait for the 90-day tariff pause to pass, the market will be caught between inflation and job prints. If inflation stays under control of the job market weakens, the Federal Reserve will likely consider cutting interest rates down the road,” Wilson-Elizondo said.

Discussions between US and Chinese officials have been a key focus this week for investors who remain on edge regarding trade policy.

Officials reached a consensus after two days of talks in London, but said that they will seek approval on the framework from the US and Chinese presidents before implementing it. As part of the framework, China would approve the exports of rare earth minerals while the US would roll back restrictions on the sale of advanced technology to China.

Even as the framework is being finalized, Commerce Secretary Howard Lutnick said Wednesday that US tariffs on Chinese imports will not change from their current levels.

President Trump said earlier in a Truth Social post that the deal with China is “done, subject to final approval with President Xi and me.” As part of the deal framework, he said that magnets and “any necessary rare earths” will be shipped up front by China and the US will allow Chinese students to attend US colleges and universities, adding that “WE ARE GETTING A TOTAL OF 55% TARIFFS, CHINA IS GETTING 10%.”

US crude oi futures rose more than 4% on Wednesday afternoon on news of escalating tensions in the Middle East, particularly after sources told Reuters that the US is preparing a partial evacuation of its embassy in Iraq due to heightened security risks in the region.

US, China agree on trade ‘framework’ after high-level talks

AFP, June 11, 2025

LONDON: Top officials from the US and China said Tuesday that they had agreed on a “framework” to move forward on trade, following two days of high-level talks in London to resolve tensions.

US commerce secretary Howard Lutnick expressed optimism after a full day of negotiations that concerns surrounding rare earth minerals and magnets “will be resolved” eventually, as the deal is implemented.

But this framework will first need to be approved by leaders in Washington and Beijing, officials said, at the end of meetings at the British capital’s historic Lancaster House.

All eyes were on the outcomes of negotiations as both sides tried to overcome an impasse over export restrictions. US officials earlier accused Beijing of slow-walking approvals for shipments of rare earths.

The world’s two biggest economies were also seeking a longer-lasting truce in their escalating tariffs war, with levies currently only temporarily on hold.

“We’re moving as quickly as we can,” US trade representative Jamieson Greer told reporters.

“We would very much like to find an agreement that makes sense for both countries,” he added, noting that the relationship was complex.

“We feel positive about engaging with the Chinese,” he maintained.

Speaking separately to reporters, China international trade representative Li Chenggang said: “Our communication has been very professional, rational, in-depth and candid.”

Li expressed hope that progress made in London would help to boost trust on both sides.

Productive talks

US treasury secretary Scott Bessent earlier described the closely-watched trade talks as productive, although scheduling conflicts prompted his departure from London with negotiations still ongoing.

Bessent, who led the US delegation with Lutnick and Greer, left early to return to Washington for testimony before congress, a US official told AFP.

Chinese vice premier He Lifeng headed his country’s team in London, which included Li and commerce minister Wang Wentao.

Both sides do not yet have another gathering scheduled.

But Lutnick said Tuesday that US measures imposed when rare earths “were not coming” would likely be relaxed once Beijing moved forward with more license approvals.

Global stock markets were on edge, but Wall Street’s major indexes climbed on hopes for progress earlier Tuesday.

The London negotiations follow talks in Geneva last month, which saw a temporary agreement to lower tariffs.

This time, China’s exports of rare earth minerals – used in a range of things including smartphones, electric vehicle batteries and green technology – were a key issue on the agenda.

“In Geneva, we had agreed to lower tariffs on them, and they had agreed to release the magnets and rare earths that we need throughout the economy,” US President Donald Trump’s top economic adviser, Kevin Hassett, told CNBC on Monday.

Even though Beijing was releasing some supplies, “it was going a lot slower than some companies believed was optimal”, he added.

‘Mirror arsenal’

Both countries “have developed almost a mirror arsenal of trade and investment weapons that they can aim at each other,” said Emily Benson, head of strategy at Minerva Technology Futures.

As they tap economic tools to try and shift global power structures, she told AFP, it may not be reasonable to expect a typical trade and investment deal.

But both sides could find ways to level off a downward spiral.

A dialing-down of temperatures could involve Chinese efforts to shore up the process for granting export control licenses, Benson said. She noted Beijing appeared understaffed given the volume of requests.

On the US side, this could look like a relaxation of certain export curbs in the high-tech domain, she added.

But observers remained cautious, with Thomas Mathews of Capital Economics warning that Washington was unlikely to “back off completely.” This could weigh on markets.

Since returning to office, Trump has slapped a 10% levy on friend and foe, threatening steeper rates on dozens of economies.

His tariffs have dented trade, with Beijing data showing Chinese exports to the US plunged in May.

The World Bank on Tuesday joined other international organisations to slash its 2025 global growth forecast amid trade uncertainty.

China is also in talks with partners including Japan and South Korea to try to build a united front countering Trump’s tariffs.

Trump said U.S.-China trade deal is ‘done’

The New York Times, June 12, 2025

After two days of talks in London, President Trump said yesterday that the U.S. and China had struck a deal to roll back some of the punitive measures they had taken against each other’s economies in recent months.

Under the agreement, China would relax its restrictions on shipments of rare earth minerals and magnets critical for some U.S. manufacturers. In return, the U.S. would not impose visa restrictions on Chinese students and would relax limits it had placed on some U.S. exports. The full details of the agreement were not immediately released.

“OUR DEAL WITH CHINA IS DONE, SUBJECT TO FINAL APPROVAL WITH PRESIDENT XI AND ME,” Trump wrote on social media. “RELATIONSHIP IS EXCELLENT!”

Context: Economic tensions between the U.S. and China spiraled after Trump announced expansive tariffs in April. The escalation threatened businesses in both countries and risked empty shelves in American stores later this year.

Tariffs: The levies between the two countries will remain unchanged, and a 90-day pause in implementing some of the tariffs will expire in August. The U.S. trade representative said that the two sides would remain in contact but that another meeting had not yet been scheduled.

Analysis: “From what we know of the agreement, it appears to merely unwind the damage and escalation from the president’s own trade war,” my colleague Ana Swanson, who covers trade and international economics, told me. “They haven’t yet made any progress toward a new trade deal.”

Rare earths: China, which controls the world’s supply of rare earth metals and magnets, has been trying not to overplay its hand during negotiations with the U.S., Keith Bradsher, our Beijing bureau chief, writes.

U.S. cities prepared for more protests

The New York Times, June 12, 2025

After days of demonstrations against immigration raids led Trump to send troops to Los Angeles, U.S. cities from the Pacific Northwest to the Southeast are seeing protests of their own.

Protests were expected in New York City; Raleigh, N.C.; Eugene, Ore.; Seattle; St. Louis; and San Antonio. In Washington, Defense Secretary Pete Hegseth told a Senate hearing that the same legal authorities the Pentagon had used to send nearly 5,000 Marines and National Guard troops to Los Angeles could be employed in other cities “if there are riots in place where law enforcement officers feel threatened.”

More Trump news:

• Trump received a phone call from Elon Musk, who later expressed regret for the attacks he had lodged against the president. “They went too far,” he wrote on X.

• Secretary of State Marco Rubio is pushing to investigate whether Harvard violated sanctions by holding a conference in China.

Netanyahu faced pressure over possible vote in Parliament

The New York Times, June 12, 2025

Israel’s opposition parties threatened yesterday to bring a motion to dissolve Parliament to a vote, a move that could lead to the collapse of Prime Minister Benjamin Netanyahu’s right-wing government and could raise the prospect of early elections.

If the motion passes, it is unlikely that the government would fall immediately, and a final vote could still take months. The opposition parties are exploiting a fight within the governing coalition over exemptions for ultra-Orthodox men from compulsory military service.

More Middle East news:

• The U.S. will withdraw diplomats from Iraq, the State Department said, as tensions with Iran spike.

• Several people were killed in the latest shooting near an Israeli-backed aid center in central Gaza.

• Mike Huckabee, the U.S. ambassador to Israel, said Muslim nations should provide territory for a Palestinian state, a suggestion that would break from longstanding U.S. policy.

Russia launches deadly strike on Kharkiv as peace talks stall

AFP, June 11, 2025

KHARKIV: Fresh Russian strikes on Ukraine’s northeastern city of Kharkiv killed three people and wounded 60 including children early today, authorities said, as Moscow pushed ahead with its relentless attacks after rejecting an unconditional ceasefire.

Russia has fired record numbers of drones and missiles at Ukraine over recent weeks, escalating three years of daily bombardments as it outlines hardline demands – rejected by Kyiv as “ultimatums” – to halt its invasion.

The northeastern city of Kharkiv, just 30km from the Russian border, again bore the brunt of the attack.

“Seventeen strikes by enemy UAVs (drones) were carried out in two districts of the city tonight,” Kharkiv mayor Igor Terekhov said on Telegram.

Kharkiv regional governor Oleg Synegubov said three people had been killed.

AFP journalists in the city saw damaged apartment blocks, burnt out cars and streets strewn with debris after the attacks.

Olena Khoruzheva had run into the hallway – away from the windows – with her two children when she heard the incoming drones.

“The younger one lay on the floor, hands on his head. I was on top of him,” the 41-year-old pharmacist told AFP.

“We heard it approaching. Silence, and then we were thrown against the wall… there were more explosions, then we heard people shouting ‘Help! Help!”

Her 65-year-old neighbour was one of those killed in the attack.

Early this morning, an AFP reporter saw first responders removing the body of one killed resident from a block of apartments in a black body bag.

Stalled peace talks

Ukraine’s air force said Russia had fired 85 drones overnight – fewer than in recent days.

US President Donald Trump has been urging the two sides to strike a peace deal

Ukrainian President Volodymyr Zelensky has in turn called on the west to up the pressure on Russia with hard-hitting economic sanctions that he says would limit its capacity to wage war.

He is expected to press that message with Trump and European leaders at a G7 summit in Canada, which kicks off on Sunday.

Two rounds of peace talks between Russia and Ukraine have failed to yield a breakthrough in ending the war.

Russia has rejected calls for an unconditional ceasefire and demanded that Ukraine give up its territory and bid to join Nato.

But the two sides agreed to swap more than 1,000 prisoners of war and hand over the bodies of dead soldiers, swapping groups of captured soldiers on Monday and yesterday.

The attacks came after Russia pummelled Kharkiv on Saturday in what Terekhov had called “the most powerful attack” on the city since the start of the war.

Kyiv has hit back with retaliatory drone strikes on Russia, with Moscow’s defence ministry saying 32 Ukrainian drones were intercepted overnight.

Both sides have downplayed any chance of progress at talks in Istanbul.

While not rejecting diplomacy, Zelensky called it “pointless” to hold further talks with the current Russian delegation – whom he previously dismissed as “empty heads” – since they could not agree to a ceasefire.

Russian President Vladimir Putin last week called Kyiv a “terrorist” regime and questioned why he should negotiate with them.

My take: Ukraine is paying the price for attacking the nuclear-carrier bomber jets of Russia last week, which has violated the nuclear convention between the US and Russia. The US has to distance itself from the Ukraine’s attack, so that it will not stir up bigger conflicts with Russia.

Updates on IOIPG

Hong Leong research published an update report on IOIPG after its analysts met with IOIPG CEO Lee Yeow Seng to get more insights on the South Beach stake acquisition.

Below are some extracts from the report:

• IOIPG recently announced to acquire the remaining 50.1% stakes in South Beach Complex from CDL for a total consideration of SGD834 million. Both the management and the board of IOIPG view the acquisition as strategic compelling for several reasons:

  i. Deep familiarity with the asset – IOIPG has been involved with the project since day one as part of the original development consortium.

  ii. These are prime, mature, and income-generating assets, which significantly reduce location risk and operational uncertainties typically associated with greenfield developments. Moreover, the opportunity to secure an en-bloc acquisition of high-quality commercial assets in Singapore is exceptionally rare, making this a highly strategic move.

  iii. Full ownership enables value creation – Gaining full control allows IOIPG full discretion to optimise operations, unlock synergies, and accelerate monetisation strategies.

  iv. REIT-ready anchor asset – With its stable cash flows and prime location, South Beach is well-positioned to anchor IOIPG’s planned asset monetisation exercise via a Singapore REIT listing.

• The transaction arose when JV partner City Developments Ltd (CDL) expressed its intention to divest its stake about a month earlier. As the existing JV partner, IOIPG held first right of refusal, allowing it the opportunity to acquire the stake ahead of other potential buyers

• Management sees significant upside in operational optimisation, particularly within the JW Marriott Hotel component. The group is confident to lift the hotel occupancy to above 90% (from currently 76%) and average daily room rates to around SGD600 (from SGD470 currently)

• Committed to maintaining Shariah compliance. Management has already secured financing for the acquisition, which will be funded through a combination of bank borrowings and bond issuance, with the latter potentially structured as sukuk to support Shariah compliance. Following the stock’s recent reclassification as Shariah-compliant in the May 2025 review, management reaffirmed its commitment to maintaining this status as part of its strategy to broaden its investor base.

• Post-acquisition of South Beach, net gearing could increase to around 0.93x. Additionally, the group also has another potential acquisition in the pipeline involving Shenton House (yes, it may be coming back!). Given that Shenton House is currently held under the private capacity of Mr Lee, the group CEO, it has flexibility in timing the payment from the potential acquisition to align better with the group financial management exercise.

• Mindful of the rise in net gearing, management shared three mitigating factors that should help to lower the net gearing.

  • Firstly, W Residences Marina View is schedule to be launched within the next few weeks, which should recoup significant cash flow to the group

  • Secondly, the group is targeting a Malaysia REIT listing in mid-CY26

  • Thirdly, it is also targeting a Singapore REIT listing in CY27

• Malaysia REIT: Targeted for mid-CY26 launch, with a combined estimated valuation of RM7-8bn. For illustrative purpose, if IOIPG retains 60% controlling stake post-listing, the exercise should unlock cash proceeds of RM2.8 - 3.2bn to the group.

• Singapore REIT: Planned for 2027, comprising South Beach and IOI Central Boulevard, with an estimated asset value of SGD7-8bn. Again, assuming IOIPG retains 60% control, this exercise should unlock cash proceeds of SGD2.8 - 3.2bn (RM9.2 - 10.6bn).

• Hong Leong analysts believe that the stock is significantly undervalued as it is trading at only 0.44x of its book value. Essentially, investors who are buying the stock today are gaining exposure to its prime assets, including IOI City Mall and IOI Central Boulevard at a steep discount for less than half of its value

• HL expect this valuation gap to narrow considerably in the near term as key assets such as IOI Central Boulevard and W Residences Marina View are approaching their inflection point. IOI Central Boulevard is expected to turn profitable soon, while W Residences is also slated for launch soon.

• In addition, the planned REIT listings in Malaysia and Singapore will not only monetise these assets but also crystallise their underlying value, providing greater visibility on the value of these assets and acting as a catalyst for a re-rating.

• Hong Leong maintains its conviction BUY recommendation with an unchanged TP of RM4.05 based on 35% discount to our estimated RNAV of RM6.24. IOIPG offers investors a rare diversified market exposure, anchored by its strategic presence in Singapore’s resilient and high-value real estate market, alongside a deep-rooted position in Malaysia’s property sector.

The planned listing of South Beach in a Singapore REIT is well expected, as I commented in my post last week when the acquisition was announced. South Beach is already an income-generating asset with the premium office and retails space enjoying occupancy of above 92% and the hotel ramping up occupancy from 76% to 90%. It is ready for injection into a REIT in Singapore anytime after the completion of the acquisition which may take a few months.

For IOI Central Boulevard, the plan to inject it into a REIT in Singapore is always there but IOIPG needs to ramp up its occupancy to 90% or above first before they can do so. Its occupancy stood at 80% as of 30 April 2025, and is targeted to reach 90% by mid 2025. The latest timing of 2027 for its listing is about right, as IOICB occupancy will have reached over 90% by 2026 and the first batch of tenants will go through the first round of rental revision by April 2027.

Assuming IOICB average rental will be revised up by 8% in 2027 to SGD14.00 psf/month, the gross rental income will be:

1.29m sf x 100% x SGD14.00 psf/mth x 12 mths = SGD217 million

Net rental income will be about SGD217m x 80% = SGD174 million a year.

At 3.5% listing yield, IOICB would be valued at SGD5.0 billion

At 4.0% listing yield, IOICB would be valued at SGD4.3 billion

South Beach complex was valued at SGD2.75 billion at acquisition by IOIPG last week. By 2027, its valuation will be over SGD3.0 billion:

Office & Retails space - 540k sf x SGD12 psf x 12 mths = SGD78m gross rental income; Net property income = SGD78m x 80% = SGD62 million

Hotel - 634 rooms x SGD600 x 365d x 90% = SGD125m gross income; EBITDA = SGD125m x 55% = SGD68 million

Total net property income / operating cashflows = SGD130 million a year

At 4.0% listing yield, South Beach would be valued at SGD3.25 billion

Hence, South Beach + IOICB would be worth SGD7.5 - 8.2 billion based on calculations above, largely inline with the company’s expected range of SGD7bn-8bn.

If IOIPG lists up 40% stakes in IOICB and South Beach, the group will be able to raise cash proceeds of around SGD3 billion, which may be used to pare down the entire SGD1bn debt at South Beach and pare down the SGD3bn debts at IOICB to just SGD1bn. IOIPG will see its net gearing drop by half to 0.3x level.

I reckon that IOIPG share price may not see much action at least until late August when it announces its Q4 earnings. If it books in larger revaluation gain for South Beach than expected, or it manages to book in land disposal gain for the Melaka land or Kulai industrial land, then the share price may see a boost.

The bigger catalysts will be:

• a successful launch of Marina View Residences in July and we see sales of over 10% by Sept end (within 3 months of launch)

• Further ramping up of occupancy rates at IOICB to over 90% in 2H 2025

• successful rental revision for the initial batches of tenants at IOI City Mall phase 2 in 2H 2025

• interest rate cuts by US Fed and continued sliding of Singapore SIBOR by 50 bps or more by year end

• kick off of the book building exercise for the REIT listing in Malaysia in early 2026

Net short positions on YTL Power decreased slightly to 21.8m shares at close Wednesday while net short positions on IOIPG and YTL remained relatively unchanged at 15.5m shares and 23.5m shares respectively.