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Thread: Stamp duty move to hit developers' ROEs: DMG

  1. #1
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    Default Stamp duty move to hit developers' ROEs: DMG

    http://www.businesstimes.com.sg/sub/...92740,00.html?

    Published December 14, 2011

    Stamp duty move to hit developers' ROEs: DMG

    This in turn may spell rough ride for stocks

    By MICHELLE TAN


    THE government's latest stamp duty measure to cool the residential property market is likely to depress the return on equity (ROE) and stock prices of developers, said Craig Irvine, the chief regional strategist of DMG & Partners Research.

    'We believe sentiment is turning down into a multi-year cycle, with important cautionary impact on confidence, liquidity, and consumer behaviour,' said Mr Irvine.

    As property companies' ROEs and share prices tend to have a strong correlation, the strategist expects the sector's share prices to take a hit as ROEs head south.

    As the 'predicted downside is material', Mr Irvine sees local property counters such as Ho Bee to be particularly 'vulnerable'.

    But property player Wing Tai was highlighted as a 'striking exception' in the pool of developers as its stock is deemed to be more price-resilient after a recent sell- down.

    Said Mr Irvine: 'Having fallen 27 per cent since end-October, Wing Tai shares actually show upside to their regression trend line over the next year. Wing Tai has already corrected more than any stock in this basket and its projected ROE holds up on the high end of the peer group range.'

    At a more macro level, the property cycle could be at its final tipping point, according to economists.

    Back in 1996, domestic residential property prices plummeted by more than 40 per cent after a round of cooling measures.

    Should there be a repeat of this scenario following the recent policy move, residential property prices are likely to take a massive hit, hurting the top lines of developers, their overall profitability, and their share valuations.

    'In the next few weeks, the market will see a lot of analysis to try to quantify and predict different angles. Some will focus on stabilising forces like buyer holding power and structural undersupply in the mass market.

    'Others will focus on downward accelerants like slowing growth in China and the 'hot money' nature of foreign buying. Yet we believe the overall mindset will be cautious to negative . . . until productivity and affordability improve,' said Mr Irvine.

  2. #2
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    Jul 2009
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    Default

    got R in this market consider good already, cannot be too greedy.

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