Play of the week

CapitaLand hit by home loan curbs

Share price suffers biggest fall in five months as investors go on selling spree in kneejerk reaction

Published on Oct 13, 2012

By Anita Gabriel, Senior Correspondent

PROPERTY stocks felt the pain this week after the Government's latest move to keep a check on property prices by capping new loans for residential properties at 35 years, among other measures.

Investors didn't waste time offloading shares in CapitaLand, the largest real estate developer in South-east Asia.

Shares of other property stocks, namely City Developments, the largest proxy for Singapore's residential segment, were also battered.

CapitaLand shares, which rose to a high of $3.30 on Oct 5, shed 3.3 per cent to $3.19 on Monday, posting its biggest decline in nearly five months.

The counter tumbled over the first three trading days of this week, shedding 16 cents or 5 per cent from its Oct 5 high to close on Wednesday at $3.14.

It gained four cents on Thursday only to lose two cents again yesterday to end the week at $3.16, having lost 14 cents or 4.2 per cent over the week.

Most analysts described the selldown as a knee-jerk reaction but a few concerns led to the selling bout.

The government measures, say analysts, could constrain upfront payments and raise monthly mortgage payments, thus driving buyers away.

Maybank Kim Eng expects mass market property prices to fall by as much as 10 per cent by the end of next year due to the tightening of mortgage rules. But prices could hold up if developers delay their project completion.

The move also dilutes the appeal of property as an investment and could soften demand for large-ticket properties in the near term, said Credit Suisse equity research.

According to a July housing survey by Credit Suisse, some 31 per cent of Singaporeans purchase property for investment.

All these factors somewhat cloud the prospects of developers.

Even with that, CapitaLand remains Credit Suisse's preferred developer, given attractive valuations and its share buyback programme.

Another plus point is the company's diversified income base. Singapore residential property accounts for only 10 per cent of its asset base. The rest includes office, retail and fund management businesses.

On Tuesday, the developer announced that its chief operating officer Lim Ming Yan will succeed long-serving Mr Liew Mun Leong as group president and chief executive officer from Jan 1.

That did not come as a surprise as in June this year, CapitaLand had announced the planned retirement of Mr Liew, who will remain as director until the next annual general meeting in April.

Analysts expect a smooth transition and a sense of continuity. Mr Lim, also deputy chairman of the firm's China executive committee, is a veteran of the group.

He helmed the firm's business in China for nine years until 2009 and helped build it into a leading real estate developer in the country.

CapitaLand is a much favoured stock. According to Bloomberg, 16 analysts have a buy, six analysts have a hold and only one has a sell call on the counter.

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