http://www.straitstimes.com/Money/St...ry_241699.html

May 28, 2008

WARRANT WATCH

CapitaLand issues hold firm despite souring property views


BEARISH reports put out recently by analysts on the Singapore property market have failed to dampen traders' appetite for covered warrants issued on property counters by foreign banks.

Yesterday, a call warrant issued by Deutsche Bank (DB) on CapitaLand rose two cents to 21 cents on a hefty volume of 10.7 million shares. In contrast, the mother share stayed flat at $6.30, with 5.25 million shares traded.

Traders were attracted by the warrant's relatively long shelf life of five months and a strike price of $6.9289 which works out to a small premium over current market prices. 'Well, I guess it boils down to how traders view the property market going forward,' said a dealer.

Investors could be betting on the residential property market making a comeback in the second half, he said.

However, not all analysts are quite so confident. Barclays Capital and Credit Suisse recently forecasted that rents and prices might drop by up to 40 per cent in the next two years.

But UOB Kay Hian sniffed fresh investment opportunities in property stocks, arguing that they had already corrected 45 per cent from their mid-2007 peaks.Property counters, as a group, had also underperformed the Straits Times Index by 20 per cent in the past year, it added. As such, it has argued that the market had already 'over-discounted' the negative prospects of the property sector and advised investors to load up on them instead.

But there are others who are urging caution. Tracking the trading patterns of top property giant executives will shed insight on how these insiders view the market.

They noted that on May 16, CapitaLand chief executive Liew Mun Leong sold 500,000 shares at $6.87 apiece and another 300,000 shares at $6.88 each.

Even though Mr Liew has made a regular practice of cashing in on his stock options and selling the resulting shares, it still stirred a debate among traders. 'If there is upside, surely, even Mr Liew will want to wait to get a better price,' one dealer said.

GOH ENG YEOW

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