SGX Market Commentary
Published October 13, 2006

Property second liners in play

Selected China stocks also see plenty of action in a broadly firm session


THE US housing market may be imploding but it appears as if the property reflation is very much alive here, judging by the attention focused on the sector over the past fortnight. However, as far as yesterday's session went, there were signs of money rotating out of the heavyweights into the second liners - City Developments, Keppel Land and Singapore Land all closed weaker while Ho Bee, Wheelock, Hotel Properties Ltd (HPL) and Second Chance Properties all rose.

In addition, China has been a recurring theme in the local stock market over the past two years and so it was again yesterday, when the volume and gainers lists contained familiar names from this segment such as Pine Agritech, China Milk, Celestial Nutrifood and China Fish.

The decline of property heavyweights meant that the Straits Times Index surrendered a 12-point lead to finish 0.97 of a point down at 2,640.64. The broad market, however, registered 257 rises versus 120 falls with 376 counters either not traded or unchanged. So it was a broadly firm session.

'Everyone is talking about property, property, property,' said a dealer. 'A big reason is that newsflows surrounding the sector have been mainly positive.'

HPL stood out as one of the second-line property stocks to rise with a 15 cents jump to $2.80. In a Wednesday 'buy', Kim Eng Securities described the stock as undervalued because it has a revalued net asset value per share of $3.05. This is based on a revaluation of its key hotel assets Hilton, Four Seasons and Le Meridian and the potential for redevelopment.

'The hotel operations in Singapore should see improvement in their average room revenues and occupancy rates due to higher tourist arrivals and the tight supply of hotel rooms in the next two years,' said Kim Eng. Its target price is $3.05 which it described as conservative.

A parcel of 31 million Pine Agritech shares that crossed at $2.40 helped fuel interest in the stock, enabling it to finish at $2.82 for a gain of 10 cents. Total trades were 33.8 million shares.

The downturn in heavyweights was not confined to just property - DBS's 20 cents drop to $20.10 cut 3.2 points off the index while SGX's 10 cents loss at $4.48 accounted for a further 1.4 points.

In its Oct 11 Emerging Markets Strategy report, BCA Research said liquidity conditions in the global system remain ambiguous with some measures pointing to plentiful liquidity while others suggesting conditions are less benign.

'Fed tightening has condensed the speculative liquidity expansion, triggering a period of consolidation in emerging market equities,' said BCA. 'However, broad global liquidity conditions are not restrictive and a bear market in global stocks is not on the cards.'

The independent research outfit recommended that asset allocators maintain a neutral stance to emerging market equities for the time being but said investors should avoid markets which are experiencing rising inflation and policy tightening. It also recommended investors stay invested in Singapore as the bull market is intact.