May 8, 2009


Now it's property counters

Real estate big guns soar but analysts say property prices yet to stabilise

By Yang Huiwen & Fiona Chan

BANKS gave way to property counters yesterday as the extraordinary share market rally stayed in high gear.

The property sector's big guns rocketed and helped the market jump almost 63 points to 2,241.6.

The numbers from two high-fliers were stunning. Keppel Land, which made a cash call late last month to raise $712 million, was the biggest gainer in percentage terms, rising 56 cents, or 25.2 per cent, to $2.78. It has gained 66.47 per cent in just five days.

City Developments looked a slacker in comparison but still surged 85 cents, or 11.3 per cent, to $8.35.

The trading volumes of some property counters, including City Developments and CapitaLand, swelled by more than 40 per cent each yesterday.

The FTSE ST Real Estate Index has surged 59.5 per cent since its March lows, outperforming the benchmark Straits Times Index, which is up 53.9 per cent.

Some observers have described the recent stock market resurgence as a 'liquidity rally' - one driven by new flow of capital into stocks.

'I think it's simply because the sector is so under-owned over the last few quarters,' said CIMB-GK property analyst Donald Chua. 'Once the market picks up and liquidity comes in, many fund managers have no choice but to buy into the sector.'

But he adds that fundamentally, there has been no changes in the sector, although there might be some talk of sales volumes picking up.

'I don't think you can conclude that property prices have stabilised and I think that's the key thing to look out for before you can say anything has changed,' he said.

Many developers have cautioned in earnings statements that this year will remain challenging as the local property market remains cautious.

Fund managers have been steadily moving money back into equities, helping to ignite a rally in stock markets around the world.

Mr David Lee, managing director of Ferrell Asset Management, a Singapore-based hedge fund, said in an interview with The Straits Times this week that he had put money into property stocks at the start of this year.

'It was the best time to increase Asian allocation in risky assets such as property stocks,' he said, adding that real estate shares had been lagging.

'Sentiment was very bearish; valuations of some stocks became very attractive,' he said.

'The situation is a lot better now. For example, refinancing risk of properties is improving. People feel a lot better now with easier credit and better liquidity.'

A recent UBS report said the Singapore economy bottomed in the first quarter, making this a good time for investors to buy property and banking stocks as they are likely to be the best-performing sectors in the six months to come.

Yet investors have been positioned 'exactly the other way round' with heavier allocations in defensive stocks like telecoms, said UBS strategist Tan Min Lan.

While rocketing share prices took the headlines, CapitaLand also offered some good news from the front line of sales. It has collected payment for almost all the 542 units sold in its RiverGate condominium at Robertson Quay, which was completed in March.

About 98 per cent of the buyers have paid up, with collection of the remaining payments still ongoing.

Most buyers opted for the deferred payment scheme where they put up a 20 per cent downpayment and delayed the remaining payments until completion.

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