Property stocks suffer sharp falls

Investors react to the latest cooling measures.

OCBC Investment Research said:

The mixed reactions on Wall Street overnight are unlikely to provide any inspiration for the local bourse this morning. 

Meanwhile, the STI continued to display resilience; despite losing as much as 1% intraday yesterday, the index rebounded to close above the 3200 psychological level with just a 0.3% loss.

And with today’s tone likely to remain muted, we could see the index drifting within a tight band between the 3230 immediate resistance and the 3200 immediate base.

Beyond that, the subsequent hurdle lies at the 3280 resistance (key peak in Jan ’11) with the subsequent base at the 3150 resistance-turned-support.

IG Markets Singapore meanwhile noted:

Property stocks took a battering yesterday in reaction to the government’s latest cooling measures and they may not be out of the woods yet.

The likes of Capitaland, Keppel Land and City Developments all suffered sharp falls yesterday as Singapore digested the latest round of curbs designed to take the heat out of the property market.

While yesterday’s price action for property counters, and to some extent the country’s big three banks, could be classified as a knee-jerk reaction there could be a more long-term shift at play.

The property sector was the best performer last year, rising an impressive 48%, and was tipped for another buoyant year. But hikes in stamp duty levies and tightening of mortgage finance have seriously dampened its prospects for another bumper year.

Investors are now fearing the property market could seriously slowdown in terms of transaction volume as a result of the latest government intervention. Property stocks have been tipped to fall by as much as 15% by some doomsayers while prices could fall up to 10%.

Some feel the rise in the ABSD for foreign buyers is overdone given they represent less than 10% of overall property sales. However, foreigners do make up about 30% of high-end property sales, which are likely to take a battering now.

And further property cooling measures cannot be ruled out, especially while the low interest rate environment encourages property speculation.

With those words of caution investors should also remember the diverse nature of the portfolios and operations of these property players, many with a regional and global focus. So while Singapore is a significant part of their business it is not perhaps as pivotal to the overall fortunes of the company as many local investors initially feel.

This doom over property stocks dragged the STI down 0.3% yesterday and it could test the 3200 threshold today, starting the day at 3206. But across Asia it was very much a mixed bag as the Shanghai Composite rocketed 3.1%.