Property stocks slump after recent rally

PROPERTY stocks plummeted yesterday as investors – afraid that the party is over for now – headed for the exit.

The sell-down follows a sharp rally in recent weeks and is viewed as overdue given that the stocks have looked overpriced, said a fund manager.

Shares of property heavyweight City Developments (CDL) closed 6.7 per cent lower at $8.95 on a volume of 7.08 million shares. It is now 10.5 per cent below last week’s high, but still a long way above its March lows.

CapitaLand closed 3.6 per cent behind at $3.71 on a volume of nearly 42 million shares. This is down from last week’s high of $4.01.

And developer Keppel Land slipped 7.8 per cent to close at $2.34 on a volume of 15.4 million shares. It is 16 per cent lower than last week’s high of $2.78.

In an AmFraser Securities report yesterday, Mr Najeeb Jarhom noted that the three stocks had recorded ’stunning’ triple-digit surges since their March lows.

Keppel Land has led the pack with a 328 per cent jump from 70 cents to $3, despite being booted out of the Straits Times Index recently.

The report added that the stock should trade between $2.30 and $2.90.

CapitaLand is expected to trade within a range of $3.50 and $4.10.

As for CDL, its shares should trade between $8.70 and $10, it said.

Yesterday, most other property counters were also hammered.

Allgreen Properties slid 4.5 per cent to 95 cents, while office landlord Singapore Land was down 1.6 per cent at $5.40.

At $1.35, Wing Tai was 7.5 per cent lower, while Wheelock Properties edged 2.3 per cent down to $1.70.

The recent rally of property stocks was in line with growing confidence in the physical property market, as general panic has slowly evaporated.

Sales of new private homes surged past the 1,000-unit mark for three consecutive months from February to April. And buying interest continues to appear strong, judging from recent sales.

A DMG & Partners Securities report yesterday upgraded the Singapore property sector to ‘overweight’ from ‘neutral’, citing various factors such as physical prices levelling off and the return of interest in prime homes.

Foreign buyers are also expected to return because of the pickup in domestic buying activity.
Key risks, said analyst Brandon Lee in the report, included a slower- than-expected economic recovery, negative newsflow emanating from the United States, and the integrated resorts failing to take off.

‘The stock market is going to be very volatile. But at least confidence is back in the physical market, which is a good thing for property stocks in the near to medium term,’ said an analyst.
The resale market is stirring and one of the upside surprises is likely to come when the Urban Redevelopment Authority caveats come out next week, he said.

Stocks-wise, the upside is not as attractive, he added.

Market observers say the market continues to search for real signs of recovery to latch onto.

Source: Straits Times, 9 Jun 2009