Monday, July 5, 2010

CapitaLand defies jitters

THERE are worries that CapitaLand's huge exposure to the China property market will be its Achilles heel if the mainland economy suffers a hard landing.

Shanghai stocks tumbled 6.7 per cent last week, due to jitters over the Agricultural Bank of China's coming initial public offering.

There are also concerns that a drop in China's purchasing managers' index last month might flag slowing growth in the country's manufacturing sector.

But so far, CapitaLand seems to be riding high in China.

Swiss bank UBS, for example, noted in a report last week that the property giant 'remains well positioned to deliver net asset value growth', as the challenging China market is likely to favour well-capitalised and diversified groups with the ability to execute on large-scale opportunities.

The investment bank also believes that CapitaLand may benefit from any appreciation in the yuan, as 'around 40 per cent of its revalued net asset value is exposed to China'.

Besides trading in CapitaLand shares, there are other means to gain exposure to the counter.

Macquarie Bank issues covered warrants on CapitaLand, which offers traders options to buy into the shares over a period of time.

The bank also has a call warrant where traders can exchange two warrants and pay an exercise price of $3.50 to get one CapitaLand share. It matures on Sept 1.

Bearish investors have the option to 'short' CapitaLand by trading Macquarie put warrants on the counter. One put derivative gives traders the option to sell CapitaLand at $3.50 by using two put warrants. It expires on Dec 2.

Source: Straits Times, 5 Jul 2010

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