Tuesday, September 15, 2009

Property curbs bring sellers out

SGX among index stocks to weaken; market sentiment also hit by expectations of Wall Street fall

NEWS of fresh anti- speculative property measures such as banning property developers from absorbing interest payments for customers yesterday sent property stocks into a tailspin and added to the generally weak sentiment in the overall market.

With Wall Street expected to open weaker yesterday, the Straits Times Index ended a nett 41.29 points lower at 2,639.74. It had risen 58 points last week and is up almost 50 per cent for 2009 so far.

Most of the pressure came after lunch when news circulated that the government will, with immediate effect, disallow the Interest Absorption Scheme and Interest Only Housing Loans.

According to the government's press release, the reason is because both schemes 'could encourage property speculation in a buoyant market where prices are rising rapidly as they are forms of housing loans that entirely eliminate or substantially lower instalment payments for property purchasers . . .'.

As a result, the FT-ST Real Estate Index lost 3.3 per cent. It wasn't all property-related selling though - a weak Europe opening suggested Wall Street might slide later yesterday.

The broad market excluding derivatives only managed 90 rises versus 387 falls. Among the few gains was offshore marine play Ezra Holdings, whose shares gained nine cents at $1.89 with 22 million done after the company announced new contracts worth US$152 million.

Deutsche Bank, in a Sept 13 report, called a 'buy' on Ezra with a $2.50 target price. 'With its upcoming high specification vessels, enhanced know-how and expertise and good execution track record, Ezra would be in a strong position to benefit (from increased spending in the global subsea market),' said the Deutsche report. DBS-Vickers, in the meantime, called a 'buy' on Ezra with a 12-month target of $2.20, saying more catalysts can be expected in the months ahead.

Among the index stocks to weaken was Singapore Exchange, which ended 15 cents weaker at $8.58. In downgrading SGX to 'neutral', UBS Investment Research (UBSIR) said last Friday that the stock has risen 74 per cent this year and is now trading near its 10-year mean price/earnings.

Although SGX is probably inexpensive relative to regional peers such as Bursa Malaysia and Hong Kong Exchanges & Clearing, UBSIR said the stock is fully valued at 21.6x 2010 estimated earnings versus the market average of 15.3. However, the broker raised its SGX target price to $9.20 using a discounted cash flow analysis.

Among other moves of note was a drop in the shares of Chartered Semiconductor, which is the subject of a takeover bid at $2.68 per share from Abu Dhabi's ATIC. Chartered's shares finished unchanged at $2.60 after earlier touching $2.58.

The company yesterday said the preliminary opinion of Deutsche Bank, the independent financial adviser to Chartered's independent directors, is that the offer is fair and reasonable. In the same announcement, Chartered said its independent directors endorsed this view.

Meanwhile, global consulting firm FTI Consulting said yesterday that the majority of 153 fund managers with US$2.8 trillion under management it surveyed recently believe the financial crisis is still not over, largely because the amount of leverage in the system has not been reduced.

'The prevailing view was that there has been so much economic stimulus that markets cannot help but go up. The concern was what would happen when government money runs out,' said FTI's president and CEO Jack Dunne.

Source: Business Times,15 Sep 2009

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