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Developers come under pressure
STI ends flat after govt announces fresh set of anti-speculative property measures over weekend
By R SIVANITHY
SENIOR CORRESPONDENT
PRESSURE on property developers was one of the main features of trading yesterday after the government announced a fresh set of anti-speculative measures over the weekend.
The other factor at work was a weak opening for Europe, probably in anticipation of a soft Wall Street. The end result was that the Straits Times Index first added 15 points but ended just 0.32 of a point higher at 2,757.46.
The unspectacular finish was perhaps not as much as might have been expected given the 2.4 per cent bounce in Hong Kong, but this was probably because the STI had, on Friday, first dropped 40 points before ending with just a 12-point loss, with the bulk of this bounce coming in the final few minutes that day.
As for the government's Budget, brokers said that as was the case most of the time, there was little or no impact.
Over the weekend the government announced its second set of property cooling measures, namely a sellers' stamp duty of 3 per cent for properties sold within a year of purchase and a lowering of the loan-to-value limit from 90 to 80 per cent. CapitaLand lost 14 cents at $3.76, City Developments dropped 52 cents to $10.30 and Wing Tai lost nine cents at $1.68.
UBS Investment Research said that it believes that more measures will be introduced if 1) prices rise more than 5-7 per cent per quarter, 2) new sales volume rises above 1,000 per month, 3) sub-sales make up over 25 per cent of total sales and 4) other jurisdictions tighten policies which could result in inflows into Singapore assets. It said that investors have probably been caught by surprise by the measures and so it expects a short-term correction in prices of residential developers.
Citi Investment Research said that it thinks that like the first batch of measures announced last September, the new measures will have little real impact. 'They simply reinforce the earlier government message to speculators, that is, it is monitoring the situation and will act when deemed necessary,' said Citi.
Credit Suisse, in the meantime, maintained an 'overweight' on the sector and recommended buying on dips.
Genting Singapore proved to be the market's other focal point when it rose three cents to 97 cents after releasing its Q4 2009 results last Friday, which included mainly revenue drops and net losses.
OCBC Investment Research described the results as disappointing, reduced its fair value for the stock from $1.35 to $1.04, but retained a 'buy'.
Credit Suisse, on the other hand, said that Genting's 2009 results were largely irrelevant as the company was still in the process of rolling out its Sentosa project and so Q4 figures were weighed down by pre-operating costs. However, it called an 'underperform' with a 94-cent target because it described Genting as one of the world's most expensive gaming stocks. 'If Genting were to trade in line with the Singapore market, this would suggest a value of 46 cents. The experience from Macau has been for an 11-29 per cent drop in share prices after new casino openings.'
OCBC rose two cents to $8.56 after releasing its results last Friday. Analysts responded with a mixed bag of recommendations - JP Morgan called an 'overweight' with a target price of $11 using a dividend-discount model while Deutsche Bank called a 'hold' with $9.10 as the target.
Morgan Stanley however, retained an 'underweight' on OCBC, pointing to an unexciting growth outlook and uncompelling valuations. Its target is $8.54.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
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