Due to a typhoon warning, Hong Kong market closed during the morning session. The closure indicated that the local stocks had suffered yesterday from an absence of proper direction and some loss of liquidity. Following the government’s anti-speculation moves last Monday, the property stocks continued to experience some pressure. However, in general, trading was restrained and was probably driven more by the performance of Wall Street.
Initially, short-covering had raised at one stage the Straits Times Index (STI) by 15 points. However, the Hang Seng Index’s fell into the red by its closing even though after lunch, Hong Kong opened for business and somewhat helped improve liquidity. The drop meant that STI closed with a net loss of 1.34 points at 2,638.40 and the gains were eroded.
The largest losing contribution of the index was derived from a US$1.58 drop in the Jardine Matheson to US$30.22, accounting to 6.85 points loss. On the other hand, the largest positive contribution of the index was also derived from a Jardine stock – US$0.08 gain from Hongkong Land at US$4.14, accounting to 2.3 points gain.
In the second day of trading, after the anti-speculation measures of the government were revealed in the Parliament, the property stocks held up fairly well. With a loss of 20 cent at $10.04, City Developments was the largest casualty while Keppel Land had 6 cents loss at $2.60. However, the CapitaLand only fell 1 cent to $3.71.
According to Citi Investment Research, although they have little impact on the genuine demand, they still act as a warning to speculative buyers. Citi said that they disagree with the notion about the present buying frenzy as an appropriate beginning of the cyclical upswing. It also added that the sharp price hikes will first, be proven unsustainable if the interest rate trend reverses; and second, without real wage growth, it cannot be sustained. In July, the volume of resale declined by 12 percent, while the volume of new sales rose by 40 percent. The Citi believe that price increases in the future will be more moderated. They also believe that there is a need to consider further measures if residential prices will continue to rise ahead of the economic fundamentals just like what they had experienced six months ago.
However, DMG & Partners recommended investors to purchase the dips and emphasised its ‘overweight’ on the property sector.
DMG said, ”We believe demand for mass projects remains sustainable, given that majority of buyers here are genuine home-occupiers and HDB prices continue to rise amid increased demand from Singaporeans and PRs. While we are cautious of the government’s mindful watch, we see the kneejerk selldown as a good opportunity to buy into property stocks.”
Last Monday, Citi suggested that instead of focusing on domestic economic growth, investors must look beyond the current provisioning cycle. The Citi also recommended a ‘buy’ on the banks.