Hong Kong’s return on line Wednesday after a typhoon forced an unwanted break on Tuesday helped revitalise buying interest. With the 2.6 percent increase in the Hang Seng at closing, coupled with a welcome boost from Europe – most likely in the hopes that Wall Street will bounce back – the Straits Times Index (STI) closed at 2,674.42 Thursday, an increase of 36.2 points from the previous day’s level at closing.
China stocks (S-chips) enjoyed ample attention while blue chips made a collective sigh of relief as the latest pressure on property stocks lessened after two days of trading sessions. The pressure was caused by National Development Minister Mah Bow Tan’s statement on Monday regarding measures to counter speculation in the property market.
One of the S-chips in play is property developer Ying Li of China, which gained ¢3.5 to ¢69 with 34 million traded shares. In a 15 September 2009 “buy” on the firm, SIAS Research said Ying Li is primed to gain from potential surges in property prices in Chongqing due to the Government’s “intense” drive to develop the area as a business and financial hub. SIAS utilised a discounted cash flow analysis to the Chinese developer’s projects and arrived at $1.07 per share. Its ¢88 target price was set at a discount of 17.5 percent to the said value.
Though blue chips generally rose, Singapore Exchange (SGX) shares remained unchanged as it closed at $8.60. In a “sell” on SGX with a target of $7, DMG & Partners said that the value per share traded in July and August was ¢79, sharply below the $1.08 from FY 2008 and the ¢94 from FY 2009.
“This suggests trading activity is concentrated in penny stocks, which historically are the last to move in an upmarket,” DMG said. “We are not optimistic that equity market volume will stay high in the months ahead.”
DMG expects dividends of ¢28.9 per share based on a payout ratio of 90 percent. “This gives an unexciting dividend yield of 3.4 percent,” DMG stated. Its target of $7 is based on 22 multiplied by earnings per share in FY 2010, where 22 is the four-year average.
On Wednesday, OCBC Investment Research said that there are more severe implications from the property measures announced on Monday. “The impact of the removal of the interest absorption scheme and interest-only loans on home buying is unlikely to be significant on genuine home buyers.”
“Nevertheless, we believe it will affect property investors and speculators. We think our earlier selection strategy for developers is even more relevant now in light of the risks and uncertainties. We reiterate our preference for developers that have already locked in profits from launches during the recent upturn in the market. We also favour developers that are trading at relatively large discounts to their NAV/RNAV.”