Property stocks surge but rally may not last

7 Apr, 2009
Property stocks surge but rally may not last
By Fiona Chan

PRIVATE home prices posted their biggest-ever plunge in the first quarter this year, but that has not stopped property stocks from surging in the ongoing market rally.

Almost all the local developers have seen their shares jump by at least 20 per cent from their lows last month, with some - such as Keppel Land - shooting up almost 80 per cent. The FTSE ST real estate index has risen by 35 per cent since March 9.

But analysts said this rally does not reflect an improvement in the property market's fundamentals and is unlikely to be sustained.

'Nothing much has changed since the stocks hit their low points in March,' said Mr Donald Chua, a property analyst at CIMB-GK Securities.

Instead, the property counters could be rising partly due to short-sellers covering their positions or funds wanting to get in on the rally, he said.

The dramatic drop in home prices in the first quarter had little effect on the market because most observers had already expected it, he added. Private home prices fell a record 13.8 per cent in the first quarter, according to the URA price index released last week.

Saying most people knew prices had fallen 'at that kind of levels'', Mr Chua added: 'In fact, as the index continues to fall, sentiment may get a little bit more positive because investors could think that a bottom is starting to form.'

Another analyst from a local brokerage said the shares could be rebounding because they had been oversold. Their values are also being boosted by the positive spillover from the G-20 summit and rallies in the United States stock markets, he said.

'There is a ripple effect from the US and it's translating into the Singapore market, so people are going for bigger plays like property and banks.'