Asian Rally Expected Ahead Of Fed Meeting

Source : The Straits Times, Oct 29, 2007

Singapore property plays likely to be hurt by govt move to curb overheating.

PROPERTY stocks are likely to come under selling pressure today, following last Friday night’s news that the Government will scrap the deferred payment scheme to slow down overheating in the property market.

The move, which took place with immediate effect, will affect private properties that have yet to be completed.

Analysts say the withdrawal of the deferred payment scheme is aimed at discouraging speculators from entering the market and driving up home prices.

This may result in a temporary cooling of the market.

‘This will definitely affect sentiment, and make property shares less attractive for the time being, but it will not spark a panic selling,’ said a remisier.

‘The initial impact will be there, but it is only temporary. Developers are still holding their prices very high.’

Smaller developers are likely to be more affected, as they have a greater proportion of lower-end projects. Bigger developers have a good balance of high-end projects that can attract foreign investors, who do not usually required deferred payment on their property purchases.

Still, property bellwether stocks such as CapitaLand and City Developments (CDL) will be closely watched to gauge market reaction.

Property counters had a sparkling run last Friday before the withdrawal of the deferred scheme was announced. CapitaLand rose 25 cents, or 3.2 per cent, to $8.05, while CDL jumped 70 cents, or 4.5 per cent, to $16.30.

Meanwhile, bank stocks may even gain from the curb on deferred payment as buyers of uncompleted homes will now be seeking loans from banks instead of waiting two to three years till their homes are completed.

Property counters aside, the overall market sentiment is expected to remain bullish. Support for the benchmark Straits Times Index is expected following a solid showing from Wall Street last Friday.

Regional markets are bullish on expectations of a US interest rate cut when the United States Federal Reserve meets over the next two days.

‘Expect another last- minute short rally, until there is a direction from the US,’ said a trader.

Asian bourses mostly closed higher last Friday, with Hong Kong’s Hang Seng Index being the star of the show - jumping 3.2 per cent for the week to close above the 30,000-point barrier.

But a Citigroup report last week noted that a slowdown in the US will have a great impact on Asian markets, especially Singapore and the Asean region.

‘Decoupling is highly unlikely,’ according to a report by three Citigroup analysts. ‘Asian equity markets are the most correlated to the US and Europe that they’ve been in 30 years.’

COOLING EFFORTS

‘The initial impact will be there, but it is only temporary. Developers are still holding their prices very high.’A REMISIER, on the withdrawal of deferred payment probably having a temporary effect