Asian Developers Rise After US Cut

Source : The Business Times, January 24, 2008

Optimism that Fed's interest rate cuts will bolster real estate sales

Sun Hung Kai Properties Ltd, Hong Kong's biggest builder, and CapitaLand Ltd, Singapore's largest, led gains in Asian property stocks on optimism that the US Federal Reserve's interest rate cuts will bolster real estate sales.

Sun Hung Kai rose 9.3 per cent to HK$154.90 at the 4 pm close in Hong Kong, the most in more than eight years as the city followed the US in cutting borrowing costs. Capitaland rose 7.8 per cent to $5.84 at the 5.05 pm close in Singapore. That helped drive the Bloomberg Asia Pacific Real Estate Index of 164 stocks up 6.5 per cent, the largest advance in at least nine years.

'For those who've got cash in their hands, they're taking advantage of the recent slump to accumulate on weakness,' said Nancy Lee, who helps manage US$200 million at Taifook Asset Management Ltd in Hong Kong. 'Now that we have a further rate cut, developers are looking even more attractive.'

Demand for real estate may rise as banks across Asia trim borrowing costs. HSBC Holdings plc cut its Hong Kong lending rate to 6 per cent after the US reduction, fuelling demand for credit in a city where property prices have been forecast to rise 45 per cent by 2010. HSBC's cut would slash monthly payments on a 20-year, HK$1 million (S$185,900) loan to HK$7,164, down 13 per cent since the bank started cutting rates in September.

Sun Hung Kai and CapitaLand are among developers from developed Asian markets that are expanding into faster-growing countries such as India and China, gauging that their greater access to international capital markets will give them an edge over domestic builders.

DLF Ltd, India's biggest developer, surged 7.1 per cent to 925 rupees as at 3.21 pm in Mumbai, snapping a six-day slide that slashed about US$14.5 billion from its market value.

India's biggest developer has projects including a US$15 billion contract to develop with Dubai World a township near Bangalore, India's technology hub.

Lower borrowing costs may also assist Emaar MGF Land's plans to sell US$1.8 billion of shares in India beginning on Feb 1. The developer is a unit of Emaar Properties PJSC.

Unitech Ltd, India's second biggest developer, traded 13 per cent higher at 396.90 rupees, reversing most of yesterday's 15 per cent slide.

Central banks including those in Taiwan, Japan and the Philippines are under pressure to reduce interest rates or hold off further increases to boost growth amid concerns that the US will slip into recession amid fallout from the sub-prime mortgage crisis.

Cheung Kong (Holdings) Ltd, the developer controlled by Asia's richest man, Li Ka-shing, surged 10 per cent in Hong Kong trading. Sino Land Co increased 9.3 per cent and Hang Lung Properties Ltd jumped 9.9 per cent. The Hang Seng Property Index rose 9.5 per cent, the biggest one-day jump since 1998.

Singapore stocks rose for the first time in four days after the US Federal Reserve cut its benchmark interest rate, seeking to avoid a recession in the city state's biggest export market.

City Developments Ltd, Singapore's second biggest property company, rose 8.1 per cent to $11.70. Keppel Land Ltd, the third largest, added 4.9 per cent to $5.95, its first gain in four days.
Sun Hung Kai, which in September said that it plans to increase investment in China to about HK$77 billion, last month joined Guangzhou R&F Properties Co and KWG Property Holding Ltd in a 4.6 billion yuan (S$923.2 million) project to build service apartments, offices, shops and hotels in southern China.

Investors are likely to put more money into Hong Kong real estate this year, following a 53 per cent increase in the value of deals last year, said CB Richard Ellis Group Inc, the world's largest commercial real estate broker, in a report on Tuesday.

'Following the buoyant investment activity in 2007, the investment market should remain robust in 2008, thanks to the influx of new international investors from the Middle East and South-east Asia,' Henry Lam, executive director of investment properties for CB Richard Ellis in Hong Kong, said on Tuesday.

Strategists at Credit Suisse and Celestial Asia Securities Holdings Ltd expressed concern that yesterday's rally could be short-lived.

Changes in Hong Kong housing prices tend to track changes in stock prices, Clifford Lam and Miranda Lai from Credit Suisse wrote yesterday in a research note.

'We still believe that the chance of disappointment in the housing market is going to be high,' the Hong-Kong based analysts wrote. -- Bloomberg