Published July 10, 2009

Nomura still cautious on Singapore property stocks

By UMA SHANKARI

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WHEN it comes to Asian property stocks, buy in China, take profit in Singapore and be selective in Hong Kong and India, Nomura Research is advising investors.

Too high: The recent rally in the shares of Singapore developers is simply 'too far, too fast ahead of supporting fundamentals', according to a Nomura analyst

The strength of Asian property stocks was one of the big surprises in the first half of 2009, analysts said at the Nomura Asia Equity Forum yesterday.

'Asian property stocks have risen 55 per cent year to date and rebounded 131 per cent from the 2008-2009 trough, but remain 48 per cent below their 2007-2008 peaks,' Nomura said in a report.

But the fundamentals vary from market to market, the firm said. For Singapore, the recent rally in the shares of developers is simply 'too far, too fast ahead of supporting fundamentals', said analyst Tony Darwell.

'Broader issues of rising inventory, weak residential leasing demand and markedly lower rents will likely weigh on underlying asset prices,' he said.

Right now, investors have priced a 20 per cent-plus rise in home prices over the next 12-18 months into developers' shares, he said. These expectations are 'premature'.

Nomura remains bearish on Singapore developers, with 'reduce' calls on CapitaLand, City Developments and Keppel Land.

But it has a 'buy' call on CapitaLand's office trust CapitaCommercial Trust (CCT), despite its overall bearish view on Singapore's office market. This is because CCT's management has shown it is able to contain the trust's portfolio vacancy - which was a low 2.3 per cent at end-April after a difficult Q1 leasing market, Nomura said.

It also said Asian markets that have done better than expected include China residential, Hong Kong residential and Singapore mass residential.

Segments that have performed worse than expected include Hong Kong office vacancy, Singapore housing rents, Singapore offices and Singapore industrial.