Following the unexpected announcement of measures to cool the property market on 5 July, the landslide in property and bank stocks brought about by investors’ heavy selling led to a consequent dip of 2 per cent in the benchmark Straits Times Index to close at 3,191.82 the next day. This is the lowest STI recorded since 1 May 2017, where the index closed at 3,175.44. The hike in stamp duty and tightening of loan limits resulted in banks and brokerages responding swiftly in revising the target prices on property developers’ stock. Major players such as City Developments Limited (CDL) and UOL Group shed 17.04 per cent and 12.65 per cent and closed at S$9.46 and S$6.70, respectively. Singapore’s largest developer, CapitaLand, was down by 5.35 per cent and trading at S$3.01, only to finish at S$2.99. Real estate brokerage APAC Realty retracted by 21.15 per cent, and ended at S$0.58, while real estate agency Propnex declined by 18.84 per cent and closed at S$0.52. Analysts were of the view that developers holding large unsold Singapore residential landbank will see a bigger impact. The three local banks also faced a similar predicament, with DBS falling by 3.19 per cent to S$25.21, UOB by 3.58 per cent to S$26.12 and OCBC on the decline by 2.61 per cent to S$11.20. While the banks are also affected by the new cooling measures in the short term, the long-term outlook remains positive against the backdrop of rising interest rates. As well, the current price weakness could be an open door to gradually buy into banking stocks.
Photo credit: SPH