KUALA LUMPUR: RHB Research Institute said many property stocks are still trading at above their seven-year historical mean price-to-book and price-to-earnings.
It said on Tuesday, Sept 27 that it expects the sector to continue underperforming the broad market.
'Three key reasons: i) Avoid high-beta play as market risk premium heightens; ii) Weakening RM signals more foreign equity selling and lower expected return from PROPERTIES []; and iii) Less bullish sales target next year as we see downside risk to GDP growth,' it said.
RHB Research highlighted that, even after the global market selldown since early August that has led the FBM KLCI to retrace by 14%, foreign shareholding of many property developer stocks, especially the large caps such as UEM Land, SP Setia and Mah Sing, is still at a relatively high level.
'We caution that, as foreign funds continue to retreat from the Asian equity markets, as seen from the recent weakness in RM and other Asian currencies, this will likely exert further downward pressure on these property stocks in the coming months. Small caps, similarly, will share the same fate as they are generally illiquid,' it said.
The research house said it had reduced its RNAV estimates for the property companies under its coverage by an average 9%-10%.
'We expect developers to be more cautious on the timing of launching and pricing strategy of their products. Launching schedules are likely to be slower, and the ability to mark up prices higher, especially for the subsequent phases of some big-scale projects such as KL EcoCity, Icon City and Velocity, will be quite limited. On the demand side, new projects are likely to see slower take-up as buyers turn more cautious on big-ticket item purchases,' it said.
It said on Tuesday, Sept 27 that it expects the sector to continue underperforming the broad market.
'Three key reasons: i) Avoid high-beta play as market risk premium heightens; ii) Weakening RM signals more foreign equity selling and lower expected return from PROPERTIES []; and iii) Less bullish sales target next year as we see downside risk to GDP growth,' it said.
RHB Research highlighted that, even after the global market selldown since early August that has led the FBM KLCI to retrace by 14%, foreign shareholding of many property developer stocks, especially the large caps such as UEM Land, SP Setia and Mah Sing, is still at a relatively high level.
'We caution that, as foreign funds continue to retreat from the Asian equity markets, as seen from the recent weakness in RM and other Asian currencies, this will likely exert further downward pressure on these property stocks in the coming months. Small caps, similarly, will share the same fate as they are generally illiquid,' it said.
The research house said it had reduced its RNAV estimates for the property companies under its coverage by an average 9%-10%.
'We expect developers to be more cautious on the timing of launching and pricing strategy of their products. Launching schedules are likely to be slower, and the ability to mark up prices higher, especially for the subsequent phases of some big-scale projects such as KL EcoCity, Icon City and Velocity, will be quite limited. On the demand side, new projects are likely to see slower take-up as buyers turn more cautious on big-ticket item purchases,' it said.
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