Friday, May 16, 2008
About this Blog
Posted by: Anonymous
Posted: 14-05-2008
There is a great deal of uncertainty for both bulls and bears. No one knows which direction the markets are going to take in a couple of months time. We are currently in limbo, waiting for the next BIG sign to appear. The markets are like a highly compressed spring. The moment there is the slightest indication that the worst is over, the rebound will be a massive uptrend. Few will believe that recovery will take the form of a V but it is plausible. The US is on the way to building the biggest bubble next to the dot-com boom with its current measures and policy changes. Though bubbles are not sustainable, they modify perceptions and tweak public opinion to create self-fulfilling prophecies of well-being and growth.
Everything that we see is an illusion. The numbers in the stock markets. The figures reflecting rises and falls in the property markets. They are but all manifestations of what the masses believe in. And belief can always be manipulated and controlled. The most dire of circumstances exist because the masses believe they exist. When that set of beliefs is manipulated by the media and governing powers, reality shifts to follow accordingly.
Growth or not, recovery or not, everything hinges on what everyone believes in.
Bears and bulls, we are all living in an illusion.
Uncertainty for both bulls and bears
This post presents the "self-fulfilling" nature of the marketplace. It is food for thought ..Posted by: Anonymous
Posted: 14-05-2008
There is a great deal of uncertainty for both bulls and bears. No one knows which direction the markets are going to take in a couple of months time. We are currently in limbo, waiting for the next BIG sign to appear. The markets are like a highly compressed spring. The moment there is the slightest indication that the worst is over, the rebound will be a massive uptrend. Few will believe that recovery will take the form of a V but it is plausible. The US is on the way to building the biggest bubble next to the dot-com boom with its current measures and policy changes. Though bubbles are not sustainable, they modify perceptions and tweak public opinion to create self-fulfilling prophecies of well-being and growth.
Everything that we see is an illusion. The numbers in the stock markets. The figures reflecting rises and falls in the property markets. They are but all manifestations of what the masses believe in. And belief can always be manipulated and controlled. The most dire of circumstances exist because the masses believe they exist. When that set of beliefs is manipulated by the media and governing powers, reality shifts to follow accordingly.
Growth or not, recovery or not, everything hinges on what everyone believes in.
Bears and bulls, we are all living in an illusion.
About this Blog
5 May 2008
Asia Pacific/Singapore
Equity Research
Real Estate Management & Development (Real Estate) / UNDERWEIGHT
All buyers please read the link below from Credit Suisse
http://star.walagata.com/w/ghisallo/42339025.pdf
Vacant real(i)ty
We believe the Singapore residential property sector could see a bursting
of a bubble that has been created from exuberant expectations and
liquidity over the past two years. With a potential economic slowdown that
may last through 2009, and historically high supply looming, we turn more
negative on this cyclical sector, which has seen price declines of 40% and
stocks trading at up to 70% discounts to RNAVs in previous down-cycles.
■ Housing prices have started falling. Secondary transactions already show
prices of like-for-like units down 5-25% from peak levels. Our previous zero
growth assumption seems to be too optimistic.
■ Prices could come off 40%. We believe further consolidation will be triggered
by: 1) withdrawal of the liquidity; 2) dumping by marginal speculators;
3) potential price cuts by small developers; 4) rising vacancies with rising
supply; 5) a deterioration of the local employment situation. In addition, low
rental yields and slowing capital inflows offer little buffer, and the strong
S$ erodes the attractiveness of Singapore properties.
Our housing supply demand model suggests that vacancy rates may rise from the current 5-6% to 9.8-19% in our base and worst cases, prompting rent and price declines of more than 40%, based on historical trends, in our opinion.
■ Bad news not fully in yet; downgrade sector to UNDERWEIGHT. We
have revised all RNAVs on base-case assumptions of average selling price
(ASP) declines of 30%, 20% and 10% in the high-end, mid-end and massmarket
segments from end-2007 levels, respectively. With the recent
20-30% rebound in stock prices, developers are now trading close to or
above RNAVs. We downgrade CDL to UNDERPERFORM, Keppel Land and
Allgreen to NEUTRAL, and we keep Wing Tai as UNDERPERFORM. We
upgrade CapitaLand to NEUTRAL, as it is defensive against Singaporespecific
headwinds. Our bear-case RNAVs assume a further 10 p.p. cut to
each segment’s ASP.
■ Switch to REITs. We advocate switching from riskier residential exposure to
S-REITs. Among them, we prefer the retail REITs for their more defensive
nature, in particular CapitaMall Trust and Frasers Centrepoint Trust.
Credit Suisse: Rent & Price to fall 40%
Article information:5 May 2008
Asia Pacific/Singapore
Equity Research
Real Estate Management & Development (Real Estate) / UNDERWEIGHT
All buyers please read the link below from Credit Suisse
http://star.walagata.com/w/ghisallo/42339025.pdf
Vacant real(i)ty
We believe the Singapore residential property sector could see a bursting
of a bubble that has been created from exuberant expectations and
liquidity over the past two years. With a potential economic slowdown that
may last through 2009, and historically high supply looming, we turn more
negative on this cyclical sector, which has seen price declines of 40% and
stocks trading at up to 70% discounts to RNAVs in previous down-cycles.
■ Housing prices have started falling. Secondary transactions already show
prices of like-for-like units down 5-25% from peak levels. Our previous zero
growth assumption seems to be too optimistic.
■ Prices could come off 40%. We believe further consolidation will be triggered
by: 1) withdrawal of the liquidity; 2) dumping by marginal speculators;
3) potential price cuts by small developers; 4) rising vacancies with rising
supply; 5) a deterioration of the local employment situation. In addition, low
rental yields and slowing capital inflows offer little buffer, and the strong
S$ erodes the attractiveness of Singapore properties.
Our housing supply demand model suggests that vacancy rates may rise from the current 5-6% to 9.8-19% in our base and worst cases, prompting rent and price declines of more than 40%, based on historical trends, in our opinion.
■ Bad news not fully in yet; downgrade sector to UNDERWEIGHT. We
have revised all RNAVs on base-case assumptions of average selling price
(ASP) declines of 30%, 20% and 10% in the high-end, mid-end and massmarket
segments from end-2007 levels, respectively. With the recent
20-30% rebound in stock prices, developers are now trading close to or
above RNAVs. We downgrade CDL to UNDERPERFORM, Keppel Land and
Allgreen to NEUTRAL, and we keep Wing Tai as UNDERPERFORM. We
upgrade CapitaLand to NEUTRAL, as it is defensive against Singaporespecific
headwinds. Our bear-case RNAVs assume a further 10 p.p. cut to
each segment’s ASP.
■ Switch to REITs. We advocate switching from riskier residential exposure to
S-REITs. Among them, we prefer the retail REITs for their more defensive
nature, in particular CapitaMall Trust and Frasers Centrepoint Trust.
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