Wednesday, October 17, 2012
Property stocks starting to stir?
Today, we saw a strong rally by Mahsing, which gained 20 sen to close at RM2.40. From Chart 1, we can see that Mahsing is in its uptrend line, S1-S1 and it has broken above its intermediate downtrend line, R1-R1 in late July. Is this the start of a strong rally in Mahsing?
Chart 1: Mahsing's weekly chart as at Oct 17, 2012_4.00pm (Source: Quickcharts)
In early July, IJMLand also broke above its intermediate downtrend line but that that rally did not sustain. In mid-September, IJMLand gave back all its gain & dropped back below the downtrend line, only to be supported by its long-term uptrend line.
Chart 2: IJMland's weekly chart as at Oct 17, 2012_4.00pm (Source: Quickcharts)
The reason for the cautious price movement for IJMLand - which is also witnessed in SPSetia (see Chart 3) - is simply due to the uncertain outlook for the property sector. All these three companies have accumulated substantial landbank and the market is simply worried that they would fare poorly if the property market suffers due to various measures taken by the government to dampen speculative buying.
Chart 3: SPSetia's weekly chart as at Oct 17, 2012_4.00pm (Source: Quickcharts)
This is clearly reflected in the Property Index, which is still capped by the overhead intermediate downtrend line. See Chart 4 below.
Chart 4: Property's weekly chart as at Oct 17, 2012_4.00pm (Source: Quickcharts)
The market may take comfort that the demand for affordable housing is still fairly strong and the demand for speculative buying may return once the restrictive measures are removed. We can see that the demand for properties in neighboring countries, such as Singapore is still very strong despite months of aggressive measures to curbs speculative. Other than genuine demand for housing, the other factor that drives the property sector is the need to hedge against inflation due to aggressive monetary easing in the US, Eurozone and Japan. It looks like a matter of time when the government will roll back the restriction and the party in the property sector will start again. When that happens, many property stocks would continue to rally.
If you agree with this observation, you may take advantage of the recent correction in property stocks and position for their recovery.
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Mahsing, IJMLand & SPSetia.