Tuesday, March 05, 2013

Property index may have a breakout

Shanghai's SSEC dropped 3% yesterday on announcement of new measures by Chinese authority to curb property speculation (here). This followed similar measures announced by Hong Kong in February (here) and in Singapore in January (here). With no new measure being introduced, property speculators will set their sight on Malaysia (here). Already, we have seen numerous deals announced in Johor (especially around Iskandar Waterfront). Slowly but surely, Malaysian property scene is coming back to live.

From the chart below, we can see that the Property index has just broken above the horizontal resistance at 1100 and it is set to test its January 2011 high of 1159. The upside breakout of the Property index means that property stocks could be good trading BUY. These include stocks with exposure in Iskandar & Nusantara, such as UEMLand and Tebrau, as well as those with landbank in Pengerang, such as MPHB. The Property theme play may spread to other property counters, such as Sunway & IJMland (which had a successful launch over the weekend in its latest township project, Rimbayu).

Chart 1: Property index's weekly chart as at Mar 5, 2013_3pm (Source: Quickcharts)

The other lagging sector on our exchange - Construction - may also benefit from the pick-up in Property sector as well as more large scale construction projects in the pipeline, such as the high-speed train connecting KL-Singapore, West Coast highway, more power plants and another 2 MRT tracks. However, from the chart below, we can see that the Construction index is still in a downtrend and until it has achieved a breakout, we cannot expect a broad-based rally among Construction stocks. For those with long-term investment horizon and who can stomach sharp drop in share price, some construction stocks to consider are Gamuda, Mudajaya & MRCB.

Chart 2: Construction index's weekly chart as at Mar 5, 2013_3pm (Source: Quickcharts)

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