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23-01-13, 15:03
http://www.businesstimes.com.sg/archive/tuesday/premium/companies/others/ocbc-cautious-property-20130122

Published January 22, 2013

OCBC cautious on property

Research house likes O&G for strong order books, Reits for attractive yields

By Teo Si Jia


COOLING measures by the government have dampened OCBC Investment Research's outlook for the property sector.

The research house's head, Carmen Lee, is more bullish on the oil and gas (O&G) and real estate investment trust (Reits) equities for this year.

The next three to four months will possibly be trying for the property sector and so "we're starting to turn more neutral towards it", said Ms Lee at the opening of OCBC Securities' Investors Hub yesterday.

"We expect both the mass and high-end market to be affected more than others because, this round, the measures are so harsh," she explained.

With the exceedingly high transactions in the previous year, coupled with new cooling measures, it is expected that both volume and value of property transactions will register a slump.

OCBC forecasts up to a 30-40 per cent decline in the volume of transactions this year, down from last year's sales of 29,000 units. The projected slide in the value of home prices is less steep at five to 10 per cent.

Ms Lee emphasised that while the latest measures are tougher, they are temporary and could be withdrawn when the market stabilises.

Prices are starting to ease anyway, she said, and the sweet spot of transaction appears to be $1-1.5 million per unit, a range which 65 per cent of sales reside in.

That said, while OCBC is staying neutral on the property sector, it remains upbeat on China's growth.

"Properties with a lot of exposure to China, like CapitaMalls Asia and CapitaLand, are in a nice position to benefit from the China pick-up because you can see the interest coming back to China already," said Ms Lee.

As for Reits, Ms Lee noted: "We've liked Reits for that last four to five years and we continue to like them. If you look at the last year, Reits have done very well so . . . despite all the good gains, the yield is still very attractive," she noted.

She also quelled concerns that interest rates may rise, saying that it could stay low for the next two to three years.

For the year, Ms Lee singled out stock picks such as YTL Starhill, for its retail exposure; Cache Logistics Trust for its industrial space; and Fortune Reit for its retail exposure overseas, all of which have yields averaging at six to seven per cent.

As for the O&G industry, as positive as OCBC is of its outlook, it prefers to err on the side of caution as headwinds still remain. However, the sector has a very strong order book and good earnings possibilities.

Following into the new year as well are penny stocks. Building up from the mergers and acquisitions (M&A) and speculations last year, penny stocks will continue to be in play for a couple more months with new listings and M&As this year.

"Do be a little bit more cautious. In particular, I've noticed strong gain in terms of the smaller cap, China-play. That segment of the market has seen quite good gains already," Ms Lee cautioned.

OCBC yesterday officially drew open the curtains on its Investors Hub. The 6,600 square feet facility was opened in July last year after a $2 million makeover and is prepped with a trading gallery, where mobile trading devices are available, and terminals to trade online.

Managing director of OCBC Securities, Raymond Chee, said that about 50 per cent of the value of its customers' trades come through the Internet, while 20 per cent of the online trades were conducted via its mobile applications.

"Since the beginning of 2013, we have seen daily trading volume for retail customers double the daily average trading volume in 2012," he added.

The proportion of foreign trades at OCBC Securities has grown eight-fold in value while absolute turnover has gone up 13 times since 2005.