HK tycoon's visit boosts property stocks

Property stocks gained in the local market yesterday, driven by news over the weekend that Hong Kong's telecom tycoon Richard Li (李澤楷) is investigating real estate in Taichung for investment.

But market watchers said this could be an extremely short-lived incentive for stock and property markets, as the plan is still in the air.

The construction and developer sub-index rose 0.49 percent in the Taiwan Stock Exchange (TSE) yesterday, compared to a 0.23 percent increase in the benchmark index for the same period.

Meanwhile, Taichung-based developers performed especially well, with Sweeten Construction Co (順天建設) closing at close to the 7 percent limit, up at NT$40.80 and Shining Building Business Co (鄉林建設) rising 4.33 percent to NT$65.10 yesterday.

"However, this is a short-lived bullish factor that can only last for one or two days, as it remains in question whether the investment plan can come true," Alex Huang (黃國偉), assistant vice president at Mega Securities Co (兆豐證券), said by telephone yesterday.

Mega Securities holds a neutral view on property plays on the likelihood that the housing market could peak out this year, Huang said.

Li, chairman of Hong Kong's biggest phone operator PCCW Ltd (電訊盈科) and son of Hong Kong billionaire Li Ka-shing (李嘉誠), who owns real estate developer Cheung Kong (Holdings) Ltd (長江實業), paid a three-day visit to Taichung that ended yesterday for what he said was to acquaint himself with the city's real estate market.

Li is considering investing in the construction of a dome in the NT$30 billion (US$906.1 million) project to develop an economic and trade park in Taichung in exchange for lands in the downtown area, the Apple Daily reported yesterday.

"Li is interested in Taichung and optimistic about the city's future development" backed by the effects of the high speed train and the Taichung science park, Shining vice president Fred Ying (應致德) said.

Shining expects to see at least a 10 percent rise in housing prices this year from NT$160,000 to NT$180,000 per ping, he said.

Banking on that optimism, the developer plans to roll out NT$15 billion for projects this year, including a single ultra-upscale housing project to be launched in September, Ying said.

Nevertheless, analysts appeared less bullish due to rising concerns over a supply glut in Taichung.

Oversupply has forced developer Mega Securities to cut unit prices for the promotion of pre-sale houses, Huang said.

Similarly, Victor Chang (張欣民), an analyst at Sinyi Real Estate Inc (信義房屋), said he did not expect the uncertain investment by Li would serve as a strong driver to boost housing prices.

Nevertheless, selling pressure is expected to rise next year, driven by a supply glut, especially when bullish factors like cross-strait direct links did not go as smoothly as expected, he warned.