Taiwan construction shares, the nation’s worst-performing group of stocks in the past month, rose as central banks acted to shore up financial companies, easing concern that the international credit crisis may worsen.
Farglory Land Development Co (遠雄建設), Taiwan’s biggest construction company by market value, advanced 4.5 percent to NT$36.10 in Taipei. Cathay Real Estate Development Co (國泰建設), the second largest, rose 6.9 percent to NT$9.46. The benchmark TAIEX index surged 5.82 percent and the construction subindex rose 5.4 percent, with 34 of 35 members rising.
“Concern over the international financial crisis has eased a little bit for now,” said Charles Chen (陳敏智), who helps manage the equivalent of US$3.7 billion at JF Asset Management Co (怡富投信).
The 35-member construction subindex has fallen 35 percent in the past month, the worst-performing group on the Taiwan Stock Exchange, on concern developers may lack working funds as the credit crisis deepened and economic growth slowed.
The nation’s central bank earlier this week cut its required reserve ratios, injecting NT$200 billion (US$6.2 billion) into the banking system. But Chang Chin-oh (張金鶚), professor of land economics at National Chengchi University, said the central bank’s action may fail to prop up Taiwan’s property market.
“You can’t rescue it,” Chang said. “Market forces are very strong.”
There’s an oversupply of housing and “prices are too high,” he said.
Taiwan’s property market has a 15 percent vacancy rate, or more than 1 million unoccupied units, Chang said. Housing prices surged 50 percent in the past two and half years, while personal income rose less than 2 percent, he said.
“Prices will slowly decline,” Chang said. “It’ll take three to five years to reach the bottom.”
Certain construction firms may have difficulties repaying debts as they are unable to sell their housing units, said Erik Chang, head of non-technology research at Capital Securities Corp (群益證券), who has a “sell” recommendation on Taiwan’s construction shares.
Taiwan holds a total of NT$80 billion in bankrupt Lehman Brothers Holdings Inc securities, the Financial Supervisory Commission said on Monday.
“Companies and investors may be punished for bad judgment, the belief that prices will rise,” Chang Chin-oh said. “They may have to face the consequences of exiting the market or going bankrupt.”
Last month the government cut its official forecast for growth this year to 4.3 percent from 4.78 as exports and consumer spending cooled.
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