Property-related stocks looked set for a rebound in the near term following the US Federal Reserve’s announcement of an open-ended third round of quantitative easing (QE3) last week, a Fubon Securities Co (富邦證券) analyst said in a client note yesterday.
Terry Liu (劉向晴), a researcher at Fubon Securities’ equity research team, said the QE3-driven liquidity and Taiwan’s continuously low interest rates are likely to support housing prices and volume.
“Indeed, evidence from QE1 and QE2 initiated in 2008 and 2010, respectively, shows outperformance of the Taiwan property index after the QE measures,” Liu wrote in the note.
Based on data compiled by Fubon Securities and the Taiwan Stock Exchange (TWSE), the building material and construction stock index — a gauge of the nation’s property sector development — had risen 9 percent within one month of the launch of QE1 against the TAIEX’s 3 percent increase over the same period, and increased 4 percent within two months against the TAIEX’s zero percent increase.
During the QE2 period, the property index had increased 10 percent one month after the practice, versus a 4 percent rise on the TAIEX and 14 percent within two months compared with TAIEX’s 9 percent expansion, the data showed.
In yesterday’s trading, the property index rose 1.21 percent, outperforming the benchmark index’s 0.31 percent growth, TWSE data showed.
Cathay Real Estate Development Co (國泰建設), one of the sector’s major players, for example, has seen its share price rise 37.68 percent so far this year to close at NT$14.25 yesterday.
Shares of Farglory Land Development Co (遠雄建設) rose 1.08 percent to NT$56.2 yesterday, while Hung Poo Real Estate Development Co (宏普建設) was up 0.97 percent to NT$31.3 and Huaku Construction Co (華固建設) edged up 0.69 percent to NT$72.8.
Despite facing a global and domestic economic slowdown, the property sector appears likely to gain further market momentum following several successful auctions last quarter and more auctions scheduled in Taipei later this month, Liu said, including beverage supplier Hey-Song Corp’s (黑松) major residential land sale and Prince Motors Co’s (太子汽車) office building auction.
“A likely price premium on the HeySong land will return the market’s focus to the residential market, especially as recent policies have become more accommodative,” Liu wrote.