Malaysia real estate stocks upgraded

MALAYSIAN property developers, set to be the best performers on the Kuala Lumpur stock exchange this quarter, had their stock ratings raised by HwangDBS Vickers Research Sdn Bhd, which said sales are rebounding and potential “positive” policy announcements may bolster demand.

SP Setia Bhd, Malaysia’s biggest property developer, was upgraded to “buy” from “fully valued,” and the target price increased to RM4.50 from RM3.90, HwangDBS said in a report today. Eastern & Oriental Bhd, Sunrise Bhd and Sunway City Bhd were raised to “buy” from “hold,” it said.

“Sales are bottoming out” and “developers are more confident now to resume launches, including high-end” properties, HwangDBS said. Property stocks are now “stepping into the limelight.”

The Kuala Lumpur Property Index of 87 stocks jumped 43 per cent this quarter, outpacing the benchmark Kuala Lumpur Composite Index’s 23 per cent gain, and making it the best performing industry group on the stock exchange.

The plan by Prime Minister Datuk Seri Najib Tun Razak to announce an easing of investment restrictions tomorrow “could further re-rate the sector,” HwangDBS said.

Loan Approvals Rise

Najib, who took office in April, has raised foreign ownership limits in banks and announced a RM67 billion (US$19 billion) spending plan in an effort to boost the economy that he predicts will shrink as much as 5 per cent this year, the first contraction in a decade.

Central bank data showed loans approved for home purchases in April climbed to the highest level in at least a year. Loans approved for home purchases in April rose to RM6.3 billion from a month earlier, the third monthly gain, adding to signs the industry is rebounding.

SP Setia has jumped 47 per cent this quarter, Sunway City climbed 82 per cent, while Eastern & Oriental more than doubled.

By Bloomberg