Why was market spooked?
Property analysts say announcement affected listed developers, so it should have been re-timed
PROPERTY stocks rebounded slightly on Friday after being spooked two days ago by the Government’s surprise announcement that it was raising development charges by 20 percentage points with immediate effect.
The Wednesday announcement — made in the afternoon and seen then as a clear signal that the Government was out to cool the red-hot property market — led the Singapore Properties Equities Index to drop 2.7 per cent and the ST Index to lose 1.8 per cent at the close of trading that day.
Now that the dust has settled — with dealers saying that property stocks have regained their bearings — one question has emerged: Why did the Government announce such a shocker before the market closed?
The last time such a “shocking announcement” had unleashed havoc on the stock market was in 1996 when the tax in capital gains — also issued to curb skyrocketing property prices — was implemented, recalled Mr Eugene Lim, assistant vice-president at ERA Singapore.
He was one of the many property analysts Today spoke to who voiced surprise at the timing of the announcement. Mr Lim said: “These announcements make quite a big impact on listed developers, so by right, they should wait till the market closes.”
The increase in development charges — from 50 per cent back to the pre-1985 rate of 70 per cent — is widely viewed by analysts as an attempt to slow down the en bloc frenzy as it will now be more expensive for developers to buy land. While he acknowledged that it was not the first time that the Government had released statistics before the market closed, Mr Lim felt none of those announcements were as big as Wednesday’s. “It is quite unlike our Government” not to see the impact of such an announcement on the stock market, he added.
Other analysts felt that it was possible that the Government did not expect the fallout to be quite so big.
Mr Colin Tan, director and head of consultancy & research at Chesterton International, said: “Perhaps, the Urban Redevelopment Authority (URA) thought the market was primed for such a policy announcement … (Or) They must have thought it wasn’t so sensitive because it’s nothing new, as they were just reinstating an old policy (of raising the development charges back to an old, higher rate). ”
But in hindsight, perhaps the announcement could have waited till later in the day, Mr Tan added, to give investors a chance to digest the news.
In any case, Mr Donald Han, managing director at Cushman & Wakefield Singapore, said: “The official line was not directed at cooling the market, but adjusting it to be more equitable, so I think Government didn’t think it was a critical announcement (that) would make much impact.” But it did have a great impact on the stock market, said analysts. “The hours of panic might have been because investors thought it was a sign of tougher measures to come,” said Mr Han.
Economist Chua Hak Bin, however, was among the analysts who did not attach much weight to the timing of the announcement as monetary policies are also released in the morning, at 8am. While he noted that the Government emphasised that the move was not a cooling measure, “it does raise the possibility that the Government is watching the property market closely and more measures are likely”.
In response to Today’s queries, the Ministry of National Development said the announcement — issued at 12.30pm during the mid-day market recess and posted on both the MND and URA websites — was “consistent” with their practice of issuing other announcements like the Government Land Sales (GLS) programme.
Source : Weekend Today - 21 Jul 2007
Obama picks Leon Panetta as CIA head »« A business continuity plan is vital
