Listed property holds up in big equities selloff

Posted On Wednesday, 01 August 2007 02:00 Published by eProp Commercial Property News
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Loss only 2% compared with 6% for shares

Anton de Goede Coronation Fund ManagersWhile global equity markets and the FTSE/JSE all share index took a battering in the sell-off last week, the South African listed property sector has surprised commentators by remaining remarkably resilient.

The expectation of strong distribution growth from listed property companies reporting results this month and demand for listed property stocks could be buoying the sector, analysts said yesterday.

Investec Listed Property Investments analyst Anton de Goede said yesterday the global sell-off in equities last week had left its mark on emerging markets, including SA.

De Goede said the FTSE/JSE all share index lost 6,6% in total returns for the week.

This led to a weaker currency market as well, with the rand losing about 25c against the dollar and losing momentum to break the R6,50 level.

But De Goede said that despite all of this, the South African listed property sector stood resilient.

The FTSE/JSE South African listed property index lost only 2% in total return during the sell-off despite the potential negative effect a weaker currency could have on bond yields.

The performance of listed property has tended to track the performance of bonds because they are both income-generating investments.

De Goede said a major reason for the sector remaining fairly resilient was the fact that during this month nearly two- thirds of the listed property companies would release results.

"As distribution growth expectations remain strong, market participants remained cautiously optimistic on the potential positive impact of the results announcements on share prices in the next month," said De Goede.

De Goede said expectations were that average distribution growth of more than 13% could be announced with better than average performances from listed property companies Hyprop Investments, Growthpoint Properties, Redefine Income Fund and Resilient Property Income Fund.

He said the cautious trading in listed property was also as a result of uncertainty regarding the next interest rate decision, expected in the middle of this month.

"Although recent inflation numbers have been inside economists' expectations, the higher than expected recent retail sales and credit extension data releases could result in a 50 basis point interest rate increase."

De Goede said the average daily value traded last week was R100m, which "compared relatively tentative" with the R130m daily average of the first six months of this year for the listed property sector.

He said Investec Listed Property Investments believed the underlying distribution growth would provide support for the listed property market.

Ian Anderson, a director of Re- Connect Research and Advisory Services, a provider of research in the listed property sector, said he thought the sector was being a lot more resilient than other asset classes.

"It's difficult to understand why. What it does show is that there is still strong demand from investors for South African listed property and that these buyers enter the market on any weakness," said Anderson

Last modified on Wednesday, 23 April 2014 19:49

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