Undervalued property stocks lack catalysts

While long-term investors may consider buying some shares at the current low rate, the sector remains plain-looking


PROPERTY stocks are lacking new catalysts for further gains despite having a decent sales record in the months after movement restriction orders were lifted.

Aberdeen Standard Investments (M) Sdn Bhd country head Gerald Ambrose said investors are also shying away from the undervalued stocks, which he described as “cheap” in a two-year view.

“There are still not many catalysts in the sector. The inventory of unsold units remains at record highs and a true turnaround seems a long way off. Investors are not sure how many mortgages will be resumed this month,” he told The Malaysian Reserve (TMR).

He said while long-term investors may consider buying some shares at the current low rate, the sector remains plain-looking for the day-trading community who Ambrose said are more accustomed to big price movement in a week.

A check on Bloomberg showed that 70 of the 96 property companies listed on Bursa Malaysia had recorded a fall in their market price since the start of the year.

Eighteen counters were trading higher, albeit marginally, over the period, while eight remained unchanged.

The top 10 counters have also seen RM11.7 billion wiped off from their market capitalisation to date.

TMR recently reported that lowering the price threshold for foreigners to purchase local properties would give a boost to the market  and help reduce property overhang in the country.

Glomac Bhd group MD and CEO Datuk Seri Fateh Iskandar Mohamed Mansor (picture) said local properties could be the catalyst to attract foreign funds and improve the country’s economy.

“At the moment, the foreigner threshold is very high, some states have a foreigner threshold of RM2 million. I appeal to the state governments to allow foreign buyers to come in since there is global interest in Malaysia now due to our good health system, and the country’s capability in controlling the spread of Covid-19,” he said.

Institute for Democracy and Economic Affairs senior fellow and Centre for Market Education CEO Dr Carmelo Ferlito agreed on the move to lower the threshold to attract foreign buyers, including foreigners currently living in Malaysia.

“I suggest considering ‘local buyers’ as those foreigners who are in possession of a regular working visa (or TalentCorp visa) for at least five years and have regularly paid taxes in Malaysia during the same period.

“In this way, the market would not be open to general speculators, but to those individuals who could be considered as persons that decided to ‘settle down’ in Malaysia,” he said.

He said this would give the government a double win in keeping foreign speculators at bay, while also opening the market up to new potential buyers to help the industry at a critical stage.

Data by the National Property Information Centre’s Property Market Status Report showed there were 31,661 overhang residential units worth RM20.03 billion in the first half of 2020 (1H20), a 3.3% rise in volume and 6.4% in value from 30,664 units worth RM18.82 billion in 2H19.

The overhang in the serviced apartment subsector continued to rise and formed the bulk of the commercial property overhang, recording a total of 21,683 units with a value of RM18.64 billion, up by 26.5% in volume and 24% in value against 17,142 units worth RM15.04 billion in June to December 2019.