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Friday, 19 October 2012

FTSE ST Real Estate Index: 19 October 2012, Friday, 11.59pm Singapore Time

FTSE ST Real Estate Index: 19 October 2012, Friday, 11.59pm Singapore Time

Following the Donovan Singapore Property Market Composite Index (refer: http://donovan-ang.blogspot.sg/2012/10/singapore-property-technical-analysis-6.html), the following is the Singapore FTSE Straits Times Real Estate Index for comparison. Both indices give different perspectives of how the Singapore Property Market is performing, where they stand currently and what to expect.

The Donovan Singapore Property Market Composite Indexhttp://donovan-ang.blogspot.sg/2012/10/singapore-property-technical-analysis-6.html shows that a long term downtrend had already begun, while the FTSE Straits Times Real Estate Index has not detected such a trend yet, perhaps because the numerous large index-constituent property conglomerations and stable REITS are still holding up the FTSE Straits Times Real Estate Index. This may mask the true pictures shone by the rest of the sector. These large property conglomerations usually have better Economies of Scale and, hence, are able to resist initial erosions to corporate results in a deteriorating environment. We cannot say the same for the mid-cap and smaller cap counterparts.

The large caps, which make up majority of the FTSE ST Real Estate Index, are hence much less sensitive in reflecting changes to business as well as economic environments, resulting in FTSE ST Real Estate Index being relatively a laggard as a litmus.

On the FTSE Straits Times Real Estate Indexthe breakdown has not happened yet but has a nicely formed bearish wedge price structure. The price satisfaction has already been achieved and the large bearish wedge is awaiting the break down. A capture above the trendline resistance formed by R1, R2, R3, R4 and R5 will negate a potential property bear caused by the bearish wedge formation. However, anything above the trendline resistance formed by R1 to R5 is also where the Big Hands and market will deliberately create an over-value zone for distributional selling. The long term bearish structure should break down soon since it is approaching the 2/3 point and that Donovan Singapore Property Market Composite Index had already broken down. At the trendline support caused by S1 and S2, the government should try to cushion the property corrections, otherwise there would be a prolonged downwards movement.

While the FTSE ST Real Estate Index is testing wedge resistance, on the Donovan Singapore Property Market Composite Index, the property rebounds are already restricted by long term Support-Turned-Resistances, and hence any upside is limited. Furthermore, on the Donovan Singapore Property Market Composite Index, the important break downs had already been completed, and current rebounds by the property sector are just mere back-test confirmation of the long term bear which had already set in.

On both charts, Donovan Singapore Property Market Composite Index and FTSE Straits Times Real Estate Index, both are bearish in nature. A break down of the FTSE Straits Times Real Estate Index below BLUE support band formed by S1 and S2 will be a double confirmation for Donovan Singapore Property Market Composite Index Bear Market which had already broken down and completing the initial stage of property bear market back-test: http://donovan-ang.blogspot.sg/2012/10/singapore-property-technical-analysis-6.html


Summary:

From Donovan Analysis as above, contrary to the popular belief that there is a housing bubble in Singapore, in actual fact, there is no bubble. There is no bubble in part due to perhaps the good preventive measures and cooling measures implemented by the Singapore government; hence, any property fall will not have too nasty an impact to the Singapore economy. In such a case, the Singapore Banking Sector will not be hurt too badly as there were no bubbles that could result in loan assets turning toxic. 

However, within 1-2 year's time, we should see the price structures reflected by the financial market (Donovan Singapore Property Market Composite Index and FTSE Straits Times Real Estate Index) get translated in the physical property market, i.e. one of which prices of physical property start significant correction mode. Expect COE and COV to drop in the same timeframe too.


Donovan Rating:
Precautions needed; watch out, as Singapore Property Market is to peak in 2012.

Related:
http://donovan-ang.blogspot.sg/search/label/Singapore%20Property




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