Property index falls on rate hike fears

Posted On Thursday, 22 August 2013 18:31 Published by Commercial Property News
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The local property index is on track to being the second-worst performer on the JSE today.

Rob Towell Consilium SecuritiesThe local property index was on track to being the second-worst performer on the JSE on Thursday.

At 12.01am‚ the property index was down 1.63% due to a spiral in local bond yields‚ which raised expectations that the South African Reserve Bank could raise interest rates before the end of the year.

“Bond yields are predicting an increase in interest rates which is negative for the property sector‚” Consilium Securities senior equities trader Rob Towell said.

According to RMB‚ the Forward Rate Agreement market has now priced in an 80% chance of a 50-basis points hike by the November meeting‚ with a small probability priced in for a hike next month.

“Whether interest rates will move higher is a question people are asking given that growth is so low‚” Towell said Since the beginning of May‚ the yield on the local R186 bond has risen 30% while US treasury’s touched a fresh two-year high on Thursday after the US Federal Reserve delivered its minutes which showed that the tapering of US stimulus before the end of the year was still a possibility.

“The Fed was not conclusive about how they were going to do it‚ but consensus is that tapering will kick off this year‚ which will see more pressure on emerging market yields‚” he said.

Shares of SA’s largest listed property company Growthpoint (GRT) fell 1.72% to R22.80‚ a near two-month low‚ with Redefine (RDF)‚ the second-biggest property group on the JSE‚ dropping 2.02% to R8.75‚ close to its worst level since May 11 2012.

Vukile Property Fund (VKE) gave up 3% to R14.55‚ marking the biggest percentage drop in the sector‚ with Investec Property Fund (IPF) losing 2.74% to R14.20‚ Hyprop (HYP) shedding 2.18% to R68.50 and Fountainhead (FPT) declining 1.40% to R7.05.

The all share index was down 0.39% at 42‚927.37 points at midday.

Last modified on Friday, 23 August 2013 20:51

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