Listed property, banks feel heat

Posted On Monday, 26 June 2006 02:00 Published by eProp Commercial Property News
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The JSE's listed property index lost more than 4% of its value on Friday

Angelique de RauvilleThe banking sector also lost ground to shed 4,33%, led by FirstRand, which fell 5,24% to R16,45. Both sectors are sensitive to interest rates.

Reserve Bank governor Tito Mboweni's warning of possible further interest rate hikes has caused jitters in the markets.

Interest rates looked set to rise even further this year after the Reserve Bank disclosed last week that the current account deficit had soared to 6,4% of gross domestic product in the first quarter, from 4,5% in the previous three months.

Fear of further rate hikes escalated when Mboweni warned in Parliament on Thursday after the release of the data that this and other ills in the economy could be put down to the fact that money was too cheap.

Angelique de Rauville, MD of Investec Listed Property Investments, said the listed property sector's fall came on the back of Mboweni's cautionary remarks about further possible interest rate increases.

"Listed property is an interest-rate-sensitive asset class like the financial sector," said De Rauville.

"With this loss today in the listed property sector all the gains from the listed property sector achieved from January 1 2006 to the end of April have essentially been eroded, and share prices today are more or less in line with where they were at the start of the year," said De Rauville.

She said the listed property sector had peaked at the end of April with a total return of 20% from January to April.

The listed property sector's prices had been on a downward trend since May 12.

By June 15 the sector had shed 14% in value.

The sector initially lost about 8% as the property sector, along with other asset classes, weakened following higher interest rates in the US.

The higher US interest rates had caused lower tolerance for emerging-market risk.

The sector then recovered, and had since experienced another dip because of the hike of 50 basis points in SA's repo rate.

 

Last modified on Tuesday, 06 May 2014 10:49

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