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Thursday, June 25, 2009

IGB leads stocks of developers higher

IGB Corp, Malaysia’s biggest owner of commercial buildings, climbed the most in two months, leading developers higher after HwangDBS Vickers Research Sdn Bhd said they would gain from any investment policy revisions.

IGB added as much as 6.7 per cent to RM1.75, set for its biggest advance since April 30, and traded at RM1.65 at 10:52 am local time. SP Setia Bhd, the country’s biggest property developer, added 1 per cent to RM4.02 , set for its highest close since June 18. The benchmark stock index gained 0.9 per cent to 1,067.14.

The plan by Prime Minister Datuk Seri Najib Tun Razak to announce an easing of investment restrictions next week “could further re-rate the sector, which is already seeing sales bottoming-out with improved consumer sentiment and attractive financing schemes by developers,” Yee Mei Hui, an analyst at HwangDBS wrote in a report today.

Najib, who took office in April, has raised foreign ownership limits in banks and announced a RM67 billion spending plan in an effort to boost the economy that he predicts will shrink as much as 5 per cent this year, the first contraction in a decade.

Policy changes are the “key driver of property market,” said Yee, who has a “fully valued” call on SP Setia and a “hold” on Sunway City Bhd. “Improving perceived investibility of Malaysian properties should help narrow the large price gap with regional markets.”

‘Potential Beneficiaries’

IGB, which owns Megamall and the Gardens shopping centres outside Kuala Lumpur, Sunway City and KLCC Property Holdings Bhd are the “potential beneficiaries should local ownership requirements be eased for retail and trade,” under the revised guidelines, Yee said.

The changes may include allowing foreigners to buy or lease properties for more than 10 years without an approval from the Foreign Investment Committee, he said. The government may also allow foreign investors to waive a requirement for 30 per cent of a locally established company to be owned ethnic Malays, known as Bumiputeras.

The government may also announce a “more competitive” withholding tax for real estate investment trusts, ease regulations on hypermarket ownerships, and take over the role of providing low-cost houses from the developers, Yee said.

Prime commercial property developers such as Malaysian Resources Corp, E&O Property Development Bhd, and UEM Land Bhd would also benefit from the policy revisions, according to the HwangDBS Vickers report.

By Bloomberg

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