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|ariane: Madrid shares close higher; Sacyr drags on profit taking UPDATE
Date : 18/05/2007 @ 17:13
Source : AFX
Madrid shares close higher; Sacyr drags on profit taking UPDATE
(Updates with full report)
MADRID (Thomson Financial) - Share prices closed higher, passing the 15,000
mark as the recovery from last week's sell-off continued though profit taking
caused Sacyr to slump, dealers said.
The IBEX-35 index closed up 100.2 points at 15,068.4, after trading in a
range of 14,937-15,114 on turnover of 9.4 bln eur.
Equities opened higher, breaking the 15,000 mark at the opening and
continuing to climb over the morning in futures-driven trade, though volumes
were relatively light.
Trading gathered momentum through the afternoon as Wall Street made a firm
start and shares closed near to session highs.
Sacyr was the main exception, falling 1.19 eur or 2.81 pct to 41.12 on
profit taking following its sharp gains at the head of a broader construction
sector recovery yesterday.
Sector peers were stronger and the day's main gainer was FCC, up 1.60 or
2.21 pct to 73.85 while ACS gained 0.61 to 47.65 and Ferrovial climbed 0.95 to
SCH was strong on heavy put through related volume, up 0.29 or 2.15 pct to
13.75. A report that RBS may be close to reaching a settlement with Bank of
America over who might own LaSalle Bank of Chicago, opening the door to a
possible RBS-led bid for ABN Amro in the coming weeks, also lent support.
Its retail affiliate Banesto was close behind, up 0.36 or 2.09 pct to 19.59.
Repsol YPF gained 0.44 to 26.91, after an upgrade at Citigroup to 'hold'
from 'sell', and in line with other European oil majors amid rising oil prices.
Amongst utilities, Union Fenosa added 0.06 to 43.57, after JP Morgan said
M&A potential gives upside to the utility's share price of up to 50 eur per
share, and Iberdrola declined 0.23 to 40.89, while Endesa gained 0.07 to 40.19.
Gas Natural fell 0.35 to 44.16 after JP Morgan initiated the stock as
'underweight' with a 39.5 eur price target, saying that an 'unlikely' hostile
bid is already priced in.
Meanwhile, Iberia was down 0.02 to 3.90, underperforming the market after
comments by BA chief executive Willie Walsh took the wind out of the sails of
hopes for an M&A announcement.
|waldron: Spanish property wobble has parallels with the US Published: 07:00 Wednesday 02 May 2007
By Lorna Bourke, Money Columnist
The recent panic in the Spanish property market which saw the shares of Spanish property developers collapse, has worrying similarities with what is happening in the United States, and raises the real concern that property prices could collapse, affecting millions of property investors and those with holiday homes in the resort areas.
Property prices were already moving down and the recent sell off of shares in Astroc Mediterraneo, a Valencian property developer, where the price dropped some 60%, precipitated a wider sell-off in Spanish property and house building related shares.
The property market has certainly looked overheated showing a rise of more than 170% since 1997-98 during which time the UK market has seen a 100% increase. But the worry is that there is an oversupply of housing with some 620,000 homes being built a year, four times the rate in the UK, but with a population some 20 million smaller.
Last year more than 750,000 properties were started, more than three times the 200,000 annual builds, the long term average during the 1990s, and more than France, Italy and Germany combined.
With Spanish families, like the Brits, being heavily indebted, the fear is that there will be panic selling as owners see themselves facing negative equity, ensuring that house prices drop even faster. More than 95% of home loans in Spain are floating-rate, not fixed.
This is a very similar scenario to the US where rising interest rates have seen over a million homes being repossessed by the lenders.
Spanish investors are worried not only about property developers, but lenders too, as in the US, where some companies are already filing for Chapter 11 protection from their creditors.
Last week's panic sell off caused the share price of BBVA, Spain's second-largest bank, to dip on fears it is sitting on a pile of non-performing residential property loans.
So could the downturn in the property market in the US and Spain affect the economy at large? Construction and related industries represent a huge 18% of economic output in Spain, which has enjoyed 14 consecutive years of economic growth and accounted for a third of all new jobs created last year in the euro zone.
Over the medium term economist believe a dowturn in the property market will fuel unemployment as the labor-intensive industry starts laying off employees.
The Bank of Spain says Spanish homes are on average about 30% overpriced and that families with household debt of over 100% of disposable income, is one of Spain's most serious problems.
'Spanish housing is about to implode,' said Charles Dumas, chief economist at Lombard Street Research following the stockmarket collapse in property shares.
But is he right? And should those who own properties in Spain be worried?
'We have reached the position in some areas that unless a property is exceptional and ticks every box for the buyer, you will struggle to sell it at the asking price and will have to be prepared to accept less,' said Knight Frank research partner Nick Barnes.
Others believe the downturn was inevitable because of competition from other lower-cost holiday and retirement locations.
Adam Cornwell, director of GEM Estates, a specialist estate agent selling in emerging markets said: 'With countries on the brink of a boom such as Brazil, with unrivalled climate and beaches, offering apartments for as little as 45,000 euros, the investment case for the traditional markets such as Spain is blown out of the water in an instant.'
Not everyone agrees, however.
'This represents the start of a long anticipated correction in the market, and has been evident in accepted offers over the last few months,' said Tim Hodges, local director for County Homesearch Company in Spain. 'It offers clear evidence that the quality of housing stock must now be reviewed and that the issues concerning off-plan investors clouding the real marketplace must be addressed.'
'However, Spain still represents a good long-term investment and rental returns for holiday lets are superb, Hodges said. But this could be wishful thinking. As long ago as 2005, letting agents were warning of a glut of holiday properties in most areas of Europe.
'Buy yourself a holiday home for retirement but be realistic. There is plenty to choose from but you will be lucky to cover your costs with rentals let alone make any profit,' said David Buckley of villa rental company Palmer & Parker.
'In the last few years the villa rental market has been flooded with properties, the demand from tourists has dropped and it is likely to get worse. The number of new developments continues to grow and you could have real difficulty letting out an apartment with shared facilities like a pool.'
Castle Asia share price data is direct from the London Stock Exchange