After plunging 9.3% for three straight days, CapitaLand registered its first positive day with a 1.4% increase by closing at $3.58 on Tuesday. It contributed 1.7 points to the STI and making it the fourth leader within the STI components.

Curbs galore
Property curbs have been coming in hard and fast as governments in Singapore and China seek to cool soaring home prices.

In January this year, the Singapore government imposed its 7th cooling measure since 2009, including a first for industrial properties. The measures include an increase in stamp duty for homebuyers, tighter Loan-to-Value limits and higher minimum cash down payment.

During the Government Budget announcement on 25 February, the government then said they were raising taxes for luxury home owners and investment properties.

More recently, Singapore-based real estate website PropertyGuru stated that MAS may slash the Mortgage Servicing Ratio (MSR) for private residential properties, while National Development Minister Khaw Boon Wan said that new housing supply for 2013 will increase 8.7% from 23,000 to 25,000 new flats.

Over in China, local governments have been ordered to tighten home-purchase limits, enforce property sales tax and the central bank has raised down-payment requirements and interest rates for second mortgages in cities with excessive price gains. Capitaland has 18% of  its exposure to the China market.

Full year profit declined
In its latest earning announcement on 21 February, CapitaLand’s 2012 full year profit declined 12% to S$930.3 million. In view of the slew of curbs imposed by Singapore and China, CapitaLand said that transaction volume and prices may “moderate”, with high-end segment more likely to be affected.

Since these measures were announced, CAPL has tumbled 11.1% from its 2013 high of $4.03. The stock has had a lacklustre year by falling 3.2% against the STI’s +4.3%, a stark contrast compared to 2012, where CapitaLand’s 67.4% gain easily outperformed the STI +19.7%.

Warrants to trade CapitaLand
Investors who believe that CapitaLand will continue to underperform and move lower may wish to consider CapitaLand put warrants such as CapitalaMBePW130903 (R5TW), strike $3.50.

Put warrants allow investors to potentially earn a profit when an underlying share price falls. Unlike call warrants whose prices tend to move in the same direction as the underlying share price, put warrants will tend to move in the opposite direction to the underlying share price, increasing in value as the underlying share price falls and decreasing in value as the underlying share price rises.

Investors who may believe that CapitaLand will rebound from here on and climb higher may consider CapitaLand call warrants such as CapitalaMBeCW131202 (Q7YW), strike $3.60.

Source: Macquarie Research - 13 March 2013