PETALING JAYA: The surprise 25-basis-point cut in the overnight policy rate (OPR) to 3% by Bank Negara has the effect of pushing up the share prices of property players on Bursa Malaysia, although analysts remain downbeat on the sector’s fundamentals.

A number of large-cap property players rallied steeply yesterday afternoon following the central bank’s decision.

At least seven property counters had reported intraday gains of 5% or more, while real estate investment trusts (REITs) also rallied.

The major players whose shares rallied include IOI Properties Group Bhd (IOI Prop), SP Setia Bhd, Mah Sing Group Bhd, Eco World Development Group Bhd, UOA Development Bhd, Matrix Concepts Holdings Bhd and IGB REIT.

It is worth noting that IOI Prop and UOA rose to new all-time highs. IOI Prop rose 13 sen to RM2.48, while UOA gained 30 sen to close at RM2.49.

The Bursa Malaysia Property Index, rose by 3.41% to 1,169.47 points, or its highest point in two months.

In a statement yesterday, the central bank noted that the implementation of macro and micro prudential measures as well as supervisory oversight had resulted in more prudent lending standards and contained speculative activities in the property market.

“The central bank has signaled in its policy statement that any overhang in speculative activity has been successfully contained. This could mean further easing in the curbing measures in the future,” said one property sector analyst.

Additionally, borrowing costs for the property firms have also decreased due to the interest rate cut, which is especially helpful for companies with a large chunk of long-term borrowings, he explained.

Asian Islamic Investment Management portfolio manager Terence Ng cautioned that the cost savings for property players were minimal, as the 25-basis-point cut only reduces loan payments by a mere 3%.

“It helps improve stock sentiment on the property stocks, but does not change the slowdown in the property market due to the high household debt and high bank loan rejection rates,” he said.

The central bank has implemented strict measures over the past three years in a bid to curb property speculation as well as rapidly rising home prices.

This resulted in a slump in new loan approvals and property transactions, as banks turned cautious amid the possibility of a further rise in non-performing loans.

In a statement, Mah Sing managing director Tan Sri Leong Hoy Kum said that an accommodative lending environment was key to improving sentiment and Malaysia’s economic growth, which is fueled by domestic demand.

“This cut will likely have a positive impact on house buyers who were previously on the fence, as they can now invest in an appreciating asset while enjoying lower monthly repayments. The OPR cut will certainly aid home ownership growth for Malaysians and we hope to see more economically friendly and positive measures from the central bank and the Government. Hopefully, there will be more measures to ease the burden of first-time home buyers,” he said.