British housebuilding stocks, which have been one of the best-performingsectors in the UK stock market over the last year, fall in a move which tradersattribute to Credit Suisse's decision to cut its rating on some of theindustry's leading companies.
Credit Suisse cuts Persimmon to "neutral" from "outperform", causingPersimmon to feature on the FTSE 100's loserboard of worst-performingstocks as Persimmon falls 2.7 percent to 1,430 pence.
Trading volumes in Persimmon come in at around 30 percent of the stock'saverage 90-day amount, above those for the FTSE 100 where volumes come in around12 percent of the index's average 90-day amount.
Credit Suisse also cuts Barratt Developments, Bellway andTaylor Wimpey to "neutral" from "outperform", causing shares in thosecompanies to fall as well, with Taylor Wimpey and Barratt among theworst-performing stocks on the FTSE 250 mid-cap index.
The UK's housebuilding and property industry has been boosted over the lastyear by government plans to spur the sector, which is a key part of the Britisheconomy. One such programme was last year's 'Help-to-Buy' mortgage schemedesigned to help consumers get onto the property ladder.
Such incentives, along with the fact that UK interest rates remain at anhistoric low of 0.5 percent, caused the FTSE 350 Construction & BuildingMaterials Index to rise 23.4 percent last year, with the index uparound 12 percent since the start of 2014, outperforming a gain of around 1percent on the FTSE All Share index this year.
However, Credit Suisse analysts say now may be a good time to book profitson that rally, given expectations that any rise in interest rates or a downturnin the British economy next year could knock back that sector.
"This is a sector where the equity market has historically looked well intothe future in terms of pricing both future returns and inflexion points," CreditSuisse analysts write in a research note.
"We recognise we may be a little early on this call, but given the hugeperformance in sector share prices over the past three years and the potentialfor sentiment to turn very quickly, we suggest, when considering the risk-rewardbalance, that it is prudent to take profits now," they add.
Dafydd Davies, senior trader at London-based Prime Wealth Group, backs usingany fall in housebuilders to buy those shares at relatively cheap prices.
"You're going to see a bit of profit-taking coming in, but I think they'vegot more upside. I'd be a buyer on the dip," he says.
Reuters messaging rm://sudip.kargupta.thomsonreuters.com@reuters.net
Barratt Developments (BDEV)
Persimmon (PSN)
Taylor Wimpey (TW.)
