Shares in UK housebuilders post strong gains, with tradersciting a bullish note on the sector from Deutsche Bank in whichthe investment bank says their sensitivity to interest rates hasbeen overestimated.
Barratt Developments leads the blue chips higher with a 3.4 percent rise, while among midcaps TaylorWimpey adds 3.1 percent and Bovis Homes climbs1.1 percent, as Deutsche Bank names the trio as its top picks.
Deutsche Bank says UK housebuilders' shares - which wereamong the top performers on the market in 2013 - have been weakrecently due to concerns that the Bank of England could raiseinterest rates sooner than previously expected.
"However, with easy affordability, significant lendingaspirations from banks combined with a willingness to reducetheir spreads further, we believe the share price reactions havebeen overdone," it says.
The Thomson Reuters UK Homebuilding index has risen around 3 percent in 2014. It doubled in value duringthe past three years, underpinned by tight supply and UKinitiatives to spur the job-intensive sector, such as the'Help-to-Buy' mortgage scheme.
Data from Thomson Reuters StarMine also suggest thehousebuilders could extend their share price gains.
Analyst sentiment remains bullish, even towards the bestperformers. Around three-quarters of StarMine's top-ratedanalysts have "buy" or "strong buy" ratings on BarrattDevelopments and Bovis Homes, which have gained about 13 percentand 7 percent respectively this year.
The FTSE 250 index, by contrast, has risen around 1 percentthis year.
StarMine shows that the companies in the sector trade at anaverage discount of 76 percent to intrinsic value.
The data rank companies based on the relationship between afirm's stock price and its most likely growth trajectory, usinghistorical models and adjusting for analyst bias.
Reuters messagingrm://tricia.wright1.thomsonreuters.com@reuters.net
Barratt Developments (BDEV)
Taylor Wimpey (TW.)
