Investors shrug off expectations of interest rate increases Property stocks rallied for the sixth straight session yesterday as investors embraced news of strong home sales over the weekend and continued to shrug off expectations of further interest rate rises. The aggressive buying saw the property sub-index advance 2.07 per cent, helping to push the Hang Seng Index up 0.43 per cent to a fresh 52-month high of 14,567. Sino Land led the way with a 7.3 per cent surge after saying it had sold 80 units at its new Mount Beacon residential development in Kowloon Tong at a high average price of $14,000 per square foot. The five best performing blue chips were all property stocks and nine of the top 11 gainers claim property as a major revenue generator. Cheung Kong (Holdings), which rallied 11.2 per cent last week, added another 1.03 per cent yesterday and Sun Hung Kai Properties gained 2.03 per cent after saying it had been able to raise rents for new retail tenants by between 30 per cent and 60 per cent this year. 'There is a lot of liquidity in the stock market at the moment and property is one of the few sectors where you see strong demand and modest competition as the supply is quite capped,' said Nichole Wong, a property analyst with Nomura Securities. When Hong Kong's major banks raised their prime lending rates by 50 basis points on July 4 - the second such increase in three months - some analysts and property agents feared the higher borrowing costs would take the steam out of the property market and limit further price increases. But demand has remained buoyant, as indicated by the sale at Mount Beacon. The property sub-index dropped 2.2 per cent in the four days following the rate rise, but in the six sessions since, it has rallied 10.2 per cent and recovered all the losses from earlier in the year. In a report published yesterday, Goldman Sachs rated the sector as attractive and said it expected the impact of rising interest rates to gradually fade as real rates were still low. 'We believe an increasingly robust job market and accelerating household income growth will boost prospective homebuyer confidence and trigger more pent-up demand,' analysts Anthony Wu and Carmen Tang said. Together with tight supply, this could push up residential prices another 30 per cent in the next 18 months, which would bring mass-market prices to about 70 per cent of the 1997 peak, they said.