ANNOUNCEMENT EFFECTS OF SELECTED PROPERTY - RELATED GOVERNMENT MEASURES ON PROPERTY STOCKS

Abstract

This study aims to examine why some property-related government measures had a significant impact on the share prices of property companies listed on the Stock Exchange of Singapore (SES) when they were first announced, while others did not, even though the latter measures were considered effective or important. The selected measures include the anti-speculation measures in 1996, the Housing and Development Board (HDB) curbs in 1997, and the off- Budget measures in 1998. The focus is on the measures' impact on property companies with a predominant residential portfolio. The event parameter approach was employed to test the hypothesis that if an announcement does not contain any useful unanticipated information that is relevant to the market participants, then the abnormal returns around the event date should not be significantly different from zero. The tests revealed significant cumulative abnormal returns (CARs) around the event date only for the announcement of the anti-speculation measures. Possible reasons identified for the non-significant findings of the other events include prior anticipation of the events by the market participants, and indifference of the participants towards the events. The former was found to be the predominant reason after thorough analysis. Based on the findings, the efficiency of the SES can at best be described as weakly efficient. An implication of the findings is that stock market investors should be open and receptive to market rumours if they wish to make abnormal gains or avoid incurring abnormal losses. This is because the rumours can turn out to be a valid indicator of the impending introduction of a new government measure, way before the measure is due to be announced.