It has been a time of extreme volatility within the property markets of the world. Fuelled by the sub-prime crisis and the accompanying credit crunch, many Asian property markets have seen values in both property and property stocks flip-flop on a fairly regular basis.
It is for this reason that when all of the Asian property companies except for the ones in Japan rallied to a strong close at the end of Friday's trading session, property investors in Japan were given a clear reason to pause and feel concern.
The main reason for the poor performance of the property and property stock sectors in Japan on Friday was banks in the country reporting higher losses than were initially suspected due to the sub-prime housing crisis. This news did not sit well with investors and many of them chose to pull their money out of property development and put it into other sectors.
Interestingly enough, the snowy weather in China had the opposite effect on the Tokyo Stock Exchange than it did in its own country. Property stocks, due to heavy speculation on what the storms might do to property development operations, dropped heavily, with many analysts pointing directly to the elements as being a reason for that happening.
In the wake of these events, many banks within Tokyo were forced to defend their records and satisfy investors that they would have the ability to remain solvent. One bank in particular, the MBIA, forcefully predicted that it would be able to maintain an AAA credit rating and that it was nowhere near being insolvent. Considering the rather hefty $2.3 billion loss that the bank has taken as a direct result of sub-prime loans, some analysts were not as optimistic as the executives for the company.
The Monday trading session will be very interesting to watch and in particular the behaviour exhibited by stocks in property and credit might give investors a real insight into whether now is the time to expand direct investment in property or whether sitting on current investments is the better way to go.
