British housebuilding stocks, which have been one of the best-performing sectors in the UK stock market over the last year, fall in a move which traders attribute to Credit Suisse (NYSE: CS - news) 's decision to cut its rating on some of the industry's leading companies.
Credit Suisse cuts Persimmon (Frankfurt: OHP.F - news) to "neutral" from "outperform", causing Persimmon to feature on the FTSE 100's loserboard of worst-performing stocks as Persimmon falls 2.7 percent to 1,430 pence.
Trading volumes in Persimmon come in at around 30 percent of the stock's average 90-day amount, above those for the FTSE 100 where volumes come in around 12 percent of the index's average 90-day amount.
Credit Suisse also cuts Barratt Developments (LSE: BDEV.L - news) , Bellway (LSE: BWY.L - news) and Taylor Wimpey (LSE: TW.L - news) to "neutral" from "outperform", causing shares in those companies to fall as well, with Taylor Wimpey and Barratt among the worst-performing stocks on the FTSE 250 mid-cap index.
The UK's housebuilding and property industry has been boosted over the last year by government plans to spur the sector, which is a key part of the British economy. One such programme was last year's 'Help-to-Buy' mortgage scheme designed to help consumers get onto the property ladder.
Such incentives, along with the fact that UK interest rates remain at an historic low of 0.5 percent, caused the FTSE 350 Construction & Building Materials Index to rise 23.4 percent last year, with the index up around 12 percent since the start of 2014, outperforming a gain of around 1 percent on the FTSE All Share index this year.
However, Credit Suisse analysts say now may be a good time to book profits on that rally, given expectations that any rise in interest rates or a downturn in the British economy next year could knock back that sector.
"This is a sector where the equity market has historically looked well into the future in terms of pricing both future returns and inflexion points," Credit Suisse analysts write in a research note.
"We recognise we may be a little early on this call, but given the huge performance in sector share prices over the past three years and the potential for sentiment to turn very quickly, we suggest, when considering the risk-reward balance, that it is prudent to take profits now," they add.
Dafydd Davies, senior trader at London-based Prime Wealth Group, backs using any 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've got more upside. I'd be a buyer on the dip," he says.
Reuters messaging rm://email@example.com