LONDON -(Dow Jones)- Another day, another downgrade for U.K. house builders.
The stocks of the biggest house builders continued to crumble after a pessimistic report titled "Uncertainty Remains: Be Afraid" from Merill Lynch, which examined the risk of write-downs and capital-raising exercises.
"We can demonstrate that a 20% or more fall in house prices in a 12-month period has the potential to eliminate all of a house builders' net asset base," Merrill said in its report. "Moreover, the early 1990s precedent would suggest that one write-down will be insufficient - and groups needed two or even three sets of write-downs before net asset value stabilized."
For a second day, Barratt Developments PLC (LSE:BDEV) (BDEV.LN) and Taylor Wimpey PLC (LSE:TW) ( TW-GB) saw about one-fifth of their market value erased as the stocks of house builders again were the biggest losers in the FTSE 100 and FTSE 250 indexes.
At 1043 GMT, Barratt's shares traded down 19 pence, or 21%, at 72 pence. It is down more than 50% this week and has lost more than 90% of its value in the past 12 months.
Taylor Wimpey's shares traded down 13 pence, or 20.4%, at 52 pence. That's down by more than one-third this week and off more than 85% in the past year.
Merrill downgraded Barratt, Bellway PLC (LSE:BWY) (BWY.LN), Berkeley Group Holdings PLC (LSE:BKG) (BKG.LN), Galliford Try PLC (LSE:GFRD) (GFRD.LN) and Redrow PLC (LSE:RDW) (RDW.LN) from neutral to underperform and Persimmon PLC (LSE:PSN) (PSN.LN) from buy to neutral.
It maintained underperform ratings for Taylor Wimpey, Bovis Homes Group PLC (LSE:BVS) ( BVS.LN) and Kier Group PLC (LSE:KIE) (KIE.LN).
Persimmon's stock traded down 26 pence, or 6.6%, at 362 pence and Wednesday is expected to lose its place in the prestigious FTSE 100 in an index recalculation.
Bellway (LSE:BWY) traded down 57 pence, or 11.3%, at 449 pence; Berkeley was down 42 pence, or 5.8%, at 687 pence; Galliford Try (LSE:GFRD) was down a penny, or 3.9%, at 31 pence; Redrow (LSE:RDW) traded down 16 pence, or 10%, at 149 pence; Bovis traded down 27 pence, or 7.9%, at 317 pence; and Kier Group traded up 3 pence, or 0.3%, at 1025 pence.
-By Jonathan Buck, Dow Jones Newswires; +44 (0)207 842 9237; jonathan.buck@ dowjones.com
(END) Dow Jones Newswires 06-11-08 0718 Copyright (c) 2008 Dow Jones & Company, Inc.
