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<Research>CCBI: US Rate Cut Largely Priced In; Link, Sino Preferred
Recommend 10 Positive 22 Negative 8 |
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The impact of US interest rate cut has been largely priced in, as stakeholders in Hong Kong's real estate market have been yearning for the Fed to cut interest rates since early 2024, CCBI said in a report. According to Bloomberg, the futures market currently expects the Fed to cut rates by 120 bps in 2024 and 135 bps in 2025. In Hong Kong, given the rate differentials between the HK and US, the market generally expects Hong Kong banks to adjust their prime rates not until November. However, the impact of the 100 and 80 bps narrowing in the one-month and three-month HIBOR since July is already being seen in Hong Kong corporates' interest expense peaking in 1H24. The broker estimated that a 25 bps rate cut will lead to an average 1.5% earnings growth, which is more favorable in the short term for developers with higher debt ratios, such as NEW WORLD DEV (00017.HK) and HYSAN DEV (00014.HK). However, considering the operational and financial difficulties at the same time, it believed that NWD's profit decline cannot be offset by interest savings. Therefore, in terms of rate-cut trades, the broker preferred LINK REIT (00823.HK), while SINO LAND (00083.HK) is its choice for “across-the-cycle trade”. Both were rated Outperform with target prices of $45 and $10.2 respectively. AAStocks Financial News |
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