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<Research>Citi Remains Bearish on HK Property Sector; 2Q Top Picks WHARF REIC/ SWIRE PPT/ SHKP
Recommend 25 Positive 58 Negative 45 |
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Citi Research wrote in a report that it remained bearish on Hong Kong's property sector due to multiple reasons. De-globalisation caused drag, as performances of the four pillar industries slowed down before new drivers emerged. Real interest rates mounted due to economic weakness and deflation. Mortgage rates in the city may not follow the US Fed's rate cut initially. At the same time, the retail sector was affected by the downgrading of visitor spending, with average spending per visitor falling. Office space is under pressure of rising supply, but demand has been reduced following staff redundancies. Relaxation of residential measures has triggered a short-term sales rush, with more new developments being launched at reasonable prices. Overall, Citi expected Hong Kong property stocks with high free cash flow visibility and stable dividend outlook to Outperform the market, while residential-focused property firms with large capex plans and high gearing are likely to lag. The broker's pecking order is retail landlords, developers, retail REITs, and finally offices. The broker maintained its forecast of a 10% drop in Hong Kong's home prices for the full year, as developers are eager to sell at reasonable prices, but demand is still dependent on the current sticky interest rates. Citi's top picks for 2Q24 are WHARF REIC (01997.HK), SWIREPROPERTIES (01972.HK) and SHK PPT (00016.HK). The broker also recommended 2 pair trades: overweighting SHKP and underweighting in NEW WORLD DEV (00017.HK), as well as overweighting LINK REIT (00823.HK) and underweighting CHAMPION REIT (02778.HK). AAStocks Financial News |
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