Fu Rui published a research report saying that it met with Singaporean investors last week and learned that investors are concerned about hedging transactions in Hong Kong and when to resume customs clearance, which will benefit companies with solid profit support if they return to the Hong Kong market. The bank is more interested in BOC Hong Kong (Holdings) Limited (2388.HK), Hong Kong property developers, and Chinese life insurance companies.
The bank said that among banks in Hong Kong, BOC Hong Kong (Holdings) Limited's strong performance was watched by Singaporean investors, maintaining its "buy" rating and target price of HK $35, while lowering its target price for 0011.HK and 0023.HK by 4 per cent and 8 per cent respectively to HK $125 and HK $11, respectively.
On property stocks, the bank points out that some investors believe that the recent correction in the share price of Wharf Real Estate Investment has provided them with a more reasonable entry point, but in the long run, low dividend yields may limit the upside, and even if Hong Kong returns to customs clearance, fundamentals will still take time to recover. The bank pointed out that the recent downgrade of 0823.HK mainly reflects higher interest rates, and there is relatively little room for profit growth after customs clearance. Leading has outperformed SG REIT (Singapore's REITs real estate trust fund) in the past because growth is driven by organic rent recovery, while SG REIT is more focused on asset growth and is now becoming more asset-oriented and may become less attractive.
The bank also mentioned that the recent weakness of 0101.HK surprised many investors, believing that the market was worried about the demand for luxury goods in the mainland due to potential policy headwinds, macro uncertainties and expectations of reopening. The dividend yield on the stock is currently 7 per cent, only slightly higher than that of Hong Kong-focused developers.
On the developer side, most investors in Singapore are more bullish on 0016.HK, while Swire Properties (1972.HK) continues to pay dividends per share in medium units, which may also play a positive role; in addition, some investors question the sustainability of New World Development's dividend due to its high debt ratio and dividend payout ratio of more than 100%. The bank believes that the group will first retain cash by slowing land acquisitions and accelerating sales, but cannot rule out the possibility of modest dividend cuts in the future.