Daiwa cut its target price for 1200.HK to HK $4.70 from HK $5.01, cutting its profit forecast for the 2013-14 fiscal year, but the bank maintained its buy rating.

Although second-hand property turnover has shrunk 40 per cent and 50 per cent since the end of October, Wachovia does not seem to think it is wise to shrink its business sharply in the near future, the bank said. The bank says there is business logic behind this: weak market conditions are usually a good opportunity for strong companies to make mergers and acquisitions; more importantly, the property agency industry has changed since the introduction of special stamp duty in October.

Daiwa expects that the first-hand property market will become the largest source of income for Wachovia, thereby reducing the negative impact of the decline in second-hand property revenue. The bank believes that Wachovia is much less dependent on the second-hand property market, but this has not been recognized by the market.