JPMorgan Chase & Co said in a research report that he takes a neutral position on Hong Kong real estate stocks because he has a negative view of developers, but remains positive on rent-collecting stocks.
The bank pointed out that the disconnect between Hong Kong property prices and Hong Kong property stock valuations will continue, and any external shocks will affect Hong Kong's high residential property prices. The performance of developers will continue to be under pressure until they give back high taxes to buyers to stimulate sales.
The bank is optimistic that rent-collecting stocks are more than developers, preferred The Wharf (00004-HK), Hishen Xingye (00014-HK), Swire Properties (01972-HK) and long Real Estate (01113-HK).
The bank expects second-hand property prices in Hong Kong to rise another 5 per cent in 2017, supported by reduced trading and low leverage, but first-hand property prices remain flat and high stamp duty rebates are also weighing on developers' profits. Due to the weak outlook for the property market, Xiaomo downgraded Henderson Land Development (00012-HK), Sun Hung Kai Properties (00016-HK) and Huifeng (00020-HK), saying that it was more bearish than bullish on property prices, and believed that if the mainland economy deteriorated and US interest rates rose faster than expected, property prices were expected to fall by 15 per cent in the worst case. However, due to the stabilization of the mainland economy, Xiaomo thought that the Hong Kong retail market would continue to recover, so it maintained The Wharf's overweight rating. Hysan Societe Generale, with its rating upgraded from neutral to overweight, expects mall rents to fall by 3% in 2017, but believes that the performance of rent-collecting stocks will be based on retail sales rather than stronger rents.
The bank upgraded Swire Properties from neutral to overweight because of its willingness to sell non-core assets and the Pacific place restructuring showed positive momentum.
Shares | rating | Target price (HK $)
Kerry Construction (00683.HK) increases its holdings by 35.9-> 24.3 yuan
New World Development (00017.HK) increases its holdings by 11.5-> 10.2 yuan
Hang Lung Properties (00101.HK) increases its holdings by 19.5-> 19 yuan
Guanjun Industrial Trust (02778.HK) increases its holdings by 4.80 yuan
The holding of 00823.HK increases by 58.9 yuan.
Sino Land Co. Ltd. (00083.HK) Neutral 12.9-> 12 Yuan
Henderson Land Development (00012.HK) reduced his holdings by 40. 0-> 41. 2 yuan
Sun Hung Kai Properties (00016.HK) reduced his holdings by 106.0-> 95.7 yuan.
00020.HK increases holdings-> reduces holdings 47.0-> 41.6 yuan