Credit Suisse said in a report that Hong Kong telecom stocks have outperformed the big market in the past few months because of pressure on high-interest telecom stocks to give up due to higher US interest rates. However, at current prices, individual Hong Kong telecom stocks are among the existing Hong Kong stocks covered, offering one of the highest interest rates, and valuations have become attractive. Credit Suisse preferred SmarTone Telecommunications (00315-HK), which slightly reduced its target price by 4.5% to 15.75 yuan, maintaining its outperformance rating.

Credit Suisse believes that SmarTone will benefit from a partnership with Hong Kong Broadband (01310-HK) with a dividend yield of 5.9%. As SmarTone does not use all free cash flow as a dividend, Credit Suisse expects SmarTone to have the opportunity to change the dividend in the medium term, which will help the stock to be revalued. Credit Suisse cut its target price because it cut its SmarTone phone EBITDA forecast by 6 per cent and 7 per cent respectively in 2017 and 2018.