GLONGHUI, Oct. 12 | Morgan Stanley published a report saying that the Hong Kong residential property market has recovered briefly after the pandemic. It is estimated that after falling 3% this year, property prices will drop another 5% to 10% next year. Views on Hong Kong real estate stocks have changed from “attracting” to “in line with expectations,” favoring real estate developers with low debt and continued strong income. According to the bank, the market is optimistic about the “Policy Address” released by the Hong Kong government on the 25th of this month, but even if the stamp duty on non-local residents' property purchases is reduced from 30% to 15%, it is not expected that the outlook for the property market will improve much. The valuations of a few real estate stocks are attractive, but this is not enough to push the shares out. Damo favors Changshi Group, Xindi and Trust. It believes that Changshi and Xindi continue to have a free cash flow yield of more than 10%. Even if residential property prices and transaction volume fall, the cash flow is still stable. Changshi and Trust have low debt and are able to handle dividends and repurchases. According to the bank, the continuing income of Kerry Properties and Henderson Land is low, which is also affected by high interest expenses. The bank lowered the target price of real estate stocks by an average of 19% to reflect the latest property price forecast. It is estimated that the industry's net asset value discount was also raised from 45% to 50%, and lowered the Jiucang investment rating to “increase holdings” to “reduce holdings” to reflect the weak underlying factors and unattractive valuations.