Morgan Stanley's research report pointed out that Hong Kong is in a unique position, benefiting from lower interest rates in the USA and higher economic growth in China. The market expects the USA to cut interest rates, which is a bullish factor for Hong Kong real estate developers. Currently, the valuations of real estate developers are at historically low levels, while providing sustainable high dividend yields.

Morgan Stanley expects that in the next month, the Hong Kong Interbank Offered Rate (HIBOR) will drop to 2.75%, and the actual mortgage rate under the best offer rate (P-1.75%) will drop to 3.25%. The bank believes that compared to retail and office spaces, Hong Kong's residential market will benefit more from the interest rate cut in the USA. It is expected that Hong Kong's residential property prices will rebound by 5% next year, after experiencing an 8% decline this year, meaning a total drop of 30% from the peak. The bank estimates that for every 100 basis points drop in HIBOR, the average profit of Hong Kong real estate developers will increase by 5%.

The bank is bullish on New World Development (00016.HK), Link REIT (00823.HK), and Wharf REIC (01997.HK) because they have stable profit outlooks and may offer higher dividends in low-interest rate conditions. Additionally, Henderson Land (00012.HK) and Kerry Properties (00683.HK) are expected to benefit. However, the bank remains cautious on New World Development (00017.HK), Hang Lung Properties (00101.HK), and Sino Land (00014.HK) due to challenging fundamental factors, and analysis shows that there are dividend risks in 2025 even with interest rate cuts.