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<Research>Citi: Concerns Over HK Govt Cooling Measures Premature; 'Slow Bull' More Constructive; SHK PPT/ CK ASSET/ SWIREPROPERTIES/ LINK REIT Recommended
Recommend 6 Positive 11 Negative 8 |
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The recent share price weakness in Hong Kong property developers has been driven more by fund flows and negative headlines rather than a deterioration in fundamentals, Citi said in its report. The broker consolidated recent investor feedback and several “double-bind” views raised by the market, and shared its views on each. Some investors are concerned that a faster-than-expected recovery in home prices could prompt the government to reintroduce demand-side cooling measures. Citi believes that, at current price levels, such risks are premature. Historically, policy responses targeted multi-year surges that markedly exceeded previous peaks. Currently, home prices are 17% above the trough recorded between March and May 2025, and 18% below the previous peak, which Citi believes is still short of the threshold for policy intervention. The broker estimates that prices may need to rise by a further 10% or more before policy risks become realistic. Some investors also worry that after the year-to-date rise in home prices, growth momentum may slow, signaling waning recovery dynamics. Citi argues that a gradual recovery is in fact healthier and more sustainable, and more constructive for fundamentals than a sharp rebound. Under this “slow bull” scenario, several reinforcing benefits could emerge: facilitating inventory destocking while maintaining transaction volumes without front-loading future demand; allowing prices to better reflect population inflows and demographic upgrades; and keeping rental yields at attractive levels. Regarding concerns over potential tightening of China’s outbound investment rules, Citi notes that this is difficult to verify or refute and related data would only come with a lag. The broker previously pointed out that only 5.5% of residential transactions conducted by non-Hong Kong ID holders are directly affected by capital controls, before considering potential offsetting factors such as reallocating equity investment gains into physical assets. Citi expects this concern to gradually fade amid sustained transaction activity and healthy sell-through rates for new projects. Citi expects near-term volatility in the sector as the market digests these concerns and amid recent rotation into growth sectors. After share prices had priced in bull market expectations, investor positioning has turned more cautious over the past month. The broker advises patience in June, and believes strong 1H26 results, likely to be delivered by developers following robust property sales and margin recovery, could serve as the next catalyst in late July to August. Citi’s sector top picks are SHK PPT (00016.HK), CK ASSET (01113.HK), SWIREPROPERTIES (01972.HK) and LINK REIT (00823.HK). Shares | Investment Ratings | TPs SHK PPT (00016.HK) | Buy | HKD168 CK ASSET (01113.HK) | Buy | HKD54.8 SWIREPROPERTIES (01972.HK) | Buy | HKD28.8 LINK REIT (00823.HK) | Buy | HKD44.8 Auto-translated by AI This article was automatically translated by AI, the original language version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. More Details
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