Listed Real Estate Asia, KT Capital Group

Jacob Cheng

Listed Real Estate Asia

KT Capital Group

Principal investments and advisory firm that focuses on connecting the CIS countries with East Asia.

Principal investments and advisory firm

Equity Bottom-Up

Sun Hung Kai Properties / Equity Bottom-Up

<ul>
<li>After announcing full year results, one investment bank revised down share price target excessively (we will look at reasons).  On Monday, HSBC also announced adjustment of mortgage rate cap</li>
<li>These 2 events caused a sell-off in the property sector, SHKP, in particular, was down 10% and trading at HKD80 per share. We think it is overdone</li>
<li>At this valuation, market is pricing in super bearish scenario.  At 0.38x P/B, I think it is a bargain to buy now.  It is a value trade.</li>
</ul>


After announcing full year results, one investment bank revised down share price target excessively (we will look at reasons).  On Monday, HSBC also announced adjustment of mortgage rate cap
These 2 events caused a sell-off in the property sector, SHKP, in particular, was down 10% and trading at HKD80 per share. We think it is overdone
At this valuation, market is pricing in super bearish scenario.  At 0.38x P/B, I think it is a bargain to buy now.  It is a value trade.


Sun Hung Kai Properties (16 HK): After Excessive Price Correction, Why I Think It Is a Bargain! BUY

<ul>
<li>MSCI China has rallied 19% YTD, outperforming DM and EM by 18% and 14% respectively.  We think it makes sense to look at China and Hong Kong again</li>
<li>Part of the rally is driven by AI optimism.  In terms of fund flow, we are seeing increasing south-bound fund flow to HK equity market at a fast pace</li>
<li>We think Sun Hung Kai Properties, which is a proxy for Hong Kong, may benefit and play the catch up game on the back of very attractive valuation</li>
</ul>


MSCI China has rallied 19% YTD, outperforming DM and EM by 18% and 14% respectively.  We think it makes sense to look at China and Hong Kong again
Part of the rally is driven by AI optimism.  In terms of fund flow, we are seeing increasing south-bound fund flow to HK equity market at a fast pace
We think Sun Hung Kai Properties, which is a proxy for Hong Kong, may benefit and play the catch up game on the back of very attractive valuation


Seeking Value and Safety in HK/China: SHKP 16 HK

Thematic (Sector/Industry)

<ul>
<li>1M HIBOR has declined by 300bps to 0.6%, which is a sharp decline. Mortgage rate, which is tied to HIBOR, will have to be adjusted downward</li>
<li>Mortgage rate declines, affordability will improve, and there is positive carry.  Developers will enjoy lower borrow cost and better earnings. 100bps change in rates leads to 2% earnings impact</li>
<li>However, the HIBOR decline can reverse, if capital flow changes and affects HKMA’s aggregate balance.  US/China interest rate movements and geo-political risks also have to be monitored closely</li>
</ul>


1M HIBOR has declined by 300bps to 0.6%, which is a sharp decline. Mortgage rate, which is tied to HIBOR, will have to be adjusted downward
Mortgage rate declines, affordability will improve, and there is positive carry.  Developers will enjoy lower borrow cost and better earnings. 100bps change in rates leads to 2% earnings impact
However, the HIBOR decline can reverse, if capital flow changes and affects HKMA’s aggregate balance.  US/China interest rate movements and geo-political risks also have to be monitored closely


Quick Note: 1M HIBOR Decline by 300bps – Implications for Hong Kong Real Estate

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>RTHK just reporting that HK Finance Secretary Paul Chan has said in his budget speech that HK will remove all property cooling measures in place, with immediate effect. </li>
<li>That would be That is Special Stamp Duty, Buyer's Stamp Duty, New Residential Stamp Duty. "Measures no longer necessary given the current economic and market conditions."</li>
<li>This should cause people to get excited short-term about property developers.</li>
</ul>


RTHK just reporting that HK Finance Secretary Paul Chan has said in his budget speech that HK will remove all property cooling measures in place, with immediate effect. 
That would be That is Special Stamp Duty, Buyer's Stamp Duty, New Residential Stamp Duty. "Measures no longer necessary given the current economic and market conditions."
This should cause people to get excited short-term about property developers.


Hong Kong To Scrap All "Spicy Measures" (Property Cooling Measures)

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>The FRTIB benchmark switch from the EAFE Index to the ACWI IMI ex-USA ex-China ex-Hong Kong Index will result in a round trip trade of around US$56bn.</li>
<li>The changes for the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-inde" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">CSI 300</a>, <a href="https://www.smartkarma.com/entities/csi-smallcap-500-index-shang" target="_blank" data-smartkarma-citation="entities:35347:1" rel="noopener">CSI 500</a>, <a href="https://www.smartkarma.com/entities/sse-science-and-technology-innovation-board-50-index" target="_blank" data-smartkarma-citation="entities:29279:1" rel="noopener">STAR50</a>, <a href="https://www.smartkarma.com/entities/shanghai-stock-exchange-sse-50-a-share-index" target="_blank" data-smartkarma-citation="entities:31073:1" rel="noopener">SSE50</a> and a bunch of other mainland China indices will be announced after market close on Friday.</li>
<li>Relatively quiet week for ETF flows with no major creations or redemptions during the week.</li>
</ul>


The FRTIB benchmark switch from the EAFE Index to the ACWI IMI ex-USA ex-China ex-Hong Kong Index will result in a round trip trade of around US$56bn.
The changes for the CSI 300, CSI 500, STAR50, SSE50 and a bunch of other mainland China indices will be announced after market close on Friday.
Relatively quiet week for ETF flows with no major creations or redemptions during the week.


Index Rebalance & ETF Flow Recap: FRTIB, Japan, CSI300, CSI500, STAR50, WuXi XDC, Asahi

Hong Kong

Sun Hung Kai Properties Limited develops and invests in properties. The Company operates and manages hotels, properties, car parking, and transportation infrastructures. Sun Hung Kai Properties serves customers in Hong Kong.

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Sun Hung Kai Properties (16 HK)