HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>With the US interest rate heading lower, the HSI constituent companies with the highest gearing levels are the prime beneficiaries as their interest burden will lessen.</li>
<li>
<a href="https://www.smartkarma.com/entities/sands-china-ltd" target="_blank" data-smartkarma-citation="entities:182:1" rel="noopener">Sands China (1928 HK)</a>, while it has the highest leverage, is not a near-term gain. This is because its debt structure with 100% fixed rate borrowings. </li>
<li>Based on the gearing level, floating rate proportion, and YTD performance, <a href="https://www.smartkarma.com/entities/new-world-development" target="_blank" data-smartkarma-citation="entities:7037:1" rel="noopener">New World Development (17 HK)</a> and <a href="https://www.smartkarma.com/entities/hang-lung-properties-ltd" target="_blank" data-smartkarma-citation="entities:49:1" rel="noopener">Hang Lung Properties (101 HK)</a> are the two potential best bets.</li>
</ul>


With the US interest rate heading lower, the HSI constituent companies with the highest gearing levels are the prime beneficiaries as their interest burden will lessen.

Sands China (1928 HK), while it has the highest leverage, is not a near-term gain. This is because its debt structure with 100% fixed rate borrowings. 
Based on the gearing level, floating rate proportion, and YTD performance, New World Development (17 HK) and Hang Lung Properties (101 HK) are the two potential best bets.


HK Strategy: Rate Cut Beneficiaries - Fixed & Floating Rate Debt Analysis

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

<ul>
<li>After Fed initiated a rate cut cycle in September, we expect the Fed will cut another 25bps in November meeting</li>
<li>Hong Kong CE John Lee delivered his policy address, and the pro-growth measures will support property market recovery</li>
<li>Industry fundamentals are improving and real estate stocks remain attractive in terms of valuation</li>
</ul>


After Fed initiated a rate cut cycle in September, we expect the Fed will cut another 25bps in November meeting
Hong Kong CE John Lee delivered his policy address, and the pro-growth measures will support property market recovery
Industry fundamentals are improving and real estate stocks remain attractive in terms of valuation


HK Property Update:  The Fed, the Policy Address and the Physical Market

<ul>
<li>With the HSI surging 21.2% since 24 Sep and many stocks have even doubled, the strategy in the HK and China markets will move to chase the laggards.</li>
<li>Among the underperforming HSI constituents, <a href="https://www.smartkarma.com/entities/china-resources-power-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:5385:1" rel="noopener">China Resources Power (836 HK)</a> and <a href="https://www.smartkarma.com/entities/china-mobile-ltd" target="_blank" data-smartkarma-citation="entities:27:1" rel="noopener">China Mobile (941 HK)</a> are the better candidates to pick up performance. </li>
<li>For HSCEI, <a href="https://www.smartkarma.com/entities/zijin-mining-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:6358:1" rel="noopener">Zijin Mining Group Co Ltd H (2899 HK)</a> and <a href="https://www.smartkarma.com/entities/china-shenhua-energy-co-h" target="_blank" data-smartkarma-citation="entities:382:1" rel="noopener">China Shenhua Energy Co H (1088 HK)</a> have lagged but their stories are interesting and should regain momentum.</li>
</ul>


With the HSI surging 21.2% since 24 Sep and many stocks have even doubled, the strategy in the HK and China markets will move to chase the laggards.
Among the underperforming HSI constituents, China Resources Power (836 HK) and China Mobile (941 HK) are the better candidates to pick up performance. 
For HSCEI, Zijin Mining Group Co Ltd H (2899 HK) and China Shenhua Energy Co H (1088 HK) have lagged but their stories are interesting and should regain momentum.


<ul>
<li>The wait is finally over.  The Fed delivered a 50bps rate cut in September meeting, kick- starting a new rate cut cycle</li>
<li>The rate cut is an absolute game changer for Hong Kong real estate.  Physical market will recover with lower mortgage rate and companies will enjoy lower borrow rate</li>
<li>With the macro backdrop in US and China, Hong Kong is well positioned for as strong re-rating with mega catalysts ahead – Buy HK real estate, especially SHKP and NWD</li>
</ul>


The wait is finally over.  The Fed delivered a 50bps rate cut in September meeting, kick- starting a new rate cut cycle
The rate cut is an absolute game changer for Hong Kong real estate.  Physical market will recover with lower mortgage rate and companies will enjoy lower borrow rate
With the macro backdrop in US and China, Hong Kong is well positioned for as strong re-rating with mega catalysts ahead – Buy HK real estate, especially SHKP and NWD


HK RE Series (4) With Macro Backdrop in US & China, HK Is Positioned for a Strong Rerating, Buy Now!

<ul>
<li>HK Property stocks are up 4-5% today.   We think the tide has turned for HK real estate.  As discussed, we identify HK to benefit if Fed starts a rate-cut cycle</li>
<li>Powell’s speech at Jackson Hole meeting confirmed the change of monetary policy and will start a rate cut cycle.  Despite fundamental issues remain for HK, market is forward-looking</li>
<li>A buy in HK RE names will be a good value trade for next 6-12 months and we discuss potential trade ideas</li>
</ul>


HK Property stocks are up 4-5% today.   We think the tide has turned for HK real estate.  As discussed, we identify HK to benefit if Fed starts a rate-cut cycle
Powell’s speech at Jackson Hole meeting confirmed the change of monetary policy and will start a rate cut cycle.  Despite fundamental issues remain for HK, market is forward-looking
A buy in HK RE names will be a good value trade for next 6-12 months and we discuss potential trade ideas


Short Note: The Tide Has Turned for Hong Kong Real Estate

Hong Kong

Link REIT is a real estate investment trust in Hong Kong. The Trust owns and operates shopping centers, parking space facilities and real estate retail space.

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Link REIT (823 HK)

HK Strategy: Rate Cut Beneficiaries - Fixed & Floating Rate Debt Analysis

With the Fed hinting at a slower rate cut path, the beneficiaries mentioned in this Insight will turn to suffer more. The names with the highest...

Osbert Tang, CFA

HK Property Update: The Fed, the Policy Address and the Physical Market

On the back of 1) Fed's rate cut cycle, 2) HK Policy Address, and 3) improving industry fundamentals, we remain positive for HK property stocks,...

Jacob Cheng

China & HK Strategy: What to Grab?

Hong Kong and China markets are seeing a surge, prompting a shift towards chasing underperforming stocks like CR Power and China Mobile in HSI,...

Osbert Tang, CFA

HK RE Series (4) With Macro Backdrop in US & China, HK Is Positioned for a Strong Rerating, Buy Now!

Under the Fed's rate cut in US and huge economic stimulus in China, we think Hong Kong is well positioned for a rerating. Real estate will benefit...

Jacob Cheng

Short Note: The Tide Has Turned for Hong Kong Real Estate

After Powell's speech, we think the tide has finally turned for Hong Kong real estate. HK property will benefit from a new rate cut cycle. We...

Jacob Cheng

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

HK Strategy: Rate Cut Beneficiaries - Fixed & Floating Rate Debt Analysis

With the Fed hinting at a slower rate cut path, the beneficiaries mentioned in this Insight will turn to suffer more. The names with the highest...

Osbert Tang, CFA

HK Property Update: The Fed, the Policy Address and the Physical Market

On the back of 1) Fed's rate cut cycle, 2) HK Policy Address, and 3) improving industry fundamentals, we remain positive for HK property stocks,...

Jacob Cheng

China & HK Strategy: What to Grab?

​Hong Kong and China markets are seeing a surge, prompting a shift towards chasing underperforming stocks like CR Power and China Mobile in HSI,...

Osbert Tang, CFA

HK RE Series (4) With Macro Backdrop in US & China, HK Is Positioned for a Strong Rerating, Buy Now!

Under the Fed's rate cut in US and huge economic stimulus in China, we think Hong Kong is well positioned for a rerating. Real estate will benefit...

Jacob Cheng

Short Note: The Tide Has Turned for Hong Kong Real Estate

After Powell's speech, we think the tide has finally turned for Hong Kong real estate. HK property will benefit from a new rate cut cycle. We...

Jacob Cheng

Hong Kong and China markets are seeing a surge, prompting a shift towards chasing underperforming stocks like CR Power and China Mobile in HSI,...