Under the haze of the Russian-Ukrainian war, the US Federal Reserve's decision to raise interest rates, and the delisting of Chinese stocks, after the Hang Seng Index fell below 19,000 points on Tuesday (15th), the central government released a signal to support the market, and the market "repelled"!
It has returned to the 21,000 level on Friday (18th), but it is still a long way from the high of about 25,000 at the beginning of the year. Together with the real estate stocks that have always been "steady", the stock price is still "diving".
The interest rate hike in the United States, and the new wave of epidemics in Hong Kong and the mainland have not yet emerged, will affect the performance of real estate stocks in fiscal year 2022, and are more likely to affect the level of dividends.
However, analysts believe that rental income has a limited impact on performance. Once the epidemic prevention and even immigration measures are relaxed, the business will usher in a major rebound. Some major banks bluntly said that investors should wait for the opportunity to "hunt for treasure". Experts prefer SHKP (0016) and SHKP ( 0017).
The U.S. Federal Reserve raised interest rates for the first time in three years, with officials broadly supporting raising rates at the remaining six meetings this year to a range of 1.75 to 2 percent, and raising interest rates three times in 2023.
If the Bank of Hong Kong eventually follows the U.S. to raise interest rates, it will bear the brunt of the increase in the cost of housing for Hong Kong, which may affect people’s desire to buy a home. If the property price falls, it will also affect developers’ pricing strategies for new projects, and borrowing costs will also rise.
In the past month, a number of property developers in Hong Kong have announced their results one after another.
However, entering 2022, the fifth wave of the epidemic broke out in Hong Kong. Property prices fell in the first quarter, economic activities were close to "stagnation", and the flow of people in shopping malls was greatly reduced. The landlord pursues the rent from the tenant in the designated industry.
Long Hanbiao, a member of the real estate and construction industry, quoted many owners earlier as saying that the measures affected cash flow and asked the government to "take it back."
Goldman Sachs: Investors should be on a 'treasure hunt'
The rental income from sales of buildings and shopping malls has decreased, the local business has not improved, the periphery is also surging, and a new wave of epidemics has broken out in the mainland; and the war in Russia and Ukraine has affected the market.
However, Goldman Sachs issued a report last month, pointing out that according to the last interest rate hike cycle, local property stocks rose in tandem with interest rates. Among them, New World Development (0017) increased by 40% from the fourth quarter of 2015 to the fourth quarter of 2019. Outperforming the market, investors are advised to "hunt for treasure" in Hong Kong property stocks, but choose individual stocks prudently.
Morton also pointed out that there is no real data to support the US interest rate hike, which will have a negative impact on real estate stocks. Instead, the continued tightening of social distancing measures will have a negative impact on retail sales and unemployment, which may be for the property market and developers. The share price brought further negative sentiment.
U.S. interest rate hikes may not have a negative impact on property sales
If you want to “hunt for treasure”, the first choice is of course the stocks with high dividend payout ratio and good prospects. Based on the closing price on Friday (18th), the dividend yield of most real estate stocks is nearly 4% to 8%, and the highest target price of large banks is used. Calculated, the potential stock price increase is 16% to 40%, and it is expected to "receive both financial and interest".
Xie Qicong, Director (Real Estate Research) of BOCOM International, bluntly said in an interview with "Hong Kong 01" that, looking at the current market conditions, "a lot of things are bad", including the start of the interest rate hike cycle, the unstable geopolitical situation, the outbreak of the epidemic in Hong Kong and the mainland, and the stock market rush. According to his statistics, the property market has a high correlation with the stock market. Under the stock wealth effect, if the stock market falls by 10%, the property price will fall by at least 3 to 4%.
However, in the medium and long term, the fundamental factors of the property market remain unchanged, and the housing supply is still insufficient. Even if the United States does raise interest rates seven times this year, Hong Kong will not necessarily follow suit, and it may not have a negative impact on developers selling properties.
In addition, everyone still hopes that the market will return to normal after the epidemic. "The Chief Executive relaxes his words. If there are Hong Kong people immigrating to foreign countries, there is no way. At least to reverse the net outflow of population. This is the key." He explained that he came to Hong Kong Most of the people who work are high-paid white-collar workers related to finance and have strong spending power. If social measures and quarantine measures for entry into Hong Kong can be relaxed in April, and even the resumption of international flights in the third quarter, coupled with the stimulus of 10,000 yuan of consumer coupons, it will be very beneficial to the government. The retail market has a very positive impact.
Xie Qicong said he is optimistic about the performance of real estate stocks.
(provided by respondents)
Tenant mix defensive improvement
However, experiencing the fifth wave of the epidemic may hurt the performance in fiscal 2022.
Xie Qicong said that it is true that under the fifth wave of the epidemic, the retail rental income of shopping malls will definitely decrease for real estate developers, but after two years of reshuffle, the defensiveness of their tenant mix has been much higher than that of two years ago, "Not at that time (2020) The killing and burial are serious, and depending on the strength of the family, the top should be topped in one or two months.” He expects that the developer’s annual rental income decline can be controlled within 10%.
Secondly, most of the business of Hong Kong real estate developers in the mainland is shopping malls and office buildings. The domestic housing policy has little impact on them, and the epidemic prevention policy is relatively strict. It is believed that the mainland business can help make up for the decline in Hong Kong business.
In the medium and long term, the property market is optimistic, the impact of short-term rental income is slight, and the consumption rebound after the switch is expected. At present, the valuation of real estate stocks is sluggish, and the stock price has also fallen a lot with the market. Retail investors can consider holding it. No matter how bad it can be, there is no need to worry about the epidemic anymore. 5 out of 10 Hong Kongers are recruited, and 7 of them are determined to be recruited, and they will all return eventually (relax or even cancel the epidemic prevention measures.)”
▼The daily life of citizens under the fifth wave of the epidemic▼
+8
Preferred SHKP and New World
He also pointed out that in the past two or three years, most real estate stocks have not significantly reduced their dividends, and "the dividend payout ratio can at least remain stable." , and New World has continued to launch new projects, the shopping mall has performed well, and the mainland business has performed well; followed by Jiuzhi (1997), optimistic about the business recovery of Harbour City.
On the contrary, he is not very optimistic about Henderson Land (0012), "It is a good idea to invest a lot of money to start an office building in Central, but there are faults in the middle, there is no sale of buildings, the acquisition of old buildings has not been completed, and the conversion of agricultural land is also difficult. I can't turn it around, and I'm not actively carrying it, obviously the second generation of Henderson has no direction." As for Xinzhi﹙0083﹚ and Hysan﹙14﹚, there are still not too many bright spots, and it is not appropriate to consider it for the time being.