Understanding the Market | Hong Kong Property Stocks Continue to Rise, Big Morgan Stanley Points to Fed Rate Cuts as Positive for Most Hong Kong Property Developers, Expecting Hong Kong Property Prices to Rebound Next Year

According to the Zhitong Finance and Economics APP, Hong Kong property stocks continued to rise. As of the time of publication, New World Development (00017) rose by 2.77% to HKD 7.42, Link Real Estate Investment Trust (00823) rose by 1.67% to HKD 39.5, SHK PPT (00016) rose by 1.18% to HKD 81.55, and Kowloon Development Company (01997) rose by 1.08% to HKD 23.3.

On the news front, on September 19, the Hong Kong Monetary Authority announced a 50 basis point cut in the benchmark interest rate to 5.25%, down from 5.75%. Overnight, the Federal Reserve announced a 50 basis point rate cut. Under the linked exchange rate system in Hong Kong, in response to the U.S. rate cut of 50 basis points, the Hong Kong Monetary Authority lowered the benchmark interest rate to 5.25%.

Morgan Stanley released a research report pointing out that Hong Kong has unique advantages benefiting from the U.S. rate cut and accelerated mainland economic growth. The Fed's expected rate cut is also at historically low valuations, providing positive support for sustainable and high dividend-paying Hong Kong property stocks. The bank expects Hong Kong property prices to rebound by 6% next year after a 8% decline this year. Even though residential prices have adjusted by 30% since 2021, the affordability ratio of Hong Kong residential properties is still at a historically high level of 50%. However, assuming mortgage rates fall to 3.2% next year, this ratio is expected to improve to 45%, and rental deductions for property returns will also turn positive