Deutsche Bank Markets Research Asia Industry Date Hong Kong 15 December 2015 Property Hong Kong Property Property Industry Update Special Tony Tsang Jason Ching, CFA Research Analyst Research Analyst Canton Road losing out to Ginza (+852) 2203 6256 (+852) 2203 6205 Chuo -dori
[email protected] [email protected] Downturn in HK retail likely to be more serious than market expects Top picks We have just hosted a property tour of Tokyo, visiting various property CK Property (1113.HK),HKD50.40 Buy projects. A key observation is that the bustling Chinese tourist retail scene and Sino Land Co (0083.HK),HKD11.34 Buy numerous tour buses that used to be present in HK (but are no longer) are now New World Dev (0017.HK),HKD7.54 Buy evident in Tokyo. In our view, in addition to more and better tourist attractions MTR Corp (0066.HK),HKD36.35 Buy (plus better service and attitude toward tourists) in Tokyo vs. HK, the lower JPY Hang Lung Properties Buy FX rate (and inability of HKD to adjust given the linked exchange rate) is a key (0101.HK),HKD17.38 reason for this shift in the pattern of mainland tourism. As prices of consumer Source: Deutsche Bank goods and prime retail rents in Tokyo are significantly lower than in HK, retail rents in HK should fall significantly in the absence of HKD adjustments. Companies Featured CK Property (1113.HK),HKD50.40 Buy We see a multi-phase and multi-year downturn in HK retail sales and rents Sino Land Co (0083.HK),HKD11.34 Buy Looking at over 1,700 retail items in 39 categories of interest to mainland New World Dev