No Details on Much Anticipated Farmland Conversion in HK CE's First Policy Address

With Scale and Dominance, Sun Hung Kai Properties Is a Bellwether of the Hong Kong Property Sector

Leading Independent Investment Research, Morningstar, Inc.

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Thematic (Sector/Industry)

Hong kong Real estate / Thematic (Sector/Industry)

The Hong Kong Monetary Authority announced its eighth round of prudential measures targeting mortgage lending. Two of the measures will directly impact borrowers’ ability to finance property purchases, affecting about 20% of the borrowers. The impact will be mostly felt in the secondary market where bank mortgages are the main source of funding. The impact on the primary market is less certain as borrowers are increasingly relying on developer financing.Fundamentally, we believe these demand-side measures do not alter the supply and demand dynamic of the property market over the long run, as argued in our report published in Dec. We maintain our negative view of the Hong Kong residential market, based on higher supply in the pipeline and poor affordability. A shrinking secondary market will further cloud the price-discovery process. We do not expect the latest measures to affect the Hong Kong property developers’ stocks given the diminishing reaction from the market participants. We maintain our moat ratings and fair value estimates for <a href="https://www.smartkarma.com/entities/111" target="_blank" data-smartkarma-citation="entities:111:1">Sun Hung Kai Properties (16 HK)</a> , <a href="https://www.smartkarma.com/entities/22650" target="_blank" data-smartkarma-citation="entities:22650:1">Cheung Kong Property Holding (1113 HK)</a> , <a href="https://www.smartkarma.com/entities/376" target="_blank" data-smartkarma-citation="entities:376:1">Henderson Land Development (12 HK)</a> and <a href="https://www.smartkarma.com/entities/3320" target="_blank" data-smartkarma-citation="entities:3320:1">Kerry Properties Ltd (683 HK)</a> .Analyst: Phillip Zhong

The Hong Kong Monetary Authority announced its eighth round of prudential measures targeting mortgage lending. Two of the measures will directly impact borrowers’ ability to finance property purchases, affecting about 20% of the borrowers. The impact will be mostly felt in the secondary market where bank mortgages are the main source of funding. The impact on the primary market is less certain as borrowers are increasingly relying on developer financing.Fundamentally, we believe these demand-side measures do not alter the supply and demand dynamic of the property market over the long run, as argued in our report published in Dec. We maintain our negative view of the Hong Kong residential market, based on higher supply in the pipeline and poor affordability. A shrinking secondary market will further cloud the price-discovery process. We do not expect the latest measures to affect the Hong Kong property developers’ stocks given the diminishing reaction from the market participants. We maintain our moat ratings and fair value estimates for Sun Hung Kai Properties (16 HK) , Cheung Kong Property Holding (1113 HK) , Henderson Land Development (12 HK) and Kerry Properties Ltd (683 HK) .Analyst: Phillip Zhong

Developer Stocks Not Likely to Be Affected by New Prudential Measures