UBS: Most optimistic about HKT-SS (06823) in Hong Kong telecom stocks, preferrin PCCW (00008) over HKBN (01310).

UBS released a research report saying that it has raised the target price of HKBN (01310) from 3.16 Hong Kong dollars to 3.3 Hong Kong dollars and upgraded the rating from "neutral" to "buy", making all three companies covered by the telecom sector in Hong Kong rated as "buy". The target price for HKT-SS (06823) remains unchanged at 12.5 Hong Kong dollars; the target price for PCCW (00008) has been raised from 4.6 Hong Kong dollars to 5 Hong Kong dollars. UBS expects the Fed to start a rate cut cycle in mid-September, expecting the three-month HIBOR in Hong Kong to be 130 basis points lower than this year by 2025. It also believes that the lower interest rate environment is beneficial to the fundamentals of the telecom industry, can reduce the burden of debt for companies, drive funds into risk assets, and is more likely to lead to a re-rating due to the pressure on dividend yields. The bank stated that based on the fact that the current debt of Hong Kong telecom companies is around 50%, it believes that interest costs will decrease, thus improving dividend prospects. The bank is most bullish on Hong Kong Telecom, as the competitive environment in the mobile communication market is stable, and the continuous demand for digitization driven by large enterprise clients makes Hong Kong Telecom's business prospects the most resilient among the three companies. In addition, the bank prefers China Unicom over HKBN, mainly because the former has a lower proportion of southbound shareholding and stable business operations, while the latter is still in the early stages of business transformation.