UBS: Hang Seng Index target at 20,000 points by the end of the year, with Hong Kong property prices expected to remain stable.

UBS Investment Bank Hong Kong strategist Chen Zhili pointed out that the target for the Hang Seng Index at the end of this year is 20,000 points. Due to the expectations of interest rate cuts, the phased implementation of tariff measures starting in the third quarter, and the effects of mainland stimulus policies, the Hong Kong stock market may experience significant volatility this year. Chen Zhili stated that the above target is based on the bank's estimation of increasing risk premiums to reflect interest rates and geopolitical uncertainties. In terms of stock selection, Chen Zhili recommends high-yielding stocks such as infrastructure, telecommunications, and real estate stocks with better performance. He also recommends internet stocks, casino stocks, beer, dairy, and home appliance consumer stocks based on high Beta indicators. The latest US 10-year bond yield has climbed to a 8-month high of nearly 4.7%, and Chen Zhili pointed out that if the 10-year bond yield continues to rise, it may pose issues for corporate refinancing. Regarding recent tech stocks being blacklisted by the US, although the list does not hinder business transactions, Chen Zhili referred to past examples where related companies underperformed the market that year, so the current situation needs to be observed. On the property market front, UBS Investment Bank Hong Kong real estate analyst Leung Chin Ka stated that small to medium-sized developers may be eager to cash out due to interest payment issues, affecting around 4,000 to 5,000 units. There is continued downside risk to property prices, but it is estimated that the Hong Kong government has measures to maintain price stability. On the other hand, if the US stops cutting interest rates, rental yields and mortgage rates stagnate, it may have a negative impact on property prices. He expects Hong Kong property prices to remain stable this year, with office rental declines narrowing to being flat to a 5% decrease, and retail property values remaining flat to a 5% decrease. The bank expects residential building supply in Hong Kong to peak this year due to tepid land sales reactions. Regarding the latest application by the West Kowloon Cultural District Authority for nearly 2,000 residential units in the area, Leung Chin Ka stated that in reality, the sales response to the West Kowloon project is uncertain because developers currently need to reduce their existing inventory first, otherwise the demand for land plots remains low. According to the bank's analysis, the most suitable areas for entering the market in the Hong Kong and Kowloon New Territories are the Western District, Hung Hom, and the Outlying Islands, while the least suitable areas are the Southern District, Shek Pai Wan, Kowloon Tong, and Yuen Long, with Yuen Long having the lowest ranking value in Hong Kong.