BOCOM INTL: Upgraded Hong Kong real estate industry rating to "leading", optimistic on SHK PPT (00016) and LINK REIT (00823).

BOCOM INTL releases research report, seizing the opportunity of asymmetric recovery in the Hong Kong property market. The bank believes that the recovery of the Hong Kong real estate market will not be a single event, but a gradual process, covering different asset sub-sectors. SHK PPT (00016) and LINK REIT (00823) are the preferred targets for residential and commercial properties, and the bank expects both to benefit from industry recovery and multiple catalysts in the next 1-2 years, with a target price of 111.7 Hong Kong dollars for New World and 45.7 Hong Kong dollars for Link REIT. The bank expects investors to focus first on the recovery of the residential sector, followed by high-quality retail assets and finally core office space. The industry rating has been upgraded from "synchronous" to "leading". There are increasing signs that the physical market is warming up, with the potential for deep intrinsic value to be released. After years of adjustment, a series of important catalysts are starting to take effect, indicating that the market turning point has arrived. The bank believes that the following changes are key supports for the market recovery: 1) improvement in macroeconomic uncertainty (especially interest rate cuts); 2) significant policy relaxation; 3) the return of driving factors for basic demand, including changes in population trends. The report predicts that Hong Kong's continued population influx will continue to drive housing demand, especially rental demand. Rent levels are expected to rise by about 3-5% in 2025, with average annual growth of about 3% in 2026 and 2027. Key catalysts for future prices include positive net rental yields and interest rate cuts, which will increase purchasing power and stimulate investment demand. Residential prices are expected to rise by 3-5%/5%/5% in 2025/2026/2027, respectively.