Citibank: Three major factors driving the growth of luxury consumption in Hong Kong, optimistic about high-end consumer rental stocks.

Hong Kong retail sales performance continues to exceed expectations, with sales in October increasing by 6.9% year-on-year, the largest increase in 22 months. Luxury retail sales increased by 9.5% year-on-year, reaching a 21-month high. Citigroup stated that some visitors who would have gone to Japan are now coming to Hong Kong, and with the Hong Kong dollar depreciating by 4% against the Chinese renminbi this year, Hong Kong retail is benefiting from increased visitor arrivals and their spending, with a positive outlook for high-end consumer stocks. Citigroup pointed out that the luxury goods sales situation is ideal, providing a positive stimulus for stock prices of WHARF REIC (01997) and Henderson Land (00014), as Harbour City under Henderson Land generates 80% of its recurring profit, with 50% of Henderson's tenant mix being retail and expanding its market share in Causeway Bay. Furthermore, in the long term, if mainland China expands the scope of luxury goods consumption tax, it may prompt consumers to shift their luxury goods purchases to Hong Kong and other regions to take advantage of price differentials and convenience. Citigroup noted that owners of luxury goods malls in mainland China are upgrading and diversifying their tenant mixes. The strong growth momentum of high-end and luxury goods shopping centers in the third quarter of this year has extended into October and November, including companies such as Hang Lung Properties (00101), SWIRE Properties (01972), and China Resources Mixc (01209). The bank believes this is mainly due to three factors: (1) the low base effect in the second half of last year; (2) positive wealth effects from a strong capital market; (3) introducing new stores and actively upgrading tenant mixes to seize market share. Citigroup has introduced a new long and short strategy, recommending an increase in holdings of Henderson Land while reducing holdings in Link REIT, as the retail sales and performance of the two companies differ, and with Christmas and Lunar New Year holidays approaching, short-term data is expected to favor luxury goods performance. In terms of the rating of Hong Kong rental stocks, Citigroup has given buy ratings to 5 companies, neutral ratings to 1 company, and sell ratings to 1 company. Specifically, Citigroup has given a "buy" rating to Henderson Land (00014), Hang Lung Properties (00101), SWIRE Properties (01972), WHARF REIC (01997), and CK Asset Holdings (00778), with target prices of HK$17.35, HK$10.1, HK$23.8, HK$30.3, and HK$5.56, respectively; Neutral rating to Link REIT (00823) with a target price of HK$36.8. A sell rating is given to Emperor Group (02778) with a target price of HK$1.4.