JPMorgan: Hong Kong Property Sector Enters an Earnings Upcycle, Most Bullish on Central Office

JPMorgan released a research report stating that unless interest rates surge sharply or market conditions reverse unexpectedly, the local property sector is entering an earnings upcycle. The bank expects average earnings per share to grow 5% in both the first and second fiscal years, with dividends per share rising 3% and 4% respectively. With NEW WORLD DEV (00017) announcing its results last week, the earnings season for local property and conglomerate companies has largely come to an end. Except for SINO LAND (00083) and HANG LUNG PPT (00101), most companies recorded earnings growth, with NEW WORLD DEV's core earnings also turning positive. Additionally, apart from NEW WORLD DEV, all companies saw their dividends per share at least remain flat. Looking ahead to the fourth quarter, the bank believes that the earnings-driven momentum for share prices will weaken, with interest rate expectations and subsector dynamics becoming key. Among subsectors, the bank is most bullish on Central office, followed in order by retail, residential, and office outside Central, and prefers landlords operating retail leasing businesses over property developers. Top picks are SWIREPROPERTIES (01972), Hongkong Land, WHARF REIC (01997), CK Asset (01113), Jardine Matheson, and CKH HOLDINGS (00001). The bank believes that Hong Kong development property margins have bottomed out, rising from 8% in FY2025 to 11% in the first half of 2026, and expects them to remain at 11% in FY2026 before recovering to 16% in FY2027.