According to the report released by UBS, the Federal Reserve recently announced a half-point interest rate cut, and the Hong Kong Monetary Authority followed suit. HSBC also lowered its prime rate by 25 basis points, which means that mortgage rates are lower. It is believed that this will inject a shot in the arm for buyers in the property market and it is also expected that funds will flow into Hong Kong's risk assets. However, it is possible that dividends will be suppressed, leading to different re-ratings.
The bank prefers high dividend stocks, companies that are sensitive to interest rates, and companies that have resistance in a weak macroeconomy. The bank has removed Cheung Kong Infrastructure (01038) and CLP Holdings (00002) from its list of favored Hong Kong stocks, and has added CKH Holdings (00001) and BOC Aviation (02588) to the list. The former has a stable free cash flow in its asset portfolio and a relatively attractive dividend yield, while the latter benefits from the tight supply of aircraft, which contributes to the rental income of new leasing transactions. In addition, the interest rate cut cycle can reduce its debt costs, accelerating the recovery of its investment return. The bank has a target price of HKD 45.3 for CKH Holdings, with a "neutral" rating, and a target price of HKD 77.9 for BOC Aviation, with a "buy" rating.
The bank has listed a number of stocks on its list of favored Hong Kong stocks, including PCCW (00008), Cathay Pacific Airways (00293), BOC Aviation, Henderson Land (00012), Swire Properties (01972), CKH Holdings, Sands China (01928), Galaxy Entertainment (00027), and AIA Group (01299).