Morgan Stanley issued a report stating that Hong Kong's retail sales decline narrowed to 10% year-on-year in August (July: -12%), despite the historically high number of outbound residents from Hong Kong, the data still performed better than the bank's expectations. The visibility of recent retail sales improvement remains very low. The bank's top pick is Link REIT (00823), with an investment rating of "shareholding".
JP Morgan pointed out that Wharf REIC (01997), Link REIT, and Hysan Dev (00014) have underperformed the Hang Seng Index by 23-40 percentage points since the beginning of the year. Retail sales were negative in March. The bank expects Hong Kong's retail sales growth rate to remain negative in the second half of this year, indicating these stocks will continue to face pressure. The bank prefers residential developers over retail and office owners.
Among retail trade owners, JP Morgan is more bullish on Link REIT, with an investment rating of "shareholding." The potential interest rate cut in the USA has led to a greater dividend yield spread compared to the US 10-year Treasury yield, low interest rates boosting earnings per share and dividends per share. Due to the slowing retail momentum, high office risks, and dividends without cash flow support, the bank's investment rating for Hysan Dev is "in line with the market."
