UBS Global Research's Head of Asia Pacific Research, Lian Peikun, stated at a press conference that the firm maintains its year-end target for the Hang Seng Index at 30,000 points. It is anticipated that the upcoming meeting between the Chinese and U.S. leaders will address major issues such as the Middle East, trade, and technology cooperation. If discussions involve cooperation between companies from both sides or easing of restrictions, it would have a positive impact on the stock market. The firm also expects the U.S. Federal Reserve to cut interest rates once in the fourth quarter of this year.
Lian further noted that although valuations in the AI sector are high, indicators such as semiconductor capital expenditures and orders have not shown a decline, suggesting that the trend in AI and related industries will continue. However, he pointed out that the market is overlooking the secondary effects of high oil prices, which have not yet been reflected in downstream industries, macroeconomic data, or inflation. Therefore, the firm remains cautious on sectors such as fertilizers; aviation and transportation; and interest rate-sensitive sectors like real estate, finance, banking, securities, and insurance. It is also anticipated that stock prices in these sectors will experience significant volatility in the near future.
UBS's Head of Asia Pacific Real Estate Research, Lin Zhenhong, indicated that Hong Kong property prices are expected to rise by 5% to 10% this year. Within the real estate sector, the preferred order is residential, office, and retail properties. Among these, optimism is driven by the potential return to Hong Kong of approximately 250,000 individuals who relocated to the UK in recent years, with an estimated 10% (around 26,000 people) likely to return after obtaining citizenship, thereby supporting the Hong Kong property market. This is further bolstered by the influx of mainland professionals.
Regarding office properties, rents in Central are expected to grow by 3% to 5%, outperforming the overall market's flat forecast. For retail properties, rising oil prices have led to faster cost increases in Hong Kong, prompting more Hong Kong residents to increase their spending in mainland China. Additionally, more mainland e-commerce platforms are intensifying their efforts in the Hong Kong market.
Lin further emphasized that when selecting real estate stocks, it is crucial to assess whether a company's balance sheet can support dividend payments. Among the sectors, residential properties are favored due to favorable cash flow and inventory turnover. For office property companies, location is a key consideration. It is also important to note that the parent company's outlook on the property market is significant, as it indicates whether there is interest in capital recovery for its listed subsidiaries.