UBS stated in a research report that CK ASSET (01113) maintained a cautious view on the Hong Kong residential market during the Asia Investment Forum on May 26. The group expects the occupancy rate for its CK Hutchison Centre Phase 2 to exceed 50% by the end of 2026, up from the current level of approximately 20%. Current rents have recovered to over HKD 100 per square foot. Regarding retail, rental performance at its shopping malls is stabilizing. UBS assigned a "Buy" rating to CK ASSET with a target price of HKD 62, representing a 40% discount to the forecast net asset value.
Management emphasized that while residential demand in Hong Kong remains resilient, supported by pent-up local demand and a steady inflow of Mainland buyers—particularly for properties below HKD 8 million—overall momentum is unlikely to accelerate significantly. Property prices continue to rise moderately, yet transaction volumes in the mid-to-high-end market have contracted, with demand for luxury properties remaining weak. Management pointed to macro uncertainties, including geopolitical risks and persistent inflationary pressures, reinforcing their view that the market is in a stabilization phase rather than a strong upcycle.
On the development front, CK ASSET anticipates pressure on Hong Kong property development margins, as projects being recognized for revenue are primarily those sold in the past. UBS noted that following the completion of the sale of its UK Power Networks (UKPN) stake, CK ASSET will transition to a net cash position and maintain high discipline in capital allocation. With current government bond yields at 4-6%, management sees limited urgency to redeploy capital into low-return development projects. The group maintains a high double-digit margin threshold for Hong Kong development projects, focusing on defensive, income-generating assets.
The board will discuss the possibility of distributing a special dividend when announcing the interim results for the first half of 2026, reflecting the substantial disposal gain from the UKPN transaction.