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Sun Hung Kai Properties Limited (0016.HK)

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  • NetEase Rally Bodes Well for Speculators in Chinese Mega Deals
    Bloomberg

    NetEase Rally Bodes Well for Speculators in Chinese Mega Deals

    (Bloomberg) -- One of Hong Kong’s most popular investment strategies -- borrow big and plow the money into a red-hot share sale -- is starting to work, just as the city prepares to host a flurry of Chinese listings.NetEase Inc. jumped as much as 9.9% in Hong Kong Thursday, on track to deliver the city’s best trading debut in more than a year for companies with a fund raising size of more than $1 billion. The retail portion of its share sale was more than 130 times oversubscribed, as mom-and-pop traders clamoured to get a piece of the Chinese gaming company. JD.com Inc.’s planned $3.9 billion share sale, which would be the world’s second-largest of the year, is also oversubscribed. China Bohai Bank Co. is planning to launch its own $2 billion offering.Such listings are reviving interest in Hong Kong’s market, boosting inflows and helping strengthen the local dollar at a time when the passing of a national security law has raised concerns about the city’s status as a financial hub. Tensions between Washington and Beijing have threatened to curtail Chinese companies’ access to U.S. capital markets, making such secondary listings closer to home more appealing.“Introducing another technology giant to Hong Kong is definitely good for market sentiment,” said Banny Lam, managing director at CEB International Corp. “It will help Hong Kong to attract more longer-term investors and demand for future listings like JD.com will be boosted since the investment now looks very profitable.”Trading as high as HK$135.2 ($17.4) per share in Hong Kong at their highest intraday level, NetEase shares were valued at about a 3% premium to those listed on the Nasdaq -- which are near a record high. One U.S. share is equivalent to 25 Hong Kong stocks. Alibaba Group Holding Ltd. rose 6.6% on its Hong Kong debut.The prospect of NetEase potentially joining the benchmark Hang Seng Index is also helping buoy investors’ confidence, Lam said. The company’s market cap exceeds that of 39 firms on the 50-member gauge, including the likes of CNOOC Ltd. and Sun Hung Kai Properties Ltd., according to data compiled by Bloomberg.The technology sector saw strong gains on Thursday. Shopping platform Meituan Dianping added 4.1% to hit a record high, while Tencent Holdings Ltd. rose to its highest since March 2018.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Despite Its High P/E Ratio, Is Sun Hung Kai Properties Limited (HKG:16) Still Undervalued?
    Simply Wall St.

    Despite Its High P/E Ratio, Is Sun Hung Kai Properties Limited (HKG:16) Still Undervalued?

    The goal of this article is to teach you how to use price to earnings ratios (P/E ratios). To keep it practical, we'll...

  • Hong Kong's Teflon Home Prices Are Virus-Proof
    Bloomberg

    Hong Kong's Teflon Home Prices Are Virus-Proof

    (Bloomberg Opinion) -- Hong Kong’s home prices have proved resilient to months of protests and now the coronavirus epidemic, a one-two punch that the city’s finance chief likened over the weekend to “tsunami-like” shocks. While a hit is probably coming, the world’s least affordable housing market still looks a better place to be than in Hong Kong office or retail property.Home prices have dropped just 6.1% from their record high in June, as measured by the Centa-City Leading Index compiled by Centaline Property Agency. The index has risen for four weeks in a row through Feb. 9, the latest data, even as the virus shut down swathes of the Chinese economy, slowed Hong Kong tourist arrivals to a trickle and forced many of the city’s financial employees to work from home.A number of factors undergird the outlook for housing: the dominance of a small number of family-controlled companies that can influence supply; low interest rates; and limited leverage among home owners. Developers completed 14,000 units last year, 33% lower than 2018, according to Morgan Stanley analyst Praveen Choudhary. By contrast, 31,000 units were built in 2002, just before the outbreak of severe acute respiratory syndrome. That was 35% more than the year before.  High equity levels mean there’s little pressure for home owners to sell, as I noted in November. The loan-to-value ratio for new mortgages dropped to 46% in September, from a peak of 69% in 2002, according to the Hong Kong Monetary Authority. Meanwhile, Hong Kong’s one-month interbank rate, against which most mortgages are priced, has fallen back below 2% this month.To be sure, a drastic worsening of the economy would change the calculation. Hong Kong’s unemployment rate is estimated to have climbed for a fourth month to 3.4% in January. That’s still far short of the 8.5% peak reached during SARS. Having risen more than fivefold from their 2003 low, Hong Kong housing prices have attained a Teflon-like response to bad news. That resilience is far less evident in commercial property, a sector that tends to move more in line with the state of the underlying economy. Once beloved by private equity firms for stable returns in a low-yield world, Hong Kong’s office and retail real estate is losing appeal as companies reduce space and shoppers desert malls.The total transaction value of office and retail properties slumped 12.9% last year to HK$49.6 billion ($6.4 billion), according to Bloomberg Intelligence analyst Patrick Wong. Grade-A offices recorded a 6% vacancy rate in December, the highest level since April 2010, when the number was the same, figures from real estate broker Jones Lang LaSalle Inc. show. Chinese companies, which have become increasingly important in the commercial property market, reduced their take-up of new office space by almost 40%. WeWork, the office-sharing company that scrapped its IPO last year, gave up some space.With Hong Kong’s gross domestic product shrinking 1.2% last year, empty workplaces became a common sight even before the coronavirus outbreak forced people to work from home. By the fourth quarter, office prices had reached the lowest since the second quarter of 2018, according to JLL.Retail landlords, meanwhile, started slashing rents by 60% this month for tenants that are trying to cope with the dearth of shoppers. The fourth-quarter vacancy rate of of 9% in core shopping areas was the highest in five years, JLL’s figures show. Average rents of prime street shops in the city fell 21% from a year earlier at the end of 2019, according to Bloomberg Intelligence.Tourism, particularly from mainland China, is far more important to Hong Kong’s economy than during SARS and has been hit hard by both the protests and the coronavirus. Preliminary visitor arrivals data for February from the Hong Kong Tourism Board show average daily traffic has plummeted almost 99% to fewer than 3,000 people.The retail sector was already facing a secular downturn. China has cut luxury taxes, reducing the incentive for mainland shoppers to buy in Hong Kong. Local consumption, barring panic-buying of toilet paper and face masks, is also suffering and will take time to recover.For real estate investors, the best place to shelter may be in cash-rich Hong Kong developers such as Sun Hung Kai Properties Ltd. and Li Ka-shing’s CK Asset Holdings Ltd. that have a higher exposure to housing. These look better placed to ride out the slump than rivals such as Wharf Real Estate Investment Co., owner of the Times Square mall in the prime Causeway Bay shopping district, or Hongkong Land Holdings Ltd., the biggest office landlord in the central business district.In a testing environment, homes can be a refuge in more ways than one. To contact the author of this story: Nisha Gopalan at ngopalan3@bloomberg.netTo contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.netThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.