Hong Kong real estate and integrated enterprise performance preview: starting an upward earnings cycle (J.P. Morgan)
J.P.
J.P. Morgan's performance preview pointed out that Hong Kong real estate and conglomerates will end the 2-3 year earnings downward cycle and start a multi-year upward cycle. It predicts that overall profits will increase by 9% year-on-year and dividends per share will increase by 2-3%. Drivers include improving development margins, stabilizing rental income and falling financing costs. This means that the fundamental bottom of the sector has appeared and is about to usher in an inflection point. The market has certain expectations for this, but the "inflection point" of earnings turning from falling to rising has been confirmed to be the biggest catalyst. When selecting stocks, we prefer companies with low interest rate sensitivity and visible earnings recovery. Short-term landlords (such as Link) have higher certainty than developers. One-sentence conclusion: The worst time for Hong Kong real estate stocks is over, overall profits will enter an upward channel, and the recovery of dividend growth is the biggest catalyst for the sector to usher in a systematic revaluation. Positive/negative: Overall positive for Hong Kong’s real estate and integrated enterprise sectors, especially Link REIT, Swire Properties, etc. The market has expectations for industry recovery, but the confirmation of the "profit upward turning point" will be the key driving force for further rise in stock prices. Catalysts: 1) The 2026 interim results that companies are about to release will verify the profitability inflection point; 2) The changes in financing costs brought about by the Federal Reserve’s interest rate cut path.