Hong Kong property stocks rally on housing development plans

Hong Kong’s real estate stocks rallied on Thursday, boosting the wealth of its property tycoons, as the city’s government pledged to ease its chronic housing shortage with a new metropolis.

The property subsection of Hong Kong’s Hang Seng index jumped as much as 3.3 per cent, as shares in development companies Henderson Land and Sun Hung Kai gained as much as 9.2 and 5.1 per cent respectively. The overall Hang Seng index jumped 2.4 per cent on Thursday.

Hong Kong chief executive Carrie Lam promised in a speech on Wednesday to remedy the city’s housing problems by building a new 600-hectare metropolis for almost 1m residents in the sparsely populated north of the territory.

The subsequent share price rally marked a welcome change of direction for the city’s real estate businesses, which are controlled by some of Asia’s richest families and which have collectively dropped almost 16 per cent since mid-June.

Concerns have mounted in recent months about Beijing’s efforts to rein in China’s property sector and the uncertain fate of indebted mainland developer Evergrande.

In turn, market moves have influenced the net worth of some of the city’s richest individuals. Li Ka-shing, top shareholder of property developer CK Asset Holdings — which gained as much as 2.5 per cent on Thursday — is worth $35.4bn, according to Forbes. Sun Hung Kai’s Kwong Siu-hing is worth $13.4bn.

Chinese media have blamed the city’s powerful real estate barons — whose political influence was tempered in the city’s latest electoral shake-up — for contributing to the city’s chronic housing shortage, which Beijing views as a driver behind the protests that rocked the city in 2019.

But Michael Wu, senior equity analyst at Morningstar Asia, said the city’s property developers had been sold down too hard by investors concerned about Beijing’s broad common prosperity clampdown in recent months.

Wu added that investors might view Hong Kong developers as better positioned to benefit from the development plans than their mainland counterparts, who had become “more focused on their balance sheets” since this year’s curbs and the liquidity crisis at Evergrande.

“Chinese developers are not what they were a few years ago,” he said.

Wu noted that the government’s building plans, which would create more than 500,000 new homes across Hong Kong’s largely agricultural northern region, could be helpful to developers with extensive land holdings in the territory.

“I think that’s what the market is looking at: maybe they can monetise that land that they have on their books.”

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