[ET Net News Agency, 10 October 2017] Goldman Sachs said discussion about rates has
increased among investors recently. It sees three directional negatives coming: (1) higher
rates, with HIBOR increasing 95bp in the next couple of years; (2) higher housing supply,
with the aggregate pipeline reaching 105k units; (3) higher fragmentation of the market,
with 47% of the pipeline held by smaller or Chinese players, potentially leading to more
price competition.
However, Goldman also sees four factors that could help counter the above: (1) a low
level of speculative activities; (2) low level of developers' leverage; (3) low overall
vacancy; (4) low unemployment rate.
As such, it maintained its view of a gradual residential price adjustment trajectory,
with a 15% decline in the next 3 years, while the ample liquidity in the market could
maintain the high-price (average secondary residential price +10% year-to-date but flat in
past 3 months) and low-volume situation near term.
Goldman revised its target prices for the property counters it covered as follows:

Name Rating Target Prices
---------------------------------------------------------------
Sun Hung Kai Properties (00016) Buy HK$157.10 to HK$158.70
Cheung Kong Asset (01113) Buy HK$77.90 to HK$78.60
Kerry Properties (00683) Neutral HK$32.40 to HK$33
Henderson Land (00012) Neutral HK$48.10 to HK$48.80
New World Development (00017) Neutral HK$10.70 to HK$10.90
Sino Land (00083) Neutral HK$15.05 to HK$15.20
Hang Lung Properties (00101) Neutral HK$21.94 to HK$22.16

(KL)