Citigroup Identifies Top Picks in Hong Kong Property Sector: SHK PPT, CK ASSET, SWIREPROPERTIES, and LINK REIT

Citigroup has issued a research report outlining its top selections within the Hong Kong property sector.

The bank's preferred stocks are SHK PPT (00016), CK ASSET (01113), SWIREPROPERTIES (01972), and LINK REIT (00823).

Citigroup noted it had previously upgraded LINK REIT to a "Buy" rating, primarily due to stabilizing market rents and the company's shift towards a capital management strategy focused on "asset disposals and share buybacks."

Hong Kong's retail sales in April grew 8.6% year-on-year, showing solid performance, though the pace slowed from the 13% growth in March and the 12% growth in the first quarter.

The luxury goods segment saw its growth rate slow to 20% year-on-year, down from a 28% increase in the first quarter, mainly reflecting a weakening base effect and a decline in gold prices.

Supermarket sales continued to show signs of stability, rising 3% year-on-year, partly benefiting from increased promotional efforts by merchants.

Online retail maintained strong momentum with a 31% year-on-year increase and now accounts for 10% of total retail sales, indicating a continued shift in consumer habits.

The bank estimates Hong Kong's retail sales for May could grow between 5% and 8% year-on-year, reaching approximately HKD 33 to 34 billion, partly supported by an 8% year-on-year increase in visitors during the May holiday period, with mainland Chinese tourists up 10%.

While the depreciation of the Renminbi relative to the Hong Kong Dollar provides some support, the overall year-on-year retail sales growth rate is expected to slow further from April's level due to a stronger base effect as market sentiment began recovering from late May through June last year.

Compared to prior expectations, the bank's view on the non-essential consumer retail segment has turned slightly more positive, as stable sales are leading to a bottoming out of market rents for retail spaces, such as supermarkets.

In the luxury retail sector in Hong Kong and mainland China, investor concerns over a slowdown in same-store sales growth in the second half due to a higher base are a primary reason for recent stock price corrections.

Nonetheless, the bank noted that the dividend yield of HANG LUNG PPT (00101) has begun attracting some income-seeking investors.

Furthermore, tenant sales performance at Harbour City, a property under WHARF REIC (01997), has outperformed the broader market.