JP Morgan has identified six property stocks in Hong Kong to bet on after applying the worst-case scenario taking into consideration home prices dropping by 30 percent, retail sales dropping by 30 percent as well and office rents dropping by 40 percent.
According to JP Morgan analyst Cusson Leung, the objective of the worst-case analysis is to identify stocks that are still good for investment even under these sorts of scenarios. The worst-case analysis also takes into account the ongoing protest in Hong Kong as well as the escalating US-China trade war.
The list comprises CK Asset, Henderson Land, New World Development, Wharf Holdings, Hang Lung Properties, and Link REIT.
According to JP Morgan, CK Asset’s strategy to diversify has seen the company move away from Hong Kong’s property market. Similarly, Henderson Land is being helped by its asset sale. New World can expect a substantial rise in rent since it is the only developer among the six to still focus on the residential housing sector.
JP Morgan has recently entered into a partnership with one of New Zealand’s largest property companies, called Stride Property. The partnership will lead to the creation of an industrial property company, whose value is expected to reach $500 million within a few years’ time.
Initially, JP Morgan would invest around $70 million into the joint venture, to be called Industre Property. JP Morgan would invest another $115 million in the next two years, taking its total investment to $185 million.
While Stride will own 70 percent of the joint venture and also manage the company, JP Morgan will own the remaining 30 percent.