Conglomerate CK Hutchison, in particular, now bears a 16% higher price objective of HK$72 ($11.68).
BofA’s higher price objectives come on the back of the analysts’ narrower target net asset value (NAV) discounts — 0.5 standard deviations (s.d.) tighter than before — reflecting strong Hong Kong development property and high-end retail sales.
“From our recent investor interactions, we sense a split in views: non-local offshore generalist investors appear more constructive on the Hong Kong home price outlook. In contrast, local, mainland and property-fund investors appear more concerned about full valuations,” write Choi and Tso in a Feb 11 research note.
Hong Kong’s developers and landlords now trade at 40% and 46% discounts to NAV and offer 3.4% and 4.4% dividend yields on average, respectively.
See also: As missiles arc across the Middle East, ST Engineering’s share price gains in tandem
“We estimate that Hong Kong developers have priced in 15% to 20% transaction value growth versus our 10% to 15% price forecast for 2026 and 2027. With a strong start to residential sales year to date (1,542 primary units in January), [the] primary volume run rate is in line with our 20,000 units forecast in 2026, and investor optimism seems understandable,” write Choi and Tso.
Further, a market rental yield of 3.5% versus the five-year fixed mortgage rate of 2.7% “theoretically implies 20% potential upside in home prices”, they add.
Rate outlook, stagnant household income key risks That said, the analysts see two main risks. The Hong Kong Monetary Authority (HKMA) has indicated limited room for further prime rate cuts, while banks’ five-year mortgage rate offers expire at the end of April.
See also: Analysts mostly keep ‘buy’ on CDL as it seeks to unlock value via strategic review
If the two rate cuts that bond markets have priced in before the end of 2026 fail to materialise, banks may revert solely to floating-rate mortgage plans.
Meanwhile, Hong Kong’s median household income over 9M2025 remained stagnant, and 2025 saw a y-o-y drop in the number of immigration visas approved. This could ultimately cap further upside in home prices, the analysts add.
Earnings sensitivity to additional home price growth
Choi and Tso have updated their earnings per share (EPS) sensitivity analysis for developers regarding the potential for further rises in home prices.
For every 5% additional increase in home prices (on top of BofA’s base-case assumptions), Choi and Tso estimate there is a 1% boost to developers’ NAV and a 4% to 8% average boost in 2026–2028 EPS.
This is led by Sino Land, whose portfolio spans retail, residential, office, industrial and recreational assets in Hong Kong and mainland China.
Despite Sun Hung Kai Properties (SHKP) being Hong Kong’s largest developer, its earnings sensitivity is not the highest, given its large rental income base, analysts say. SHKP currently holds a 50% stake in Singapore’s ION Orchard.
‘Laggard’ Link REIT among BofA’s picks
BofA has raised its price objectives for the sector by 10% on average. Among developers, Choi and Tso like CK Asset (target price up 8% to HK$53 based on a 46% discount to NAV) and Sino Land (target price up nearly 11% to HK$13.30 on a 22% discount to NAV).
Sino Land’s strong balance sheet should allow it to take advantage of lower competition in the land market, say the analysts.
Among landlords, Choi and Tso favour Swire Properties (target price up 7% to HK$29 on a 30% discount to NAV) and Hang Lung Properties (target price up 10% to HK$11.50 on a 52% discount to NAV) to reflect higher yields and resilient sales momentum for luxury retail in the mainland.
As mentioned above, BofA has raised its target price for CK Hutchison by 16% to HK$72, at a 42% discount to NAV — narrower than the 47% discount previously.
“We believe a narrower target NAV discount is justified given CK Hutchison’s more proactive stance towards unlocking value (e.g. the merger of its three UK mobile operations with Vodafone and its attempt to sell its ports division).”
In addition, Link REIT is BofA’s “non-consensus laggard pick” for longer-term investors, given its widened valuation gap compared to its peers. We think its near-term online retail challenges are well-flagged.”
Choi and Tso also point to Link REIT’s 7% dividend yield, which was dethroned in October 2025 as Asia’s largest REIT by market capitalisation by CapitaLand Integrated Commercial Trust.
The analysts have maintained their HK$43 target price for Link REIT, with an unchanged 48.3% discount to NAV.
