Which Hong Kong property-related stocks hold up better when the Hang Seng Index falls?

  • The Hang Seng Index fell 5% last week. JPMorgan reviewed seven major corrections since 2021: the index fell an average of 23%, Hong Kong conglomerates fell an average of 8%, and Hong Kong developers fell an average of 15%; the last figure excludes New World Development.
  • Hong Kong rental-property stocks fell an average of 19%, slightly outperforming the Hang Seng Index overall, but underperformed it in three of the seven corrections, showing an inconsistent defensive performance.
  • Companies that held up relatively well typically had strong balance sheets, non-cyclical businesses or diversified operations. For example, Sino Land held net cash, Link REIT focused on essential-goods retail, and CK Hutchison had diversified operations. Swire Pacific A rose an average of 1% across the seven corrections, while the Hang Seng Index fell an average of 23% over the same periods.
  • Companies with higher leverage or greater exposure to discretionary retail generally performed more weakly. For example, Hang Lung Properties and Wharf Real Estate Investment fell an average of 28% and 26%, respectively, across the seven corrections.

Why have large mainland property companies owned by the central government held up relatively well in the recent sell-off?

  • From 21 October to the 22th, the Hang Seng Index and the MSCI China Index fell 3.9% and 4.5%, respectively, while China Overseas Land & Investment and China Resources Land fell 2.9% and 3.2%, respectively, slightly smaller declines.
  • JPMorgan believes the main reason may be a rotation of capital from AI and technology stocks into non-AI sectors. The bank believes positioning in bank stocks may already be crowded, and some capital therefore flowed into other sectors, including property.
  • The bank has not seen rumors of new property support policies and points to divergence within the sector as evidence: over the same period, some distressed developers and smaller state-owned enterprises, including Sunac, Shimao, China Jinmao and Greentown, fell more than 7%.

What does the giant LV trunk at LANDMARK mean?

  • A giant trunk-shaped structure has appeared outside Louis Vuitton’s flagship store at LANDMARK in Central, Hong Kong; it is actually renovation hoarding. The brand has also set up a pop-up store in the mall’s atrium and is holding an underground exhibition.
  • This is part of Hongkong Land’s “Tomorrow’s CENTRAL” renovation announced in 2024. Total investment in the project is 1 billion US dollars, with Hongkong Land contributing 400 million US dollars and tenants contributing 600 million US dollars; almost all major brands will renovate their stores.
  • Under the project plan, by 2028 the entire LANDMARK development will have 10 flagship boutiques and 20 Michelin-starred restaurants.

How will the renovation affect the assessment of Hongkong Land’s operations?

  • Even as construction continued, LANDMARK tenants’ sales rose 11% year on year in the first half of 2026. JPMorgan expects the project to have the potential to gain further market share as more stores reopen.
  • Full completion of the renovation may take about another two years: Van Cleef & Arpels has reopened its renovated store, while Cartier and Tiffany are still renovating. The timing of tenant reopenings is therefore an important condition for gaining market share.
  • Hongkong Land remains one of JPMorgan’s top picks. In addition to retail performance, the bank is optimistic about Central’s office market: office rents in Central rose 5% quarter on quarter in the third quarter of 2026, rebounding 14% from their third-quarter 2025 low; the bank rates Hongkong Land overweight.