Why has the rebound in retail sales not changed the cautious outlook?

  • China’s total retail sales of consumer goods rose 1.1% year on year in September 2026, faster than the 0.4% recorded in August and above the market consensus of 0.5%. But HSBC expects retail sales to remain under pressure in the fourth quarter unless there is significant policy support.
  • HSBC believes that if reforms to the presale system improve home price expectations, they could boost consumption through a wealth effect. However, the bank’s global consumer team sees no clear timeline or evidence for a recovery in Chinese luxury consumption.

Which malls can outperform amid weak consumption?

  • A CBRE expert interviewed said that despite sluggish consumption growth and intensifying competition, well-located and well-managed malls continue to perform better. Projects lacking scale or a clear positioning struggle to sustain rental growth, particularly those with a high proportion of food and beverage, family services and education tenants.
  • Stock market volatility has weakened the wealth effect, making luxury consumers more cautious; meanwhile, spending on experiences such as travel and live entertainment remains resilient. The expert therefore favours outlet malls with a distinctive appeal and regional malls with strong community engagement.
  • A Blackstone expert interviewed also observed stronger performance among leading malls and robust sales by affordable luxury brands: Tapestry, Coach’s parent company, grew its Greater China revenue by 35% in fiscal 2026.

Why do commercial REITs still face issuance obstacles?

  • Blackstone believes that the issuance of commercial REITs under the China Securities Regulatory Commission framework has significantly improved the liquidity of commercial properties, but market expansion is constrained by misalignment between regulatory objectives and the demands of original asset owners.
  • Regulators want attractive issuance valuations to support sustained performance after listing and therefore impose stricter issuance requirements; original asset owners are unwilling to accept conservative valuations that may be below the book value of their assets.

Why does HSBC prefer China Resources Land?

  • Year-on-year growth in China Resources Land’s monthly rental income has slowed since July 2026 but remains at 6%–8%. HSBC values the resilience of its rental income, its visible pipeline of assets for C-REIT spin-offs, and its potential to distribute asset revaluation gains. The bank maintains its Buy rating and HK$38.30 target price.
  • China Resources Mixc Lifestyle Services’ year-to-date same-store sales growth has slowed to single digits from 10% in the first half of 2026. HSBC believes its valuation is more sensitive to retail sales trends and maintains its Hold rating and HK$44.00 target price; the bank also notes the risks of a retail slowdown and narrowing margins.