HK Property: Modest rate hike unlikely to derail upcycle; US rate hike fears: stagflation or reflation?

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HK Property: Modest rate hike unlikely to derail upcycle; US rate hike fears: stagflation or reflation?

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HK Property

Modest rate hike unlikely to derail upcycle;

US rate hike fears: stagflation or reflation?

Price Objective Change

A mild 25bp US rate hike unlikely to derail prop upcycle 18 May 2026

HK property stocks underperformed the broader market on 18 May amid renewed rate Equity

hike concerns, with the 10Y UST yield rising to 4.6%. Markets currently price in one US Hong Kong

hike in late‑2026/early‑2027 (vs. BofA economists expecting stable Fed Funds in 2026). Real Estate/Property

We believe a modest 25bp hike alone is unlikely to derail HK’s residential upcycle, Karl Choi, CFA >>

though sentiment—especially among leveraged investors and multi‑unit buyers—may Research Analyst

soften. The key uncertainty is the macro backdrop for any rate hike: stagflation vs. Merrill+852 3508Lynch3108(Hong Kong)

reflation (see US Economic Weekly report). Historical data (Exhibits 1–3) suggest CCL karl.choi@bofa.com

and SHKP share prices correlate more with economic conditions than interest rates Fan Tso, CFA >>

Research Analyst

alone. For landlords, higher rates have a more indirect impact via tenants’ business Merrill Lynch (Hong Kong)

performance and rental demand. For example, a stronger USD could also weigh on +852 3508 2875

fan.tso@bofa.com

high‑end HK retail sales, but RMB has already appreciated .2.7% YTD.

Prefer quality names amid uncertainty, Wharf PO to

HK$28.50

Given the sector’s strong YTD performance, we favor balance sheet strength and CCL = Centa-City Leading Index

above‑average yields (CKA, Sino, Swire Prop). We also see value in laggard WREIC, (tracks HK secondary home prices)

supported by strong 1Q tenant sales and likely solid 1H results.