Hong Kong Property and Conglomerates Results Preview: An Earnings Upcycle May Be Starting

Overview

This report is JPMorgan's results preview for covered Hong Kong property and conglomerate companies, covering earnings, dividends, and key operating indicators for 1H26, FY26, and 1HFY27. The report believes the sector is near or has entered an upswing after the earnings trough, mainly driven by improving Hong Kong development property margins, gradually stabilizing rental income, lower financing costs, and disposal gains at some companies. In the short term, share prices will still be significantly influenced by the interest-rate narrative, but fundamentals are beginning to shift from a downcycle to recovery.

Core views

The core views include: first, after 2-3 years of earnings decline, sector earnings are expected to resume growth from 2026; second, landlords offer greater certainty than developers in the current environment, especially companies with Central office exposure, high-quality retail assets, and capital recycling capability; third, dividend certainty is an important investment clue, and except for New World Development, which is expected to pay no dividend, most companies are expected to at least maintain flat DPS; fourth, developers' share prices depend more on residential price momentum, primary project sell-through, and sales volume, while landlords depend more on retail sales, office rents, and capital recycling; fifth, Mainland China office remains a drag, but Hong Kong landlords generally have limited exposure.

Analysis framework

The report combines top-down sub-sector cycle assessment with bottom-up company results previews. At the macro and industry level, it focuses on interest rates, Hong Kong residential prices, retail sales, office rents, vacancy rates, and capital flows; at the company level, it breaks down development property profit, investment property rent, financing costs, asset disposal gains, dividend policy, and capital allocation. The report also lists company-specific watch points for the upcoming results one by one.

Methodology notes

• Industry cycle analysisEarnings upcycle assessment

  Earnings cycle turning from down to up

  It assesses whether the sector is emerging from an earnings downcycle through YoY core net profit growth, development property margins, rental income, and changes in financing costs.

• Sub-sector comparisonMomentum ranking

  Ranking sub-sectors by price and rental growth momentum

  The report ranks 2H26 sub-sector momentum as Hong Kong Central office, Hong Kong residential, Mainland China retail, Hong Kong discretionary retail, Hong Kong staples retail, non-Central Hong Kong office, and Mainland China office.

• Dividend analysisDPS certainty assessment

  Stability and growth visibility of dividends per share

  It judges whether each company's dividend can be maintained or increased through earnings growth, payout ratio, balance sheet, disposal gains, and management commitment.

• Company selection frameworkLow rate sensitivity and capital recycling screen

  Preference for companies with low rate sensitivity, earnings recovery, and proactive capital recycling

  The report emphasizes that stock selection should focus on interest-rate sensitivity, earnings recovery over the next 2-3 years, capital recycling capability, and improving operating data of core assets.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Link REIT (823.HK)

  One of the top landlord picks

  Strengths

  Cost savings, buybacks, and stabilization in Hong Kong staples retail support stable DPU; tenant sales are expected to turn positive in 1QFY27.

  Weaknesses

  The Hong Kong retail portfolio still faces negative rental reversions.

  Comparison

  Offers higher cash flow and dividend certainty than developers.

  Risks

  Weak Hong Kong tenant sales, rental guidance below expectations, or weaker-than-expected execution of disposals or new CEO strategy.

• Hongkong Land (HKL SP)

  One of the top landlord picks

  Strengths

  Scarcity of Central office assets, lower financing costs, commitment to mid-single-digit dividend growth, and capital recycling potential.

  Weaknesses

  Hong Kong office rents are still in a negative reversion phase, and development property has been redefined as a non-strategic business.

  Comparison

  Provides strong leverage to a Central office recovery with high dividend certainty.

  Risks

  Office rent recovery slower than expected, or execution risks around capital recycling or potential acquisitions.

• Swire Properties (1972.HK)

  One of the top landlord picks

  Strengths

  Recognition of Hong Kong development properties drives core net profit growth, while Mainland China retail and Hong Kong retail offset part of the office pressure.

  Weaknesses

  Negative rental reversions in Hong Kong office and lower rental EBIT after the Miami asset disposal.

  Comparison

  Has more stable rental cash flow than pure developers.

  Risks

  Mainland China tenant sales, Hong Kong office rent recovery, and capital recycling plans falling short of expectations.

• Sun Hung Kai Properties (16.HK)

  Top developer pick

  Strengths

  One of the best proxies for the Hong Kong residential market, with both FY26 earnings and DPS expected to grow 5% YoY, and development property margins improving in 2H.

  Weaknesses

  Margins on some projects were very low in 1H, and contribution from high-margin Mainland China projects being recognized is declining.

  Comparison

  Among developers, it has stronger fundamentals and dividend quality.

  Risks

  Changes in Hong Kong residential prices, sell-through, margins, and dividend policy.

• CK Hutchison (1.HK)

  Top conglomerate pick

  Strengths

  Underlying profit excluding UKPN disposal gain is still expected to grow 11%, with solid contributions from retail, ports, and Cenovus Energy; DPS is expected to grow 5%.

  Weaknesses

  Telecom and infrastructure contributions are affected by disposals; DPS growth may not fully track EPS growth.

  Comparison

  More diversified than property developers, with more capital recycling options.

  Risks

  Uncertainty around port disposals, telecom or AS Watsons listing, special dividends, and capital allocation.

• Jardine Matheson (JM SP)

  Top conglomerate pick

  Strengths

  Growth at DFI Retail, HKL, and Jardine Pacific plus lower financing costs support core profit growth, with a commitment to 5% full-year DPS growth.

  Weaknesses

  Lower contribution from Astra is a drag.

  Comparison

  Has diversified businesses and capital allocation themes.

  Risks

  Full-year earnings and dividend guidance, Indonesia strategy, I-Med progress, and capital recycling execution.

• CK Asset (1113.HK)

  Overweight-covered name

  Strengths

  Disposal gains drive strong reported earnings growth, while a net cash position and potential special dividend provide support.

  Weaknesses

  Core net profit is expected to decline excluding disposal gains, and Hong Kong development property margins are low.

  Comparison

  Prioritizes defensiveness over growth.

  Risks

  Special dividend below expectations, Hong Kong residential pricing, capital allocation, and timing of asset disposals.

• New World Development (17.HK)

  Neutral-covered name

  Strengths

  Underlying losses are expected to narrow, helped by recognition of high-margin Hong Kong development properties and lower HIBOR.

  Weaknesses

  It is still expected to record a net loss and pay no dividend, with liquidity pressure remaining.

  Comparison

  Compared with other developers, balance sheet and liquidity risks are more prominent.

  Risks

  Further impairments, deleveraging progress, uncertainty over rights issue or family support, and progress at 11 SKIES.

Key data

• Sector earnings forecastAbout 9% YoY growthThe report expects the upcoming results to kick off a multi-year earnings upcycle.
• Sector DPS forecastAbout 2-3% YoY growthExcept for New World Development, which is expected to pay no dividend, most companies are expected to at least maintain flat DPS.
• Hong Kong Central office spot rentUp 9% from the 3Q25 lowThe report expects mid-single-digit percentage growth to continue in 2H26.
• Central office vacancy rate8.8%Improving vacancy supports rent recovery.
• Hong Kong residential prices YTDUp 11%This has already reached the report's FY26 full-year target range of 10-15%.
• Hong Kong discretionary retail sales YTDUp 17% YoYBut still 20-30% below 2015-2018 levels.
• Mainland China tier-1 city office rents YTDDown 4%The report expects another mid-single-digit percentage decline in 2H26.
• CK Hutchison underlying profit forecastUp 11% YoY to HK$12.6bn excluding UKPN disposal gainSupported by contributions from ports, retail, and Cenovus Energy.
• Sun Hung Kai Properties FY26 earnings forecastUp 5% YoY to HK$23bnMore development property completions and a recovery in Hong Kong development property margins are the main drivers.
• Link REIT interim DPU forecastFlat at HK$1.27Negative rental reversions are offset by lower expenses, financing costs, and unit count from buybacks.

Impact & implications

The investment implication is that the key trading theme for Hong Kong property and conglomerates is shifting from pure interest-rate sensitivity toward confirmation of an earnings bottom, dividend visibility, and execution of asset recycling. In the short term, the focus should be on high-quality landlords and developers with solid balance sheets; if rate expectations turn dovish and the Hong Kong stock market continues to recover, driving better residential transactions, developers' upside could increase. Conversely, if capital outflow controls, rising rates, or weaker retail tourism momentum emerge, the pace of sector recovery may slow.

Risks

• A renewed hawkish interest-rate narrative could raise financing costs and valuation pressure.
• Uncertainty around capital outflow controls has not been fully removed and may suppress residential transactions and investor risk appetite.
• Hong Kong residential price momentum may slow after strong gains in 1H26, and lower-than-expected sell-through would drag on developer earnings.
• A slower recovery in Hong Kong retail tourism could affect tenant sales and rent recovery.
• High vacancy rates and falling rents in non-Central Hong Kong offices and Mainland China offices will continue to weigh on rental income.
• Asset disposals, capital recycling, or buyback execution may fall short of expectations.
• Highly leveraged companies such as New World Development may face further impairments, financing, or liquidity pressure.

What to watch

• Results for 1H26, FY26, and 1HFY27 to be announced progressively from July to November.
• Whether each company's DPS is at least flat, and whether dividend growth is delivered for SHKP, HKL, CKH, JM, Swire Properties, and Wharf REIC.
• Hong Kong residential price momentum, primary project sell-through, and secondary transaction volume.
• Whether Central office spot rents, vacancy rates, and negative rental reversions stabilize in FY27.
• Hong Kong retail sales, tourist arrival growth, and tenant sales trends.
• Tenant sales in Mainland China premium retail and the extent of rent declines in Mainland China offices.
• Capital recycling, disposals, and buyback progress at HKL, Swire Properties, Link REIT, JM, CKH, and Wharf REIC.
• New World Development's deleveraging, asset disposals, potential financing support, and impairment risk at 11 SKIES.