<JPM's Perspective> Despite Surprise Over HK's Luxury Home Stamp Duty Increase for Properties Over $100M, Firm Views It as a Positive Redistributive Fiscal Measure

Market Performance: The Hang Seng Index (HSI) rose by 249 points (0.9%) to close at 26,630, with a total market turnover of HKD288.42 billion. The HSCEI and HSTECH also saw gains, closing at 8,859 and 5,137 respectively.

Property Sector Highlights: SHK PPT reported a nearly 17% increase in interim underlying profit, leading to a 7.1% rise in its stock price. Other property developers like New World Dev and CK Asset also experienced stock price increases.

MSCI Index Changes: Changes to the MSCI China Index constituents were noted, with stocks like HESAI-W and SENSETIME-W seeing significant gains of 4.4% and 4.9%, while PONY-W and YOFC surged over 10%.

Tech Sector Updates: In the tech sector, BIDU-SW reported a 42% YoY decline in non-GAAP net profit but slightly exceeded market expectations, leading to a minor stock rebound. Other tech stocks like Tencent and Netease also saw modest increases, while Alibaba and Kuaishou experienced slight declines.

JPMorgan's Reaction to Stamp Duty Increase: JPMorgan expressed surprise at the increase in stamp duty rates for properties over $100 million in the 2026-27 Budget, noting it would only impact 0.3% of transactions.

Impact on Ultra-Rich Homebuyers: The additional 2.25% cost is seen as negligible for ultra-rich buyers, as a slight increase in home prices could easily offset this expense.

Policy Intent: The stamp duty hike is intended as a redistributive fiscal policy, aimed at taxing the ultra-rich to provide subsidies for lower-income groups rather than suppressing the property market.

Stock Recommendations: JPMorgan's top stock picks among developers include SHK PPT, HENDERSON LAND, and SINO LAND, while also mentioning HANG LUNG PPT and SWIRE PROPERTIES among landlords.

Hong Kong Budget Overview: The Hong Kong government did not announce major stimulus measures for the residential market in the Budget, which has shown signs of recovery since mid-2025, leading to a more positive outlook.

Fiscal Surplus Projection: Due to strong capital market activities and economic recovery, the fiscal surplus for FY2025/26 is now projected at HKD2.9 billion, aided by higher-than-expected stamp duty and corporate tax revenues.

Market Sentiment and Developer Profitability: Despite the lack of stimulus, Goldman Sachs believes that improved economic conditions, favorable immigration policies, and low land sale prices will enhance market sentiment and profitability for developers.

Stock Recommendations: Goldman Sachs has upgraded its home price growth forecast for 2026 to 12% and issued Buy ratings for SHK PPT, HENDERSON LAND, and SINO LAND, reflecting optimism in the Hong Kong residential market.

HSBC's Outlook on Hong Kong Property Market: HSBC Global Research predicts a continued supportive policy stance for Hong Kong's real estate market, highlighting potential opportunities in REITs and favoring homebuilders like SHK PPT, Henderson Land, and Sino Land.

Impact of Stamp Duty Increase: Following the government's increase in stamp duty on luxury residential properties, some developers experienced a stock price drop of about 2%, but this correction is viewed as healthy amid a strong year-to-date uptrend in the sector.

Limited Market Impact: The stamp duty hike is expected to have a minimal effect on the overall market, accounting for only 0.3% of total trading volume, with the government's intention likely focused on increasing fiscal revenue rather than suppressing the housing market.

Positive Long-term Perspective: HSBC believes that the government's housing policy remains supportive, especially in light of the broader land and housing strategy outlined in the 2026-27 Budget.

Stamp Duty Increase: The Hong Kong government has raised the stamp duty rate for residential properties over $100 million to 6.5%, which is expected to negatively impact WHARF HOLDINGS and other companies exposed to high-value property risks.

Market Impact: Morgan Stanley predicts that properties over $100 million will represent 0.3% of total trading volume but 8% of total transaction amounts by 2025, with a constructive outlook on home prices increasing by 10% this year.

REITs Developments: The government plans to include REITs in mutual-market access and amend regulations to facilitate their privatization or restructuring, potentially exempting stamp duty on non-residential property transfers, which is favorable for LINK REIT.

Earnings Outlook: Despite a positive view on home price recovery, the upcoming earnings season may introduce volatility due to lower profit margins and a weak earnings outlook for 2026, following significant share price increases of 20-50% year-to-date.

Market Performance: The Hang Seng Index (HSI) fell by 491 points (1.8%) to close at 26,590, with significant declines also seen in the HSTI and HSCEI, which dropped 114 points (2.1%) and 189 points (2.1%) respectively, amid a market turnover of $250.99 billion.

Active Heavyweights: Major stocks like Meituan, Ping An, Tencent, Alibaba, and Xiaomi experienced notable declines, with Meituan down 4.2% and Tencent down 3.3%, reflecting a trend of short selling across these companies.

Constituents on the Move: Several constituents saw significant price changes, including Sino Biopharma and Hansoh Pharma, which dropped 6.6% and 6.4% respectively, while WH Group rose by 4.4%, reaching a new high.

Other Notable Stocks: Stocks such as MIRXES-B and CTG Duty-Free faced substantial losses, with MIRXES-B down 21.7%, while KB Laminates and CNBM saw gains of 12.4% and 10.5%, respectively, also hitting new highs.