Midday Update: HSI Ends at 25,818, Gaining 44 Points; HSTI Reaches 5,499, Up 10 Points; SMIC Rises Over 3%; CKI Holdings, Power Assets, HSBC Holdings, CLP Holdings, and Global New Material Achieve New Highs

The analyst rating from the article is influenced by several key factors: 1. Market Performance: Hong Kong utilities have outperformed the broader market index, with returns of 6-8% compared to a 3% drop in the HSI, indicating strong defensiveness against market volatility. 2. Stable Cash Flows: Existing businesses in the sector are delivering stable cash flows, which is a positive fundamental indicator. 3. Potential Catalysts: There are company-specific catalysts that could enhance performance, such as CKI Holdings' M&A activities and CLP Holdings' asset restructuring. 4. Free Cash Flow (FCF): CKI is favored for its potential for better shareholder returns driven by solid FCF and the potential for value-accretive M&As. CLP is also preferred for its ample FCF, which supports shareholder returns. 5. Defensiveness: HKElectric is noted for its strong defensiveness due to its focus on the Hong Kong electricity market, although its tight FCF limits the likelihood of a near-term dividend hike. 6. Caution on Certain Stocks: The broker maintained a Hold rating for POWER ASSETS and HKCG due to their FCF crunch, which may restrict shareholder return growth. Overall, the ratings reflect a preference for companies with strong cash flows and potential for growth, while being cautious about those facing financial constraints.

The analyst rating from Citi is based on the recent announcement of tariff cuts by CLP Power and HKELECTRIC-SS, which are attributed to decreased fuel surcharges due to lower coal and liquefied natural gas prices. Citi views these tariff cuts as neutral events since the fuel costs are fully passed on to customers and do not impact profitability. Consequently, they maintained a Buy rating on CLP HOLDINGS with a target price of HKD76, while assigning a Neutral rating to HKELECTRIC-SS with a target price of HKD6.6.

The analyst rating for CLP Holdings remains a "Buy" due to several key factors highlighted in the HSBC Global Research report. The company's 3Q25 operational data met expectations, demonstrating resilience and stability across its regional operations. Additionally, CLP's decision to exit coal-fired generation in India reinforces its commitment to green energy. The report also notes that CLP's stable operations support the Buy thesis, and there is an expectation for an increase in the full-year dividend per share (DPS) to be distributed in early 2026. Furthermore, CLP is positioned as a top pick in Hong Kong's utilities sector, with anticipated growth momentum from the region's long-term strategic development and the ability to provide stable and sustainable dividends backed by ample free cash flow (FCF).

UBS downgraded CLP HOLDINGS from Buy to Neutral and trimmed its target price from $74 to $70 due to pressure from adverse overseas factors impacting the company's short-term fundamentals. While the Hong Kong operations remained strong, the 1H25 results indicated earnings pressure from Australia and mainland China. This poor performance in overseas operations is expected to limit earnings growth for FY2025 and result in flat dividend per share (DPS) for 2025, contrary to the previous forecast of a 3% increase. However, UBS maintains a positive long-term outlook, projecting an average annual dividend growth of 3% from 2026 to 2029, anticipating a return to stable growth as non-local operations stabilize.