Carrie Lam has officially gotten the green light from mainland China to become the Chief Executive of Hong Kong.
As Lam looks to fill out her cabinet, analysts are reviewing her platform to define and clarify her impact on markets. From housing to equities, Lam will be instrumental in guiding Hong Kong over the next five years.
On the real estate front, part of her strategy will be to increase the supply of available land and execute her “starter home” strategy. Lam’s starter homes will target those families who don’t qualify for public housing, but can’t afford a housing unit at current market prices. Relief like this is much needed for citizens, as real estate prices have rallied back from the late 2015 / early 2016 slight pullback levels. Prices don’t seem to have any intention of moving backward. According to the Centa-City Leading real estate data, secondary private residential property prices in Hong Kong just hit a new all time high. Also on the agenda is increasing available supply to develop. According to CNBC, the HK government plans to release, “28 plots of land for private housing in 2017-18…almost 19,000 flats.”.
On the other side of the market, stocks are expected to move higher under the guidance of Lam. As such, Citi recently upped their Hang Seng Index price target. The firm expects stocks to move up to 25,500…the index currently stands at 24,111. The 5.7% upside derives from a number of themes, from tax cuts to suggesting a 12.5x multiple on EPS, and rising interest rates in the USA (from which the HKMA takes their monetary cue from). Valuation wise, according to Yardeni Research, “Emerging Markets” are currently trading at a 12.2x forward P/E vs. the “All Country World” at 16x.
In any case, Chief Executive-Elect Lam will look to build upon a number of key themes…Hong Kong’s economic freedom, preserving and growing its financial sector dominance, and making housing more affordable.