Hong Kong developers surge on Lam's northern metropolis plans

[HONG KONG] Hong Kong Chief Executive Carrie Lam's plans for a new metropolis in northern Hong Kong came as a big relief to investors in the city's property giants.

Shares of major developers including Henderson Land Development jumped a day after Ms Lam unveiled her target to turn the remote northern part of the New Territories into an urban area for 2.5 million residents.

Investors are betting that the move - aimed at alleviating Hong Kong's housing crisis - will benefit developers who hold large tracts of land in the area. They are also cheered by the absence from her address of any measures to cool the property market, such as higher taxes.

That lifts a cloud following speculation that China's government may put more pressure on the real estate tycoons to solve the city's housing woes.

"Developers that now have the most agricultural land on hand will benefit the most under this policy address," said Philip Tse, director and head of Hong Kong and China property research at Bocom International Holdings. "The market is reacting on both: policy overhang pressure is lower and there's potential for more business for them."

The Hang Seng Properties Index rose 2.1 per cent as at 1.38 pm on Thursday, paring this year's decline to about 5 per cent.

Henderson Land jumped 6.2 per cent, the most in two years. Sun Hung Kai Properties and New World Development climbed more than 3 per cent, and CK Asset Holdings rose 2.5 per cent.

The project can create value for builders that have more land holdings in the area, when they develop it into homes or sell it to the government, according to analyst Kenny Ng.

"The market initially was worried that housing supply would drastically rise in the short term after the policy address, but the policies turned out to be relatively gentle," said Mr Ng, a securities strategist at Everbright Sun Hung Kai Ltd. "This alleviated the market's concerns, thus benefiting shares of property developers."

Real estate firms will also be cushioned by the likelihood that the plan will not tame Hong Kong's sky-high home prices for now. "It isn't something that can happen instantly," said Patrick Wong, a property analyst with Bloomberg Intelligence. He estimates Hong Kong's home values will rise between 5 per cent and 10 per cent this year.

BLOOMBERG