Zhi Tong Cai Jing·2025-09-24 03:42Group 1 - UBS downgraded the investment rating of Hongkong Electric Holdings (02638) from "Buy" to "Neutral" while maintaining the target price at HKD 6, citing a year-to-date stock price increase of 20%, outperforming Hong Kong utility stocks by approximately 16 percentage points, indicating that the current price reflects its defensive nature [1] - The firm anticipates that as the US enters a rate-cutting cycle, the yield on the US 10-year Treasury is expected to decline from the current 4.1% to 3.8% by the end of 2025 and to 3.4% by the end of 2026, which may lead to a recovery in risk appetite and a shift of funds towards growth stocks, diminishing the appeal of defensive stocks like Hongkong Electric [1] - Currently, Hongkong Electric's forward dividend yield stands at 5.3%, with a premium of 115 basis points over the US 10-year Treasury yield, which is more than one standard deviation below the historical average; the premium over the industry average is only 11 basis points, also below the historical average of 89 basis points, with profit forecasts for 2025 to 2027 aligning with market expectations [1] Group 2 - In comparison, Cheung Kong Infrastructure Holdings (01038) presents a more attractive valuation, with regulatory adjustments in the UK and Australia, as well as potential mergers and acquisitions, offering additional growth opportunities [1]