Industry Investment Rating - The industry investment rating is "Outperform the Market" [1] Core Viewpoints - Recent policy adjustments in Beijing, such as the removal of purchase limits for eligible families outside the Fifth Ring Road, are expected to lead to a temporary increase in transaction volumes, further stabilizing the market [1] - The cumulative new housing transaction area in 30 major cities has reached 54.92 million square meters this year, with a year-on-year decrease of 4.2% [2][11] - The average transaction area for new homes in first-tier cities has decreased by 23.2% year-on-year, while second-tier cities have seen a 10.4% decline [2][11] Summary by Sections 1. Industry Fundamentals Tracking - New housing transaction area in 30 major cities last week was 1.22 million square meters, with a cumulative area of 54.92 million square meters this year, down 4.2% year-on-year [2][11] - The average transaction area for new homes in first-tier cities was 0.41 million square meters, down 23.2% year-on-year, while second-tier cities recorded 0.69 million square meters, down 10.4% [2][11] - The available residential area in 14 cities was 79.96 million square meters, down 9.93% year-on-year, with a de-stocking cycle of 17.37 months [14] 2. Market Review - The A-share real estate index rose by 2.16% last week, outperforming the CSI 300 index by 0.93 percentage points [4][27] - The Hong Kong property service and management index also increased by 2.16%, outperforming the Hang Seng Composite Index [4][27] - In the A-share market, real estate ranked 16th among 31 first-level industries last week [28]

Core Viewpoint - The Hong Kong Cheng family, facing a debt crisis, is negotiating a $2.5 billion financing deal with Blackstone Group, which may involve preferred/common stock investments or a joint privatization [1][4]. Group 1: Financial Situation of New World Development - New World Development announced a delay in interest payments on four perpetual bonds issued by its subsidiary, amounting to $3.4 billion [3][4]. - This marks the first debt issue for New World Development since its listing, which could lead to increased debt rates and affect refinancing negotiations with banks [4][10]. - The company's net debt ratio has risen from below 30% to around 50%, with losses and asset impairments expected in 2024 [10]. Group 2: Historical Context and Strategic Decisions - The Cheng family's strategic missteps, including aggressive expansion and misjudgment of market trends, have led to significant financial challenges [9][10]. - The transition of leadership from Cheng Yu-tung to his son Cheng Ka-shun in 2011 marked a shift in strategy, but subsequent decisions have not aligned well with market realities [6][9]. - The family's reliance on a heavy asset model, particularly in the K11 shopping mall expansion, has resulted in long payback periods and cash flow issues [9][10]. Group 3: Blackstone Group's Interest and Market Position - Blackstone Group has a history of involvement with the Cheng family, having previously sold a significant stake in a shopping center to New World Development [6][19]. - The firm has shown a keen interest in the Asia-Pacific real estate market, with a record $1.2 trillion in assets under management as of Q2 2025, and a total investment of $145 billion in the past year [14][16]. - Blackstone's investment strategy includes acquiring mature assets and optimizing operations to enhance value, as demonstrated by its successful investments in Japan and other markets [16][19].

Market Overview - The central bank conducted a 7-day reverse repurchase operation of 122 billion yuan at a fixed rate of 1.40% on August 8, with a net withdrawal of 4 billion yuan for the day and a total weekly net withdrawal of 536.5 billion yuan [2] - A total of 1,126.7 billion yuan in reverse repos will mature from August 11 to 15 [2] - The central bank also executed a 700 billion yuan reverse repurchase operation, with the overnight repo weighted average rate slightly decreasing to 1.31% [4] Interbank Certificates of Deposit - The latest transaction rate for one-year interbank certificates of deposit among major banks is at 1.62%, showing a slight decrease from the previous day [7] Government Bonds - The closing prices for government bond futures showed mixed results, with the 10-year contract rising by 0.03% and the 30-year contract falling by 0.02% [13] Regulatory Developments - The China Securities Regulatory Commission (CSRC) is committed to deepening capital market reforms, focusing on nurturing long-term capital and enhancing the policy framework to support long-term investments [14] - The State Administration of Foreign Exchange reported a current account surplus of 971.5 billion yuan in Q2 2025, with a goods trade surplus of 1,575.1 billion yuan [15] Global Macro Events - U.S. President Trump nominated his chief economic advisor Stephen Miran to the Federal Reserve Board, marking a significant step towards reshaping the Fed [17] - Brazil's President Lula stated he would not negotiate with the U.S. regarding increased tariffs on Brazilian goods, focusing instead on domestic measures [17] - Japan urged the U.S. to amend its tariff policies during ongoing trade discussions [17] Bond Market News - The Hainan Provincial State-owned Assets Supervision and Administration Commission aims to exit all financing platforms this year [18] - New World Development is reportedly in talks with Blackstone and CapitaLand to sell assets to improve liquidity [18]

Market Overview - The debt-driven sell-off trend in the commercial real estate market is expected to continue, but merely lowering prices will not resolve the core issues [2] - The vacancy rate for Grade A office buildings remains high and shows signs of increasing differentiation, with first-tier cities experiencing overall vacancy rates between 16.9% and 27.8% [2] - Beijing has the lowest vacancy rate among first-tier cities at 16.9%, down from 18.3% at the end of 2024, indicating a potential for further decline in vacancy rates due to no new supply entering the market [2] Demand Dynamics - In Q2 2025, the TMT sector accounted for 55.2% of the leasing transaction area in Beijing's Grade A office market, driven by significant new leases from AI and telecommunications companies [3] - The TMT sector also leads leasing demand in Shanghai, Guangzhou, and Shenzhen, with respective shares of 22.7%, 37.4%, and 18.7% [3] - Other notable sectors include professional services and finance, which are also significant contributors to leasing demand in these cities [3] Asset Transactions - New World Development is reportedly selling part of the K11 office building in Shanghai, with a listing price of 2.85 billion yuan for approximately 81,000 square meters, although the company has denied these claims [4][5] - The company is focusing on asset disposals as a strategy to optimize its capital structure and alleviate liquidity pressures, planning to sell several landmark assets in mainland China [5][6] - Recent asset transactions indicate a decline in both the number of transactions and total transaction value, with only two commercial asset transactions totaling 816 million yuan during the reporting period [7] Transaction Case Studies - The largest transaction during the period was the acquisition of the Taihe Shanghai Headquarters building for approximately 660 million yuan, with a unit price of about 36,100 yuan per square meter [8] - The market is witnessing a trend of judicial auctions and debt-related transactions, with many assets being sold at significant discounts due to ongoing liquidity crises among real estate companies [8][9] - The current market mismatch is characterized by an oversupply of assets and a scarcity of quality assets, with investors favoring clear-title, well-operated properties in core urban areas [9]

Core Viewpoint - New World Development is facing financial difficulties and is reportedly in talks with Blackstone Group for a potential financing agreement, which may involve a privatization offer, although the company has denied these rumors [1][2][4]. Group 1: Financial Situation - New World Development's total debt exceeds HKD 151 billion, with short-term debt over HKD 32 billion and a net debt ratio of 57.5%, up from less than 30% in the fiscal year 2018 [10]. - The company reported a shareholder loss of approximately HKD 19.68 billion for the fiscal year 2024 and over HKD 6.6 billion for the mid-term of fiscal year 2025 [11]. Group 2: Asset Management and Financing - New World Development is seeking to improve liquidity by disposing of assets and refinancing, having signed a new refinancing agreement involving HKD 88.2 billion of existing unsecured offshore debt [12]. - The new agreement extends some debt maturities to 2028 and requires core assets as collateral [13]. - The company has accelerated the sale of its real estate projects in mainland China, including landmark buildings in Hangzhou, Shenzhen, and Shanghai, as part of the refinancing strategy [13]. - In 2024, New World sold its entire interest in Tsuen Wan's Citywalk mall and parking lot for HKD 4.02 billion to raise cash [14]. Group 3: Market Reaction - Following the denial of privatization rumors, New World Development's stock experienced significant fluctuations, with a rise of over 20% on August 7 and approximately 10% on August 8 [8].

Core Viewpoint - New World Development is facing financial difficulties and has been rumored to be in talks with Blackstone Group regarding a potential financing agreement, which may include a privatization offer, although the company has denied these claims [2][4][5]. Group 1: Financial Situation - As of the end of 2024, New World Development's total debt exceeds HKD 151 billion, with short-term debt over HKD 32 billion; the net debt ratio has reached 57.5%, compared to less than 30% in the fiscal year 2018 [11]. - The company reported a shareholder loss of approximately HKD 19.68 billion for the fiscal year 2024 and over HKD 6.6 billion for the mid-fiscal year 2025 [11]. Group 2: Asset Management and Financing - New World Development is seeking to alleviate liquidity issues through asset sales and refinancing; a new refinancing agreement was signed with bank creditors involving HKD 88.2 billion of existing unsecured offshore debt [12]. - The new agreement extends some debt maturities to 2028 and requires core assets as collateral; the company is accelerating the sale of its real estate projects in mainland China [13]. - In 2024, New World sold its entire interest in Tsuen Wan's Joy City Mall and parking lot for HKD 4.02 billion to raise cash [13]. Group 3: Market Reaction - Following the privatization rumors, New World Development's stock price saw significant increases, with a rise of over 20% on August 7 and approximately 10% on August 8 [8].

Group 1: Hainan's Policy Initiatives - Hainan Province is optimizing its duty-free shopping policy and expanding the "immediate purchase and pick-up" product list to enhance overseas consumption return [1] - The province aims to attract high-quality overseas educational resources, targeting 18,000 students and teachers in the Lingshui Li'an International Education Innovation Pilot Zone by 2027 [1] - Hainan plans to boost overseas medical consumption, with a goal of introducing at least 40 international innovative drugs and medical devices annually by 2027, and increasing medical tourism to over 1.5 million visitors [1] Group 2: Shanghai's Retail Developments - Shanghai Hongqiao Qianwan Impression City MEGA is set to officially launch by the end of the year, with over 70% of its leasing completed and plans to introduce more than 350 lifestyle brands [2] - The project will create a super complex of 400,000 square meters, integrating living, office, and retail spaces [2] Group 3: Hotel Industry Updates - Atour, a chain hotel listed in the US, is reportedly considering a listing in Hong Kong [3] - The Hilton Garden Inn in Zhongshan, Guangdong, is set to open this month, featuring 174 luxury rooms [2] Group 4: Disney's Financial Performance - Disney reported a net profit of $5.262 billion for the third quarter, a 100.8% increase year-over-year, with revenues of $23.65 billion, up 2% [4] Group 5: Earnings Reports from Scenic Areas - Emei Mountain A reported a net profit of 121 million yuan for the first half of 2025, a decrease of 8.48%, with a 6.5% drop in visitor numbers [5] - Lijiang Co. reported a net profit of 94.5 million yuan, down 15.86%, attributed to adverse weather conditions and the pre-opening phase of a new hotel [6] Group 6: Swire Properties' Financial Results - Swire Properties achieved a revenue of 8.723 billion HKD for the first half of 2025, a 20% increase, with a basic profit attributable to shareholders of 4.42 billion HKD, up 15% [8] Group 7: New World Development Clarification - New World Development clarified that there have been no offers for the acquisition of its shares, despite media speculation regarding potential privatization by its controlling shareholder and Blackstone Group [9] Group 8: Indoor Ski Resort Development - Hot Snow Miracle has established operations in Jinan, Shandong, to manage the construction and operation of an indoor ski resort, which will cover approximately 45,000 square meters [10]

Report Industry Investment Rating - Maintain a buy rating on FUTLAN/FTLNHDs [2] Core Viewpoints - China's export growth is expected to decelerate from 5.9% in 2024 to 2% in 2025, while import growth may mildly slow down from 1.1% to 0.5%. The USD/RMB rate may appreciate from the current 7.15 to 7.1 by year-end [2][14] - Seazen shows improving access to the CBICL-guaranteed bond market, with lengthened tenors and lower funding costs, and has relieved near-term refinancing pressure [7][8] Summary by Directory Trading Desk Comments - Yesterday, NWDEVL 27 - 31s and NWDEVL Perps rose 1.8 - 4.5pts and 1 - 1.5pts respectively on rumors and reports. CNH SWIPROs were largely unchanged. Swire Pacific 1H25 revenue rose 15.7% yoy to HKD45.77bn, while operating profit was down 62.4% yoy to HKD1.86bn. In Chinese properties, LNGFOR 27 - 32s/ROADKG 28 - 30s were 0.2pt lower to 0.1pt higher. Longfor begins phased early repayment of offshore syndicated loan. ROADKG failed to obtain bondholder consent. China IG was 0 - 2bps tighter. In Macau gaming, related bonds were 0.1pt lower to 0.1pt higher. Wynn Macau 2Q25 operating revenue was flat yoy, while MGM China 1H25 adjusted EBITDA slipped 1.4% yoy. TW lifers were 1 - 3bps wider. Japanese AT1s and insurance hybrids edged up c0.25pt, SOFTBKs were up 0.1 - 0.7pt. SoftBank Group 1Q26 net sales rose 7% yoy to JPY1.82tn. Korea space was largely unchanged, except HYNMTR 30s tightened 1bp [1] - This morning, the new CNH paper XYDXIV moved 0.5pt higher, while other CNH new issues remained largely unchanged. MTRC Perps were up c0.1pt. China IGs and Thailand BBLTB tightened 1 - 2bps, while LGENSOs widened 1 - 2bps [2] - Yankee AT1s continued to move up slowly. In SEA, VEDLN 28 - 33s were unchanged to 0.2pt higher. KBANK 31s were 2bps tighter and BBLTB unchanged. PETMKs were unchanged to 2bps wider [3] FUTLAN/FTLNHDs - The 8th tranche of CBICL - guaranteed bond. Maintain buy on FUTLAN/FTLNHDs. FTLNHD 4 5/8 10/15/25 was 0.2pt higher this morning [2] - Provide details of FUTLAN/FTLNHDs including Amt o/s, Maturity, Coupon, Offer price, and YTM [6] Seazen - On 4 Aug'25, Seazen issued the 8th tranche of CBILC - guaranteed bond with an issue size of RMB1bn, 5 - year tenor, and a coupon rate of 2.68%. The tenor has lengthened from 3 - year to 5 - year and the funding cost has trended lower. Proceeds will be used for project developments and repaying offshore debts. It has a RMB1bn bond maturing on 13 Sep'25 [7] - In Jun'25, Seazen completed partial tender offers and a concurrent new issue of 3 - year USD300mn bond, relieving near - term refinancing pressure. Its high - quality IPs, secured financing headroom, and growing recurring income offer financial flexibility for refinancing in the coming 2 - 3 years [8] China Economy - China's exports rebounded despite a contraction in exports to the US, with ASEAN and Africa making up for 129% of the US loss since Apr. Exports of motor vehicles and chips were strong, while ships, personal computers, and cell phones softened. Imports rebounded due to robust AI - related demand, and soybean imports from the US rebounded. However, there are headwinds in 2H25 for exports [9] - In July, exports edged up to 7.2% yoy, with exports to the US further slumping to - 21.7%. Shipments to Africa accelerated to 42.4%, and exports to ASEAN remained at 16.6%. Exports to the EU, Australia, Korea, and Canada rebounded. Trade surplus narrowed to US$98bn. Exports of transport equipment and tech products polarized. Imports increased to 4.1% yoy, with strong AI - related demand. Import volume of some energy products, machine tools, etc. dropped, while crops rebounded. Soybean imports from the US rebounded [11][12][13] New Issues - No offshore new issues were priced today [16] - There are no offshore new issues in the pipeline today [17] News and Market Color - Regarding onshore primary issuances, 152 credit bonds were issued yesterday with an amount of RMB148bn. Month - to - date, 501 credit bonds were issued with a total amount of RMB507bn, a 17.6% yoy increase [19] - AVIC plans to take direct control of AVIC International Leasing via an equity restructure. SK Hynix and Samsung Electronics will be exempt from 100% US tariffs on semiconductors. Longfor begins phased early repayment of HKD9.3bn offshore syndicated loan. MGM China 1H25 adjusted EBITDA slipped 1.4% yoy to HKD4.9bn. Mongolian Mining expects a consolidated net loss of USD15 - 25mn for 1H25. New World Development dismisses take - private reports. ORIX 1QFY26 revenue rose 8.5% yoy to JPY768.6bn. Rakuten Group will early redeem JPY16.8bn RAKUTN 1.81 11/04/55 on 4 Nov'25. Road King fails to obtain bondholder consent. SoftBank Group 1QFY26 net sales rose 7% yoy to JPY1.8tn. Wynn Macau 2Q25 operating revenue was down 0.2% yoy to USD883.5m [19]

Group 1 - The White House Economic Council Chairman Miran has been nominated by Trump to serve as a Federal Reserve Governor, with a term lasting until January next year [1][4] - Trump's advisors believe that Federal Reserve Governor Waller is the most suitable candidate to succeed Powell as Chairman [1][4] Group 2 - The U.S. stock market saw the Dow Jones Industrial Average and S&P 500 index close lower, primarily due to a significant drop in Eli Lilly's stock price, while the Nasdaq reached a record closing high [2] - U.S. Treasury yields experienced slight increases amid volatile trading, with the 2-year Treasury yield at 3.7279% and the 10-year Treasury yield at 4.2500% [3] - Oil prices have declined for six consecutive days, influenced by expectations of a diplomatic resolution to the Ukraine conflict following news of a meeting between Putin and Trump [2][3] Group 3 - The number of Americans filing for unemployment benefits has risen to the highest level since the end of 2021, indicating a cooling labor market [4] - U.S. productivity rebounded in Q2, which may help mitigate wage-related inflation pressures [4] - The Atlanta Fed President anticipates a potential interest rate cut within the year, while tariffs continue to impact inflation [4] Group 4 - The U.S. Treasury Secretary indicated that there may be future tariffs on Russian oil imports to China [7] - The Bank of England has lowered interest rates to a two-year low amid significant disagreements among committee members [5]

Core Viewpoint - The company reported a significant decline in revenue for the first half of the year, primarily due to a drastic drop in property sales, but is shifting its strategy from conservative to aggressive expansion, particularly in the Hangzhou market [1][4][22]. Financial Performance - Total revenue for Hang Lung Group and Hang Lung Properties was HKD 52.02 billion and HKD 49.68 billion, representing declines of 18% and 19% respectively, mainly due to an 87% drop in property sales revenue [1][2]. - Rental income decreased by 3% to HKD 4.91 billion for the group and HKD 4.68 billion for the properties, with mainland China contributing HKD 3.36 billion and Hong Kong HKD 1.55 billion [2][10]. - Hotel revenue saw an increase of 84% to HKD 129 million, attributed to the performance of the Kunming Hyatt [2][6]. Strategic Shift - The company is transitioning to a more aggressive growth strategy, focusing on expansion in Hangzhou, where the Hang Lung Plaza is set to increase its footprint by 40% [4][22]. - The rental income from shopping malls in mainland China remained stable, with a total income of HKD 24.12 billion, indicating resilience despite market pressures [8][10]. Market Position - Mainland China has become the primary market for Hang Lung, accounting for 69% of rental income, with lower revenue declines compared to Hong Kong [6][12]. - The company is facing challenges in certain projects, particularly in Wuhan and Shenyang, where rental income has significantly decreased due to local competition and market conditions [17][20]. Future Outlook - The company is optimistic about its future, believing that the worst is over, and is focusing on enhancing its operational capabilities to compete effectively in the Hangzhou market [12][24]. - The upcoming openings in Hangzhou are seen as critical for the company's recovery and growth trajectory, with expectations of strong consumer demand in the region [22][24].