Investment Rating - The report maintains a positive outlook on the Hong Kong property sector, indicating that the sector rating is supported by buying flows rather than solely fundamentals [9][37]. Core Insights - National support is seen as a game changer for Hong Kong, enhancing its position as a financial hub and protecting asset prices [8]. - The property sector represents approximately 5.8% of the Hang Seng Index, with expectations of increased buying flows due to China’s yield compression [9][17]. - Short-term buying flows are expected to benefit high-yield and index stocks, particularly after a pullback in July [9][39]. Summary by Sections I. National Support - National support strengthens Hong Kong's financial hub status, attracting talent and capital, which helps protect asset prices [8]. II. Flow Dynamics - The report highlights that new buying power from China’s yield compression is expected to continue into the second half of the year, with flows outpacing fundamentals in the short term [9]. - Southbound holdings in the Hong Kong property sector increased by 1% in the first half of 2025, reaching 2.4% [9]. - The mutual fund KPI reform in May 2025 is anticipated to drive additional buying flows into the property sector [16]. III. Fundamentals - The residential market is nearing a bottom, with easing oversupply and expectations for a profit upcycle starting in 2027 [51]. - Demand for residential properties is supported by household formation and an influx of new talent, with rent growth indicating underlying demand [51]. - The office market is showing signs of stabilization, particularly in Central, with positive absorption expected [50]. - Retail sales turned positive in May 2025, driven by increased visitation and a weaker Hong Kong dollar [2][50]. - Commercial real estate continues to face challenges, particularly for smaller developers, due to liquidity issues and funding pressures [34][49]. IV. Company Recommendations - Top picks for investment include Swire Properties, Hongkong Land, and Link REIT, with expectations of potential buybacks and stable dividends [39][40].