MENU

How Will Hongkong Land Holdings Ltd Be Affected By Hong Kong’s Political Crisis?

Over the weekend, there was a clash between pro-democracy protesters in Hong Kong and the city’s police. The protest has been the most violent encounter in the city to-date and is expected to continue as schools and businesses remains closed today. The unrest is affecting Hong Kong’s reputation as a safe financial hub for the Asia Pacific region. In response, the Hang Seng Index has already dropped 1.96% today.

Singapore is home to quite a number of Hong Kong related companies. Of them all, maybe the most obvious company is Hongkong Land Holdings Limited (SGX: H78). As one of the largest property owners in Hong Kong, Hongkong Land also opened significantly lower today, falling about 2% from its Friday’s closing price.

Is this drop an opportunity for investors, or the hint of something nastier around the corner?

Hongkong Land Holdings owns 12 commercial real estate properties in Hong Kong’s Central Business District, the main bulk of its overall asset base. On top of that, it also owns properties in Singapore, Indonesia, and China. As the nature of its business is mainly property investment, the protest will likely have minimal impact on the company in the short term. In the longer term, if investors see Hong Kong as a less attractive place to house their offices and reduce their presence in the city, Hongkong Land might see a lower demand for the lease of its properties in the future.

What seems to be a more pressing issue for Hongkong Land, however, is the possibility of housing bubble bursting in Hong Kong. Similar to Singapore, the government of Hong Kong has been implementing new rules to cool down the property market. On a year to year basis at the end of June 2014, Hong Kong property prices have dropped 0.6%, indicating the effect of the government’s cooling measure. If the property prices continue to fall, Hongkong Land might need to revalue some of its assets.

Interestingly, it seems that investors might already be pricing in the slowdown in Hong Kong property market, valuing the company only at 0.58 price to book ratio. It looks like this company might not suit investors looking for a high growth rate. Its 2.6% dividend yield is also not high enough to attract investors looking for dividends. And investors looking for a turnaround at Hongkong Land might not be seeing any in the near future. At this point in time, Hongkong Land seems to be a company that is unloved by many.  But does that signify an opportunity? Learn more about investing opportunities through a FREE subscription to Take Stock SingaporeSign up here to The Motley Fool’s weekly investing newsletter that will teach you how to GROW your wealth in the years ahead.

Like us on Facebook to follow our latest news and articles.

The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim does not own any companies mentioned