CLSA Touts Hong Kong Conglomerates as Safe Havens, Reaffirms CK Hutchison, New World as Top Picks

Hong Kong-listed conglomerates are being positioned as quality, high-yield safe havens for investors navigating market uncertainty, according to a research report from brokerage CLSA. The firm maintained its top sector picks, reaffirming its positive ratings on CK Hutchison Holdings (00001) and New World Development (00659).

Sector Viewed as Undervalued Safe Haven

CLSA noted that investors are increasingly drawn to the sector's resilient asset portfolios and potential for rising dividends, particularly amid heightened economic uncertainty. The report highlighted that these companies are generally not heavily owned by investors, suggesting room for increased allocation.

The brokerage forecasts that for 2026, the aggregate recurring profits for Hong Kong conglomerates will grow 6% year-over-year to $8.0 billion, while cash dividends are expected to increase by 9% to $4.2 billion. According to the report, the sector is currently trading at a 37% discount to its net asset value (NAV), which is wider than its long-term average discount of 30%.

Company Outlooks and Ratings

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CLSA's analysis pointed to CK Hutchison and Swire Pacific 'A' (00019) as the primary drivers of the sector's anticipated earnings growth. For CK Hutchison, earnings are expected to be supported by its holding in Cenovus Energy amid high oil prices, though investors remain focused on the timeline for potential asset sales. Meanwhile, Swire's growth is underpinned by both its property and non-property divisions.

In its report, CLSA maintained the following ratings and price targets:

• CK Hutchison (00001): "High-Conviction Outperform" with a price target of HK$110.
• New World Development (00659): "Outperform" with a price target of HK$11.50, offering a sustainable annual dividend yield of 7.6% at current levels.
• Swire Pacific 'A' (00019): "Outperform" with a price target of HK$114.
• First Pacific (00142): "Outperform" with a price target of HK$6.80.
• MTR Corp. (00066): "Hold" with a price target of HK$33.

The brokerage cautioned that MTR Corp. faces a potential risk of dividend cuts or the need for equity financing. This is due to its substantial planned capital expenditure, guided at HK$84.8 billion for the 2026-2028 period.