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Hong Kong property in profit crunch
CNN HONG KONG, China (CNN) -- Bellwether property stock Sun Hung Kai Properties Ltd. on Tuesday reported net profits that were down 40.1 percent for the first half of the business year. Total net earnings were HK$3.2 billion ($408 million). That was down from HK$5.3 billion the same time last year. Despite the large drop, the company predicted strong sales for the second half of the year. "The contribution from property sales in the second half of the current financial year will be higher than that in the period under review," Chairman and CEO Walter Kwok Ping-sheung stated in a release. Industry insiders are watching for further signs of a rebound in Hong Kong's battered property market. Negative equityA series of factors, including a shift to mainland China, a glut of new development and fresh swaths of land carved out by the Hong Kong government, have contributed to a situation that leaves many Hong Kong property owners with negative equity. In other words, they owe more to the bank on their properties than they are worth. Like many companies, the property developer also cited the impact of September 11. "Hong Kong faced challenging economic conditions in the wake of the global economic downturn, particularly after the events of September 11 in the US," Kwok stated. "At the same time, the local job market has been adversely affected." But since October, sales have bounced back to pre-attack levels, the company said. Prices appear to have stabilized. As a result, Sun Hung Kai foresees sales of more than HK$7.56 billion, the amount it sold for the first half. That was down from HK$13.8 billion the same time last year, but that included the sale of the huge Leighton Hill development on Hong Kong island. The company said retail sales at that development, which will continue now the project is wrapping up, will add to sales later this year. Around 85 percent of the company's apartments are sold ahead of completion, the company said. Airport dealAlso on Tuesday, Sun Hun Kai also said it had signed a $30 million deal to develop a logistics center at Beijing International Airport. It will then own one-third of the center, according to Reuters news agency. Ahead of the earnings announcement, Sun Hung Kai stock closed up 0.81 percent at HK$62.00. That came on a day the main Hong Kong index, the Hang Seng, fell 0.4 percent to 11,273.86. Market watchers credited profit taking for the drop, after a six-day run of rises for the Hang Seng. But the index is still down 1.08 percent for the year, one of the worst performances in Asia. Two smaller Hong Kong developers reported earnings that met expectations. So Sun Hung Kai had a double whammy on the stock market. Besides property stocks, China plays were also good gainers in Hong Kong on Tuesday. |
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