Citi: The reform of the ancillary equity tax system is expected to catalyze the demand for office and residential properties in Hong Kong. SWIRE PROPERTIES (01972) and SHK PPT (00016) will benefit.

Citigroup released a research report stating that the Hong Kong government published a Gazette in June this year and submitted the "2026 Taxation (Amendment) (Concerning Funds, Family Investment Control Tools, and Associated Rights) Bill," which suggests optimizing tax relief measures by expanding the definition of funds, abolishing the 5% threshold for associated transactions, and providing tax relief for associated rights to attract private equity funds and family offices to establish themselves in Hong Kong, thereby promoting the inflow of capital and talent. Citigroup maintains a "Neutral" rating on Hong Kong's real estate sector, with preferred stocks for the second half of the year being SWIRE PROPERTIES (01972), LINK REIT (00823), and SHK PPT (00016). Citigroup believes that the reforms will become a structural catalyst for attracting capital and talent to Hong Kong, supporting demand for office and residential properties. It is expected that demand for office space may grow by at least 5%, leading to an increase of about 2% in new talent moving in. Meanwhile, existing asset management managers in Hong Kong may use their tax savings for property purchases, potentially enhancing the city's international status over the long term and supporting economic and asset value growth, particularly for companies like Swire Properties. The bank estimates that if 3% of the fund managers from Singapore and mainland China choose to relocate to Hong Kong to take advantage of tax incentives, it could result in an influx of around 1,500 asset management professionals. If the talent inflow occurs within a year, it would correspond to an annual increase of approximately 2% in residential demand; in addition, if the tax savings of existing Hong Kong asset management managers are used for property purchases, it could provide an additional upward potential of about 4% in annual transaction value, with the high-end and luxury residential markets benefiting even more.