Battered Hong Kong property stocks have been on a roll over the past four weeks, led by pacesetters Wharf REIC, owner of the Harbour City and Times Square luxury shopping centres, and New World Development. In just over four weeks to Wednesday’s close, Wharf REIC’s share price has shot up nearly 35 per cent, such a rapid rise that it crossed an “overbought” technical warning level this week before slipping a bit. It hasn’t been alone. Since May 29, New World Development has shot up 23 per cent, CK Asset Holdings has risen nearly 14 per cent, Sun Hung Kai Properties and Swire Properties have both advanced about 13 per cent, and Link Reit and Kerry Properties each gained 10 per cent. In comparison, the Hang Seng Index gained about 8 per cent over the same period. For property stocks, it’s been quite a change from the steep falls seen over the past 12 months, as social unrest, the coronavirus, the plunge in tourism and rising US-China tensions created uncertainty about the sector’s outlook. Even with the recent spurt, Wharf REIC, for example, is still down nearly 33 per cent over the past year, while Sun Hung Kai Properties has dropped 25 per cent and New World Development has tumbled more than 21 per cent. But Jonas Kan, a long-time property analyst at Daiwa Capital Markets, is among those who are bullish about the sector, citing strong company fundamentals, strengthening recurrent incomes, and decent and sustainable dividends. He also points to history, which shows both the Hang Seng Index and Hong Kong property stocks have always bounced back after crises. He points to the 1967 riots, the 1973 oil crisis, the 1980 sovereignty crisis, the 1989 Tiananmen Square crackdown, the 1997 Asian Financial Crisis, the 2003 Sars outbreak, and the 2008 Global Financial Crisis. Property stocks specifically, he said, ran up between 40 per cent and 100 per cent following these crises. Hong Kong, of course, is in another moment of crisis. It faces many unknowns, as Beijing tightens its grip, the economy remains mired in recession and the coronavirus pandemic continues. “Now is the time to be more greedy than fearful,” Kan says. “Hong Kong has faced many ordeals over the past few decades – and it has survived all of them.” The signal that Hong Kong property stocks are entering that “after-crisis” rapid rise pattern could come in the form of sizeable fresh capital coming in and locals committing capital to real estate at home, Kan said. “That would be a reassuring signal,” Kan said. “Historically, it is more often for overseas investors and wealthy locals to lead the rebound as they are often better able to afford the incremental capital and holding power to bet on the longer-term future of the city.” Despite the recent rally, Hong Kong property companies face stiff competition for interest from investors, who have been piling into China-based new economy stocks like Tencent and Alibaba Health Information and Technology. The question for investors is whether the rallying is a blip, followed by profit taking, or a signal that Hong Kong property stocks are ready to climb out of a deep hole, despite the unknowns. Alex Wong, director of asset management at Ample Capital, believes the recent rally is only short term. He reduced his fund’s exposure to Hong Kong property stocks to one per cent from 20 per cent last year, leaving some investment in Sun Hung Kai Properties. He has shifted to new economy stocks like Tencent that are expected to do well after the pandemic ends. “I don’t think this [run-up in Hong Kong property stocks] will last long because the coronavirus has changed fundamentals,” Wong said. “The best is to stick with companies that will have quality growth.” But J.P. Morgan is taking a fresh – and positive look – at Hong Kong residential property, upgrading Sun Hung Kai Properties and Sino Land to overweight from neutral, putting them with earlier favourites CK Asset Holdings, New World Development and Kerry Properties. The investment bank’s analysts cited such factors as an absence of distressed sellers, no supply surge, the Hibor benchmark interest rate for lending between banks reaching new lows, no signs of exodus by multinational corporations, as well as secondary and primary transactions volumes hitting eight year and one year highs. “Most of the worry over negative factors is gradually proving to be overdone so far,” analysts led by Cusson Leung wrote in a recent note. “We believe the expectations of asset price inflation on the back of global credit loosening will support residential market demand.” But they believe shopping centre operators – especially those tied to tourist-centric shopping malls, which includes Wharf REIC – will struggle as long as the coronavirus hampers tourism and also because the price of luxury goods on the mainland has become more aligned with those in the city. Nevertheless, they upgraded Wharf REIC to neutral from underweight, saying it is fairly valued. Before Wharf REIC began perking up on May 26, it had plunged 41 per cent from the start of the year, as the collapse in mainland foot traffic amid social rest in the second half of 2019 was compounded by the coronavirus outbreak, leading shops to close or demand rent breaks. Kan rates the stock as a buy. “The worse is probably over for the [Wharf REIC] stock for the time being,” Kan said, adding that local traffic on streets and at shopping malls like Harbour City has been returning as Kong Kong residents feel safer from the virus. Meanwhile, Hong Kong billionaire Peter Woo Kwong-ching successfully took flagship Wheelock and Co. private , giving shares in Wharf REIC to shareholders and ending uncertainty on the privatisation move. But Kan recommends that investors wait for a correction after the run-up to get into Hong Kong property stocks. For Wharf REIC, Kan advises waiting until it falls closer to HK$30; it closed on Wednesday at HK$37.90. Link Reit, Sino Land, Sunlight REIT, Swire Properties, CK Asset Holdings and Hang Lung Properties are Kan’s top picks, all with buy ratings. They are poised for rapid gains once a catalyst sparks a rush of buying, especially interest from global investors, he said.