Transcription
Welcome to Property Market C View. Let's first look at the latest issue of the CCL. It closed at 155.2 points, up 0.96% week-on-week, returning to the level of October 2023.
Before we start today's main topic, let's ask Mr. Shi. Mr. Shi, the property market has been very strong recently, with major developers constantly launching new projects. Can this momentum continue? Will there be any favorable factors or hidden concerns in the future that we need to pay attention to?
I think this momentum should continue. The property market experienced adjustments in 2022, 2023, and 2024, lasting for three years with a decline of over 20%. The market has accumulated a certain amount of purchasing power. When property prices fall, properties, as an investment commodity, can be intimidating. People won't buy when prices are falling, to avoid further losses. So, they are all waiting and watching. After watching for three years, it has started to improve for about a year. There should still be some support for further increases. This is purely an analysis from an ecological perspective.
On the other hand, Hong Kong's economy is actually doing well. Hong Kong's economic pillars are finance, trade, and logistics, as well as professional services and tourism. Basically, they are all doing well, except for retail and catering, which have been significantly impacted by the internet. Hong Kong's pillar industries are performing well. When the economy is good, people have no worries about unemployment, and their income is stable, which will enable property prices to continue to rise.
In addition, Hong Kong's population is actually increasing, not due to birth rates, but due to the government's policies to attract talent and capital. These policies have, to some extent, attracted some foreign investors or people coming to Hong Kong to develop their careers. When they come to Hong Kong, they need a place to live. Even if they don't buy, they have to rent. Therefore, rents have performed quite well during this period. As rents rise, investment attractiveness increases. When the investment attractiveness of properties rises, some people will choose to buy rather than rent. So, this is why the future market can still be viewed positively.
Okay, thank you, Mr. Shi. We have also invited Mr. Samson Li, an analyst from the European Natural Resources Discovery Fund, to discuss another physical asset besides property, which is gold. Hello, Samson.
Hello everyone. Samson, in the past, whenever there was a war, gold was always considered a safe-haven asset, and gold prices would rise. The surge in gold prices in 2025 was due to global geopolitical tensions. However, this year, despite the ongoing Middle East conflict, gold has been fluctuating downwards, with safe-haven funds flowing into the US dollar instead. Why is the market operating in such an opposite manner this year? Has the role of precious metals as a safe-haven asset changed? What will be the future trend?
First, I believe there are several main reasons why gold prices have fallen instead of risen during this Middle East event. The first point is that from the end of 2019 to its peak this year, gold prices have already accumulated an increase of approximately 268%. What does this represent? It means that gold has already seen a relatively large increase in a relatively short period. Theoretically, gold is the opposite of the US dollar, and to some extent, it is a form of currency. Any currency that appreciates by 268% against the US dollar over 6 years has already seen a considerable cumulative increase.
Firstly, this indicates that many people have already bought gold. Gold used to be a relatively niche asset, but now it has become a more popular asset. Any minor fluctuation can easily attract many people to take profits, leading to greater price volatility. However, conversely, gold prices have only fallen by about 18% from their peak this year to around $4,600. Gold has accumulated a 268% increase over the past 6 years, and has only fallen by 18% from its peak. Frankly, I think this pullback is relatively not too excessive, or not too large. This is the first reason.
The second reason is that during this Middle East event, particularly some Middle Eastern countries, as far as I know, have stopped buying gold since the conflict began. At that time, their consideration shifted from preserving asset value to spending money. For example, they might need to buy more oil, i.e., crude oil. Other Middle Eastern countries might need to buy food, etc. In such circumstances, everyone has stopped buying gold. As far as I know, gold trading was at its lowest in March this year. A lot of gold produced in Africa was originally sold to the Middle East. Then, those merchants said that the Middle East suddenly stopped buying their gold. So, the gold produced in Africa was sold at a discounted market price to some Chinese people or those interested in buying gold in Africa. Therefore, in the short term, with fewer Middle Eastern countries buying gold, some gold suppliers, in order to move their inventory, would sell gold at a discounted price.
The third reason is more recent: the Indian government suddenly announced the imposition of a tax on some imported gold, approximately 4% if I recall correctly. This news hit Indian banks, causing them to be hesitant to import gold in April. According to official data, India only imported 15 tons of gold in April, the lowest single-month gold import volume in the past 30 years, excluding the COVID period.
These three factors combined have led to what I believe is the reason why, in the short term, we have seen gold prices fall instead of rise. However, should one buy gold now, or is gold a good safe-haven asset? Personally, I believe the reason for buying gold is not to seek safety, but to look at the cycle. Gold is also a commodity. I believe one needs to consider other factors before deciding whether to continue buying gold. For example, look at whether the commodity cycle will continue. For instance, some people believe that most parts of the world will enter stagflation. Normally, stagflation is relatively favorable for commodities, especially gold. Then, we need to analyze what the future global economic environment will look like. Or will the US raise interest rates? Of course, the Federal Reserve might sound hawkish, but looking at some recent economic data, especially US employment data, it is actually deteriorating. Can the Federal Reserve really raise interest rates in this environment? I think it's more of a scare tactic than a genuine intention to raise rates. Therefore, I believe whether to buy gold now is not purely for hedging, but to analyze the future trends of the global macro environment.
Mr. Shi, what are your thoughts?
I have also been paying attention to the trend of gold prices. The moment the US attacked Iran, gold prices rose slightly at first, and then retreated. Why did this happen? It can be analyzed from political, economic, and various other angles. Politically, the US attack on Iran surprised the world. Why was it unexpected? Because former US President Trump had said that he wanted to return to the Monroe Doctrine, which prioritizes American interests in the Americas. If he prioritizes American interests in the Americas, he has been retreating. He tells European countries to increase their own military spending and protect themselves, and not always rely on US protection. In fact, Trump wanted to withdraw from Europe. Even in Asia, he has shifted some defense responsibilities to Japan and South Korea. Originally, he was preparing to refocus on Venezuela, Colombia, or Mexico, Canada, or Greenland. His attention would have gone there. Suddenly, he returned to the Middle East. People would then wonder if the US wants to make a move, hoping to add another seat to its current global hegemony. If he truly succeeds in Iran, the US's international standing will be strengthened. The Middle East is the main oil-producing region. In the Americas, he controls Venezuela. In the Middle East, Saudi Arabia, Qatar, and the UAE have long followed the US. If even Iran sides with the US, and if the US can truly bring about a regime change in Iran, installing a pro-US government, the US will have better control over global oil supply. This would be relatively unfavorable for China. This means that the US's position as a global hegemon might be consolidated by this war. If the US's hegemonic position is consolidated, the status of the US dollar will also be consolidated. If one wants to de-dollarize, the US dollar might face pressure in terms of finance and debt. But if the US is strong militarily and has significant political influence, no one will dare to challenge it. So, at that moment, people felt that the US might be making a move, and its global standing would be consolidated. The situation where de-dollarization was previously discussed has instead become dominated by strength derived from military victory. Gold's strength is mainly caused by the weakness of the US dollar. If people have confidence in the US re-establishing its international standing, meaning a US-led market, then it will not be easy for gold and silver to strengthen. This is a political consideration.
Furthermore, once there is a war in the Middle East, oil cannot be transported out, and oil prices will rise. From $50-$60 per barrel to $120. The entire world will be affected. Even though the US is an oil-producing country, its oil prices will also rise. US oil companies will not refrain from raising prices just because the US produces oil. When prices rise everywhere, they will also rise. So, the US also faces rising oil prices and rising prices of goods, and will be under inflationary pressure. At that time, there was a saying that if inflation comes, the Federal Reserve will not be able to cut interest rates, and some even thought they would raise interest rates. When interest rates rise, assets like gold and silver, which do not yield interest and incur storage costs, will face some pressure. So, at that time, it was thought that interest rates might rise, and gold prices would fall.
However, the current situation is that, as Samson just said, the market originally thought that this adjustment would be deeper. Since gold has been rising for so many years and has seen such a large increase, once an adjustment occurs, bears will take the opportunity to counterattack. It shouldn't just fall by a dozen percent or so. There are also people in the market saying that the gold bull market has ended. So, gold prices should take this opportunity to adjust further. But now, looking at the war between the US and Iran, the US has not consolidated its hegemonic position. Instead, its position has been questioned. Even a country like Iran, the US cannot control. Therefore, the US is also being questioned.
Furthermore, will interest rates definitely be raised? Will the Federal Reserve raise interest rates? In the last interest rate meeting, they ultimately did not raise rates. If they don't raise rates, hawks gain the upper hand. But in the actual objective environment, with hawks in charge, Powell has not yet left. Powell leaves in mid-May. Except for Milan, all members of the Federal Reserve support not cutting interest rates. In such an environment, they are not raising interest rates. The Federal Reserve should have the conditions to raise interest rates. Inflation is rising. The US economy in the first quarter was not that bad. They should take the opportunity to raise rates a bit to curb inflation. But the Federal Reserve is not doing it. Why not? I think they have calculated that raising interest rates will be useless. Raising interest rates is beneficial for cooling an overheated economy, but raising interest rates cannot control oil prices. This adjustment in oil prices is caused by the war. If oil prices cannot be controlled, rising prices of goods also cannot be controlled. It is not inflation caused by an increase in circulating currency. So, the impact of raising interest rates is not significant. Since the impact is not significant, there is no need to raise interest rates. Therefore, the Federal Reserve feels that there are insufficient conditions to raise interest rates.
The US government owes so much debt. The current total debt is 39 trillion. With an annual interest rate of over 3%, the interest alone will exceed one trillion. If they have to raise interest rates again, they will have to pay more interest themselves, as bonds are constantly maturing. The bonds that are maturing now were borrowed when interest rates were low. To repay these debts now, they are not using a lot of tax revenue. Instead, they are borrowing new debt to repay old debt. The interest on old debt is low, and the interest on new debt is high. So, for the federal government, it may not be able to bear the burden of further interest rate hikes. Therefore, interest rate hikes may not occur in this situation.
So, this adjustment is not a deep adjustment. It's not just a brief dip, but it's also not a significant fall. Some people now estimate that after gold prices fluctuate at this level, a new upward trend will emerge.
Mr. Shi, you just said that oil prices reached $120 per barrel. Actually, that was the price in the futures market, i.e., the financial market. But I heard that in some actual crude oil transactions, the oil price has reached over $270 per barrel. So, there might be some invisible hands suppressing oil prices. I would also like to ask both of you, given the continuous volatility in precious metal prices, how should investors manage their risks? And comparatively, property is also a physical asset. In turbulent times, will it be more stable and preserve value?
Mr. Shi, please go first.
For ordinary people, I do not recommend them to speculate in the futures market. Although in the futures market, you don't need to pay a lot of money and can achieve leverage, allowing for larger investments, the risk of fluctuations also increases significantly due to the leverage. Therefore, I personally prefer ordinary people to allocate a portion of their assets, the amount of which you decide yourself. Generally, most people allocate 5%, I have always allocated 10%, and now even more. You can buy gold coins or gold bars for storage. Once bought, you don't need to worry about them. Watching the cycle of rises and falls is for professionals. We ordinary people don't have the opportunity to understand it so deeply. It's just that the current global monetary system is indeed unstable. To avoid the situation where your assets evaporate overnight if the monetary system suddenly collapses, it's better to hold a portion of gold. If you have never bought gold before, suddenly increasing your holdings carries greater risk. Each time you have new income, allocate a portion to it. The risk you bear will be smaller. Once a certain level of increase is accumulated, then you can add more. You don't need to suddenly make an investment that you have never done before all at once in a short period. If you want your asset portfolio to have a portion linked to gold, you can buy physical gold. The advantage of buying gold is that it does not require a country behind it, using its sovereignty, its economic and military strength, to support its value, unlike other currencies. The value of gold is inherent; it doesn't need anyone to prove it. So, buying gold has this advantage.
As for buying property, like gold, it is a physical asset. Should you buy it during wartime? If it's in a war-torn area, of course, you shouldn't buy property there. Property is immovable, and you can't move it during wartime. Of course, you wouldn't buy property in Dubai now. Unless the Middle East is peaceful and the US withdraws, and the chance of such conflict reoccurring in the Middle East is reduced. At this moment, of course, don't invest in real estate in chaotic areas. However, Hong Kong is protected by China. China can now compete with the US in many aspects of military strength. So, the chance of someone invading Hong Kong and going to war with China is very slim. Therefore, you see, after the US-Iran conflict, property transactions in Hong Kong are still very active.
The advantage of property over precious metals is that you can receive rent by buying a property. In fact, the current rent increase has been more sustained than the property price increase. Property prices have only risen for about a year, while rents have been rising for almost two years. Previously, many international students rented apartments in Hong Kong during the summer holidays. Now, the rental boom has started earlier, with many people renting since April. The rent increase has accelerated again. Last year, we also opened some student dormitories. The leases are for one year. Last year, around August or September, they moved in. This year, when their leases expire, over 50% to 60% of students have chosen to renew their leases. The renewal rent has increased by nearly 10% compared to the same period last year. So, a benefit of property is rental yield. Of course, you need to consider whether the location is safe. If it's a safe place, it will attract more capital during times of war and chaos.
Finally, I would like to ask, will the property market's upward trend in 2026 be affected by gold prices or the trend of the US dollar?
In theory, it definitely will. Because, as Mr. Shi mentioned before the broadcast, gold and property are very similar; both are physical assets. Holding physical assets, to some extent, means not being optimistic about the US dollar. If the US dollar depreciates, physical assets usually appreciate. Because for now, most physical assets in the international market are priced and settled in US dollars. For example, in the second half of the year, if people believe that the US will cut interest rates, or if other events occur that lead to a decline in the value of the US dollar, it will theoretically have a positive impact on both the property market and physical assets, such as commodities or gold. Especially gold, as a commodity, has a very long cycle. Whether it's a bull or bear market, its cycle can be 6 to 10 years or more. This gold bull market, I consider it to have started in 2020 and has lasted for about 6 years. Normally, its cycle has at least passed the halfway point. However, if we look at the current situation, for example, this Middle East event, I think it has caused a more severe division between the US and most other countries in the world, including the EU, South Korea, etc. If we look at the situation, the US dollar or the US's position is falling instead of rising. Furthermore, the market generally believes that interest rates in the US will remain unchanged in the second half of this year, for now. But earlier, there was even about a 40% chance that the market estimated interest rates would be raised. Now, if the market is uncertain about US interest rates, there is a possibility of an increase. If the US starts cutting interest rates in the second half of this year, the US dollar may fall at a higher speed in the second half of this year.
Thank you for your analysis. I hope today's analysis can provide some advice to investors, allowing them to consider whether they need to review their assets. Our time is almost up for today. See you next time.