"Analysis Report": Nomura lowers Hong Kong's GDP forecast for this year to 3.2%, expecting that the "spicy reduction" will not reverse the fundamental situation of the property market.

The Financial Secretary, Paul Chan, recently stated that Hong Kong's GDP is expected to grow by over 3% this year, which is lower than the estimated range of 3.5% to 5.5% in the February budget. Nomura has released a report lowering its GDP forecast for Hong Kong in the next two years from 4% and 2.6% to 3.2% and 2.4% respectively. The report indicates that preliminary data shows Hong Kong's GDP in the third quarter grew by 4.1% YoY, up from 1.5% in the previous quarter, but still fell short of expectations. After seasonal adjustment, the QoQ GDP growth turned positive at 0.1%, compared to a decline of 1.3% in the previous quarter. The report states that the rebound in YoY growth is partly due to a low base, while local demand remains stable. Personal consumption expenditure remains healthy, while government spending has declined. Private investment has surged on a low base, and inventory growth has reversed its previous decline, making a significant positive contribution to GDP growth. The report also mentions that retail sales in Hong Kong increased by 13% YoY in September, maintaining a healthy growth rate, although slightly lower than the previous month's growth of 13.7%. The labor market remains healthy, with the latest unemployment rate at 2.8%. Overall, it is expected that private consumption will remain resilient in the coming months, but external demand remains weak. Private investment continues to face headwinds due to high interest rates. Residential property prices have fallen below last year's record low, and the real estate sector is expected to remain under pressure due to structural factors and high interest rates. Nomura predicts that the 3-month HIBOR rates in Hong Kong will be 4.25% and 3.5% in the next two years. Following the November meeting of the Federal Reserve, the bank's US team continues to believe that the US has completed its current rate hike cycle. This will provide the Hong Kong Monetary Authority with continued breathing room. However, local banks still have a significant opportunity to further slightly increase the Prime Rate. In the Chief Executive's Policy Address at the end of last month, the Hong Kong government announced measures to cool the property market, but it is believed that this will not fundamentally change the trend in the Hong Kong property market, as structural headwinds still persist.