UPDATE 1-SHK Prop revises down sales target to $2 bln

(Add background, management comment)

By Donny Kwok

HONG KONG, Dec 4 (Reuters) - Developer Sun Hung Kai Properties (0016.HK) has cut its apartment sales target for this fiscal year as the global financial crisis hits Hong Kong's property market, but expects a market pick-up in early 2009.

Asia's third most valuable property group now aims to generate HK$16 billion ($2 billion) in revenue in the year ending June 2009 by selling 2,400 housing units, the head of its real estate agency, Eric Chow, told reporters on Thursday.

But he countered analyst predictions for a market slump next year, saying he expected a 5 percent rise in Hong Kong property prices next year.

"We will see a more active market in the first half of next year than the second half of this year," he said after a shareholders' meeting on Thursday.

Some analysts said the outlook was difficult to determine.

"It will be a bit optimistic (for room on the upside) and it all depends on whether the economic environment deteriorates or not, if the jobless rate still rises or stays steady," said Patrick Yiu, a director from CASH Asset Management.

Sun Hung Kai Properties has surprised some analysts by recording strong sales in recent weeks. Chow said sales at projects in Yuen Long and Shatin in the New Territories had generated about HK$3.8 billion.

But total property transactions in Hong Kong fell to a 17-year low in November, with home sales plunging 79 percent from a year earlier as a deepening global financial crisis shattered buyers' confidence in the market.

And a Reuters poll of analysts earlier this month showed apartment prices were expected to slide more than 20 percent by the end of 2009.

Chow did not elaborate on the revision of the sales target. The company had said in September for that it aimed to rake in HK$20 billion worth of apartment sales in this fiscal year, with about 90 percent coming from Hong Kong and the rest in mainland China.

Sun Hung Kai Properties said the strong public response to its projects recently reflected a stablising property market, and a relatively small supply of 10,000 units a year in Hong Kong also helped. The average annual supply of new apartments in the last decade has been around 18,000.

"We believe property prices have stablised," said Raymond Kwok, managing director of the property group.

He said recent mortgage rate hikes by some banks were expected to have a limited impact on home buyers as rates were still relatively low at around 3-4 percent.

HSBC Holdings (0005.HK) and Bank of China (Hong Kong) (2388.HK) raised their Hong Kong mortgage rates earlier this week, dragging the blue chip property index .HSNP down 7.7 percent so far this week.

In the office property segment, Sun Hung Kai Properties has leased about 90 percent of its 2.5 million square feet office towers in International Commerce Centre on Kowloon to tenants including Morgan Stanley (MS.N), Credit Suisse (CSGN.VX) and Deutsche Bank, said Victor Lui, an executive director of Sun Hung Kai Real Estate Agency.

Lui said he did not note any lapse of leasing deals despite the current economic conditions and tenants were expected to move in as planned.

Sun Hung Kai Properties is now chaired by Kwong Siu-hing, the mother of the Kwok brothers, after long-time chairman Walter Kwok left the firm this year following a dispute with his brothers over control of the firm. Raymond Kwok said Kwong was likely to continue to be chairwoman of the group.

Shares of Sun Hung Kai Properties, which have fallen more than 66 percent so far this year, closed down 1.2 percent on Thursday, lagging a 0.6 percent drop for the benchmark index .HSI. ($1=HK$7.751) (Reporting by Donny Kwok; Editing by Anne Marie Roantree)