Hong Kong needs clear legislation and firm stock exchange commitment for the development of the Real Estate Investment Trust (REIT), according to analysts.
They warned Hong Kong would be left behind by other regional financial centers like Singapore and Taiwan if local regulators do not encourage the launch of such an investment product soon.
“Singapore, Taiwan and Japan have made tremendous progress in the development of REIT products, while Hong Kong has been slow off the block,” said a fund manager with a European investment house.
Investment advising firm Angus Moore’s director, Ronnie Law, said Hong Kong investors were educated enough to buy REITs, and such an educated investment community should ease the setting up of a REIT market here.
She said with the property market improving in Hong Kong, retail investors would want to take advantage of the rising real estate prices and invest in a REIT product.
Standard & Poor’s associate director, Winston Siay, said although the establishment of a REIT in Hong Kong has been delayed, there is still a future for REITS given the many compelling reasons for its formation.
Taiwan’s first REIT, Fubon No1, was listed last week in Taipei.
The NT$5.83 billion (HK$1.48 billion) REIT was five times subscribed. Promoter Fubon Group said a total of three to four REITs may be launched in the year ahead.
Singapore has five listed REITs, including Fortune Real Estate Investment Trust which was launched by property tycoon Li Ka-shing. Fortune is 27.4 percent owned by Li’s Hong Kong-listed flagship Cheung Kong (Holdings) and 12.5 percent by Hutchison Whampoa.
The Housing Authority launched Hong Kong’s first REIT issue last year, but it had to be cancelled after a public housing tenant, Lo Siu-lan, took the Authority to court, challenging the ownership of the carparks and housing blocks.
Siay said REIT offers investors a steady return and good dividend yield.
Returns on REIT investments are usually enhanced by tax incentives, as well as providing accessibility to investors, who are bullish on the property sector but may not have the resources to acquire real properties, Siay said.
He added a key advantage in investing in REIT is that the structure of the vehicle ensures corporate governance and transparency is held at the highest level. “Good corporate governance and transparency should instill greater confidence in investors, and that will in turn enhance the value of the REITs,” Siay said.mukul.munish@singtaonewscorp.com
By Mukul Munish
Source: The Standard
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