Hang Seng mulls adding REITs to blue chip index

21 August 2014   Category: News, Asia, Global, Hong Kong   By Derek Au

Hong Kong indices provider Hang Seng Indexes (HSI) has said it will add REITs to its list of potential candidates for inclusion in the territory’s blue chip index.

HSI revealed its decision as part of the results of a quarterly index review. It said REITs will become eligible for selection for all indices within the HSI family, including the Hang Seng Index, which covers 50 blue chip stocks, starting from the next index review.

Vincent Kwan, director and general manager at HSI, told Asia Asset Management that local REITs had evolved sufficiently to be considered for inclusion.

“In the past, we needed more time to observe and study the investor perception of REITs, as well as the trading volume of the trusts. Now, we believe the criteria for every aspect is relatively suitable. REITs have had lots of changes after a number of years; there have been relaxations recently in their business restrictions and requirements. Investors have a deeper understanding of REITs and the trusts are also actively traded,” Mr. Kwan said.

Asia’s largest REIT, Hong Kong-listed The Link REIT, which owns shopping malls, food markets and car parks, has become the favourite to be added to the blue chip index following HSI’s announcement. Its market capitalisation was HK$107 billion (US$14 billion) as of its closing price on August 19.

Victor Yeung, managing partner at Admiral Investment, told Asia Asset Management that he believed the move by HSI made sense, as REITs have already been included in the key indices of regional markets such as Singapore and Australia. He said the decision could attract more REITs to list in the city.

Mr. Kwan added that HSI would periodically evaluate other financial instruments in terms of becoming contenders for the blue chip index. He said eligibility depends on their development, turnover and investor understanding.