The Asia Pacific Real Estate Association (APREA), a lobbyist for the regional property industry, believes that adding REITs to the Hang Seng Index (HSI) will help to promote local investment into these funds.
Hang Seng Indexes, the compiler of Hong Kong’s blue chip index, will conduct its quarterly index review on November 7. Investors are likely to keep a close eye on whether The Link REIT, the territory’s largest such investment vehicle, will be included in the HSI. Such a move would be the first of its kind for a REIT.
The last index review, conducted in August, made REITs eligible for selection in the HSI, which currently covers 50 stocks, starting from the next index review. Vincent Kwan, director and general manager at Hang Seng Indexes, said at the time the decision was based on the maturity of REITs’ development in Hong Kong.
Speaking to Asia Asset Management, Hubert Chak, a member of APREA’s Hong Kong chapter board, said that inclusion would boost the local REIT market. “The fact that Hang Seng Indexes mulled including REITs in the HSI can allow the market to be more familiar with the vehicle, and as such this is good for the development of REITs,” he said. Mr. Chak added that inclusion in the index would immediately boost the REIT’s trading volume, as index-tracking funds subsequently rebalance their portfolios.
Mr. Chak’s interest in The Link REIT’s inclusion in the HSI is also a personal one, given that he is director (finance) of the fund’s management firm, The Link Management Limited.
Peter Verwer, chief executive at APREA, told Asia Asset Management that he believes new rules which allow Hong Kong’s REITs to expand into property development projects will also play a role in the latest decision of Hang Seng Indexes in regard to listed real estate funds. “The fact that REITs are now eligible for inclusion in the Hong Kong Stock Exchange’s blue chip index is another positive sign that the new Hong Kong REIT rules are changing mind sets,” he said.
In making its decision, Hang Seng Indexes will incorporate factors such as market capitalisation, turnover and financial performance.
