Few changes seen after Deutsche Bank raises Link stake

PUBLISHED : Thursday, 13 September, 2007, 12:00am
UPDATED : Thursday, 13 September, 2007, 12:00am

The fact that Deutsche Bank, the biggest financial institution in Germany, has become the largest investor in the Link Real Estate Investment Trust is unlikely to lead to any more shake-ups at Hong Kong's first and largest reit, analysts said.

'It's mainly related to holdings on behalf of clients so it's likely going towards derivative or structured products,' said Kenny Tang Sing-hing, an associate director at Tung Tai Securities. 'Some investors want to enhance yield so they can sell a call option on the stock. And when they do that, they have to put shares with the bank for collateral.'

A similar 'renting out of shares' happened when Lehman Brothers and Credit Suisse got involved in warrants related to HSBC several months ago, he said.

Deutsche held more than 482 million Link shares, or a 23 percent stake, as of September 4, according to a filing with the Hong Kong stock exchange. In August the bank held only 110 million shares.

Deutsche's share purchases put its holding above the 18 per cent held by activist hedge fund The Children's Investment Fund Management of Britain. TCI has a reputation for using aggressive tactics to influence the corporate strategy of companies in which it has a stake.

The fund helped force the departure of Link Reit chairman Paul Cheng Ming-fun in January, a year before his contract expired.

TCI, set up in 2003 by money manager Christopher Hohn, had long tried to remove Mr Cheng for ignoring its demands for a more aggressive investment strategy.

In July last year the Link Reit appointed TCI director John Ho Chi-on as a non-executive director. Many saw the move as an attempt to appease the fund while keeping the management intact.

Link Reit, which listed in November 2005, runs 180 shopping centres and car parks in public housing estates that were previously owned by the city. Reits distribute a dividend to investors generated from rental properties they own.

Last year, rises in service charges and rents at Link-held properties led some critics to charge the Link Reit with trying to force out small retailers. Shop tenants were accustomed to below-market rents previously offered by the Housing Authority.