Hong Kong Reits need greater flexibility
The city has one of the world's largest retail-oriented operations, but lags behind some regional neighbours, including Singapore
The development of the international financial industry has been robust and rapid, and to maintain its position as an international financial centre, Hong Kong must align itself with market changes and strengthen its advantages in view of the rapid growth of wealth in Asia as well as market reform on the mainland.
By doing these two things, Hong Kong can enhance its role as an offshore yuan business hub and international asset management centre.
The launch of real estate investment trusts (Reits) in Hong Kong in 2005 marked a milestone in the development of financial products. A Reit is a collective investment scheme with clear business objectives that allows investors to share the benefits of investing as a group, benefits that include professional management, economies of scale, and diversification of investments.
Reits can invest in real estate only. Compared with direct investment in property, marketability and liquidity are higher. Therefore, Reits provide investors with an investment alternative to purchasing properties and investing in property-related stocks, allowing them to diversify their portfolios and capitalise on the development of the industry.
Simply put, a retail investor with as little as HK$44.45 (the closing unit price on May 7), can buy a unit of The Link Reit, and indirectly become a part owner of some of the largest retail assets in the city.
The development of Asian Reits has taken place only recently. The first was launched in Japan in 2001, and Hong Kong set up a regulatory framework. The listing of The Link in 2005 marked the birth of Hong Kong's Reit market.