The share price of Link Reit dropped 2.2 per cent to $13.35 yesterday in a sign that institutional investors, who had previously regarded the real estate investment trust as a long-term investment, were taking profits and looking for fresh opportunities.
The stock began to lose momentum after Cafe de Coral chairman Michael Chan signalled his intention of cashing in the firm's 1.1 million Link Reit shares to book a $3 million to $5 million gain, more than the dividend Link Reit could pay over the next five years.
Even for institutional investors, the temptation has been strong to sell Link Reit shares rather than lock up an almost 30 per cent capital gain in less than three weeks.
Pauline Dan of Manulife Asset Management (HK), which owns an undisclosed number of Link Reit shares, said it was logical to take profits at the present price level.
'If you are looking for long-term returns, there is no obvious substitute for Link Reits in the same class of investment - they offer a steady return and they are property related,' she said.
'But you have to bear in mind the share price has got a limited upside and the 4-plus per cent yield it presents is not attractive for investors, compared with, for example, the 4.5 per cent yield the 10-year HK dollars exchange fund notes offer.'
The aggressive accumulation of 17.95 per cent of Link Reit shares by British hedge fund The Children's Investment Fund Management (TCI), which pushed the price to a high of $13.65 to post a gain of nearly 41 per cent based on the discount price of $9.70 per share, has led to speculation the hedge fund may attempt a board shake-up. It is also raising fears that undervalued companies may have to offload shopping malls and car parks to create value.