Tight controls on trusts would run counter to Hong Kong’s free economy

PUBLISHED : Tuesday, 31 October, 2017, 4:47pm
UPDATED : Tuesday, 31 October, 2017, 11:02pm

I noticed a banner with a picture of legislative and executive councillor Regina Ip Lau Suk-yee, at Lei Tung Estate, in Ap Lei Chau, and I was so surprised by what I read that I took a picture of it. I think it requires some clarification from Mrs Ip.

The banner called for the Hong Kong exchange’s listing rules and guidance to be revised to bar real estate investment trusts (reits) from disposing of their assets.

If this is really Mrs Ip’s view, I find it surprising, given that she is a member of the de facto cabinet of the Hong Kong government (Exco) and directly influences policy.

There are a total of 11 of these reits listed in Hong Kong, including the Link Asset Management Limited (the Link Reit). The stringent general listing rules aside, they are also subject to the Securities and Futures Commission’s code on reits. Ceilings, for example, are imposed on their borrowing limits as well as the ratios of property development in their asset portfolios.

These are vital and reasonable investor safeguards, especially when the market is being overshadowed by an imminent hike in interest rates.

Mrs Ip’s demand, however, has nothing to do with market safeguards. Instead, it appears to be a populist, political move calculated at appeasing those voters who have, for example, complained about rising rents at shopping malls and wet markets run by the reits in places like Ap Lei Chau. Surely it is the basic right of any business to sell its so-called livelihood-related properties, such as car parks, wet markets and malls.

Is she saying that the reits should be deprived of that right? Given prevailing market conditions, increases in rents for commercial units are inevitable. Even the government’s Housing Authority is known to have raised rents in its commercial units by up to 30 per cent.

What Mrs Ip is calling for could hardly curb commercial rent rises. But surely it runs counter to the very essence of our capitalist way of conducting business.

If such a policy was implemented it would set a dangerous precedent of dictating what assets a public company can or cannot dispose of. It could put at risk Hong Kong’s status as a hub for initial public offerings.

Louisa Ko, Aberdeen