Sell Hong Kong property stocks on Trump win: Dutch fund manager

Investors should dump Hong Kong real estate stocks if Donald Trump wins the US presidential election in November, according to a Dutch pension fund manager who oversees almost US$13.5 billion of property equities globally.

A win for the billionaire real estate mogul could bring about more protectionism and hurt world trade, which would have a significant impact on China and Hong Kong, said Hans Op ’t Veld, head of listed real estate at PGGM. The impact of a victory for the Republican candidate would be as far reaching as the UK’s Brexit vote that caused Japanese real estate stocks to fall, he said.

“The minute Trump gets elected I would worry about Hong Kong, not so much about the US,” said Op ’t Veld. “China is the producer for the world, so you don’t want to be in China” if Trump wins. About 9 per cent of Op ’t Veld’s real estate holdings are in Hong Kong.

The Hang Seng Properties Index has gained about 14 per cent this year compared with a gain of about 6 per cent for the 107-member MSCI World Real Estate Index.

US real estate stocks, which together with Canada accounts for about 55 per cent of PGGM’s allocation, will probably enter a more volatile period now that the election is less than two months away, Op ’t Veld said.

Publicly-traded US landlords that are most exposed to global trade, including lodging and logistics, could be the most vulnerable to any sell-off following a Trump victory, he said.

PGGM reviewed its allocation to UK real estate securities about six months ahead of the Brexit vote and cut its relative position there in favour of German residential landlords, the manager said, declining to elaborate. Landlords with significant development programmes and exposure to financial services tenants continue to be the most vulnerable to under performance in the UK, he said.

Office rents in the City of London financial district will fall by 9 per cent next year, causing values to decline by about 11 per cent, JPMorgan Chase & Co. analysts including Tim Leckie wrote in a note published last week.

Rather than buying UK real estate stocks, investors should focus instead on continental European property shares as they offer better dividends, Leckie said.