Hang Seng Reit Index makes quiet, timely debut
Updated: 2008-11-05 07:47
By Raymond Ho(HK Edition)
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Hong Kong's own benchmark index designed exclusively for Reits (real estate investment trusts) has seen a humble inception last week when the financial world was glued to the main indices, most of the time in red, around the globe.
The Hang Seng Indexes Company has officially launched Hang Seng Reit Index on Oct 27, covering all Reits currently listed in Hong Kong, including GZI Reit (14.78 percent), Sunlight Reit (15.42 percent), RREEF CCT Reit (12.54 percent), Prosperity Reit (11.42 percent), Link Reit (20.25 percent), Regal Reit (11.55 percent), and Champion Reit (14.05 percent).
The Hang Seng Reit Index serves as the basis for index products, including funds and derivatives, says the index provider, as well as a benchmark for investors exposed to the Reit asset class.
Having suffered from the plummeting stock markets, global investors are turning to Reits, said Standard & Poor's in its Oct 25 report to coincide with the launch of Hang Seng Reit Index.
The debut of Hong Kong's local Reit index may come just right on time to remind the investors that there is an option out there that guards against the swings of stock and property markets.
Especially during uncertain times, Reit is poised to demonstrate its defensiveness against market volatility, drawing on its high liquidity, transparency, tax efficiency, and most important out of all, steady dividend yields versus other listed stocks.
Reits are legally bound to distribute 90 percent or all of their income to investors. That may look attractive when listed property developers decide not to pay out dividends amid challenging times.
Although the risk and return to a larger extent of Reits mirror that of the real estate sector, Reits receive special tax considerations and offer both high yields and liquidity that physical properties cannot compare.
Including Hong Kong, Reits in Asia have been the best performers for the 12-month period ending June 2008 in terms of one- and three-year returns, according to another report published by Ernst & Young last month.
Total market capitalization of all publicly-listed Reits around the world reached nearly $605 billion, as of June 30, down from $764 billion a year ago, the accounting firm computed.
S&P's Global Reits index fell only 4.4 percent in the third quarter this year, faring much better than the global equity market, which declined 16.6 percent.
As the mainland is planning to launch a pilot Reit scheme next year, (distressed) mainland developers will be offered a chance to offload their rental assets, be them Grade-A office towers or shopping malls, so as to generate some cash flow to finance development activities and overheads.
The author is deputy managing director with Vigers Asia Pacific Holdings.
(HK Edition 11/05/2008 page3)