Hong Kong real estate investment trusts (REITs) are to be included in the blue-chip Hang Seng Index, following similar moves in Singapore, Japan and Australia.
The decision is part of an outcome of a quarterly index review by indices provider Hang Seng Indexes. It says REITs will become eligible for selection for all indexes in the Hang Seng Family of Indexes starting from the next quarterly review.
The move is expected to lead more real estate companies to consider REIT listings in Hong Kong.
Peter Verwer, CEO of the Asia Pacific Real Estate Association (APREA), said: “The significance is that Hong Kong becomes a magnet for capital because the announcement means that REITs have now moved into the mainstream for consideration by investors.”
APREA has been spearheading a campaign to include REITs in stock market indices around Asia-Pacific.
“This is particularly important in a world where pension and provident funds, mandatory savings schemes and ETFs rely on benchmark indexes to guide investment allocations,” Verwer said.
While there has been a marked increase in interest to include real estate in portfolios from pension funds and provident funds, many of these investors remain “seriously underweight in both public and private real estate,” he said.
“We are moving from a phase where they were zero allocation to an awakening of interest in real estate allocation. The decision to unchain eligible REITS from the confines of a sector-specific index will boost visibility and attract more capital to Asian real estate.”
In Singapore, the latest REIT to be included in the benchmark FTSE Straits Times Index is Ascendas Real Estate Investment Trust (A-REIT), which is managed by Ascendas Funds Management.
Verwer said REITs were evolving rapidly as a viable asset class in Asia as policy makers considered them a fund raising instrument to finance economic development and create retirement wealth.
The Indian government recently paved the way for Indian REITs. The Modi government said that it saw REITS as a vehicle to achieving economic development.
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