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As the post title suggests, I will be starting my foray into the Hong Kong Stock Exchange.
Origination
My wife has a lump sum of Hong Kong dollars during her two-year work stint in Hong Kong. I realized that there is 0% interest for Hong Kong Dollar deposits or any financial instruments. The money has been lying there for a couple of years! And she agreed for me to help her manage it.
Investment objective
My wife mentioned that the investment objective is capital preservation. She had already lost quite a lot due to forex rate and inflation. She was earning Hong Kong dollar when it was HKD5+ to SGD1 and now its HKD6+ to SGD1!
Investment approach
In terms of tools, I am going to use my SCB online equity trading account to invest in the Hong Kong Stock Exchange. The reason why I choose this is because I already have an SCB online equity trading account and the commission rate is one of the lowest around. I’ve read a little about Interactive Brokers which also have competitive rates, but it will be too much of a hassle to open a new account on a different platform.
HK REITs
Since my wife wanted to preserve capital, I think the HK REITs will be a good starting point. From my research, Hong Kong does not have capital gains tax and there is no withholding tax for dividends repatriated to Singapore.
There are currently 11 HK REITS
Champion Real Estate Investment Trust 2778:HKG
Fortune Real Estate Investment Trust 778:HKG (In case you’re wondering, its the same Fortune REIT on SGX as its dual-listed on HKSE & SGX)
Hui Xian Real Estate Investment Trust 87001:HKG
Link Real Estate Investment Trust 823:HKG
New Century Real Estate Investment Trust 1275:HKG
Prosperity Real Estate Investment Trust 808:HKG
Regal Real Estate Investment Trust 1881:HKG
Rreef China Commercial Trust 625:HKG
Spring Real Estate Investment Trust 1426:HKG
Sunlight Real Estate Investment Trust 435:HKG
Yuexiu Real Estate Investment Trust 405:HKG
I have done a brief scan of the property portfolio of the 11 HK REITs and two REITs stood out for me:
Champion Real Estate Investment Trust (2778:HKG)
Amongst the various types of REIT, I particular like Grade A office REITs and industry space REITs. Champion REIT has a portfolio of 2.85 million square feet of prime office and retail floor area by way of two properties in Hong Kong, Citibank Plaza and Langham Place, one on each side of the Victoria Harbour. I quite like these two properties. Quantitative wise, Champion REIT has a Price/Book value of 0.45 and dividend yield (ttm) of 5.83%, which is pretty decent. Sounds like a “champion” to me! (pun intended!!)
Link Real Estate Investment Trust 823:HKG
Link REIT’s portfolio consists of properties with an internal floor area of approximately 11 million square feet of retail space and approximately 80,000 car park spaces. Other than the huge GFA, why LINK REIT stood out is because I’ve not really seen ‘car park spaces’ specifically mentioned inside the portfolio of a REIT. From what I was told car park lots in Hong Kong is expensive. Link REIT has a Price/Book value of 1.03 and dividend yield (ttm) of 3.85%. From the first look, it may seem its fairly priced right now. But it will be interesting to research further into the REIT’s operations.
That’s all for now. I will be focusing some time on Hong Kong stocks. I will greatly appreciate any pointers that any experts in the comments below!
Regards,
Naro
Finance 4 U and Me 
Hi Naro,
Does that mean that you have opened a multi-currency account to transfer your HKD to your HKD trading settlement account?
I was told when I visited SCB the last time that regardless of the base currency being traded, it has to be converted from SGD. However, I was serviced by a young man, so I am not sure how accurate his information was.
If I am not wrong, the currency conversion rate that SCB charges is also very high, about 1% each way, depending on the currency pair.
I would love to hear more about how this goes for you. Good luck!
Chris
Hi Chris,
I was informed over the phone that I need to open a SCB Foreign Currency Account (HKD) and TT the HKD into this account.
With the HKD in the SCB Foreign Currency Account, I can do an internal transfer into the HKD Securities Settlement account (for trading) via internet banking.
However, when I went to SCB branch over last weekend, I was told that there was a loophole that allows me to TT direct into the HKD Securities Settlements account and without fees! Hush hush. I’m going to try it out soon as I need to settle some issues with my wife’s HKD account first.
Best regards,
Naro
Hi Naro,
Would just like to share that while REITs does seem attractive to many given their yield, they can actually be quite dangerous. Any increase in interest rates, these heavily geared REITs bottom line profits would be affected, resulting in lower dividends. This might result in a loss in capital as well given how people start exiting it due to the lower yield.
Thanks TL for the caution on REITs. Agree that interest rate is key and the gearing ratio is important when assessing the REITs.