Regulators Approve Cross-Border Trading for Mainland REITs in Hong Kong: Link REIT’s Jurong Point Mall in Singapore

Regulators in Beijing have recently approved a groundbreaking system that could potentially revolutionize the real estate investment landscape in China. The new system allows the country’s 36 Real Estate Investment Trusts (REITs) to be traded cross-border into Hong Kong, opening up a world of opportunities for mainland investors.

This move, known as ‘REIT Connect’, was announced by the China Securities Regulatory Commission (CSRC) and is set to provide mainland investors with the chance to invest in real estate globally. With the inclusion of qualified REITs in the Stock Connect scheme linking the Shanghai, Shenzhen, and Hong Kong exchanges, wealthy mainland individuals, mutual funds, and institutions can now buy and sell equity in property trusts on the HKEX.

Jeremy Ong, partner and head of Hong Kong REITs practice at Baker McKenzie, highlighted the appeal of Hong Kong REITs to mainland investors, citing factors such as overseas property exposure and higher yields compared to mainland REITs. This move comes on the heels of the CSRC expanding its pilot REIT program to include trusts holding retail properties, offering more options for developers, fund managers, and retail investors.

The manager of HKEX-listed Link REIT, George Hongchoy, sees REIT Connect as a game-changer for both markets, expanding the investor base, attracting more capital, and diversifying stable income options. Link REIT, Asia’s largest REIT by market cap, manages a diverse portfolio across Hong Kong, mainland China, and overseas markets, with a significant portion invested in assets in Singapore, Australia, and the UK.

With Singapore’s REIT market currently larger than Hong Kong’s, REIT Connect presents an opportunity for the asset class to build scale and liquidity on Greater China exchanges, potentially competing with Singapore for new listings. Investor education will be key to the success of REIT Connect, particularly in mainland China, where retail investors may need more guidance on investing in fixed income products.

Overall, the approval of ‘REIT Connect’ marks a significant milestone in the evolution of real estate investment in China, opening up new avenues for mainland investors to diversify their portfolios and access global real estate opportunities.