Hong Kong’s first property investment fund, which was nearly scuppered by a legal action from a pensioner, has gained on its first day of trading.
Shares in the Link REIT, or Real Estate Investment Trust, rose as much as 15% to 11.80 Hong Kong dollars ($1.5).
The fund will buy real estate such as car parks from the government and pay investors a fixed return from rents.
However, the scheme was delayed by a legal case that complained it would push up rents and grocery prices.
The case was dismissed earlier this year and demand for Link REIT has been strong because the returns it offers are better than those available in bonds.
That is especially the case now that the US Federal Reserve has hinted that it will stop raising interest rates in the world’s largest economy, prompting many investors to look elsewhere for opportunities.
“In the long-term, I think there is quite a lot of institutional money that might just want to simply have a yield, a relatively high yield, with perhaps a little bit of growth potential in it,” said Howard Gorges of South China Brokerage.
“If the expectation is that interest rates are near their peak, then it would be quite tempting to lock this in,” he explained.
The sale of shares in the Link REIT was the world’s largest initial public offering (IPO) of a property trust.
It was delayed after 67-year-old pensioner Lo Siu-lan applied for a judicial review.
She argued that the sale of property to Link REIT would push rents higher, not only for public housing tenants like herself but also for the shops where she buys fish and vegetables.
Those prices would then have to rise as a result, creating a situation where she and others like her were subsidising the profits of Link REIT.
Ms Lo also alleged that the portfolio of property being sold to the Link REIT was undervalued.
The case went all the way to the territory’s highest court, which found against Ms Lo in July.