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Chart of the Week: Link REIT Gets Hammered by Multiple Headwinds

It has been a horrid 12 months for property landlords and developers alike in Hong Kong. That’s particularly true for Asia’s largest REIT, and major Hong Kong landlord of suburban malls, Link REIT (SEHK: 823).

Having seen solid gains between its IPO in 2005 (when it floated at HK$10.30 per share) and July of last year, the landlord has been hit by a number of headwinds.

The REIT had managed to grow its distribution per unit (DPU) strongly for the 12 years after it listed on the back of robust rental reversions and by riding the boom in demand for retail space in the city.

Yet this year looks set to be one of the most challenging periods for it. First, in the middle of last year a series of anti-government protests in Hong Kong turned increasingly violent and hit business sentiment. This unrest lasted until the end of 2019.

Then, Covid-19 took hold in Hong Kong as the pandemic that began in China went global. Tourism, food & beverage and retail profits have plunged even further as mainland Chinese tourists stay away from Hong Kong and locals stayed indoors.

Yet finally, just as life in the city seemed to be returning to some semblance of normalcy, China’s government looked set to pass a controversial new national security law for Hong Kong.

All these events over the past year have hit Link REIT, and other developers and landlords, hard. Link REIT had actually touched an all-time high of HK$99.80 in June of 2019, when protests in Hong Kong had already started.

Since then, it has been all downhill for Link as confidence in the property sector in the city evaporates. Link REIT shares now sit at HK$60.95, nearly a whopping 40% down from its high around a year ago.

On Friday alone, after news of the planned national security law became public, Link REIT shares plunged by 10.2%.

Link REIT has hedged its exposure to Hong Kong by buying properties in China and Australia, although the majority of its income is still derived from its home city. Is this the end of a lucrative journey for the giant REIT or do better days (eventually) lie ahead?

Link REIT share price (past 12 months)

Link REIT decline

Source: Google Finance

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Tim Phillips owns shares in Link Real Estate Investment Trust.