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Link Reit sinks as surprise US$2.4 billion cash call triggers a sell-off in Hong Kong property stocks amid debt concerns

  • A Hang Seng gauge tracking 13 Hong Kong and mainland China developers slips by the most in two months, erasing US$5 billion of capitalisation
  • Link Reit’s first-ever rights issue, priced at a steep discount to market price, will be fully underwritten by HSBC and other banks

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A vehicle zooms past a screen displaying the Hang Seng stock index at Central, Hong Kong in July 2022. Photo: Reuters
Jiaxing Li
Link Reit, Asia’s largest real estate investment trust, spooked Hong Kong property stocks on Monday after it unexpectedly asked US$2.4 billion from unit holders to help pare debt. Investors dumped the stock for its worst sell-off since October 2008.
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The stock sank as much as 16.4 per cent to HK$52.50 in Hong Kong trading, erasing HK$19 billion (US$2.4 billion) from its market capitalisation. It closed 12.8 per cent lower on Monday at HK$54.75, the worst one-day setback since a 15.4 per cent plunge on October 10, 2008.

Link Reit proposed a rights issue on a one-for-five basis at HK$44.20 each, according to a stock exchange filing on Friday. The subscription price represents a steep 30 per cent discount to its market price, stoking concerns about earnings dilution and dividend cuts.
George Hongchoy, CEO of Link Reit, during an interview in Wan Chai in November 2019. Photo: Tory Ho
George Hongchoy, CEO of Link Reit, during an interview in Wan Chai in November 2019. Photo: Tory Ho

The HK$18.8 billion cash call, the company’s first since its listing in early 2005, will be fully underwritten, it said. HSBC, one of the lead underwriters with DBS Group of Singapore and JPMorgan Chase, slipped 0.4 per cent to HK$57.75. Citigroup and Goldman Sachs cut their stock recommendations.

“The raise came as a surprise to us,” Sam Wong, an analyst at Jefferies said in a report. “Deleveraging does not appear to be a priority with the cost of debts actually showing signs of peaking out.” The plan could hurt other highly leveraged Hong Kong developers with equity raise risk, he added.
Link Reit recently bid and won a parcel of land near Anderson Road in Kwun Tong for HK$766 million. Photo: SCMP
Link Reit recently bid and won a parcel of land near Anderson Road in Kwun Tong for HK$766 million. Photo: SCMP

The plan infected the city’s broader stock market. The Hang Seng Property Index, which tracks 13 developers in Hong Kong and mainland China, slumped 3 per cent, the most in two months. The index’s capitalisation shrank by HK$39.2 billion (US$5 billion), according to Bloomberg data.

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