Have $1,500 to Invest? 1 Affordable Hang Seng Index Stock to Consider

Hong Kong REIT

Author: Tim Phillips

May 25, 2021

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For investors in Singapore, Hong Kong stocks are a great way to diversify your exposure to local and US companies. That’s because stocks listed in the city are primarily exposed to the vast growth in China.

However, for investors here, if you want to buy stocks in Hong Kong there are minimum “lot” sizes. Unfortunately, unlike Singapore, companies listed in Hong Kong do not have a uniform lot size.

Therefore, the high amount of cash needed to buy one “lot” of shares can vary from company to company. However, that shouldn’t be a barrier to buying great companies over the longer term.

If you’re starting out, though, that can be an issue. For example, investors who want to buy Tencent Holdings Ltd (SEHK: 700) will require quite a bit of initial capital.

For the online gaming giant, investors have to purchase a minimum of 100 shares. At Tencent’s current price of HK$610 that means purchasing HK$61,000 worth of shares.

Many investors, therefore, may want to purchase stocks that aren’t prohibitively expensive and are more affordable (say under HK$9,000, or S$1,500, per lot). With that, here’s one Hang Seng Index stock that fits the bill.

Link REIT

Link Real Estate Investment Trust (SEHK: 823) is Asia-Pacific’s largest REIT by market cap. It owns multiple suburban shopping malls and car parks in Hong Kong.

In recent years, it has also expanded its portfolio of real estate assets into mainland China and Australia, while in the middle of 2020 it also purchased its first London real estate asset – a 17-story office building in Canary Wharf.

The REIT’s unit price has done extraordinarily well since it was first listed in 2005. Its units were listed back then at a price of HK$10.30 apiece while today its unit price sits at HK$74.70.

That gives investors who had invested at the IPO an over-600% return – on just the unit price alone. In its latest interim earnings report for the six months ended 30 September 2020, it announced a distribution per unit (DPU) of HK$1.4165.

Even better for retail investors is that its minimum lot is 100 shares meaning one lot of Link REIT units costs just under HK$7,500 to purchase.

Holding up amid headwinds

Even with the Hong Kong protests and Covid-19 battering retail sentiment in the city, Link’s earnings held up alright.

For the six months ending 30 September 2020, its revenue only fell 1.9% year-on-year to HK$5.2 billion while its net profit income was HK$4.04 billion, down just 0.8% year-on-year.

Commonly compared to local Heartland shopping mall REIT Frasers Centrepoint Trust (SGX: J69U), Link REIT also has a solid track record of rising distributions and solid financials given the reliable nature of its Hong Kong malls that serve local communities.

Income stream + affordable

Link REIT provides investors with a relatively reliable income stream and is starting to look overseas for growth as its latest purchase of a Shanghai shopping mall attests to.

Although investors should watch Link REIT’s expansion plans going forward, it should still be able to pay out solid dividends for investors – and at a relatively low cost of entry to boot.

Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares in any companies mentioned.

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.