HKEx To Allow Fast Listing Of Collective Investment Reits

by Mary Swire, for LawAndTax-News.com, Hong Kong

28 August 2003

After Hong Kong's Securities and Futures Commission decided last week to allow Reits (Real Estate Investment Trusts) to operate as Collective Investment Schemes in Hong Kong, provided they are listed, stock-market regulator Hong Kong Exchanges and Clearing (HKEx) has decided to change its rules to allow for the almost-automatic listing of such schemes, including Reits. Reits typically pool property assets with stable rental income, such as car parks, hotels, shopping malls and offices. Approved collective investment schemes in Hong Kong are exempt from profits tax.

HKEx announced:

'The Stock Exchange of Hong Kong Limited (the Exchange) has amended Chapter 20 and its ancillary sections of the Main Board Listing Rules for the purposes of:

• Creating a listing and trading platform for all collective investment schemes that are authorised by the Securities and Futures Commission (the “SFC”);
• Clarifying the respective regulatory roles of the SFC and the Exchange in the initial listing of, and the on-going regulatory monitoring of, collective investment schemes; and
• Streamlining the listing process for authorised collective investment schemes.

'The rule change will come into effect on 1 September 2003.

'Since the offer structure and offer document of a collective investment scheme would have been vetted by the SFC during its authorisation process, the Exchange’s role at the time of listing will be confined to ensuring compliance with procedural aspects of the listing process. Therefore, the function to grant listing approvals will now be discharged by the Listing Unit, instead of the Listing Committee, of the Exchange.'

'An authorised collective investment scheme listing applicant will no longer require a “sponsor”. Given the involvement of the SFC in all aspects of the approval of a CIS, the SFC is in a position to impose requirements as to the qualification and behaviour of persons involved in arranging the offering of interests in a CIS. The new rules simply codify the current practice of the Exchange in accepting the administrative nature of the listing related work of the “sponsor”, which can be carried out by an experienced agent of the CIS.'

Initially, many Hong Kong institutions expressed major doubts about the usefulness of Reits in the SAR, but recently property companies and agencies have warmed to the idea. The Housing Authority is said to want to use reits to dispose of $20 billion worth of car parks and shopping centres, while Sun Hung Kai Properties, Cheung Kong (Holdings) and Hutchison Whampoa have all expressed interest.

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