Sell H.K. Property Stocks on Trump Win Says $13 Billion Managerby
PGGM’s Op ’t Veld says protectionism might hurt global trade
Pension manager says it cut U.K. holdings before Brexit vote
Investors should dump Hong Kong real estate stocks if Donald Trump wins the U.S. presidential election in November, according to a Dutch pension fund manager who oversees almost $13.5 billion of property equities globally.
A win for the billionaire real estate mogul could bring about more protectionism and hurt world trade, which would have a significant impact on China and Hong Kong, said Hans Op ’t Veld, head of listed real estate at PGGM. The impact of a victory for the Republican candidate would be as far reaching as the U.K.’s Brexit vote that caused Japanese real estate stocks to fall, he said.
“The minute Trump gets elected I would worry about Hong Kong, not so much about the U.S.,” said Op ’t Veld. “China is the producer for the world, so you don’t want to be in China” if Trump wins. About 9 percent of Op ’t Veld’s real estate holdings are in Hong Kong.
The Hang Seng Properties Index has gained about 14 percent this year compared with a gain of about 6 percent for the 107-member MSCI World Real Estate Index.
U.S. real estate stocks, which together with Canada accounts for about 55 percent of PGGM’s allocation, will probably enter a more volatile period now that the election is less than two months away, Op ’t Veld said. Publicly-traded U.S. landlords that are most exposed to global trade, including lodging and logistics, could be the most vulnerable to any sell-off following a Trump victory, he said.
PGGM reviewed its allocation to U.K. real estate securities about six months ahead of the Brexit vote and cut its relative position there in favor of German residential landlords, the manager said, declining to elaborate. Landlords with significant development programs and exposure to financial services tenants continue to be the most vulnerable to under performance in the U.K., he said.
Office rents in the City of London financial district will fall by 9 percent next year, causing values to decline by about 11 percent, JPMorgan Chase & Co. analysts including Tim Leckie wrote in a note published last week.
Rather than buying U.K. real estate stocks, investors should focus instead on continental European property shares as they offer better dividends, Leckie said at a conference in Paris on Wednesday.