The Link Conundrum: Two Ways Out — Housing Authority Malls for Competition, MPF Default Funds Holding Link

Link REIT has long been the city’s favourite target, but politicians’ handling of it varies wildly in effectiveness. Non-establishment groups have stormed Link’s offices; when she was chief secretary, the former chief secretary ranked Link first among the “three big mountains”. Yet none of that generated as much discussion as legislator Regina Ip’s two moves last week. This piece unpacks her arguments, then offers two genuinely workable solutions.

Ip’s Two Moves: Why They Outperformed Radical Protests

Regina Ip introduced two new dimensions to the Link debate:

Move one: questioning the 2014 relaxation of the REIT Code. She criticised the government for relaxing the Code on Real Estate Investment Trusts in 2014, a move whose harms arrived before any benefits. Because this touches overall financial policy rather than Link alone, the government cannot ignore it.

Move two: the “political eviction” allegation. She accused Link of threatening to evict a district councillor’s office, lifting the affair from an economic matter (market imbalance hurting small tenants) to the level of political persecution — and public opinion erupted.

The non-establishment camp may simply not know financial regulation well enough to use the first move; but the second works for any party — any district councillor evicted over political stance is guaranteed headlines. That they still have not learned the trick, leaving Ip to harvest the gains, is a gap in craft and experience.

Notably, on operational matters Ip was the rational one: she did not blast Link for neglecting small shopkeepers. Instead she took the SFC’s 2014 relaxation of the REIT Code as her entry point, questioning its purpose and effect, and demanded the Legislative Council’s relevant panel follow up — aiming squarely at the SFC and the Financial Services and Treasury Bureau rather than at Link. Strategically precise.

The Fundamental Difference Between Link and the Other Two “Mountains”

Precisely because Link has low public character and the government cannot intervene directly, Ip chose the explosive “political eviction” narrative — appealing to sentiment and gossip, leaving Link with no counter but clarification.

The Two Relaxations of the REIT Code

The 2014 relaxation was meant to kill two birds with one stone. First, to lure more Hong Kong and mainland companies to package properties as listed REITs, diversifying financial products and cementing Hong Kong’s status as an international financial centre — Hong Kong’s REIT market had clearly lagged the world over the previous decade: in Asia alone, Japan, Australia and Thailand each had roughly five times Hong Kong’s number of REITs, Singapore more than three times, and even Malaysia had more. Second, to let Link earn returns elsewhere so it need not “squeeze Hong Kong dry” — if Link earned more abroad, it might ease off local tenants and rent pressure.

That was the government’s good intention, even wishful thinking: in reality, after the 2014 change Link upgraded and cashed out malls, channelling the proceeds into property development and other financial products.

Myth-Busting: Would Tighter REIT Regulation Work?

Demanding the government and the SFC tighten REIT regulation runs against the global direction of the financial industry, weakens Hong Kong’s competitiveness, and is simply impractical. And the malls Link has sold or is selling are spilt milk — they cannot be taken back.

From an operational view, Link offloading some malls merely shifts a high-risk, hard-to-run business into lower-risk, higher-return investments — a commercial decision, not a corporate-social-responsibility failure. Given how entangled malls are with district politics, Link selling to avoid the hassle is understandable.

Two Workable Solutions

Solution one: the Housing Authority builds competing malls next to Link malls. From a town-planning perspective, the government should find land near every Link mall for a Housing Authority-managed shopping centre. This introduces competition — and when Link sells a mall in future, even if the buyer just wants the land for property investment with no interest in running a mall, residents still have the Housing Authority mall as backup instead of travelling to another district for daily goods and doctors. The new malls could also favour youth entrepreneurship or social enterprises under government policy, multiplying the social benefit.

Solution two: let MPF funds invest further in Link — share the gains. Current MPF law treats REITs as high-risk “other investments”, capping them at no more than 10% of an MPF portfolio. Lowering the threshold for buying REITs would help — whether individual funds buy Link is each manager’s call, but a lower bar makes it easier for local funds.

Going further: since April 2017, every MPF scheme must offer a Default Investment Strategy (DIS, the “lazy fund”). The government could require the strategy to include Link — binding more Hongkongers’ retirement plans to Link’s fortunes, giving Link’s development a public character so that Link making money no longer triggers automatic condemnation.