HSBC Global Research noted in a report that share prices of REITs hiked 10-17% in the week after they were admitted to the Southbound Stock Connect, outperforming the HSI. With increased interest from yield investors, REITs have the potential to be re-rated as they gain a larger investor base and better liquidity. This interest rate-sensitive sector could also be supported when the US starts to cut interest rates. From a global perspective, REITs are attractively valued.According to HSBC, most REITs invest in Hong Kong real estate and focus on traditional assets such as retail, hotels and offices. Compared with LINK REIT (00823.HK) 0.000 (0.000%) Short selling $22.13M; Ratio 6.172% , most REITs have smaller and less liquid underlying assets. While the better-performing REITs are restoring rental growth, other REITs have only been able to slow the rate of income decline.However, rising interest rates are putting pressure on REITs' distributions per unit (DPU) as interest costs have soared due to Hong Kong's interest rate peg with the US. Given that interest expenses are expected to stabilise in the coming months, even as interest rates remain high, the broker expected the DPU outlook for REITs to gradually improve over the next 12 months.HSBC commented that LINK REIT is one of the few REITs likely to resume DPU growth from FY25 onwards. The broker also upgraded its rating on FORTUNE REIT (00778.HK) +0.050 (+1.176%) Short selling $2.56M; Ratio 16.246% from Hold to Buy, saying its resilient portfolio of non-discretionaries, 9.1% yield in FY24 and improving DPU outlook may attract yield investors.Shares | Rating | Target Price (HKD)LINK REIT (00823.HK) 0.000 (0.000%) Short selling $22.13M; Ratio 6.172% | Buy | 47.00CHAMPION REIT (02778.HK) +0.020 (+1.124%) Short selling $134.69K; Ratio 2.578% | Hold | 1.75FORTUNE REIT (00778.HK) +0.050 (+1.176%) Short selling $2.56M; Ratio 16.246% | Hold → Buy | 4.80(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-05-17 16:25.)