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China’s first Reits make steady start on market debut as investors hunt for stable yield
- The nine Reits, which are linked to underlying infrastructure projects, raised a total of 30 billion yuan (US$4.7 billion), according to Jefferies
- The nine Reits made first-day gains ranging from 0.7 per cent to as much as 15 per cent
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Zhang Shidongin Shanghai
China’s first batch of publicly traded real estate investment trusts (Reits) got off to a steady start on their debut, as traders chased the new asset-backed products that yield stable returns.
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The nine Reits, which are linked to underlying infrastructure projects from industrial estates to waste water treatment plants, rose above their offer price on the mainland’s exchanges on Monday. The one backed by assets tied to China Merchants Shekou Industrial Zone jumped by 15 per cent, the most among all the debutants. The Reits linked to Soochow Suzhou Industrial Park and Guanghe Expressway rose the least, each advancing only 0.7 per cent.
They raised a total of 30 billion yuan (US$4.7 billion), according to Jefferies Group.
The Chinese Reits differ from their overseas counterparts as their pool of underlying assets are backed by infrastructure projects rather than commercial properties. Hong Kong’s Link Real Estate Investment Trust, a member of the Hang Seng Index, covers a portfolio of about 130 properties including shopping malls and car parks.
“The rationale for launching infrastructure Reits is to provide a mechanism for local governments to monetise projects and allow funding for new investment, particularly into business parks,” said Sean Darby, a global strategist at Jefferies. “Nevertheless, this approach to securitisation ought to open the window for further liberalisation of assets that can adopt the Reit structure.”
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The launch of the Reits gives a new option to those investing in China’s US$11.7 trillion stock market at a time when yields matter amid a cloudy outlook for the global economy. An index of dividend-rich stocks on the Shanghai exchange has emerged as the best performer among the major gauges tracking Chinese onshore shares this year, as demand for stable returns rises.
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