China's first Reits make solid debut in Shanghai, Shenzhen

Shanghai

CHINA'S first batch of real estate investment trusts (Reits) made their stock market debut on Monday with solid initial gains, as the nine Reits drew interest from Chinese retail investors.

All the newly-listed Reits - five in Shanghai and four in Shenzhen - opened higher on Monday, but their performance varied hugely, as investors bet on potential land price gains in industrial park projects, but showed tepid interest in highway assets.

In a statement, GLP said GLP C-Reit became the first logistics C-Reit to be listed on the Shanghai Stock Exchange.

It said the IPO was "significantly oversubscribed" by institutional and retail investors and raised more than 5.8 billion yuan (S$1.21 billion). GLP is the first international company to list a Reit in China.

The biggest Reit gainers were the Bosera CMSK Industrial Park fund and the AVIC Shougang Biomass fund, which both jumped as much as 20 per cent.

By contrast, the PingAn Guangzhou-Heyuan Expressway Fund only rose 1 per cent in morning trade.

"New types of investment products often attract eyeballs and become the target of stir-frying (speculation) in China," said Cai Hongfei, analyst at Hong Kong-based brokerage Central Wealth.

China is launching a public Reits market to channel private money into infrastructure projects, ranging from toll ways to sewage plants, to ease debt burdens on local governments.

Reits trade like stocks but offer stable cash dividends like bonds.

But limited supply of the instruments initially and a sense of novelty are attracting retail interest in Reits, typically favoured by long-term, institutional investors.

China's Reits market will likely witness high volatility over the next few months before sentiment calms down, added Mr Cai.

The Shanghai Securities News, a local newspaper, advised investors to be rational. "Reits investors should not dream of becoming rich overnight," the state media said in a commentary. "You should not 'stir-fry' Reits as newly-listed stocks, and should avoid herd investing."

The Bosera CMSK Industrial Park fund rose to 2.67 yuan by mid-day, 16 per cent higher than its offer price of 2.31 yuan, giving the Reits a 15 per cent premium over the value of its underlying assets.

Central Wealth's Mr Cai said the jump in the fund partly reflected investor bets that land prices in the Shenzhen industrial park will rise, generating capital gains in addition to stable rental incomes.

China is only allowing Reits to invest in infrastructure projects, in contrast to markets in Hong Kong, Singapore and United States, where they can also invest in shopping malls and office buildings.

A broader China Reits market that eventually covers commercial properties could reach over US$3 trillion, according to a Goldman Sachs estimate - surpassing the US as the world's largest. REUTERS

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