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New Chinese REITs Rise In Market Debut (Nikkei Asia)

New Chinese REITs Rise In Market Debut (Nikkei Asia)

June 21, 2021 – China’s first batch of publicly traded real estate investment trusts debuted with strong initial gains on Monday as the government launched a new channel for local governments to raise infrastructure funds.

In Shenzhen, the Bosera CMSK Industrial Park Closed-end Infrastructure Securities Investment Fund jumped 15.6% in morning trade while the AVIC Shougang Biomass Close-end Infrastructure Securities Investment Fund climbed 12.3%.

In Shanghai, the Zheshang Securities Shanghai-Hangzhou-Ningbo Expressway Closed-end Infrastructure Securities Investment Fund closed the morning session up 6% after paring early gains while the CICC GLP Warehousing Logistics Closed-end Infrastructure Fund finished up 4%.

Together, the nine REITs that debuted on Monday — five in Shanghai and four in Shenzhen — own assets ranging from sewage treatment plants and toll roads to industrial parks and raised about 30 billion yuan ($4.65 billion) in well-subscribed offerings.

“This approach to securitization ought to open the window for further liberalization of assets that can adopt the REIT structure,” Jeffries equities strategists led by Sean Darby said in an investor note on Monday. “Given the size of China’s infrastructure, the inaugural launch of the nine REITs is a precursor to a market that should eventually rival the U.S. in terms of size.”

U.S. REITs have a combined market capitalization of $1.2 trillion, according to trade group Nareit. Goldman Sachs estimates China’s REIT market, in value terms, could reach $3 trillion if the authorities widen the program to include traditional real estate assets.

Beijing had been hesitant about REITs, fearing they could further push up home prices that are already among the world’s highest as compared to local incomes.

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