China’s First REITs snapped up by Retail Investors
China’s first batch of real estate investment trusts (REITs) were snapped up by retail investors on their first day of sales on 31st May. The retail tranches of the nine REITs, worth about 2 billion yuan ($314.05 million), attracted over 30 billion yuan of retail subscriptions, or over 10 times the amount available. Meanwhile, fund managers have suspended taking new subscriptions.
China is kicking off its long-awaited public REITs market, as Beijing seeks to channel private money into infrastructure projects to ease debt burdens on local governments. Initially, eligible underlying assets don’t include commercial properties such as shopping malls or offices. The nine REITs seek to raise an estimated 30 billion yuan, and will invest in projects such as warehouses, highways, industrial park and sewage plants. Only a small fraction is reserved for retail investors, with the remainder being sold to institutions.
REITs trade like stocks on stock exchanges, but promise investors stable incomes from their underlying assets in much the same way as bonds do.Of China’s first nine REITs, five will be traded in Shanghai and four in Shenzhen. Their managers include AVIC Fund Management Co, Bosera Asset Management Co and Fullgoal Fund Management Co.