Reits are China’s latest market darlings as quality income provides anchor in volatile market
- Prices of 11 infrastructure Reits in China have risen 30 per cent on average since their debuts, while blue-chip benchmarks in Shanghai and Hong Kong tumbled
- Investors will get more involved in Reits as supply is expected to increase, though analysts cautioned about market fluctuations
Real estate investment trusts (Reits) are becoming China’s latest stock market darlings, as investors whiplashed by roller-coaster rides in the equity market seek buffers that still deliver consistent returns in the industry.
The 11 pioneer infrastructure-backed Reits traded in Shenzhen and Shanghai have risen by 30 per cent on average since their debuts from as early as June last year. That included a 5.2 per cent advance this year, while benchmark stock indices in Shanghai and Hong Kong fell by 9.8 per cent and 5.6 per cent, respectively.
“As the stock market is sluggish and the secondary market lacks the opportunity to [generate] profits, investors are paying more attention to Reits,” said Wang Qunhang, vice general manager at TopMind Asset Management in Guangzhou.
Reits are funds that own, operate and finance real estate projects, generating a stable and predictable flow of rents, service fees and other income as dividends for investors. Their popularity validates the push by financial regulators to expand the number of investable options and divert the nation’s savings away from an over-reliance on equities.
The successful experiment with infrastructure-backed Reits is encouraging market regulators to expand the categories to state-subsidised rental homes and clean energy assets, analysts said.