Following a period of consecutive gains, the secondary market for public Real Estate Investment Trusts (REITs) experienced a correction last week. As of last Friday, July 10th, the CSI REITs (Closing) Index closed at 735.6 points, marking a week-on-week decline of 0.18%. The CSI REITs Total Return Index settled at 980.69 points, down 0.17% from the previous week.
Data from Guosen Securities indicates that in terms of weekly performance comparisons for major indices, the ranking was CSI Aggregate Bond > CSI REITs > CSI Convertible Bonds > CSI 300.
According to Wind data, among the 86 listed public REIT products, 44 saw week-on-week increases. The top three gainers were Huaan Zhangjiang Industrial Park REIT, China Southern Power Grid Tebian Electric Apparatus New Energy REIT, and CCB Zhongguancun REIT, which rose by 3.92%, 3.43%, and 2.70% respectively during the week. Conversely, the number of products declining week-on-week increased to 42. The three largest decliners were China Merchants Science and Technology Innovation REIT, China Asset Management - CBRE Global Logistics & Industrial REIT, and Huatai Nanjing Jianye REIT, with weekly drops of 6.16%, 3.48%, and 3.40%.
Key Developments in the Sector
Last week, the first batch of four REITs index funds, managed by E Fund, China Asset Management, China Southern, and CICC, successfully completed their fundraising, bringing nearly 1.2 billion yuan in incremental capital poised to enter the REITs market. On the policy front, nine ministries including the Ministry of Commerce issued support for eligible retail business entities to issue Asset-Backed Securities (ABS) and REITs.
Data from Kaiyuan Securities shows that last week, the performance for various REIT sectors was as follows: affordable housing (-0.81%), environmental protection (0.2%), highways (-0.16%), industrial parks (0.18%), warehousing and logistics (0.2%), energy (0.17%), and consumer-related REITs (-0.3%). The warehousing & logistics and environmental protection sectors led the gains.
Detailed Trading Activity
Tianfeng Securities data reveals that the total REITs trading volume (5-day moving average) last week was 481 million yuan, down 12.5% from the previous week. Trading volume for equity REITs and operating right REITs was 316 million yuan and 164 million yuan respectively, changing by -18.3% and 1.4% week-on-week. By segment, transportation infrastructure REITs accounted for the largest share of trading volume last week at 20.7%.
Market Activity and Policy Updates
Several significant developments occurred within the industry last week. The initial four REITs index funds conducted their fundraising from July 1st to 7th, each with a cap of 300 million yuan. By July 9th, all four funds had announced their establishment, with initial fundraising amounts ranging from 297 million to 300 million yuan. CICC pointed out that as of July 10th, the net asset values per unit for the index funds managed by China Southern, E Fund, CICC, and China Asset Management were 1.0004, 1.0003, 1.0001, and 1.0000 respectively, indicating that the first three funds have begun portfolio construction and have already generated returns.
Project applications in the public REITs market continued to advance. According to Kaiyuan Securities, on July 7th, Orient Securities & Shenergy New Energy REIT was formally submitted to the Shanghai Stock Exchange. Its underlying asset is the 200 MW Wulan Huayang onshore wind power project in Qinghai, with a total investment of 1.556 billion yuan, which achieved full grid connection in December 2019.
On July 9th, China Southern Runze Technology Data Center REIT submitted an application for expansion, proposing to acquire the Runze (Langfang) International Information Port A-7 and A-8 data center projects. The fund's initial underlying asset was the A-18 data center in the same park. If this expansion is successfully completed, it will further enlarge the fund's data center asset scale.
Additionally, the review status for China Merchants Asset Management - China Merchants Shekou Commercial Real Estate REIT was updated to "under inquiry" this week. Its underlying assets include Shenzhen Prince Plaza and Kunshan China Merchants Garden City.
Regarding policy, on July 9th, nine departments led by the Ministry of Commerce issued the "Opinions on Accelerating the Innovative Development of the Retail Industry," proposing support for eligible new and high-quality retail enterprises to go public. Some institutional analysis suggests that the support from the nine departments for eligible retail business entities to issue ABS and REITs will continue to propel high-quality retail properties into the fast lane for REITs issuance.
Furthermore, the National Development and Reform Commission's (NDRC) infrastructure REITs project information system was recently made public to the entire market, disclosing key information and recommendation dates for all projects recommended to the China Securities Regulatory Commission (CSRC). The system shows that as of June 30th this year, the NDRC has cumulatively recommended 133 projects (including expansion projects) to the CSRC, of which 82 are already listed on exchanges and 10 have completed expansions.
The National Investment Projects Online Approval and Supervision Platform, built by the NDRC starting in 2014, consists of central and local platforms and is applicable for the entire process of approval, supervision, and service for various non-confidential investment projects.
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