China’s once-hot real estate trusts get slammed as property slump spills over to dent demand

REITs debuted on China’s stock market in 2021 with much fanfare, hailed as a way to channel retail investor money into large-sized infrastructure and property projects

The idea initially caught on, making them one of the hottest investments amid the government’s infrastructure push and relatively scarce offerings

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Construction at China Vanke’s Isle Maison development in the Anhui provincial capital of Hefei on November 27, 2023. Photo: Bloomberg

Published: 11:43am, 15 Dec 2023

A double whammy of China’s deepening property crisis and a stock market slump has claimed a victim – real estate investment trusts.

REITs debuted on the country’s stock market in 2021 with much fanfare, hailed as a way to channel retail investor money into large-sized infrastructure and property projects. The idea initially caught on, making them one of the hottest investments amid the government’s infrastructure push and relatively scarce offerings.

Not any more. A CSI gauge of 28 trusts has lost 31 per cent this year, underperforming the benchmark CSI 300 Index by 18 percentage points. All but three of the listed REITs are trading below their debut prices, according to data compiled by Bloomberg.

Some of the hardest hit include Fullgoal Capital Water Close-end Infrastructure Fund – linked to a waste-water treatment project in eastern Anhui province – which has fallen in all but one day over the past month. The CCB Principal Zhongguancun Industrial Zone Close-end Infrastructure Fund, which leases land in Beijing, has dropped nearly 50 per cent this year.

“The performance of REITs depends on the fundamentals of their related sectors, which are largely tied to the macro economy,” said Fu Lichun, co-founder of Beijing Yuntai Capital. “Their prices have gravitated to lows amid poor stock market sentiment. The fact that they are a fairly new asset class does not make them exempt from downturns.”