Since the beginning of the year, the trading price of 11 public REITs products listed on the secondary market has shown an independent market situation from the stock market. Industry insiders said that in the new year, the expansion speed of public REITs products is expected to be greatly accelerated. At the same time, investors should be cautious about the valuation return after the overheated REITs transaction. The current hot performance of the secondary market has a certain relationship with “more money and less goods”. With the increase of product supply, trading funds need to be vigilant.
the valuation of REITs secondary market rose well at the beginning of the year, and the project expansion is expected to accelerate
Different from the pressure fluctuation of the stock market, since the beginning of 2022, the secondary market price of 11 REITs products has risen well. As of the 19th, Wells Fargo’s first water REIT rose by 11.58% after the beginning of the year; Followed by red earth innovation and AVIC Shougang green energy REIT, or 7.35%% and 3.88% respectively. Only Ping An Guangzhou Guanghe Expressway and Huaxia Yuexiu Expressway fell slightly, down less than 1%.
The first batch of public offering REITs was listed in June last year and has been running for more than half a year. At present, a total of 11 publicly raised REITs products have been listed, covering four major areas of infrastructure, including toll roads, industrial parks, waste and sewage treatment and warehousing; According to the type of operation, it can be divided into franchise projects and property rights projects.
Industry insiders said that the capacity expansion of public REITs will be accelerated in 2022. In addition, it is expected to see the launch of REITs products in new areas.
On December 31, 2021, the national development and Reform Commission issued a notice on accelerating the work related to real estate investment trusts (REITs) in the field of infrastructure, encouraging enterprises to participate in the pilot infrastructure REITs with high-quality assets and accelerating the application progress; It is proposed to do a good job in project classification and reserve, and the national infrastructure REITs pilot project library should ensure that the project is “willing to enter and should enter”. In this regard, Huaxia Fund said, “the notice summarizes the key links in the application process of pilot projects, and puts forward to strengthen the coordination of relevant departments, which is conducive to improving the support of relevant departments for REITs application and accelerating the application progress.”
“Although the implementation results of the notice need to be further observed, we believe that the expansion rate of subsequent public offering REITs products will be accelerated, especially the approval process of specific types of projects may be shortened, including housing leasing public offering REITs projects and clean energy projects.” Morningstar fund analyst Wu Xueyan said.
Recently, Nanjing has signed three public offering REITs projects for affordable rental housing, and many places have also issued documents to support the development of public offering REITs for Housing leasing. In addition, Penghua Shenzhen Energy Group Co.Ltd(000027) clean energy closed infrastructure securities investment fund, a public REIT product of Penghua Fund, was officially declared a few days ago. On the whole, at present, 4 public REITs are waiting in line for approval. With the 11 listed REITs products, the public REITs team is expected to expand to 15 in the short term.
The Shanghai Stock Exchange also said that it would promote the normal supply of projects and deepen the pilot of infrastructure REITs. “Shanghai Stock Exchange will further cooperate closely with all parties, closely focus on major national strategies, actively support innovation driven, green development, livelihood security and other important fields, assist in solving key and difficult problems, implement mature projects as soon as possible, promote the normal supply of projects, and form the scale effect and agglomeration effect of REITs market.” Lu Dabiao, deputy general manager of Shanghai Stock Exchange, said.
high product valuation is related to “more money and less goods”. Transaction funds need to be vigilant
Review the performance of listed products. In terms of valuation, the growth of REITs underlying assets is reflected in the secondary market price. As of the 14th of this month, the closing price of all REITs products had increased compared with the initial price, and the average increase in the relative issue price of 11 products reached 31.06%. Among them, Wells Fargo pioneered water, ranking first with 63.76%; The second is the innovation of red clay and the Beijing Centergate Technologies (Holding) Co.Ltd(000931) Industrial Park REIT, which also gained an increase of over 40%. Ping An Guangzhou Guanghe is currently at the end of the team with an increase of 4.35%.
With regard to valuation, Huaxia Fund said that at present, China REITs is still in the initial growth stage of listing. In the state of “more money and less goods”, the activity of secondary trading is much higher than that of overseas REITs market, which is equivalent to the stock market, and the stock nature will inevitably be enlarged. “At present, REITs products are scarce. In addition, the listed REITs projects are relatively mature and high-quality, and the allocated funds can actively participate in and balance the layout; for trading funds, it is necessary to be vigilant against the risk of return to rational valuation after overheated REITs transactions.”
In terms of fluctuation, the existing REITs products show similar characteristics. On the first day, it experienced a hot new scene. After more than two months, it experienced a relatively calm wait-and-see period. The price gradually fell, the trading volume decreased, and the market was relatively calm. Since September last year, public REITs have entered an active growth period and started to develop in the secondary market. In terms of liquidity, since the beginning of the year, the average turnover rates of 11 public REITs in the first two weeks have reached 1.19% and 1.53% respectively, which is not low compared with the international market.
With more REITs listed, industry insiders said that investors need to judge more carefully.
\u3000\u3000 “REITs is a configuration asset suitable for long-term holding rather than short-term speculation. REITs has investment values such as high coupon, anti inflation, high long-term return and risk diversification. From overseas experience, the average return of REITs products in 20 years outperforms other stocks, bonds and other assets. Therefore, from the perspective of lengthening dimension, REITs is a configuration asset suitable for long-term holding , it is not suitable for excessive speculation of trading funds. ” Huaxia Fund said.
In addition, Wu Xueyan said that according to the relevant notice published on December 31, 2021, for the projects that have issued infrastructure REITs, the tracking and supervision of the use of recovered funds will be strengthened in the future. “With the strengthening of relevant disclosure, the project information is more transparent, investors have a deeper understanding of the underlying projects, and the price fluctuation of the project in the secondary market may be more reasonable.”
Wu Xueyan said that investors also need to pay attention to the project operation risk of underlying assets. The current estimated future cash flow is uncertain and cannot be cashed when the operating condition is lower than expected. Ordinary investors participating in the public offering REITs investment need to carefully study the quality of the basic assets of the REITs project, make a comprehensive judgment on the location, historical operation, cash flow prediction, rationality of asset evaluation value and other factors of the basic assets, and then make an investment judgment according to whether the price of the secondary market deviates from the fundamentals of REITs.
In addition, the industry also said that it looked forward to the introduction of raising rules. “In the future, we hope to see more overseas investors participate in China’s REITs investment. Scale is an important liquidity measure and investment threshold for investors. At present, the monomer scale of China’s REITs products is still small.” UBS Securities Asia Pacific industrial infrastructure industry director Xu Bin said. Wu Xueyan also said that unlike overseas public REITs, which can invest in a variety of assets, 80% of the assets of Chinese public REITs are invested in a single infrastructure asset, so it has a high concentration risk.
In this regard, the Shanghai Stock Exchange said it would improve the raising mechanism in the future. “The Shanghai Stock Exchange will support well functioning REITs to become bigger and stronger through the raising mechanism. In combination with the mature experience of the international REITs market and the relevant mechanism arrangements of the domestic stock market, the Shanghai Stock Exchange will actively promote the introduction of supporting rules for raising, organize all parties in the market to screen appropriate assets and strive to promote the implementation of raising projects as soon as possible.” Lu Dabiao said.
