China's first batch of publicly traded real estate investment trusts (REITs) began trading on Monday, with five on the Shanghai Stock Exchange and four on the Shenzhen Stock Exchange.
The price change limit is 30 percent on the first day of listing and 10 percent after that.
These nine REITs focus on China's infrastructure systems and are expected to channel investment into projects such as highways, industrial parks, storage and logistics, and sewage treatment.
Infrastructure REITs can generate new capital to help fund the sector's expansion and provide companies with additional liquidity and deleveraging opportunities, said a report from Moody's Investors Service.
"Although we expect China's infrastructure REIT market to remain small over the next two to three years, it could expand sizably for infrastructure assets over the next decade," noted Ralph Ng, vice president and a senior analyst at Moody's.
Infrastructure REITs allow companies to monetize their infrastructure assets and apply sale proceeds to finance projects or debt reduction. The assets' operating records and ability to generate positive cash flows will also reduce risks for investors, the report noted.
In April 2020, China initiated a pilot scheme for infrastructure REITs. In mid-May this year, the securities authority approved the registration of the country's first batch of nine REITs and, on May 31, China kicked off sales of the REITs.
"Promoting the healthy development of REITs in the infrastructure sector" is written into the outline of the 14th Five-year Plan, a key progress in building infrastructure REIT systems, said Hu He, an official with the investment department of the National Development and Reform Commission.
Local governments have actively participated in the pilot projects. Beijing, Shanghai, Shenzhen, Chengdu and other places issued supporting policies.
Experts said the infrastructure REITs will be conducive to efficiently using China's high-quality infrastructure assets, forestalling local governments' debt risks and boosting economic growth.
The securities regulatory authority will further support those assets, which have mature operation, stable cash flow and high market recognition, to realize equity financing through REITs, said Chen Fei, an official with the department of corporate bond supervision in the China Securities Regulatory Commission, on Monday.
The limited supply of the instruments for the time being is attracting retail interest in REITs. All of the nine REITs closed higher on Monday with the total turnover exceeding 1.8 billion yuan (about 279 million U.S. dollars). Enditem