Qihang Specific Asset Management Plan doesn’t trade like REIT, and it’s not taxed like a REIT, but investors eager for an alternative investment vehicle in China’s stunted finance market are willing to call it a REIT, and it technically began trading on Wednesday. But you can’t buy it.
Qihang Specific Asset Management Plan was launched by Citic Securities on a special section of the Shenzhen Stock Exchange which is restricted to a few institutional investors, and even before its launch had managed to raise $835 million, according to a story in the Wall Street Journal.
The financial product is called a REIT (real estate investment trust) because it’s backed by rental income from commercial properties (owned by Citic) but in other aspects it bears little resemblance to REITs as they’re known in more developed markets.
Unlike REITs elsewhere, the owners of the properties backing the REIT still need to pay all taxes on the rental income before paying out any dividends to shareholders, and the REIT is not required to pay out any set level of its income as dividends to those investors.
At least regarding the retail trading of REITs there may be some hope for liberalisation, as the Shenzhen exchange pointed out on Wednesday that it is getting ready to launch REITs that smaller investors could trade shares in. The Journal article indicated that such REITs could be used to support low-income housing schemes.
In an earlier statement regarding Qihang Specific Asset Management Plan Fitch ratings pointed out tat the product also differs from traditional REITs in that it offers a predetermined yield – more similar to the trust products found in China’s shadow banking world, and it has a time horizon limited to five years.
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