Public REITs have a general callback the next day after listing, and market participants reminded to look at product features rationally
Author: Di Lingyue
Investors can pay attention to the investment opportunities that appear after the price drops.
On June 22, the overall performance of the first batch of 9 publicly offered REITs cooled down from the strength of the previous day. Among them, 7 products closed down, 1 remained flat, 1 closed up, and 5 products fell below the issue price in intraday trading.
Some people in the industry believe that the price break in the secondary market of publicly offered REITs relative to the issue price is a normal manifestation of the return of the price to the intrinsic value. Investors should not ignore the intrinsic value of the product and blindly kill it.
5 products “breaking” in intraday trading the next day
As of the close of trading on the 22nd, Shekou Industrial Park (180101.SZ) fell 7.02%, Zhejiang Shanghuhangyong REIT (508001.SH) fell 3.78%, Huaan Zhangjiang Everbright REIT (508000.SH) fell 1.42%, and Shougang Green Energy (180801.SZ) fell 0.07%. On the 21st, the above-mentioned four products had the highest growth rates, rising 14.72%, 4.97%, 5.89%, and 9.95% respectively. In addition, on the 22nd, China Jinpuluosi REIT (508056.SH) and Yangang REIT (180301.SZ) both fell by more than 1%, Guangzhou Guanghe (180201.SZ) fell slightly by 0.44%, and the rich country’s first water REIT (508006) .SH) rose slightly by 0.13%, while Soochow Suyuan Industrial REIT (508027.SH) remained flat.
It is worth noting that Zhejiang Merchants Shanghai-Hangzhou-Ningbo REIT, Zhongjin Prologis REIT, Yangang REIT, Soochow Suyuan Industrial REIT, and Guangzhou Guanghe once broke in early trading on the 22nd.
The total turnover of the 9 publicly offered REITs on the 22nd was 508 million yuan, a significant drop from the 1.86 billion yuan turnover on the first day of listing (21st).
Hu Haibin, Fund Manager of the Infrastructure Investment Management Department of Boshi Funds, said that the logic of the break soon after listing is the same as the short-term price increase. There are two reasons. One is that the price of the REITs is already higher than the intrinsic value during the first-level inquiry stage. The price break in the secondary market relative to the issue price is a normal manifestation of the price returning to the intrinsic value; second, investors should not ignore the intrinsic value of REITs and blindly kill them.
“Regardless of the reason, the IRR (internal rate of return) of the REITs project will rise after the secondary price drops, so the investment value will gradually appear, and the price will stop falling and rebound. Investors can pay attention to the investment opportunities that appear after the price drops. Investors can make an analysis of the relationship between the price drop and the upward trend of IRR. In theory, when the IRR rises to a certain level, there will be allocation-oriented investors entering the market.” Hu Haibin added.
Introduce market makers to improve on-market liquidity
As a closed-end product, publicly offered REITs adopt a closed-end operation, do not open subscription and redemption, and can only trade in the secondary market. The investor structure is dominated by institutional investors, and there are problems such as insufficient liquidity.
Hu Haibin stated that the characteristic of publicly offered REITs products is that they are far less liquid than stocks. This is because investors of publicly offered REITs are originally for the purpose of holding rather than trading. In this case, it is reasonable to have weak liquidity. Over time, institutional investors who are really willing to hold these basic assets for a long time will basically not sell them again, which results in a lower secondary turnover rate, which is a product feature of REITs products. In theory, when the market is effective, the liquidity characteristics of REITs have actually been reflected in the prices of primary issuance and secondary transactions.
How to improve the secondary market liquidity of public REITs? Hu Haibin believes that on the one hand, REITs have a market maker mechanism compared with stocks, which can provide a certain degree of liquidity; on the other hand, the types of investors are also relatively dispersed, ranging from retail investors to different types of financial institutions. Different investors have different risk appetites, and relatively speaking, market transactions can be active to a certain extent.
According to statistics, the first batch of 9 REITs have announced liquidity service providers, with an average of 4 liquidity service providers for each REIT. Among them, Guangzhou Guanghe has the most market makers, with a total of 7; Zheshang Shanghai-Hangzhou-Ningbo REIT has 6 market makers. At the same time, Yangang REIT has the least number of market makers, with only two; Shougang Green Energy and Huaan Zhangjiang Everbright REIT have three market makers.
Wang Minglun, executive general manager of Ping An Fund’s public REITs investment center, believes that investors should rationally view the characteristics of public REITs. It is a product issued on the basis of stable income from infrastructure assets. Its characteristics are stable returns, moderate risks, and suitable for long-term investment. If the secondary market fluctuates sharply, investors should treat it rationally. If the price premium is substantial, investors should consider the greater risks involved, and should not divorce the characteristics of the product itself and blindly follow the trend and speculate. If there is a discount, investors should also remain rational. Since it is a long-term holding product, and the long-term stable dividend is what they want, they should minimize the impact of short-term fluctuations and hold firm confidence.
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