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Guangzhou Investment Co Ltd's (GZI) Real Estate Investment Trust (REIT), the first mainland REIT to be listed overseas, is expected to receive a strong response from Hong Kong investors and set a good example for mainland property developers, analysts say.
The Guangzhou municipal government-backed company, which began marketing a US$204 million initial public offering (IPO) last week, has the potential to compete for subscriptions with other listing candidates.
"Given the upbeat market sentiment and investors' enthusiasm for REITs, this should attract investors," a Hong Kong-based analyst, who spoke on condition of anonymity, told China Daily.
The recent robust performance of the first REIT in Hong Kong - Link REIT - will surely encourage investors to buy GZI shares, he said.
Link REIT, which raised US$2.5 billion in its IPO last month, has seen its shares rise some 30 percent to HK$13.35, compared to its IPO price of HK$10.3. Its shares started trading on November 25.
Moreover, the analyst said GZI REIT's assets are more appealing.
Unlike Link REIT, whose properties are mainly public street markets and other basic urban utilities, GZI is transferring its prime property projects into its REIT, including the City Development Plaza, Fortune Plaza, Victory Plaza, and the White Horse Building, all located in Guangzhou's prime business Tianhe District.
"With increasing individual incomes and steadily growing domestic demand on the mainland, especially in prosperous South China, property developers that are involved in shopping malls and commercial buildings will find an even better potential market," said the analyst, who personally gave a "buy" rating for GZI.
Also, recently-listed mainland property stocks are trading quite well in Hong Kong.
Suzhou-based New Heritage Holdings Ltd rose 55 percent to 90 HK cents at its peak on its first trading day last Friday, the largest jump for a debut stock so far this year.
Guangzhou Investment, which also manufactures paper and operates toll roads, is offering 583 million units, or 58 percent of its GZI REIT from today to next Thursday, reports said.
GZI, which is set to debut the REIT on December 21, said it would seek shareholders' approval for the separate listing of the trust in a meeting to be held on Saturday. The market has predicted it will price its shares at HK$2.73 apiece as early as next week.
Striking a note of caution, however, poor land management regulations on the mainland may hurt investors' confidence in the long term, said another analyst.
Lai Wai-shing, associate director of Hong Kong-based Hantec Investment Holdings Ltd, said that land ownership and regulations often seem confusing to Hong Kong investors.
"It is an issue both property developers and investors should be aware of," said Lai.
(China Daily December 8, 2005)
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