Listed firms seek high yields in re­alty

China Daily (USA) - - BUSINESS - ByWUYIYAO in Shang­hai wuyiyao@chi­nadaily.com.cn

Some 1,305 com­pa­nies listed on the Shang­hai and Shen­zhen bourses — 44 per­cent of all the A-share com­pa­nies — have in­vested a com­bined 595.1 bil­lion yuan ($88.32 bil­lion) in real es­tate, as com­pa­nies seek long-term and sta­ble in­come, data from an­a­lysts re­vealed on Tues­day.

“For smaller A-share com­pa­nies that are suf­fer­ing from (eco­nomic) down­ward pres­sure, seek­ing prof­its and diver­si­fy­ing risks by in­vest­ing in prop­er­ties in first- and sec­ondtier cities is a nat­u­ral choice,” said a re­search note from Sealand Se­cu­ri­ties Co.

DTZ East China an­a­lyst Shen Yun said the av­er­age re­turn of Grade A prop­er­ties in cen­tral Shang­hai was about 4 per­cent, and the yield from res­i­den­tial prop­er­ties could reach 7 per­cent or higher.

That com­pared with find­ings from Wind In­for­ma­tion Co Ltd, a Shang­hai-head­quar­tered fi­nan­cial in­for­ma­tion ser­vices provider, whose data showed that com­pa­nies in some sec­tors — such as ce­ment, elec­tri­cal com­po­nent and the steel-re­lated sec­tors— av­er­aged earn­ings yields the past three quar­ters be­low 3 per­cent.

Ac­cord­ing toWindIn­for­ma­tion, A-share com­pa­nies have in­vested in real es­tate through di­rectly buy­ing prop­er­ties, in­clud­ing com­mer­cial as­sets such as of­fice build­ings, and res­i­den­tial as­sets such as apart­ments, or pur­chas­ing equities from real es­tate de­vel­op­ers to reap the re­wards from fast-grow­ing real es­tate prices in first- and sec­ond-tier cities.

Shen­zhen Huicheng Elec­tric Ltd said it plans to sell eight prop­er­ties in Bei­jing, Nan­jing, Wuhan and Fuzhou, in a deal that will bring in prof­its of 33.56 mil­lion yuan, turn­ing the pre­vi­ous loss-mak­ing out­look for the third quar­ter into a guid­ance for prof­its for the quar­ter.

An­a­lysts also said big fi­nan­cial in­sti­tu­tions, such as in­sur­ers and banks, were also tap­ping into re­alty to lever­age the huge amount of cash.

Among A-share in­sur­ers and banks, 12 had each in­vested more than 10 bil­lion yuan in real es­tate, with Ping An In­surance (Group) CoofChina Ltd head­ing the list. It had in­vested 33.43 bil­lion yuan by the end of sec­ond quar­ter. in of

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Po­ten­tial home­buy­ers visit a hous­ing expo in Chengdu, Sichuan prov­ince.

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