Jinwu Financial News | BOC International said that the China Securities Regulatory Commission website was released on April 19. The CSRC will deepen cooperation with Hong Kong, China and adopt 5 measures to promote the collaborative development of capital markets between the two places. Among them, REITs will be included in the Shanghai-Shenzhen-Hong Kong Stock Connect.
According to the bank, inclusion in the Shanghai-Shenzhen-Hong Kong Stock Connect is expected to bring in > 4 days of trading volume. The bank believes that the inclusion of the Shanghai-Shenzhen-Hong Kong Stock Connect will support the short-term stock price of H REITs. According to data from the Hong Kong Stock Exchange as of April 19, 2024, Southbound Capital held about 0.6% of the shares in circulation in Hong Kong. Based on the average daily trading volume over the past 250 trading days, this is equivalent to the trading volume of these stocks for about 4.4 trading days. Long-term valuations are rising, and trading discounts are expected to narrow. The bank expects that the inclusion of the Shanghai-Shenzhen-Hong Kong Stock Connect will enhance the long-term liquidity of hREITs and narrow transaction discounts. At the same time, due to its low liquidity and high yield, it can attract more south-bound investors to establish positions.
Although the bank believes that C-REITs can provide southbound investors with relatively more mainland asset options in the future, the stability of the Hong Kong real estate market and recent policy relaxation have attracted the attention of mainland investors. Therefore, the bank believes that H-REITs, which have more Hong Kong assets, will benefit more from being included in the Shanghai-Shenzhen-Hong Kong Stock Connect. In terms of market capitalization, Lingzhan REIT (00823) is currently the largest real estate trust in Hong Kong and Asia. The bank maintains its target price of HK$48.7 and a purchase rating.