Behind The Popularity Of The Secondary Market Of "New Infrastructure": What Is The Obstruction Of Public Reits In 100 Days?

At the end of April this year, the China Securities Regulatory Commission and the national development and Reform Commission jointly issued the notice on promoting the pilot work of real estate investment trust funds (REITs) in the field of infrastructure (hereinafter referred to as the notice), and issued supporting guidelines.

The word "new infrastructure" is very popular. All kinds of capital should be moved according to the time and "salary is added to the fire".

The release of the notice marks the official launch of the Chinese version of public offering REITs. At the same time, the national development and Reform Commission also clearly requires that infrastructure REITs will focus on new infrastructure such as information network.

It has been three months since the Chinese version of public REITs has set sail. What kind of investment opportunities has the public REITs collided with the new infrastructure? What is the development process of new infrastructure REITs in China?

In this regard, the reporter of 21st century economic report interviewed several public fund companies.

Slow progress of public REITs

The 21st century economic report reporter has learned from many investigations that at the beginning of the pilot project of public offering REITs, many public fund companies are ready to move, but few projects are actually implemented.

According to an insider of a public offering fund in South China, because the public offering has no obvious advantage in obtaining high-quality assets, it needs to cooperate with securities companies. So far, many public offering companies have not taken formal action in REITs.

An insider of a public fund in Shanghai told the reporter: "when (public REITs) first came out, the company discussed whether to do it, but in the end, they found it difficult to select projects, so they decided not to make relevant product layout for the time being."

In an interview with a reporter, a strategic analyst of a large public fund company in Shanghai said that at present, the company has not developed relevant products, and there is no team specializing in public offering REITs.

Asked why, he said that it is difficult to do public REITs. On the one hand, it is necessary to find good targets and projects, on the other hand, it is necessary to establish a good risk isolation mechanism, which requires a very professional management team.

"Due to the lack of good projects and the scarcity of professional management teams, the domestic public REITs are in a water testing stage and the development process is very slow," said the strategic analyst

It is understood that Penghua Fund is the most active one in promoting public offering REITs in China. As early as 2015, Penghua Fund established the first domestic public offering REITs product in line with international practice, Penghua Qianhai Vanke REITs.

According to the introduction of Penghua Fund, during the establishment of Penghua Qianhai Vanke REITs, Penghua Fund has set up an investment banking department, equipped with a professional team with complex professional background and multi knowledge system, including infrastructure project operation experience, real estate research experience, risk control experience, special asset valuation and accounting experience.

The new infrastructure is corresponding to the old infrastructure represented by "tiegongji", which mainly includes seven fields: 5g, big data center, artificial intelligence, industrial Internet, UHV, new energy vehicle charging pile, and urban rail transit. This concept began in December 2018, and the central economic work conference emphasized "strengthening the construction of new infrastructure such as artificial intelligence, industrial Internet and Internet of things". Subsequently, in July 2019, the Political Bureau meeting of the CPC Central Committee pointed out that it is necessary to accelerate the construction of new infrastructure such as information network.

In order to promote economic recovery as soon as possible, new infrastructure has been mentioned frequently.

In May 2020, the government work report proposed to "strengthen the construction of new infrastructure, develop a new generation of information network, expand the application of 5g, build a data center, increase facilities such as charging piles and power stations, and promote new energy vehicles".

In this context, at the end of April this year, China Securities Regulatory Commission and the national development and Reform Commission jointly issued the notice on promoting the pilot work of real estate investment trust funds (REITs) in the field of infrastructure (hereinafter referred to as the notice) and issued supporting guidelines.

Xu Bin, an analyst at UBS Securities, believes that infrastructure REITs can help improve the investment and financing channels of the capital market and enrich the choice of investment products; from the perspective of the real economy, infrastructure REITs is conducive to broaden the financing channels of infrastructure, better meet the financing needs of new infrastructure, and help the rapid expansion of new infrastructure.

Why is financial innovation a significant move?

What are the difficulties in landing?

From the above interviews, the promotion of public REITs in China is not so smooth.

The 21st century economic reporter found that this is mainly limited by two reasons.

First of all, policies and regulations are not specific and clear enough, which makes public offering institutions and investors dare not follow up easily.

"With regard to public REITs, there are still some problems in the policy mechanism that have not been effectively dealt with, especially the tax treatment is not clear enough, including the income tax on the basic assets of REITs and the income tax on investors." Shen Meng believes that "if the details of tax and other aspects are uncertain or not adjusted, it is difficult to define the expected return on investment, resulting in a lack of investors in the market."

In fact, since the beginning of the pilot project of the Chinese version of public REITs, the issue of tax arrangement has attracted the attention of the market.

It is reported that the notice mentioned above does not explicitly mention the tax policy of infrastructure public offering REITs.

Although the establishment of res and its is not a prerequisite to promote the development of the market, it is not a prerequisite for all parties in the industry.

A public fund raiser in Shanghai told reporters that the product structure of REITs is relatively complex, and there may be problems of double taxation and excessive taxation in terms of Taxation, which will drag down the income of products.

Secondly, it is difficult to screen the infrastructure projects and manage the underlying assets. In fact, not all projects are suitable for issuing public REITs.

Penghua Fund pointed out that the following principles should be followed in selecting the basic assets suitable for issuing public REITs: first, the basic assets should have a high rate of return to better match the risk premium requirements of investors' equity investment; second, the basic assets must have long-term and stable cash flow; third, the market-oriented operation of basic assets, and the rights and interests are flawless, transferable and legally isolated.

According to the above principles, Penghua Fund believes that the infrastructure suitable for public REITs includes 5g base station, intercity high-speed railway and intercity rail transit, new energy vehicle parking / charging pile, big data center, industrial park, industrial logistics park, etc. Most of the above are in the field of new infrastructure construction.

In Xu Bin's opinion, in the pilot project of new infrastructure, data center is the ideal target of public offering REITs, because the data center industry has the characteristics of heavy assets, high leverage and stable cash flow.

"Compared with the data center, other areas covered by the new infrastructure, such as 5g and artificial intelligence, may not be as suitable for issuing REITs." In addition, it is difficult for Xu Bin to analyze the rapid growth of cash flow in these fields, which is similar to the rapid growth of cash flow

Popular in secondary market

Although there is no practical "spark" between the new infrastructure and public REITs, the new infrastructure has become a hot topic in the secondary market.

With the continuous release of policy dividends, many institutions have obtained brilliant report cards for their new infrastructure layout.

According to the disclosed fund second quarter report, in the second quarter of 2020, the top five fund companies with heavy positions in the total market value of communication companies are ZTE, Yilian network, xinyisheng, Zhongtian Technology and Tianfu communication. Among them, xinyisheng, Zhongtian Technology and Tianfu communication are new heavy positions, which belong to optical module board.

In the second quarter, ZTE, Zhongtian Technology, Yilian network, Dr. Peng and xinyisheng were the top five stocks in the fund companies. Compared with the first five stocks in the first quarter of 2020, Dr. Peng of IDC company was added.

In the second quarter, the government of Guangdong Province will actively promote the construction of industrial energy consumption indicators of IDC, and the government will continue to promote the overall layout of IDC More configuration.

It is worth noting that the new infrastructure theme fund also performs well. Taking Changsheng electronic information industry as an example, the fund belongs to the new infrastructure theme fund, and the proportion of investment in the shares of Listed Companies in the electronic information industry will not be less than 80% of the equity assets.

As of July 30, 2020, the performance of Changsheng electronic information industry has increased by 85.59% in the past year. According to its disclosure of the second quarter report of 2020, the fund shares increased by 27.59%, and the benchmark yield of performance was 21.15%.

According to the second quarter report, the top ten heavy positions of the fund are Lixun precision, Dongfang fortune, goer shares, Xinwei communication, Pengding holding, Zhaoyi innovation, AVIC optoelectronics, San'an optoelectronics, new media shares and Shengyi technology. Among them, Xinwei communications, Pengding holding and Shengyi technology are all the stocks in the field of new funds that attract much attention.

According to the white paper on the development of "new infrastructure" issued by saidI think tank of the Ministry of industry and information technology, by 2025, the direct investment scale of the seven fields of "new infrastructure" will be about 10.77 trillion yuan, which will drive the investment of 17.07 trillion yuan. Although the overall investment in infrastructure is small, the average annual growth rate is 10.55%.

Xu Bin pointed out that the contribution of the new infrastructure is relatively small if it is purely from the perspective of boosting the economy and investment, but the new infrastructure is a relatively new field, so the growth potential of some emerging industries driven by it will be relatively large.

"The investment scale of new infrastructure such as 5g, UHV, data center, industrial Internet, AI and charging pile is about 800 billion to 900 billion yuan this year, accounting for only 5% of the total investment of 20 trillion yuan in the whole infrastructure construction. However, the growth potential of some emerging industries driven by the new infrastructure is relatively large. Among them, 5g's investment this year is about 300 billion to 400 billion yuan, and that of UHV is about 300 billion yuan. The investment growth of data center in the next few years can reach about 30% Xu Bin said.