CHINA’S first batch of nine real estate investment trusts (REITs) made their stock market debut yesterday with solid initial gains, as they drew interest from Chinese retail investors.

All the newly-listed REITs, five in Shanghai and four in Shenzhen, opened higher, but their performance varied hugely, as investors bet on potential land price gains in industrial park projects, but showed tepid interest in highway assets.

The biggest REIT gainers were the Bosera CMSK Industrial Park fund and the AVIC Shougang Biomass fund, which both jumped as much as 20 percent.

By contrast, the PingAn Guangzhou-Heyuan Expressway Fund only rose 1 percent in morning trade.

“New types of investment products often attract eyeballs and become the target of stir-frying [speculation] in China,” said Cai Hongfei, analyst at Hong Kong-based brokerage Central Wealth.

China is launching a public REITs market to channel private money into infrastructure projects, ranging from toll ways to sewage plants, to ease debt burdens on local governments. REITs trade like stocks on stock exchanges, but promise investors stable incomes from their underlying assets in much the same way as bonds do.

But unlike other markets such as Singapore or the United States, China only allows REITs, investment vehicles that are backed by income-producing properties, to be invested in infrastructure initially. Eligible underlying assets don’t include commercial properties such as shopping malls or offices.

REITs widen the financing channel for infrastructure projects and provide more investment options for investors, said the Shanghai Stock Exchange. The instrument will help reduce China’s macro leverage ratio and fend off financial risks, the Shenzhen Stock Exchange.

A broader China REITs market that eventually covers commercial properties could reach more than US$3 trillion, according to a Goldman Sachs estimate, surpassing the United States as the world’s largest.

But limited supply of the instruments initially and a sense of novelty are attracting retail interest in REITs, typically favored by long-term, institutional investors.

China’s REITs market will likely witness high volatility over the next few months before sentiment calms down, added Cai. (SD-Agencies)