Listed firms seek high yields in realty

Potential homebuyers visit a housing expo in Chengdu, Sichuan province. [Photo provided to China Daily]

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 second-tier 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 in the past three quarters of below 3 percent.

According to Wind Information, 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) Co of China Ltd heading the list. It had invested 33.43 billion yuan by the end of second quarter.