Hui Xian Real Estate Investment Trust (REIT), the real estate flagship firm owned by Li Ka-shing, has obtained regulatory clearance to open Hong Kong’s first yuan-denominated REIT.
After the much-awaited approval from the Securities and Futures Commission (SFC), the joint parties, BOC International, Citic Securities and HSBC Holdings, will begin pre-marketing the initial public offering (IPO) this week.
Hui Xian REIT comprises the Oriental Plaza in Beijing, which is primarily controlled by Cheung Kong Holdings Ltd, the real estate company owned by Mr. Li.
Mr. Li plans to spin off the rental properties, aiming to raise approximately 10 billion yuan (S$1.9 billion).
The successful listing of Hui Xian REIT may push other Hong Kong property firms to launch similar products to tap into the increasing yuan deposits in Hong Kong.
Analysts expect Hui Xian REIT to provide a four percent yield, making the IPO attractive to investors seeking higher returns on their yuan deposits in Hong Kong. It will also allow them to speculate on the Chinese currency’s appreciation.
At the end of February, yuan deposits in Hong Kong amounted to 407.7 billion yuan, more than four times from last year. Such deposits only gained a few basis points in interest, while yuan-denominated bonds yielded between one and three percent.