* Regulator asks more questions before approving deal-sources
* Some brokers say back offices not fully ready for product
(Adds details, broker comments) By Fiona Lau and Alison Leung)
HONG KONG, March 22 Regulators have yet to approve Cheung Kong (Holdings) Ltd's (0001.HK) $1 billion yuan-denominated real estate investment trust IPO, sources said, potentially derailing the company's target for a mid-April launch.
Sources familiar with the matter said on Tuesday that the territory's securities watchdog came back with more questions during meetings on Monday, underscoring the regulator's caution in dealing with untested instruments in the world's busiest IPO market.
"No research reports will be sent out tonight," one source told Thomson Reuters IFR.
The Huixian real estate investment trust (REIT) will need approval from Hong Kong's Securities and Futures Commission (SFC) before investment banks can send research reports to potential investors ahead of a premarketing.
The bankruptcy of Lehman Brothers during the financial crisis led to a lot of complaints by retail investors who bought the bank's minibonds, and the SFC has since become more cautious about new issues approval, an industry source said.
The market had expected the REIT to be approved by the SFC on Tuesday after the Hong Kong stock exchange successfully conducted a simulation test on yuan product trading last weekend.
The yuan-denominated REIT, the first of its kind in Hong Kong, was expected to draw a lot of retail investor interest with a payout rate of 3 to 4 percent per year, compared with the territory's yuan deposit rates of 0.4 to 0.6 percent.
Cheung Kong was not immediately available for comment. The sources were not authorised to talk about the matter publicly.
A number of hurdles, including the arrangement of margin loans, would need to be sorted out before the successful listing and trading of a yuan IPO could start and some brokers said their information and accounting systems were not fully ready yet to tackle the new product.
"Everything is still up in the air," said Alfred Chan, Chief Dealer Cheer Pearl Investment Ltd.
Brokers are still in discussion with banks on whether they can get a credit line, in what currency and what exchange rates. Investors could borrow up to nine times of margin loans from brokers currently for a mainboard IPO.
Some brokers said a yuan REIT listing in April would be too early and could lead to chaos.
"It will be a bit of rush in April. June or July will be better," said Andes Lau, an investment manager at Prudential Brokerage. (Additional reporting by Kelvin Soh; Editing by Hans Peters)