HONG KONG, April 10 Billionaire Li Ka-shing's yuan-denominated property trust was launched on Sunday, counting on demand by yield-hungry investors looking to benefit from growth in China's real estate market.
Hui Xian, as the real estate investment trust is called, could raise up to 11.16 billion yuan, or renminbi, ($1.7 billion), with the sale of 2 billion units at a price of 5.24 yuan and 5.58 yuan. The REIT will be the first ever yuan-denominated equity initial public offering outside mainland China.
A successful listing of the Hui Xian REIT may encourage other companies to launch similar products to tap into the bulging yuan deposits in Hong Kong. The IPO may also lure investors looking for higher returns on their yuan deposits, while allowing them to bet on appreciation of the Chinese currency.
"The future is for the renminbi to become a global currency and this is definitely a milestone for Hong Kong," said a banker involved in the Hui Xian transaction. "Other issuers make their own decisions based on market conditions. If this one becomes successful then other people will follow."
The REIT will be managed by Hui Xian Asset Management Ltd, a joint venture between Citic Securities , Singapore's ARA Asset Management and Cheung Kong (Holdings) Ltd , the property company controlled by Hong Kong tycoon Li Ka-shing.
Hui Xian controls the Oriental Plaza complex in Beijing, which includes a shopping center, two serviced apartment towers, a high-end hotel and eight office buildings. The REIT is set to start trading on April 29 under the code "87001."
Yuan deposits in Hong Kong pay rates of 0.4 percent to 0.6 percent, while yuan-denominated bonds yield between 1 percent and 3 percent, making IPOs denominated in the Chinese currency an attractive option for yield-hungry investors.
Yuan deposits in Hong Kong totalled 407.7 billion yuan at the end of February, more than quadrupling from a year earlier, with authorities and analysts expecting that to rise to nearly one trillion yuan by end of 2011.
BOC International , Citic Securities and HSBC Holdings were hired as joint bookrunners for the Hui Xian offering.
($1 = 6.542 Chinese yuan) (Reporting by Elzio Barreto, editing by Miral Fahmy)