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UPDATE 1-China broadens equity financing channels for developers to aid economy

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SHANGHAI, Nov 28 (Reuters) - China’s securities regulator said on Monday it would allow China- and Hong Kong-listed Chinese property developers to sell additional shares to acquire real estate assets, replenish working capital, or repay debts, lifting a ban on such refinancing to help stabilize the economy.

The China Securities Regulatory Commission (CSRC) said it would also promote financing by developers through the listing of qualified projects via real estate investment trusts (REITs),and will encourage the setup of property-focused private equity funds.

These measures would bolster equity financing for Chinese developers, and follow a move by regulators to facilitate loan and bond financing for an industry teetering under mountains of debt and stagnant sales.

“These policies represent China’s third arrow” to aid the property sector, said Yuejin Yan, head of research at the Shanghai E-house Real Estate Research Institute, adding that bank lending and bond financing measures were the other two arrows.

“Shooting the three arrows simultaneously shows China is rescuing the market by rescuing developers first, greatly broadening the companies’ refinancing pipelines.”

Listed Chinese developers currently cannot sell additional shares.

The CSRC said on Monday the new measures will help improve the balance sheets of quality developers, help transform the property sector, and prevent risks.

More specifically, the CSRC will allow listed developers to buy real estate assets through cash payments or additional share sales for business restructurings.

Proceeds from share sales can be used to buy existing projects, replenish capital or repay debts, but cannot be used to buy land or develop new projects, the CSRC said.

The regulator added that the rules also apply to listed firms in industries closely related to property, such as construction.

In addition, listed companies will be allowed to raise money through private placement of shares to fund the acquisition of unfinished home projects as well as shanty town and city renovation projects.

Stalled home projects have been the source of widespread boycotts in China against mortgage payments.

Meanwhile, policies for Hong Kong-listed “H-share” developers would be brought in line with their China-listed “A-share” peers, the CSRC said.

The CSRC said it will also encourage developers to list industrial parks, logistics projects and affordable rental homes in the form of REITs.

The regulator will also launch a pilot scheme for private equity funds dedicated to investing in residential and commercial properties as well as infrastructure. (Reporting by Samuel Shen, Brenda Goh and Beijing newsroom; Editing by Toby Chopra and Paul Simao)

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