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REITs to help China funds compete with banks, insurers

SHANGHAI: China's planned launch of a real estate investment trust (REIT) market will give mutual fund companies access to areas other than stocks and bonds, helping them to compete with banks, insurers and trust firms, a researcher at China's securities regulator said on Oct 21.

"REITs would represent a big step forward for the mutual fund industry, giving them access to alternative investment opportunities," Wang Ou, deputy director of research at the China Securities Regulatory Commission (CSRC), told a conference.

"On the other hand, people need to share rapid growth of the real estate sector through capital markets."

China's asset management business is expanding rapidly as investor appetite grows amid rising wealth income in the world's third-largest economy.

Wang added that China's mutual fund houses not only compete with each other, but are increasingly competing with other types of financial institutions such as banks and insurers to manage rising wealth in the country.

China plans to allow mutual fund companies and brokerages to launch publicly traded REITs, people familiar with the situation told Reuters in August, citing draft CSRC rules.

REITs invest mainly in commercial and industrial properties and pay most of their rental incomes as dividends.

Wang forecasts huge growth potential for China's mutual funds industry as demand for wealth-management rises as people get older.

Mutual fund assets may exceed its 2007 peak of RMB3.3 trillion ($1.63 trillion) by the end of this year, from less than RMB2 trillion at end-2008, fuelled by a stock market rebound and fresh fund inflows, he said.

China's stock market has gained more than 60% this year, following a 65% tumble in 2008. -- Reuters

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