*People crowd into the Nanjing Municipal Real Estate Trading Centre looking to sell property ahead of a new capital gains tax. Chinese couples are divorcing so they can sell their properties tax-free, and then remarry. Picture: ChinaFotoPress/Getty Source:Getty Images
In recent weeks, Asianmacro was travelling around Europe looking at opportunities on the ground when China announced a capital gains tax on housing sales. The tax was intended to cool China’s sizzling property market, but since it was announced last Friday it has had the exact opposite effect: a panic pent up buying of housing units has been unleashed. Sales have spiked and prices have increased as buyers try to close deals before the 20 per cent tax goes into effect. There has also been a jump in divorces, a practical if rather hard-hearted strategy for exploiting a loophole in the rules.
But nothing beats the latest stock IPO from Singapore, aka MAGIC – Yes, the ticker assigned to the Mapletree Greater China Trust is MAGIC! This S$1.8 billion offering is 8.9x oversubscribed on the retail tranche and 38.1x oversubscribed on the institutional tranche; priced at S$0.93 per share right at the top end of the forecasted pricing range.
Once upon a time during Asianmacro previous incarnation, he was one of the biggest REIT investor in Asia and that was when REIT was still not in the popular lexicon and when Singapore was still a backwater in REIT offerings. Fast forward to present day, there are more REITs and Business Trusts in Singapore, Hong Kong and rest of Asia to form an alphabet soup with varied underlying assets.
Asianmacro is neither endorsing nor disputing the merits of this MAGIC … but anybody subscribing to this IPO attracted to the supposed 6.1% yield should be asking whether the magic is really in the air with a yield of 6.1% that while supposedly has a higher yield in SGD terms vs other S-Reits but the underlying assets are Chinese malls & complexes, CNY/SGD FX risks, CNY/SGD interest rate risks, yield enhancement / asset decanting measures, and whole host of other considerations … just make sure the magic is not illusion with some smoke and mirrors!
*Asianmacro is a beach bum managing his own wealth. Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself. While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith. Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication. This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.