China Securities Co., Ltd.: The first batch of REITs index funds have been filed for, and incremental funds will help promote high-quality market development.

China Securities Co., Ltd. released a research report stating that the first batch of four public offering REITs index funds have been officially submitted for approval, marking the official launch of public offering REITs index investment. The bank proposed in its 2026 annual strategic report at the end of last year that the current REITs index products have the necessity and sufficient conditions for demand, and index products are expected to lower the threshold for investment research, introduce incremental funds, improve liquidity, and enhance pricing efficiency. In the short term, the entry of index products is expected to significantly improve market liquidity; in the medium term, index products will connect long-term funds with infrastructure assets, improving fund structure, liquidity, and valuation system; in the long term, the perfection of the index investment system will drive overall market size, pricing efficiency, and institutionalization to promote high-quality development of the REITs market. Key points from China Securities Co., Ltd. include: Event On May 18th, according to the China Securities Regulatory Commission's administrative licensing system disclosure, the first batch of REITs index funds under Huaxia Fund, China Construction Fund, Southern Fund, and E Fund have received application materials. The first four public offering REITs index fund products have been officially submitted for approval, and public offering REITs index investment has officially set sail. In terms of product system, REITs index tools can be divided into three categories: on-exchange ETFs, off-exchange ETF feeder funds, and ordinary off-exchange index funds. Among them, on-exchange ETFs emphasize trading and arbitrage functions, off-exchange ETF feeder funds rely on underlying ETF products, and ordinary off-exchange index funds directly invest in index constituent securities, using a cash subscription and redemption model that is not dependent on intraday trading mechanisms, with lower sensitivity to market fluctuations, making them more suitable for widespread sales through channels such as banks, securities firms, and third-party platforms, and able to cover a wider range of individual and conservative institutional investors. Commercial real estate REITs are quickly applying for registration, and the introduction of index products is timely As of May 15, 2026, a total of 82 public offering infrastructure REITs have been issued, with a total issuance size exceeding 210 billion yuan, covering eight major sectors such as industrial parks, guaranteed rental housing, and highways; at the same time since the beginning of 2026, commercial real estate REITs have filed for 20, with a total valuation exceeding 70 billion yuan. At the micro level, institutional research efficiency and project scale do not match, while liquidity levels restrict fund allocation size. On the supply side, the market urgently needs the issuance of index products. Demand-side policy coordination, expansion of bond funds into REITs, and the introduction of index products are expected to bring nearly 10 billion yuan in incremental funds to the REITs market this year The bond fund policy in April has already included public offering REITs as an investment option. The bank's calculations show that if this year's newly issued secondary bond funds for REITs reach a cumulative size of 100 billion yuan, based on an average REITs allocation rate of 5%, the total amount invested in REITs would be approximately 50 billion yuan; if 10 institutions are approved for REITs index funds this year, with each institution issuing 3-5 billion yuan, the index products could contribute 30-50 billion yuan in total, bringing nearly 10 billion yuan in incremental funds to the REITs market this year. In the short term, the marginal impact of index funds on the market mainly manifests in emotional recovery and liquidity improvement The secondary market for REITs has seen continuous adjustments recently, with the China Securities REITs Total Return Index falling by 2.2% from May 11th to May 15th, marking the largest weekly drop of the year; on May 15th, the index closed at 989.9 points, breaking below the 1000-point mark. At this juncture, the initial application of index funds is a strong signal for the market. The expected launch of REITs index products will have a positive impact on market liquidity and pricing efficiency by introducing incremental funds and activating arbitrage mechanisms. First, through fund subscription and redemption activities, the market will see an inflow of substantial and continuous incremental funds, enhancing trading liquidity; second, through arbitrage mechanisms, individual security mispricing will be controlled, narrowing the price differential between the primary and secondary markets, driving overall REITs valuation to a more reasonable level. In the medium to long term, index products connecting long-term funds with infrastructure assets will improve fund structure, liquidity, and valuation system, driving overall market size, pricing efficiency, and institutionalization The valuation of the current REITs market is mainly driven by individual project supply and demand, scarcity, and distribution rates, making it easy for price deviations to occur between individual securities due to differences in liquidity and investor structure. With the development of index funds, funds will be more focused on configuring and rebalancing constituent securities, helping to increase the trading activity of constituent securities, strengthen sector valuation anchors, and promote the formation of clearer asset class risk premiums in the market. Considering that policy dividends are gradually being implemented, combined with the release of a concentrated supply of commercial real estate, the bank expects a significant change in market trends in 2026 compared to the past two years, shifting from a strategy of allocating in the first half and taking profits in the second half to a strategy of observing in the first half and allocating in the second half, optimistic about the performance of the REITs market in the second half of 2026. In terms of the secondary market, the bank recommends three major strategies: liquidity strategy, economic prosperity strategy, and strong original equity strategy The bank suggests focusing on three main themes: 1) Stable anti-cyclical sectors on the molecular end: including consumer, policy-oriented main rental housing, urban environmental protection, and other sectors; 2) High-prosperity sectors that align with national strategies: such as the data center sector; related targets with marginal economic recovery: including some warehousing and logistics assets with improved supply-demand relations and leading operational efficiency (e.g., Jiashi Jingdong Warehousing REIT, Zhonghai Yishang Warehousing REIT), as well as high-speed highway projects benefiting from regional economic vitality enhancement and sustained traffic volume recovery (e.g., Huatai Jiangsu Traffic Control REIT, Huaxia Nanjing Highspeed REIT) 3) Strong demand for original equity expansion, targets with high-quality reserve assets: including Huaxia CR Commercial REIT, China Construction Xiamen Anju REIT, China Construction Liandong Technology and Innovation REIT, China Construction Shandong Hi-speed REIT, etc.