Real Estate Trust Issuance Suddenly Cools in July

Real estate is the main driver of trust finance and its cooling sharply. Without offsetting credit growth or stimulus, the economy will slow yet again.

iFeng: 7月份房地产信托发行骤冷
Sogou: Sudden Chill in Real Estate Trust Issuance
Supervision continues to exert its power and the issuing market of the collective trust market is "cooled". Statistics show that the scale of real estate trust fund raising dropped sharply in July compared with the previous month, which may end the boom since 2018. However, the status of basic industry trust has risen after the real estate trust supervision has been tightened.

The scale of issuance has generally declined.

In early July, the China Insurance Regulatory Commission (CIRC) issued a warning to some trust companies whose real estate trust business grew too fast and increased too much. The rapid growth of real estate trust came to an abrupt end. Usufructuary trust data show that 63 trust companies issued collective trust products in July, with a total of 1,632 products issued, a decrease of 20.31% from the previous month. The issuance scale of collective trust products was 184.577 billion yuan, a decrease of 20.22% month on month.

Judging from the issuance situation, the issuance scale of Everbright Trust, which ranks first only, rose 2.48% month on month. However, the other four trust companies in the top five have seen their issuance scale decline to varying degrees.

In terms of product establishment, 59 trust companies established 1,473 collective trust products in July, down 7.06% from the previous month. The establishment scale of collective trust products in the month was 137.071 billion yuan, down 18.9% from the previous month. In July, due to the influence of "policy+window guidance", real estate trust fund raising encountered a "sudden brake" and the establishment scale of the overall collective trust market dropped significantly month on month.

Real Estate Trust Shrinks into Stereotype

In July, the real estate trust raised 58.425 billion yuan, a decrease of 19.63% from the previous month, but the proportion of the real estate trust still ranked first in that month. Since 2019, with the exception of February, which is affected by the long Spring Festival holiday, the scale of real estate trust fund raising in other months in the first half of the year has exceeded 60 billion yuan. The decline in July may be considered as the starting point for the scale contraction of real estate trust.

Industry insiders said that the regulatory requirements for real estate trust continue to tighten, and the contraction of real estate trust business is a foregone conclusion. For some trust companies that rely heavily on real estate trust business, the performance pressure in the second half of the year will be relatively great. Head real estate companies have become "hot cakes". Trust companies will face fierce competition against high-quality counterparties, and the rate of return of real estate trusts is expected to decline.

The scale of basic industry trust increased by 7.31% month on month

Tighter regulation of real estate trust forces trust companies to carry out other businesses to replace them. The continuous policy of "red packets" is an important reason for the growth of basic industry trust against the trend. The foundation scale of basic industry trust increased by 7.31% month on month.

The basic industry trust returned to the upward trend in March, and the product yield remained relatively high. In July, the amount of funds raised by basic industry trust was 36.385 billion yuan, up 7.31% month on month and 2.25 times over the same period last year. The basic industry trust has maintained a good upward trend since the second half of 2018, reaching its peak in March 2019. Influenced by the crowding-out effect of the massive issuance of local bonds and the improvement of local financing environment, the scale and yield of basic industrial trusts both showed significant downward trend in the second quarter. In July, the fund-raising scale of basic industry trust bottomed out and the product income also rebounded.

The status of basic industry trust has risen after the real estate trust supervision has been tightened. Industry insiders said: First, as an important means of counter-cyclical adjustment by the state, the policy effect of expanding investment in infrastructure has begun to emerge, with strong demand for capital in infrastructure and fewer policy obstacles in trust companies' development. Second, the mode of government-trust cooperation is becoming more standardized, and regions with strong fiscal revenue capacity should be carefully selected for cooperation.

It is worth mentioning that in July, the distribution of funds invested in basic industrial trust was distinctive, with economically developed provinces being the first choice, and gradually expanding to the central and western provinces. Jiangsu Province is far ahead with 151 products and has become the hottest area for basic industry trust development, while Sichuan, Shandong, Zhejiang, Guizhou, Hunan and Shaanxi are the second groups, and trust funds are also continuously flowing in.

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