Jeffrey Jaensubhakij, chief investment officer, said that China, whose real estate market contributes to nearly a third of its economy, has “come to the end of its growth model” that relied on infrastructure and property construction.
The slump in China’s property sector has become a significant drag on the broader economy and is exacerbating a liquidity crisis among developers. Authorities are trying to help revive the industry and restore buying sentiment by removing the floor on mortgage rates and encouraging local governments to acquire homes to convert them into affordable housing.
Despite the ongoing property crisis in China, Jaensubhakij said GIC sees opportunities in its residential and commercial properties in major cities with a large inflow of people. In residences, for example, he said GIC has invested in and continues to see “a lot of demand” for rental estates.
In June, GIC reportedly teamed up with China’s Vlinker, a leading rental housing operator backed by Warburg Pincus, to form a $180 million joint venture. The vehicle plans to acquire and develop affordable rental housing projects in Shanghai, Vlinker said in its announcement without naming GIC.
Earlier this month, GIC was also reported to have acquired an additional 48% stake in Shanghai’s largest single-building shopping mall from China Vanke, a state-affiliated property developer.
“As people have looked at Chinese real estate and said I need to get out of everything,” Jaensubhakij said, “some of the best positioned retail assets are still quite valuable, and if you can buy them at a price that you can earn a good return on them, if they’re managed well… I think we can still invest.”
“But it’s different from the areas that we used to invest more heavily on in China before,” he added.
By asset class, GIC has increased its exposure to private equity from 17% to 18% of its portfolio in the year to March. Its allocation to public equities and real estates were unchanged at 30% and 13%, respectively, of its overall investments. Nominal bonds and cash decreased from 34% to 32%.
By geography, the U.S. remains the largest investment destination that formed 39% of GIC’s portfolio in the year to March, up from 38% a year ago. This was followed by Asia excluding Japan — a metric that includes its Chinese assets — which fell from 23% to 22%.
Source: Nikkei asia
