Stamp duty reduction and exemption implemented, focus on progress of index ETF.

Zheshang released a research report stating that the upward trend in volatility of public REITs since the beginning of this year has strong sustainability. In the short term, the most important marginal change is that stamp duty payments required by original equity holders and SPVs in the restructuring of underlying assets have been reduced. In addition, as a long-term financing tool with Chinese characteristics, public REITs are very likely to become an important allocation choice for funds with absolute return properties in the process of market-leading funds practicing political and people-oriented requirements. With the launch of real-time indices for public REITs by regulatory authorities, the focus will shift to the issuance and realization of public REITs-related index ETFs. Short-term catalyst: Reduction in stamp duty for corporate restructuring to lower REITs issuance costs On September 4, 2024, the Ministry of Finance and the State Administration of Taxation jointly issued the "Announcement on Stamp Duty Policies for Enterprise Restructuring and Institutional Reform" (Announcement No. 14 of 2024 of the Ministry of Finance and the State Administration of Taxation, referred to as Announcement 14), which clarifies for the first time the tax exemption policy regarding stamp duty for property transfers during the restructuring of enterprises. The restructuring of project companies owning underlying assets is a key step in the preparation and issuance of public REITs, and previously stamp duty at a rate of five thousandths of the transaction amount was levied bilaterally in this step. The latest Announcement 14 means that the stamp duty of five thousandths of the property transfer payable by original equity holders and SPVs has been exempted, thereby reducing the issuance costs of public REITs. In fact, before the issuance of public infrastructure REITs, the original equity holders usually need to inject underlying assets into project companies or divest non-pooled assets, and then transfer the equity of project companies to special plans. In practice, many issued infrastructure REITs have used three restructuring methods: asset transfer (specifically referring to the transfer of assets within the group entities by the issuer, including forward divestiture of underlying assets and reverse divestiture of non-pooled assets), corporate spin-offs (i.e., separating underlying assets into a spun-off company), and non-monetary investments (contributing basic assets to the project company in exchange for equity). According to the latest policy of Announcement 14, the exemption of stamp duty further reduces the complexity and time cost of tax treatment, helping to improve issuance efficiency. With the lower costs and increased efficiency, public REITs become more attractive to issuers, providing greater convenience for the future expansion of the public REITs market. Medium to long-term support: The cost-effectiveness advantage of public REITs is more prominent in a low-interest rate environment The bank once again points out that the underlying assets of public REITs mainly consist of mature, high-quality, and stably operated infrastructure projects, with relatively clear cash flow expectations and limited unit value volatility in principle. Secondly, the growth potential of public REITs' returns is relatively limited. For example, from the perspective of property operations, the likelihood of significant growth in property income or maintaining sustained high growth is small. Based on this, public REITs have a high dividend payout ratio. Public REITs have a mandatory dividend distribution ratio, with the distribution ratio not less than 90% of the annual distributable amount after the merger, and the distribution mechanism is stricter compared to other major asset classes. More importantly, considering factors such as debt burdens and demographic adjustments, China's interest rates may remain in a fluctuating downward trend for a considerable period in the future, creating an asset shortage in a low-interest rate environment and making public REITs with both capital gains and fixed returns advantages. From a regulatory policy perspective, it is expected that the supporting rules and regulations will continue to be improved in the future, refining project review and information disclosure points, especially through innovations in REITs trading mechanisms, the development of REITs indices and index products, and the acceleration of the implementation of the REITs mutual market access mechanism, to attract more long-term funds that match the characteristics of REITs into the market. It should not be ignored that public FOFs are becoming an increasingly important investment force for public REITs products. As public FOFs are relatively skilled in balancing and comparing multiple asset types, mid-term industries, and market styles, they have a certain level of awareness of market focuses and the cost-effectiveness of various assets in different environments. Increasing the allocation of public FOFs to REITs will also partially improve the liquidity of public REITs. With the expansion of the public REITs market and the increasing number of market participants, public REITs are expected to attract more attention from institutional and individual investors. Focus on the innovation of public REITs-related ETF products It can be seen that on June 24, 2024, the full yield index of the CSI REITs (closing) index officially changed its index name and index code to "CSI REITs total return index" and "932047". In order to fully consider the reinvestment income of the sample dividends and better reflect the overall market performance of listed REITs, the CSI REITs total return index will begin to update real-time market changes from that day. The bank believes that the release of real-time market data for REITs is more beneficial for investors to quickly understand the market situation and the design and promotion ideas of related index products. At the same time, the real-time market data of the CSI REITs total return index will provide effective references for the future launch of sub-sector thematic indices such as industrial parks, toll roads, and rental housing, in order to provide investors with more timely, detailed, and comprehensive market information, and more easily facilitate cross-sector comparisons, contributing to the efficient flow of information. The significance of the disclosure of real-time market data for REITs is not only to provide investment references for investors but also more likely to lay a good foundation for the development of subsequent index-linked investment products, which is conducive to introducing incremental capital. The bank believes that the launch of real-time market data may attract more investor attention to the public REITs sector, increase market activity, improve market liquidity, stimulate more financial product innovation related to REITs, such as REITs index ETF products, and facilitate investors in asset allocation and risk management. The bank believes that if REITs index products are launched in the future, the enthusiasm of various funds to allocate to public REITs may be increased.Further increase.Risk warning: External impacts such as natural disasters may cause systemic damage to infrastructure; unforeseen deterioration in geopolitical situation may affect risk appetite.