SINGAPORE (BLOOMBERG) - Singapore sovereign wealth fund GIC sees pockets of opportunity in the beleaguered China real estate market as Beijing tries to make homes more accessible for the middle class.
In China, where disposable income per capita is a fraction of that in the United States, it often takes years of savings to afford an apartment, which normally costs a few million yuan in the main urban centres. Helping middle- and lower-income Chinese is a priority for the government, said Dr Jeffrey Jaensubhakij, chief investment officer of GIC.
"For us in China, that is one of the areas of focus," Dr Jaensubhakij said in an interview discussing the fund's annual report released on Wednesday (July 27). "Housing for the middle class and lower middle class is still a heightened need, so from the real estate point of view, we have partnered with a couple of companies in residential-for-rent in China."
Beijing has avoided piling stimulus into housing despite a sharp drop in home sales and property investment. Banking regulators reiterated last week that housing was "not for speculation", a slogan associated with the financial tightening that has roiled the sector and prompted dozens of developers to default.
Instead, China's Housing Ministry plans to build 2.4 million units of affordable rental housing this year, and policymakers have eased a cap on loans to fund projects in that space. The China Securities Journal has flagged rule changes that would encourage greater investment in rental projects by widening the listing rules for infrastructure real estate investment trusts.
While it has been a tough year, "there is a fair amount of resilience that we've seen in a range of real estate sectors", Mr Jaensubhakij said, pointing to transactions in retail properties, and continued demand for office space in Beijing and Shanghai.
"We have found that the investments can still be good holdings," he said.
GIC's greater exposure to direct holdings and projects, rather than developers' stocks, has helped it skirt some of the turmoil, though GIC remains one of the largest non-government shareholders of residential developer China Vanke, according to a June filing.
Overall, GIC is looking to rotate its China exposure into areas that align with the government's priorities, including growing domestic consumption, technological self-reliance and sustainability, Mr Jaensubhakij said.
GIC has been an investor in Chinese technology platforms and education companies. It has backed Ant Group, whose record initial public offering was torpedoed by regulators in 2020.
GIC is "not targeting net dis-investing in China" when it comes to exposure to the private market, said Mr Jaensubhakij. "We are finding that there is a lot of need and a lot of room for rotation."
GIC chief executive officer Lim Chow Kiat said that eventually, GIC's strategy depends on China's gross domestic product, making the whole macroeconomic outlook important.
"We maintain our presence in China," he said. "Whether we net invest or not depends on whether we can find those opportunities."
The fund expected that China's gross domestic product growth probably bottomed in the second quarter, with a front loading of fiscal stimulus likely to support economic activity going forward, according to GIC chief economist Prakash Kannan.
GIC, which does not disclose its assets under management, is ranked the world's sixth-biggest sovereign investor with US$799 billion (S$1.11 trillion) in assets, according to research firm Global SWF. But estimates vary; competing firm SWFI pegs its assets at a more conservative US$690 billion.
