WOULD THE REPUTATION AND BEHAVIOUR OF THE CHINESE STOCK EXCHANGE BE A DISINCENTIVE TO INVESTORS CONSIDERING A CHINESE REIT?

China has drawn the worldís attention with the emergence, rapid growth and increasing maturity of its real estate market in the past twenty years. Currently the worldís third largest economy, China was the second largest Asian country for commercial property transaction capital flows in 2006 (JLL, 2007). Urbanisation in the country is expected to increase from 40 percent of the population in 2006 (estimated 1.3 billion) to 60 percent by 2030 (RREEF, 2007), creating substantial demand for property development and in turn further potential assets for investment. International investors have also recently shown considerable interest regarding property investment in China, via both direct and indirect property. China is yet to develop a REIT market despite investors, both domestic and international, eagerly seeking exposure to property. Chinese REITs would provide the opportunity for investors to access ípropertyî returns with liquidity and flexibility. The Chinese government has stated its intention to run pilot REITs aiming to take advantage of their significant role in stabilising the Chinese capital market in the medium and long term (Wang et al, 2009). This purpose of this paper is to examine whether the reputation and behaviour of the Chinese stock exchanges is a disincentive to investors considering a Chinese REIT. This is addressed firstly by assessing the Chinese stock marketsí volatilities compared to the Hong Kong and Singapore stock exchanges. Secondly it investigates the performances of two REITs which own Chinese real estate and are listed in Hong Kong and Singapore, to distinguish the critical factors influencing their risk/return profiles: the fundamental tangible nature of the investment or equity market movement. Finally, a survey approach is proposed to explore investorsí attitudes to future investment in Chinese REITs listed on different stock markets and their opinions of the reputation and governance of the three main Asian stock exchanges where Chinese REITs might potentially be available.