(Yicai) Aug. 13 -- The Shanghai Stock Exchange is considering approving the issuance of more asset-backed securities that are guaranteed with immovable properties this year, to help companies activate their assets and raise more funds as well as safeguard investors’ rights and interests, Yicai learned.

The bourse is helping firms that wish to make full use of their existing assets to initiate such ABSs for issuing later. As a result, more products of this kind are expected to be listed in the second half, according to market insiders.

Currently there are only two such ABSs trading on the bourse and a third was given the greenlight by regulators last month, according to the stock exchange’s website. 

ABSs in the form of immovable properties have better ‘asset credit’ and ‘rights and interests’ than that of conventional ABSs, a source at a market institution said. And the cash flow generated from the underlying assets will help to realize a constant and stable payment of bonuses to investors to truly bring out the product’s asset credit.

“Investors will be able to enjoy rentals from underlying assets as earnings, just the same as with conventional ABSs,” said a fund manager, who participates in the trading of asset-backed securities in the form of immovable properties.

Investors in ABSs in the form of immovable properties will be able to have a deeper understanding of projects’ operation and construction, through the setting up of a product-related management committee, which includes the managers, investors and operating institutions, the fund manager said. This will resolve the issue where investors in conventional ABSs feel that it is difficult for them to get involved in the operation of underlying assets.

This type of ABS will also have an incentive mechanism that will activate the management capability of organizations that operate and manage products, the person added.

ABSs in the form of immovable properties will be turned into an equity-like investment vehicle that will vitalize existing assets through a series of market-oriented innovative designs, the source from the market institution said. This will not only enrich companies’ channels for fundraising, but will also provide new options for institutional investors to allocate their assets.

Editors: Tang Shihua, Kim Taylor