Merrill Lynch and CLSA are both raising huge amounts for further investment in Chinese real estate. While the US real estate markets have turned cold, both companies are looking for continued returns in the growing Chinese market. Merrill Lynch kicked off a new investment with a total portfolio of approximately $3 Billion to be invested in property all around the Pacific Rim.
The new Merrill capital will be invested around the Pacific in countries like India, Austrailia, and Japan. CLSA is looking a little more into nations with more new development potential, such as China, Japan, Hong Kong and Singapore. The capital has found a new home in Asia, where the real estate markets are thriving even with US home prices lagging.
The CLSA fund is expected to invest 20-30% of its funds in China to diversify among many different real estate markets. The Chinese investments allow for more speculative investments in Singapore and Hong Kong to boost returns, while earning consistent returns from China. Other banks such as UBS, Morgan Stanley and Blackstone group are also developing real estate in China. UBS is seeking $1 Billion to drive real estate investments in China.
No Asian credit crunch
Asian banks are holding up well regardless of the credit crunch overseas. Reserves remained stable throughout a downturn in the United States and Europe, while cash rich banks are putting even more money back into the country. In 2007, China saw an increase of 26% in direct real estate investment, showing that the market in China is still alive and well.
Much of the real estate gains might come from rising inflation. The country is loaded with cash and fighting decade-high inflation, much like the US market saw during the late 1990s and early 2000s with Greenspan at the helm. All of this cash must find a home somewhere, and the housing market looks to be the place.
Falling US dollar impacting investments
The falling US dollar is also sending investment banks out of the US and into Asian real estate. Each time the Fed cuts rates, credit pours into Asia, particularly in the real estate market. Much of the losses in the US are paired with gains in China, as a drop in the value of the dollar brings up the value of the RMB. Chinese real estate gains are here to stay.
You too can get into the Chinese Realestate market through ETFs like TAO, which buys construction and real estate companies throughout China. The stock has been beaten down by market dynamics in North America, but its prosperity comes from a booming market in China. This one looks good, especially at today’s PE of just 18.