A unit of British retailer Tesco Plc is raising about $600 million (378 million pounds) in Asia's second largest initial public offering (IPO) of 2012, pricing the high-yielding property fund at the top end of expectations.

The strong demand for the offering, the biggest in Thailand in almost six years, was in stark contrast to deals in other large Asian markets such as Hong Kong and Shanghai that have faced weak investors' appetite.

The IPO was priced at 10.4 baht per unit, equivalent to a yield of 6.5 percent a year, according to two sources with direct knowledge of the offering who were not authorised to speak publicly on the matter. The deal was marketed at a range of 9.65-10.40 baht per unit.

That would compare with 7.7 percent for CPN Retail Growth Leasehold Property Fund , which owns three malls and an office tower, according to KT-Zmico estimates.

The yield is quite good for this type of property, said Pornsawat Jirajarus, an analyst at brokerage KT-Zmico in Bangkok, before the pricing.

The yield on the property fund, which is similar to a real estate investment trust, or REIT, helped to lure investors reeling from ongoing volatility in global markets and concerns over Europe's debt troubles.

Tesco media officials were not available for an immediate comment.

The IPO, Thailand's biggest since Rayong Refinery's $710 million offering in May 2006, received about $40 million in commitments from Capital Research and Management, a unit of U.S. fund manager The Capital Group Companies, according to the prospectus of the fund.

The deal was also the second largest equity offering in Asia in 2012 so far, behind the $794 million listing by China Communications Construction in Shanghai in February.

GROWING TREND

The IPO of the property fund -- called The Tesco Lotus Retail Growth Freehold and Leasehold Property Fund -- is part of a growing trend among retailers to squeeze more value from their real estate assets.

They bundle some of their supermarkets and shopping malls into a property fund and sell the fund units to investors, leasing back the property. Tesco has said it plans to use proceeds of the IPO to fund future expansion in Thailand.

The fund comprises 17 shopping malls anchored by a Tesco Lotus hypermarket in cities including Bangkok and tourist destinations such as Krabi and Koh Samui.

Tesco Lotus expects to add at least two more assets to the fund in the 2012/2013 fiscal year and one or two assets a year after that, according to a February statement.

The ongoing uncertainty in global markets weighed on Hong Kong's first major IPO of the year, with shares of China-backed Canadian oil explorer Sunshine Oilsands Ltd <2012.HK> down for two straight days since its debut on Thursday.

Bank of America Merrill Lynch , Nomura Holdings Inc <8604.T>, Phatra Securities
and Royal Bank of Scotland managed the IPO.

Tesco lags only French group Carrefour and U.S. industry leader Wal-Mart by annual sales, and has over 5,300 stores in 14 countries. ($1 = 30.515 Thai Baht)

(Additional reporting by Denny Thomas; Editing by Denny Thomas and Keiron Henderson)