Hong Kong listing on the cards for China Vanke

Developer suspends trading on mainland, amid reports of plan to switch shares to Hong Kong

PUBLISHED : Thursday, 27 December, 2012, 12:00am
UPDATED : Thursday, 27 December, 2012, 1:59am

China Vanke, the biggest developer by market value traded on the mainland's exchanges, may be planning to convert its foreign-currency denominated shares for a listing in Hong Kong, according to Credit Suisse.

Vanke suspended trading in both its B shares and yuan-denominated A shares from yesterday as the company said it was "planning important matters", according to a filing to the Shenzhen stock exchange yesterday, in which the firm did not elaborate.

Vanke would be joining China International Marine Containers Group, the first Chinese company to leave the B share market for the Hong Kong bourse where the daily trading volume is more than 3,000 times larger, according to data compiled by Bloomberg.

The conversion gives the Shenzhen-based developer direct access to global investors as funding channels remain restricted in mainland China amid government curbs aimed at stemming speculation that has driven up home prices.

"This is a long-expected move," Jinsong Du, a property analyst at Credit Suisse, wrote in an e-mailed report yesterday, citing Vanke's earlier indications of the intention to list in Hong Kong.

"It seems this process has accelerated after CIMC successfully converted its B shares to H shares last week," referring to mainland Chinese companies traded in Hong Kong.

Tan Huajie, Vanke's Shenzhen-based board secretary, could not immediately be reached for a comment on the report.

A listing in Hong Kong will give Vanke a "smoother funding channel" than Hong Kong-listed Winsor Properties, in which Vanke bought a 79.26 per cent stake in July, said Tian Shixin, a Shanghai-based analyst at BOC International China.

"In a capital intensive industry like real estate, the more cash you have, the faster you can grow," she said.

About HK$22.6 million of Vanke's B shares on average changed hands daily in the past six months, according to data compiled by Bloomberg, compared with HK$302.1 billion for Evergrande Real Estate Group, a Hong Kong-traded Chinese developer that has less than half the market value of Vanke.

Chinese real estate companies' funding environment "remains not optimistic" as new development loans fall, restricting housing starts and investments even as a rebound in sales improves their ability to repay debt, Vanke said in its first-half report on August 6.

China's B-share markets were set up in 1992 to give local companies a way to raise funds from foreign investors, who were banned from buying securities denominated in yuan. Foreigners and Chinese individuals are allowed to trade B shares.

Interest in the mainland's B-share market has waned as the central government allowed qualified overseas investors to access the larger, more liquid A-share market.

Vanke had 1.31 billion B shares, denominated in Hong Kong dollars, as of September 30, according to the company. The stock has gained 63 per cent this year in Shenzhen trading. Its A shares, which are seven times as many, rallied 35 per cent, compared with a 0.3 per cent gain in the benchmark Shenzhen Composite Index.