China Property

Investors give China Vanke's share plan thumbs up

Mainland property giant's move to convert its B shares into H shares seen positive bymarket, sparking strong rally in the stock

PUBLISHED : Monday, 21 January, 2013, 12:05pm
UPDATED : Tuesday, 22 January, 2013, 2:37am

Shares of China Vanke rose their 10 per cent daily limit yesterday after the country's largest developer by market value announced plans to move trading of its foreign-currency shares to Hong Kong from Shenzhen.

The developer's A shares, also listed on the Shenzhen Stock Exchange, rose to 11.13 yuan (HK$13.86), the highest since December 17, 2009. The B shares jumped to HK$13.75, the highest in more than five years.

Trading in both classes of shares resumed yesterday after having been halted since December 26.

The company's Hong Kong subsidiary, Vanke Property (Overseas), rose an intraday high of 19 per cent before closing up 12.75 per cent at HK$16.98.

The Shenzhen B-share index shot up 4.72 per cent to 799.3 points, its highest close in 20 months as investors expect more mainland companies to convert their B shares into Hong Kong-listed H shares.

On Friday, Vanke announced a long-awaited plan to convert all its B shares to H shares. The plan has to be approved by shareholders and regulators.

Analysts said it was a positive move.

"It's good for the company, mainly by broadening its funding channels, lowering funding costs and heightening its valuation," said Alan Jin, an analyst at Mizuho Securities Asia. "Vanke has long established its status as an industry bellwether and is well-known to international investors. But buying its shares was not convenient in the past. Converting B shares to H shares will clear such a hurdle."

Yu Liang, the company's president, said the conversion would help raise Vanke's profile in the international market and give it a broader platform.

No fundraising would be involved, Yu told mainland reporters yesterday.

He said the firm had been exploring development opportunities outside the mainland but its main business would still focus on the mainland, where it has projects in 60 cities.

Vanke Property would focus on Hong Kong, he said.

Meanwhile, the subsidiary warned yesterday it expected a significant fall in last year's profit.

Du Jinsong, an analyst at Credit Suisse, said Vanke's large valuation discount to other leading mainland developers should warrant significant relative upside for the stock.

Du said Vanke was trading at a discount to net asset value of more than 20 per cent, compared with a premium to net asset value in the case of state-owned China Overseas Land & Investment.

Vanke's shares are expected to start trading in Hong Kong in April.

The company said it had 1.31 billion B shares, about 11.96 per cent of its total capital, with a market value of HK$18 billion before trading ended yesterday when the price hit the daily limit.

The China Securities Regulatory Commission created the B-share market in 1992 to help state-owned companies raise funds in foreign currencies.