Offshore hopes trigger rally in Vanke Property

Investors optimistic HK unit will become overseas investment arm of China Vanke

PUBLISHED : Saturday, 26 January, 2013, 12:00am
UPDATED : Saturday, 26 January, 2013, 4:59am

Investors expressed high hopes for Vanke Property (Overseas), a subsidiary of the mainland's biggest developer, China Vanke, pushing the share price of the Hong Kong-listed unit up 12.95 per cent yesterday.

Vanke Property closed at HK$17.10 after its shares resumed trading following a one-day suspension on Thursday.

Yesterday's close represented a 175.4 per cent gain on the closing price of HK$6.21 on July 16 last year, when China Vanke completed the acquisition of a 75 per cent stake in the Hong Kong company.

"Investors are buying the concept that Vanke Property will become the arm of China Vanke to invest overseas," said Alfred Lau, a property analyst at Bocom International.

China Vanke chairman Wang Shi was quoted by Chinese-language newspapers yesterday as saying the company would make its first investment in the United States during this quarter.

Investors speculated that the mainland developer would use Vanke Property as a vehicle for offshore investments.

Over the past two years, the group has highlighted internationalisation as a long-term direction and identified the US as one of its targeted economies.

With annual property sales of more than 140 billion yuan (HK$174.4 billion) in mainland China, analysts said it was sensible for China Vanke to consider offshore opportunities to improve earnings growth.

The news came on the heels of a Vanke Property announcement on Thursday that China Vanke could inject its Tsuen Wan property investment into the company.

In a 20-80 joint venture with New World Development, China Vanke made its first foray into Hong Kong's property market by acquiring a Tsuen Wan waterfront site for a high-than-expected HK$3.43 billion.

The winning bid was 10 to 27 per cent above analysts' estimates, which ranged from HK$2.7 billion to HK$3.12 billion.

Vanke Property said it was not involved in the Tsuen Wan project.

Lau expected China Vanke would take some time before transferring assets into the Hong Kong subsidiary.

"However, with the backing of China Vanke, Vanke Property will find it easier to arrange bank borrowings for future site acquisitions or bids in both Hong Kong and overseas," Lau said.

Lee Wee Liat, the head of research at BNP Paribas, said China Vanke had set its sights on the global market, rather than Hong Kong.

"The bigger plan for Chinese developers is to go international - to the US, for example," Lee said. "Hong Kong is just a test bed for the internationalisation of Chinese developers."

Vanke Property was formerly known as Winsor Properties, originally a property unit of textile and garment company Winsor Industrial.

In July 2007, Winsor Properties was taken over by USI, which later changed its name to Wing Tai Properties.

In May last year, China Vanke proposed a plan to take control of Winsor Properties from Wing Tai.

The deal was completed in July.