Punters warned on back-door listings

The share prices of companies targeted as back-door listing vehicles over the past year by mainland property developers have surged as investors punted on big asset injections that might follow from their new parents.

But analysts, who expect the acquisition trend will continue, caution that valuing the shares based on little more than guesswork about what the new owners plan to do with the companies is a highly risky gamble.

"In the short term, prices are influenced more by pure speculation," said Du Jinsong, a research analyst at investment bank Credit Suisse.

The cautions come after high-profile takeovers of locally listed companies by mainland developers. The acquisitions have been aimed at providing a back door to listing in Hong Kong, because access to listing by property companies on the mainland has been blocked by regulators, and liquidity is tight.

In all cases, the acquisitions triggered huge rises in share prices. On April 10, shares in Hengli Commercial Properties surged nearly fivefold to HK$1.95 after the company became a back-door listing for Dalian Wanda Commercial Properties, one of the largest mainland developers.

On Friday, the shares closed at HK$4.50, up 131 per cent from the close on April 10.

On May 9, shares of SPG Land almost doubled to HK$7.14 after an announcement that Greenland Holding Group would become a majority stakeholder in the company. The stock closed at HK$8.39 on Friday.