Institutional investors, taking advantage of the recent rebound in equities, tapped the market for up to HK$1.33 billion yesterday with offers to sell stakes in Lenovo Group and Harbin Power Equipment, according to sources.
International Business Machines Corp was selling 116 million old shares of computer maker Lenovo at HK$5.30 to HK$5.41 each for up to HK$627 million, according to a sales document given to fund managers.
'The deal was closed within the first 15 minutes with some quality funds participating,' a source said.
'I expect more institutional investors will tap the market for stake disposals due to the current tight market liquidity,' he added.
Market liquidity has dried up, with no new issuance of bonds or other credit-related products for some time, according to Winson Fong, the managing director of SG Asset Management (Hong Kong).
'Stake disposal is the quickest way to get the money back,' Mr Fong said.
Citi, the sole bookrunner in the deal, was also engaged in transactions in which IBM sold shares of Lenovo last year.
IBM sold stakes in Lenovo twice last year to raise HK$1.6 billion by trimming its holdings to 4.9 per cent from an initial 15 per cent.
After the latest stake sale, IBM will own 3.6 per cent of Lenovo. The United States technology giant has agreed not to sell more shares in Lenovo until at least March 31.
Shares of Lenovo closed 3.53 per cent higher at HK$5.58 yesterday. The stock has slid 39.35 per cent from its historic peak of HK$9.20 in November last year.
Lenovo announced a 15 per cent increase in turnover to US$4.6 billion for its financial third quarter, which ended in December last year.
The computer maker's net profit grew 198 per cent to US$173 million, compared with US$58 million a year earlier.
'We estimate China's [personal computer] market will grow 19 per cent in 2008, beating global growth of 6 per cent,' a Morgan Stanley report said. 'Lenovo commands a 29 per cent share of the China [personal computer] market with roughly 40 per cent of sales and 60 per cent of operating profits generated from China. A strong home market will cushion macro concerns.'
The Hang Seng Index advanced for the third consecutive day to close at 24,591.69 points yesterday, a gain of 1,322.55 points since Monday.
Meanwhile, an undisclosed institutional investor in Harbin Power - the mainland's third-largest coal-fired power equipment maker - was attempting to sell HK$700 million worth of stock yesterday after the market closed, fund managers said.
The investor was offering 38.1 million shares at HK$18 to HK$18.50 each, representing a discount of up to 6.54 per cent to the stock's close yesterday of HK$19.26, an e-mail sent to fund managers shows.
UBS is the sole bookrunner for the share offering.
Early this week, an institutional investor in Swire Pacific cashed in HK$1.02 billion from a secondary share placement, marking the first share placement since the beginning of the Lunar New Year.
IBM has been selling down its holdings in Lenovo Group
The number of Lenovo shares IBM was selling in its latest disposal: 116m