Shares in property trader Pearl Oriental Holdings surprised the market yesterday by soaring almost 18 per cent following a private placing to a US fund manager to raise $213.6 million. The stock closed at $2.30 and was the most actively traded issue in the market yesterday by volume and turnover. The heavy buying followed an announcement by Pearl that it had sold 120 million shares at $1.78 a share to Alliance Capital. Investment bank Smith Barney (Hong Kong), which brokered the deal, suggested Alliance's stake was a vote of confidence in Pearl's impressive track record of profits growth - up from $262 million to $410 million last year. 'A blue-chip name is come in and said it might take a larger stake,' Smith Barney vice-president Brad Allen said. Rival brokers said that on fundamentals the Pearl share was massively overvalued. 'Pearl is the one property company in Hong Kong that seems to have discovered a magic elixir, and Smith Barney is drinking at the trough,' the director of a Hong Kong brokerage said. His contention is that, while many property companies in the territory trade at discounts to their net assets of up to 30 per cent, Pearl is trading at a massive premium. According to figures from Smith Barney, at the time of Pearl's most recent annual report it had shareholders funds of $782.29 million. After yesterday's two-for-one scrip issue, there are about 4.26 billion shares in issue. This gives a net asset value of only 18.3 cents a share - less than 8.3 per cent of the share price. Even allowing for revaluations of the property assets in Pearl's accounts, there would still be an enormous discrepancy between asset value and the share price. Pearl chairman and chief executive Wong Kwan said he was not buying shares in the market yesterday and attributed the strong support to the group's strong growth and earnings prospects. He said the estimated net proceeds of $206 million from the share issue would finance its hotel and property investments but he declined to give a breakdown. Mr Wong said his group would give uncommitted buyers of office floors in Pearl Oriental Centre in Wan Chai more time to complete their purchases. Half the buyers of 16 office floors in the building still had not come forward to close the deals although the deadline passed yesterday, he said. He said his group had offered a further grace period for those buyers to arrange financing, but he would not say when the final deadline would come.