China SCE keen to tap US$255m in HK offer

Investors will see more developers from the mainland tapping Hong Kong's equity market this year, and the first is likely to be Xiamen-based China SCE Property Holdings, which hopes to raise about US$255 million in an initial public offering.

The developer plans to sell 600 million shares with a price range starting from HK$2.60 to HK$3.30 each and a scheduled listing date on the Hong Kong stock exchange of February 5.

Deutsche Bank is the global co-ordinator and sole sponsor of the deal along with book runners China Construction Bank International and Macquarie.

A source familiar with the situation said Li Ka-shing had personally subscribed to HK$100 million in shares, Dow Jones reports.

Investment banks such as JP Morgan expect more mainland property developers will raise funds from flotations this year.

However, demand for new property stocks was weak last year. Fujian developers Powerlong Real Estate Holdings and Mingfa Group (International) cut their funding targets, and Shenzhen-based Excellence Real Estate Group and Tianjin-based Sunac China Holdings shelved their plans to list on the Hong Kong bourse.


Some analysts brushed aside the possible impact of Beijing's decision to increase bank reserve requirements on the earnings of Chinese property firms , saying that the property sector is still undervalued.

'I don't think credit tightening will be a major issue for mainland developers,' said David Ng, an analyst with Royal Bank of Scotland. 'As long as sales are still going strong, credit tightening shouldn't have a big impact on the property market.'

Ng said one of the reasons why property stocks had underperformed was that investors had reacted negatively to Beijing's policies.

To curb speculation on property prices, second-home buyers in mainland cities must make a minimum down payment of 40 per cent on the property and pay a 10 percentage point premium on the benchmark mortgage lending rate.