OpinionRights deals help cut borrowing costs for China developers

If you are a mainland property developer, a rights offering is a costly and time consuming way of funding that is rarely considered, unless you are in dire straits.

Cash-strapped developers' appetite for rights issues has picked up after at least two mainland property firms - Country Garden and Yuexiu Property - announced they will raise a combined HK$7 billion, overshadowing other deals in the fairly stagnant initial public offering market in Hong Kong.

Country Garden was the first Hong Kong-listed mainland developer to offer a rights issue this year and was followed by rival Yuexiu Property last week.

There is little compelling reason why the two property firms offered discounts to the rights shares, besides concerns over their ability to weather a downturn in the sector.

To be fair, the rights shares offered by the mainland duo to mollify investors were less than a US$460 million offering by Hong Kong billionaire Vincent Lo's Shui On Land last year that was at a steep 38 per cent discount.

But the level of discount is certainly an indication of investors' confidence in the company.