© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
January 21, 2013 3:39 am
Shares in China Vanke, the country’s biggest property developer by sales, rose by the 10 per cent daily limit on Monday after the company announced plans to open itself more widely to foreign investors by listing in Hong Kong through a share conversion.
Vanke said over the weekend that it will convert its Shenzhen-listed B shares to Hong Kong-listed H shares, a complex process that was completed for the first time by Chinese shipping container company CIMC last month.
Vanke’s shares had been suspended in Shenzhen since late last month, with no reason given for the move at the time. The company will maintain its A-share listing, which is denominated in renminbi.
B shares, which are traded in US dollars in Shanghai and Hong Kong dollars in Shenzhen, were intended to be the main platform for foreigners seeking access to Chinese companies. But they are now an increasingly illiquid market as Hong Kong-listed shares have become a far more popular option.
With last month’s successful conversion of CIMC, investors believe that many of the 86 remaining B-share companies will also make the switch, seeking the greater liquidity, higher profile and higher valuations that can be found in the Hong Kong market. Deloitte expects around 40 such share listings to move to Hong Kong.
“It makes sense for Vanke to go to Hong Kong. It gives it one more platform for raising finance and it will give it a better environment for international development,” said Sun Jianbo, chief strategist for Galaxy Securities in Beijing.
The move to convert B shares to H shares would also provide a much-needed boost to Hong Kong’s equity market. In 2012, Hong Kong dropped to fourth in the global new listings league table, only narrowly outstripping Kuala Lumpur, the Malaysian capital, according to data from Dealogic.
Shanghai and Shenzhen currently have almost 900 companies awaiting the green light for an initial public offering, with many having held off due to the moribund performance of Chinese equities over the past three years.
Earlier this month Chinese regulators vowed to carry out more stringent background checks as a way to whittle down that waiting list, and last month relaxed the rules on overseas listings to encourage some of those companies into H-share IPOs instead.
Vanke has achieved its scale by being a mass-market developer in China, building residential compounds often with dozens of near-identical apartment blocks that cater to the country’s emerging middle class.
Worried about a property bubble, the government has clamped down on the real estate market over the past three years, with luxury homes hit especially hard. But Vanke sales have held up well because it has been more focused on affordable housing.
Because B shares are so thinly traded, the valuation of Vanke’s converted shares will be lower than other Chinese property companies in Hong Kong.
The Hong Kong listing will also make it easier for Vanke to raise capital for an international expansion. Vanke said last year that it would begin to pursue foreign markets where there are large overseas Chinese communities.
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in