Mainland developers seen to make a beeline for Hong Kong funds

Updated: 2015-05-13 09:08

By Sophie He in Hong Kong(HK Edition)

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A proposed placement of HK$9.7 billion shares by China Resources Land Ltd (CRL) is expected to encourage mainland property firms to raise much-needed capital in Hong Kong, stock analysts say.

Shenzhen-based CRL told the Hong Kong Stock Exchange on Tuesday to suspend trading in its shares pending an announcement of its share placement plan.

According to local media reports, the developer aims to raise up to HK$9.7 billion by offering 380 million shares to selected institutional investors at HK$25.25 to HK$25.65 apiece. The offer prices represent a discount of up to 7 percent to the company's closing price of HK$27.15 on Monday. CRL's Tuesday trading was suspended.

Market sources said CRL plans to use the proceeds of the placement for acquisition of land for future development.

Francis Kwok Sze-chi, marketing director at Bright Smart Securities (HK) Ltd, told China Daily he expects more mainland developers to raise capital from the local bourse in the near term to take advantage of the higher valuation of their shares in the latest rally.

In the past three months, CRL's share price has picked up 38.5 percent.

The central government lowered the down-payment requirement for homebuyers at the end of March in addition to cutting interest rates for the third time in six months earlier this week. "These measures are considered to be good news for developers," Kwok said.

The benchmark index has risen 1,276 points since early this year, and stock analysts say it's now considered to be a good time for companies to raise new capital.

Mainland developers seen to make a beeline for Hong Kong funds

Vincent Cheung Kiu-cho, national director of Greater China at property consultant firm Cushman & Wakefield, said although more mainland developers are expected to raise capital, they are unlikely to be aggressive in land purchasing.

"Although the policy environment is more favorable now, I think developers are still very cautious," Cheung said.

He explained that mainland developers are monitoring the economic environment across the border closely as well as the actual demand in the housing market.

Most mainland builders are not expected to take great risk by putting their money in new projects without having the confidence in cashing out from their existing projects, Cheung said.

Franco Leung, a senior analyst of corporate finance at Moody's, said the recent climb in the share prices of mainland property companies has made it more attractive for them to raise equity from shareholders.

"We believe developers' bids to raise equity capital to support their operations will be positive to their credit profile and long-term development," said Leung, adding that it will expand their funding channels and reduce reliance on debt, which has been a major funding source for developers in the past few years.

(HK Edition 05/13/2015 page1)