MAINLAND DEVELOPERS A STEP CLOSER TO SELLING A-SHARES
About 30 companies join process following introduction of ‘three arrows’ rescue plan by Beijing
Three major Chinese developers have moved a step closer to raising funds in the country’s capital market after Beijing restarted equity financing for the property sector late last year.
China Vanke, the country’s second-largest developer by sales, was notified by the Shenzhen Stock Exchange last Friday that its A-share placement application had been received for further processing, the firm said on Monday.
It has applied to sell no more than 15 billion yuan (HK$16.6 billion) worth of shares in what could be the largest onshore shares sale – if approved – since the restart of equity financing for property firms.
Vanke joins Poly Developments and Holdings and China Merchants Shekou Industrial Zone Holdings, China’s largest and sixth-biggest developers, respectively, in pursuing new A-share placements.
About 30 developers have applied for share placements since last November.
Poly Developments aims to raise 12.5 billion yuan while China Merchants Shekou plans to raise as much as 8.5 billion yuan from as many as 35 investors, according to separate statements from the Shanghai exchange in January and Shenzhen exchange in February. These developers replied to inquiries by regulators separately last Tuesday and are now awaiting further processing.
“If their A-share placement plans are approved by China’s regulators, it would help to reduce their asset-liability ratios and control interest expenditure, and shore up market confidence towards the real estate sector,” Chloe He, director of Asia-Pacific corporate ratings at Fitch Ratings, told the Post yesterday.
The share placement plans by Vanke, Poly Developments and China Merchants Shekou come after Beijing introduced its “three arrows” rescue measures late last year, allowing property firms listed in China to issue bonds and raise funds in the onshore market after a period of six years.
The approval process for the placements could take time, with regulators analysing the impact of equity financing on the development of the property sector as well as the stock market very carefully, according to Will Chu, a senior associate at CGS-CIMB Securities.
“What we can see from the processes so far is that China’s authorities tend to consider the biggest state-owned enterprises as a priority, than some smaller ones,” Chu said.
“In general, the net gearing ratios of all developers are rising, which means that all developers need [equity] capital.
“When so many industry players are in need of [equity] capital, those large, important ones would likely be given preference for access to the equity market, in order for regulators to effectively restore confidence in the industry.”
Vanke’s application for the A-share placement comes after it sold 300 million H shares at HK$13.05 apiece in Hong Kong in March.
A research note released on March 9 by Fitch said Vanke’s rating headroom would improve after the completion of its H-share placement, which was worth HK$3.9 billion, and its proposed A-share placement. The developer’s leverage would drop by 2 percentage points after their completion, the rating agency said.
China’s large property developers reported a slump in home sales last month, with transaction value at the top 100 builders by sales falling 14.4 per cent month on month in April to 566.5 billion yuan, according to real estate consultancy firm Cric.
China’s authorities tend to consider the biggest stateowned enterprises as a priority
WILL CHU, CGS-CIMB SECURITIES