China Vanke Co. (000002), the country’s biggest developer by market value, surged by the 10 percent daily limit in Shenzhen after announcing plans to shift trading of its foreign-currency shares to Hong Kong.
Vanke’s yuan-denominated A shares and its Hong Kong dollar B shares both jumped to the highest in more than three years, triggering a broader rally in China’s foreign-currency stocks on speculation other companies will follow the move.
The plan would widen Vanke’s access to global investors, giving the company entry to an exchange where the daily trading value is more than 100 times higher than in the B-share markets. The developer joins China International Marine Containers Group Co. (2039) in seeking to exit the B-share market, which has languished after the nation opened its local-currency stock markets to foreign investors.
“The move will help Vanke access more resources in the long run,” Jinsong Du, a Hong Kong-based property analyst at Credit Suisse Group AG, said in a phone interview today. “The developer will have two platforms to raise funds in the international market if the conversion is approved.” Du said he expected Vanke to debut in Hong Kong around April.
Vanke rose to 11.13 yuan at the close on the Shenzhen exchange, the highest since Dec. 17, 2009. Its B shares, denominated in Hong Kong dollars, also jumped by the 10 percent limit to HK$13.75, the highest in more than five years. Both classes of shares resumed trading after a halt since Dec. 26.
Vanke Property (Overseas) Ltd., its Hong Kong unit, surged 13 percent to HK$16.98, the highest in four months. Vanke, based in the southern city of Shenzhen, in May said that it will pay HK$1.08 billion ($139 million) for a 74 percent stake in what used to be Winsor Properties Holdings Ltd. to expand overseas.
The Shenzhen B-share index jumped 4.7 percent, the most since November 2009, while the Shanghai B-share index climbed 3 percent, the highest since August 2011.
The developer plans to convert all of its Shenzhen-listed B shares to Hong Kong-listed H shares pending approval from shareholders and the regulators, the company said in a filing to the Shenzhen stock exchange on Jan. 18.
Vanke had 1.31 billion B shares, about 12 percent of the total capital, with a market value of HK$16.4 billion before the Dec. 26 suspension. It was the second-largest listed company among both Shanghai and Shenzhen B shares in terms of market capitalization.
B-share markets, where foreign institutions and Chinese individuals are allowed to trade, were set up in 1992 to give local companies a way to raise funds from global investors, banned from buying securities denominated in yuan. Interest in B shares has waned as the government allowed qualified overseas investors to access the larger, more liquid A-share market and eased limits on foreign exchange.
The conversion may reduce Vanke’s financing costs in the long term, and provide more flexibility for the developer to optimize its capital structure, analysts led by Wang Yi at Goldman Sachs Group Inc. wrote in a report today.
The average daily trading in Shenzhen and Shanghai’s B- share markets was 463 million yuan ($74 million) in the last three months, compared with HK$62.1 billion ($8 billion) for Hong Kong, according to data compiled by Bloomberg.
“The Hong Kong market has better market influence and resources compared with China’s B share market, so the conversion will mean a lot to investors and the company,” said Tan Huajie, Vanke’s board secretary in an e-mailed statement on Jan 18. “The conversion will help raise Vanke’s profile in the international market and obtain a broader platform.”
A group of so-called third parties will provide a cash option for B-share holders who decide not to swap their stock for H-shares, according to the statement. China Resources (Holdings) Co., Government of Singapore Investment Corp. and Hillhouse Capital Management Ltd. are among buyers who have agreed to pay HK$13.13 a share to exiting investors.
The China Securities Regulatory Commission is considering looser criteria for mainland companies to sell shares in Hong Kong as part of its efforts to increase their access to capital, the Shanghai Securities News reported Dec. 28, citing an unidentified CSRC official.
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