Chinese drug developer Sino Biopharmaceutical Ltd. plunged the most in more than two years in Hong Kong trading after agreeing to pay 4.9 billion yuan ($744 million) for shares in China Cinda Asset Management Co.
Sino Biopharm fell as much as 16 percent to HK$5.60, the biggest intraday drop since September 2013. The stock traded 12 percent lower at HK$5.83 at 10:15 a.m. in Hong Kong.
The company will buy 1.9 billion new China Cinda shares for 2.58 yuan each, it said in a statement to the Hong Kong stock exchange today. Sino Biopharm develops and sells modernized Chinese medicines as well as treatments for hepatitis and cardio-cerebral diseases. China Cinda provides distressed asset management and financial services.
"The market doesn’t quite understand the logic for such a transaction between a pharmaceutical company and an asset management firm," said Su Zhang, an analyst at BNP Paribas Securities (Asia) Ltd.
Sino Biopharm in its statement said the share purchase provides a "reasonable investment opportunity" for the company and will help generate "attractive returns" for shareholders. Sino Biopharm didn’t immediately respond to an e-mail seeking comment.
China Cinda shares traded 0.4 percent lower at HK$2.62 at 9:58 a.m. in Hong Kong.
— With assistance by Hui Li