China Developers’ Financing Hopes Revive on Share Sale Plans
Chinese developers may resume share sales on the country’s mainland exchanges as announcements of such plans by property companies in the past week add to signs that the government may allow new equity financing to proceed.
Sundy Land Investment Co. (600077), a Shenyang-based developer, plans to raise as much as 1.5 billion yuan ($245 million) in a private placement to finance two housing projects, the company said in a statement to Shanghai Stock Exchange yesterday. China Merchants Property Development Co. (000024), the country’s third-biggest developer by market value, plans to sell shares to buy assets, according to a statement posted to Shenzhen Stock Exchange.
The planned share sales reinforce expectations that regulators will ease limits on fundraising by developers, according to Haitong International Securities Group Ltd. (665) China will seek “stable and healthy” development of the property market, the Communist Party’s Politburo said July 30, the first time this year that authorities didn’t mention further tightening of restrictions, according to Credit Suisse Group AG and Orient Finance Holdings (H.K.) Ltd.
“These companies must have received some signal that the government will gradually ease refinancing for developers, otherwise they wouldn’t announce such plans,” said Hugo Hou, a Hong Kong-based analyst at Haitong. “It will be good news for the industry, because the availability of more options will lower fundraising costs for developers.”
Both Xinhu and Sundy Land’s share sales plans, along with China Merchants Property, will need approval by Chinese regulators. The country hasn’t allowed developers to raise money by selling shares since 2010, according to Zheshang Securities Co. and Haitong.
The two developers followed Xinhu Zhongbao Co. (600208), which last week said it plans to raise as much as 5.5 billion yuan in a private placement to finance two real estate projects.
The government’s stance on developers’ financing has not changed, said an unidentified news official at China Securities Regulatory Commission, who asked not to be identified because of the agency’s rules, in a phone interview on Aug. 5.
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