China Vanke’s A Shares Plunge 10% After Six-Month Suspension

  • Shares drop by daily limit to 22 yuan in Shenzhen trading
  • Developer is trying to push through a reorganization plan

China Vanke Drops 10% After Resuming Trade

China Vanke Co., the developer whose reorganization proposal is being stymied by a battle for control, plunged by the 10 percent daily limit Monday when its shares resumed trading in Shenzhen after being suspended for more than six months.

The A shares, which have been halted since Dec. 18, fell to 22 yuan on the mainland bourse. The Hong Kong-traded stock of China’s biggest residential developer jumped 8.4 percent to HK$16.48 as of 1:07 p.m. local time, trimming its decline this year to 28 percent and surpassing the 1.5 percent advance in the benchmark Hang Seng Index.

The company’s board last week turned down an extraordinary general meeting called by Shenzhen Jushenghua Co. and Foresea Life Insurance Co., units of Vanke’s largest shareholder Baoneng Group, to remove almost all directors, the builder said in a Shenzhen Stock Exchange filing on Sunday. The board’s rejection of the proposal meant a management shuffle may not occur in the near term, said Alfred Lau, an analyst at Bocom International Holdings Co. in Hong Kong.

The plunge in Vanke’s A shares was “within expectations” after the mainland-traded stock rallied 62 percent in December before the halt, while the Hong Kong-listed shares tumbled as much as 36 percent this year, David Yang, a Shanghai-based analyst at UOB Kay Hian Investment Co., said by phone. “The valuation of the firm’s H shares has become cheaper than its shares in Shenzhen, which prompted some investors to sell its A shares and to buy shares in Hong Kong for hedging purposes.” Yang has a target price of HK$22.50 for the Hong Kong-traded stock.

The A shares are likely to decline further by the 10 percent daily limit two or three more times, Wang Ruizhe, a Shanghai-based analyst at Capital Securities Corp., said.

Prolonged Tussle

Shenzhen-based Vanke has announced a 45.6 billion yuan ($6.8 billion) share sale to Shenzhen Metro Group in a bid to end a battle for control of the developer that has been going on for more than six months. China Resources (Holdings) Co. and Baoneng, its two largest shareholders, have both said they opposed the deal that would make the southern Chinese rail operator Vanke’s biggest shareholder.

The fight over ownership of the largest publicly traded developer in mainland China is “far from over,” UOB’s Yang said, adding that the reorganization proposal is certain to be revised given the opposition from the two biggest shareholders.

“Whether the Shenzhen stock exchange will consider China Resources has acted in concert with Baoneng will have a big impact on Vanke’s future share moves,” Yang said.

The bourse last week asked China Resources and Baoneng to explain whether they have acted in unison to increase their combined voting rights in Vanke. While the two denied the alleged assumption, saying that no deal was signed, and no partnership or joint venture existed between them, the bourse is scheduled to reply with its view later.

Legal Vote

A vote last month at a board meeting in favor of the restructuring plan had been legal and effective, after a query from the Shenzhen exchange, Vanke said in a separate statement Friday. The withdrawal from voting of Zhang Liping, an independent non-executive director, was within the rules, the company said. Zhang, employed by Blackstone Group LP, abstained from voting on the proposal because Blackstone and Vanke are in talks about a commercial property project.

Earlier, China Resource opposed the legality of the vote, saying only members directly affiliated with the companies involved in the resolution -- in this case, Shenzhen Metro -- should be excluded from voting.

— With assistance by Emma Dong

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