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Developers seek financing in Hong Kong

By Liang Fei (Global Times)

09:09, November 13, 2012

An increasing number of mainland real estate developers have started to seek sources of financing in Hong Kong, as credit for the sector is still tight in the mainland, experts noted Monday.

Shanghai-based developer CIFI Group launched its pre-listing road show Monday, Securities Daily newspaper reported. The company aims to raise as much as $270 million by selling about 1.3 billion shares on the Hong Kong Stock Exchange.

Future Land Development Holdings, another Shanghai-based developer, also started its initial public offering (IPO) on the Hong Kong bourse Monday. Other domestic developers such as Chongqing-based Forebase Group and Sincere Group are also eying a listing in Hong Kong.

"Liquidity on the Hong Kong capital market is increasing after the US announced its third round of quantitative easing, which has reduced the difficulties for mainland developers to get financing in Hong Kong," Liu Yuan, a senior research manager at Centaline China Real Estate, told the Global Times Monday.

According to data from Centaline, mainland real estate developers issued $1.25 billion worth of bonds in Hong Kong in October, up from $850 million in September.

Earlier in November, leading developer SOHO China issued $1 billion worth of bonds in Hong Kong.

Liu said that even though the domestic real estate sector has been warming up since April this year, developers are still suffering as credit to the sector remains tightly controlled.

During the past two years, there were few real estate developers who launched IPOs on the mainland market.

"It seems Hong Kong is now the best place for mainland developers to seek financing, and investors in Hong Kong generally respond well to real estate stocks," Feng Po, an analyst at ChinaVenture Investment Consulting, told the Global Times Monday.

Feng noted that back-door listings - a method of floating on the stock market by buying a company that is already listed - can also be a good way for developers to seek financing.

"A back-door listing is less time-consuming compared with launching IPOs, and the cost of such acquisitions now is also lower given the poor economic outlook at present," said Feng.

China Vanke, the country's largest listed property developer in terms of sales, bought a 74 percent stake in Hong Kong-listed Winsor Properties Holdings for HK$1.08 billion ($139 million) in May, aiming to seek more financing in Hong Kong and also to expand in overseas markets.

But Feng also noted that the global capital market is still very bearish, so it is not very likely that mainland developers will price their shares too high.

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