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China Vanke Shares Soar on B-Share Migration to Hong Kong

Sunday, 20 Jan 2013 | 9:01 PM ET
China Vanke Co.'s 'Fun City' apartment complex in the Fangshan district on the outskirts of Beijing, China.
Keith Bedford | Bloomberg | Getty Images
China Vanke Co.'s 'Fun City' apartment complex in the Fangshan district on the outskirts of Beijing, China.

Shares in China Vanke shot up by their daily limit on Monday after the major property developer said its foreign-currency B-shares would move to Hong Kong, the second firm to have left the mainland's moribund B-share market in Shenzhen.

Vanke's B-shares, which are denominated in Hong Kong dollars, opened up 10 percent - the maximum intraday gain mainland shares are allowed to post - at HK$13.75 ($1.77) per share from HK$12.50 at last close.

Its yuan-denominated A-shares also opened at the top of the trading limit, at 11.23 yuan ($1.81) per share, up from 10.21 yuan.

(Read More: Firms Ditch B-Shares for Better Luck in Hong Kong)

Shares in its Hong Kong-listed subsidiary Vanke Properties Overseas, formerly known as Winsor Properties, were up around 18 percent at 0200 GMT in Hong Kong, changing hands at over HK$17.6 per share, their highest level since September 2012.

Vanke Overseas shares have been climbing steadily on expectations that its business would be reorganized if Vanke B shares move to Hong Kong, where exchange rules require issuers with two or more listed companies to guarantee they will not compete directly with each other.

Trading in Vanke shares has been suspended since December 25 when the company suspended trading pending an announcement. It announced the plan to shift the shares to Hong Kong on Friday.

(Read More: Why Hong Kong's Bull Market Will Last)

The positive response to Vanke's announcement follows the successful migration of China International Marine Containers' (CIMC) B-shares to Hong Kong in December.

CIMC's new Hong Kong shares have gained over 26 percent since their first day trading in Hong Kong on December 19, compared to a 6.5 percent rise in the China Enterprises Index of the top Chinese listings in Hong Kong over the same time period.

It is also good news for Chinese regulators, who have struggled to find a way to close down the B-share market, a once-vibrant market for foreign investors in Chinese equities that policy changes have rendered a little-traded backwater.

Chinese equities markets have rallied strongly since December 25 when Vanke suspended trading, but B shares have outperformed the wider indexes on what analysts have said is optimism that other firms will be able to execute similar migrations.

The Shenzhen B-share index was up 2.9 percent by 10:00 a.m. local market time, outperforming a 0.1 percent gain for the CSI300 index which tracks the largest firms listed in Shanghai and Shenzhen.

(Read More: China Stocks Overbought? Charts Suggest Correction)

It has risen by over 18 percent since Vanke halted trading. During the same period the CSI300 has gained only 6.4 percent.

Chongqing Changan Automobile and glass maker CSG Holding are also cited as high-profile companies with B shares that meet Hong Kong listing criteria.

Changan Auto's B shares jumped 3.3 percent on Monday while CSG's climbed 2.2 percent.

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