STOCKWATCH: Swire lower on profit taking; Guangzhou deal gives little support
HONG KONG (AFX-ASIA) - Swire Pacific shares were lower in mid morning trade on profit taking in line with the broader market, with its newly announced joint retail-office property project in Guangzhou failing to lend support to its share price, dealers said. They said the deal signals that Swire Pacific is preparing to join other Hong Kong property developers in exploring the China property market which is believed to have greater growth potential than Hong Kong. At 11:27 am, Swire Pacific was down 0.70 hkd or 1.52 pct at 45.20 on trade of 1.16 mln shares, while the Hang Seng Index was down 123.85 points at 13,715.25 on turnover of 3.26 bln hkd. Eric Yuen, research manager with Dao Heng Securities, said Swire Pacific's decline came on profit taking with the broader market lower on a weaker Wall Street overnight. "The Guangzhou joint deal failed to help the stock offset the selling. But the deal has served as an indication that Swire Pacific has become more aggressive in the China property market," Yuen said. Swire Pacific will take a 55 pct stake in the Guangzhou joint deal, which is valued at 4 bln hkd, with partner Guangzhou Daily to hold the balance. While Yuen did not provide his estimate of the return from the Guangzhou deal, he said "the upside potential of property prices and rentals in major Chinese cities is higher than Hong Kong". Yuen said Swire is just one of the Hong Kong property developers who are paying increasing attention to the China market. Earlier this year, Kerry Properties and Shui On Construction and Materials announced investment projects in Shanghai. Other major developers, such as Cheung Kong, Sun Hung Kai Properties, Henderson Land and New World Development, have been active in China for years, he said. "I expect more property investment projects will be announced after China enters the World Trade Organisation," Yuen said.
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