Chinese Mall Builder Considers $1bn Hong Kong IPO

Chinese mall developer SZITIC Commercial Property is reportedly planning to float itself on the Hong Kong stock exchange as the company looks to benefit from the recent uptick in property shares.

From the proposed initial public offering (IPO), the company intends to generate about $1bn (£638m, €757m), The Wall Street Journal reported, citing people familiar with the matter.

SZITIC also hired China International Capital and JPMorgan Chase to help it with the listing, according to the sources. The IPO is expected by the end of the year or in the first quarter of 2014.

The Shenzhen-based company's prime business is construction of shopping centre properties for customers including Wal-Mart. Founded in 2003, it has so far built 10 shopping malls in Chinese cities including Beijing, Hangzhou, and Suzhou.

In May, the company sold a 49% stake in two of its malls located in second-tier cities of Hangzhou and Suzhou. The stake was acquired by US private-equity firm Carlyle Group for an undisclosed amount as part of a strategic partnership between the companies in Asia.

Surging Property Shares

Due to favourable housing market conditions in the home market, Chinese property developers listed in Hong Kong enjoyed significant growth recently.

Shares in the 10 largest Hong Kong-listed Chinese property developers surged more than 20% on average since late June, compared to an 8% growth for the MSCI Asia ex-Japan index, an Asia-wide equity benchmark, according to the Journal.

Along with its unprecedented economic growth over the last two decades, China experienced a property bubble. In order to rein in the issue, the People's Bank of China tightened its monetary policy in January 2010. However, it had to loosen the measures in November 2011 due to the loss of economic momentum.

Since then, China's property developers have been benefiting from increased sales and better home prices, leading to a surge in their shares.

Rising IPOs in Hong Kong

SZITIC is the latest in a group of Chinese companies planning to list on the Hong Kong Stock Exchange.

E-commerce giant Alibaba Group is preparing for an IPO, which is expected to be the largest by a technology firm since Facebook's $16bn listing last year. However, the listing is subject to the city's stock exchange regulator's approval of the company's controversial board structure.

Chinese milk producer China Huishan Dairy Holdings has begun taking orders on its IPO with an expected value of $1.3bn, the city state's largest in four months.

China Cinda Asset Management is also planning a $2bn IPO in Hong Kong later in 2013.