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HONG KONG: Singapore-listed Fortune Real Estate Investment Trust (Fortune Reit) has regulatory approval to list by introduction in Hong Kong after agreeing to adopt precautionary measures to maintain stable trading in two markets.
It will be the first approved listing by introduction since Asian Citrus Holdings in November last year. Introduction involves listing a company without new shares being sold first to investors.
The mainland's biggest orange plantation saw a sharp decline on the first day of trading, prompting strong criticism of the Hong Kong stock exchange by legislators.
Fortune Reit, whose shares will start trading on April 20, said its two joint listing agents - JP Morgan and DBS Asia Capital - would act as bridging dealers to independently conduct arbitrage price differentials between Hong Kong and Singapore during the first month of listing.
Fortune Reit has a portfolio of 14 retail properties in Kowloon and the New Territories. They were worth about HK$11.5 billion as of December 31 last year.
"It is aimed at reducing material price divergence between Hong Kong and Singapore," JP Morgan executive director David Lau said.
For example, if the price of Fortune Reit in Hong Kong is trading well above that of Singapore, the listing agents will sell in Hong Kong and buy in Singapore. But Lau declined to disclose what range in price difference will trigger such an action.
The move came after what happened to Asian Citrus, whose shares opened at HK$51.25 on its first day of trading on November 26 last year but the price quickly plunged 62.9 per cent to HK$19 before being suspended after just two hours. They tumbled to HK$7.10 when trading resumed on November 27.
Asian Citrus said in its listing document that its net asset value per share was 37.30 yuan (HK$42.37) on June 30. But it failed to give an updated figure after a 10-for-one split weeks before the listing. Its shares, which are also listed on the Alternative Investment Market in London, closed on November 25 at just 45.75 pence (HK$5.38).
Legislators at that time criticised the lack of transparency that created the opportunity for unfair arbitrage. Other measures agreed include providing a reasonable supply of units and information to investors, including the transfer of units from Singapore to the Hong Kong market in three batches.
Cheung Kong (Holdings) (SEHK: 0001), which holds 31.6 per cent of Fortune Reit, will transfer 15 per cent of the trust to Hong Kong before listing, and up-to-date transfer information will be given to the public closer to the listing.
Justin Chiu Kwok-hung, an executive director of Cheung Kong and a also chairman of Ara Asset Management which manages Fortune Reit, said the measures came after talks with the Securities and Futures Commission. The dual primary listing would enable the firm to gain direct access to Hong Kong's capital market, he said. -- South China Morning Post?
