Dollar, yuan denominated share, assets swap offers new listing option

An innovative plan to form new shares, which debuted on the Shenzhen Stock Exchange on Wednesday, could become a blueprint for more major market listings in coming months.

Shares in China Merchants Shekou Industrial Zone Holding Co Ltd came into being after the company was merged with China Merchants Property Development Co Ltd, in a deal which combined dollar-denominated shares with yuan-denominated assets.

Officials said it is an option which will be appealing for enterprises that wish to combine local and overseas assets, and list in the future.

Shenzhen Stock Exchange called the listing "an innovative plan, completed in China's capital market" in a statement.

Shekou's parent China Merchants Group is one of the largest State-owned corporations to consolidate both Chinese and overseas assets, in its case spread across various real estate development arms denominated in yuan and dollar.

China Merchants Shekou is now one of the largest companies listed in Shenzhen by market value.

During the process, China Merchants Shekou issued new shares to finance the takeover of China Merchants Property, its assets and liabilities.

At the same time, China Merchants Property's dollar-denominated shares in Singapore were delisted and an employee stock-ownership plan was launched.

In its first day's trade in Shenzhen, China Merchants Shekou shares lost 8.38 percent, which analysts said was largely expected for such a large-cap company.

Its IPO price had been set at 25.3 yuan ($3.9) per share, but trading opened 5.53 percent lower at 23.9 yuan and immediately slumped 14.98 percent, until its trading was suspended for an hour. They closed at 23.18 yuan, and 27.11 percent of the available stock changed hands.

China Merchants Shekou released an after-trading statement, saying that China Merchants Group had increased its holding in the new stock, spending 2.535 billion yuan for 111.5 million shares, or 1.5 percent of its total shares.

According to a research note by China Investment Securities Co, large-cap companies such as China Merchants Shekou are likely to experience fluctuating prices.

"Profit-taking and speculative investors may have accounted for the active opening day's trade, and that high turnover rate showed investor interest in the stock is intense," the report said.

21st Century Business Herald cited Sun Chenming, China Merchants Shekou's chairman, as saying the company was willing to inject some 3 billion yuan more on Thursday to recover the share price if it did drop on the first day to lower than its IPO price, and that senior executives could still buy shares in the firm from the secondary market to underline their confidence.