China Sovereign Fund Buys Poly Hong Kong Stake

Property Company Says CIC Intends Long-Term Investment By JACKIE CHEUNG HONG KONG -- Poly (Hong Kong) Investments Ltd. said it plans to sell a 2.3% stake to China's sovereign-wealth fund for 409 million Hong Kong dollars (US$52.8 million) as a long-term investment. The company also said it plans to sell shares to its parent for HK$2.74 billion in exchange for property assets on the mainland. Poly Hong Kong is the offshore property flagship of state-owned China Poly Group Corp. Upon completion of the two share sales, China Poly's stake in Poly Hong Kong will rise to 58.1% from 51.85%. Poly Hong Kong shares rose 15% Friday to HK$9.02, off an early high of HK$9.15, the highest intraday level since Nov. 7, 2007. The share resumed trading Friday after being suspended Sept. 11. The benchmark Hang Seng Index finished down 0.7%. Poly Hong Kong said it plans to sell 60 million new shares at HK$6.81 each to China Investment Corp., the Chinese government's investment arm, a 13% discount to the developer's last traded share price of HK$7.81 on Sept. 11. CIC intends to hold the shares as a long-term investment, Poly Hong Kong said. CIC, which holds about US$300 billion in assets, has been ramping up its investment activities. It is in talks on taking a minority stake in AES Corp., a U.S. power-plant developer based in Virginia. It is also considering investments in U.S. mortgage-backed securities and recently bought a stake in the company behind London's Canary Wharf real-estate development. "China Investment Corp.'s stake purchase is a surprise, a long-term positive," an analyst at a regional brokerage firm said. Poly Hong Kong has been receiving strong support from its parent in recent years. The company, which previously had operations ranging from manufacturing to power production, first expressed plans to focus on the property sector in 2005, and by April 2008 it had already sold all noncore assets and bought 1.39 billion yuan ($203.6 million) worth of land assets from its parent. The land had a gross floor area of more than four million square meters and was spread across 12 cities in China. To further boost its land bank, Poly Hong Kong will sell 403 million shares at HK$6.81 each to its parent in exchange for six property projects in China. The projects, which are located in Foshan, Guangzhou, Shanghai, Shenzhen, Suzhou and Hainan Island, will increase the company's land bank by 2.1 million square meters to 11.5 million square meters. Poly Hong Kong, which had 5.5 billion yuan worth of contract sales in the January-August period, said its parent will continue to buy land assets for injection into the Hong Kong-listed firm. "Investors are betting Poly Hong Kong will follow the path of China Resources Land, which enjoyed substantial growth after a slew of asset injections from its parent," the analyst from the regional brokerage firm said. China Resources Land Ltd.'s shares soared fivefold, from HK$3.23 at the end December 2005 to HK$17.24 at the end of December 2007, after its parent injected assets into the company. The company's shares finished at HK$17.26 Friday. Jackson Wong, investment manager at Tanrich Securities, said CIC's purchase of a stake in Poly Hong Kong had sparked investor interest in the company. Write to Jackie Cheung at jackie.cheung@dowjones.com