* Shares jump more than 30 pct, trading volume leaps
* Latest in series of Beijing moves to bolster economy
* Assets from steel to property switch to private sector
(Adds analyst comment, rationale for reorganisation)
By Denny Thomas
HONG KONG, March 27 Shares and bonds of Chinese
conglomerate CITIC Pacific Ltd surged after its
state-owned parent, one of the country's biggest industrial
companies, injected prime operating assets into the Hong
In a sign that Beijing is intent on accelerating
market-based economic reform, the move switches a raft of parent
firm CITIC Group Corp's steel, property, banking and
mining businesses out of full state control and into the glare
of the private sector. The businesses made
billion of dollars of profit last year for CITIC Group, which
owns 57.5 percent of CITIC Pacific.
Investors sent CITIC Pacific stock as much as 30 percent
higher on Thursday, welcoming the move as the most significant
step taken by a central government-controlled enterprise in the
current campaign to restructure Beijing's state-owned companies.
It's the latest in a series of reforms planned by China to
bolster the world's second-biggest economy as it slows after the
blistering growth of the past decade.
"The backing of the government for all these
companies is being slowly dissolved. These companies will have
to stand by themselves," Hong Kong-based Jefferies strategist
Sean Darby said.
At 0300 GMT, CITIC Pacific shares were trading up 13.6
percent at HK$14.38, having surged as high as HK$16.54 earlier
in the session. The benchmark Hang Seng Index was flat.
The shares had been suspended from trading since last Monday
pending an announcement. Trading volume were in excess of 115
million shares, close to 10 times the moving 30-day average.
CITIC Pacific's 2023 bonds traded up, with
the issuer now seen by investors as a much stronger company. The
curve has shifted up 5-10 points in price, with market betting
on a rating upgrade which will take it closer to investment
Chinese President Xi Jinping is personally leading the
charge of economic and social reforms, underscoring his
determination to push through change amid fears of resistance
from vested interests. [ID: nL4N0J0350]
As part of that process, China Petroleum and Chemical Corp
(Sinopec Corp) is planning to sell an up to 30 percent
stake in its sprawling market business, a restructuring analysts
say could raise $10-20 billion.
CITIC Group was established in 1979 by Rong Yiren, one of
the few industrialists to stay behind in the mainland after the
revolution of 1949. The company was set up with the support of
former leader Deng Xiaoping, and now has 11 stock market-listed
entities, including commercial lender China Citic Bank Corp
, worth $32 billion by market capitalisation.
Rong's son, Larry Yung founded CITIC Pacific and went on to
become one of China's richest men.
CITIC Pacific said in a filing late on Wednesday that it
will acquire 100 percent of CITIC Ltd, the business housing the
CITIC Group assets, using a combination of new shares and cash.
CITIC Pacific will issue an undisclosed number of shares at a
price of HK$13.48 each, equivalent to a 6.5 percent premium to
its Monday close of HK$12.66, subject to a definitive agreement.
CITIC Ltd had total equity of about 225 billion yuan ($36.3
billion) at the end of 2013.
CITIC Ltd's businesses in China range from real estate to
banking, securities, infrastructure, energy, natural resources
and engineering among others. It made a net profit of 34 billion
yuan ($5.48 billion) in 2013, the filing said.
($1 = 6.2094 Chinese Yuan)
(Reporting by Denny Thomas; Additional reporting by Umesh
Desai, Anne Marie Roantree in HONG KONG and Matthew Miller in
BEIJING; Editing by Kenneth Maxwell)