April 9, 2014 / 8:16 AM / in 4 years

UPDATE 2-China Vanke says keen on state-owned property firms amid reform moves

* Developer Vanke says plans “big moves in M&A and equity investment”

* Says overseas investment in next 5 yrs won’t exceed 10 pct of total

* Favours U.S. market over UK for now, thanks to strong Chinese interest (Adds quotes from president, stock price, details)

By Clare Jim

HONG KONG, April 9 (Reuters) - China Vanke Co Ltd , the country’s largest listed real estate developer, is looking to invest in property firms held by state-owned enterprises as Beijing gradually relaxes its hold on government assets.

As part of the government’s reform plans, Beijing has promised to allow more private participation in state-owned enterprises. Many of those state-owned enterprises have expanded into property development in recent years, drawn by big profits.

In February, China’s decision to sell a stake in a subsidiary of state-controlled Sinopec Corp , Asia’s biggest oil refiner, signalled more privatisation of its bloated state-owned sector will take place soon.

“We see opportunities from the reform and opening, SOEs selling their competitive business,” Vanke president Yu Liang told a real estate forum in Hong Kong on Wednesday.

“We will make some big moves in M&A and equity investment,” he added, without providing details.

Vanke’s comments come a month after it said net profit for 2013 was 15.12 billion yuan ($2.44 billion), in line with forecasts, and warned property prices in some Chinese cities were overheating.

The outlook for the sector has been hit in the past months due to tighter credit on the mainland and a slowing economy. Weaker home price data and reports that developers have cut prices have also rattled investors.

Shares of Vanke, which is based in the southern Chinese boom town of Shenzhen, were down more than 1 percent on Wednesday, lagging a flat CSI300 index of the largest Shanghai and Shenzhen A-share listings.


Vanke has also joined a host of Chinese developers in venturing overseas a time when tighter liquidity and the default of a real estate developer on the mainland last month are fuelling worries over the outlook for China’s property market.

Yu said Vanke’s total overseas investment for the next five years would not exceed 10 percent of the company’s overall investment over that period and it favoured the United States over Britain for now.

“We look at places where first, Chinese children are willing to go study, and second, Chinese are willing to do business. There are more and more Chinese going to the U.S., not UK, so we consider the U.S. first,” he said.

“If in the end we find a suitable partner in the UK we will consider investing there.”

China is expected to see 20 percent growth per annum in outbound real estate investment in the next decade, up from $11.5 billion last year, property agent Savills has forecast.

In February, Vanke said it will team up with U.S. developers RFR Holding and Hines on a residential tower in New York that will target high-end customers, its second project in the United States after it tied up with Tishman Speyer last year on a project in San Francisco.

Vanke also has investments in Singapore and Hong Kong. Last week, it bought a project for HK$860 million ($110.87 million) in Hong Kong from Soundwill Holding through its overseas unit, Vanke Property Overseas Ltd. ($1 = 6.1968 Chinese Yuan) (Additional reporting by Yimou Lee; Writing by Anne Marie Roantree; Editing by Miral Fahmy and Ryan Woo)

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