May 6, 2010 / 7:36 AM / 8 years ago

UPDATE 4-Hong Kong's Swire scraps $2.7 bln property IPO-sources

* Swire Property IPO shelved due to market downturn - sources

* One of several global deals yanked from offering process

* Swire Pacific shares suspending, announcement pending

(Adds more analyst quotes, examples of pulled deals)

By Kennix Chim and Michael Flaherty

HONG KONG, May 6 (Reuters) - The property unit of conglomerate Swire Pacific (0019.HK) has pulled plans to raise up to $2.7 billion through a Hong Kong initial public offering, sources said as regional real estate stocks took a beating in a weak market.

Swire Properties, deep into its spin-off process, is one of several deals in the last few days to be yanked or downsized, as local stock and bond markets suffer from a combination of Chinese government tightening measures to fears of further financial troubles in Greece and the rest of Europe.

On Thursday, sources with direct knowledge of the matter said Swire decided to pull the offering after the market sell-off weakened demand. In a filing to the Hong Kong stock exchange, Swire asked for trading in its shares to be suspended, pending an announcement.

The sources did not want to be identified because the announcement is not yet public.

“The market, globally, has been pretty volatile lately due to negative news, such as Greece’s debt problems,” said Adrian Ngan, an analyst at CCB International. “I‘m not too surprised that Swire is holding off plans right now, especially since its size is quite huge and the pricing is relatively high.”

India’s Essar Steel [ESRG.UL], which had been looking to issue a roughly $500 million U.S. dollar bond, put that deal on hold on Thursday, a week after its sister company Essar Energy cut the price of its London IPO.

China’s New Century Shipbuilding withdrew its Singapore IPO on Wednesday. [ID: nSGE644028]

In addition to malaise spreading across stock and bond markets, the property sector itself is under major pressure, particularly in Greater China.

Property shares have dominated short-selling activity which has picked up to one-year highs.

Hong Kong stocks have dropped nearly 10 percent since mid-April, hit by government measures to curb property prices and measures to absorb excess market liquidity, including a rise in bank reserve requirements unveiled over the weekend.

Swire Pacific, the property unit’s parent, is a conglomerate with businesses in aviation, property, shipping and offshore services industries. Swire Pacific also owns Cathay Pacific Airways (0293.HK), Hong Kong’s dominant airline and Asia’s No. 5 by market value.

    Swire Pacific shares were suspended on Thursday afternoon. The stock fell 2.8 percent to end the morning session at HK$81.05 before trading was halted. The company did not respond to calls seeking comment.

    Goldman Sachs (GS.N), HSBC (0005.HK)(HSBA.L) and Morgan Stanley (MS.N) were underwriting the Swire Properties deal. The banks declined to comment as well.


    Authorities in China and Hong Kong have been concerned with fast-rising property prices fuelling worries of asset bubbles forming. Over the past few months, the Hong Kong government has repeatedly expressed concerns with rising property prices.

    Some of its moves over the past few months include raising taxes on luxury apartments, increasing land supply and targeting irregular sales practices by developers.

    Since the launch of the Swire Properties roadshow on April 26, shares of Singapore developer CapitaLand (CATL.SI) have dropped 15.9 percent, while the Hang Seng Properties Index is down 8.3 percent. Swire Pacific’s shares dropped 15 percent.

    Shares of Chinese developer Evergrande (3333.HK) fell 10 percent on Thursday

    “The Swire Properties IPO is quite expensive. At 20-21 times PE (price to earnings), it is not surprising if they decide to pull out,” said Andrew To, sales director, Tai Fook Securities Co Ltd. (Additional reporting by Lee Chyen Yee, Vikram Subhedar and Alison Leung; Editing by Lincoln Feast and Anshuman Daga)

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