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CapitaLand up nearly 15% as business in China grows

IT HAS been a good week for CapitaLand, with its shares gaining nearly 15 per cent.

The property giant not only rode on the market’s rebound from one of its worst slumps in 20 years.

It also got a leg up from its growing exposure to China’s property market. The exposure is helping it make its name, literally, in China.

Many dealers believe CapitaLand, with its growing profile, may be one of the first foreign stocks to benefit from any decision made by China to eventually buy into foreign equities.

China said on Monday that its citizens could soon invest directly in Hong Kong stocks.

Many now expect China to liberalise some more by letting its citizens buy regional equities if its ongoing experiment is successful.

This is where firms like CapitaLand will benefit because their names are already familiar among Chinese investors.

The potential is huge. The first wave of Chinese money going overseas has already ignited a property boom in Hong Kong, where mainland Chinese are snapping up upmarket condominiums.

The next wave may well involve buying shares in companies with successful operations in China itself, such as CapitaLand.

Some research houses feel that even on the merits of its China business alone, CapitaLand may be underpriced.

‘We believe the current share price does not reflect the significant progress CapitaLand has made in building its business in China, where it is now the largest foreign real estate group,’ said UBS Investment Research on Wednesday.

CapitaLand, it noted, has 40 per cent of its 8,500 staff in China, with offices in the key cities of Beijing and Shanghai.

UBS also believes that the value of CapitaLand’s China business will become increasingly transparent once it spins off two China residential development businesses as separate listed firms.

Volatile market conditions are also unlikely to affect CapitaLand, given that it has over $4 billion on hand to fund acquisitions.

The stock gained 10 cents to close at $7.35 yesterday.


Source: The Straits Times 25 Aug 07

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