There were rumours of sales concerning the two Hang Seng Index constituent stocks that registered the greatest rise on this Monday.
The market is spreading the news that Cheung Kong Property Holdings (1113.HK) plans to sell 75 percent equities in The Center, Queen’s Road for HKD 35.7 billion.
It is also rumoured that HSBC Holdings (0005.HK) sold part of its stake in Bank of Communications (3328.HK) at GBP 5 billion.
As a result, the share prices of Cheung Kong Property Holdings and Bank of Communications rose by 3.14 percent and 1.72 percent respectively.
It Should be True that Cheung Kong Property Holdings is Selling the Center
One of the abovementioned rumours has been denied, and the other one remains unverified. Nevertheless, this is not the first time that Cheung Kong Property Holdings is rumoured to sell its stake in the Center. I believe that this time, it’s probably true, though it would only be announced officially after the contract has been signed.
On the other hand, it should be purely market speculation that HSBC is selling Bank of Communication.
Why do I think that the former is more likely then? That is because Cheung Kong Property Holdings has just confirmed the sale of Century Link in Shanghai for RMB 20 billion. Hence, it is only a matter of course that it will sell its stakes in the Center. In fact, in the last CK shareholders meeting, Li Tzar-kuoi (son of Li Ka-shing) had publicly said that all the buildings could be sold with the exception of Cheung Kong Center.
Every big trade signifies that one party is bullish and one party is bearish, but we only know who the right one is after a couple of years. Currently it appears that Li Ka-shing is bearish, but I believe that he is not looking at the short-term when he invests, but the situation two years later.
In order words, Li Ka-shing is bearish towards the property prices of commercial buildings in 2018.
HSBC Holds Bank of Communication Shares to Enter China’s Market
It is less likely that HSBC Holdings will sell its stakes in Bank of Communication. While there had been many such rumours in the past years, none turned out to be true.
Another reason why I don’t think it will happen is because HSBC has always wanted to enter China’s market. Therefore, it is not just an investment decision, but also a strategic act of HSBC to own a 19.9% stake in Bank of Communications.
On the other hand, other foreign capital banks only buy 3-5% of the shares of mainland Chinese banks when the latter get listed in Hong Kong. They hold these shares purely for the purpose of investment, and would sell them once it looks profitable to do so.
On a side note, panic selling of AIA Group Ltd (1299.HK) did not occur. The reason is that a number of big firms supported the share together, with some making big purchases. Thus, AIA’s stock price opened lower, but gradually picked up.