Saturday, October 01, 2011

Hang Lung, CapitaMalls Plan Chinese Shopping Centres to Tap Luxury Market

Hang Lung Properties Ltd and CapitaMalls Asia Ltd have announced plans to build new shopping malls in China, underscoring their confidence in the country’s growing luxury consumer market.

Hang Lung, the Hong Kong developer that is building high-end shopping centres in other parts of China, and its parent bought two sites in Kunming in the southwest for RMB3.5 billion (US$547 million), it said in a stock exchange filing Thursday.

Singapore-based CapitaMalls said Friday it plans to trade its shares in Hong Kong, a day after announcing a venture to invest RMB6.7 billion in a mall and office development in Suzhou, a city west of Shanghai.

Luxury-products makers such as Prada SpA and LVMH Moe Hennessy Louis Vuitton SA are expanding in China, where the number of millionaire households jumped 31 per cent to 1.11 million in 2010 from a year earlier, according to a Boston Consulting Group survey. Demand for retail space helped drive a 42-per cent surge in commercial real estate investments in the country last year, according to Cushman & Wakefield Inc.

“There are a lot of opportunities in retail property in China,” said Sherman Yeung, Beijing-based director of retail services for North China at Colliers International. “The population is big and the country needs domestic consumption to boost the economy.”

Hang Lung fell 1.4 per cent to HK$24.05 as of 10:25 am in Hong Kong trading, while its parent Hang Lung Group gained 1.8 per cent to HK$40.10. CapitaMalls climbed 1.7 per cent to S$1.22 in Singapore, the first advance in three days.

Chinese consumers will be the world’s largest luxury spenders by next year, according to a HSBC Holdings Plc report last month. The nation’s retail sales climbed 17 per cent in August from a year earlier, after increasing 17.2 per cent the previous month, the statistics bureau said earlier this month.

Foreign developers may have an advantage in acquiring commercial projects over local rivals, who are “short of capital,” Yeung said.

Chinese developers are facing an “increasingly severe” credit outlook that may force them to cut prices and borrow on higher interest rates, Standard & Poor’s said in a September 27 report. Fewer than half of the 70 cities monitored by the government in August posted month-on-month gains in home prices for the first time, according to Samsung Securities Co.

CapitaLand unit CapitaMalls said in a statement to the Hong Kong exchange Friday that it plans to start trading its shares in the city on October 18 after applying for a secondary listing. The stock started trading in Singapore two years ago.

China makes up 44 per cent of CapitaMalls’ S$6.19 billion (US$4.8 billion) of assets, and is its biggest market.

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