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Third CRC arm may join Hang Seng Index soon

(China Daily/Agencies)
Updated: 2009-11-11 08:41

China Resources (Holdings) Co (CRC), a State conglomerate with businesses from retail to real estate, may join Li Ka-shing in controlling three members of the Hang Seng Index following a quarterly review of the gauge.

China Resources Land Ltd, a property developer, is the most likely candidate to join the measure after Hang Seng Indexes Co announces the results of its latest review on Nov 13, Goldman Sachs Group Inc and Nomura Holdings Inc said.

The stock has the highest combined ranking in market value and turnover of possible candidates for inclusion, according to reports from the brokerages.

China Resources Land shares have doubled this year, giving the company a market capitalization of HK$96.3 billion ($12.4 billion). The parent has its roots as a trading agent established in 1938 and has since evolved into a conglomerate with businesses that span industries from real estate and retail to pharmaceuticals and infrastructure.

"It's an iconic state-owned enterprise," said Pauline Dan, Hong Kong-based chief investment officer at Samsung Investment Trust Management, which oversees $100 billion in assets.

China Resources Land's inclusion would make its parent the only company apart from billionaire Li's Cheung Kong (Holdings) Ltd to have three companies as constituents in the Hang Seng Index. Any amendments, based on criteria such as market capitalization and trading volume, may prompt funds that buy shares based on the index to adjust their holdings.

Related readings:  CRC to open its first store in China  CRC cement IPO facing rough ride: Analysts  High-speed boost to railways, CRC  Outlook grim for CRC IPO

Goldman Sachs analysts Kenneth Kok and Richard Tang said the likelihood of any index reshuffle was small, according to their report dated Oct 29. While Hang Seng Indexes, the compiler of the city's benchmark indexes, said in February 2007 that it plans to expand the gauge to 50 members, it kept the gauge's membership unchanged at 42 in its August review.

China Resources Land's stock gain this year is almost double the Hang Seng Index's 56-percent climb. The company last month posted a 59-percent surge in net profit for the six months ended June 30. Property is under-represented in the Hang Seng, according to Goldman and Nomura's reports.

The developer's inclusion in the benchmark measure would be "mostly symbolic", said Kenny Tang, an analyst at Redford Securities Co. "But it is a recognition of the companies' corporate governance and management," he said.

China Resources Enterprise Ltd, whose venture with SABMiller Plc makes China's best-selling beer by volume, is the best performer on the Hang Seng Index in the second half of this year through Monday.

China Resources Power Holdings Co, an electricity supplier, joined the benchmark measure after its quarterly review in May. Goldman Sachs and Nomura also picked China Resources Power as a possible addition ahead of that announcement.