The suspension of trading in
Shanghai Automotive Co Ltd's shares on the
Shanghai stock exchange on Tuesday stirred a flurry of speculation about an impending transaction that could have a major impact on the firm's future earnings.
The company has yet to make an announcement on the matter.
Market analysts have speculated for some time that
Shanghai Automotive will receive an injection of assets from its parent company
Shanghai Automotive Industry Corporation (Group) (SAIC). These assets could include part of SAIC's stakes in its joint ventures
Shanghai GM and
Shanghai Volkswagen.
But SAIC spokeswoman Bai Mei yesterday denied the speculation, saying the firm is not planning to transfer its stakes in
Shanghai Volkswagen and
Shanghai GM to
Shanghai Automotive.
SAIC now holds a 30 per cent stake in
Shanghai GM, 50 per cent of
Shanghai Volkswagen and a 51 per cent share in another joint venture with General Motors Wuling Auto.
The
Shanghai Automotive Co Ltd may raise about US$650 million to buy SAIC's assets, according to a
Shanghai Securities News report.
"Compared with the initial public offering (IPO), it is faster and easier for SAIC to sell its assets to its listed arm," said Wang Peng, an analyst with Orient Securities Company Ltd.
"Whatever the measures SAIC will take for its public trading, there has been a common understanding in the market that the company will bring in its 50 per cent share in
Shanghai Volkswagen and 30 per cent share in
Shanghai GM to
Shanghai Automotive Co Ltd."
Hu Song, an analyst with Haitong Securities Research Center, and Wang Zhihui, an analyst with Shenyin&Wanguo Securities, echoed Wang's comments.
"At least, SAIC will inject its 30 per cent assets in its joint venture
Shanghai GM to its listed company. SAIC will lift the percentage of high-quality assets, especially the part in
Shanghai GM, in its listed company," said Hu.
SAIC's assets in auto parts and components, which accounted for a major part in the listed company, may be stripped off, said Wang.
Shanghai GM and
Shanghai Volkswagen are market leaders in China.
Shanghai GM sold 201,901 autos in the first half of the year, up 49 per cent from last year.
Shanghai Volkswagen saw sales jump 90 per cent in the first half to 173,600 vehicles.
SAIC's public trading was approved by the local government, which is anticipating the company to trade its assets as soon as possible in the bull market.
Stocks rose to a two-year high yesterday and experts familiar with the business said the bull market would continue in the second half of the year.
"SAIC should take the opportunity," said an official with the
Shanghai Municipal Government who refused to disclose his full name.
"SAIC need to raise money to develop their own cars and brands. It is the only way for SAIC to compete with the international players both in the global and domestic market," said Sun Xin, a consultant with Shanghai-based AT&Auto consulting firm.
SAIC is planning to become the sixth-largest carmaker in the world by 2020, following General Motors, Ford and other automakers from Japan.
The company will launch a self-developed passenger car in the coming two months with core technology from British automaker MG Rover.
SAIC also focuses on the development of alternative energy cars. By 2012, the company is planning to make 10,000 fuel cell cars per year.
