By Clarence Leong
Shares of China South City Holdings Ltd. rose in Hong Kong this morning after the Chinese company sold a stake in a unit for 5.00 billion yuan (US$717 million).
The stock was up as much as 14% in early trade on Monday, before paring gains to 0.59 Hong Kong dollars (US$0.08). The stock has lost 19% this year.
The Hong Kong-based company, which builds and runs logistics and trade centers in China, said in a filing Sunday night that it has sold a 69.35% stake in Xi’an China South City Co. to Shenzhen Infrastructure Investment, which is owned by Shenzhen State-owned Assets Supervision and Administration Commission. It will pay for the stake in cash in tranches, with the first CNY2 billion to be paid within 10 business days after the deal is completed, according to the filing.
China South City said the deal will provide additional working capital and help reduce its gearing ratio. Part of the proceeds are expected to go toward repaying external debts, it added.
Moreover, the transaction can boost investor confidence in the company, as it reflects continued support from the state-backed entity, China South City said.
Write to Clarence Leong at clarence.leong@wsj.com
Read More: China South City Shares Rise After $717 Million Stake Sale