HONG KONG: CITIC Pacific went against the general market uptrend, plunging 2.4 percent after former chairman Larry Yung sold at a steep discount 60 million shares in the investment firm.

The benchmark Hang Seng Index yesterday surged 2.5 percent, chalking up gains for five consecutive sessions, supported by hefty gains by HSBC, its unit Hang Seng Bank and other financials.

However, CITIC Pacific failed to capitalize on the market's extended rally as Yung's share sale sent a negative signal to investors.

Yung hired Morgan Stanley to arrange the sale of 60 million CITIC Pacific shares at the top end of the initial offer, which ranged between HK$11.95 and HK$12.20.

The HK$12.20 per share offer price represented a 7.58 percent discount to CITIC Pacific's closing price of HK$13.20 yesterday.

Yung raised HK$732 million from the share sale, which resulted in a reduction in his shareholding in CITIC Pacific to 9.93 percent from 11.53 percent before the transaction.

Yung's move drew a generally positive reaction from analysts.

"The share sale is positive for the company as it gears up for a thorough restructuring of its diversified businesses," said Patrick Chow, an analyst at China Everbright Research.

Yung, CITIC Pacific's second-largest shareholder, stepped down as chairman last month after HK$14.6 billion in currency losses, mainly in the Australian dollar, forced the group to seek a bailout from its mainland parent.

"This (share sale) should be good news for CITIC Pacific as it will help reduce the personal image of Mr Yung in the firm and give investors hope that its parent will do something good for its Hong Kong unit," said Patrick Yiu, managing director at CASH Asset Management.

Market sources said demand was strong for the shares which Yung offered for sale. The order book was closed within an hour and it was more than five times covered, with strong interest shown by new investors including mutual funds, hedge funds and private wealth management clients.

Macquarie Securities maintained its "underperform" rating on CITIC Pacific, citing challenges facing its property development business despite recent improvement in the volume of housing sales on the mainland - the group's key market.

CITIC Pacific shares have slumped nearly 42 percent since the beginning of October.

(HK Edition 05/07/2009 page16)