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Falling stock scuttles sale for China Development

China Development Financial Holding Corp (中華開發金控), the nation's fifth-biggest financial services company by market value, canceled a US$318 million sale of global depositary receipts because of falling share prices. Its stock fell further.

Last month China Development had wanted to complete issuance of the shares, which it acquired after buying Grand Cathay Securities Corp (大華證券) in 2002 and later converted into treasury stock, the company said in a statement issued late on Monday. It canceled the sale as it wouldn't be able to complete it at a "reasonable price," it said.

In April, China Development's plan to merge its Grand Cathay Securities unit with smaller brokerages President Securities Corp (統一證券) and KGI Securities Co (中信證券) failed after government-appointed directors rejected the plan. The financial services company then decided to dispose of its 795 million treasury shares in Grand Cathay Securities, acquired via share swaps in 2002.

"It's negative news for China Development," said Parker Wu, who helps in managing the equivalent of US$3.1 billion at Shinkong Investment Trust Co (新光投信). "It might now have to dispose of the existing treasury stocks by writing off shares at a price of NT$10 per share that might result in losses."

Shares of China Development fell 4.3 percent to NT$10.05 on the Taiwan Stock Exchange.

Wu said China Development had previously failed to sell its shares in Grand Cathay Securities, the nation's second-largest arranger of local share sales, at higher prices overseas.

The company then announced on Aug. 30 that it planned to sell as much as US$318 million of stock overseas in the form of global depositary receipts to fund expansion. The proceeds would have been used for US dollar-denominated financing, the company said.

China Development posted a net profit of NT$8.47 billion (US$252 million) in the first nine months of this year, against a loss of NT$5.47 billion a year earlier, it said on Monday in a statement.
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