China auto faces reconstruction storm

　　Origin

The rumors of automobile-enterprise reconstructions are underway. Since the end of last month, Dongan Power, Ankai Auto, Xingma Automobile, Shuguang Holdings and Brilliance China's shares and other auto-related stocks demonstrated abnormal volatility. Some individual stocks went into hasty suspension and published major restructuring information in some public notices. All of these seem to indicate that a series of restructuring projects are being carried out quietly, according to the WCC Daily.

　　Sudden suspension

　　FAW will buy shares of Brilliance?

On October 28th, the shares of Brilliance China (01114.HK) were suspended in the midday trading pending the issue of a connected and major transaction announcement which is price-sensitive. However, Brilliance China did not provide further information in the suspension notice. Before the trading was suspended, Brilliance China's shares went up 0.78% with a close at 1.29 Hong Kong dollars. The price surged to 1.37 HK dollars in the intraday trading, which was a record high for nearly a year and a half.

Behind the scenes: According to some informed sources, FAW and Guangzhou Automobile are contacting with government departments in order to build up connections with Brilliance. Since Guangzhou Automobile is busy dealing with the joint venture program between Fiat and Changfeng, it may not have enough energy to tackle the issue of Brilliance whereas FAW has long been coveted for Brilliance. FAW has regional approaches and for FAW it is relatively convenient to communicate with government departments. We cannot rule out the possibility of acquisition or restructuring of Brilliance.

　　Ankai boomed

There are rumors that Chery may implement the backdoor listing.

Recently, due to the market rumors that Chery Automobile may backdoor Ankai (000868) stock, Ankai's shares surged to the daily limits for two consecutive trading days.

On October 27th, the shares of Ankai rose again in the intraday trading. Due to unusual fluctuations in share price, the trading of Ankai was suspended for one hour. In the first trading day of this week, the share price of Ankai was up 10.05% on November 2nd.

Behind the scenes: Mr. Jin Yibo, the Assistant General Manager and spokesman of Chery, said that those were just speculations in the market. Chery will choose IPO to be listed directly. Mr. Jin said the reason why there were speculations, including the news that there was a reorganization project between Chery and JAC, may be that all of the three automakers are in Anhui Province. At the same time Anhui Provincial Government hopes that mergers and acquisitions could be achieved with the enterprises of Anhui. However Mr. Jin said that as to the specific time of listing Chery expected that it should be in the first half of next year. “At present Chery is carrying out process. The time of IPO is connected with the process of government approvals, but we are fully prepared," Mr. Jin Yibo said.

　　Hasty suspension:

Hualing Heavy Truck will take shares of Xingma Automobile?

Xingma Automobile has announced that Maanshan Huashen Building Material Industrial Co., the controlling shareholder of Xingma, was planning for a major asset restructuring project for Xingma which is a listed company. Since October 22nd the trading of Xingma shares was suspended. The company intended to convene the board of directors to talk about the major asset restructuring plan within 30 days after the notice was published.

Behind the scenes: In this regard, the auto market expected that Hualing may succeed in taking shares of Xingma Automobile. However, some sources told the WCC Daily that the more likely approach is to inject the chassis assets into the listed corporation. Such an asset injection will solve a long-standing issue of related-party transactions and reduce the cost of buying chassis for Xingma Automobile. In 2008, Xingma paid 880 million yuan to Hualing Heavy Truck for the procurement of chassis, which accounts for 70% of the total cost. And the cost of chassis accounts for 67% of the company's main cost.

Analysts said that since the purchase price of chassis in the related-party transactions is not high, the saving of cost is relatively limited even if related assets were injected into Xingma Automobile. There is even greater significance that Xingma would build up a new kind of business-the chassis of heavy truck. And the EPS of Xingma is expected to expand over 50%.

　　News about Dongan Power

　　CNAC and CSGC loaded integration.

In the end of last month, the trading volume of Dongan Power（600178） was unbelievable high for four consecutive trading days. The single-day turnover rate surged to 9.6% from the normal level of 1% to 2%. The trading amount of single-day turnovers boomed to nearly 540 million yuan, which led the rise of military-related stocks.

Behind the scenes: Behind Dongan's actions, there was a market rumor recently. CNAC and CSGC may sign contracts that CNAC would allocate auto-related and listed assets, including Dongan Power and Dongan Panthers, to CSGC for free. And the Changan Automobile Group (000625), which belongs to CSGC, will become the platform for the integration of these assets. (Translator: Qinghua/Hanxin)

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