By Xie Yu and Ziyi Tang
HONG KONG (Reuters) -Chinese property developer Shimao Group Holdings Ltd plans a private placement of shares, becoming the second player in the cash-squeezed sector to tap equity fundraising options just a day after Beijing lifted a ban on such deals.
Shares of Shimao, a mid-sized developer, surged in Shanghai by their daily upward limit, or 9.9%, on Wednesday after the developer made the announcement in a filing late on Tuesday. The benchmark Shanghai market index was down 0.2%.
Shimao's fundraising target will not exceed 30% of the current capital base, it said. Based on the developer's market value of 11.3 billion yuan ($1.58 billion) on Wednesday the deal size could be up to $474 million.
Developer Hubei Fuxing Science and Technology Co had announced a similar move earlier on Tuesday.
The Chinese securities regulator on Monday lifted a ban on fundraising via equity offerings for listed property companies.
More developers are set to tap the equity fundraising window in the days ahead, analysts said, which would be a key test of investor appetite for battered property stocks as persistent COVID-19 curbs continue to weigh on demand from home buyers.
Property developers that are able to access equity financing will benefit from improved balance sheets as well as merger and acquisition opportunities, analysts from Citic Securities said in a note on Wednesday.
Beijing has in recent weeks stepped up support for the industry to loosen a liquidity squeeze that has stifled the sector, a business that accounts for a quarter of the Chinese economy and has been a key driver of growth.
China had suspended refinancing by listed property firms in August 2009 as part of its attempts to control surging home prices.
Regulators briefly lifted the suspension by granting approval to refinancing requests by a selection of property firms starting from 2013, but reimposed restrictions in 2016 to curb housing prices.
Many cash-strapped Chinese developers have defaulted on debt obligations and have halted construction since a credit-crisis hit the sector last year after Beijing cracked down on a debt-fuelled building boom in the world's second-largest economy.
Shanghai-based Shimao first missed a public offshore bond obligation in July this year and became the first major Chinese developer to begin negotiating restructuring terms with creditors.
In its filing, Shimao said it aims to raise funds from up to 35 investors by a private placement of shares to "improve capital structure, ease liquidity difficulty and stabilise financial conditions".
Shimao said that the proceeds from the share sale would be used to ensure it could hand over properties to buyers and to repay some debts and replenish working capital.
Recent Beijing policies have sent a clear message that regulators will support "good quality" companies, as well as making sure of the delivery of houses, said Renyuan Zhang, a credit analyst with S&P Ratings in a research note.
"The policies will help restore confidence in the market, but investors should pay attention to how and when they will be implemented, and in what scope," he said, adding not all of the property developers will benefit from support measures.
Minyue Liu, an investment specialist at BNP Paribas Asset Management, described policies introduced over the last few weeks as a "comprehensive set of guidelines to the market" to support the property sector.
She said the industry is now looking out for further signals on boosting demand from potential home buyers.
"However, it may take some time for property demand to stabilise or recover," she said, adding the zero-COVID policy and weak macroeconomic environment are still restraining home buyers' confidence and willingness to spend.
Underscoring the continued uncertainty in the sector, Sunac Holdings issued a profit warning late on Tuesday, with the developer expecting profit for last year to plunge by around 207%.
A gauge tracking the sector slipped nearly 1% in afternoon trade in Hong Kong.
($1 = 7.1426 Chinese yuan renminbi)
(Reporting by Xie Yu and Ziyi Tang; Editing by Sumeet Chatterjee and Kenneth Maxwell)