Changan Auto: no new reason for share jump

Chongqing Changan Automobile Co, a Chinese partner of Ford Motor, said on Friday that it knew of no undisclosed information that might be responsible for a leap in its share price.

The company's A shares soared 95 percent to 7.15 yuan between Feb. 16 and Tuesday, rising their 10 percent limit every day, after it announced a HK$909 million ($117 million) plan to buy back its own Hong Kong dollar-denominated B shares . The B shares jumped 80 percent to HK$3.03.

That prompted a two-day suspension of trade in the shares while the company investigated the abnormal movement. Trade was expected to resume on Friday.

Changan Auto said neither it nor its parent group had any undisclosed information that might have caused the jump, and that there had been no major change in its operations. It said it had not entered into important new negotiations or agreements.

It also noted that in late January, it had estimated net profit plunged between 50 and 100 percent in 2008, from 666.9 million yuan ($97.6 million) in the previous year, as growth in China's auto market slowed drastically.

The company announced on Feb. 15 that it would buy back up to 70 percent of its B shares, equivalent to 18.1 percent of its total share capital, at a maximum price of HK$3.68 per share. Previously, its A and B shares had been suspended for four months pending a major announcement.

Industry analysts said that in addition to the buy-back, Changan's shares had benefitted from news of government subsidies for rural residents who trade in high-emission vehicles, since the firm is a big domestic producer of light trucks and minivans.
 
The company, which runs a car venture with Ford and Mazda Motor and produces compact cars developed in-house, also stands to benefit from other state incentives, such as a 50 percent cut in the purchase tax on cars with engine sizes smaller than 1.6 litres.