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Only listed bamboo firm quits for property market

The world's only listed bamboo company has turned its back on the plant to go into the China's property market, citing a "shrinking pool" of agricultural labour and weakened export prospects.

Asian Bamboo - which operates in Fujian province in south east China, but is listed in Frankfurt - said it was to stop investing in its bamboo assets, of which some would be put up for leasing out or "possibly" for sale.

"If attractive possibilities arise to dispose of parts of the business, that will be considered," Asian Bamboo said.

The group, which traces its history back 21 years, said its decision reflected a below-inflationary rise in bamboo prices, and a "shrinking pool of available farm labour in the areas where Asian Bamboo operates" as workers head into China's cities.

For what workers remained in the countryside, the company said it faced competition from other agriculture operators such as tea or tobacco producers.

"The overall environment for running a bamboo plantation business in China has significantly deteriorated, which has caused the company's revenue and profitability to decline sharply," Asian Bamboo said.

Property boom

Instead, the group said it intended to exploit China's social upheaval by entering China's famously strong property market.

"The same factors which are working against the company in the plantation business will work for the company in the property business," Asian Bamboo said.

"Rising salary levels and the urbanisation process will continue to underpin demand for property.

"Furthermore, many Chinese prefer to invest in real estate rather than keep cash in banks or buy stocks or bonds."

The company will, "to the degree that it is possible and reasonable", attempt to convert some of its 54,500-hectare plantation portfolio into development land.

'Prices remain high'

China's property market has been in a multi-year rally, belying government attempts since 2001 to slow price growth.

"Despite high interest rates and government initiatives to limit speculation in the property market, prices remain high and volumes are solid," Asian Bamboo said.

While some investors notably Jim Chanos, founder of hedge fund Kynikos Associates - believe prices are in bubble territory, others point to fast wage growth too which, on some measures, has outstripped property price rises, increased affordability.

Although a booming Chinese property sector should support the market for bamboo, used largely in making houses, the industry has been undermined by a strengthened remninbi, which has stemmed exports.

Asian Bamboo reported a loss of E3.57m for the first nine months of 2013, compared with earnings of E1.86m a year before, on revenues down 59% at R25.4m.

Shares slump

Tuesday's announcement, which Asian Bamboo said would mean the issue of a convertible bond, to "strengthen the Company's capital base and to facilitate its entry into the property industry", received a cool welcome from investors.

Asian Bamboo shares plunged 37% to an all-time low of E1.152 on Tuesday  at their intraday low.

The shares stood at E1.16 in early deals on Wednesday, down 1.7%.

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