HONG KONG: Shares in BYD, the mainland carmaker backed by billionaire Warren Buffett, and mainland shoe retailer Daphne International Holdings Ltd both surged, defying the Hong Kong market's weak performance, on news of separate transactions which spurred strong buying of their stocks.

BYD gained 3.34 percent and ended at HK$34 yesterday after signing an electric-vehicle pact with Volkswagen AG. The stock has more than doubled this year.

Volkswagen, Europe's biggest carmaker, and BYD will explore cooperation in areas including hybrid cars and lithium-battery powered electric vehicles, the German automaker said in a statement yesterday. BYD, maker of the world's first mass-produced plug-in electric car, said in April that it expects to supply batteries to two European automakers and one in the US.

China's carmakers have invested in developing alternative-energy vehicles as part of a government-led push to curb oil imports and create a globally competitive auto industry. The government has also pledged subsidies to public agencies and transport companies to spur sales of alternative-energy vehicles.

"Particularly for the Chinese market, potential partners such as BYD could support us in quickly expanding our activities," said Ulrich Hackenberg, a member of the board for Technical Development at Volkswagen. Volkswagen is the largest overseas carmaker in China.

Buffett's MidAmerican Energy Holdings Co in September agreed to buy 9.9 percent of BYD for HK$1.8 billion ($232 million). The stake sale, which is still pending regulatory approval, may help the automaker boost its profile overseas and also reassure potential customers, BYD President Wang Chuanfu said last year.

Daphne International, a retailer of women's shoes on the mainland, gained as much as 17 percent in Hong Kong trading after announcing that it will issue convertible bonds to private equity group TPG Capital.

The company, owner of the Daphne and Shoebox brands, said in a filing on Monday that TPG Capital will make a strategic investment through the purchase of 550 million yuan ($81 million) unsecured convertible bonds with warrants.

TPG Capital will hold about 14.5 percent of Daphne's total enlarged-issued share capital if the bonds are fully converted and the warrants are fully exercised.

Daphne said it will use the proceeds to expand its store network in China. The company said it expects to raise a further HK$400 million ($52 million) on the full exercise of the warrants, which will be used as general working capital.

China Daily - Agencies

(HK Edition 05/27/2009 page4)