Hong Kong on track for global IPO crown but many new listings sag

Bank of Gansu

09/12/2018 23:00

By Julia Fioretti
    HONG KONG, Dec 10 (Reuters) - Hong Kong is on course to take
the global IPO crown this year for the most money raised in
stock market flotations, narrowly ahead of arch-rival New York,
but its new listings have posted the worst performance among
leading bourses, data show. 
    The figures are a blow to Hong Kong, whose hopes of a
listings bonanza spurred by new tech-friendly rules have been
dented by weak markets, sparking fears the soggy performance
could weigh on initial public offering (IPO) volumes in 2019. 
    Several companies have in recent weeks cut the size of their
offerings, while others have held back from floating in the hope
of a better environment later.
    Companies listing in Hong Kong have sold shares worth $31.4
billion so far this year, the highest total in eight years,
compared with $30.2 billion on the New York Stock Exchange
(NYSE), according to Dealogic data.
    But just six of the biggest 20 IPOs in Hong Kong that have
begun trading were above their offer prices a month after debut,
the data show, compared with 16 on the NYSE and 10 on Nasdaq.
    Two of Hong Kong's biggest deals, Xiaomi  1810.HK  and
Meituan Dianping  3690.HK , which raised $9.7 billion between
them, are down 19 percent and 26 percent respectively since
their floats in July and September.  
    Hong Kong has been hit by volatility stemming from concerns
over a U.S.-China trade war and by slowing growth in China, the
world's second-largest economy.
    
    INVESTING PERSPECTIVE
    The city's benchmark Hang Seng Index  .HSI  has fallen 13
percent this year, while the Shanghai Composite index  .SSE  has
dropped more than 20 percent. In the United States the S&P 500
is up 0.8 percent.
    "From an investing perspective it's obviously been
terrible," said a Hong Kong-based investor at a major asset
manager. 
    "A lot of these companies are very interesting, they're
really attractive ... and I think there's been a certain amount
of ... fear of missing out," the person said, referring to
investors' continued participation in IPOs despite their
performance.
    Hong Kong has hosted a series of Chinese tech floats after a
change in its listing rules in April to allow dual-class shares,
brought in to avoid a repeat of Chinese e-commerce group Alibaba
 BABA.N  picking New York in 2014 for its record $25 billion IPO
because Hong Kong would not accept its unusual control
structure.
    Bankers said a factor in the soggy post-IPO performance was
a reluctance by many company founders to accept lower
valuations, meaning many deals priced high. Xiaomi for instance,
valued at $54 billion in its July IPO, had been seeking a
valuation of more than $70 billion as recently as May. 
    Bankers however took comfort from the renewed interest this
year in Hong Kong listings among global institutions, many of
which had previously been deterred by a parade of unexciting
Chinese state-owned enterprises that dominated local IPOs. 
    "That (poor performance) is symptomatic of the process of
re-institutionalisation of the Hong Kong market and that is
going to take time," said a senior equity capital markets
banker. "It was never likely to be particularly smooth." 

 (Reporting by Julia Fioretti
Editing by David Holmes)
 ((julia.fioretti@thomsonreuters.com; +852 2912 6686; Reuters
Messaging: julia.fioretti.thomsonreuters.com@reuters.net))