Foreign IPO tide flows back into Hong Kong

Maoyan Entertainment

14/02/2019 02:45

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Robyn Mak
    HONG KONG, Feb 14 (Reuters Breakingviews) - International
companies are returning to Hong Kong. A handful of firms are
eyeing initial public offerings in the city, which has struggled
to attract foreign listings. This latest crop has close Chinese
ties, and healthy growth prospects in the region. A recent
decision allowing foreign names to join the $4 trillion Hang
Seng Composite Index will support demand; a thin pipeline of
IPOs from China should help too.
    The Fragrant Harbour's bourse hosts over 2,300 companies.
Yet only around 30 are from beyond Greater China: just 7 percent
of total market capitalisation. Notable names include Italian
label Prada  1913.HK , luggage-maker Samsonite  1910.HK  and
skincare brand L'Occitane  0973.HK . All three went public in
Hong Kong almost a decade ago.
    Hopes that other gourmet offshore brands would follow them
have been disappointed. Pricing curbs, long trading halts, and a
volatile, retail-driven market have deterred many. Dismal
trading volumes saw Glencore  GLEN.L  and U.S retailer Coach,
now named Tapestry  TPR.N , and others scrap secondary listings.
    The tide may be coming back in. UK-based Global Switch,
Czech-owned Home Credit and Mongolia's state-owned coal giant,
Erdenes Tavan Tolgoi plan to raise a combined $5 billion,
according to sources cited by Refinitiv's IFR. Anheuser-Busch
InBev  ABI.BR  is mulling a spinoff of its Asia business, worth
a mooted $70 billion. All boast strong China connections: Global
Switch is majority-owned by mainland backers; Home Credit, Tavan
Tolgoi and the Belgian brewer have sizable businesses inside the
People's Republic. 
    Last year's rule change that lets foreign firms into the
HSCI should provide a liquidity boost. Exchange trade funds
listed in Hong Kong, for instance, accounted for 8 percent of
annual turnover in the first half of 2017, according to the
securities watchdog – and that excludes offshore funds and ETFs.
Although it has less than 500 constituents, the HSCI accounts
for 95 percent of the overall market capitalisation and the bulk
proportion of its turnover. Inclusion also paves the way for
Chinese investors to trade shares via cross-border programmes.
    Recent Chinese tech IPOs in Hong Kong, including movie
ticketing app Maoyan Entertainment  1896.HK  and food delivery
giant Meituan Dianping  3690.HK , have disappointed, and the
2019 queue has thus dried up. That should make it easier for
foreign hopefuls to find backers. If they do, Hong Kong will
burnish its global financial centre credentials.
    On Twitter https://twitter.com/mak_robyn
    
    CONTEXT NEWS
    - UK-based Global Switch, a data centre operator, will
appoint banks for its Hong Kong initial public offering,
Refinitiv's IFR reported on Jan. 25, citing people familiar with
the matter.
    - The company is planning to raise $1 billion. It was last
valued at $10.7 billion in July 2018, when it sold a 25 percent
stake to a consortium of mostly Chinese Asian investors. 
 - Global Switch is 51 percent-owned by Elegant Jubilee, a
Chinese holding company which counts state-owned Jiangsu Sha
Steel Group as a backer.    
    - Separately, Czech-owned consumer finance company Home
Credit and Erdenes Tavan Tolgoi, Mongolia's state-owned company
that owns the Tavan Tolgoi coal mine in the Gobi desert, are
also planning Hong Kong initial public offerings this year,
according to IFR. 
    - For previous columns by the author, Reuters customers can
click on  MAK/   
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    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
IFR: Global Switch to meet banks next week for IPO‎   
 urn:newsml:reuters.com:*:nL8N1ZP03Y
IFR: HK lures rare non-Chinese listings     urn:newsml:reuters.com:*:nL3N1ZI26H
BREAKINGVIEWS - Sinochem's backtrack sends a fresh IPO warning  
  urn:newsml:reuters.com:*:nL3N1ZV1CG
BREAKINGVIEWS - Hong Kong's IPO crown rests on rickety market   
 urn:newsml:reuters.com:*:nL3N1YO2AN
BREAKINGVIEWS - Asian IPO slump brings welcome valuation sanity 
   urn:newsml:reuters.com:*:nL4N1XR00E
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Pete Sweeney and Sharon Lam)
 ((robyn.mak@thomsonreuters.com; Reuters Messaging:
robyn.mak.thomsonreuters.com@reuters.net))