Hong Kong joins the IPO pop parade

Smoore International Holdings

10/12/2020 01:19

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Jennifer Hughes
    HONG KONG, Dec 10 (Reuters Breakingviews) - Bankers have for
years told investors and corporate clients not to expect big
first-day gains in Hong Kong like those New York is renowned
for. This is no longer true after a series of eye-popping debuts
including e-cigarette maker Smoore International’s  6969.HK 
150% gain and this week, a 56% bump for JD Health International
 6618.HK , now valued at $45 billion. There’s a changing dynamic
in the local market beyond a general rally. 
    Hong Kong debutants have enjoyed a 29% average first-day
gain this year, according to Dealogic, compared to 19% in
Manhattan. Over the past decade, the Asian financial hub’s
average has been less than half its rival’s 15%. Some of the
change has to do with a buoyant market, but much can be put down
to the sorts of companies now going public. 
    Nine of Hong Kong’s 10 biggest pops in the past five years
are 2020 vintage. Of those, three are biotechnology- or
healthcare-related, three are technology stocks including JD
Health and three are China consumer companies. That’s a big
change from the previous parade of stolid Chinese state-owned
enterprises and regional banks. Hong Kong changed its rules two
years ago to lure more startups and new-economy stocks, and it
is working. 
    New stocks in Hong Kong are finally generating buzz,
however, just as New York financiers debate whether initial
public offerings are the best way to sell shares to the public.
Direct listings, where only existing shares are sold, and
special purpose acquisition companies, which can provide a quick
backdoor listing, are both on the rise. 
    Debut surges may not be a good look for everyone. JD
Health’s, after its $3.5 billion offering, implies its bankers
could have raised another $1.8 billion for the company’s coffers
if they’d asked for a higher price. Nor are they a good guide to
future performance, though Hong Kong’s often abysmal secondary
market performance has improved. Even so, the city has watched
for years as tightly controlled listings in Shanghai and
Shenzhen bourses routinely popped by their 44% limit while New
York attracted the most glamourous listings. At least Hong Kong
now has a few success stories of its own.
    On Twitter https://twitter.com/JennHughes13
    
    CONTEXT NEWS
    - JD Health International shares rose 56% from their
HK$70.58 offer price in the online healthcare provider’s market
debut on Dec. 8.
    - The company, a subsidiary of e-commerce outfit JD.com,
raised $3.5 billion from its Hong Kong initial public offering,
the largest in the city in 2020.    
    - For previous columns by the author, Reuters customers can
click on  HUGHES/ 
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Robust JD Health shines on Hong Kong debut with 56% rise   
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China's Nongfu Spring pops 54% in Hong Kong debut   
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BREAKINGVIEWS-Hong Kong speculators should read China Literature
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BREAKINGVIEWS-Alibaba and Hong Kong celebrate happy anniversary 
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 (Editing by Robyn Mak and Katrina Hamlin)
 ((jennifer.hughes@thomsonreuters.com; Reuters Messaging:
jennifer.hughes.thomsonreuters.com@reuters.net))