Hong Kong IPO market is ‘almost dead’
By Justine Lau in Hong Kong
Published: March 20 2008 07:43 Last updated: March 21 2008 10:40
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Hong Kong’s initial public offering market, which has been rattled by plummeting share prices, is “almost dead” as companies continue to pull their offerings.
Evergrande, the Chinese property developer, and China’s Wing Fat Printing this week became the latest casualties of the recent stock market stumble after they pulled listings in Hong Kong that together could have raised as much as $3bn.
EDITOR’S CHOICE
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HK’s IPO market shows signs of recovery - Mar-03
The postponements came as a record number of companies have withdrawn or delayed their IPOs in Hong Kong, and are likely to cast a further shadow on the market.
“[The IPO market] is not dead yet but it is definitely almost there,” said Ben Kwong, chief operating officer of KGI Asia, a local brokerage. “I don’t see any catalyst for sentiment to improve in the short term.”
The Hong Kong market has plunged in the last few weeks following a string of bad news from the US, including the collapse of Bear Stearns. The benchmark Hang Seng Index has dropped 24.1 per cent since the start of the year.
In view of dim investor sentiment, many companies have delayed their planned listings as they search for better opportunities to sell stocks.
According to Dealogic, eight companies in Hong Kong have withdrawn or postponed their offerings so far this year, bringing the number of scrapped IPOs to the highest level ever. Only 14 companies have pulled their listings in the previous five years combined.
While some have eventually listed, they have been forced to cut sizes of their offerings or sell their shares at lower prices.
Guangzhou-based Evergrande had planned to sell 2.86bn shares in a price range of HK$3.50to HK$5.60 apiece on the Hong Kong Stock Exchange to raise US$2.1bn.
The company, which began bookbuilding on March 6, is understood to have decided to shelve the IPO after failing to receive enough orders from retail and institutional investors by the time subscriptions closed on Wednesday night. This is in spite of the developer having extended the subscription period for its retail offering by one day.
At the top of the pricing range the listing would have made Xu Jiayin, the company’s owner, China’s richest person. The IPO is expected to go ahead when the market recovers.
Some analyst had questioned the timing of Evergrande’s IPO given that Beijing is keen to cool the property market to tame soaring inflation, which hit 8.7 per cent in February, the highest in 12 years.
Chinese authorities are controlling bank loans and credit to developers as well as restricting foreign investment in the sector. They have also made it harder for consumers to obtain mortgages.
Credit Suisse, Goldman Sachs and Merrill Lynch are joint book-runners on Evergrande’s IPO. They declined to comment.
Wing Fat, a Chinese packaging paper manufacturer, was hoping to raise up to $89m in a sale arranged by UBS and BNP Paribas. The banks declined to comment.
Copyright The Financial Times Limited 2008