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Thursday 8 October 2009
Wary Hong Kong gets ready for more IPOs
Three more firms will list on the Hong Kong stock exchange on Thursday, but analysts warned that cooling economic optimism and overpricing has been responsible for a series of disappointing debuts.
Three more firms will list on the Hong Kong stock exchange on Thursday, but analysts warned that cooling economic optimism and overpricing has been responsible for a series of disappointing debuts.
Companies forced to shelve their listing plans after the US financial crisis set in had been tempted back by a rally of about 80 per cent since early March on the benchmark Hang Seng index.
But amid signs the US economy is not picking up as quickly as previously thought, that optimism is tailing off, just as dozens of Hong Kong firms are preparing to launch their IPOs.
The three firms listing on Thursday – Ausnutria Dairy, China Vanadium Titano-Magnetite Mining and Yingde Gases – will be hoping they do not follow Shenzhen-based logistics firm China South City Holdings which dived 23 per cent.
According to data company Dealogic, that debut last week was the worst ever on the Hang Seng for a listing over US$50 million.
In recent days there have also been disappointing showings from mainland’s Glorious Property, which sunk 14.5 per cent, and Peak Sport which fell 17.1 per cent.
Engineering and construction firm Metallurgical Corp of China, Hong Kong’s biggest public offering this year, planned to raise up to US$2.9 billion, but the stock lost 14.1 per cent on its launch last month.
And despite rising 28 per cent on its Shanghai debut days before, it soon fell back to just a little above its listing price the day after.
Eric Yuen, head of research at Dao Heng Securities, blamed aggressive pricing conceived at a time when the market was touching this year highs in September.
“[Companies] took advantage of bullish market sentiment and many were priced at a premium to their competitors,” he said.
Private investors guided more by prevailing market sentiment than optimism about an individual company’s prospects also helped fuel inflated prices, analysts said.
“The market had a huge run-up and a lot of retail investors bought into the hype,” said Jackson Wong, vice-president of Tanrich Securities.
Wong, like other market watchers, expects companies listing later in the year to price their stocks more reasonably as a result.
“Unless pricing has been at the realistic end of the range or there is something distinctive about the company, people are likely to be very cautious,” said Howard Gorges, vice-chairman at South China Securities.
Recent results compare unfavourably with the heady days before the collapse of US investment bank Lehman Brothers last year. E-commerce firm Alibaba.com’s debut in November 2007 saw it surge 165 per cent.
As hopes for a recovery grew this year, there were some successful debuts including Sinopharm Group and China All Access which as late as September gained 15.8 per cent and 13.1 per cent respectively.
And shares in China State Construction Engineering Group soared 60.3 per cent on their July debut in Shanghai, as investors jumped on what was the world’s largest stock offering in 16 months at the time.
Although optimism has faltered, companies with an established reputation such as casino business Wynn Macau, which starts trading on Friday, are seen as stronger than some of the smaller, mainland companies with IPO plans.
In particular, mainland property companies eyeing a Hong Kong listing, such as Mingfa and Yuzhou Group, are expected to face strong competition after a glut of such stocks in Hong Kong.
“They will need to price them at very attractive levels compared to the companies that are already listed,” said Dao Heng’s Yuen.
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Wary Hong Kong gets ready for more IPOs
Agence France-Presse in Hong Kong
07 October 2009
Three more firms will list on the Hong Kong stock exchange on Thursday, but analysts warned that cooling economic optimism and overpricing has been responsible for a series of disappointing debuts.
Companies forced to shelve their listing plans after the US financial crisis set in had been tempted back by a rally of about 80 per cent since early March on the benchmark Hang Seng index.
But amid signs the US economy is not picking up as quickly as previously thought, that optimism is tailing off, just as dozens of Hong Kong firms are preparing to launch their IPOs.
The three firms listing on Thursday – Ausnutria Dairy, China Vanadium Titano-Magnetite Mining and Yingde Gases – will be hoping they do not follow Shenzhen-based logistics firm China South City Holdings which dived 23 per cent.
According to data company Dealogic, that debut last week was the worst ever on the Hang Seng for a listing over US$50 million.
In recent days there have also been disappointing showings from mainland’s Glorious Property, which sunk 14.5 per cent, and Peak Sport which fell 17.1 per cent.
Engineering and construction firm Metallurgical Corp of China, Hong Kong’s biggest public offering this year, planned to raise up to US$2.9 billion, but the stock lost 14.1 per cent on its launch last month.
And despite rising 28 per cent on its Shanghai debut days before, it soon fell back to just a little above its listing price the day after.
Eric Yuen, head of research at Dao Heng Securities, blamed aggressive pricing conceived at a time when the market was touching this year highs in September.
“[Companies] took advantage of bullish market sentiment and many were priced at a premium to their competitors,” he said.
Private investors guided more by prevailing market sentiment than optimism about an individual company’s prospects also helped fuel inflated prices, analysts said.
“The market had a huge run-up and a lot of retail investors bought into the hype,” said Jackson Wong, vice-president of Tanrich Securities.
Wong, like other market watchers, expects companies listing later in the year to price their stocks more reasonably as a result.
“Unless pricing has been at the realistic end of the range or there is something distinctive about the company, people are likely to be very cautious,” said Howard Gorges, vice-chairman at South China Securities.
Recent results compare unfavourably with the heady days before the collapse of US investment bank Lehman Brothers last year. E-commerce firm Alibaba.com’s debut in November 2007 saw it surge 165 per cent.
As hopes for a recovery grew this year, there were some successful debuts including Sinopharm Group and China All Access which as late as September gained 15.8 per cent and 13.1 per cent respectively.
And shares in China State Construction Engineering Group soared 60.3 per cent on their July debut in Shanghai, as investors jumped on what was the world’s largest stock offering in 16 months at the time.
Although optimism has faltered, companies with an established reputation such as casino business Wynn Macau, which starts trading on Friday, are seen as stronger than some of the smaller, mainland companies with IPO plans.
In particular, mainland property companies eyeing a Hong Kong listing, such as Mingfa and Yuzhou Group, are expected to face strong competition after a glut of such stocks in Hong Kong.
“They will need to price them at very attractive levels compared to the companies that are already listed,” said Dao Heng’s Yuen.
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