Add another achievement to Hong Kong’s impressive curriculum vitae as an international financial center.
The city stands to regain its ranking this year as the world’s No. 1 spawning ground for initial public offerings.
But no one except the folks at Hong Kong Exchange and Clearing (00388.HK) have much to celebrate, because there were lemons in the pile of new listings.
A look at the five biggest IPOs in Hong Kong this year reveals that four of them are underwater — the stocks are now worth less than when they made their debuts.
And the share prices of 70 per cent of this year’s top 10 IPOs – all mainland Chinese companies — have declined.
One typical example is HTSC (06886.HK), which topped all the 75 newly listed companies with HK$34.7 billion (US$4.48 billion) in capital raised.
It debuted on June 1, just as a two-month bull market turned into an ongoing bear market.
The leading Chinese brokerage, which shortened its trading name from Hua Tai Securities Co. Ltd. in emulation of HSBC, has fallen 26 percent.
Only China International Capital Corp. Ltd. (03908.HK), Fuyao Glass Industry Group Co. Ltd. (03606.HK) and Bank of Jinzhou Co. Ltd. (00416.HK), among the newly listed firms that raised over HK$6 billion, managed to stay above their IPO prices.
Bank of Jinzhou is an interesting case.
Although it has performed well in the market so far, retail investors subscribed for less than 4 per cent of its share offering.
Why? It’s because there are already a dozen Chinese banks listed in Hong Kong, many of which have underperformed over the years.
Bank of Jinzhou was one of more than 10 new offerings that were undersubscribed, a ratio of 15 per cent in the world’s No. 1 market.
It is fair to say that the IPO scene in Hong Kong this year has not been exciting, far from the days when everyone wanted to get a piece of Tom Group Ltd. (02383.HK) or other mega listings, like China Construction Bank Corp. (00939.HK).
There was no notably hot IPO among investors this year except IMAX China Holding Inc. (01970.HK), which rose over 30 per cent after its debut, on the back of booming box office revenues in China and in anticipation of popular movies, like the latest in the Star Wars series.
The largest local listing came from Hong Kong Broadband Network Ltd. (01310.HK), which raised HK$5.8 billion and has stayed above its IPO price most of the time.
It was a completely different scene when it came to the Growth Enterprise Market, Hong Kong’s second board.
GEM, which fosters young and unprofitable companies, became a paradise for speculators who received shares through placements and flipped them for handsome returns.
Over the years, the GEM board has made a name for volatile share prices that surge over 10 times at debut, resulting from the supply of stock falling far short of demand.
That has triggered a closer look from stock regulators, especially at shareholders of companies that cash out after they have been listed for just a year.
And that is the other side of our glamorous IPO centre.
– Contact us at [email protected]