Hong Kong IPO market hits the brakes

May 9, 2010
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, HONG KONG, May 9 – Hong Kong\’s IPO market – the biggest in the world last year – has hit the brakes with several companies shelving share sales as the Greek debt crisis pounds global markets.

Swire Properties, a major real estate developer in the city, Thursday pulled a planned 3.09-billion US dollar share sale, just two days after Giti Tire, China\’s largest tyre maker, shelved a 500-million dollar initial public offering.

On Friday, iron ore producer China Tian Yuan halted its 522-million dollar issue, Dow Jones Newswires reported, citing an unnamed source.

The shelving of the IPOs comes as British insurer Prudential on Wednesday delayed launching a rights issue in London aimed at helping it fund a 35.5-billion-dollar takeover of AIA, the Asian arm of troubled US insurer AIG.

Prudential, which remains in talks with Britain\’s financial sector regulator over the deal, said Friday that its planned listings on the Hong Kong and Singapore exchanges would also be delayed.

It did not give a revised date for those listings, which will add trading venues without issuing new shares.

The announcement came hours after Hong Kong\’s benchmark Hang Seng index fell Friday to its lowest level in three months, closing at 19,920.29 points as investors fretted about the spectre of a European fiscal implosion.

One company that has gone ahead with plans to list is French cosmetics maker L\’Occitane, which saw its share price dive 4.51 percent to 14.40 Hong Kong dollars (1.85 US) when it debuted in Hong Kong on Friday after raising 704 million US dollars in its IPO.

Brian Brenner, national director of tenant representation at global real estate services firm Jones Lang LaSalle in Hong Kong, said it made sense for companies to pull their share sales given current market conditions.

"If you\’re going to float something, you want to do it in the strongest market possible because you only have one go at it," he said.

"A lot of it has to do with the sentiment of the time more than anything else," added Brenner.

"It has been like a domino effect with the credit problems in Greece and Portugal, the delayed Prudential offering."

Francis Lun, general manager of Fulbright Securities in Hong Kong, said given the global market conditions, more companies would likely drop their IPO plans in the coming weeks.

"The situation will last for some time until the Hang Seng Index bounces back to above 20,000 points," Lun told AFP.

But he said the market fall was due largely to external factors such as Greece\’s debt crisis and the tumbling euro.

"Any turmoil in the Hong Kong market will be relatively limited compared to the overseas markets," Lun said.

The listing slowdown comes as Hong Kong\’s bourse aims to establish the city as an international IPO hub, shrinking its reliance on mainland Chinese companies.

Last year, firms listing in Hong Kong raised almost 32 billion US dollars, making it the world\’s largest IPO market in 2009.

In January, aluminium giant UC Rusal raised 2.55 billion US dollars in a Hong Kong flotation, the first by a Russian company in the city.

But Strikeforce Mining and Resources Plc, controlled by Rusal\’s chief executive Oleg Deripaska, will delay its 200-million US dollar Hong Kong IPO, Dow Jones reported, citing an unnamed source.

A spokesperson for the company could not be immediately reached.

Still, it may just be a matter of delaying IPOs until sentiment picks up rather than cancelling them altogether, said Brenner at Jones Lang LaSalle

"The level of business confidence is still pretty strong, especially in these parts," he said.

"You\’re seeing a lot of private equity firms coming into the market, you\’re seeing expansion and companies increasing headcounts. There is a scarcity of availability in top-tier buildings (in Hong Kong)."

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