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SINGAPORE – Shares of Chinese bottled water giant Nongfu Spring rose more than 85% on its debut on the Hong Kong stock market on Tuesday.
The stock closed at 39.80 Hong Kong dollars per share ($ 5.14), up from about 35.00 Hong Kong dollars ($ 4.52). Its initial public offering was priced at 21.50 Hong Kong dollars ($ 2.77), allowing the company to raise approximately $ 1.1 billion.
Kingston Securities executive director Dicky Wong told CNBC’s “Squawk Box Asia” that Nongfu Spring was “one of the hottest IPOs” in the history of Hong Kong’s stock market. He said that the IPO was viewed 1,148 times.
Wong explained that investors are interested in the stock and not just for its “fundamentals or its high profit margins.” He said there is a general lack of investment opportunities, noting that valuations of many stocks – especially technology or Internet companies – are high.
“So investors feel that (participating in a new IPO) is always the best strategy,” he said.
Fraser Howie, an independent analyst, said investors are also turning to stocks as interest rates remain low globally.
CNBC’s “Street Signs Asia” said, “Ultimately, half the world is operating at negative rates and half of the rest is running at zero operations and governments continue to print money.”
He said, “Money is scarce in the world, Chinese stocks are hot.” ”
Nongfu Spring sold 388.2 million shares in its IPO deal. Its cornerstone investors include fund manager Fidelity, hedge fund Kotyu and Singapore sovereign wealth fund GIC. Its IPO is the largest in Hong Kong this year.
Apart from bottled water, the company produces other packaged drinks such as tea, coffee and fruit juices. The company cited a Frost and Sullivan report that it had the largest share in China’s packaged drinking water market from 2012 to 2019.
Nongfu Spring said its 2019 revenue was up 17.3% to 24.02 billion yuan ($ 3.51 billion). The company said its revenue declined 12.6% to 8.66 billion yuan ($ 1.27 billion) from January to May this year.