Photographer: Paul Yeung / Bloomberg
Photographer: Paul Yeung / Bloomberg
The days of massive pop from the first day in the Hong Kong IPO frenzy may be coming to an end.
Even as the pandemic raged for most of 2020, Chinese offshore city IPOs and new listings were in high demand from institutional and family investors. Given that most of the new stock sales posted huge gains on their first day of trading, the investor euphoria was justified.
That was then. Investors’ huge success last year in racking up initial public offerings and exiting after their debut is no longer a failure: 31% of the thirteen initial public offerings that raised more than $ 100 million posted losses on the first day of this year. , almost double the 17% in 2020. The first day movement showed gains of 2.1% in 2021 from 5.7% last year, according to data compiled by Bloomberg.
Volatility caused by large turnover in previously neglected stocks sensitive to economic fluctuations in highly valued technology and healthcare is to blame, according to investors. Others also pointed to concerns about policy tightening in China as weighing on investors’ risk appetite for new stocks.
“Most of the IPOs had a very, very strong performance last year, but I don’t expect that kind of move this year,” said Joohee An, fund manager at Mirae Asset Global Invest (HK) Ltd. Investors will be “more prudent “market liquidity” will not be as abundant as it used to be, “he added.
Hong Kong bankers work around the clock as IPOs and SPACs increase (1)
Shaky performance
To be clear, listed by Kuaishou Technology and New Horizon Health Ltd. still did unusually well in February, and the stock more than doubled on the first day.
But tepid post-listing performances are on the rise. Chinese Household Insecticide Company Cheerwin Group Ltd. fell as much as 20% on its first day of trading last week. Biopharmaceutical company SciClone Pharmaceuticals Holdings Ltd. ended its debut unchanged on March 3 and is now trading 8.6% below its offer price.
The secondary listing wave of Chinese companies listed in the US hasn’t always had a brilliant debut in Hong Kong. Autohome Inc., a Chinese car sales website online with its main listing in New York, ended its Hong Kong It will debut Monday with a modest 2% increase.
Not everyone is concerned, given growing concerns some expressed that global markets were in bubble territory.
“When you have these deals that don’t work out well, it actually tells you that people are still being cautious about what they’re investing in and what they’re not investing in, which is a good sign,” said Sumeet Singh, research director at Aequitas Research at Singapore, which publishes on Smartkarma. “It means the market is good.”
Reality check
The next multi-Billion dollar listings of Baidu Inc. and Bilibili Inc. will be closely watched to see if the Hong Kong IPO market is still strong, given their size and high profile as technology companies.
Baidu, which is trading at a nearly 3% discount to its US-listed shares, will begin trading on March 23. Investor demand for its offering was strong, with retail investors placing orders for nearly 100 times the shares available to them, according to a person familiar with the matter. Bilibili, the video streaming platform seeking to raise as much as $ 3.2 billion on a second listing, plans to debut on March 29.
“I’m definitely not worried,” said Oliver Cox, a High Yield Fund Manager at JP Morgan Asset Management. Overall, “the quality and long-term earnings growth prospects of the companies we see coming to market are still very high and the IPO price doesn’t affect that,” he said.
Read: JPMorgan Fund 100% Gain in One Year Focuses on Asia Tech IPOs