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HONG KONG, Make Money Blog$—Despite volatility that has made investors wary of buying, a wave of companies are rushing to complete initial public offerings here, pushing the local exchange's listing committee to take extra steps to clear the backlog.
A person familiar with the situation said Wednesday that Hong Kong's stock-exchange listing committee, which usually reviews IPO candidates each Thursday, will hold extra meetings in coming weeks to consider applications by companies wanting to list before the year is out. A Hong Kong stock-exchange spokesman declined to comment.
These IPOs, if given the green light, will come to a falling market. The Hang Seng Index fell 2% Wednesday, and is 6.2% lower over the past three months. It has fallen 18% since the start of the year.
Three Chinese firms moved forward with listing plans that could raise up to US$6.25 billion Wednesday, while a Hong Kong-owned trust holding mainly fixed-line telecom assets opened its offering to retail investors. The offering, which seeks to raise as much as US$1.4 billion, appeared to attract limited interest from retail buyers.
Since Nov, 9, PCCW Ltd., Hong Kong's dominant telecommunications company, has been taking orders from institutional investors for an IPO of a telecom trust named HKT Trust & HKT Ltd.
Hong Kong listing rules stipulate that every IPO has a retail tranche. The PCCW trust has allotted 10% to the public.
People at four local brokerages, Phillip Securities, KGI Securities, Haitong International Securities and Wing Fung Financial Group, said they had received few orders from clients seeking to buy units of the trust on margin, although order-taking for the deal runs until Nov. 21.
Margin financing, or the use of borrowed money to buy stocks, at these brokerages is often used to gauge investor appetite for IPOs by retail investors. At Phillip Securities, margin borrowing for the offering amounted to only 490,000 Hong Kong dollars, or about US$63,000.
The IPO of the PCCW trust is meant to play on the demand by investors for yield. It offers yields of 7.5%-8.9%, more than the 4%-6% average available from listed real-estate investment trusts in Hong Kong.
But brokers and analysts said that because growth is likely to be limited in the fixed-line telecommunications business in Hong Kong, prospects for increasing cash flow at the trust are dim.
The poor performance of another recently listed trust, the yuan-denominated Hui Xian Real Estate Investment Trust, has also made some investors wary, they said. Hui Xian, which is controlled by Li Ka-shing, the father of PCCW Chief Executive Officer Richard Liraised US$1.6 billion in Hong Kong in an April IPO. It is currently trading 34% below its IPO price.
China's third-biggest insurer by premiums, New China Life Insurance Co., and Chinese brokerage Haitong Securities Co., also moved toward listing by the end of the year, people familiar with the situation said. New China Life got approval from the China Securities Regulatory Commission to list in Shanghai Wednesday, according to Xinhua, the Chinese state-run news service. Its IPO in Hong Kong will be vetted by the local listing committee on Thursday.
If the deal is approved, New China Life will join peers such as China Life Insurance Co.Ltd. and Ping An Insurance (Group) Co. of China Ltd. in having both Hong Kong and Shanghai listings.
Haitong Securities, whose IPO will be the latest by a domestic Chinese brokerage afterCitic Securities Co. raised US$1.7 billion in a Hong Kong IPO in October, plans to seek Hong Kong listing approval Tuesday if it receives Chinese regulatory approval this week, people familiar with the situation said.
Another Chinese company, China Polymetallic Mining Ltd., started testing the market for interest in an IPO that could raise US$150 million-US$250 million. It hopes to list on the Hong Kong market on Dec. 15, according to a term sheet seen by Dow Jones Newswires. The company, which mines lead and zinc, plans to sell 500 million shares at between HK$2.34 and HK$3.90 per share. The price is equivalent to 4.9 to 8.1 times forecast 2012 earnings, the term sheet said. Deutsche Bank Asset Management, part of Deutsche Bank AG, and Morgan Stanley Private Equity own stakes in the miner.
The order-taking process will begin on Nov. 28.
source: online.wsj.com
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