Mixed reaction from investors for trading debuts in Hong Kong
Consumer goods company Casablanca gains 9 per cent on its debut but buyers lose appetite for property shares like CIFI which fell 1.5 per cent
Shares of bedding maker Casablanca and mainland property firm CIFI headed in opposite directions on their Hong Kong debut yesterday, indicating fresh investor appetite for the domestic consumer sector at the expense of bubbly real estate.
Shares of Casablanca soared more than 9 per cent to HK$1.64 on the first trading day, while the credit-strapped developer CIFI fell 1.5 per cent below its offer price of HK$1.33.
"The lacklustre Hong Kong debut of CIFI's offering highlighted investors' wariness over the property market in China, especially the small-sized developers that have been suffering from two years of property curbs and strapped credit conditions," a Hong Kong-based fund manager said after the market closed.
He said the credit crunch among small property firms is likely to persist due to slowing economic growth at home and less reliance on property and infrastructure development.
Jim O'Neill, the Goldman Sachs economist who coined the acronym BRIC for emerging powerhouses Brazil, Russia, India and China, said China would shift towards a domestic consumption-driven economy over the next five years.
A person familiar with the Casablanca deal said jittery investors favour a simple business structure with realistic projected revenue.
Casablanca raised about HK$100 million and plans to use the bulk of it for expansion on the mainland. The company had wanted to raise about HK$300 million through a dual-currency listing in Hong Kong, but the plan received a tepid reaction.
CIFI offered its new shares at a steep 69 per cent discount to net asset value, reflecting its thirst for funding amid heavy debt and sharply declining profitability.
Both companies priced their offerings at the bottom of the expected range.
The mixed start could bode ill for other listing candidates, such as People's Insurance Company (Group) of China (PICC). Its jumbo US$3.6 billion listing attracted a record 17 cornerstone investors, including AIG and China Life, who will subscribe to US$1.77 billion of its shares.
PICC's chairman, Wu Yan, is upbeat and said at a listing briefing in Hong Kong that "the cross-business synergies within the PICC Group are likely to provide meaningful value and interest to investors".
Unlike the flood of listings in the past three years, much of the capital raising in Hong Kong this year has been through block trades or the significant involvement of cornerstone investors, who agree to at least a half-year lock-up period.
Future Land, a Jiangsu-based property developer, has priced its new shares at HK$1.45, the bottom of the indicative range. It is expected to begin trading in Hong Kong on November 29.
Following sharp gains over the past few days, shares on the Hong Kong exchange continued their rally even though trading remained subdued, probably because of concern over the US fiscal cliff and deteriorating corporate earnings.
The Hang Seng Index rose 0.8 per cent to 21,913.98 points, capping the best weekly gain in 2½ months.
