Hong Kong listings

By Marty Sun, Goldman Sachs

The launch of the Shanghai-Hong Kong Stock Connect last November has made it easier for international investors to access China’s equity markets.

The link got off to a smooth start largely thanks to the money from hedge funds worldwide flowing into Shanghai.

But unlike their hedge fund cousins, less than one-third of Hong Kong’s long-only fund managers (who buy stocks hoping their prices will rise) are using the link to buy Shanghai-listed shares, according to a recent survey by the Hong Kong Investment Funds Association (HKIFA). Access from Europe has been even more measured, with only a few Luxembourg funds approved for the programme, even though a fast track application process has been put in place. Read more

Some might call it investing Nirvana. Combine a company with a steady – inevitable, even – growth in its customer base with a trend towards higher spending. Sell it as a rare route into the growing wealth of the ethnic Chinese middle class. The enterprise in question is even called Nirvana – and it sells funeral services.

Nirvana Asia, a southeast Asian undertaker, opened the books on its $300m initial public offering in Hong Kong on Tuesday. Late in the first day of a week-long roadshow, bankers reported bids had already covered the shares on offer.

The deal would create in Hong Kong a mini-sector of what bankers like to call “deathcare services” following the listing last year of Fu Shou Yuan, a China-focused group in the same business, which enjoyed a 45 per cent opening day bounce. Read more

China is not known for its moral scruples or sensitivity when it comes to investing in dangerous countries. It may help to build schools, hospitals and railways as a quid pro quo for getting access, but what it mostly seems to want is to get in and out with its raw materials and without interfering in local politics.

Erik Prince and China could be made for each other. The former Navy Seal who founded the hugely controversial private security group Blackwater is pitching to run logistics for Chinese mining and energy companies in Africa. Read more

Death may not just be a “delightful hiding place for weary men”, as Herodotus once said. It may also offer shelter for Asian investors who have grown tired of looking at battered banks and boring oil producers.

Fu Shou Yuan, a chain of Chinese graveyards, is seeking to list on the Hong Kong stock exchange later this year, in a deal that could raise up to $200m. Read more

One head, many voices

Half Pilgrim’s Progress, half Mad Hatter’s Tea Party, Wednesday’s wonderfully crackers blog entry from Hong Kong Exchange chief executive Charles Li is sure to up the hit count, and raise a few smiles.

It’s all too easy to get lost in Li’s winding, dreamscape narrative, where imaginary characters (Mr Innovation, Ms Practical, Mr Righteous and others) battle it out to decide whether the stock market operator should bend to the will of a prospective new listing candidate (ie Alibaba). At times it feels like 12 Angry Men, but played out by the colourful inhabitants of Sesame Street or the Mr Men series. And all in the arena of a sleeping Li’s brain. Read more

With the largest tumble in gold in three decades, the shares of Hong Kong’s three biggest jewellery retailers fell sharply this week, despite a rush of customers wanting to take advantage of lower bullion prices.

Investors were clearly more interested in the impact of lower gold prices on the stores’ margins than in the potential benefits of the surge in sales. Read more

On the face of it, Hong Kong’s market for new equity listings has perked up. Deal volume in the year to date is at its highest since 2010, while retail investors have finally returned. But, with many of the recent deals faring poorly in secondary trading, and China’s equity rally losing steam, the market for new offerings may stall before it gets out of first gear.

So far this year, Hong Kong has seen six deals, which have together raised $788m, compared with $452m by this time last year and $256m in 2011, according to Dealogic. Retail activity has also picked up, with heavy oversubscription in a number of this year’s offerings.

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A seasonal gift from Beijing for canny, or lucky, investors in Hong Kong. China Machinery Engineering Corporation (CMEC), the state-owned contractor, saw its shares leap by as much as 19 per cent as it made its HKSE debut on Friday.

With Asian markets generally weak on Washington’s failure to reach a fiscal cliff deal, CMEC’s soaraway $500m initial public offering was a surprise bonus on an otherwise dull day. Read more

That’s a nice way to end the week: PICC’s first day of trading in Hong Kong has shown that there is appetite – especially among retail investors – for a slightly underpriced IPO stock. The question is, with an opening day pop of over 7 per cent, did the company leave too much on the table?

Source: Bloomberg

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Lean times require mean valuations. And so it is with Chinese state-owned insurer PICC Group, which has cut back the proposed price tag on its Hong Kong IPO from an original estimate of up to $30.5bn to $15.4bn-$18.2bn.

The much-delayed sale would still raise up to $3.6bn in Hong Kong’s biggest offering since AIA (also an insurer) secured $20.5bn in 2010. With cornerstone investors headed by US insurer AIG and Chinese state companies pledging $1.85bn, the deal – at its new price level – finally seems set to reach the market. Read more