April 20, 2024

DealBook: Hong Kong Looks to Regain Footing as I.P.O. Leader

Tim Parker, chief executive of Samsonite, at an investor presentation in Hong Kong.Jerom Favre/Bloomberg NewsTim Parker, chief executive of Samsonite, at an investor presentation in Hong Kong on Monday. Samsonite’s stock market listing in Hong Kong could raise $1.5 billion.

HONG KONG — Is Hong Kong, the global leader for initial public offerings in 2009 and 2010, in danger of losing its coveted title this year?

The stock market here has had an underwhelming start to 2011 compared with its Western rivals. By the end of May, there were 21 I.P.O.’s in Hong Kong, raising a total of $8.8 billion. New York notched 43 transactions and $23.8 billion, according to data compiled by Thomson Reuters.

Although a flurry of debuts over the next few weeks, including those from Samsonite and Prada, are expected to raise billions of dollars, Hong Kong will find it tough to hold on to the top spot given the strong showing in the United States.

The Nasdaq and New York Stock Exchange are benefiting from a boom in social media companies that are going public, like LinkedIn and Yandex. On Thursday, Groupon filed for its highly anticipated offering, which could value the company at nearly $30 billion.

Still, the sudden burst of activity in Hong Kong shows that recent worries over China’s economic slowdown and the relatively poor performance of many regional stock exchanges is fading. Instead investors are focusing on the prospects of companies that are heavily exposed to fast-growing Asia.

“There is still a lot of cash around,” said Kester Ng, head of equity capital and derivatives markets at J.P. Morgan for the Asia-Pacific region. “The risk appetite right now is not as pronounced as it was late last year, and issuers currently may not be able to get the valuations they would like. But if you have the right kind of asset in the right sector, you can definitely get deals away.”

Resource companies and luxury goods, he added, are likely to continue to do well, as investors look to capitalize on Asia’s ravenous demand for commodities and the rising affluence in the region. Huaneng Renewables, a Chinese wind power company, is planning to announce on June 9 its pricing for a $1 billion listing. Shares in MGM China, whose main asset is a giant hotel and casino in the booming gambling hub of Macao, is set to begin trading on the Hong Kong exchange on Friday. The offering raised $1.5 billion.

The strong economy is also a big reason why overseas companies are looking to Hong Kong for their market debuts.

Samsonite, which is owned by the British private equity group CVC Capital Partners, announced plans on Thursday for a Hong Kong listing that could raise as much as 11.75 billion Hong Kong dollars, or $1.5 billion, with a trading start planned for June 16.

“We want to orient the company to where the world’s center of gravity is going to be in future,” which means China and Hong Kong, Tim Parker, chief executive of Samsonite, said at a video news conference.

On Monday, Prada, the Italian fashion house, is due to start marketing a June 24 listing that could net $2 billion, according to a person with knowledge of the plans who spoke anonymously because the details had not been made public. Resourcehouse, a mining company owned by the Australian billionaire Clive Palmer, is expected to price its $3.6 billion Hong Kong offering on Friday.

“Some of these companies make 30 to 40 percent of their revenues or profits in China — their fastest growth is coming from here,” said Justin Haik, a managing director of Morgan Stanley’s global capital markets group in Hong Kong. “It is natural for such companies to list here. It gets them added visibility. And it aligns their interests with their long-term aspirations of doing business in Asia.”

Tighter credit conditions in much of Asia have provided an incentive for companies to seek alternative sources of financing, like I.P.O.’s, said Emil Wolter, head of regional strategy at Royal Bank of Scotland in Singapore.

Reflecting this, many market aspirants are mainland Chinese companies. China Everbright, a Shanghai-based lender, announced plans for a listing that could raise $6 billion to $7 billion, Reuters reported this week. Haitong Securities, a brokerage firm, could raise more than $1.5 billion, according to Bloomberg News.

The attraction to list here is understandable. Much of Asia is growing rapidly, and many of its economies escaped the pain wrought by the global financial crisis. Its financial markets have grown more sophisticated. And investors in the region and elsewhere have ample cash they want to put to work in Asia.

All of this has helped Asian exchanges capture a rising share of stock market activity in recent years, with Hong Kong the standout beneficiary in terms of attracting new listings.

Two blockbuster listings in 2010 — the Agricultural Bank of China and American International Assurance, the Asian life insurance unit of American International Group — helped Hong Kong raise nearly $53 billion in I.P.O.’s by the end of December. That accounted for 19.5 percent of the global total and easily topped the $34.5 billion raised in New York, according to Thomson Reuters data.

“When it comes to supply and demand, a lot of people are looking to participate in the Asian story,” said Mr. Haik of Morgan Stanley. “We’ve seen wealth growing across the region, and an institutional investor base — asset management firms and sovereign wealth funds — that is increasingly looking to put money into equities.”

The New York Times

Article source: http://dealbook.nytimes.com/2011/06/02/hong-kong-looks-to-regain-footing-as-i-p-o-leader/?partner=rss&emc=rss

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