Hong Kong IPOs: market shows glimmer of revival as three solid debuts in a week raise US$111 million

Investor appetite for new share listings in Hong Kong shows signs of improvement amid a market rebound, with a series of recent IPOs (initial public offerings) registering strong performance - albeit on a small scale compared with the blockbuster deals the market is accustomed to.

Autostreets Development, a used-car dealer based in Shanghai, saw its stock price surge as much as 66 per cent from the offering price on its first day of trading on Friday, before closing up 27 per cent at HK$12.94. The IPO raised HK$153 million (US$19.6 million), with oversubscription of 433.34 times by local investors and 0.98 times by global funds, according to a stock exchange filing on Thursday.

Add in new listings by vending-machine company Qunabox Group on Monday and e-commerce supply chain player EDA Group on Tuesday, and three debutants this week raised a total of HK$868 million - the most since the week of April 22 when bubble-tea brand Chabaidao, the biggest IPO of the year, flopped.

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The solid IPOs could provide a sentiment boost to other listing candidates in a market where debuts have wobbled and planned offerings have vanished amid the slowest start since 2009.

"The price-performances are all quite positive," John Lee, vice-chairman and co-head of Asia country coverage at UBS, said at a media briefing this week. "Although the deals are small, the sentiment is improving." The market still wants to see more big, representative deals, he added.

Proceeds from first-time stock offerings in Hong Kong fell 29 per cent in the first quarter to US$604.4 million, according to London Stock Exchange Group data. The city was the world's top IPO destination seven times between 2009 and 2019, but saw its ranking fall two places to 10th during the quarter.

The Autostreets debut came as the Hang Seng Index declined 0.8 per cent on Friday after the release of weak China manufacturing data for May. The offering was priced at HK$10.20, the lower end of its target range.

Qunabox jumped 40 per cent from its IPO price on its first day of trading on Monday, and EDA Group surged more than 84 per cent on Tuesday in its debut, with its shares oversubscribed 103 times.

"The recent rally in the stock market is shoring up sentiment for new shares, especially among smaller investors who are looking to profit from short-term trades," said Kenny Ng, a securities strategist at China Everbright Securities International. "It's an improvement, but for sustained recovery, the market still needs to see bigger, better-quality companies."

Hong Kong's stock market has staged a powerful rally after China's stimulus package lifted sentiment and global investors rebalanced their portfolios to take advantage of cheap local shares. The Hang Seng Index's four-month winning streak is its longest since a five-month run through February 2021.

Recent interactions with investors have generated "very positive feedback", with long-term overseas funds, hedge funds and even some sovereign wealth funds showing more interest in IPO deals in the pipeline, Selina Cheung, co-head of Asia equity capital markets at UBS, said at the briefing.

Still, the recent deals are relatively small in size, and investors are closely watching for major IPO announcements following the China Securities Regulatory Commission's pledge to facilitate Hong Kong listings by Chinese companies, she added.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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