Chinese consumer companies have launched nearly $485 million worth of IPOs in recent days in Hong Kong, a rare sign of confidence after nearly seven weeks of no deals, but investors remain cautious as global markets lose further ground.
Tea maker Tenfu Holdings Co Ltd and Xiao Nan Guo Restaurants Holdings Ltd launched initial public offerings on Monday, following shoemaker and retailer Hongguo International Holdings Ltd , which began its roadshow on Friday.
The deals will the first to price after a lull in recent weeks, but with the benchmark Hang Seng Index dropping more than 4 percent on Monday, the outlook for successful listings remains grim. They will also test demand ahead of $5.5 billion of offerings from Citic Securities Co Ltd and construction machinery company Sany Heavy Industry Co Ltd in coming days.
"It's not a good time for investors to be buying into IPOs," said Alvin Cheung, associate director at Prudential Brokerage in Hong Kong. "The market is not doing well at the moment, so maybe some IPOs won't list successfully. Maybe in the fourth quarter."
Companies have raised $16.41 billion through IPOs in Hong Kong since the beginning of the year, Thomson Reuters data shows. But activity in the territory, the world's top IPO destination for two years running, has ground to a halt with no deals since late July.
Despite the cautious outlook, Cheung said Hongguo and other consumer-oriented companies stood a better chance of weathering the storm in equity markets since people in China "have more money and are willing to spend more on leisure products".
Hongguo could raise up to $208 million for takeovers, and to fund expansion of its retail outlets and factories, while Tenfu is seeking up to $192 million to expand its sales network and open new stores, according to terms of the IPO seen by Reuters.
Xiao Nan Guo, which operates 51 restaurants in China and Hong Kong, could raise as much a $95 million as it seeks to open 26 new restaurants in 2012 and 33 in 2013, according to a securities filing.
Hongguo is expected to begin trading on Sept. 23, while Tenfu is slated to debut on Sept. 26 and Xiao Nan Guo on Sept. 28.
Citigroup Inc and DBS Asia Capital are joint bookrunners for the Hongguo offering, while Credit Suisse Group AG , China International Capital Corp (CICC) and Polaris Securities Co Ltd are handling the Tenfu IPO.
Bank of America Merrill Lynch was hired as sole global coordinator for the Xiao Nan Guo deal, with Standard Chartered Plc helping to manage the offering.
Source:reuters
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