HK’s IPO rush ahead of US election

Mid-sized companies dominate offerings as Hong Kong enters peak season for listings.
Donald Trump unnerves some investors
Donald Trump unnerves some investors

The final quarter of every year is peak season for Asia’s equity capital markets and this year is no different, with a number of companies seeking to list before prices potentially become volatile after the US election early next month.

Unlike last year, when a number of large financial institutions including China Huarong Asset Management, China Reinsurance and CICC launched their offerings in the last three months, bankers said Hong Kong will only likely see a number of small- to mid-cap companies come to market.

Leading the pack is Hangzhou-based apparel retailer JNBY Design, which launched a HK$966 million ($125 million) initial public offering on Tuesday through joint bookrunners CCB International and Citic CLSA Securities.

Power engine manufacturer VPower and fast food restaurant chain Zhou Hei Ya International are expected to follow shortly, having both launched pre-deal investor education for their IPOs this week. Early indications suggest VPower could raise $400 million while Zhou Hei Ya is expected to raise $300 million.

Together with drug manufacturer China Resources Pharmaceutical Group’s $2 billion listing and Cofco Meat’s $333 million deal, these transactions could add some $3 billion to the $18.8 billion already raised from IPOs in Hong Kong so far this year, further cementing the city’s leading position as the world’s largest IPO fundraising hub this year.  

According to Dealogic, Hong Kong is well ahead of Shanghai in terms of IPO volume year-to-date, with the latter raising $10.9 billion thus far.

US election uncertainties

Prospective investors for these IPOs are wary of stock market volatility after the US presidential election which is scheduled to take place on November 8.

Big policy differences between the two presidential candidates could create swings in capital flows, as well as foreign exchange and investment policies.

"Whether Clinton or Trump is elected will make-or-break the stock market," a fund manager at a Chinese equity fund said. "I can't imagine the selloff pressure if Trump wins the race, so it is logical to reduce stock positions at times like this until things get clearer."

Senior management of upcoming listing candidates are certainly aware of such concerns and are therefore pushing their deals before the November 8 deadline, according to bankers familiar with their plans.

Bankers said VPower is likely to adopt an accelerated schedule and start the bookbuilding process early next week. If everything goes well, the company could list on November 4, three trading days ahead of the US election.

CR Pharma, JNBY Design and Cofco Meat will also list before the election date under the current timetable, whith respective target listing dates on October 28, October 31 and November 1.

Zhou Hei Ya is the only expectation. Bankers said analyst presentation for the Reg S/144A deal will take eight days because it will cover non-Asia cities including London, New York and Boston. This means it will only be able to launch the deal in November and will only be able to list by mid-November at the earliest.

BOC International and Citigroup are joint sponsors of VPower’s IPO. Zhou Hei Ya is advised by Morgan Stanley and Credit Suisse.

Other small- or mid-cap companies preparing IPOs by the end of the year include Guangzhou Kanghua Healthcare, Wisdom Education, Minsheng Education and Shandong International Trust.

¬ Haymarket Media Limited. All rights reserved.