Weak markets delay more than $3 billion in HK IPOs

By Michael Smith and Alison Leung

HONG KONG (BestGrowthStock) – More than $3 billion worth of Hong Kong floats were shelved on Wednesday, a blip for the world’s hottest market for IPOs, as investor sentiment soured due to tensions in Korea and Ireland’s debt problems.

Animal feed product market Bluestar Adisseo Nutrition Group said in a statement it would not proceed with plans to raise up to $1.56 billion due to a deterioration in market conditions.

China Datang Corp, the country’s second-largest power producer, postponed plans to raise up to $1.5 billion through a Hong Kong initial public offering of its renewable energy unit, banking sources said.

Both companies had been due to list in Hong Kong by the end of the year but scrapped the plan amid a sharp drop in Asian stock markets as a deadly exchange of artillery fire on the Korean peninsula rattled investor confidence already dented by Ireland’s debt woes.

Investment bankers said while the delays were only a blip in what has been the world’s hottest IPO market, there was concern about the market performance of floats after listing if they were priced to high in uncertain times.

“The market is getting much choppier right now,” one banker said.

“You are seeing a lot of spikeiness in a lot of the returns and some of the aftermarket is going to be pretty poor. That’s always something that keeps us awake at night.”

Hong Kong has been the world’s most popular destination for IPOs last year, due to the city’s strong stock market recovery and its key location. Agricultural Bank of China (1288.HK: ) raised a record $22.1 billion in Hong Kong and Shanghai in July and AIA Group Ltd (1299.HK: ) raised $20.5 billion IPO last month.

China’s Datang had been due to launch a road show and bookbuild for the offer this week, with listing planned for next month, according to a term sheet.

Datang had aimed to sell shares at a price to earnings ratio (PE) of between 22 and 26 times, but the consensus price level of potential investors was much lower after market sentiment soured, another source said.

“Datang Corp Renewable is still in pre-marketing and will hold a meeting at the weekend to decide on the IPO schedule,” a source close to the deal said.

Bluestar Adisseo planned to sell 2.3 billion shares with an indicative price range of HK$3.50 to HK$5.25 per share, raising capital to fund expansion and upgrade its plants, for acquisitions, and to repay short-term borrowings.

The issue was expected to be priced on Nov 23, with trading expected to begin on Nov 30 under the listing symbol 1095 (1095.HK: ).

The company said it decided not to proceed “in light of the deterioration in market conditions and the continued and excessive market volatility, and with the investors’ best interests in mind”.

Deutsche Bank AG (DBKGn.DE: ) is the joint global coordinator and joint lead manager for the issue.

China New Materials, which planned to raise up to $126 million in an Hong Kong IPO, postponed a news conference on Wednesday but said this was due to a technical issue.

“Its public subscription will be postponed for a few days due to technical issue,” a public relations official representing the company told Reuters.

Last month, China’s second-largest wind turbine maker Xinjiang Goldwind Science & Technology Co (2208.HK: ) (002202.SZ: ) relaunched its Hong Kong IPO, cutting the size of the issues by about a quarter.

Goldwind shelved its share sale plan in June citing fragile investor sentiment and concern about overcapacity in the sector.

Shares in Hong Kong and China fell sharply on Tuesday with the blue chip Hang Seng Index (.HSI: ) posting its biggest single-day drop in six months on news that North Korea had shelled a South Korean island, prompting a return of fire by the South.

The Hang Seng Index ended up 0.6 percent on Wednesday, recouping part of Tuesday’s 2.7 percent loss.

(Additional reporting by Leonora Walet and Denny Thomas; Editing by Lincoln Feast)

Weak markets delay more than $3 billion in HK IPOs