Honghua IPO draws lukewarm retail response
Honghua Group, the world's second-largest producer of onshore oil and gas drilling rigs, has drawn lukewarm retail orders for its initial public offering as investors prefer to wait for the upcoming share sale by China Railway Construction Corp, which is considered a safer bet in the current volatile market.
According to four major securities houses polled by the South China Morning Post, only two had provided margin financing for Honghua's offering.
Phillip Securities (HK) has received HK$430 million worth of margin orders, while Sun Hung Kai Financial Group has attracted up to HK$400 million. The combined HK$830 million was around two times Honghua's HK$370 million worth of shares on offer in the retail tranche.
'Recent market volatility is one of the major reasons why we have decided not to offer margin financing to our clients,' said Nelson Chan Kai-fung, general manager of Bright Smart Securities.
The benchmark Hang Seng Index has fallen 11.97 per cent so far this year.
Francis Lun Sheung-nim, general manager of Fulbright Securities, cited uncertainties in the market for his firm not providing any margin financing.
'Investors are cautious. They will not put their money into the market until they are fully convinced that they can gain a decent return,' he said.
China Railway Construction is considered a safer bet because the company's business is less affected by the economic slowdown as the mainland government has committed to expanding rail links, analysts said.
Mr Chan said investors were expecting lucrative returns from the listing, adding: 'We are planning to keep at least HK$7 billion for margin financing for China Railway Construction.'
Mr Lun said that Fulbright would reserve 'billions of dollars' to meet demand for margin financing for the deal but declined to give further details.
China Railway Construction will start its public offering in Hong Kong from February 29, aiming to raise as much as HK$18.25 billion from the market. The company's trading is slated on March 13.