Weak interest in Hui Xian shares, say brokers

PUBLISHED : Tuesday, 19 April, 2011, 12:00am
UPDATED : Tuesday, 19 April, 2011, 12:00am

Tycoon Li Ka-shing's latest share offering has failed to stir Hong Kong's retail investors - response to the public tranche of the yuan reit has been lukewarm, according to brokers.

Hui Xian, the first yuan-denominated real estate investment trust, which will close for subscription at noon today, is expected to announce its offer price tonight.

Copies of its public offering prospectus could still be found at the Bank of China branch in Wan Chai and HSBC branch in North Point yesterday, with some brokers saying interest in the offering has been weak.

Many Hong Kong banks, however, have been looking to make the most of investor interest in yuan share products and have launched special promotions. Citic International, for example, has created an account designed to facilitate settlement of yuan securities that pays a 'special' 1 per cent annualised interest until the end of this year.

'We have not had much of an interest [in Hui Xian],' said Mark To, head of research at Wing Fung Financial Group, which is not offering margin financing for Hui Xian. 'It's hardly surprising. Many people use margin financing to speculate, hoping to make a quick gain on the first day of trading and Hui Xian is not attractive for them unless you want to go long.'

But even for long-only investors, there are better alternatives, brokers said. 'We haven't had many customers setting up yuan trading accounts with us [because of Hui Xian],' said Alvin Cheung, an associate director with Prudential Brokerage, which had received 30 million yuan (HK$35.6 million) worth of margin financing orders for the IPO as of yesterday.

'Many people have compared Hui Xian, whose only asset is Beijing Oriental Plaza, with other reits listed in Hong Kong. In terms of dividend payouts, it's just not as appealing.'

Based on its forecast profit of 140 million yuan between its listing date and June 30, on a revenue of 404 million yuan, Hui Xian says its yield would be between 4 and 4.26 per cent per unit.

The public tranche, which has been priced at an indicative range of 5.24 to 5.58 yuan per unit, represents 20 per cent of the total number of units available in the IPO - more than the required minimum 10 per cent that has usually been offered to retail investors in recent IPOs.