Glencore debut fails to impress HK investors

PUBLISHED : Thursday, 26 May, 2011, 12:00am
UPDATED : Thursday, 26 May, 2011, 12:00am
 

Glencore International received the cold shoulder in its Hong Kong stock market debut yesterday, with its shares slipping amid demonstrations accusing the commodity trader of inflating global food prices.

The weak first-day performance, which saw its shares fall 2.45 per cent, follows Glencore's unimpressive debut in London last week. It was the largest initial public offering on the London Stock Exchange, raising US$10 billion.

Yesterday a dozen protestors from the League of Social Democrats - displaying banners and chanting slogans - marched to the Hong Kong Stock Exchange, claiming that Glencore profited from artificially inflating agricultural product prices.

Glencore is now the world's biggest listed commodities trader, covering oil, gas, coal, gold, aluminium, bauxite, nickel, iron ore, zinc, copper, grain, rice, sugar and foodstuffs.

The motive behind the long-awaited offering has been met with scepticism from some commentators who say that the flotation of Glencore signals the commodity bull run is coming to an end.

The Hang Seng Index yesterday edged up 0.07 per cent or 16.5 points, recovering from Monday's steep fall of 2.11 per cent or 488.37 points. The Hong Kong benchmark yesterday closed at 22,747.28 points.

'The overall investor sentiment was weak,' said Patrick Yiu Ho-yin, managing director at CASH Asset Management. 'The response was rather lukewarm. I think a lot of Hong Kong investors can't get a grip on Glencore's business.'

Glencore, which has focused on marketing its shares to institutions, only sold 2.5 per cent of its shares to Hong Kong retail investors, pricing each share at HK$66.53.

The total orders for the Hong Kong portion of the offering was about 3.92 times the shares on offer, according to a stock exchange filing.

Yesterday, the stock fell as low as HK$64.55, closing at HK$64.90, 2.45 per cent below its offer price.

For many years, Glencore has stayed out of the public eye but has recently attracted some controversy.

It emerged from Glencore's listing prospectus that at its subsidiary Glencore Grain Rotterdam, a former employee and a current employee have been charged with 'having committed corruption in exchange of information covered by professional secrecy in the course of applications for European exports restitutions' in a criminal case in Belgium.

The document said a criminal investigation was probing a public official, the European Commission's Directorate General for Agriculture and others for 'violation of professional secrecy, corruption of an international civil servant and criminal conspiracy'.

The trial is expected to take place this year, according to the listing document.

Analysts believe Glencore's earnings were likely to be volatile this year as the commodity markets head for corrections with the more bearish predicting a crash in the second half.

Commodity prices have been in moderate correction since the start of the month, raging from metals to crude oil.

A report released by HSBC yesterday expected commodity prices to further soften but a crash would be unlikely.

Chief executive Ivan Glasenberg insisted Glencore was not selling out at the peak, saying that demand from China for commodities was still growing.

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