Debt crisis blunts taste for IPOs

PUBLISHED : Saturday, 16 July, 2011, 12:00am
UPDATED : Saturday, 16 July, 2011, 12:00am


The Hong Kong equity market extended its losses yesterday as concerns over the euro-zone debt crisis and the US budget stand-off eroded investor appetite for new issues.

Yesterday, children's health care product-maker Prince Frog International Holdings became the latest initial public offering to fall on its debut, closing down 2.69 per cent at HK$2.53.

Prince Frog, which was priced at HK$2.60 a share, raised a total of HK$590.6 million through its initial public offering to fund expansion of its sales network and production facilities.

The Hang Seng Index closed down 0.3 per cent, or 64.82 per cent, at 21,875.38 yesterday.

The Hong Kong benchmark lost 2.11 per cent this week, although it recovered some of its losses from Tuesday when reports suggesting that Greece was close to a sovereign debt default roiled markets.

Patrick Yiu Ho-yin, managing director at Cash Asset Management, said the Hong Kong stock market was likely to remain volatile next week, trading between 21,500 and 22,300.

He said this reflected investor jitters about Europe's bank sector, as well as the warning on US debt issued this week by Moody's Investors Service.

Market volatility has caused 10 mainland companies to shelve or postpone listing plans in Hong Kong in the first half of this year.

Separate data from researcher Dealogic showed that globally in the first half of the year, a total of 155 IPO deals were either delayed or cancelled, up from 114 in the same period last year.

'It's quite possible that there could be more [IPO] delays, given the uncertain outlook,' Yiu said.

Mainland hypermarket operator Sun Art Retail Group said it would delay its IPO for two weeks after finding errors in its listing prospectus on Thursday, a day before it was due to make its Hong Kong debut.

In a filing with the Hong Kong bourse yesterday, Sun Art said retail investors would have six days to reconsider their orders for the HK$8.2 billion IPO.

The hypermarket operator, which is controlled by Taiwanese conglomerate Ruentex Group and French retailer Groupe Auchan, failed to disclose up-to-date earnings per share figures in its listing prospectus after a stock split.

In a filing yesterday, Sun Art said it had a 1-26 stock split on June 27, but its prospectus failed to change EPS figures based on the number of outstanding shares.

Sun Art yesterday published revised EPS figures following the stock split in the stock exchange filing and will release a supplemental prospectus on Monday.

Brokers said the Sun Art offering received a good response from retail investors despite a weak IPO market recently.

'Investors are obviously very disappointed [with the Sun Art IPO delay],' Mark To, the head of research at Wing Fung Financial Group, said.

'Most of them would think again before bidding for the stock. Risk aversion has rocketed over the past week.'