The three big listing themes in 2014
All eyes on Alibaba in the technology front while investors remain wary about city commercial banks and Huarong may revive plans to sell shares
While Hong Kong's equity market may have yet to shake off its holiday lethargy, IPO Watch is casting a glance back into 2013 to explore three important issues that may serve as a guide for stock picking among this year's listing hopefuls. At least one of the trends is likely to emerge as the defining issue of the city's listing market in 2014.
Alibaba is already an online retail star. Now fresh speculation suggests that the mainland internet giant will become the toast of the stock market in the second half of 2014. The fundamentals and prospects are bright for Alibaba, which owns a number of highly profitable portals, including Taobao and Tmall.
As Alibaba plans for what could be the biggest technology initial public offering after Facebook, any valuation of the offered shares is definitely tricky. Instead of the traditional yardstick of a price-earnings ratio, some analysts are looking to a different measure: the firm's proposed market capitalisation to sales over the past 12 months. This new gauge may help retail investors swot up on Alibaba's prospects before making a bet on the household name.
Shares in the then business-to-business firm Alibaba.com which were priced at a record price-earnings ratio of 100 times, initially soared after a listing in 2007. Later, they were largely ignored by investors due to slowing growth. This stands in contrast to the blockbuster performance of Tencent.
Inspired by the runaway success of Twitter's listing in the United States last year, other mainland e-commerce operators such as Jingdong Mall, which operates as 360Buy.com and Wal-Mart-backed Yihaodian may revive their listing plans. Market participants expect their listing schedules may converge in head-to-head competition with Alibaba. Twitter posted a return of 73 per cent after a month of trading, compared with a drop of 21 per cent for Facebook.
City commercial bank
The planned multibillion-dollar offerings of a number of city commercial banks, including Guangfa Bank and Bank of Shanghai, may help spur Hong Kong's listing market. However, investors generally remain wary about these banks' exposure to local government borrowings.
The debt racked up by local governments to fund infrastructure projects may be positive to economic growth, but it is prompting worries about potential defaults and bad loans. Investors will be focused on Beijing's resolve to address the issue. Shares in two of the three city commercial banks listed last year, China Everbright Bank and Bank of Chongqing, have been trading under water.
Government efforts to rein in the mainland's debt problems have been positive to China Cinda Asset Management. The strong performance of the distressed-asset manager, which was created in the late 1990s to handle the bad debts of China Construction bank, has raised hopes for a share sale by Huarong, which took over the bad debts of Industrial and Commercial Bank of China.
The asset managers have been marketed as countercyclical bets to the mainland's slowing economy against the backdrop of investor concerns over asset quality in the banking system.
Despite the lingering cautious mood for listings, casino-cum-hotel operator Macau Legend Development raised eyebrows after a trimmed offering. The stock has jumped more than twofold since its listing, showing up last year's best-performing blue chip, Galaxy Entertainment. This may rekindle the listing plans of a number of junket operators.