Bullet train maker CNR derailed by tepid IPO market
Mainland bullet train manufacturer China CNR priced its shares near the bottom of the range for its Hong Kong initial public offering at a time when overall sentiment over new share sales remained lukewarm at best.
State-owned CNR, which already has a Shanghai listing, priced the shares at HK$5.17, the low end of its marketing range of HK$5 to HK$6.2, suggesting subdued investor appetite for railway stocks. The firm raised US$1.2 billion after selling 1.8 billion new shares.
Eugene Law, a director at Galaxy Securities International, said the Hong Kong stock market has weakened as investors soured given the sluggish economic landscape in China, which is broadly weaker in areas ranging from retail sales to government led infrastructure spending.
"Hong Kong's listing market has turned ice cold after pork maker WH Group's scrapped listing," Law said. "The one-time outperformers such as Macau casino stocks dropped as poor sentiment pushed investors to take profits."
Before a formal launch last week and burdened by soaring debt and shrinking cash, CNR captured US$100 million from three cornerstone investors - Dongfeng Motor, China National Machinery Industry, and Shanghai-listed Jinxi Axle.
Shares of CNR are scheduled to begin trading in Hong Kong on Thursday.
CNR and CSR Corp, both state-owned enterprises, are the world's biggest makers of railway equipment, including high-speed trains.
CNR said in the prospectus it will use HK$1.98 billion of the listing proceeds to repay bank loans. The company's gearing ratio stood at 67.1 per cent at the end of last year, while its total borrowings were 22 billion yuan (HK$27.6 billion). CICC, Macquarie, UBS are the managers for the deal.
Looking at the visible pipeline, Tianhe Chemicals, a Liaoning-based producer of oil additives and special chemicals, is also planning to launch its US$1 billion offering in a Hong Kong float after getting approval from the local stock exchange last week.
"Investors are awaiting for a clearer stimulus package from Beijing," said Alma Yang, a portfolio manager at Shen- yin Wanguo Asset Management.