Hopewell exit adds to strains on IPO market

Decision to put the property spin-off on ice underscores concerns for outlook with better prospects elsewhere, but New World pushes on

PUBLISHED : Wednesday, 12 June, 2013, 1:55pm
UPDATED : Thursday, 13 June, 2013, 3:31am


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The outlook for Hong Kong's tepid initial public offering market has been further weighed down by the deferral of Hopewell Hong Kong Properties' offering.

The city's stock market has fallen sharply amid renewed worries over the mainland's tightening measures.

Investors are fretting about the poor performance of newly listed stocks this year, prompting more capital flows into developed markets such as the United States and Japan.

Hopewell Hong Kong Properties, a spin-off from conglomerate Hopewell Holdings, controlled by Gordon Wu Ying-sheung, did not price its shares yesterday as "both institutional and retail demand fell short of expectations".

The H-share index, which tracks major mainland firms, fell for the 10th successive day on Tuesday, the longest losing streak in more than a decade.

Hopewell was looking to raise about HK$5 billion for its development in Wan Chai. The deferral of its share sale follows a decision by parts supplier Mando China, the first South Korean firm to seek a Hong Kong listing, to pull a US$200 million deal last month, citing "adverse market conditions".

"The slowdown in credit growth in May was not due to a monetary tightening, but rather tougher regulations on banks' off-balance sheet activises and shadow bank lending," analysts at UBS said in a recent note.

Despite the poor mood for new offerings, New World Development is likely to continue with its US$700 million spin-off offering by listing three hotel assets in the form of business trust, people familiar with the deal said.

However, investors remain vigilant about the highly engineered business trust structure after shares in Langham Hospitality Investments performed badly.

Elsewhere, it is believed that Cheung Kong will resume its hotel spin-off listing after it cancelled the sale of HK$1.4 billion of hotel rooms last month amid regulatory probes. But people familiar with Cheung Kong said the blue-chip property giant had not been in discussion with underwriters as the 10-year benchmark treasury yield shot up recently.

It was reported last year that Cheung Kong was forced to delay a plan to raise up to US$800 million by selling four extended-stay hotels after it failed to capture enough interest from institutional buyers.

Battered by persistence weakness in stock markets, global investment banks have quietly shifted their focus to Southeast Asian markets where investors are more upbeat about the region's domestic consumption and public spending on infrastructure.

In addition, listing hopefuls in Southeast Asia come to the market with less "financial engineered" offering terms, which help to boost overall confidence.