Peak Sport latest to consider leaving Hong Kong stock exchange amid low trading volumes
Appeal of a mainland listing growing for many companies, but observers say it’s too early to sound the death knell for the Hong Kong bourse
Peak Sport Products, one of China’s largest sports goods manufacturers, said it may delist from the Hong Kong bourse.
In a filing to the Hong Kong stock exchange Tuesday night, Peak said its controlling shareholder is “in the preliminary phase of considering proposing a scheme of arrangements with respect to the ordinary shares of the company, subject to such a scheme which, if proceeded with, could result in the privatisation and delisting of the company from the stock exchange.”
Its shares surged 14 per cent on Wednesday to close at HK$2.19, after they resumed trading. Peak was trading at HK$1.92 before the suspension, which was 53 per cent lower than its initial public offering price of HK$4.10.
“The trading volume of Hong Kong stocks has been very low in the past month,” said Wong Chi-man, head of research at China Galaxy International Securities. “Many mid- and small-cap stocks only have some hundreds of thousands transactions a day. For them, Hong Kong has already lost its function as a financing platform.”
Peak’s price to earnings ratio (P/E) was only nine times before it announced the buyout plan.
That compares with an average 37 times for firms trading on the Shenzhen Stock Exchange, which is dominated by small- and medium-sized companies.
There are a rising number of companies feeling dissatisfied with their Hong Kong shares’ weak trade.
Billionaire Wang Jianlin is preparing to take his Hong Kong-listed Dalian Wanda Commercial Properties private as he believes it has been undervalued on the city’s market.
“In the short term there will be a trend that companies consider privatisation and a return to an A-share listing on the mainland,”Wong said. He added that any company considering a Hong Kong de-listing would not be likely to announce anything until it found prospective listed shell companies for a possible backdoor re-listing, given the long waiting time for a regular listing on mainland bourses.
In the longer term, however, Wong said it is still too early to say if the Hong Kong stock market has lost its shine.
“The Hong Kong stock market was rallying just a year ago,” he said. “It’s hard to predict what will happen in the future.”
Brazil’s Vale S.A., the world’s biggest iron ore producer, is another company leaving Hong Kong. On Wednesday it said the Hong Kong stock exchange had approved the withdrawal of its HDRs (Hong Kong depositary receipts) after they had been listed for five years.