Consumer firms line up to launch IPOs
More than a dozen are lined up to take advantage of Beijing's looming stimulus
More than a dozen consumer brands including popular restaurant operators South Beauty and Tsui Wah are lining up to launch initial public offerings as Beijing prepares to boost the domestic economy.
With the recent failure by some mainland financial institutions, such as China Everbright Bank, to launch IPOs in Hong Kong, bankers say small and medium-sized consumer companies have become more attractive to investors.
According to banking sources, the Hong Kong offices of major investment banks such as Citic Securities and Merchants Securities have all pitched six or seven IPO deals that were hoping to be launched once the market improved. Most of the deals involve listings by consumer firms.
"The 'China bank story' is not as attractive as when China's 'Big Four' state-owned commercial banks were listed," said Paul Lau, a partner at KPMG. However, "the consumer sector, especially well-known brands remain very attractive".
China may soon announce further stimulus policies to boost the economy, the Shanghai Securities News reported last week. Key sectors included household appliances, food, electronic trade, household furniture, the paper said.
"The growth story in the consumer sector is easier for investors to understand," said Gary Wong, associate director of institutional sales at China Merchants Securities (Hong Kong).
Consumer staple firms are often deemed as defensive players in a sliding stock market. Instant-noodle maker Uni-President China, for example, has seen 72 per cent gains so far this year, even as the benchmark Hang Seng Index advanced only 7.56 per cent.
A total of 37 IPO deals have been launched in the city this year, of which 60 per cent are financial and energy companies. Only three consumer companies have listed successfully in Hong Kong this year, sharply down from last year's 28 firms. However, bankers are expecting a very different picture for the rest of the year and in 2013.
Hui Shan Dairy and South Beauty Restaurant were among 12 consumer-related firms which planned to launch their Hong Kong IPOs late this year or next year, banking sources said, adding the exact timing would mostly depend on the market.
Sentiment has remained low in recent months due to the worsening debt crisis in the euro zone.
Korean clothier Basic House Global and Taiwan's Uniasia Cosmetics are also on the list, planning to raise US$250 million and US$200 million respectively, sources said.
Apart from the 12 firms, two Hong Kong restaurant operators, Tsui Wah, famous for its Chinese-style fast food, and Tai Hing Roast, were also planning IPOs in Hong Kong late this year or next year, the sources said.