China Huishan Dairy stock falls on first day of Hong Kong trading
China Huishan Dairy, a mainland milk producer backed by billionaire Cheng Yu-tung, fell on its first day of trading yesterday. The poor debut casts a shadow on listing hopefuls in Hong Kong, likely adding to investors' reluctance to pay a decent valuation on future offerings.
Huishan Dairy was one of the city's best-priced initial public offerings this year, with its listing priced at the top of the marketed range. The stock fell 3 per cent from its offer price of HK$2.67, as the Hang Seng Index gained 0.4 per cent.
The company's pricing at the top end was too aggressive as Hong Kong's IPO market has not fully recovered, said Ronald Wan, the chief China adviser at Asian Capital (HK).
"The high-end price makes it less attractive to investors, who may be waiting on the sidelines for lower valuations," said Wan. "The market is not stable yet and there are no sure-win IPOs."
David Chin, head of Investment Banking Department for Asia at UBS who led the Huishan listing, said such a decline was normal amid volatile market conditions and expects future listings to be unaffected.
Chin expects Hong Kong to see at least a dozen listings worth between US$5 billion and US$7 billion over the rest of the year. These would come from businesses as diverse as pawnshops, health care and non-traditional financial industries, he said.
The value of Hong Kong offerings has reached US$7.8 billion this year, poised to surpass the US$8 billion for all of last year. The value is still far below the US$20 billion in 2011, according to data compiled by Bloomberg.
The company had offered shares at HK$2.28 to HK$2.67 each as it and investors sold at least HK$10 billion of stock. Huishan was established in 2009 as a raw milk producer, and has moved into the business of selling liquid milk and milk powder products, grain processing and trading.