Hongkong Electric makes dim start on stock market
Units of Li Ka-shing's trust spin-off drop 4pc amid concern over returns of utilities
HK Electric Investments, the latest initial public offering by Li Ka-shing, took a tumble on its trading debut yesterday, joining a number of other disappointing listings by Asia's richest man.
Units of HK Electric, a trust spun off from Power Assets, the international utility firm controlled by Li, dropped as much as 4.03 per cent before closing at HK$5.34, down 2.02 per cent from their offer price.
Turnover was 516.63 million units worth HK$2.76 billion.
The trust offering, priced at the bottom of the indicative range of HK$5.45 to HK$6.30, raised HK$24.1 billion from the sale of 4.43 billion units.
Li is also exploring the sale of shares in AS Watson, a retail unit of Hutchison Whampoa, that may fetch HK$98 billion.
It is believed the fundraising in Hong Kong is designed to amass a war chest to exploit opportunities in other, faster-growing industries elsewhere.
Bankers said the AS Watson listing might eventuate in the second half of this year after the appointment of Bank of America Merrill Lynch, Goldman Sachs and HSBC to lead the flotation.
Ben Kwong Man-bun, the chief operating officer at broker KGI Asia, said HK Electric's weak debut was "not surprising at all, given that investor apathy has grown towards interest-paying instruments amid expectations of an interest rate rise".
"Shares in real estate investment trusts, which are also sensitive to changes in interest rates, have dropped since last year," he said.
HK Electric chairman Canning Fok Kin-ning, who is also the managing director of Hutchison, said at the listing ceremony he was confident about the company's long-term prospects.
"I think HK Electric Investments is a good stock with a return of more than 7 per cent," he said.
In sharp contrast to a slew of stellar debuts by small-cap companies, HK Electric's poor first day of trading further cemented investor scepticism over sizeable offerings in the city because of a lack of growth momentum.
HK Electric supplies power to Hong Kong and Lamma islands and investors, who are expecting interest rates to rise as the US Federal Reserve tapers its bond-buying programme, have expressed concern that the regulated returns of Hong Kong utilities could fall further towards the end of the decade.
State Grid, the mainland's largest power distributor, invested HK$10 billion for an 18 per cent stake in the company, while Oman Investment Fund bought a stake for HK$387.5 million, leaving Power Assets holding a 49.9 per cent interest.
A number of Li's other deals, including Singapore-listed Hutchison Ports Holdings Trust and Hong Kong-listed Champion Reit, also performed poorly after listing.