Property worries undermine small-cap issues

Smaller share offerings affected by fears of real estate slump on the mainland while leading market player China Vanke finds solid support

PUBLISHED : Friday, 27 June, 2014, 1:04am
UPDATED : Friday, 27 June, 2014, 1:42am

Investor demand for newly listed stocks in Hong Kong is likely to remain tepid amid concern about slumping property prices and increasingly tight liquidity on the mainland.

Small initial public offerings that tapped the market this week have struggled, while big-cap stocks such as China Vanke were in strong demand.

Yida China Holdings, which develops business parks on the mainland, priced its shares near the bottom of its initial range at HK$2.45 to raise a net HK$1.36 billion.

China New City Commercial Development, a spin-off of Zhong An Real Estate, priced its 468 million shares at HK$1.30 each, far below its range between HK$2.12 and HK$2.92.

The company said it would postpone its listing date to July 10.

Shares of the mainland's biggest property developer, China Vanke, jumped as much as 10 per cent before closing at HK$14.18 on their debut yesterday.

Market participants are getting increasingly worried about the likelihood of a sharp fall in mainland property prices and the impact spreading to the wider economy, with property sales estimated to account for 12 per cent of the mainland's gross domestic product.

Meanwhile, weak sentiment in smaller listing candidates has also been partly attributed to Vanke's debut, after fund managers piled up their cash to buy its shares.

"We believe that funds will rotate from other large-cap developers to Vanke in the near term because it is a market leader in the sector and its corporate governance is better than most other [mainland] developers," said Edison Bian, the research head for China property at UOB Kay Hian.

Bian said he expected a further 10 to 20 per cent upside for Vanke.

Elsewhere, Chanjet Information Technology finished at HK$15.04, down 8.2 per cent from its issue price, while lingerie maker Cosmo Lady (China) Holdings closed at HK$3.55 from its listing price of HK$3.60.

The market saw its biggest gain in six weeks yesterday, recovering from the biggest slump in three months on Monday, as casinos rose. The Hang Seng Index closed 1.45 per cent higher.

A number of mainland firms is set to tap the market in the coming weeks. Drugmaker Luye Pharma Group is looking to raise US$764 million. Its shareholders include CDH Capital, Citic Private Equity and New Horizon Capital.

Tian Ge Interactive Holdings, whose live video content ranges from music to talk shows, is planning a US$208 million offering. The stock opened its institutional books earlier this week and has managed to lock in US$80 million from cornerstone investors, including Atlantis Investment Management.