Hong Kong trumps Singapore in yuan hub race with Hopewell IPO
City chosen for second yuan-denominated IPO, as island state loses deal
Hong Kong 2, Singapore 0.
That was the score yesterday, as Hong Kong widened its lead over Singapore in the race to be the leading offshore yuan hub.
Toll road operator Hopewell Highway Infrastructure began its yuan-denominated initial public offering here - the second in the city - while a real estate investment trust backed by Li Ka-shing paused its planned yuan IPO in the island state.
Dynasty REIT cited poor market conditions for its decision to put the offering on ice. The deal, sponsored by real-estate fund manager ARA Asset, was to raise up to US$1 billion. Had it gone through it would have been the second off-shore yuan offering outside the mainland and the first such IPO in Singapore.
The first yuan IPO offering outside the mainland, by Li's Hui Xian REIT last year in Hong Kong, raised 10.5 billion yuan (HK$13 billion).
Hong-Kong-based Hopewell, controlled by local property mogul Gordon Wu Ying-sheung, may raise up to US$63.2 million in this second yuan issue.
"The Hopewell offering has drawn the attention of a number of big names, from conservative long-only institutions to short-term hedge funds, who are asking for a sizeable position in the deal, as it offers attractive yields at a time when the market sentiment is decidedly weak," said a source who is familiar with the transaction but did not wish to be named.
Hopewell is expected to offer an annual yield of 6 per cent next year, a substantial return in a low-interest environment.
Hopewell shares were suspended from trading yesterday pending the release of pricesensitive information. Bankers familiar with the deal said they were in talks with the firm to issue up to 120 million shares for the retail market, substantially higher than the originally planned 70 million, as the institutional placement has been oversubscribed by more than 10 times.
If the company does decide to issue 120 million shares it could raise up to US$63.2 million, or 70 per cent more, than what was originally planned.
The deal would make Hopewell the first company to list shares in both Hong Kong dollars and yuan, as Hui Xian is listed as a trust.
The two shares would be traded at separate counters but the renminbi shares would be fully convertible to Hong Kong dollar-denominated shares, according to a term sheet obtained by the South China Morning Post.
Hopewell is set to offer the new shares at an indicative price range of 3.15 yuan to 3.29 yuan per share, which translates into a discount of 4.9 to 9 per cent to the closing price on October 22.
The issue of the first yuan equity marks a watershed in Hong Kong's efforts to emerge as an offshore yuan hub and caps the local exchange's ambitious drive to launch dual-currency trading.
It is also expected to widen Hong Kong's offer of yuan products to foreign investors.
Asset management firm Harvest Global Investments this month launched the first dual-currency exchange-traded fund on the Hong Kong Stock Exchange.
Though Singapore has been trying to emerge as an alternative, Hong Kong continues to be the world's largest offshore yuan centre, processing 80 per cent of yuan payments last month.