I.P.O. candidates get cold feet

Small- and mid-cap mainland firms are having second thoughts about listing in Hong Kong or pruning offering sizes, as negative reports undermine sentiment in an already softening market.

Sportswear maker Hosa International plans to shelve its listing plan because of the weak stock market, a person with knowledge of the situation said. It had planned to raise HK$1.15 billion to HKS1.64 billion at HK$2.88-HK$4.10 per share, and had intended to start trading next week.

Another mainland clothing firm, China Outfitters Holdings, is also likely to shelve its flotation plan, the person said. UBS, one of China Outfitters' sponsors, declined to comment. It also would not discuss another offering it is sponsoring, that of Beijing Jingneng Clean Energy.

China Fiber Optic Network System Group may reduce the size of its global offering, another person familiar with the matter said. Pricing would be delayed until the week of July 4, and the launch date is yet to be decided. The person said the firm is watching equity and debt markets.

VC CEF Brokerage director Louis Tse Ming-kwong said Hong Kong's share market had been swamped by initial public offerings in recent months that had soaked up liquidity.

Poor trading performances by new stocks, especially mainland firms, is making investors nervous. They are also wary of 'muddy waters', he said, in an apparent reference to Hong Kong-based research firm and short seller Muddy Waters, which recently accused mainland forestry company Sino-Forest of fraudulent accounting. Sino-Forest said the allegations were inaccurate and defamatory, but its shares have lost more than 80 per cent of their value, wiping out about US$4 billion since the beginning of June.