Investors give their collective cold shoulder to Hong Kong stock sale by Club Med’s owner Fosun Tourism amid market rout

  • Hong Kong retail tranche of the IPO was only 30 per cent bought
  • Timing of the IPO proves tricky amid a surge of new listings in Hong Kong
PUBLISHED : Thursday, 13 December, 2018, 1:35pm
UPDATED : Thursday, 13 December, 2018, 3:22pm

Fosun Tourism Group, which owns the Club Med resort chain, failed to sell more than half of the shares allocated for retail investors in its initial public offering, in yet another sign of weakening demand for new listings in Hong Kong.

The company received applications for 6.47 million shares, a mere 30 per cent of the 21.4 million shares kept aside for Hong Kong investors, or a tenth of all shares it issued, according to a statement released on Thursday.

The world’s largest tourism group by revenue priced the IPO at HK$15.6 per share, the bottom end of an indicative range of HK$15.6 to HK$20, raising HK$3.3 billion (US$462 million), according to the statement.

Club Med owner scales back Hong Kong IPO plan by nearly half amid downbeat mood

The unsold shares were allocated to the international offering that targets global institutional investors, which was “moderately oversubscribed”.

The Hong Kong retail tranche of an IPO has been long seen as a key indicator of the market’s appetite for investment and risks.

The timing of Fosun Tourism’s IPO, however, was a bit unfortunate. Although the city’s bourse has been swamped by a surge of new listings this year, including several big ones, the market has slumped as a result of worries over the US-China trade war and China’s slowing economy.

Hong Kong is on track to become the top IPO market in the world for 2018, after the bourse operator in April introduced reforms to listing rules to allow new economy start-ups and biotech companies to raise funds with greater ease.

Companies have raised HK$256 billion (US$33 billion) in the first 10 months of this year, a 187 per cent jump from the HK$89 billion in the same period last year.

Meanwhile, the benchmark Hang Seng Index has lost 13 per cent so far this year.

Many newly listed firms are now trading at below their offer prices. The much-watched Chinese smartphone maker Xiaomi, for example, was trading at HK$13.72 on Thursday morning, well below the offer price of HK$17 in its June IPO.