Weak demand for Qingdao Port IPO sours market sentiment

The outlook for Hong Kong's once-hot initial public offering market is looking increasingly murky after the share sale by the mainland's Qingdao Port Group received a tepid response from investors.

Unlike most offerings in Hong Kong, the listing of Qingdao Port International, a state-owned port operator in Qingdao, Shandong province, led to a paltry demand for margin financing services provided by brokers to retail investors, a common way for small players to leverage their position to get more shares, especially in red-hot offerings that have a higher chance to pop on their first day of trading.

Battered by an economic slowdown on the mainland, 16 out of 21 newly listed firms, including Li Ka-shing's US$3.1 billion HK Electric Investments, were bleeding red ink, while the Hang Seng China Enterprises Index, which tracks listed mainland enterprises, has fallen 7 per cent so far this year, making it one of the worst performers in Asia after Japan.

"Concerns over [market] volatility were dampening sentiment across all asset classes," said Michael Huddart, Manulife's executive vice-president and general manager for the Greater China region.

Eugene Law, a director at Galaxy Securities International, said mom-and-pop investors shied away from investing in new offerings as they focused on buying safe blue-chip stocks at a time when the market was range-bound.

Huddart said the somewhat depressed sentiment in Hong Kong towards different asset classes, including equities, should prompt some investors to look for bargains in the market.