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ESR Cayman chairman and non-executive director Jeffrey Perlman spoke at a press conference on June 5, 2019. Photo: K.Y. Cheng

Logistics developer ESR Cayman scrubs Hong Kong IPO amid ‘market uncertainties’, delaying likely biggest listing this year in Asia

  • Plans for what may have been the biggest share listing in Asia so far this year were pulled after protests
  • Analysts point to low market liquidity as a factor

Logistics real estate developer ESR Cayman said Thursday it would postpone its listing on the Hong Kong stock exchange, ­becoming the latest company to scale back plans amid escalating tensions related to the city’s ­controversial extradition bill and to the trade war between the US and China.

“In light of the current market conditions, the company, having consulted the joint global coordinators, has decided that the global offering will not proceed at this time,” the largest logistics real ­estate operator in Asia-Pacific said in a statement.

The IPO would have overtaken Ningxia Baofeng Energy Group as the largest in Asia so far this year, if it fulfilled its plan to raise as much as US$1.24 billion, according to data provider Refinitiv.

Li Kwok-suen, fund manager of Phillip Capital, said the delay makes sense in light of market conditions.

“The market sentiment is not good recently, particularly after the protest against the extradition bill,” Li said. “Liquidity is low in the market. Investors now are very cautious and it may affect the fundraising target.”

The Hang Seng Index has plummeted 9.2 per cent since May 3, just before US President Donald Trump revealed plans to impose fresh tariffs against China this summer.

A source close to the company said the decision to postpone the offer reflected concern over the timing.

“We have to be responsible to existing shareholders and long-term investors,” the source said.

The decision comes a day after tens of thousands of protesters blocked access to Hong Kong’s legislature, in a conflict which turned violent in the late afternoon when riot police fired rubber bullets, tear gas and pepper spray as some in the crowd hurled objects at officers.

Listing delays were a common tactic when the market enters the doldrums, said Raymond Cheng, head of Hong Kong and China property research at CGS-CIMB Securities

“When the market is not very rational … they would rather delay to get a fairer valuation instead of listing no matter what,” Cheng said.

Trading debutant Tai Hing, a local catering group, saw its shares open 17.3 per cent below the offer price of HK$3 on Thursday. The share ended the session at HK$2.64, while the Hang Seng Index was little changed at 27,294.71, retreating 0.1 per cent from the prior session.

“The subscription of Tai Hing was completed two to three weeks ago. At that time, nobody knew the protests would become so serious,” Cheng said. “So some investors, after reassessing the situation, might find that the risk was bigger than expected. As a result, they may sell down [their holdings] first.”

Cheng said other listings may also be delayed.

“IPOs are all about the price. The issuer or the major shareholder have ideas about the valuation. They know how much the low-end price should be,” Cheng said. “If they think the market condition is not good, they may delay the listing.”

Upcoming listings include Budweiser Brewing Company APAC. The company is a unit of the world’s largest brewer AB InBev, and AM Group Holdings, a Singapore-based online marketing company.

China Evergrande postponed a listing planned for March 2008, amid a wave of global market contagion following the collapse of investment bank Lehman Brothers. The real estate company successfully listed on the Hong Kong stock exchange at the end of 2009.

Additional reporting by Pearl Liu

This article appeared in the South China Morning Post print edition as: Largest city listing this year shelved as tensions grow