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Capital Markets

Asian equities: Is the IPO train running out of steam?

As bankers work feverishly to complete mandated China and Hong Kong IPOs before the final window shuts ahead of the Christmas break, there are hints of investor indigestion.

With the Hong Kong market flagging in the current quarter, a lacklustre initial trading performance from the world’s largest IPO this year, the $8 billion issue from China Construction Bank, did not help sentiment. The stock closed flat on the first day of dealings after strenuous efforts by underwriters to keep the price above the offering price.

Concerns

Several recent IPO debutants have also experienced bumpy starts to trading on the listing venue of choice for China companies, including Kasen International Holdings, China Yurun Food Group and Guangdong Nan Yue Logistics. Mainland listing candidates Shenzhou International Group and China Infrastructure Machinery Holdings have just relaunched IPOs in Hong Kong after being forced to pull the initial issues because of valuation concerns.

All of this paints a rather gloomy backdrop for the latest big issues in the Hong Kong market. China’s third-largest automobile manufacturer, Dongfeng Motor Corp, is in the throes of marketing its IPO with an unusually wide indicative valuation range to raise between $450 million and $650 million, a sure sign of nervous underwriters.

Meanwhile, the ill-fated Link real estate investment trust is hoping that its deal will get away second time around.

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