Hong Kong IPOs head for worst year as megadeals delay

Bloomberg

Hong Kong’s market for initial public offerings is heading for its worst year since 2012 as a combined $20 billion of megadeals are being pushed to next year.
State-owned China Tower Corp. was slated to be one of this year’s biggest deals, with a fundraising goal of as much as $10 billion, according to people with knowledge of the matter. The wireless infrastructure owner, which was initially pushing to list at the end of this year, is now targeting the first quarter of 2018, the people said, asking not to be identified because the information is private.
An executive at one of China Tower’s main shareholders expressed confidence as recently as August that the deal was on target for this year. Preparations including asset valuation and regulatory approvals have been going more slowly than initially expected, according to one of the people. The need to get signoffs from the three phone carriers that jointly own China Tower also means that decision-making takes more time, the person said.
Waiting until next year could mean the companies risk missing out on the optimism driving a rally in Hong Kong’s benchmark index, which hit a decade high this month. The China Tower delays follow similar hiccups at fellow state-owned enterprise China Petroleum & Chemical Corp., which is working to spin off its retail business through a $10 billion IPO in the city.
“It’ll be very difficult for the Hong Kong IPO market to return to its heyday,” said Steven Leung, executive director at UOB Kay Hian (Hong Kong) Ltd. “The big Chinese companies that are viable for listing are already listed.”
Representatives for China Tower and China Unicom (Hong Kong) Ltd., one of its three main shareholders, declined to comment. Representatives for the company’s two other backers China Mobile Ltd. and China Telecom Corp. didn’t immediately respond to requests for comment.
Sinopec, as the oil refiner is known, revived plans late last year for a long-mooted listing of the retail unit, people with knowledge of the matter said at the time. It asked banks to pitch for a role on the Hong Kong offering, which was scheduled to take place this year. It is now considering a dual listing in Hong Kong and Shanghai and aims to complete the offering in 2018, people with knowledge of the matter said in March.
A representative for Sinopec declined to comment.
Hong Kong has hosted $11.1 billion of first-time share sales so far this year, down from $19.5 billion during the same period in 2016, according to data compiled by Bloomberg. This will be worst year for new offerings in the city since 2012, unless $11 billion more deals are completed over the next two and a half months, the data show.
While financial firms like banks and brokerages are still dominating this year’s fundraising, the proportion of the biggest deals coming from other industries like health and education is rising. Half of the top 10 first-time share sales in Hong Kong this year hailed from outside the traditional finance industry, compared with just one in 2016, data compiled by Bloomberg show.
Among major listings in the city this year, contract drug manufacturer Wuxi Biologics Cayman Inc. was one of the best performers, rising 93 percent since it began trading in June.
“The Hong Kong market has been transforming,” Edward Au, co-leader of Deloitte China’s national public offering group, said Monday by phone. “Hopefully it will attract both mega-size deals in traditional industries as well as new economy offerings.”