Falling stock prices, weak trend fail to temper HK listing plans

Despite disappointing market performance and lukewarm investor appetite casting a shadow over the new economy IPO frenzy, a flurry of mainland companies have lost no time in filing their IPO applications in Hong Kong, in their quest to cash in on the city's listing regime reform and raise funds before a potential reversal from peak valuations.

Despite muted demand from retail investors and a sustained stock market downturn, Chinese mainland smartphone maker Xiaomi remains on track to debut in Hong Kong next Monday.

Other deals in the pipeline include those from Tencent-backed online food review and delivery company Meituan-Dianping, online travel agent Tongcheng-eLong, livestreaming app Ingkee, and steel and iron e-commerce Zhaogang.

WuXi AppTec, the Shanghai-based biotechnology firm, also announced plans to sell shares in Hong Kong, just two months after it went public in Shanghai.

"Many of the pending deals basically track the listing regime reform in Hong Kong that paves the way for companies with the dual-class share structure and early-stage biotech firms to raise funds," said Edward Au, co-leader of the national public offering group of Deloitte China.

Hong Kong remains in the sweet spot to harness Chinese mainland floats. Over the first half of the year, nearly three in five newly minted stocks have come from Hong Kong-based companies. However, Chinese mainland firms still contributed to more than 80 percent of funds raised, according to the latest report from Deloitte.

This trend will pick up steam in the second half of 2018, said Deloitte, which projects at least five HK$10 billion ($1.27 billion) IPOs from the new economy sectors and roughly 10 unicorns－startups valued at $1 billion or more－will list in Hong Kong in the coming six months.

"Moreover, many companies are catching the last bus to raise funds, as the good old days when investors just closed their eyes and bought into the new economy deal are essentially gone," said Fielding Chen Shiyuan, a Hong Kong-based Asia economist at Bloomberg Intelligence.

Amid mounting concerns about hefty pricing and valuations that prove hard to sustain, the new economy frenzy has fizzled out. Among the 19 Chinese mainland companies that raised a combined total of HK$36.1 billion in Hong Kong this year, nine firms traded below their offering prices on the first day of trading. As of Thursday, only five companies managed to stay above their offering prices.

As escalating Sino-US trade tensions weigh on global equity markets, newly listed companies are in for a bumpy ride in Hong Kong, Chen said.

"Looking ahead, boom or bust, it is the company's fundamentals that have a big say in the valuation and market performance of the newly minted stocks," Au said.

The flagship benchmark Hang Seng Index was down 0.21 percent, or 59.58 points, to close at 28182.09 points on Thursday.