Storm Delays Trading Debut for Hong Kong’s Biggest IPO This Year

(Bloomberg) -- China Tourism Group Duty Free Corp., which raised HK$16.2 billion ($2.1 billion) in Hong Kong’s biggest listing this year, will have its debut delayed due to tropical storm Ma-on.

The shares were sold at HK$158 each, above the mid-point of a marketed range, and when the Hong Kong stock was priced last week, the discount to the firm’s equities trading in Shanghai was about 27.5%. Hong Kong Exchanges & Clearing Ltd. scrapped trading of stocks and derivatives during the morning session, with trading scheduled to start at 1 p.m.

Proceeds from the retailer’s offering boosted this year’s tally for new-share sales in Hong Kong to $7.2 billion, according to data compiled by Bloomberg. Still, that amount is about 80% lower than the same period last year, with large-size offerings becoming scarce globally as rising interest rates and high inflation keep big issuers on the sidelines.

The allocation of CTG Duty Free’s Hong Kong shares was skewed toward long-term investors and sovereign wealth funds, with the top 15 buyers taking about 70% of the listing, a person familiar with the matter said after the shares were priced. Nine cornerstone investors that committed to join the deal snapped up about $795 million in shares.

The shares changed hands below the offering price in gray-market trading in Hong Kong on Wednesday. Only 43% of the companies that listed in Hong Kong this year rose on their first day of trade, Bloomberg data show. That compares with a positive performance on day one for 55% of newcomers during the same period in 2021.

Hainan Outbreak

CTG Duty Free managed to sell the Hong Kong shares as the island of Hainan, a major tourist destination in China and the source of most of the company’s sales, saw one of the country’s worst Covid-19 outbreaks since Shanghai’s lockdown earlier this year.

The international portion of the offer was over-subscribed by 4.7 times, according to a filing this week. The tranche reserved for individual investors saw a number of bids that were almost equal to the amount of shares offered.

The company reported preliminary net income for the first half of 2022 of 3.94 billion yuan, almost 27% less than the same period last year. It derives about 70% of sales from Hainan and 18.5% from Shanghai, according to its latest annual report.

CTG Duty Free suspended a potential $5 billion Hong Kong listing last December, joining a slew of companies that chose not to proceed with deals amid a choppy market. The seller of tax-exempt goods such as tobacco, wine and perfumes to travelers considered reviving the listing plan to seek as much as $3 billion, Bloomberg News reported in June.

China International Capital Corp. and  UBS Group AG are joint sponsors of CTG Duty Free’s offering.

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