Hong Kong’s mom-and-pop merchants squeeze funds as IPOs sizzle

 

HONG KONG As Hong Kong’s stock market prepares for billions of {{dollars}} in product sales of newest shares, worldwide fund managers have a large downside – competing with city’s army of mom-and-pop merchants for a slice of the pie.

Record participation by retail merchants in a modern Hong Kong preliminary public offering and sky-high demand in one other IPOs has pressured massive merchants to hold onto newly listed shares.

 

Under IPO pointers in Hong Kong – which competes fiercely with New York and London to attract worldwide listings – a deluge of orders from retail merchants reduces the portion that fund managers can purchase.

This newest rivals from specific individual merchants has pressured a rising number of funds to become “cornerstone” merchants: they get priority sooner than a deal launches nevertheless most keep the shares for at least six months.

Chinese biotech agency Ocumension Therapeutics set a doc this month for an IPO over HK$500 million ($65 million) when the retail portion was virtually 1,900 situations oversubscribed, in line with stock alternate info.

Retail merchants had been initially to be allotted 10% of the $184 million offering, nevertheless Hong Kong’s “clawback” rule, which kicks in when the retail portion of an IPO is carefully oversubscribed, bumped that as a lot as 50%.

 

“Strong retail demand is the key reason we see more and more institutional investors willing to consider becoming a cornerstone investor,” talked about Morgan Stanley managing director Cathy Zhang, who labored on the Ocumension deal.

Ocumension shares popped to $HK37 in early shopping for and promoting from an preliminary $HK14.66. It closed on Friday at $HK29.45.

Hong Kong has among the many many highest retail shopping for and promoting ranges on the planet, and an OECD analysis remaining yr estimated that exact individual merchants owned 30% of the market – far above 11% inside the United States and 16% in Britain.

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Bankers say whereas Asian IPOs have seen sturdy retail curiosity, the levels do not eclipse Hong Kong – in Seoul, SK Biopharmaceuticals’ $791 million share sale in June seen 323 situations retail oversubscription payment, in line with native media.

 

In Europe, bankers seen an uptick specifically individual curiosity in IPOs not too way back, nevertheless most of the retail train has been in secondary shopping for and promoting and via exchange-traded funds and index trackers.

Hong Kong’s extreme retail demand risks over-valuing firms, resembling biotech startups, after they arrive to market, bankers say.

“It is a consensus among institutional investors that valuation for the majority of the biotech companies listing in Hong Kong are stretched,” in line with Aequitas Research co-founder Ke Yan, who publishes on the SmartKarma platform.

Strong newest itemizing performances by biotech corporations may be serving to to lure Hong Kong retail shareholders.

 

Ocumension rose 154% on its first day and Peijia Medical, which was 1,184 situations oversubscribed, gained 68% on its market debut, Refinitiv info current.

Hong Kong Institute of Investors chairman Ricky Tam talked about city’s retail merchants are being enticed by jumps in stock prices on the first day of shopping for and promoting.

“A lot of investors don’t know the details of the companies, they only want to know if an IPO is going to perform well or not,” he talked about.

Massive retail demand for Hong Kong IPOs has been pushed by “very, very low” charges of curiosity and can proceed, talked about brokerage UOB Kay Hian authorities director Steven Leung.