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

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HONG KONG As Hong Kong’s inventory market prepares for billions of {dollars} in gross sales of recent shares, international fund managers have an enormous problem – competing with town’s military of mom-and-pop traders for a slice of the pie.

Record participation by retail traders in a current Hong Kong preliminary public providing and sky-high demand in another IPOs has compelled large traders to carry onto newly listed shares.

Under IPO guidelines in Hong Kong – which competes fiercely with New York and London to draw international listings – a deluge of orders from retail traders reduces the portion that fund managers should purchase.

This current competitors from particular person traders has compelled a rising variety of funds to turn out to be “cornerstone” traders: they get precedence earlier than a deal launches however most maintain the shares for not less than six months.

Chinese biotech firm Ocumension Therapeutics set a file this month for an IPO over HK$500 million ($65 million) when the retail portion was almost 1,900 instances oversubscribed, based on inventory change information.

Retail traders had been initially to be allotted 10% of the $184 million providing, however Hong Kong’s “clawback” rule, which kicks in when the retail portion of an IPO is closely oversubscribed, bumped that as much as 50%.

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

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

Hong Kong has among the many highest retail buying and selling ranges on the earth, and an OECD examine final yr estimated that particular person traders owned 30% of the market – far above 11% within the United States and 16% in Britain.

Bankers say whereas Asian IPOs have seen robust retail curiosity, the degrees don’t eclipse Hong Kong – in Seoul, SK Biopharmaceuticals’ $791 million share sale in June noticed 323 instances retail oversubscription price, based on native media.

In Europe, bankers noticed an uptick in particular person curiosity in IPOs lately, however a lot of the retail exercise has been in secondary buying and selling and thru exchange-traded funds and index trackers.

Hong Kong’s excessive retail demand dangers over-valuing firms, akin to biotech startups, once they come to market, bankers say.

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

Strong current itemizing performances by biotech companies can be serving to to lure Hong Kong retail shareholders.

Ocumension rose 154% on its first day and Peijia Medical, which was 1,184 instances oversubscribed, gained 68% on its market debut, Refinitiv information present.

Hong Kong Institute of Investors chairman Ricky Tam stated town’s retail traders are being enticed by jumps in inventory costs on the primary day of buying and selling.

“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 stated.

Massive retail demand for Hong Kong IPOs has been pushed by “very, very low” rates of interest and may proceed, stated brokerage UOB Kay Hian govt director Steven Leung.

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“Whenever there is a hot deal with a good story, lots of investors, retails, institutions, hedge funds rush to participate,” Leung stated.

Disclaimer: This submit has been auto-published from an company feed with none modifications to the textual content and has not been reviewed by an editor


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