“No takers?” A trader wearing a red trading jacket on the trading floor of the Hong Kong Stock Exchange, operated by Hong Kong Exchanges & Clearing Ltd. (HKEX), in Hong Kong, China. (Photographer: Anthony Kwan/Bloomberg)

Red Hot Hong Kong IPO Market Is Cooling as Retail Buyers Flee

(Bloomberg) -- Retail investors’ enthusiasm for Hong Kong initial public offerings is suddenly waning.

Individual buyers placed orders for an average 28.7 times of the shares initially available to them in July, according to data compiled by Bloomberg excluding the city’s small-cap Growth Enterprise Market. That’s the lowest retail-book ratio since January 2016 and down from 1,191 times in April. Six out of 21 offerings this month failed to attract sufficient retail demand and relied on institutions to fill the gap, pushing the ratio of undersubscribed deals to the highest since November 2016.

Red Hot Hong Kong IPO Market Is Cooling as Retail Buyers Flee

A falling stock market and higher borrowing costs are suppressing mom-and-pop’s appetite for new listings. The benchmark Hang Seng Index has slumped 15 percent from a January high, bringing its year-to-date loss to 5.8 percent. A jump in Hong Kong’s interbank rates has forced some local brokerages to raise interest rates by more than 100 basis points on margin loans that investors take to apply for IPOs.

Qeeka Home (Cayman) Inc., an interior design platform backed by Baidu Inc. that began trading on July 12, had orders for only 14 percent of its initial retail portion, the lowest among deals this month. Chinese developer Redsun Properties Group Ltd., which also listed on July 12, received bids for just 18 percent of its initial retail stock, the second-lowest ratio.

Qeeka Home has lost 18 percent from its IPO price, while Redsun Properties has gained 26 percent.

©2018 Bloomberg L.P.