Southeast Asian IPOs Lose Their Shine in Hong Kong

Zhen Hao Toh

22 Jan 2020, 04:08 PM IST

(Bloomberg) --

Southeast Asian companies seeking to list in Hong Kong may be better off staying at home as investors in the financial hub continue to avoid small-cap stocks.

Initial public offerings from Southeast Asian companies in Hong Kong are generally tiny. The average deal size of such IPOs last year stood at just $15.3 million, according to data compiled by Bloomberg. The largest deal was by Singaporean furniture retailer, Design Capital Ltd., which raised $19 million.

The subsequent trading losses, however, are anything but small. Design Capital is currently trading 61.7% below its debut price, while the 14 Southeast Asian companies that listed in Hong Kong in 2019 are trading 35.9% below their IPO prices on average, weighted by deal size, the data show.

Southeast Asian IPOs Lose Their Shine in Hong Kong

Investors deepened their preference for larger stocks after a series of short-seller attacks and flash crashes last year caused share prices to plunge. Kasen International Holdings Ltd. was targeted by a short seller in November which caused the Chinese furniture maker’s stock price to plummet over 90% in a single day. The MSCI Hong Kong Small-Cap Index has been underperforming its large-cap counterpart in the past few years.

The widening valuation gap between large caps and small caps is another indication that investors are losing interest in smaller stocks. The MSCI Hong Kong small-cap gauge is trading at 8.2 times forward earnings, compared with 14.6 times for the large-cap measure.

UPCOMING LISTINGS:

Central Retail Corp
- Thailand stock exchange
- Size up to $2.6b
- Books close Feb. 3, listing Feb. 20
- Bualuang Securities, Phatra Securities, Credit Suisse, Morgan Stanley, UBS
Shenzhen Leoking Environmental Group
- Hong Kong exchange
- Pre-marketing started Dec. 18
- CLSA sole sponsor
Mr D.I.Y Group
- Bursa Malaysia
- Size up to $500m
- Pricing date TBD
- CIMB, Maybank
Gongniu Group Co Ltd
- Shanghai exchange
- Size $519m
- Listing TBA
- Sinolink Securities
Suzhou Zelgen Biopharmaceutical Co Ltd
- Shanghai exchange
- Size $292m
- Listing TBA
- CICC, Soochow Securities
EIT Environmental Development Group Co Ltd
- Shanghai exchange
- Size $148m
- Listing TBA
- China Merchants Securities

More ECM situations we are following:

China Water Environment Group Ltd. is said to consider an IPO in Hong Kong that could raise as much as $500 million, according to people familiar with the matter.