SYDNEY, April 27 (Reuters) – Shares in Chinese liquor maker ZJLD Group (6979.HK) closed down 18% in its first day of trading on Thursday, dampening hopes of a positive debut for Hong Kong’s biggest new stock sale of 2023 trigger a rush of offers in the second half.
The KKR-backed company raised $675.2 million last week in Hong Kong’s biggest sale of new shares since CALB Group Co (3931.HK) raised $1.3 billion in October.
Dealmakers had hoped a strong performance by ZJLD on day one could give companies looking to list in Hong Kong confidence to push new deals and revitalize the city’s sluggish IPO market.
ZJLD shares opened at HK$9 compared to the issue price of HK$10.82 per share. The stock fell to a low of HK$8.82 in the afternoon before ending at HK$8.88, still 17.9% below the IPO price. This was offset by a 0.4% gain in the Hong Kong Hang Seng Index (.HSI).
The IPO price was at the lower end of the range of HK$10.78 to HK$12.98 per share that was given to investors at the start of the transaction.
ZJLD produces Baijiu, the clear distillate popular throughout China. The drink is considered China’s national liquor and is the world’s most consumed spirit, according to the ZJLD prospectus.
“The tepid listing is unlikely to lift Hong Kong’s ECM (Equity Capital Markets) sentiment and deals in the second half of the year would likely need to come in at a more digestible valuation to achieve a successful listing,” said Clarence Chu, an Aequitas Research -Analyst publishing on Smartkarma.
ZJLD’s three major baijiu peers, led by Kweichow Moutai (600519.SS), have seen shares fall 7.6% to 22% since late January.
“The drop in debut is an adjustment of relatively high prices and is consistent with the soft market,” said Linus Yip, chief strategist at First Shanghai Securities, referring to the softer premium baijiu sector and the broader Hong Kong market .
Only $508.3 million of new shares were sold in Hong Kong in the first quarter, compared to $1.2 billion in the same period last year, according to Refinitiv data.
Institutional investors subscribed for 3.9 times the ZJLD shares on offer in this tranche, according to company filings, which was higher than many other Hong Kong IPOs this year.
reporting by Scott Murdoch; Editing by Jacqueline Wong
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