First the good news – the world’s biggest initial public offering in four years is coming to Hong Kong on August 8. But the listing will take place amid poor investment sentiment for new stocks due to volatile global markets.
The state-owned China Tower, China’s largest mobile infrastructure operator, aims to seek as much as HK$68.27 billion (US$7.85 billion). The world’s largest telecom tower is offering 43.1 billion shares at between HK$1.26 and HK$1.56 with pricing to be fixed on August 1.
China Tower has been billed as the largest IPO globally this year and also the largest since Alibaba Group raised US$25 billion in 2014. At the high-end, it should still come up short of Glencore, now delisted in Hong Kong earlier this year after it raised US$10 billion in 2011.
But it still surpasses Xiaomi Corp, which raised US$5.4 billion, or half its initial target, earlier this month. Despite a good post-market performance which saw the Chinese smartphone maker stay 15% above the offer price, the investment sentiment in IPO stocks remains weak amid volatile global stock markets.
The over-subscription ratio of Hong Kong’s newly listed stock was only 28.7 times, much lower than the 153.9 in June and 310 times in May, according to Bloomberg data. It was the lowest subscription level since November 2016.
That followed a disappointing debut of some hot IPOs including Ping An Good Doctor, which fell more than 10% since its debut in May. The IPO frenzy was triggered by Tencent Holdings’ spin-off China Literature, whose share price doubled to HK$110 on its first trading day last November.
The e-book operator in China has seen a 30% surge in its IPO, but all other Tencent spin-offs such as the car-trading Yixin and online insurance Zhongan Insurance were under water.
All eyes will be looking at how China Tower will fare against the poor investment sentiment. One selling point of this mega offering is its defensiveness, given its business is generated from its shareholders, China Mobile (28.5%), China Unicom (21.1%) and China Telecom (20.9%).
Despite China Tower announcing it would maintain a 50% dividend payout ratio, analysts pointed out that its yield ratio is only about 1%.