By Scott Murdoch and Donny Kwok
Chinese home appliances maker Midea Group made a stunning debut on the Hong Kong trading floor, surging by up to 9.5% after a successful $4 billion share offering. This marks the largest share offering in the city in almost four years, igniting optimism for the resurgence of large Chinese issuances.
Midea, already listed in Shenzhen, priced its shares at HK$54.80 each for its Hong Kong float. The stock soared to HK$60 per share, 9.5% above the offer price, with a total of 34.6 million shares valued at HK$2.04 billion changing hands. Midea quickly became the most traded stock by turnover in Hong Kong on Tuesday, according to exchange data.
In a bid to revitalize Hong Kong's capital markets, Midea sold 565.9 million shares in the offering, with bankers banking on a revival after a prolonged slump in share sales. The final price was set at a 20% discount to Midea's Shenzhen-listed share price, as mainland Chinese shares generally trade at a premium compared to Hong Kong-listed stocks.
Midea saw high demand from investors during the bookbuilding process, prompting an increase in the number of shares available for sale. The institutional tranche was oversubscribed by 8 times, while the Hong Kong retail offering portion was covered 5.31 times, as per Midea's regulatory filings.
Despite the oversubscription rates being higher than recent Hong Kong deals, they still fall short of the market boom experienced in 2021 when transactions were oversubscribed by hundreds of times. Trade tensions between the U.S. and China, coupled with global high interest rates, have dampened foreign investors' appetite for Chinese equity capital market deals.
Midea's successful deal brings the total worth of IPOs and listings in Hong Kong to $6.5 billion in 2024 so far, compared to $2.7 billion at the same point last year. In contrast, at this time in 2021, when Hong Kong's markets were peaking, the total stood at $35.7 billion, according to Dealogic data.
Analysis:
The strong debut of Midea Group in Hong Kong signals a potential revival in Chinese issuances, which could have significant implications for investors and the broader financial markets. The oversubscription of the offering indicates strong demand for Chinese stocks, despite prevailing trade tensions and high global interest rates. This trend could lead to increased investor confidence in Chinese companies and boost capital market activity in Hong Kong. As an investor, it is crucial to monitor developments in Chinese issuances and assess their impact on investment opportunities and portfolio diversification.