Harbin Bank, a Chinese commercial lender, raised $1.1 billion through its initial public offering in Hong Kong, but priced at the bottom of its expected range in a further blow to a market smarting from losing the impending IPO of Alibaba to New York.
Demand for new issues looked to be on the up in Hong Kong after a difficult couple of years, but the muted response to Harbin will be cause for concern.
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Harbin priced its IPO at HK$2.90 a share, after offering 3.02 billion shares within an indicative range of HK$2.89 to HK$3.33.
Harbin is one of China’s largest lenders to small and medium-sized businesses. The bank secured $513 million-worth of cornerstone investments, following the recent trend in Hong Kong, to make sure a deal gains traction, regardless of wider investor sentiment in choppy equity markets.
The largest cornerstone was Fubon Life, with $289 million, followed by Citic Capital, with $150 million. Five Chinese groups – China Future Financial, Chongqing Tiantai, Boom Win, Introwell and Wah Tao International – backed the deal with $73.8 million each.
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First this year
Although the investor response to the deal was subdued, it is the first finance-sector IPO on the Hong Kong Exchange so far this year and the second-largest flotation overall behind the $3.1 billion listing of HK Electric in January. It is also the world’s second-largest finance sector IPO so far this year, following Santander Consumer USA Holdings’ $2 billion offering in January, according to Dealogic.
Global IPO volume of $43.1 billion so far this year is at the highest year-to-date level in three years and up 86% year on year. Asia Pacific accounts for 41% of IPO volume so far this year, up from 24% in the same period last year. EMEA follows with 37% and the Americas accounts for 23%.
The first day pop on IPOs, an increasingly important measure of success, also provides some better news for companies considering an IPO. The average one-day return for Asia Pacific IPOs is 32% so far this year, the highest average since 2000 and up from 15% in the same period last year. This compares with the average one-day return for global IPOs of 28% this year, up from 20% for the same period last year.
Goldman Sachs leads the Asia Pacific IPO bookrunner ranking, with 15.1% market share in 2014 year to date, followed by HSBC and Citic Securities, with 9.5% and 7.5%, respectively.
Meanwhile, WH Group, the Sino-US pork group, has set a new record for the number of banks employed on a new listing, with 28 working on its $6 billion offering. The deal will be the largest Hong Kong IPO since AIA’s $20 billion listing in 2010, but the large number of underwriters means banks will have to share the spoils.
The group had initially appointed 17 bookrunners on the deal and has added a further 11 more recently.
The banks with the most meaningful and lucrative roles are expected to be Morgan Stanley and Bank of China International along with UBS and Goldman Sachs. The number of banks involved in the deal surpasses the previous record of 21 banks that worked on the $1.1 billion IPO of China Galaxy Securities last year.
The deal is even more important for Hong Kong after Alibaba confirmed that it would conduct its listing in New York.
This comes after the tech company and the Hong Kong Exchange failed to agree on a listing structure that suited both after protracted discussions. Alibaba wanted to retain control over board appointments after it went public in Hong Kong, saying it needed this to retain the culture of the firm.
The Hong Kong Exchange said this was unacceptable and that it would not make an exception for Alibaba. For its part, Alibaba, in a statement that it would list in the US, said simply that a US listing would "make us a more global company and enhance the company’s transparency".
Fear
Sources close to the deal said Alibaba was forced to draw a line under its efforts to list in Hong Kong after a series of Chinese tech companies forged ahead with their own listings in the US. The company is said to have worried that investors would grow weary of the sector and demand for its own offering would wane.
Weibo, a Twitter-like service, has already filed to raise $500 million via an IPO in the US. Last year, Alibaba paid almost $600 million for an 18% stake in Weibo, valuing the company at more than $3 billion.