SYDNEY, Sept 17 (Askume) – Shares in Midea Group rose as much as 9.5% in its Hong Kong debut after the Chinese home appliance maker raised nearly $4 billion in the city’s biggest share sale in nearly four years, boosted by hopes for a recovery of large enterprises.
The stock closed 7.8% higher at HK$59.10 on Tuesday, while Hong Kong’s main market index (.HSI) rose 1.4%.
Midea Group (000333.SZ), which is also listed in Shenzhen, priced its Hong Kong-listed shares at HK$54.80 per share last week, the upper end of an indicative range for strong investor demand. Markets in mainland China were closed on Tuesday for the Mid-Autumn Festival holiday.
Midea’s public offering is the biggest in Asia this year and the second-largest in the world, after Lineage Inc (LINE.O)’s IPO in New York in July that raised $5.1 billion, according to London Stock Exchange data.
In recent years, U.S.-China trade tensions and higher global interest rates have dampened foreign investors’ appetite for equity capital market deals in Hong Kong and China.
China’s economic slowdown and the real estate sector’s debt crisis are also making issuers and investors cautious about equity offerings and company valuations. Since 2021, Beijing has also stepped up scrutiny of foreign financing by domestic companies।
However, bankers expect Midea’s positive debut to increase the number of potential IPO candidates.
Sumeet Singh, director at Aequitas Research, said: “We believe Midea’s strong performance could lead to more companies seeking to list in the mainland and overall IPOs in Hong Kong.”
Hong Kong Stock Exchange chief executive Bonnie Chan said Midea’s listing underscored the China Securities Regulatory Commission’s commitment earlier this year to support the Hong Kong market and facilitate the listing of more major mainland companies.
“I believe today’s listing is a good prelude to bigger deals to come,” Chen said in a LinkedIn post.
I hope there will be more properties
Midea’s share price once reached HK$60 per share, up 9.5% from the issue price, with a total of 65.1 million shares worth HK$3.84 billion. Exchange data shows the stock was the second most actively traded stock in Hong Kong on Tuesday in terms of trading volume.
The company sold 565.9 million shares in the transaction, which was ultimately priced at a roughly 20% discount to the Shenzhen-listed share price. Mainland Chinese stocks typically trade at higher prices than Hong Kong-listed shares.
Midea’s regulatory filings showed the company’s institutional tranche was oversubscribed eight times, while the Hong Kong retail issuance tranche was oversubscribed 5.31 times.
The oversubscription rate, although higher than recent Hong Kong transactions, is still well below the boom years of Hong Kong’s capital markets in 2021, when transaction volumes were hundreds or even thousands of times higher.
Midea received strong demand from investors during the price testing process and increased its offering volume.
Devi Subhakesan, an analyst at research firm Investree who writes on investment research platform Smartkarma, said that given the strong response, “investment bankers will work hard to get more high-quality companies to list in Hong Kong.”
The latest deals bring IPO and listing volumes in Hong Kong, one of the world’s leading listing locations, to $6.5 billion so far in 2024, up from $2.7 billion in the same period last year, according to Dealogic.
Data shows that when the Hong Kong market hit a record high in 2021, the transaction volume during the same period reached US$35.7 billion.
Midea’s debut adds to strong momentum in Asia this month – shares of India’s Bajaj Housing Finance (BAJO.NS) more than doubled in their debut on Monday, making it the fourth-biggest listed company in India’s red-hot IPO market this year.
