Weak market derails mainland auto firms' share sales in HK
Updated: 2014-10-25 08:35
By Celia Chen in Hong Kong(HK Edition)
Hong Kong's current political uncertainty, coupled with a weak investment climate, have forced two mainland auto firms to put off share sales to raise nearly HK$22 billion ($2.8 billion) in the city.
China Grand Automotive Services - the country's largest car dealership and backed by private equity firm TPG Capital - has decided to hold back its planned HK$8-billion initial public offering (IPO) and is considering getting the company floated on the mainland stock market instead as its valuation in the Hong Kong market is lower than expectations.
Beijing-based BAIC Motor Corporation Ltd has also postponed its planned share sale in Hong Kong to raise about HK$13.6 billion in the third quarter of this year amid poor investor appetite.
"It's understandable that BAIC Motor has put its Hong Kong IPO on hold as the city's investment environment is complicated at the moment," Francis Kwok Sze-chi, executive director of Bright Smart Securities, told China Daily. "BAIC Motor, I believe, would like to wait for a stronger investment climate to launch its mega IPO rather than take the risk of underfunding in a weak market," he said.
Alvin Wong, a funds manager at Prudential Brokerage, agreed that the weak investment market in Hong Kong is not conducive to launching IPOs. "Hong Kong's current investment environment is unfavorable for mega IPOs as the ongoing 'Occupy Central' campaign, I believe, is weakening the city's investment climate," Wong told China Daily.
"Besides, a company's valuation on the mainland stock market is always higher than that in Hong Kong, so it's not a bad choice for China Grand Auto to launch its IPO on the mainland as the funds to be raised by the company are large," Wong added. "But, if it would like to develop its international business, Hong Kong is still the first choice."
Some Hong Kong investors believe that even if the auto companies' IPOs were successfully launched in the SAR, investors' response would not be enthusiastic as there are less encouraging merits in their business.
"The appetite for auto stocks will not be as strong as before because the growth of auto companies tends to stay stable. So, we should not expect an overwhelming response to the mega IPOs of auto companies," Kwok said. "The two companies' decision to put off their Hong Kong IPOs is not due to the large size of the equity fund but the weak market," Wong added.
BAIC Motor recently signed cooperation agreement with MBtech Group GmbH&Co.KGaA, a European leading engineering and consulting company offering professional technical services. The two sides will cooperate in conducting research and in the development of BAIC Motor's proprietary brands of manufacturing, and providing passenger vehicles.
Workers assemble electric cars at a factory in Zouping, Shandong province. Two mainland auto companies have put off their planned share sales in the SAR as investors lack enthusiasm in the auto business. AFP
(HK Edition 10/25/2014 page6)