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Home appliance maker Midea is set to raise about $4bn in a secondary listing in Hong Kong, but the market’s biggest debut in more than three years does not yet signal a broader revival in public offerings, according to analysts.
The amount raised by the manufacturer of fridges and air conditioning units will provide a much-needed boost to some dire numbers, with Hong Kong and Chinese mainland markets mired in one of their worst years for listings in the past decade.
The company, headquartered in the southern province of Guangdong and already listed over the border in Shenzhen, closed its book in Hong Kong a day early on Thursday. Its share offering had been multiple times oversubscribed, according to people familiar with the listing. Shares were priced at the top of the range, at HK$54.80, and the number being offered was increased ahead of its market debut on Tuesday.
Industry insiders said that one successful listing by a mainland Chinese company with a strong international brand would not be sufficient to shift the narrative on the Hong Kong market.
“I wouldn’t take it as a broad commentary on a new IPO cycle,” said Zhikai Chen, head of Asia Equities at BNP Paribas Asset Management. “This is very specific to a market champion in the white goods space.”
Midea, which bought German robotics maker Kuka in 2017, has around 40 per cent of its sales outside China.
The Midea float is the territory’s largest since short-form video app Kuaishou’s in January 2021. Its Shenzhen shares traded at a roughly 21 per cent premium to the Hong Kong listing price at Friday’s close and they were the seventh most traded security through Hong Kong’s Stock Connect link to mainland exchanges in August, according to HKEX data.
One person familiar with the process cautioned that an “A to H” listing, in which a mainland China-listed company launched a secondary listing in Hong Kong, did not necessarily herald a reopening of the IPO pipeline, although it was a positive step. HKEX said at the end of June that it had 107 active IPO applications.
“It’s unknown whether Hong Kong could absorb that much paper,” the person added, referring to market liquidity. “It also shows that global investors are not out of China.”
Tim Wang, partner and chair of law firm Clifford Chance’s China practice, said they were seeing “strong interest in companies from mainland China to list in Hong Kong”.
Cornerstone investors in the Hong Kong listing, who have to hold the shares for at least six months, include carmaker BYD, UBS Asset Management and Cosco Shipping. They had committed about $1.6bn to the offering, according to a term sheet seen by the Financial Times.
Hong Kong’s equity market fell behind India’s equity market in terms of total share value for the first time earlier this year. It has slipped to eighth worldwide in terms of the value of listings in 2024, behind even Madrid and Amsterdam, according to data from Dealogic. Also, the value of companies delisting from the Hong Kong stock exchange is at its highest since 2020.
In mainland China, the picture is even bleaker. The amount raised in A-share IPOs in mainland China so far in 2024 is down 86 per cent year on year and is the lowest of any year on record, according to Dealogic, apart from in 2013, when regulators halted all issuance to overhaul rules. Domestic M&A, at $129bn, is at its lowest year-to-date level since 2013.
Syngenta, the Swiss agrochemicals group, earlier this year withdrew long-standing plans to issue in Shanghai. China’s securities regulator has also stepped up its scrutiny of new listings.
The collapse in market activity is part of a wider slump in mainland China’s economic and business sentiment. Beijing has renewed its focus on industry and sought to reduce its reliance on a struggling real estate sector.
Additional reporting by Chan Ho-him in Hong Kong and Thomas Hale in Shanghai