Hong Kong IPOs Fall in Gray Market Before Debuting

Chow Tai Fook Jewellery Group Ltd. and New China Life Insurance Co. dropped in gray-market trading ahead of their debuts in Hong Kong as concern over slowing growth in China sapped stocks for a fifth straight day.

Chow Tai Fook, the Hong Kong-based jeweler with about 1,400 outlets in the country, declined 5.2 percent to HK$14.22 at the 6 p.m. close of the gray market yesterday, according to trading shown on the website of Phillip Securities Group, a Hong Kong- based brokerage. New China Life, the nation’s third-biggest life insurer, fell 5.3 percent to HK$27.

Recent Hong Kong IPOs have struggled to lure investors as economic turmoil globally curbs demand for Chinese exports and diminishes appetite for new stocks. The city’s benchmark Hang Seng Index has sunk 4.6 percent since Dec. 7, the day before New China Life priced its IPO.

“Markets fell quite a bit after the IPOs were priced so there’s some catch up to do,” said Edward Chan, who oversees about $1 billion at Royal London Asset Management. “The sentiment is quite poor at the moment. Companies planning future IPOs may not want to sell at such cheap valuations unless they are desperate.” Chan didn’t participate in the two IPOs.

Chow Tai Fook raised $2 billion selling shares at the low end of its price range on Dec. 9, while New China Life’s offer price was slightly higher than the bottom of its range.

City’s Performance

Hong Kong IPOs have raised $5.6 billion in the fourth quarter, an 81 percent slump from the amount raised in the year- ago period, according to data compiled by Bloomberg. It’s the smallest volume since 2008 after the collapse of Lehman Brothers Holdings Inc., the data show.

At least 12 IPOs were pulled or delayed in the Chinese city this year, compared with seven in the same period in 2010, according to the data. Haitong Securities Co. (600837), China’s third- biggest brokerage by market value, canceled plans to raise as much as $1.7 billion from a share sale on Dec. 12.

Guodian Technology & Environment Group Corp., a Chinese maker of wind power equipment, may cut the size of its Hong Kong IPO in half to about $300 million because of a lack of demand, two people with knowledge of the matter said yesterday.

To contact the reporters on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net; Zijing Wu in London at zwu17@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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