Hong Kong’s most-popular initial public offerings among retail investors since the start of 2010 have plunged an average of 54 percent from their offer price and trail returns of the city’s IPOs.
The CHART OF THE DAY shows the 54 percent slump by the 10 companies with the most orders from individuals relative to stock available, against an average 7 percent drop by the 10 most-undersubscribed IPOs and a 13 percent decline for all 186 companies completing Hong Kong IPOs. The data, showing returns through May 18, are compiled by Bloomberg and Computershare Hong Kong Investor Services Ltd. By contrast, the 435 IPOs in the U.S. generated a loss of 5 percent in the same period.
“Retail investors are easily driven by market sentiment and may crowd into over-priced deals if recent IPOs have been profitable,” said Pamela Chung, managing director of Computershare, a share registry that handled IPO applications accounting for 90 percent of Hong Kong’s deal flow in the last three years. “They may stay away from good deals if people recently got burned.”
Milan Station Holdings Ltd.’s May 2011 share sale drew the highest IPO subscription rate in Hong Kong’s history, five weeks after the benchmark Hang Seng Index rose to a two-month high. The retailer of used handbags lured orders from individuals worth about HK$59 billion ($7.6 billion), or 2,180 times the HK$27 million of shares available, the data show. Shares in the company, which issued a profit warning last month, plunged 54 percent since their debut through last week.
Citic Securities Co., the biggest Chinese brokerage, is the best performer among the 10 deals that drew the lightest demand from individuals. The company received orders covering just 9 percent of the HK$660 million of stock available to retail investors. The stock has rallied 13 percent since its Oct. 6 debut, which was two days after the Hang Seng fell to its lowest level in more than two years.
The 10 most-popular IPOs received orders for 342 times to 2,180 times the stock available on these transactions, while individual buyers ordered 2 percent to 23 percent of the shares available on the least popular offers. The average size of a Hong Kong IPO fell to $138 million this year, the smallest in nine years, Bloomberg data show. That compares with $301 million last year and $609 million in 2010.