By Scott Murdoch and Donny Cook
SYDNEY (Reuters) – Midea Group jumped 9.5 percent on its Hong Kong debut on Tuesday after the Chinese home appliance maker raised nearly $4 billion in the city’s biggest share offering in nearly four years, boosting hopes of a rebound in large Chinese issuances.
Midea, also listed on the Shenzhen Stock Exchange, priced its shares at HK$54.80 per share in its Hong Kong IPO. Mainland Chinese markets were closed on Tuesday for the Mid-Autumn Festival holiday.
According to data from the London Stock Exchange, Midea’s listing is the largest in Asia this year and the second largest globally after Lineage’s initial public offering in New York in July, which raised $5.1 billion.
According to Media’s regulatory filings, Media’s institutional tranche was oversubscribed about eight times, while the retail tranche in Hong Kong was oversubscribed about 5.31 times.
Oversubscription rates, while higher than recent deals in Hong Kong, remain well below the city’s capital markets boom in 2021 when deals were covered hundreds if not thousands of times.
“Given the way investors have received such a large deal (Media), it is expected that investment bankers will try to source more quality names for listing in Hong Kong,” said Devi Subhakisan, an analyst at research firm Investority who publishes on investment research platform Smartkarma.
Hopes for more listings
Trade tensions between the United States and China and high global interest rates have dampened foreign investors’ appetite for capital market deals in Hong Kong and China, bankers and consultants said.
However, bankers hope that Midea’s positive debut performance will increase the number of potential IPO candidates.
“In our view, Midea’s strong performance is likely to lead to more companies trying their luck in mainland listings to Hong Kong and IPOs as well,” said Sumit Singh, research director at Aequitas.
Midea shares rose to HK$60 a share, or 9.5% above the offer price, with 56.2 million shares worth HK$3.32 billion changing hands. Midea was the most heavily traded stock in Hong Kong by volume so far on Tuesday, stock exchange data showed.
The stock market index rose by 1.3%.
Midea sold 565.9 million shares in the deal and the final price set was about 20% below Midea’s listed share price on the Shenzhen Stock Exchange. Mainland Chinese stocks typically trade at a premium to those listed on the Hong Kong Stock Exchange.
Midea increased the number of shares offered for sale at the close of the deal after receiving strong demand from investors during the book-building process.
The Midea deal means there will be $6.5 billion worth of IPOs and listings in Hong Kong so far in 2024, according to Dealogic data, compared with $2.7 billion at the same time last year.
Meanwhile in 2021, when Hong Kong markets were at record highs, trading volume reached $35.7 billion, the data showed.