HONG KONG - Shares of Yum China Holdings closed 5.3% lower Thursday following its US$2.2 billion secondary offering.

No company selling at least US$1 billion of stock ahead of listing in the city had fallen since Shenwan Hongyuan Group Co dropped 12% in April 2019, according to data compiled by Bloomberg. 

Yum China’s Hong Kong deal is the city’s third largest secondary listing in 2020

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Yum China is the first US-listed firm to slip on day one since Alibaba Group Holding Ltd started the current run last November of having shares also trade in Hong Kong.

The losing commencement by Yum China contrasts with what’s been a hot market for initial public offerings in Hong Kong. IPOs this year raised a combined HK$147.7 billion (US$19.1 billion) through August, 74% above year-earlier levels, according to data from Hong Kong’s stock exchange operator. 

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Yum China’s new shares were 52 times subscribed by retail investors, a ratio that beat nearly two-thirds of new offerings in the city this year, data compiled by Bloomberg show. The company’s fundraising schedule clashed with the IPO by Nongfu Spring Co., whose retail oversubscription rate topped 1,100.

Yum China’s Hong Kong deal is the city’s third largest secondary listing in 2020.

Yum China continues to target opening 800 to 850 new stores this year despite impacts from the coronavirus, said Yum China Chief Executive Officer Joey Wat on Thursday, adding that the company has been able to get better locations, especially in top-tier cities, as smaller peers had to leave the market. 

At the end of June 2020, the company had 9,954 restaurants in over 1,400 cities and towns in the mainland. 

“The outlook for China’s fast-food sector is promising, as demand is strong and new players are still attracted to enter the market,” said Wat. 

Yum China was spun off from US food corporation Yum! Brands and went public in New York in 2016.

The Shanghai-based company owns local brands of the Little Sheep, Huang Ji Huang, East Dawning and COFFii & JOY.

Global markets uncertainty

Steven Leung, executive director of institutional sales at UOB Kay Hian in Hong Kong, said, “Investors whom subscribed for the stock, are unlikely to hold for long amid the softer tone in the US stock lately.”

Asia’s stock markets snapped their longest losing streak since February on Thursday and rose following a bounce on Wall Street, though subdued trade in currency, commodity and bond markets suggested investors remain cautious about the outlook.

Hong Kong-based Geo Securities’ chief executive, Francis Lun, said the stock’s weakness was also driven by highly leveraged retail investors rushing to dump their shares following its lower opening.

"People who apply for stock in these deals are looking for quick money, they borrow very heavily so if a stock falls they need to get out,” he said.

Nongfu Spring Co Ltd jumped 85% when it began trading on Tuesday..

The two largest secondary listings of 2020 in Hong Kong both surged in their debuts. Netease Inc shares opened up 8% and JD.com Inc rose 5.75% when the stocks began trading on the Hong Kong market in June.

With Bloomberg, Xinhua inputs