Hong Kong Exchanges and Clearing, which operates the city’s stocks and futures markets, has brushed aside concerns arising from US beer titan Anheuser-Busch InBev’s decision to abandon a projected $10-billion share sale in Hong Kong by its Asia Pacific unit that would have been the world’s biggest initial public offering so far this year.
Charles Li Xiaojia — chief executive of HKEX — said on Tuesday Hong Kong’s IPO market remains robust with a trusted market mechanism, and that the bourse operator respects the decision of the issuers and investors.
It’s important to maintain the SAR’s privileged positions and keep attracting international investors
Charles Li Xiaojia
chief executive of HKEX
Despite the scrapping of the planned flotation by AB InBev’s Asia-Pacific unit, Budweiser Brewing APAC, Li said his confidence in Hong Kong’s IPO market has not faltered, and hoped that high-profile international enterprises will maintain an interest in the SAR market.
He noted that HKEX had been the best performer among Asia’s IPO markets last year, and a batch of companies are expected to go public in Hong Kong in the second half of 2019.
Global auditing giant Ernst & Young has predicted that total proceeds from planned flotations in Hong Kong this year would soar by more than 120 percent to $286 billion.
St Louis, Missouri-based AB InBev — the world’s biggest brewer — said last Friday the planned listing in Hong Kong by Budweiser Brewing APAC would be dropped after having taken into consideration various factors, including prevailing market conditions.
However, the group added that it will continue to closely monitor the market trend as it strives to enhance shareholder value and drive long-term growth.
AB InBev had proposed offering 1.63 billion shares of its Asia-Pacific arm in the Hong Kong IPO at between HK$40 and HK$47 per share, which would value the unit at 28.5 to 33.5 times a 2020 earning consensus — well above the ratios for two other world beer behemoths Heineken of Holland and Carlsberg Group of Denmark.
“We thought the valuations they gave in the range were too high to begin with,” said a senior credit analyst at Bloomberg Intelligence. “When they were pricing the IPO with a mid-twenties multiple, it was probably a little bit too high,” the analyst said, adding that expectations had been a “little too lofty” for listings.
Last Thursday, ESR Cayman — the largest logistics real-estate developer in the Asia Pacific — also put off its planned listing in Hong Kong that could have raised up to $1.24 billion.
The company did not explain the reasons for its decision.
Despite the high-profile IPO cancellations, other prominent issuers are still eyeing Hong Kong’s IPO market.
On Monday, consumer lender Home Credit Group — a unit of Czech financial group PPF — said it has filed a listing with HKEX. International Financing Review Asia quoted unidentified sources as saying that the group plans to raise $1 billion to $1.5 billion.
United Kingdom-based data center operator Global Switch is also seeking a flotation in Hong Kong this year, aiming to raise more than $1 billion, according to Bloomberg.
So far this year, the largest IPO in Hong Kong has been that of China’s oldest brokerage Shenwan Hongyuan, which raised $1.2 billion in April.
Speaking at a listing ceremony at HKEX on Tuesday, which saw six companies making their IPO debut, Li stressed the role Hong Kong has been playing as a world financial hub.
He said it’s important to maintain the SAR’s privileged positions and keep attracting international investors.
Li said earlier this year HKEX was mulling reforms, including cutting the IPO settlement time as the current system, known as “T+5”, allows share trading to start five days after the share subscription period ends.
He said the “T+5” mechanism has no impact on company listings and the shortened settlement time could protect retail investors from injecting funds too early when subscribing to new shares.
HONG KONG NEWS