Public offerings at risk of hangover despite cheer from Budweiser
- Decision by world’s largest brewer to go ahead with slimmed down listing in city wracked by protests is welcome news, but this is not the time for complacency
Market sentiments have turned more positive. More listings are expected to follow Budweiser, which at an estimated US$4.8 billion, is the second-largest globally since Uber Technologies’ US$8.1 billion listing in New York in May.
Of course, markets can turn on a dime. Chinese-American trade talks can easily falter again. The ongoing anti-government unrest may continue and even escalate, despite the government’s olive branch.
This may well be a lull before the return of market volatility. For now, though, besides Budweiser, there is a slew of IPOs to keep up investors’ interest.
Among these are logistics real estate developer ESR Cayman and Home Credit, a China-focused consumer finance lender.
But, with the average price-to-earnings ratio in the market at a multi-year low, the brewer is being realistic.
The mainland is one of its principal markets in Asia. The return of IPOs is perhaps part of a bigger, positive story that Hong Kong remains the primary gateway for foreign investors going into China.
The nation received US$62.9 billion in foreign direct investment through Hong Kong in the first eight months of this year, accounting for 70 per cent of the total. This is despite the ongoing protests and a downgrade of the city’s rating and outlook by credit agencies Moody’s and Fitch.
But Hong Kong people should not be complacent that their city will always remain the proverbial goose that lays the golden egg.
Hong Kong faces a drought of initial public offerings as valuations fall
Prolonged civil unrest and widespread antagonism in Hong Kong towards the mainland make economic cooperation across the border increasingly difficult.
It took decades to build up Hong Kong as a world-class financial hub and undermining that status will take a much shorter time.
While market sentiments are fickle and rise and fall in response to the latest news, long-term investors, both foreign and domestic, look for stability. It will take some convincing that this is a good time to buy.