To infinity, and beyond
The European credit market was given an early Christmas gift last week when the European Central Bank said it would restart asset purchases and cut the deposit rate, decisions expected to further lift an already buoyant mood. There was much speculation ahead of the meeting as to what the central bank would do on Thursday and what the package of measures would include. In the end, any concern that Mario Draghi would not deliver as his eight-year term at the helm of the institution draws to a close proved unfounded. The headline announcement was the restart of quantitative easing, with the ECB set to buy €20bn of bonds a month from November 1 with no end-date. “It’s definitely positive for credit,” a head of syndicate said. “We’re off to the races. Look at the Kerry trade – it’s a blowout. We’ve got a decent pipeline for [this] week, which we think will go well.” Books for the Irish food ingredient company’s €750m 10-year on Friday peaked at €2.6bn. That gave leads Bank of America Merrill Lynch, HSBC, NatWest Markets and Rabobank plenty of leverage to move pricing to swaps plus 78bp, 22bp inside the tight end of the 100bp–105bp IPT range. The deal came flat to arguably inside fair value. “It’s party time for corporates,” a senior DCM banker said. While the Kerry deal was senior unsecured, the banker said the backdrop couldn’t be better for other formats either. “When it comes to hybrids, conditions are exceptional and the market’s ability to absorb paper is huge. The senior/hybrid spread ratio is very tight.” Already Infineon Technologies has mandated Citigroup and UniCredit (structuring advisers and global coordinators) and Bank of America Merrill Lynch, BNP Paribas, Deutsche Bank, Goldman Sachs and JP Morgan for a two-part euro perpetual comprising non-call 5.5-year and non-call 8.5-year tranches. Longer-dated transactions had become increasingly popular in the run-up to the ECB meeting, with a number of issuers bringing tenors of 15 years and longer. Bankers say more deals targeting the long end should be in the offing. “What QE should in theory result in is yields capped at where they are and probably a curve flattening phenomenon. What that could do is steepen credit curves, but CSPP may balance that out, and help the bid for the long end.” “So if anything, I like long-end euro a bit more now, though I liked it before too,” said a second syndicate banker. And though the ECB’s stimulus highlights the sluggish nature of the eurozone economy, credit investors are unlikely to have any other option than to go long. “Overall, the ECB package hasn’t changed our base case for credit. Seen over what may well be a three to four-year horizon, even at a mere €20bn a month, the cumulative amount of purchases that the ECB will do at a time of excess liquidity should strike fear into anyone who is underweight on European credit,” wrote Hans Lorenzen, head of European investment-grade credit strategy at Citigroup. Even if the ECB’s monthly purchases of corporate bonds are as small as €2.5bn, that, combined with other inflows into the asset class and even deeper negative deposit rates, should ensure that ”QE will slowly and steadily grind away at the market over time”, said Lorenzen. The ECB also relaxed restrictions on some of the securities it can buy, saying that it will now consider corporate bonds yielding less than the deposit rate. While there’s little paper at such levels “its removal is nonetheless a bullish signal, ensuring that even the richest part of the current eligible universe remains eligible in the event of a further bond rally”, wrote Michal Jezek, credit strategist at Deutsche Bank. All of this is likely to bring a further tightening in credit spreads – Lorenzen thinks the iBoxx corporate index will rally to 60bp from its current level of 80bp – and an extended era of negative yields. FIZZLING OUT Unlike the corporate sector, which appeared to emerge as a clear winner, question marks remain as to how the ECB package will
Aramco IPO fees could hit US$180m
Banks will pick up an aggregate base fee of at least US$70m for the local listing of Saudi Aramco expected in November, providing the oil giant achieves an expected valuation of US$2trn. The base fee has been set at 35bp, according to bankers on the deal. The emphasis is on outperformance as the incentive fee is much bigger at 55bp, and could be finalised at a higher level. If fully paid it would put total fees at US$180m. The Saudi kingdom intends to float at least 1% of Aramco on the Tadawul exchange this year, with pricing now expected in November. That would give a deal size of US$20bn, with the local route seen as the best chance to secure the desired US$2trn valuation, smaller than Alibaba’s record US$25bn NYSE float in 2014, and not big enough to break into the top five largest IPOs. Alibaba paid a 120bp total fee, with US fees typically higher than in EMEA. A further 1% is expected to be listed on an international exchange in 2020 or 2021, but plans for that are still some way off. JP Morgan, Morgan Stanley and HSBC are once again joint global coordinators, having been mandated previously. They have been joined on the same level by Bank of America Merrill Lynch, Citigroup, Credit Suisse, Goldman Sachs and local banks National Commercial Bank and Samba Financial. The banks have yet to be informed on the final syndicate structure, although JP Morgan and Morgan Stanley are said to be sponsors and will “do more quarter-backing than others involved”, said one banker on the deal. Another banker said that international participation will probably be as low as 10%, with domestic money getting 90%. The company has already talked to large domestic investors, with Saudi princes expected to be central, and is understood to have lined up indications of interest of around US$40bn. The company could opt for a well covered deal at US$20bn or increase sizing above 1% for a float nearer US$25bn–$30bn. There is no concern about getting the deal done, however. Typically, an IPO would need to be covered at least two times to be sensibly allocated, but this was not the case with Arabian Centres, which priced a SR2.47bn (US$659m) IPO in May. That deal was only 10% oversubscribed, with just 16% international participation. Despite initial weakness the shares are now up 7%. Two bankers said that Aramco expects international banks to drum up significant additional demand. One said that the level of interest from Western money was high but not as much as when a London listing was expected. The deal size may be slightly smaller, with reports of a valuation closer to US$1.5trn, and international accounts may want a discount for emerging markets risk. “This will be one of the largest IPOs anywhere for one of the largest companies in the world, and it is being done on an exchange that has not been tested anywhere near that scale, so it will pose some challenges,” said a third banker working on the transaction. He said MSCI inclusion in June last year has been a big step forward for the deal, but Western investors will have to come to terms with other issues, such as a much longer settlement period. “That being said, if the political will is there, there is no doubt that the relevant infrastructure will be tip top,” he said.
ECB tiering little relief for squeezed banks
Another European Central Bank stimulus package looks set to keep eurozone interest rates negative for longer and tighten the squeeze on the region’s banks, heaping more pain on German lenders in particular. The ECB cut its deposit rate by 10bp to a new record low of minus 0.5% on Thursday because the eurozone faced “more protracted weakness” than previously estimated, outgoing ECB president Mario Draghi said. The ECB is aware negative rates are hurting bank profitability, and tried to ease the pain by introducing tiered interest rates on their excess liquidity. But that is only likely to provide a partial shield from the negative rates. “It’s bad news for the banks compared to expectations, and banks with excess liquidity are more penalised,” said Scope Ratings analyst Marco Troiano. He estimated less than half of eurozone banks’ excess liquidity will be covered by the tiering system. “That’s underwhelming,” he said. “SUCKING THE ENERGY” Banks had already been groaning. The era of rock-bottom interest rates has been hurting the margins they make on deposits and loans. And while the ECB’s measures are aimed at stimulating the economy and could help trading and deal-making and in turn perk up capital markets activity, the negative rates are contributing to the malaise across European banks, bankers said. Deutsche Bank has a long list of problems, and negative rates is one of its biggest headaches – and one it can do little about. A senior banker at a rival US bank said, coming after the global financial crisis and the eurozone banking industry’s problems with bad loans, the drag of negative rates “has sucked the energy” out from much of the European sector. Indeed, eurozone banks have been charged €23.2bn due to negative interest rates since the policy was introduced in 2014, analysts at Scope Ratings estimated. They said the cost to banks was €7.5bn last year, reducing euro area bank RoE by about 40bp. TIERING The tiering is meant to provide relief for banks. But bankers said it’s hard for the ECB to offer a “one size fits all” package that helps banks in different countries. The ECB has set the exemption as a multiplier of minimum reserve requirements. It has initially set the multiplier at six, but that could be adjusted later. Scope estimated the 6x multiplier will exempt about €800bn from negative rates, less than half of the €1.7trn excess liquidity at the end of August. Troiano said the annual cost of excess liquidity for eurozone banks will still be €4.6bn, compared with €8.5bn if there was no tiering. “While not immaterial, the €4bn shield is less than we had expected and the impact on banking sector RoEs will be minimal,” he said. Its benefit will also be uneven. The tiering should cover all the excess liquidity in Italy and Spain, for example, but not cover the higher excesses in Germany, France, Finland and Luxembourg. German banks have a glut of savings that is proving costly to hold, and the Association of German banks has said German, French and Dutch banks account for about two-thirds of the penalty charges paid for hoarding cash. NOT ALL BAD Still, while five years of negative deposit rates have hit bank profitability, on a net basis it is arguable that many have in fact made a considerable amount of money from the ECB and its various efforts to shake the economy out of its decade-long economic slumber. Many of the central bank’s efforts have been channelled directly to banks, in a bid to bring down their funding costs and get them lending again. Since 2011, when it first launched its longer-term refinancing operations, the ECB has lent banks almost €2.2trn in cheap loans. The ECB said last week it will offer a third TLTRO and sweetened the terms. Those facilities have been provided well below market funding costs, making lending much more profitable than it would otherwise have been. Since 2014, the ECB has even offered to pay banks to take its money, offering to pay them up to €3bn of bonuses a year if lending
ECB tiering little relief for squeezed banks
Another European Central Bank stimulus package looks set to keep eurozone interest rates negative for longer and tighten the squeeze on the region’s banks, heaping more pain on German lenders in particular. The ECB cut its deposit rate by 10bp to a new record low of minus 0.5% on Thursday because the eurozone faced “more protracted weakness” than previously estimated, outgoing ECB president Mario Draghi said. The ECB is aware negative rates are hurting bank profitability, and tried to ease the pain by introducing tiered interest rates on their excess liquidity. But that is only likely to provide a partial shield from the negative rates. “It’s bad news for the banks compared to expectations, and banks with excess liquidity are more penalised,” said Scope Ratings analyst Marco Troiano. He estimated less than half of eurozone banks’ excess liquidity will be covered by the tiering system. “That’s underwhelming,” he said. “SUCKING THE ENERGY” Banks had already been groaning. The era of rock-bottom interest rates has been hurting the margins they make on deposits and loans. And while the ECB’s measures are aimed at stimulating the economy and could help trading and deal-making and in turn perk up capital markets activity, the negative rates are contributing to the malaise across European banks, bankers said. Deutsche Bank has a long list of problems, and negative rates is one of its biggest headaches – and one it can do little about. A senior banker at a rival US bank said, coming after the global financial crisis and the eurozone banking industry’s problems with bad loans, the drag of negative rates “has sucked the energy” out from much of the European sector. Indeed, eurozone banks have been charged €23.2bn due to negative interest rates since the policy was introduced in 2014, analysts at Scope Ratings estimated. They said the cost to banks was €7.5bn last year, reducing euro area bank RoE by about 40bp. TIERING The tiering is meant to provide relief for banks. But bankers said it’s hard for the ECB to offer a “one size fits all” package that helps banks in different countries. The ECB has set the exemption as a multiplier of minimum reserve requirements. It has initially set the multiplier at six, but that could be adjusted later. Scope estimated the 6x multiplier will exempt about €800bn from negative rates, less than half of the €1.7trn excess liquidity at the end of August. Troiano said the annual cost of excess liquidity for eurozone banks will still be €4.6bn, compared with €8.5bn if there was no tiering. “While not immaterial, the €4bn shield is less than we had expected and the impact on banking sector RoEs will be minimal,” he said. Its benefit will also be uneven. The tiering should cover all the excess liquidity in Italy and Spain, for example, but not cover the higher excesses in Germany, France, Finland and Luxembourg. German banks have a glut of savings that is proving costly to hold, and the Association of German banks has said German, French and Dutch banks account for about two-thirds of the penalty charges paid for hoarding cash. NOT ALL BAD Still, while five years of negative deposit rates have hit bank profitability, on a net basis it is arguable that many have in fact made a considerable amount of money from the ECB and its various efforts to shake the economy out of its decade-long economic slumber. Many of the central bank’s efforts have been channelled directly to banks, in a bid to bring down their funding costs and get them lending again. Since 2011, when it first launched its longer-term refinancing operations, the ECB has lent banks almost €2.2trn in cheap loans. The ECB said last week it will offer a third TLTRO and sweetened the terms. Those facilities have been provided well below market funding costs, making lending much more profitable than it would otherwise have been. Since 2014, the ECB has even offered to pay banks to take its money, offering to pay them up to €3bn of bonuses a year if lending
HKEx falls flat with LSE bid
The Hong Kong stock exchange operator’s audacious £31.6bn (US$39.1bn) bid for the London Stock Exchange Group drew a savage response on Friday, as the LSE flatly rejected a proposal it said was fundamentally flawed. LSE said the board unanimously rejected the approach in a letter slamming the long-term viability of a merger with would-be suitor Hong Kong Exchanges and Clearing. “We see the value of your share consideration as inherently uncertain. The ongoing situation in Hong Kong adds to this uncertainty,” LSE chairman Don Robert wrote. “Furthermore, we question the sustainability of HKEx’s position as a strategic gateway in the longer term.” The timing of the approach from HKEx had stunned market participants, as LSE is in the final throes of a US$27bn deal to acquire financial information provider Refinitiv, IFR’s parent company. HKEx said its offer would be subject to that purchase being called off by December 31. It also comes amid rising geopolitical tensions between China and the West, which will probably complicate the approval process. LSE owns the Milan exchange, the FTSE Russell index business and major international clearing houses, meaning that the deal would probably require sign-off from the US and the EU as well as the UK government. Charles Li, chief executive officer of HKEx, said the exchange had long considered buying LSE and the deal was strategically compelling as it would create a combined 18-hour trading zone, enhancing capital flows between East and West. He conceded that the exchange had been late with an offer, however. “We are here, just to be a bit lighthearted, almost like a corporate Romeo and Juliet. We were probably a bit hesitant and slightly late,” he said. “We know we were late; we don’t want to be late again.” “We wanted to be able to openly express our admiration so that people, using this analogy, the villagers, the parents and the siblings and all the community are able to hear that we truly mean to bring a compelling proposition to the City of London and to LSE.” Li’s Juliet, however, made her feelings quite clear in Friday’s letter. “We do not believe HKEx provides us with the best long-term positioning in Asia or the best listing/trading platform for China. We value our mutually beneficial partnership with the Shanghai Stock Exchange, which is our preferred and direct channel to access the many opportunities with China.” REFINITIV COMMITMENT HKEx announced its unsolicited cash-and-shares takeover of LSE on Wednesday. The offer comprises £20.45 a share in cash and 2.495 newly issued HKEx shares, valuing LSE at £83.61 a share and £29.6bn overall (or £31.6bn inclusive of net debt and other adjustments). This represents a 22.9% premium to last Tuesday’s closing price. It is also a 22.4% premium to the volume weighted average closing price since July 29, the first trading date after the announcement of the Refinitiv deal and a 47.4% premium to the July 26 price, the day before the announcement. HKEx’s approach sent LSE’s share price higher last Wednesday, jumping more than 15% in early trading before paring gains to close the day up 6% at £72.32 after the board said in a statement it was “committed” to the Refinitiv deal. HKEx slid 3.3% the following day in Hong Kong as investors reacted to the potential acquisition. Guy de Blonay, a fund manager at Jupiter Asset Management, one of LSE’s top 25 shareholders, said he expected LSE shareholders would be unlikely to back HKEx’s takeover unless the exchange changes its stance on the Refinitiv deal. “The crucial element of the deal is whether it is indeed contingent on the London Stock Exchange’s deal with Refinitiv being taken off the table,” he said, before Friday’s rejection. “If this is the case, it looks uncertain whether shareholders will accept the offer given that the Refinitiv deal is popular across the shareholder base for its potential to transform the business and add value over the long-term.” Refinitiv was created last year when
Budweiser adds cheer to HK IPOs
Anheuser-Busch InBev has revived plans for a Hong Kong IPO of its Asia-Pacific business that could raise about US$5bn, underlining the city’s appeal as a capital raising venue despite ongoing political protests. Budweiser Brewing Company APAC, which pulled a mega Hong Kong IPO in July, plans to open books on Wednesday with pricing tentatively slated for September 23 and listing on September 30. “We have a market window here and we think we should go ahead. You never know how the Hong Kong protests, Brexit and US-China trade talks will go,” said a person close to the deal. The deal comes at a time when months of protests in the territory have put at least one other high-profile transaction on hold. Chinese e-commerce giant Alibaba Group has held back a US$10bn–$15bn secondary listing in Hong Kong since filing confidentially in June. The Hang Seng Index rallied close to 1,000 points on September 4 after the government formally withdrew a controversial extradition bill that had ignited the protests. As of last Thursday, the index has risen 6.1% since September 3. MINUS AUSTRALIA AB InBev shelved a HK$76.6bn (US$9.8bn) float of Budweiser APAC in July after investors pushed back on the high valuation. The Belgium-headquartered brewer then sold its Australian operations, which are considered profitable but slow-growing, to Japan’s Asahi Group Holdings for A$16bn (US$11bn) to help pay down debt. In July, Budweiser APAC marketed primary shares at a 2020 EV/Ebitda of 15.5–18.2 and a 2020 P/E of 28.5–33.5. It intended to list about 15.4% of its enlarged share capital at a pre-shoe valuation of around US$54bn–$64bn. Minus the Australian unit, the company is now looking at a valuation of about US$45bn in the revived listing, said another person close to the deal. “With a lower valuation for assets of higher growth, the deal should be able to get done,” said the person. In the updated filings posted on the stock exchange’s website last Thursday, Budweiser said it considers China, South Korea, India and Vietnam to be its principal markets. Ex-Australia the company posted a net profit of US$240m for the first three months of 2019, up 12.7% year-on-year. Previous filings, which included the Australian business, had shown net profit of US$351m for the same period but a slower growth rate of 1.4% year-on-year. In the first quarter, the normalised Ebitda of Budweiser’s Asia-Pacific business grew 23% from a year earlier, compared with a 13.4% growth rate including the Australian unit. JP Morgan and Morgan Stanley are the sponsors. IPO BOOST The Budweiser deal, together with a HK$3.7bn Hong Kong IPO launched last Monday for Shanghai Henlius Biotech, comes as a welcome boost to Hong Kong’s IPO market, where new listings on the main board year to-date are down 55% year-on-year at HK$84bn, according to data from the Stock Exchange of Hong Kong. Months of unrest, including violent clashes between protesters and police, and a worsening US-China trade dispute, have contributed to market volatility over the summer and turned many investors cautious on Hong Kong’s long-term future. To improve its chances of success, Fosun-backed Henlius brought in four cornerstone investors for a combined US$140m including a US$90m investment from Qatar Investment Authority. (See Equities section.) “Markets are shaky and investors are still very cautious over IPOs. A renowned cornerstone investor hopefully can help drive momentum,” said a banker on the Henlius deal. Books were covered by Friday. Others have chosen to lower their fundraising size or wait for a better window. Czech consumer finance company Home Credit and Chinese lender Bank of Guizhou aim to open books in October for respective Hong Kong IPOs of about US$1bn, despite having already finished pre-marketing for the floats. Home Credit has cut its fundraising target from US$1.5bn to US$1bn, potentially selling just 10% of its enlarged share capital. The company is now firming up cornerstone demand. Bank of Gui
HKEx falls flat with LSE bid
The Hong Kong stock exchange operator’s audacious £31.6bn (US$39.1bn) bid for the London Stock Exchange Group drew a savage response on Friday, as the LSE flatly rejected a proposal it said was fundamentally flawed. LSE said the board unanimously rejected the approach in a letter slamming the long-term viability of a merger with would-be suitor Hong Kong Exchanges and Clearing. “We see the value of your share consideration as inherently uncertain. The ongoing situation in Hong Kong adds to this uncertainty,” LSE chairman Don Robert wrote. “Furthermore, we question the sustainability of HKEx’s position as a strategic gateway in the longer term.” The timing of the approach from HKEx had stunned market participants, as LSE is in the final throes of a US$27bn deal to acquire financial information provider Refinitiv, IFR’s parent company. HKEx said its offer would be subject to that purchase being called off by December 31. It also comes amid rising geopolitical tensions between China and the West, which will probably complicate the approval process. LSE owns the Milan exchange, the FTSE Russell index business and major international clearing houses, meaning that the deal would probably require sign-off from the US and the EU as well as the UK government. Charles Li, chief executive officer of HKEx, said the exchange had long considered buying LSE and the deal was strategically compelling as it would create a combined 18-hour trading zone, enhancing capital flows between East and West. He conceded that the exchange had been late with an offer, however. “We are here, just to be a bit lighthearted, almost like a corporate Romeo and Juliet. We were probably a bit hesitant and slightly late,” he said. “We know we were late; we don’t want to be late again.” “We wanted to be able to openly express our admiration so that people, using this analogy, the villagers, the parents and the siblings and all the community are able to hear that we truly mean to bring a compelling proposition to the City of London and to LSE.” Li’s Juliet, however, made her feelings quite clear in Friday’s letter. “We do not believe HKEx provides us with the best long-term positioning in Asia or the best listing/trading platform for China. We value our mutually beneficial partnership with the Shanghai Stock Exchange, which is our preferred and direct channel to access the many opportunities with China.” REFINITIV COMMITMENT HKEx announced its unsolicited cash-and-shares takeover of LSE on Wednesday. The offer comprises £20.45 a share in cash and 2.495 newly issued HKEx shares, valuing LSE at £83.61 a share and £29.6bn overall (or £31.6bn inclusive of net debt and other adjustments). This represents a 22.9% premium to last Tuesday’s closing price. It is also a 22.4% premium to the volume weighted average closing price since July 29, the first trading date after the announcement of the Refinitiv deal and a 47.4% premium to the July 26 price, the day before the announcement. HKEx’s approach sent LSE’s share price higher last Wednesday, jumping more than 15% in early trading before paring gains to close the day up 6% at £72.32 after the board said in a statement it was “committed” to the Refinitiv deal. HKEx slid 3.3% the following day in Hong Kong as investors reacted to the potential acquisition. Guy de Blonay, a fund manager at Jupiter Asset Management, one of LSE’s top 25 shareholders, said he expected LSE shareholders would be unlikely to back HKEx’s takeover unless the exchange changes its stance on the Refinitiv deal. “The crucial element of the deal is whether it is indeed contingent on the London Stock Exchange’s deal with Refinitiv being taken off the table,” he said, before Friday’s rejection. “If this is the case, it looks uncertain whether shareholders will accept the offer given that the Refinitiv deal is popular across the shareholder base for its potential to transform the business and add value over the long-term.” Refinitiv was created last year when
Budweiser adds cheer to HK IPOs
Anheuser-Busch InBev has revived plans for a Hong Kong IPO of its Asia-Pacific business that could raise about US$5bn, underlining the city’s appeal as a capital raising venue despite ongoing political protests. Budweiser Brewing Company APAC, which pulled a mega Hong Kong IPO in July, plans to open books on Wednesday with pricing tentatively slated for September 23 and listing on September 30. “We have a market window here and we think we should go ahead. You never know how the Hong Kong protests, Brexit and US-China trade talks will go,” said a person close to the deal. The deal comes at a time when months of protests in the territory have put at least one other high-profile transaction on hold. Chinese e-commerce giant Alibaba Group has held back a US$10bn–$15bn secondary listing in Hong Kong since filing confidentially in June. The Hang Seng Index rallied close to 1,000 points on September 4 after the government formally withdrew a controversial extradition bill that had ignited the protests. As of last Thursday, the index has risen 6.1% since September 3. MINUS AUSTRALIA AB InBev shelved a HK$76.6bn (US$9.8bn) float of Budweiser APAC in July after investors pushed back on the high valuation. The Belgium-headquartered brewer then sold its Australian operations, which are considered profitable but slow-growing, to Japan’s Asahi Group Holdings for A$16bn (US$11bn) to help pay down debt. In July, Budweiser APAC marketed primary shares at a 2020 EV/Ebitda of 15.5–18.2 and a 2020 P/E of 28.5–33.5. It intended to list about 15.4% of its enlarged share capital at a pre-shoe valuation of around US$54bn–$64bn. Minus the Australian unit, the company is now looking at a valuation of about US$45bn in the revived listing, said another person close to the deal. “With a lower valuation for assets of higher growth, the deal should be able to get done,” said the person. In the updated filings posted on the stock exchange’s website last Thursday, Budweiser said it considers China, South Korea, India and Vietnam to be its principal markets. Ex-Australia the company posted a net profit of US$240m for the first three months of 2019, up 12.7% year-on-year. Previous filings, which included the Australian business, had shown net profit of US$351m for the same period but a slower growth rate of 1.4% year-on-year. In the first quarter, the normalised Ebitda of Budweiser’s Asia-Pacific business grew 23% from a year earlier, compared with a 13.4% growth rate including the Australian unit. JP Morgan and Morgan Stanley are the sponsors. IPO BOOST The Budweiser deal, together with a HK$3.7bn Hong Kong IPO launched last Monday for Shanghai Henlius Biotech, comes as a welcome boost to Hong Kong’s IPO market, where new listings on the main board year to-date are down 55% year-on-year at HK$84bn, according to data from the Stock Exchange of Hong Kong. Months of unrest, including violent clashes between protesters and police, and a worsening US-China trade dispute, have contributed to market volatility over the summer and turned many investors cautious on Hong Kong’s long-term future. To improve its chances of success, Fosun-backed Henlius brought in four cornerstone investors for a combined US$140m including a US$90m investment from Qatar Investment Authority. (See Equities section.) “Markets are shaky and investors are still very cautious over IPOs. A renowned cornerstone investor hopefully can help drive momentum,” said a banker on the Henlius deal. Books were covered by Friday. Others have chosen to lower their fundraising size or wait for a better window. Czech consumer finance company Home Credit and Chinese lender Bank of Guizhou aim to open books in October for respective Hong Kong IPOs of about US$1bn, despite having already finished pre-marketing for the floats. Home Credit has cut its fundraising target from US$1.5bn to US$1bn, potentially selling just 10% of its enlarged share capital. The company is now firming up cornerstone demand. Bank of Gui
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