By Prudence Ho And Yvonne Lee
HONG KONG—A slew of companies plan to seek as much as $8 billion from Hong Kong investors in coming months, testing the Chinese territory's go-go market for initial public offerings at a time when foreign investors are pulling back from Asia.
Among those planning IPOs are mining companies—underscoring the Hong Kong stock exchange's push to become a destination for natural-resources producers—and pharmaceutical makers, which see promise in China's growing affluence. The continued interest could help Hong Kong keep its title as the world's top market for IPOs, which it has claimed for the past two years.
China's Inner Mongolia Yitai Coal Co. is planning to raise US$1.5 billion from a Hong Kong IPO in April, a person familiar with the situation said Tuesday.
Hong Kong property developer New World Development /zigman2/quotes/202357413/delayed HK:17 -0.56% Co. and infrastructure unit NWS Holdings Ltd. plan to jointly submit a new application to list their China iron-ore mining business, Newton Resources Ltd., other people familiar with the situation said Tuesday. The company shelved its plan to raise up to $522 million in May; the amount it plans to seek this time is unclear.
Shanghai Pharmaceuticals Holding /zigman2/quotes/205714034/delayed CN:601607 -1.00% Co. aims to raise up to US$1.2 billion in April, while Shanghai Fosun Pharmaceutical (Group) Co. is planning to raise around $1 billion through a Hong Kong IPO in the third quarter, separate people familiar with the situation said Tuesday.
The new entrants join others that plan to begin marketing previously announced offerings in Hong Kong. They include a $3 billion IPO by Australian miner Resourcehouse Ltd. and a $260 million offering by Perth-based lithium concentrate miner Galaxy Resources Ltd.
Another offering, a US$249 million sale by China Kingstone Mining Holdings Ltd., is currently being marketed to investors in what is known as a roadshow.
Far East Horizon, the financial-leasing unit of state-owned Sinochem Group and part-owned by private-equity firm Kohlberg Kravis Roberts & Co., is set to seek Hong Kong listing approval for its planned $600 million Hong Kong IPO on Thursday, another person familiar with the situation said. If approved, the company should list in Hong Kong at the end of the month, the person said.
Fueled by its proximity to mainland China, Hong Kong has benefited from a slew of offerings that included last year's huge Agricultural Bank of China /zigman2/quotes/200705246/delayed HK:1288 -0.78% Ltd. deal, and it has attracted potential interest from major Swiss resource trader Glencore International AG and Italian design house Prada SpA.
Still, fund managers said appetite for IPOs is likely to be limited, given Mideast turmoil and inflation worries. Hong Kong's benchmark Hang Seng Index rose 1.7% Tuesday, and it is up 2.9% this year, but that is less than the Dow Jones Industrial Average, which was up 4.4% in 2011 as of Monday's close.
"This is a challenging market for IPOs," said Pauline Dan , chief investment officer of Samsung Investment Management (Hong Kong) Ltd. "Fund flows into Hong Kong have been negative since the beginning of the year, and unless the IPO is priced at a very attractive valuation or there is a unique business model, investors are unlikely to be keen buyers."
Investors have been retreating from Asia and emerging markets in general after enjoying strong gains over the past two years. Six consecutive weeks of emerging-market outflows have totaled $23 billion, with Asia the weakest region, chalking up $7 billion of outflows, according to a Citigroup report last week. By contrast, developed markets have seen $27 billion of net inflows in the same period.
This year through Tuesday, nine IPOs that raised a total of only US$314 million had been completed in Hong Kong, compared with six deals totaling $3.13 billion in the same period a year earlier, according to data provider Dealogic.
A few deals in the region have been called off amid volatile markets. Perennial China Retail Trust, a unit of property-investment firm Perennial Real Estate, on Saturday said it will defer its proposed Singapore IPO, which aimed to raise 1.1 billion Singapore dollars (US$869 million), because of volatile market conditions. In January, China aluminum producer China Hongqiao Group /zigman2/quotes/207358542/delayed HK:1378 -2.48% Ltd. scrapped its up-to-$2.2 billion IPO; and last week Russian electricity producer EuroSibEnergo decided not to start pre-marketing for its Hong Kong IPO targeting at least US$1 billion.