By Prudence Ho and Sam Holmes
HONG KONG—The fallout from Japan's earthquake continued to hurt Asia's initial public offerings.
Chinese aluminum producer China Hongqiao Group /zigman2/quotes/207358542/delayed HK:1378 -2.48% Ltd. raised $817 million from a Hong Kong IPO Friday after pricing at the bottom of its range, while the $6 billion Hutchison Port Holdings Trust IPO in Singapore and Hong Kong-listed Kingstone Mining fell on their debuts.
That the deals were completed at all in a week of falling stock markets around the globe was attributed to the presence of cornerstone investors or to low pricing. The ability of the three deals to price was seen by some as boding well for Far East Horizon Ltd., which is meeting with prospective investors as it seeks up to US$711 million ahead of a Hong Kong start planned for March 30.
Not all deals have gotten that far.
In the week after the Japanese earthquake, $4.2 billion worth of IPOs have been put on hold in Hong Kong and Singapore. Among them are the $190 million Hong Kong listing by Chinese oilfield equipment provider Hilong Holding Ltd.; the $3 billion offering of Australia's Resourcehouse Ltd.: the $260 million share sale from Perth-based lithium concentrate miner Galaxy Resources Ltd.; and, in Singapore, the $782.6 million IPO of U.S. private equity group Kohlberg Kravis Roberts & Co.'s engineering group, MMI Holdings.
Falling share prices have cast doubt on planned multibillion dollar IPOs by such companies as Swiss commodities trader Glencore International AG and Italian fashion house Prada SpA, both seeking Hong Kong listings.
Hongqiao is the biggest IPO to price in Hong Kong so far this year, after the $167 million IPO of China Kingstone Mining Holdings Ltd., which priced on March 11, and the $200 million IPO of Top Spring International Holdings Ltd., which is due to begin trading Wednesday. Like Hongqiao, both priced at the bottom of their proposed price ranges.
Honggqiao, which scrapped a plan to raise up to $2.2 billion in January because of deteriorating market conditions, had offered shares between 7.2 Hong Kong dollars and 8.3 Hong Kong dollars (92 U.S. cents to US$1.06) for its sale of 885 million shares this time around. Shares are to start trading Thursday.
Among stocks that began trading Friday, Hutchison Port Holdings, which owns deep-water ports in Hong Kong and China and is controlled by Hong Kong tycoon Li Ka-shing 's Hutchison Whampoa /zigman2/quotes/203034716/delayed HK:13 +0.47% Ltd., closed at 95 U.S. cents, 6% below the IPO price of US$1.01 and near the intraday low of 94.5 U.S. cents.
The IPO has an overallotment option in the event of strong demand. If it isn't exercised, the sale would raise about US$5.5 billion, still ranking as the largest in the region, and in the world so far this year.
Hutchison Port Holdings Trust Chairman Canning Fok said he was happy with the debut given market conditions. He predicted that the financial impact of the earthquake and tsunami in Japan last week, which forced the closure of production lines and ports, is likely to be minimal.
"Our trade is more intercontinental; 70% of our trade is intercontinental. I think we are well protected by the nature of our business," Mr. Fok said at a briefing Friday during the company's listing.
Shares of Kingstone Mining slumped 12% Friday to HK$1.98 from the offer price of HK$2.25. The company, based in China's Sichuan province, priced the 580 million shares at the bottom of its HK$2.25-HK$3.35 a share indicative price range, raising HK$1.31 billion, or US$167 million.
Bankers and fund managers said that the ability of Hutchison Port, Hongqiao and Kingstone to lock up a sizeable chunk of their IPOs helped them get their shares sold in weak markets.
Cornerstone investments have taken up at least 29% of the Kingstone, Hongqiao and Hutchison Port IPOs. Kingstone locked up a total of US$48 million in cornerstone investments from five investors, while Hongqiao secured combined US$350 million cornerstone investments from four investors.
Cornerstone investors pay the IPO price but get a predetermined amount of shares and are subject to a lock-up period. Anchor investors aren't subject to a lockup.
Cornerstone investors in Kingstone were Chow Tai Fook Nominee Ltd., which is controlled by Hong Kong tycoon Cheng Yu-tung ; Chinese property developer Guangzhou R&F Properties Co. Ltd's chairman Li Sze-lim ; Chinese property developer Evergrande Real Estate Group /zigman2/quotes/208605330/delayed HK:3333 +8.55% Ltd.'s chairman Hui Ka-yan ; Bondic International Holdings Ltd. and Golden Feather Corp.
Hongqiao's four cornerstone investors were developer Cheung Kong /zigman2/quotes/208405501/delayed HK:1 0.00% (Holding) Ltd., Chow Tai Fook Nominee Ltd., as well as Thomas Lau , managing director of shopping mall operator Lifestyle International Holdings /zigman2/quotes/210031957/delayed HK:1212 -0.22% Ltd., and his brother, Joseph Lau Luen-hung , chairman of Chinese Estates /zigman2/quotes/202301422/delayed HK:127 -1.77% .
Hutchison Port's cornerstone investors were Ally Holding Ltd., Arnada Invesments, Capital Research and Management Company, Cathay Life Insurance Co., Lone Pine Capital LLC, Metropolitan Financial Services Ltd., Paulson & Co. Inc. and Seacrest IFR Inc.
Top Spring's anchor investors included Dutch pension fund APG Algemene Pensioen Groep NV and Metro Holdings Ltd., each of whom subscribed to US$40 million worth of the offer as anchor investors in the deal and secured 40% of the offering, according to a person familiar with the deal.
Cornerstone investors pay the IPO price but get a predetermined amount of shares and are subject to a lock-up period. Anchor investors aren't subject to a lockup and place their orders on the first day of order-taking.
Far East Horizon Ltd., the financial-leasing unit of Chinese state-owned Sinochem Group, that is making its sales pitch to investors, secured US$250 million in cornerstone investments from six investors: Sun Hung Kai Properties /zigman2/quotes/209086152/delayed HK:16 -0.67% Ltd., Value Partners Group /zigman2/quotes/209590374/delayed HK:806 -5.28% Ltd., Hillhouse Capital Management Ltd., Prime Capital Management Co. Ltd., Owl Creek Asset Management L.P. and OZ Management LP, according to the company's prospectus.