Mom and pop investors pile into HK IPOs in $221b bonanza

HONG KONG • Mom and pop investors have not been this crazy for Hong Kong initial public offerings since 2009.

Hong Kong retail stock buyers placed orders for US$163 billion (S$221 billion) worth of equity in this year's major deals, according to data compiled by Bloomberg. That's equal to more than three quarters of the territory's monetary base. The most popular was China Literature, a local take on Amazon.com's Kindle Store that's risen 71 per cent since it started trading this month.

Small investors in the city are jumping at the chance to buy into higher-growth industries like tech, after years of being offered stock in a string of sleepy state enterprises and commercial lenders from the Chinese hinterland. The most popular offerings this year had well-known backers like Hong Kong's richest man, Mr Li Ka Shing, and Chinese Internet giant Tencent Holdings.

Among Hong Kong first-time share sales this year that raised more than US$500 million, four deals saw retail investors apply for at least 100 times the amount of stock initially offered to them. The last time Hong Kong hosted so many hot deals was in 2009, when five major transactions attracted that level of retail interest, ranging from cement maker BBMG Corp to drug distributor Sinopharm Group, data compiled by Bloomberg show.

Every IPO on Hong Kong's mainboard must set aside stock for small investors, giving them early access to deals that they are not afforded in most other major markets like the United States. Hong Kong listing candidates usually reserve 10 per cent of their IPO shares for such investors, who can get margin loans to cover the bulk of their subscription cost. The tranche can be increased to as much as half the offering when there is heavy interest.

All that enthusiasm is spilling over into after-market performance. China Literature's 86 per cent first-day gain was the best of all major tech listings globally this year. That beat the 44 per cent rise in Snap, the developer of Snapchat, on its March debut. Shares of FIT Hon Teng, a unit of Apple's biggest supplier, have more than doubled since they began trading in Hong Kong in July.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 21, 2017, with the headline 'Mom and pop investors pile into HK IPOs in $221b bonanza'. Print Edition | Subscribe