HONG KONG-Hong Kong’s market for new stock listings may be emerging from a summer slump, after a Chinese dairy company raised more than $1 billion on Thursday in the city’s biggest offering since May.
Strong demand from both large and small investors enabled the company, China Huishan Dairy, to raise 10.1 billion Hong Kong dollars, or $1.3 billion, in its initial public offering, three people with direct knowledge of the deal said. The people spoke on the condition of anonymity because the information was not yet public.
Huishan, one of China’s largest dairy companies, is based in the northeastern city of Shenyang and makes products including fresh milk, infant formula and yogurt. It priced its I.P.O. at 2.67 Hong Kong dollars per share, at the top of the range of 2.28 dollars to 2.67 dollars at which the offering had been marketed, the people said.
The success of the Huishan deal is likely to raise hopes among other companies seeking to tap the market â€" and their bankers â€" after a rough few months for Hong Kong share sales.
The year had started off well, and in May, China Galaxy Securities raised about $1.1 billion, while Sinopec Engineering raised $1.8 billion. But by June, several I.P.O.’s were shelved or sharply reduced after investors became concerned about the effects of a slowing Chinese economy and the Federal Reserve’s plans to begin reducing its bond purchases in the United States.
Huishan’s I.P.O. also appears to have been unaffected by ongoing concerns over food safety in China’s dairy industry. In recent years, many Chinese consumers have been skeptical of locally made infant milk formula after government inspections found that widespread contamination of formula with the industrial chemical melamine had caused kidney-related illnesses, some fatal, in hundreds of thousands of infants and children.
Investors piled into the Huishan deal, including institutions like hedge funds, pension funds and sovereign wealth funds, as well as retail investors. Orders for share subscriptions from retail investors were more than 10 times the number that had been allocated to them, setting off a so-called clawback provision that increased the overall portion of the stock sold to retail investors from 10 percent to 15 percent of the total.
‘‘This is the first sizable Hong Kong I.P.O. since the market correction in May and the summer slowdown,’’ said one of the people with direct knowledge of the deal. ‘‘To be able to get that level of subscription from the retail investor base is a promising outcome, and hopefully it bodes well for future I.P.O.’s between now and the end of the year.’’
So-called cornerstone investors in the I.P.O., who commit to buy and hold shares for six months, accounted for about $214 million worth of the offering. Those investors included Norges Bank, which helps manage Norway’s government pension funds; Inner Mongolia Yili Industrial Group, another Chinese dairy company; and Baohua Investments, part of the private equity arm of the Cofco Group, a giant agricultural products supplier in China.
Shares in Huishan are set to begin trading in Hong Kong on Sept. 27. The underwriters on the I.P.O. are Deutsche Bank, Goldman Sachs, HSBC and UBS.
