More than 70 per cent of new Hong Kong listings ended 2021 below their IPO price, hit hard by Beijing's tech crackdown

Last year was a write off for investors hoping to profit from new listings, with over 70 per cent of the 96 initial public offerings in Hong Kong trading below their offering price by December 31, most suffering collateral damage from China's regulatory crackdown on the technology sector.

Eight of the 10 largest Hong Kong IPOs in 2021 would have delivered losses to their investors if they held the stocks until December 31, according to data from Refinitiv and Everbright Sun Hung Kai.

Short video-sharing platform operator Kuaishou Technology was the largest and most popular new listing in the city last year - and among the biggest losers. The stock finished 2021 at HK$72.05, down 37 per cent from its offer price of HK$115 in January, when the company raised US$6.2 billion.

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However, short term investors who offloaded the stock on its debut were handsomely rewarded, as it closed the first day of trading at HK$300, more than double the offer price.

Shares of Kuaishou, which means "quick hand", climbed to a peak of HK$415 two weeks after its listing, but in July the stock plummeted to below its IPO price after Beijing started to tighten regulation of the tech sector.

A similar pattern could be found in most of the other top 10 new listings, which were dominated by tech stocks that were hit the hardest by the crackdown.

When comparing their year-end close and original offering price, JD Logistics fell 34 per cent while search engine Baidu plunged 43 per cent. They were 2021's second- and third-largest IPOs respectively, raising over a combined US$6.6 billion.

Bilibili, another video-sharing platform, lost 56 per cent, Linklogis plummeted 58 per cent, online travel platform Trip.com Group ended down 29 per cent, while Shenzhen-listed Asymchem Laboratories Tianjin fell 18 per cent from listing to year-end.

Online video platform operator Bilibili's logo at the China Digital Entertainment Expo and Conference on July 30, 2021. Photo: Reuters alt=Online video platform operator Bilibili's logo at the China Digital Entertainment Expo and Conference on July 30, 2021. Photo: Reuters>

Dongguan Rural Commercial Bank, the only financial firm among the top 10 IPOs last year, lost a relatively modest 4 per cent.

The only two winners in the group were two US-listed mainland Chinese electric vehicle makers that launched dual primary listings in Hong Kong. Xpeng closed the year at HK$186.3, up 13 per cent from its offering price in Hong Kong in June, while rival Li Auto gained 4 per cent from its listing price in August until the end of the year.

"The Hong Kong IPO market did not perform well in 2021. In total, over 70 per cent of the new listings [last year] recorded a decline in their share price as of the end of the year when compared with their IPO offering," said Kenny Ng Lai-yin, a securities strategist at Everbright Sun Hung Kai.

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Ng said the poor performance of the mega-IPOs was a factor in the significant decline in Hong Kong's stock market last year.

"The mainland's tightening regulation of overseas listings also caused investors to worry about the IPOs of Chinese companies," he said

Ng, however, believes IPOs in Hong Kong will perform better in 2022. "Due to the tension in the Sino-US relationship, the trend of Chinese companies listing in Hong Kong is expected to continue," he said.

A robotic arm hits the gong during a ceremony marking the debut of JD Logistics on the Hong Kong stock exchange. Photo: Bloomberg alt=A robotic arm hits the gong during a ceremony marking the debut of JD Logistics on the Hong Kong stock exchange. Photo: Bloomberg>

Hong Kong's main board slid to third from second in the international IPO rankings last year, as fundraising sank 17 per cent to US$42.6 billion. That was below Nasdaq and the New York Stock Exchange, but higher than the Shanghai Stock Exchange and the Shanghai Star Market.

The worst performer last year was genetic technology research company Suzhou Basecare Medical, which added 1.2 per cent to its debut price of HK$27.36 in February, but had lost 75 per cent of its value by year-end, closing at HK$6.7 on December 31.

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The biggest winner was Morimatus International, a mainland pressure equipment maker, which soared 259 per cent on its debut on June 28. Its shares have continued to gain since, ending 2021 at HK$8.95 for a total return of 261 per cent on its IPO price.

In November, the Securities and Futures Commission (SFC) issued a warning about the high concentration of shareholdings in the company, with 17 shareholders owning 21.14 per cent of total issued shares, and the controlling shareholder owning 72.29 per cent.

The SFC said because only 6.57 per cent of Morimatus shares were in the hands of other shareholders, the stock could experience price fluctuations.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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