Hui Xian closes at 4.75 yuan, down 9.4% from its 5.24 yuan IPO price
Hui Xian Real Estate Investment Trust (REIT), the first yuan-denominated initial public offering (IPO) outside the mainland, encountered a dismal debut on the Hong Kong exchange Friday as investors were less than impressed by it.
Shares of Hui Xian closed at 4.75 yuan ($0.73), down 9.4 percent from its 5.24 yuan IPO price.
Unlike normal stocks, REITs are long-term but low-yield income-generating products which may not satisfy the appetite of retail investors who are looking for short-term profits, Kenny Tang, executive director of Redford Securities, told China Daily in response to Hui Xian’s lackluster debut.
The 4.26 percent forecast yield of Hui Xian REIT is also lower than an average estimated yield of 4.85 percent for Hong Kong-traded REITs, according to Bloomberg.
Other Hong Kong-listed trusts – Link REIT, Fortune REIT, Regal REIT and Champion REIT – have forecast yield of 4.46 percent, 6.36 percent, 4.60 percent and 5.01 percent respectively.
“If the city’s first yuan-denominated stock was not a REIT, the outcome should have been quite different,” said Tang, who estimated more yuan-denominated stocks to appear in the city and forecast a better outlook for them.
Controlled by tycoon Li Ka-shing, Hui Xian, which owns the Oriental Plaza commercial complex in Beijing, priced its 10.5 billion yuan offer at the bottom end of its indicative price range of between 5.24 and 5.58 yuan.
Nevertheless, Hui Xian Chairman Kam Hing-lam said Friday that the listing is a “historic act for Hong Kong and the mainland”.
Kam also said he believes that the interest in yuan products will pick up after investors become more familiar with them.
On the same occasion, the chief executive of the city’s stock exchange, Charles Li, told reporters that while the market response to the Hui Xian IPO was outside the control of the bourse, its successful listing was a milestone for the internationalization of the yuan.
“Yuan products don’t necessarily have anything inherently more superior than Hong Kong dollar products. They are just denominated in a different currency. In the end, we just want to make sure yuan products do not have a natural disadvantage,” said Li.
Hui Xian sought to tap the growing pool of yuan currency deposits in the city. Yuan deposits in Hong Kong increased to 407.7 billion yuan in February, up 10 percent from a month earlier, the Hong Kong Monetary Authority said on March 31.
Yuan deposits in Hong Kong may rise to 870 billion yuan by the end of this year, Zhang Guangping, deputy director-general of the China Banking Regulatory Commission’s Shanghai branch, said Friday.
The yuan’s continuous appreciation against the US dollar also drew investors to favor yuan-denominated products. Also on Friday, the yuan breezed past 6.50 per US dollar for the first time since 1993. It has risen 27.5 percent since the nation’s landmark currency reforms in 2005.