Translated by Andrew Vanburen from a Chinese-language piece in Sinafinance
WHEN A STOCK MARKET is in decline and the sound of firms knocking at the door looking to get in becomes a deafening silence, any uptick in possible IPO interest is big news.
That's why the dozen brave souls in China’s consumer space planning IPOs by year end in Hong Kong’s struggling capital market is more than worthy of mention.
Among them include well-known retail names like Beauty Group and Basic House Global.
Will they succeed amid a sluggish IPO market?
First, let’s get down to the brass tacks.
This dynamic dozen is set to add a whopping 20.2 billion yuan in proceeds to the moribund Hong Kong IPO market.
Market watchers keeping an eye on the Special Administrative Region’s (SAR) capital market and the other eye on up-and-coming Chinese consumer sector firms say that it is the perfect marriage of convenience as the Hong Kong stock exchange struggles to attract new talent.
They say that the plethora of PRC food and beverage plays in particular looking to raise capital via a Hong Kong debut make the anticipated cooperation all the more attractive as the “domestic consumption” theme in Mainland China still has tremendous untapped potential, having barely gotten started at all.
In a manner of speaking, the consensus is that the prospect of a few good hot foods and drinks on the Hong Kong bourse could even thaw the frozen IPO market that the SAR has been enduring all these months.
And thanks to the strong promotions by investment banks and a wide assortment of funds pushing PRC consumer sector stocks to go public in Hong Kong, it looks like the door is being cracked open even wider.
In fact, a good number say this could be the trend – PRC consumer IPOs in Hong Kong – that becomes the next potential upside driver for the struggling stock market.
The list of aspirants to the Hong Kong Stock Exchange no doubt contains many names familiar to frequent travelers to Mainland China.
The dozen consumer plays awaiting a green light from Hong Kong’s market regulator include Beauty Group, Basic House Global and a host of peers.
Beauty Group, one of the few Hong Kong-based IPO candidates on the list, is aiming to raise some 2.3 billion hkd in proceeds.
The firm is the holding company of an international array of luxury brands including Ingrid Millet, Bioscreen, Organic Beauty and Shimmer.
On the hot meal provider list is another firm using “beauty” in its name but offering quite different wares than Beauty Group.
Beijing-based South Beauty, an upscale Chinese restaurant group, recently won approval to launch a Hong Kong IPO, and is seeking up to 200 million usd in proceeds, with Deutsche Bank and UBS appointed its major underwriters.
The decision to select Hong Kong as its IPO platform follows a refusal by China’s securities watchdog to launch an A-share IPO in the PRC earlier this year.
The restaurant play, founded in 2000 and operating 60 venues across the country. was turned down by the China Securities Regulatory Commission following more stringent IPO qualification standards for PRC-based restaurants.
Whether or not this means Hong Kong has laxer standards and is desperate for newcomers at any price has yet to be determined.
Another aspirant to the HKSE is neither Chinese nor from Hong Kong.
Seoul-based The Basic House Company is hoping to be the first Korean name on the SAR’s bourse.
The clothing retailer, already listed in Seoul and representing apparel brands like Speedo, D’Urban, and its own Basic House line – is aiming to raise some 300 million usd in the process.
Huishan Dairy, Ten Wow Foods and Heilongjiang Province-based Star King are also hoping to bring food to the table in the way of Hong Kong listings before the calendar turns to 2013.
Investors would do well to keep a close eye on this possible mini-flood of retail plays eyeing the Hong Kong market.
It is yet to be proven whether the dozen candidates are legitimate players with strong cases for selling shares in Hong Kong, or whether they are merely food for thought for analysts to chew on.
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