Jeweler and insurer decline in debut as investors stay away

   Date:2011-12-16liuhongli

 

Chow Tai Fook Jewellery chairman Henry Cheng Kar-shun (right) presents a souvenir to Hong Kong stock exchange Chairman Ronald Arculli during the company listing ceremony on the bourse yesterday.

CHOW Tai Fook Jewellery Group Ltd and New China Life Insurance Co yesterday fell on their debut in Hong Kong, reflecting a slump in demand for new equity as China's growth slows and Europe's debt crisis persists.

Chow Tai Fook, the world's largest listed jewelry chain, dropped 8 percent to HK$13.8 after raising HK$15.8 billion (US$2 billion) in an initial public offering. New China Life, the country's third-largest life insurer, fell 9.8 percent to HK$25.7 at the market close after completing a US$1.9 billion IPO.

New China Life had the worst debut among Hong Kong IPOs of at least US$1 billion since June, according to data compiled by Bloomberg News. Other companies selling stock for the first time, including Haitong Securities Co and Guodian Technology & Environment Group Corp, canceled or cut offerings in the past week as the economic turmoil sapped demand for equity.

"Investors are holding on to their cash, doubtful about not only new stock, but also shares in the secondary market," said Ronald Wan, a Hong Kong-based managing director at China Merchants Securities Co, which oversees about US$1.5 billion. "Worries about Europe will keep investors cautious in months to come."

Hui Xian Real Estate Investment Trust fell 9.4 percent on its April debut after raising US$1.8 billion in Hong Kong's first yuan-denominated IPO. Samsonite International SA, the world's biggest branded-luggage maker, lost 7.7 percent on its first day of trading in the city in June.

Chow Tai Fook and New China Life fell even after pricing their IPOs at or near the bottom of ranges marketed to investors.

Hong Kong's Hang Seng Index has fallen 6.3 percent since December 7, the day before New China Life priced its shares.

"With the uncertain outlook for the macro economy, it's difficult to ask investors to buy newly listed stocks at the moment," said Alex Au, Hong Kong-based managing director of Richland Capital Management Ltd, which oversees US$300 million.

Chow Tai Fook's offer price values the company at about 15 times estimated profit for the year ending March 2013, according to people with knowledge of the matter.

Tiffany & Co, the New York-based luxury jeweler, trades at 15.4 times the average analyst estimate for 2012 earnings, data compiled by Bloomberg News show. Signet Jewelers Ltd, the world's second-largest jewelry chain, trades at 11.3 times.

China Polymetallic Mining Ltd plunged 39.2 percent on Wednesday on its debut after raising HK$1.1 billion in a Hong Kong IPO. Baoxin Auto Group Ltd lost 14.1 percent on Wednesday in its debut after a HK$3.2 billion IPO.

Chow Tai Fook expects "buying power of customers to weaken" Chairman Henry Cheng said yesterday.

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