UPDATE 1-Langham Hospitality tumbles in debut amid U.S. rate concerns
* Langham Hospitality plunges as much as 9.6 pct in HK debut
* Concerns over U.S. stimulus, rate hikes seen affecting REITs
* Hopewell Hong Kong launches up to $780 mln Hong Kong IPO (Adds Hopewell Hong Kong IPO launch, comments)
By Elzio Barreto
HONG KONG, May 30 (Reuters) - Langham Hospitality Investments Ltd dropped as much as 9.6 percent in its trading debut in Hong Kong on Thursday, underscoring concerns that rising yields in the United States could reduce demand for REITs and trusts in Asia and affect upcoming real estate sector IPOs.
The weak debut comes after a plunge in benchmark indexes for real estate investment trusts (REITs) in Singapore and Hong Kong in recent days on concerns that the U.S. Federal Reserve could soon scale back its massive bond buying programme. These concerns have pushed up yields on U.S. Treasuries and reduced the relative appeal of REITs and other yield-paying securities.
Higher U.S. rates would mark a reversal of fortunes for REITs and business trusts that had been riding high amid record low borrowing costs around the world. It could also dampen demand for $2.1 billion worth of deals from in coming weeks in Hong Kong, including an up to $780 million initial public offering by Hopewell Hong Kong Properties Ltd launched on Thursday.
"Sentiment has changed, particularly over the last few days, on fears over a scale-back of the easing programme in the U.S. and there's also some concern than the rate hike cycle will come earlier than many people previously expected," said Wilson Ho, a property analyst at brokerage Core Pacific-Yamaichi in Hong Kong.
"There's been a sectorwide correction. It's not just Langham."
The Hong Kong REIT index has plunged 10.3 percent since reaching an all-time high last week, while the REIT index in Singapore has fallen in eight of the past 10 sessions, down nearly 11 percent.
Langham Hospitality, an investment trust controlled by property developer Great Eagle Holdings Ltd, was trading at HK$4.55 at 0417 GMT. It fell as low as HK$4.52, below the HK$5.00 IPO price set last week when it raised US$550 million in the offering. The benchmark Hang Seng index was down 0.5 percent.
The developer Hopewell Hong Kong, a unit of Hopewell Holdings Ltd, is offering 340 million new shares in an indicative range of HK$15.30 to HK$17.80 each, putting the total deal at up to HK$6.05 billion ($780 million), according to a term sheet of the IPO seen by Reuters.
About 40 percent of the IPO proceeds will be used to develop Hopewell Centre II, with 22 percent set aside for the purchase and development of Amalgamation Properties and potential new developments. Another 30 percent will be used to pay down debt.
DEMAND FOR YIELD
REITs had been riding in recent months, with issuance in Asia ex-Japan more than quadrupling in 2013 from the same period last year on increased demand by investors for high-yield securities to bolster returns amid low global rates.
Langham Hospitality said in a filing on Wednesday that demand from retail investors was nearly 11.7 times the number of units on offer, with the institutional tranche of the IPO "moderately over-subscribed."
But the market has quickly turned since last week, when Fed Chairman Ben Bernanke said that the U.S. central bank might decide to gradually decrease its bond purchases in the next few policy meetings if data shows the economy is gaining steam.
Deutsche Bank AG and HSBC Plc were hired as sponsors and joint global coordinators of the Langham Hospitality offering, with Citigroup also acting as a joint bookrunner.
BOC International and Credit Suisse were hired as sponsors and joint global coordinators of the Hopewell Hong Kong IPO, with Citigroup, HSBC and JPMorgan also acting as joint bookrunners. (Reporting by Elzio Barreto; Editing by Chris Gallagher)
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