UPDATE 3-China's Renhe braves harsh IPO market, up 4.4 pct
(For an expanded IPO diary, click <HK/IPOMENU>) (Updates with closing share price, adds company comment)
By Tony Munroe
HONG KONG, Oct 22 (Reuters) - China's Renhe Commercial Holdings Co Ltd rose 4.4 percent in its trading debut in Hong Kong on Wednesday in an IPO unlikely to inspire other listing hopefuls to venture into a global market that has all but shut to newcomers.
Renhe (1387.HK), which develops underground shopping malls, raised $435 million, although its initial public offering was undersubscribed even after the company cut its offer price, forcing existing shareholders to make up the difference.
Numerous companies have shelved plans to raise billions of dollars by going public, and little improvement is expected anytime soon. Investors shun risk these days, and companies that want to list would be forced to accept rock-bottom valuations to get their deals done.
"The general market has to improve worldwide, but that is a tall order," said Francis Lun, general manager of Fulbright Securities in Hong Kong.
Hong Kong's benchmark Hang Seng Index .HSI ended 5.1 percent lower, taking its losses to around 49 percent this year.
Renhe's listing is just the third to be completed since late July in the once-thriving Hong Kong market. In the United States, no company has gone public since the week of Aug. 3 through last week, a stretch that is the longest since 1980 when such data was collected, according to Thomson Reuters data.
With debt financing expensive and hard to come by in the global credit crunch, capital-hungry companies face dwindling financing options. In Asia, several small firms have defaulted on debt or gone into liquidation in recent weeks. [ID:nHKG311711]
"Company stocks are falling a lot, which is making it difficult for their major shareholders to borrow money from banks using their stocks as collateral," said Alex Huang, vice president at Mega International Securities in Taipei, which saw its first IPO this week since July 10.
"We'll have to wait for the stock market to pick up to see an improvement in IPOs, probably not before the second quarter of next year," he said.
PRICE CUT
Renhe sold 3 billion shares, or 15 percent of its share capital, at HK$1.13 each, lower than its earlier target price range of HK$1.40-HK$1.71 per share. The IPO price values Renhe at 10.4 times forecast earnings.
Renhe ended at HK$1.18 in a debut that was delayed by a week.
"Getting listed is part of the company's operational plan. We desire to be a public company, which gives us good credibility and a positive image for our market development and refinancing," Wang Hongfang, Renhe's executive director, told reporters.
Of the 300 million IPO shares allocated to Hong Kong retail investors, or 10 percent of the overall total, Renhe received applications for less than 19.9 million shares, or 6.6 percent of the shares available to local individuals.
The institutional portion of the deal was also undersubscribed, leaving existing shareholders to buy 396.25 million shares in the IPO.
BOC International, HSBC (HSBA.L) (0005.HK), Morgan Stanley (MS.N) and UBS (UBSN.VX) (UBS.N) are handling the deal. (US$=HK$7.8) (Additional reporting by Gina Chang in Taipei and Fion Li in Hong Kong) (Editing by Anne Marie Roantree and Anshuman Daga)
