Hong Kong’s biggest listing may travel badly

People wearing face masks following the coronavirus disease (COVID-19) outbreak shop at a cosmetics store inside the Sanya International Duty-Free Shopping Complex in Sanya, Hainan province, China November 25, 2020. Picture taken November 25, 2020. REUTERS/Tingshu Wang

HONG KONG, Aug 18 (Reuters Breakingviews) - A big float is worth Hong Kong celebrating in a poor year. But plans by duty-free operator China Tourism Group (601888.SS) to price its $2 billion-plus share sale towards the top of its range, per reports from industry publication IFR, may make for less cheer.

Hong Kong shares of mainland listed groups are typically offered at valuations well below their northern cousins. China Tourism’s 189 yuan price in Shanghai represents a 32% premium to the HK$165.5 top end of its indicated range for its new shares. Yet an index tracking the gap between dual-listed Chinese groups’ shares puts the average premium at 46%, making the new shares relatively expensive.

Buyers will also have to factor in the potential hit to the company’s business from China’s preference for fighting Covid outbreaks through sudden, harsh lockdowns. A recent shuttering in the tourist hotspot of Hainan trapped thousands of holidaymakers. China Tourism’s revenue dropped 7% year-on-year in the first quarter of 2022. More of the same isn’t going to help its new investors’ journey. (By Jennifer Hughes)

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Editing by Una Galani and Pranav Kiran

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