HK retail investors join rush for Cinda IPO
By Elzio Barreto, Reuters
December 5, 2013, 12:24 am TWN
HONG KONG--Hong Kong's army of mom and pop investors has piled into China Cinda Asset Management Co. Ltd.'s initial public offering, lured by the marquee global names already buying into Hong Kong's biggest IPO this year as well as strong backing from Beijing.
Setting aside unfamiliarity with how Cinda makes money out of managing bad loans, retail investors joined institutional buyers in placing a deluge of orders. That's encouraging Cinda to price the IPO at the top of its indicative range, about US$2.5 billion, one person with direct knowledge of the matter said.
The final price will be set on Thursday morning Hong Kong time, with the trading debut slated for Dec. 12.
A separate person with knowledge of the IPO said the retail tranche was more than 160 times oversubscribed, unusual for such a large deal. Demand from institutions was also brisk enough to prompt early closure of that side of the offering.
“This kind of company is very new to the market, you can't find any peers compared to Cinda. It's the only one going to be listed in Hong Kong (for now), so there's the novelty factor,” said Jasper Chan, corporate finance officer at Hong Kong brokerage Phillip Securities.
Robust appetite for the original US$123 million retail tranche of the IPO has defied expectations of some in the market who feared a lukewarm reception from individual investors, usually drawn to easy-to-understand businesses, unlike Cinda's complicated bad debt trading activities.
While Cinda's business model may be complex, it's lucrative. It said in the IPO prospectus that profit attributable to equity holders was 4.06 billion yuan (US$666 million) for the six months ended June 30. That was up 36 percent from 2.99 billion yuan a year earlier.
Cinda's offering has an initial allocation of 5 percent for individual investors. But that can rise as high as 20 percent if over-subscription is 100 times or more, according to its prospectus, with shares being clawed back from the offering to institutions.