October 27, 2020

Market and Financial News Aggregator

Yum China shares drop as much as 6.3% on Hong Kong debut

2 min read

Fast food group Yum China’s stock fell as much as 6.3 per cent on its Hong Kong debut, as the latest so-called “homecoming” listing of a Chinese company struggled to get investors’ pulses racing.

Shares in Yum China, which operates KFC and Pizza Hut restaurants in the world’s second-biggest economy, slipped on Thursday after the group raised about $2.2bn earlier this month. Hong Kong’s broader Hang Seng index gained 0.3 per cent.

Yum China’s shares were sold to investors at HK$412 ($53.16) on September 3, then about 5 per cent below the price of the company’s US-listed stock. Their fall on Thursday puts Yum China’s Hong Kong-traded shares below the closing price for the company’s New York-listed American depositary receipts on Wednesday.

“It’s bad timing,” said Andy Maynard, a trader at China Renaissance. Mr Maynard pointed to Hong Kong listing rules that require a five-day waiting period between when shares are priced and when they begin trading, during which global markets had entered a strong sell-off.

“If Yum China had come a month ago, we wouldn’t be euphorically talking about it . . . but it wouldn’t be as negative as it is today,” he added.

The listing of Yum China, which has traded in New York since 2016, in Hong Kong comes against a backdrop of tensions between Washington and Beijing. The float makes it the latest multibillion-dollar share sale by a Chinese company threatened with forced delisting from Wall Street.

Legislation passed by the US Senate as well as plans announced by the Trump administration this year have laid out how Chinese companies listed on the New York Stock Exchange and Nasdaq could be forced to exit US markets if they do not provide American regulators access to their audit reports.

Other so-called “homecoming” listings in Hong Kong this year include internet groups NetEase and JD.com, which sold shares worth almost $3bn and $4bn, respectively.

The tepid market debut for Yum China comes despite strong demand for the shares during this month’s initial public offering. The portion of the secondary offering allocated to retail investors in Hong Kong was increased after demand outstripped supply by more than 50 times. Bankers on the deal said investors included global, long-term funds and prominent Chinese investors.

The slide in Yum China’s shares also stands in contrast to another big listing in Hong Kong this week. On Tuesday, shares in Chinese bottled water company Nongfu Spring jumped as much as 80 per cent on their debut in the Asian finance hub, making founder Zhong Shanshan China’s third-richest person.

Additional reporting by Mercedes Ruehl in Singapore

2020-09-09 23:21:25

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