Mobile phone maker Xiaomi’s disappointing initial public offering has cast a cloud over potential new listings by Chinese companies in Hong Kong. The intensifying trade conflict between Beijing and Washington is only further deflating sentiment.
Xiaomi shares closed lower Monday in Hong Kong on its first day of trading after the world’s fourth-largest mobile phone maker priced an IPO that gave it a valuation of about $54 billion — half of what it had originally expected.
And though the Beijing-based company’s shares subsequently rebounded, its experience was closely watched by other companies considering or planning possible Hong Kong IPOs, including food delivery platform Meituan Dianping and financial services company China Renaissance, which have both filed to list on the city’s exchange.
“The sentiment in the market is not extremely good,” Jackson Wong, associate director at Huarong International Financial Holdings, told CNBC of the current outlook for Hong Kong listings.
In a blow to the local exchange, Chinese internet giant Tencent Holdings said in a statement on Sunday that it plans to list its online music entertainment business, Tencent Music Entertainment Group, on an unspecified U.S. exchange.
Tencent’s turn toward the U.S. reflects some of the problems the East Asian finance hub has recently faced, which, according to Wong, include disappointing valuations and waning investor enthusiasm.
Recent Hong Kong IPOs, including companies such as online healthcare provider Ping An Good Doctor and gaming hardware company Razer, were up to a thousand times oversubscribed, whereas Xiaomi’s was much less, indicating fervor has waned, he said.
Investors “are not giving a huge premium to these so-called new economy technology stocks at this point,” Wong said.
“New economy” largely refers to companies riding the wave of the expanding mobile internet, such as online shopping platforms and other web-based services including ride-hailing, food delivery and financial services.
Even financial services firm China Renaissance is tied to the sector, saying on its website that it serves “new economy entrepreneurs and investors globally.”