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Shares of fast food group Yum China fell as much as 6.3 percent on its Hong Kong debut, as the market struggled to digest the latest “homecoming” listing for a Chinese company.
Shares of Yum China, which operates KFC and Pizza Hut restaurants in the world’s second-largest economy, fell on Thursday after the group raised about $ 2.2 billion earlier this month.
The shares ended up trading 5.3% lower, while the Hang Seng overall fell 0.6%.
Some traders said there were concerns about Yum China’s growth prospects. Louis Tse, managing director of Hong Kong-based VC Asset Management, said investors saw little room for Yum to expand its market share in China, where it had been operating for more than 30 years. It had more than 9,000 restaurants in the country as of June.
“If you add a few more [restaurants] It doesn’t have much of an impact on their income there, ”said Mr. Tse. “You are talking about volume, not high profit margins.”
Yum China shares were sold to investors at HK $ 412 on September 3, roughly 5 percent below the price of the company’s shares traded in the United States at the time. Its fall on Thursday puts Yum China’s Hong Kong-traded shares below the closing price on the company’s US depository receipts listed in New York on Wednesday.
“It’s a bad time,” said Andy Maynard, a China Renaissance trader. Maynard pointed to Hong Kong’s listing rules that require a five-day waiting period between the time the shares are listed and the time they begin trading, during which global markets had fallen.
“If Yum China had come a month ago, we wouldn’t be talking about it with euphoria. . . but it would not be as negative as it is today, “he added.
Yum China’s listing in Hong Kong, which has been listed in New York since 2016, occurs in a context of tensions between Washington and Beijing. The float makes it the latest multi-billion dollar stock sale of a Chinese company threatened with forced exclusion from Wall Street.
Legislation passed by the US Senate, as well as plans announced by the Trump administration this year, have established how Chinese companies listed on the New York Stock Exchange and the Nasdaq could be forced out of business. US markets if they do not provide US regulators access to their audit reports.
Other so-called welcome listings in Hong Kong this year include Internet groups NetEase and JD.com, which sold nearly $ 3 billion and $ 4 billion worth of shares, respectively.
Yum China’s tepid market debut comes despite strong demand for the shares during this month’s initial public offering. The share of secondary supply allocated to retail investors in Hong Kong increased after demand exceeded supply by more than 50 times. Bankers in the deal said investors included long-term global funds and major Chinese investors.
The decline in Yum China shares also contrasts with another big listing in Hong Kong this week. On Tuesday, shares in Chinese bottled water company Nongfu Spring rose as much as 80 percent on its debut in the Asian financial center, making founder Zhong Shanshan the third-richest person in China.
Additional information from Mercedes Ruehl in Singapore
