China Tower joins growing list of subdued Hong Kong IPO debuts

By Julie Zhu and Donny Kwok

HONG KONG (Reuters) - China Tower Corp Ltd's (:0788.HK) shares closed flat on their debut in Hong Kong on Wednesday, with escalating Sino-U.S. trade tensions dragging on investor sentiment toward the world's biggest initial public offering (IPO) in two years.

Coming after a string of weak IPO debuts in Hong Kong, China Tower's performance could influence upcoming listings such as Sinochem Energy. It may also weigh on the city's attempts to sustain its record fundraising from stock floats.

Shares of China Tower, the world's largest mobile telecommunications tower operator, edged only as high as HK$1.29 before ending unchanged from their IPO price at HK$1.26. The Hang Seng Index (.HSI) closed up 0.4 percent.

Analysts said China Tower holding at or above its issue price would engender some confidence in the wider market.

"Long term institutions will park their funds in firms like China Tower - its the sort of stock you wouldn't expect to see any explosive jump in and it won't attract much retail speculative interest," said Linus Yip, chief strategist of First Shanghai Securities.

Also debuting on Wednesday was Nasdaq-listed BeiGene Ltd (:6160.HK), the second firm to float under new rules in Hong Kong designed to attract biotechs. Shares in the firm, which raised $903 million after pricing its stock at HK$108 each, slipped to HK$106.30, down 1.6 percent.

Under rules introduced earlier this year, biotech firms without revenue or profit can apply to list. Ascletis Pharma Inc (HKSE:1672.HK - News), a maker of anti-viral and cancer drugs, last week became this first to list under the new regime, but has seen its shares fall 20.8 percent below their IPO price since debut day.

Companies have now raised $22.4 billion in Hong Kong through listings this year, the city's best-ever seven-month performance, data from Thomson Reuters showed.

But the Hang Seng Index has dropped 14.5 percent from its January peak amid Sino-U.S. trade tensions, and several recent listings, such as that of Chinese smartphone maker Xiaomi Corp (HKSE:1810.HK - News), have struggled to maintain their IPO prices.

"Investors are becoming more cautious and selective toward new listings," said Ben Kwong, head of research and executive director at KGI Asia. "The overall pace of the IPO market will slow down a bit and listing candidates may try to avoid this weak sentiment when they can't demand higher valuations."

MOBILE GIANT

China Tower priced its IPO last week at the bottom of an indicative range, raising $6.9 billion in the world's biggest listing since Postal Savings Bank of China Co Ltd's (HKSE:1658.HK - News) $7.63 billion Hong Kong float in 2016.

The company operates 1.9 million tower sites and had 2.8 million tenants at the end of June, its IPO prospectus showed. It was formed in 2014 from the tower operations of China's three state-backed telecoms providers - China Mobile, China Telecom and China Unicom - to reduce duplication.

China Tower Chairman Tong Jilu, speaking at the open of trading in Hong Kong, said the fact that the company could go public after just three years of operation showed its quality was recognised by investors.

"I'm very happy that the international offering of our IPO has attracted global long-long funds, sovereign wealth funds and hedge funds as well as high-quality Chinese investors," he said.

China Tower's operating revenue in 2017 rose nearly 23 percent to 68.7 billion yuan ($10.07 billion), while profit rose more than 25 times to 1.9 billion yuan. Its three telecoms shareholders accounted for almost all its revenue last year.

China Tower's float is the latest move in a government push to inject new life into bloated state-owned enterprises by encouraging greater private capital investment.

Sinochem Energy, a unit of state-owned Sinochem Group, has filed for a $2 billion Hong Kong IPO as the group seeks to raise capital for a shift to higher-value businesses.

(Reporting by Julie Zhu and Donny Kwok; Editing by Christopher Cushing and Muralikumar Anantharaman)