- Decision by world’s largest brewer to go ahead with slimmed down listing in city wracked by protests is welcome news, but this is not the time for complacency
It has been a dry season for initial public offerings. So it is welcome news that Budweiser Brewing Company APAC will list in Hong Kong, after scrapping an attempt to go public in July. Market sentiments have turned more positive. More listings are expected to follow Budweiser, which at an estimated US$4.8 billion, is the second-largest globally since Uber Technologies' US$8.1 billion listing in New York in May. Investors have become more optimistic since the summer of discontent as Chinese and American negotiators are about to resume trade talks. The Hong Kong government's shelving of the controversial extradition bill also briefly boosted market sentiments.
Of course, markets can turn on a dime. Chinese-American trade talks can easily falter again. The ongoing anti-government unrest may continue and even escalate, despite the government's olive branch. This may well be a lull before the return of market volatility. For now, though, besides Budweiser, there is a slew of IPOs to keep up investors' interest. Among these are logistics real estate developer ESR Cayman and Home Credit, a China-focused consumer finance lender. Chinese e-commerce giant and South China Morning Post parent Alibaba Group Holding may yet go ahead with a second listing in Hong Kong, reportedly at between US$10 billion and US$15 billion, later this year. Alibaba first went public in New York in 2014.
The Asia-Pacific arm of Anheuser-Busch InBev, the world's largest brewer, Budweiser's latest public offering has considerably slimmed down from its failed attempt in July, which tried to raise as much as US$9.8 billion. But, with the average price-to-earnings ratio in the market at a multi-year low, the brewer is being realistic. The mainland is one of its principal markets in Asia. The return of IPOs is perhaps part of a bigger, positive story that Hong Kong remains the primary gateway for foreign investors going into China. The nation received US$62.9 billion in foreign direct investment through Hong Kong in the first eight months of this year, accounting for 70 per cent of the total. This is despite the ongoing protests and a downgrade of the city's rating and outlook by credit agencies Moody's and Fitch.
But Hong Kong people should not be complacent that their city will always remain the proverbial goose that lays the golden egg. Prolonged civil unrest and widespread antagonism in Hong Kong towards the mainland make economic cooperation across the border increasingly difficult. It took decades to build up Hong Kong as a world-class financial hub and undermining that status will take a much shorter time. While market sentiments are fickle and rise and fall in response to the latest news, long-term investors, both foreign and domestic, look for stability. It will take some convincing that this is a good time to buy.
Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.