Midea shares leap 9.5% in Hong Kong debut after $4 billion listing

By Scott Murdoch and Donny Kwok

SYDNEY (Reuters) -Midea Group stock jumped by up to 9.5% on its trading debut in Hong Kong on Tuesday after the Chinese home appliances maker raised nearly $4 billion in the city's largest share offering in almost four years, bolstering hopes for a revival in large Chinese issuances.

Midea, also listed in Shenzhen, priced its shares at HK$54.80 each in its Hong Kong float. Mainland Chinese markets were closed on Tuesday for mid-autumn festival holidays.

Midea's listing is the largest in Asia this year and second biggest globally behind Lineage Inc's New York IPO in July that raised $5.1 billion, according to LSEG data.

Midea's institutional tranche was oversubscribed by eight times and the Hong Kong retail offering portion was 5.31 times covered, according to Midea's regulatory filings.

The oversubscription rates, while higher than recent Hong Kong deals, remain well below the city's capital markets' boom in 2021 when transactions were hundreds if not thousands of times covered.

"Given how investors have lapped up such a big deal (Midea), one can expect investment bankers will be trying to get more quality names to list in Hong Kong," said Devi Subhakesan, an analyst at research firm Investory who publishes on investment research platform Smartkarma.

HOPES FOR MORE LISTINGS

Trade tensions between the United States and China and high interest rates globally have dampened foreign investors' appetite to buy into Hong Kong and Chinese equity capital markets deals, according to bankers and advisers.

However, bankers are hopeful a positive performance by Midea in its debut could prompt an increase in the number of potential IPO candidates.

"The strong performance by Midea will probably lead to a few more companies trying their luck with mainland to Hong Kong listings and overall IPOs as well, in our view," said Sumeet Singh, Aequitas Research director.

Midea rose as high as HK$60 per share, 9.5% above the offer price, with 56.2 million shares worth HK$3.32 billion changing hands. Midea was the most actively traded stock by turnover on the Hong Kong market so far on Tuesday, exchange data showed.

The bourse's Hang Seng Index was up 1.3%.

Midea sold 565.9 million shares in the deal and the final price set was about a 20% discount to Midea's Shenzhen listed share price. Mainland Chinese shares typically trade at a premium compared to Hong Kong listed stocks.

Midea increased the number of shares on sale at the end of the transaction after receiving strong demand from investors during the bookbuilding process.

Midea's deal means there have been $6.5 billion worth of IPOs and listings in Hong Kong so far in 2024, according to Dealogic data, compared to $2.7 billion at the same time last year.

At the same time in 2021, when Hong Kong's markets were at a record high, there had been $35.7 billion, the data showed.

(Reporting by Scott Murdoch in Sydney and Donny Kwok in Hong Kong; Editing by Muralikumar Anantharaman, Sonali Paul and Emelia Sithole-Matarise)