(Bloomberg) — Chinese kitchenware firm Carote Ltd. rose as much as 88% in its Hong Kong listing debut on Wednesday, reinforcing perceptions that the city’s once-anemic initial public offering market has sprung to life.
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The company, the first to list in Hong Kong since Chinese appliance maker Midea Group Co.’s $4.6 billion debut, raised about HK$751 million ($97 million) via its IPO. The Hangzhou-based firm priced its shares at HK$5.78 each, the top of the marketed range.
Demand for its IPO, which has drawn interest from investors including Hillhouse Investment and Shunwei Capital, was so strong that Carote closed order books a day earlier than planned last week. The deal’s Hong Kong tranche was more than 1,300 times subscribed, the third largest of such orders among all the local listings this year.
By late Wednesday morning, Carote’s shares have narrowed their gains to 22%.
The company’s trading debut adds to investors’ belief that the Asian financial hub is back in business, after Midea’s IPO that marked Hong Kong’s biggest listing in more than three years. Further aiding it has been the remarkable turnaround in Chinese equities since last week, after Beijing ramped up efforts to revive its slowing economy and depressed equities.
“Investors are even more focused on trying to secure allocation in Hong Kong IPOs, especially for quality names, which has not been seen for quite some time,” said Ivy Hu, head of China equity capital markets at UBS Group AG.
Founded in 2007, Carote makes kitchenware including pots and pans, tableware and beverage containers. It generated a profit of 88.5 million yuan ($12.6 million) for the first three months of 2024, up 58% from the same period last year, Carote’s listing documents show.
Underpinned by Midea’s deal, Hong Kong listings have raised more than $7 billion so far in 2024, eclipsing last year’s annual total but far below the $51.7 billion raised in 2020, according to data compiled by Bloomberg. The rebound followed a three-year slump due to concerns over China’s economy as well as Beijing’s regulatory crackdowns and tensions with the West.
New stock offerings on the near-term horizon include China Resources Beverage Holdings Co., which has started gauging investor interest, and Alibaba Group Holding Ltd.-backed cloud services firm Qiniu Ltd., which is seeking to raise up to HK$457 million.
Carote’s IPO couldn’t have come at a better time, following the recent stellar rally in Chinese stocks listed both in Hong Kong and on the mainland. A key gauge of Chinese firms traded on the city’s bourse has risen more than 26% since Beijing unveiled a sweeping stimulus package over a week ago.
The rally provides a good backdrop for equity capital market activities in the near term, especially with a new supply of deals involving quality companies, said Peihao Huang, co-head of Asia-Pacific equity capital markets at JPMorgan Chase & Co.
“Given IPOs take a longer time to prepare, the number of large IPOs coming into the market for the remainder of this year will still be limited,” Huang said. “But if current market sentiment continues, 2025 will be a busy year for Hong Kong and China.”
Some investors remain cautious.
Sam Wyatt, a London-based senior portfolio manager at Mondrian Investment Partners Ltd., said his firm participated in Midea’s share sale as he saw competitive advantages in the company. Whether other Chinese listings will be as appealing is a different story, he said.
“It really needs to be an attractively valued IPO,” Wyatt said, adding that he prefers companies that would help diversify his fund’s existing China portfolio.
–With assistance from Julia Fioretti, Pei Li and Julie Chien.
(Updates with price moves and subscription details)
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