Shares in Chinese bubble-tea chain Baicha Baidao plummeted nearly 40 percent on its first trading day in Hong Kong, dealing a blow to the city’s efforts to revive its markets. The Chengdu-based company, also known as Chabaidao, raised around HK$2.59 billion during its initial public offering in November, making it the largest IPO since then. However, the stock price dropped from HK$17.50 to HK$10.80 upon opening, marking a 38 percent decrease before closing at HK$12.80. This marked the worst debut for a company raising at least US$300 million since 2015.
Another new listing, Tianjin Construction Development Group, also saw a sharp decline of over 30 percent despite raising about US$20 million in its IPO. These losses underscore the challenges facing Hong Kong’s trading market, which has seen a decline in fundraising through new listings for four consecutive years.
To address these issues, Hong Kong’s security chief, John Lee, announced five new measures last week aimed at boosting market sentiment. These measures include allowing more funds, such as real estate investment trusts, to engage in cross-border trading and supporting leading Chinese companies to list in the city. Lee noted that numerous companies have applied to mainland regulators to go public in Hong Kong, including large companies from traditional industries like manufacturing and logistics, as well as key players in high-value industries like AI and fintech.
Despite reporting its second-best profits on record in February, the Hong Kong exchange only saw 73 IPOs last year, raising a total of HK$46.3 billion. The decline in new listings comes amid a regulatory crackdown by Beijing that began in 2020, prompting some Chinese companies to put their listing plans on hold. One significant event that contributed to this crackdown was China’s last-minute cancellation of Ant Group’s IPO in 2020, which would have been the world’s largest. This move initiated a broader clampdown on multiple sectors and led to significant losses in market value for many Chinese firms.
