Chinese Appliance Giant Midea Set to Trade in Hong Kong After Raising $4 Billion

(Bloomberg) -- Chinese appliance giant Midea Group Co. will start trading in Hong Kong after robust demand for the biggest public stock offering in three years revived hopes for the city’s languishing market.

The Foshan, China-based company’s $4 billion upsized listing on Tuesday is Hong Kong’s biggest debut since Kuaishou Technology’s $6.2 billion offering in early 2021. Midea, whose shares are traded in Shenzhen, priced its Hong Kong shares at the top end of the marketed range, at HK$54.80. 

The market is pinning hopes on the much-feted deal after initial public offering volumes had slumped in Hong Kong against the backdrop of China’s economic struggles. Subscription levels for Midea, whose brands include Comfee and Eureka, show sizable demand still exists in the city for stocks with established business lines — and offer a glimmer of hope for investor confidence. 

Order books were multiple times subscribed and closed a day earlier than planned, Bloomberg News reported last week. Midea sold 566 million shares after exercising an option to boost the size of the offering by 15% due to demand, it said.

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Midea’s top-of-range pricing “indicates investors’ strong demand for liquid names in the China home appliance sector,” Citigroup analysts Xiaopo Wei and Vincent Young wrote in a note.

The company, founded in 1968, is China’s largest appliance maker and sells air conditioners, washing machines, elevators and other products. Some of the share sale proceeds would be used to expand its global distribution channels and sales network to boost overseas sales, it said. 

Midea’s debut may be arriving at an opportune time for the company. Home appliances are Citi’s most preferred sector among China’s consumer discretionary industries in the second half of this year given “higher earnings visibility,” the Citi analysts wrote. 

Second-half sales growth could accelerate as the Chinese government continues to promote its “trade-in” policy, in which consumers and businesses are encouraged to upgrade existing appliances and equipment. “We expect the ‘Trade-in’ policy to cover all China provinces by October,” the Citi analysts wrote in another note. 

Growing Numbers

Midea’s listing has pushed Hong Kong IPO proceeds to $6.5 billion this year, more than the total volume in all of 2023 but below bumper levels in past years, according to data compiled by Bloomberg. IPOs in the Asian financial hub generated an average 2.1% gain on their first day of trading this year. 

The listing’s cornerstone investors — who generally commit to keeping shares for at least six months — have agreed to buy $1.26 billion of its stock. They include a subsidiary of container-shipping company Cosco Shipping Holdings Co. and a unit of UBS Asset Management AG.

Midea offered a roughly 20% valuation discount to its stock price in Shenzhen before the deal launched. After the debut in Hong Kong, the deal size could be increased to $4.6 billion later if an overallotment option is exercised.

In recent years, a handful of mainland-listed companies have come to Hong Kong for a subsequent listing, including China Tourism Group Duty Free Corp. and Tianqi Lithium Corp. Midea could pave the way for more of such listings in Hong Kong, said Sharnie Wong, an analyst at Bloomberg Intelligence who covers the city’s stock exchange. 

“A more material rebound in listings might not come until stock market sentiment recovers,” Wong said. 

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