HONG KONG (Reuters) – Zhongsheng Group, a Chinese dealership which provides services for automakers including Japan’s Toyota Motor Corp (7203.T), on Tuesday put off a $1 billion Hong Kong initial public offering, citing volatile market conditions.
The postponement comes as once-booming markets in both Shanghai and Hong Kong, which raised more funds in IPOs than anywhere else in the world last year, have started to flag and Asian stock market sentiment softens.
A company spokesperson confirmed the IPO had been postponed, saying markets were too volatile to go ahead now.
Analysts said the company’s link with Toyota would also affect investors’ views of the offering.
“The recent Toyota recall issue definitely impacts investors’ appetite for Zhongsheng’s IPO,” said a banker involved in the deal, who declined to be named as he was not authorised to speak publicly on the issue.
Zhongsheng mainly provides sales and services and surveys businesses for major international auto brands in China.
The poor performance of Asian stocks so far this year — MSCI’s index of Asia stocks outside Japan .MIAPJ0000PUS is down 3.4 percent year-to-date — indicates that selling future deals could be tough.
Shares of recent IPOs have tumbled amid market volatility.
Russia’s UC RUSAL (0486.HK) (RUSAL.PA) and Canada-listed SouthGobi (1878.HK) (SGQ.TO) both fell 11 percent on their debuts, though South Gobi has since rallied.
In Shanghai, mid-sized brokerage Huatai Securities (601688.SS), which in a rare move priced its IPO at the bottom of an indicated range, rose more than 5 percent on its debut on Friday, below the double-digit gains that typified Chinese IPOs last year. [ID:nTOE61P022]
Analysts said that given the growth of China’s auto market, the world’s largest, Dalian-based Zhongsheng would likely wait until markets picked up for its Hong Kong listing.
Auto sales in China, including commercial vehicle sales, have more than doubled since 2005, rising to nearly 13 million units last year. In contrast, the U.S. market plunged from almost 17 million vehicles in 2005 to nearer 10 million in 2009.
Morgan Stanley (MS.N), UBS (UBSN.VX) and BOC International were handling Zhongsheng’s IPO. (US$1=HK$7.75)
By Kennix Chim
(Editing by Valerie Lee and Ian Geoghegan)