China rare-earth firm slumps 17% in Hong Kong trading debut

[HONG KONG] Shares of China's JL MAG Rare-Earth Co dropped as much as 17 per cent in their Hong Kong debut after being sold at the bottom of the marketed range in what is the biggest offering so far this year in the Asian financial hub.

The producer of magnetic rare-earth materials slid to as low as HK$28 on Friday (Jan 14). That's versus an offer price of HK$33.80 apiece in the sale that raised HK$4.24 billion (S$731.6 million). The Chinese company is already listed in Shenzhen.

JL MAG's is the first offering to raise more than US$500 million in Hong Kong this year as China's crackdown on several private enterprises plus the prospect of rising interest rates cast a shadow over deals in the Asian financial hub.

The slow 2022 start contrasts with a busy kick-off in 2021, when 16 companies priced near US$8 billion worth of shares last January, Bloomberg data show.

Shares of the 19 companies that debuted in Hong Kong over the past year after raising at least US$500 million rose by an average 18 per cent on the first day of trade, according to data compiled by Bloomberg. The average gain among those that debuted over the past 6 months, though, was just 4 per cent.

At the intraday low, LG MAG Rare-Earth was headed for the worst performance since February 2018 for a Hong Kong listing bigger than US$500 million. A-Living Smart City Services Co declined 23 per cent in its first session on Feb 8, 2018.

LG MAG Rare-Earth has said it aims to use proceeds of the share sale for construction of a production base in Ningbo, potential acquisitions through 2023 and expansion of a global industry-chain layout.

Profit for the 6 months ending June 2021 was 220.6 million yuan (S$46.7 million), a 141 per cent jump over the same period a year earlier, according to the company's prospectus. Citic Securities Co and BNP Paribas SA were joint sponsors of the Hong Kong deal.

BLOOMBERG