SenseTime jumps on debut after IPO delayed by US sanctions

[HONG KONG] Chinese artificial intelligence giant SenseTime Group jumped on its first day of trading in Hong Kong after a rocky initial public offering (IPO) that was delayed by concerns over fresh US sanctions.

The stock gained as much as 23 per cent in early trading before ending 7.3 per cent higher, the biggest first-day gain since mid-July for any Hong Kong IPO that raised at least US$500 million. The SoftBank Group-backed company raised HK$5.78 billion (S$1 billion) selling 1.5 billion shares at HK$3.85 apiece, the bottom of its marketed range.

SenseTime's strong debut is a rare feat in Hong Kong, where new listings have been among the worst performers this year. It also comes in defiance of new sanctions levied this month by the US Treasury Department over the company's alleged involvement in human rights abuses in Xinjiang. SenseTime, which has also been blacklisted by the Commerce Department under the Trump administration, has vigorously denied the charges.

The company pushed ahead with the listing, securing US$512 million from 9 cornerstone investors including the state-backed Mixed-Ownership Reform Fund and Shanghai Xuhui Capital Investment Co.

It excluded US investors from the issuance, citing the "the dynamic and evolving nature of the relevant US regulations".

Chinese companies that debuted in Hong Kong since July, when Beijing extended the clampdown over several industries, have seen their shares rise an average 1 per cent on the first day of trading, according to data compiled by Bloomberg. Nine firms that have listed this month prior to SenseTime have seen an average drop 2.8 per cent in their stocks.

Market watchers such as Steven Leung, executive director at UOB Kay Hian (Hong Kong), attributed SenseTime's strong gain in part to buying by short-term speculators.

"Today's price jump is because of the reasonable valuation, and investors want to buy in this famous company to make money in 1 or 2 days as there are no hot themes in the market at present," said Gary Ching, vice-president at Guosen Securities (HK). "But the trend won't continue as the company still faces a lot of bad news."

BLOOMBERG