China’s Tianqi Lithium shares had a volatile first day on the Hong Kong Stock Exchange, plunging more than 11% in early trading before bouncing back to close the session unchanged.
The stock’s recovery was a significant boost for both Tianqi and the market, given the IPO is the city’s biggest listing so far this year and because its lacklustre start could have further depressed sentiment for similar equity sales in the second half of 2022.
The city has seen share sales plunge by as much as 90% this year with global financial markets roiled by geopolitical tensions and rising interest rates.
Shares in Tianqi, one of the world’s top producers of lithium chemicals for electric vehicle batteries, fell to as low as HK$72.65 from its final sale price of HK$82.
The stock then recovered during the afternoon session to end at HK$82.
The company’s Shenzhen-listed shares closed the day up 0.62% after trading down by as much as 5%.
‘Negative Impact on Other IPOs Feared’
Hong Kong’s Hang Seng Index gave up an earlier positive lead to close down 0.22% on Wednesday.
“With Tianqi not managing to do well despite being decently priced, it will definitely have a negative impact on other deals in the pipeline, as people will be wary of all and any future deals till markets settle down,” said Sumeet Singh, the director of Aequitas Research, who publishes on Smartkarma.
The initial decline in the Hong Kong shares followed a sell-off in Tianqi’s Shenzhen listed stock which had dropped 15% since the Hong Kong shares were priced on July 6.
“The recent drop in A-share stock prices has put pressure on Hong Kong stock prices,” said Kenny Ng, Everbright Sun Hung Kai analyst.
“At the same time, the recent decline in the share prices of new energy vehicle sector has also made investors more cautious about Tianqi Lithium, which is a related concept stock.”
That HK$82 pricing represented a discount of nearly 50% to where the firm’s Shenzhen stock was trading during the share sale.
Mainland listed stocks typically trade at a premium to Hong Kong-listed stocks because of China’s capital controls and a lack of fungibility between the two listed sets of shares.
Tianqi raised $1.71 billion in its Hong Kong share sale.
- Reuters, with additional editing by George Russell and Jim Pollard
Note: This report was updated and the headline amended with new details after the close of trading in Hong Kong.