HPH Trust – BT

HPH Trust sets sail in choppy seas, struggles

Mega IPO falls below offer price; may trade in S$ by year-end

HUTCHISON Port Holdings (HPH) Trust, the world’s largest initial public offering so far this year, went underwater yesterday in its stockmarket debut in Singapore.

But there was an interesting morsel thrown at investors. The container port business trust, which is trading in US dollars, could also be trading in Singapore dollars by year-end, potentially becoming the first counter on the Singapore Exchange (apart from exchange traded funds) to be quoted in two currencies.

That is for the future. For now, it had to put up with a rough day. Market watchers had predicted a lacklustre first-day showing from the US$5.45 billion IPO as investors remain jittery about Japan’s nuclear crisis, and those expectations materialised.

HPH Trust opened at 97.5 US cents per unit in the afternoon – 3.5 per cent below the offer price of US$1.01. It peaked at 98 cents, before sinking to as low as 94 US cents in intraday trading. It eventually closed at 95 US cents. A total of 616.79 million units changed hands, pushing the counter to the top of the trading volume table.

The trust was said to be trading below the offer price in the grey market even before its official debut. Institutional broker BTIG Hong Kong told Bloomberg that units were sold for 98 US cents on Thursday in deals it handled.

HPH Trust’s fall yesterday was in line with the Singapore broad market’s – the Straits Times Index dipped 7.1 points to close at 2,935.78. But markets elsewhere in the region rose after enduring selldowns in the wake of the earthquake and tsunami in Japan. The Nikkei 225 Stock Average climbed 2.7 per cent, while the Shanghai Composite Index gained 0.33 per cent.

Canning Fok, chairman of HPH Trust’s trustee-manager, was unperturbed by the trust’s stockmarket showing. ‘Considering the situation, this is excellent,’ he told reporters after the listing ceremony. ‘This is a testing time.’

CIMB research head Kenneth Ng pointed out the final stages of the IPO pricing process had played out before the Japanese catastrophe. With sentiment down since, the drop in HPH Trust’s unit price ‘is just reflecting market’s perception of fair value’, he said.

But even before last Friday’s natural disasters in Japan, signs of unease had emerged on HPH Trust’s IPO. For instance, some analysts were concerned about distributions being denominated in the Hong Kong dollar – which could depreciate as it is pegged to the weakening greenback.

What investors will be watching out for next is whether trade volumes – and HPH Trust’s business – will be affected in the wake of the Japanese calamity. The impact on the trust has been ‘minimal’, Mr Fok said.

For SGX, HPH Trust’s listing has boosted the size of its business trust sector significantly. There are now nine business trusts listed on the exchange with a combined market capitalisation of about US$11.9 billion. HPH Trust itself has a market capitalisation of US$8.8 billion based on the US$1.01 unit offer price.

‘SGX will promote the listing,’ said SGX chairman Chew Choon Seng. ‘We intend, within the year, to facilitate quotation and trading of HPH Trust in Singapore dollars in addition to the pricing in US dollars.’

SGX head of listings Lawrence Wong told reporters that there could be an arrangement allowing investors to buy HPH Trust units in Sing dollars. This is the first time the exchange is working on such an arrangement, ‘and we hope to roll it out to more companies and also even to our derivative products’, he said.