China’s largest duty-free group stages Hong Kong listing despite zero-Covid

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Travel retail large China Tourism Group Duty Free has raised $2.1bn in a downsized Hong Kong share supply, as a sweeping Covid-19 lockdown within the tropical island province often known as “China’s Hawaii” wreaked havoc on the corporate’s largest market.

The world’s largest retailer of tax-exempt wine, cosmetics and luxurious items priced 102.8mn shares at HK$158 (US$20.14) every, coming in properly beneath a most supply worth of HK$168 and marking a reduction of greater than 27 per cent on the closing worth of the duty-free group’s Shanghai-listed shares on Thursday.

That discount additionally got here as CTG’s Shanghai stock has dropped nearly 10 per cent over the previous month. The firm, which has a near-monopoly on the Chinese market, additionally sells tax-exempt items domestically.

CTG had obtained approval to checklist in Hong Kong on August 9, days after surging Covid-19 circumstances prompted mainland authorities to lock down the highest vacationer vacation spot in Hainan, CTG’s main supply of gross sales revenues.

The enforcement of President Xi Jinping’s zero-Covid coverage within the vacation hotspot of Sanya has pummelled financial exercise in Hainan, which accounted for 72 per cent of CTG’s gross sales within the three months to the top of March.

The province had beforehand benefited from Covid-19 journey restrictions imposed in 2020, which compelled many of the nation’s largest spenders to vacation inside China, the place just about all of CTG’s retailers are positioned.

But the most recent lockdown, which has run for almost two weeks, is the largest in China because the two-month shutdown of Shanghai earlier this yr and has left tens of hundreds of holidaymakers trapped in quarantine in Sanya, which is as well-known domestically for its duty-free luxurious buying as its five-star seaside resorts.

Authorities have scrambled to include the Covid outbreaks, with native media publishing images of officers in hazmat fits swabbing the throats of fish freshly caught off the island’s coast to verify for the virus.

CTG famous in its prospectus that Hainan passenger site visitors within the second quarter was down 60 per cent from a yr in the past because of a two-month lockdown in Shanghai, warning {that a} resurgence in circumstances may affect revenues.

But it assured buyers that the extremely contagious Omicron variant was “under effective control and the government is devoted to speeding up economic recovery and the resumption of business activities”.

The subdued exhibiting for CTG’s Hong Kong listing got here despite further help from a set of cornerstone buyers together with funds run by China’s central authorities, delivery conglomerate Cosco Shipping and the Shanghai airport’s funding arm, whose mixed share purchases accounted for roughly 40 per cent of the providing.

Analysts at Citigroup stated that past the short-term affect of the Sanya lockdown, CTG’s “mid-to-long-term structural growth remains intact” because of home journey demand, progress in onshore spending and “unparalleled operation capabilities”.

CTG had beforehand deliberate to lift as a lot as $5bn in Hong Kong final December however postponed listing plans as new restrictions on offshore IPOs despatched share costs for lots of the largest listed Chinese teams plunging.

But the downsized haul of $2.1bn nonetheless represents the largest listing this yr for Hong Kong, which has struggled to draw Chinese corporations due to the crackdown on offshore share gross sales. IPO fundraising within the metropolis was down about 90 per cent within the first six months of the yr.



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