Overseas unit of China’s state-owned cigarette monopoly lights up after lacklustre trading debut as market sentiments turn stale
- Shares of China Tobacco International changed hands for the first time in Hong Kong at HK$4.97, a 1.8 per cent premium to its IPO price of HK$4.88
- The stock rose to an intraday high of 20.7 per cent amid a declining market, before ending the day up 9.7 per cent
China Tobacco International, the overseas subsidiary of China’s state-owned tobacco monopoly and the world’s largest cigarette maker, picked up pace after a lacklustre trading debut in Hong Kong on Wednesday, as the company’s initial public offering proved extremely popular with retail investors.
The shares began trading in Hong Kong at HK$4.97, 1.8 per cent premium to its initial public offering (IPO) price of HK$4.88. The stock picked up pace even as the market declined amid street protests, reaching an intraday high of HK$5.89, up 20.7 per cent. But it eventually closed up 9.6 per cent at HK$5.35. The benchmark Hang Seng Index closed 1.7 per cent lower at 27,308.46.
The IPO’s retail tranche was oversubscribed 101.4 times. The shares were priced at the high end of the indicative range at HK$4.88, helping the company raise HK$734.9 million (US$93.4 million).
As a subsidiary of China National Tobacco, it primarily procures tobacco leaves from countries like Brazil, Argentina and Canada for its parent company, earning revenue mainly from a fixed mark-up on the sale of leaves to domestic cigarette makers, the company’s prospectus said.
The international unit is also the sole exporter of Chinese cigarette brands like Yuxi and Hongtashan to duty-free outlets in Thailand, Singapore, Hong Kong and Macau. In May last year, it began exporting heat-not-burn tobacco products made in China.
According to the company’s filings, it made a profit of HK$259.5 million last year, a decline of 24.6 per cent from 2017.