Typhoon Delays Chinese Travel Retailer’s Hong Kong Trading Debut

The company’s shares opened 24% below their initial public offering price and quickly bounced back to trade near it for most of the afternoon. They ended exactly where they were priced last week, at 158 Hong Kong dollars apiece, equivalent to $20.14.

CTG Duty Free is already listed in Shanghai. The company had earlier wanted to raise $7 billion to $10 billion in its Hong Kong listing, but abandoned that plan in late 2021, The Wall Street Journal previously reported. Volatile market conditions this year forced it to downsize its fundraising ambitions.

The latest IPO drew strong support from long-term investors, sovereign-wealth funds and major hedge funds, said Zili Guo, co-head of Asia equity capital markets at

UBS Group AG

one of the joint sponsors of the offering. “Global investors are still interested in quality assets from China and they are still willing to write big checks,” he said.

The retail portion of the CTG Duty Free offering, however, was barely covered—a sign of weak demand from mom-and-pop investors that in years past had flocked to Hong Kong IPOs when the market was hot.

Individual investors placed orders representing only about 1.06 times the small portion of the offering that was reserved for them. Nearly two years ago, when China’s top bottled-water company,

Nongfu Spring Co.

went public in Hong Kong, the retail portion of its deal was more than 1,000 times subscribed.

Just $7.2 billion has been raised so far this year in Hong Kong, compared with $35.1 billion in the same period last year, according to Dealogic. The global trend has been similar. Russia’s invasion of Ukraine, high inflation and rising interest rates in the U.S. have all contributed to a slump in global IPO volumes.

CTG Duty Free, established in 1984, operates 193 stores that are mostly situated in airports, cruise ships and city downtown areas. It has big duty-free operations in a seaside resort city on Hainan island, where a recent Covid-19 outbreak led to a lockdown this month.

Asset manager

Abrdn,

the Canada Pension Plan Investment Board and Singaporean sovereign-wealth fund GIC each bought close to $200 million of the travel retailer’s stock, according to a person familiar with the matter. Other investors included mutual-fund houses

T. Rowe Price Group

and Fidelity International, the person added.

Nine cornerstone investors bought the equivalent of about $794 million of the deal, or around 38% of the shares on offer, according to a regulatory filing. They included seven Chinese state-owned enterprises as well as South Korean beauty company

Amorepacific Group

and U.S. investment firm Oaktree Capital Management LP. The cornerstone investors have agreed to keep their shares for at least six months, the filing said.

Write to Dave Sebastian at dave.sebastian@wsj.com