Graff pulls US$1bil HK share offering

HONG KONG: London luxury jeweller Graff Diamonds has pulled its planned US$1bil Hong Kong initial public offering, the fourth major IPO to be called off in Asia this week, as tumbling stock markets threaten to claim yet more casualties in the region.

Graff had been due to price its IPO today, putting it on the verge of becoming Asia's biggest completed flotation so far this year, but investors baulked at the issue amid market-wide fears over the eurozone crisis and China's economic slowdown.

“Consistently declining stock markets proved to be a significant barrier to executing the transaction at this time,” Graff said in a statement. Graff was due to list next week.

A slump in Asian equities in the past week has already derailed three major IPOs which were aiming to raise a collective amount of up to US$1.37bil: two in Hong Kong and one in Singapore.

Deal volumes in Hong Kong, Asia's IPO capital, have plunged 85% in the first five months of 2012 from a year earlier. Across the Asia-Pacific, overall volumes for share issues, including secondary offers, are down by about one-third.

The value of IPOs pulled in Asia ex-Japan has jumped to US$7.7bil so far in 2012 from 46 planned offerings, up from US$5.8bil, according to Thomson Reuters data. Hong Kong accounted for most of the scrapped deals.

Graff, which had planned to raise capital to help build a bigger Asian business centring on China, pulled its IPO as European and US markets tumbled more than 1% on Wednesday.

Asian shares followed suit on Thursday, with an MSCI pan-Asia index falling 1.6%.

Rival Tiffany & Co had added to the pressure, cutting its sales forecast last week and blaming slower demand from key markets such as China.

The market slump could also pressure IPOs now on the road, such as a deal worth up to US$3bil by motor racing firm Formula One in Singapore. Despite expectations the deal will be priced next month, Formula One chairman Peter Brabeck said last week he had yet to give the final go-ahead.

“Appetite for new listings is pretty weak generally because of the macro situation,” said Eugene Mak, an analyst at brokerage Core Pacific Yamaichi in Hong Kong, adding that the Graff IPO did not offer a lot of upside potential.

Credit Suisse group, Deutsche Bank, Goldman Sachs and Morgan Stanley were hired as joint global coordinators on the Graff IPO. Rothschild acted as financial adviser to the London company on the transaction.

Malaysia launched yesterday the biggest Asian IPO to hit the road so far this year: a US$3bil offer in Felda Global Ventures Holdings Bhd, the world's third largest palm plantation operator. It is preparing for a market debut on June 28.

But the Felda IPO is unlikely to suffer the same fate as Graff. Cornerstone investors are taking about two-thirds of the shares.

“The chance of it being successfully listed is quite high,” said Alan Tan, fund manager for Asian equities at Lion Global Investors in Singapore.

The biggest IPO still in the Asian pipeline is Chinese state-owned insurer PICC Group, which plans to raise up to US$6bil in a Hong Kong-Shanghai dual listing. IPOs from Chinese state-owned entities could be less sensitive to market volatility because they tend to be supported by funds of other government companies and by China's sovereign wealth fund. - Reuters

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