HONG KONG (Reuters Breakingviews) - Hong Kong has modestly burnished its financial-centre credentials with beauty-app Meitu's $629 million listing, the biggest tech deal in a decade. Other Chinese entrepreneurs are watching intently. But Hong Kong's lacklustre aftermarket may still send mainland unicorns galloping to New York.
Meitu's debut is a win for Hong Kong. For years, China's hottest tech groups have snubbed the former British colony to float Stateside, including Jack Ma's $226 billion e-commerce empire, Alibaba. Stodgy financial, industrial and property giants continue to dominate Hong Kong's bourse. In 2016, financial companies alone collected HK$136 billion ($17.4 billion) in the city - 69 percent of all money raised and almost 20 times the amount from tech, media and telecoms groups, according to EY.
The hope is that other internet upstarts will follow Meitu. Beijing's recent tightening on capital controls, as well as a backlog of over 700 companies still waiting for approval to go public in Shanghai and Shenzhen, puts Hong Kong in an ideal position to garner new listings. Three of the world's most valuable fintech startups, including Ma's $60 billion Ant Financial, are reportedly considering going public.
Shares of Xiamen-based Meitu, which makes smartphones and photo-apps with skin whitening and virtual makeup features, opened 3.3 percent above the offer price, which came at the bottom of the range. The shares have since fallen below their initial $8.50.
That underlines one of the biggest drawbacks to listing in Hong Kong. In the year to Wednesday, just two out of the ten biggest IPOs in 2016, excluding Meitu, traded above their issue prices. The exceptions are a logistics company and a Wuhan-based chain of braised duck treats.
Just having Meitu choose Hong Kong is an accomplishment. But for Chinese entrepreneurs holding the reins to unicorns like handset maker Xiaomi and car app Didi Chuxing, the city's beauteous glow may not last long.
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