October 11, 2018 / 1:56 AM / 2 months ago

UPDATE 3-Ganfeng Lithium in dreadful Hong Kong debut, may bode ill for rival Tianqi

* Ganfeng down 29 pct in debut after sale priced at bottom

* China lithium prices have halved this year on oversupply

* Sell off in global stock markets exacerbates negative sentiment

* Rival Tianqi also planning HK float this year -sources (Updates with closing price)

By Julia Fioretti and Julie Zhu

HONG KONG, Oct 11 (Reuters) - China’s Ganfeng Lithium sank 29 percent on its first day of trade in Hong Kong, a grim debut that follows a disappointing share sale and an ill wind for a planned listing by rival Tianqi Lithium .

Prices for lithium, a key ingredient in rechargeable batteries used in electric vehicles, have halved in China this year due to oversupply, hurting near-term earnings prospects for lithium producers. The longer-term outlook is, however, brighter as Beijing actively promotes EVs to combat air pollution.

Wall Street’s worst drubbing in eight months overnight, when the S&P 500 fell 3.3. percent, also exacerbated the slide for Ganfeng, China’s top lithium producer by capacity and a supplier to carmakers like Tesla and BMW.

Ganfeng Chairman Li Liangbin put the blame for the share dive on stock market sell-offs around the world.

“As our company has a healthy and solid performance ... we are confident that we can further improve our performance to reward our investors in Hong Kong,” Li said at the opening bell ceremony.

Shares in Ganfeng closed at HK$11.76 ($1.50), far below its offer price of HK$16.50 - a level that was the bottom of the marketed range in a sale that raised $421 million. This was the fifth worst debut performance this year in Hong Kong.

The broader market closed down 3.5 percent.

Ganfeng’s shares in Shenzhen also dropped up to the maximum limit of 10 percent on Thursday.

The listing gives Ganfeng a market value of roughly $4.5 billion, not far off Tianqi which is the world’s No. 2 by lithium sales but has a market value of about $5.5 billion.

Tianqi is hoping to raise as much as $1 billion in its Hong Kong stock float, sources told Reuters in August. But they also cautioned that the final deal size could be smaller than that due to the steep drop in lithium carbonate prices.

Tianqi has grabbed more headlines than Ganfeng - building the world’s biggest lithium processor in Western Australia and seeking to close a deal to buy a coveted 24 percent stake in Chile’s SQM , the world’s No. 2 producer of lithium.

Ganfeng plans to use the proceeds from its Hong Kong listing to acquire lithium resources and expand its production capacity of lithium metals, batteries, compounds and recycling.

The company made a net profit of 478.7 million yuan ($69 million) in the second quarter of this year, up 33 percent from the first quarter. Its 2017 revenue jumped 54 percent to 4.38 billion yuan.

Helen Lau, metals and mining research analyst at Argonaut Securities, said the stock’s performance was more a reflection of the sell-off in global markets and did not reflect the fundamentals of the company.

The retail portion was also under-subscribed, which put pressure on the stock as retail investors are very sensitive to market sentiment, Lau said.

“It’s not fully subscribed, so coupled with yesterday’s decline in the U.S. market that spilled over into Hong Kong market so the whole market sentiment becomes very bad.”

While Hong Kong is on track for a bumper year of listings, many such as online food delivery-to-ticketing services firm Meituan Dianping and hotpot chain Haidilao, have fallen below their offer price amid weak markets.

Ganfeng could still raise as much as $448 million if a greenshoe option is exercised within a month of its debut. ($1 = 6.9298 Chinese yuan) ($1 = 7.8366 Hong Kong dollars) (Reporting by Julia Fioretti and Julie Zhu; Additional reporting by Tom Daly in Beijing and Donny Kwok in Hong Kong; Editing by Edwina Gibbs and Himani Sarkar)

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