Markets

Russian firms not on HK listing radar

By Yuriy Humber and Hanny Wan (China Daily)
Updated: 2010-06-02 09:51

HONG KONG - Billionaire Oleg Deripaska, who listed his United Co Rusal in Hong Kong this year, says the city is Russia's best chance to tap into Asian economic growth. Investors, who have watched debt-laden Rusal slump, are yet to be persuaded.

"Hong Kong is the gateway to Asia," Deripaska said. "I focus more and more on Asia because I believe we can do better business in Asia than in struggling economies" such as the United Kingdom.

The challenge for Russian companies seeking to follow Deripaska to Hong Kong will be to show Asian investors why they should care, at a time when initial public offerings (IPOs) worldwide struggle. Funds from RCM Asia Pacific Ltd to Samsung Investment Trust say Russian IPOs don't fit with their Asia-focused investment strategy.

"Those companies can list here, but who wants to buy them?" said Pauline Dan, Hong Kong-based chief investment officer at Samsung Investment, which oversees about $78 billion. "Our focus is on Hong Kong and mainland. It's not as if China doesn't have resources itself."

That ambivalence may frustrate hopes by Russian companies to avoid European market turmoil by entering Asia, where wealth is accumulating faster than anywhere else, said Chris Weafer, chief strategist at UralSib Financial Corp. Many of them see Hong Kong as an "easy" alternative to London or New York, with regard to its liquidity and trading rules, as they seek to raise $100 billion over five years to repay debt and grow, he said.

Faltering markets

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Hong Kong has not been immune to canceled share sales this year as sovereign-debt concerns in Europe roil global stocks. The MSCI World Index has fallen about 14 percent since its April 15 high.

Rusal's IPO, Russia's first in Hong Kong, relied on support from outside Asia. Vnesheconombank, Russia's state-run bank, took 30 percent of the offering, and two more of the five cornerstone buyers were US funds, including Paulson & Co.

"Is Russia on the radar? Honestly? No," said Ben Collett, head of equities for Louis Capital Markets brokerage in Hong Kong. "If you want to trade Russia then you're in Europe."

Danny Yan, a fund manager at Taifook Asset Management Ltd in Hong Kong, said unless a Russian company can show how a "significant" part of its business is related to China, he won't buy it. Wariness among Chinese investors may scupper plans for some of the 40 Russian companies that have met with the Hong Kong exchange or enquired about a listing.

"Hong Kong is ambitious in trying to attract listings from companies that are domiciled elsewhere, but our view so far is that this is not a natural fit," said Mark Konyn, chief executive officer of RCM Asia Pacific, which oversees $11 billion.

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