The first Russian company to list in Hong Kong never really hit its stride in the Asian share market, and so three years later it’s turning back to its home bourse.
Russia’s United Co. Rusal PLC said Monday that it plans to list its shares on Russia’s MICEX Stock Exchange by the end of the year, adding to its listings on EuroNext and the Hong Kong Stock Exchange.
Rusal, the world’s largest aluminum producer, said it will consider converting its MICEX-listed Russian depositary receipts into shares rather than issue new shares.
Rusal listed in Hong Kong to much fanfare–and controversy–in January 2010. The initial public offering prompted hopes that the door would open for more foreign issuers, particularly resource-focused companies, to raise capital in Hong Kong as opposed to at more-established international exchanges. London had traditionally been the exchange of choice for Russian companies seeking to go public.
In an unusual move, Hong Kong regulators initially restricted retail investors from buying Rusal’s stock by setting the minimum order size at 24,000 shares, due to worries over the financial health and corporate governance of Rusal, which is controlled by Russian billionaire Oleg Deripaska. The minimum order size was later gradually reduced to 6,000, then 1,000, allowing retail investors to buy in to the company.
Rusal has rarely traded at or above its listing price of 10.80 Hong Kong dollars per share. After hitting the mark in 10 months after its IPO, it mostly stayed above HK$10 until August 2011–and it has since fallen to around HK$3 per share.
The average daily trading volume of Rusal’s stock is 7.94 million shares so far this year, down from a daily average of 14.98 million shares last year.
Other foreign issuers did follow Rusal’s example in Hong Kong, but most have been hobbled by poor liquidity. The downturn in commodity prices hasn’t helped, as many of the issuers were resources companies hoping to tap into investor appetite from China.
Trading in the shares of Russian miner IRC Ltd. 1029.HK 0.00%, the first unprofitable miner to get listing approval in Hong Kong, is even thinner than Rusal’s, with just 1.4 million shares traded daily on average over the past three months, according to FactSet data.
Calgary-based Sunshine Oilsands Ltd., which raised $579 million in a Hong Kong IPO last year, recently decided to add a Toronto listing to raise demand for its shares. It said investors in Canada would better understand its business, which isn’t expected to be profitable until 2014, as its projects are still in the exploration stage.
In contrast to the commodity-company listings, consumer-focused companies such asPrada SpA 1913.HK -5.11%and cosmetics company L’Occitane International SA have performed well after going public in Hong Kong.