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Li Ka-shing's HK Electric Investments falls on Hong Kong debut

The stock market debut of a utility trust owned by Asia's richest man Li Ka-shing went with a whimper not a bang in early trade Wednesday, despite being Hong Kong's biggest IPO of the year.

HONG KONG: The stock market debut of a utility trust owned by Asia's richest man Li Ka-shing went with a whimper not a bang in early trade Wednesday, despite being Hong Kong's biggest IPO of the year.

Shares in HK Electric Investments -- carved out from Li's Hong Kong-listed utilities firm Power Assets -- dropped 4.04 per cent to a low of HK$5.23 ($0.67) in morning trade, after raising $3.11 billion earlier this month ahead of the initial public offering.

The company sold 4.43 billion units at the low end of its HK$5.45 to HK$6.30 indicative price range.

The benchmark Hang Seng Index went up 0.94 per cent in morning trade Wednesday.

Li's utility assets have endured weak profit growth after the Hong Kong government capped the rate of return on electricity firms five years ago at 9.99 per cent, down from 15 per cent.

The rate of return pegs the maximum profit the city's electricity companies can make to the value of their fixed assets.

"The growth prospect of HK Electric is very limited," Tanrich Securities vice president Jackson Wong told AFP.

The restricted rate of return and the fact that the utilities company is "confined" within the southern Chinese city are factors negatively affecting its debut, Wong said.

Cornerstone investors, which include China's state-owned electric utility State Grid Corp of China and sovereign wealth fund Oman Investment Fund, had already bought 38 percent of the firm's offering, with shares valued at $1.17 billion.

In an IPO, cornerstone investors are given the option to buy vast portions of stock if they agree to hold the shares for a certain period.

The HK Electric listing is the city's biggest since China Everbright raised $3.2 billion for its December IPO last year.

Li remained Asia's richest man as of January 2014 with an estimated net worth of $32 billion, according to the Forbes rich list.

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