HTHT H World Group Ltd

By Joanne Chiu 

The tally of U.S.-listed Chinese companies securing alternative listings in Hong Kong grew, as stock in China's largest restaurant group started trading in the city and a major hotel chain began taking orders for its own offering.

Yum China Holdings Inc., which runs KFC and Pizza Hut on the mainland, made a lackluster debut days after it had raised the equivalent of $2.2 billion by selling new stock.

Separately, Nasdaq-listed hotelier Huazhu Group Ltd., which counts Accor SA and Trip.com Group Ltd. as shareholders, began taking orders for a $970 million stock sale ahead of its planned secondary listing in Hong Kong on Sept. 22.

The new deals follow a string of sizable stock sales in Hong Kong by big Chinese technology companies whose securities already trade in New York, such as Alibaba Group Holding Ltd., JD.com Inc. and NetEase Inc.--and show such secondary listings also hold appeal for companies outside the tech industry.

A Hong Kong listing means a company's stock can be traded during the Asian day and is likely to broaden its investor base. If shares are later added to Hong Kong's so-called stock connect program, they could also become accessible to investors in mainland China.

At the same time, American lawmakers have sought to step up financial scrutiny of U.S.-listed Chinese companies, raising the risk of potential delistings. And Hong Kong's stock exchange has also revamped its rules to allow some Chinese companies whose shares already trade on other exchanges to list in the city.

Yum China's stock fell 5.3% from its offer price on Thursday to close at 390.20 Hong Kong dollars, the equivalent of $50.34. Its New York-traded stock closed Wednesday at $53.20.

The lukewarm market reception came even though Yum China's stock sale generated solid demand. Individual investors placed more than 52 times the stock offered to them, while institutions ordered nearly nine times more shares than they were offered.

Paul Pong, managing director at Pegasus Fund Managers Ltd., said investors liked Yum China's growth prospects and saw the company, which was spun off from Yum Brands Inc. in 2016, as well-managed.

"China's market is far from saturated for Yum China, giving it a lot of growth potential for new store openings," he said. However, Mr. Pong said any resurgence of coronavirus infections in the winter could slow Yum China's recovery, even if its long-term potential remained intact.

Lockdowns and social-distancing measures forced the company to close about a third of its restaurants earlier this year. Yum China has since reopened most stores but said sales and profits were trending unevenly. Net income fell 26% to $132 million in the second quarter and its sales fell 11% from a year earlier to $1.9 billion.

P.R. Venkat contributed to this article.

Write to Joanne Chiu at joanne.chiu@wsj.com

(END) Dow Jones Newswires

September 10, 2020 05:13 ET (09:13 GMT)

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