Chinese circuit board firm Dongshan Precision plunges at Hong Kong debut

Suzhou Dongshan Precision Manufacturing Co. slumped in its Hong Kong trading debut after an underwhelming HK$9.9 billion (US$1.26 billion) initial public offering (IPO), as investor sentiment was haunted by the deepening sell-off across China’s artificial intelligence (AI) and tech hardware sectors.

Shares of the circuit-board manufacturer, a key supplier of components for AI servers, dropped as much as 6 per cent after its debut in Hong Kong market on Wednesday. It bounced back slightly with a fall of 4.6 per cent at 9.45am.

The weak debut came despite the company pricing 113.8 million shares at HK$86.80 apiece, a 7.5 per cent below its indicative maximum price and a 27 per cent discount to the Tuesday close of its Shenzhen-listed stock.

Its Shenzhen-listed shares have plunged more than 63 per cent from a peak in July, now having a market capitalisation of 185 billion yuan (US$27.7 billion).

“There is no question that market enthusiasm on Chinese AI-related stocks has visibly ebbed away since July,” said Stevan Tam, associate director at Fulbright Financial.

“Once valuations undergo a correction, it is difficult to regain that earlier speculative premium unless overseas markets stage another strong rebound.”

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The Star Market 50 index, predominantly made up of chipmakers and AI trading on the Shanghai exchange, has plunged over 40 per cent from its July peak, while the CSI 300 Index, which tracks 300 of the largest stocks listed in Shanghai and Shenzhen, has dropped roughly 20 per cent from June levels.

Other mainland printed circuit board (PCB) makers listed in Hong Kong this year – Victory Giant Technology and Guangzhou Guanghe Technology Co. – have also slumped roughly 70 per cent from their peaks and now trade below their offer prices.

Zhongji Innolight, the city’s largest listing this year, has fallen 26 per cent in three months.

The Dongshan’s listing, Hong Kong’s largest in nearly two months, met weak demand from investors. The Hong Kong offering was undersubscribed, covering 52 per cent of shares available to retail buyers, with the international portion 2.17 times subscribed.

Even with cornerstone heavyweights – including JPMorgan Asset Management, Alibaba Group and quantitative firms like Jane Street – taking up half the offering, market sentiment proved too fragile to stage a rally.

Dongshan said it had not exercised an upsize option. Alibaba owns the South China Morning Post.