Despite a temporary trade deal between Presidents Donald Trump and Xi Jinping earlier this week at the G20 Buenos Aires summit, global stock markets have taken a major hit, as investors remain uncertain that the trade war will end. The continued effects of this, along with an overall cloudy economic forecast, have not been kind to companies planning to raise funds via an IPO.
With investor sentiment in mind, Fosun Tourism Group, the parent company of Club Med, has decided to set the luxury resort brand’s Hong Kong IPO at the lower end of the price range. The official opening price will be set on Friday, December 7, and is expected to be between HK$15.60 and HK$20 ($2-2.56) per share.
Fosun Tourism’s resorts revenue, including Club Med, which it acquired in 2015, totaled RMB 11.8 billion in 2017. It hopes to raise $548 million from the IPO, which is set to begin trading on December 14. The company’s original IPO filing indicated it had intended to raise up to $700 million. Bloomberg noted that two other IPOs were launched this week in Hong Kong—Mobvista Inc., a mobile advertising company and Natural Food International Holding Ltd., a health product company—both trading near the bottom of their respective price range.
As Chinese economic growth is expected to further slow, the travel industry may subsequently experience slower growth. However, Chinese government policies, including promoting domestic consumption, may benefit Club Med, as the company has resorts throughout the country. Additionally, the government’s recent increase in the duty-free allowance may help Club Med’s Atlantis resort, which opened in April 2018 in Sanya, China, which is home to the world’s largest duty-free shopping mall. And while Club Med might be best know for its tropical resorts, it’s been heavily courting Chinese travelers interested in winter activities. The company’s ski resorts, particularly those in northern Japan, have benefitted from Chinese interest in winter sports, following the announcement that Beijing will host the Winter Olympics in 2022.
While China’s outbound travel market has continued to grow this year, there are headwinds that have lowered investor confidence in travel-related stocks. Overall, it has not been a banner year for Chinese stocks, with major companies from Ctrip.com International to Tencent Holdings to Alibaba Group all losing significant value. It’s been reported that Alibaba has agreed to be a cornerstone investor in the Club Med IPO.