Hutchison Port, a unit of Hutchison Whampoa , priced its IPO at $1.01, the middle of its indicative range of $0.91-$1.08, making it Southeast Asia's largest stock offer and the biggest in Asia so far this year.
Units of Hutchison Port may drop as much as 3 percent on its first day of trading, analysts and traders said.
"Hutchison's IPO may be clouded by ongoing fears about a nuclear meltdown in Japan. Its performance may also be affected by Japan and China's trade shifts following the earthquake. As such, sentiment may be against Hutchison," said Lin Jin Shu, an analyst at SIAS Research.
Fears that Japan's nuclear crisis may worsen come on top of worries about escalating tensions in the Middle East, undermining investor confidence and sparking a sell-off in Asian equities in the last few sessions.
Both the Straits Times Index and Asian shares outside of Japan have also dropped about 4 percent since Friday when a massive earthquake struck Japan.
"Hutchison was a bit lucky as it priced before the Japan earthquake. It should open weakly," said Wong Kok Hoi, chief investment officer of Singapore-based APS Asset Management, which manages $2 bln.
However, weakness in Hutchison Port's stock price may be a good time for investors looking for yield plays and an exposure to China's booming trade to scoop up its shares.
Hutchison Port owns and operates ports in Shenzhen and Hong Kong and is aiming to cash in on a recovery in global trade and provide investors with access to China's booming infrastructure business.
At the offer price of $1.01, the trust offers a yield of about 5.8 percent based on its forecasted distribution per unit (DPU) of 5.9 cents for 2011. This compares with a yield of around 7 percent offered by many Singapore-listed business and property trusts.
Kevin Scully, managing director at NRA capital, said he expects Hutchison Port's DPU to grow in the coming years.
"They have capacity expansion coming on this year and in 2015 so that will support future DPU growth. The underlying business of container ports in Hong Kong and Shenzhen and three river ports offer good exposure to the booming Chinese economy," said Scully.
The IPO, which takes the form of a business trust, had attracted cornerstone investors including Singapore state investment firm Temasek Holdings , U.S. hedge fund manager Paulson & Co and fund manager Capital Research and Management, which had committed to pour in $1.6 billion in the deal.
DBS , Deutsche Bank and Goldman Sachs are joint bookrunners and issue managers for the offering. JPMorgan , UBS , Barclays , Morgan Stanley are among co-lead managers. (Reuters)
