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Russian IPOs Fail to Catch On in Hong Kong

Bloomberg is running an interesting piece today about the lukewarm reception of many Hong Kong-based investment funds to Oleg Deripaska’s recent listing of the metals giant Rusal.  For many Russian companies looking to raise funds through initial public offers, there is the hope that Asia can provide an alternative to the slumping markets in Europe – but these hopes on the East might be dashed.

“Those companies can list here, but who wants to buy them?” said Pauline Dan, Hong Kong-based chief investment officer at Samsung Investment, which oversees about $78 billion. “Our focus is on Hong Kong, China. It’s not as if China doesn’t have resources itself.” (…)

“Is Russia on the radar? Honestly? No,” said Ben Collett, head of equities for Louis Capital Markets brokerage in Hong Kong. “If you want to trade Russia then you’re in Europe.”

But it seems like there is more going on here – that perhaps the hesitation is born out of the bad reputation accumulated by Rusal over the years.

The success of Russian IPOs in Hong Kong will depend as much on perception as fundamentals, Collett said. Samsung Investment, for one, didn’t feel “comfortable” with Rusal’s management during the IPO marketing, fund manager Dan said.

“The perception of oligarchs here is bad,” Collett said. “The only thing that people know of Rusal is debt and question marks over Deripaska. They don’t know what those question marks are.”

That kind of uninformed speculation doesn’t seem fair – and team Deripaska should do a better job to inform investors of all questions and the value of the company’s activities.  But if Rusal and other Russian IPOs don’t catch on to this appetite for transparency, all those U.S.-based funds (like hedge fund Paulson & Co.) are going to have an expensive lunch bill.