Bottom line: Lackluster debuts for two of this year's largest China IPOs in Hong Kong points to a cresting of the current new listing wave, with sentiment starting to wane as investor appetite for new choices gets satisfied.

Two of the year's biggest China IPOs have formally launched in Hong Kong this week, each with a different story and accompanying moral to tell. The larger of those, and the world's largest IPO in the last two years, has seen state-run cellular tower operator China Tower (HKEx: 0788) raise nearly $8 billion, while the second has seen biotech firm BeiGene (HKEx: 6160; Nasdaq: BGNE) raise a smaller but still significant sum of nearly $1 billion.

These two listings are about as different as you could possibly ask for, at least in terms of the companies' backgrounds. On the one hand China Tower is a big state-owned behemoth that was formed by the telecoms regulator a few tears ago by pooling the cellular toward assets of China's big three telcos. At the other end of the spectrum, BeiGene is a privately-backed hotshot that develops biologically-based cancer-fighting drugs.

All that said, the pair also have something in common, namely that neither of them did particularly well in their trading debuts the same day. BeiGene's shares actually fell about 1 percent in their trading debut (English article), while China Tower's were flat. (English article) A couple of days into their lives as newly-listed companies, BeiGene was down a sharper 3.7 percent from its listing price, while China Tower has ticked up slightly over that time and is up about 2.3 percent. 

Let's review the two deals quickly, and then try to quickly dissect what happened and where we're likely to go from here. China Tower's IPO has been a bit of a laggard from the get-go, dogged mostly by its low-growth potential and state-run background. The company first mooted an IPO last year, but apparently sentiment wasn't quite there yet. It relaunched the plan this year, and ultimately priced its shares at the very bottom of their range, raising around HK$54.3 billion ($6.9 billion).

The main story behind the lackluster reception is what I've hinted at already, namely that China Tower is a big state-run behemoth without much growth potential. It's revenue only grew about 5 percent in the first quarter of this year, marking a steep slowdown from its first few years immediately after its formation. If this were a private company it might perhaps start looking for other ways to leverage its vast real estate holdings to find new revenue sources. But it's a state-run giant, and I suspect it will be content to maintain its current revenue stream from China's big 3 telcos, with little or no growth beyond inflation.

Investor Burnout

Next there's BeiGene, whose shares priced closer to the top of their range, indicating positive sentiment about the company. BeiGene is just the second money-losing drug maker to list on Hong Kong's main board, after the regulator earlier this year relaxed its long-standing prohibition on IPOs by such money-losing companies in a bid to attract more names from the hot sector. 

BeiGene also had the distinction of being one of the first, if not the first, company to make a dual listing in New York and Hong Kong, since its shares have traded on the Nasdaq since 2016. In this case I think the disappointing trading debut is probably indicative of a bit of investor burnout on money-losing biotechs. The first money-losing firm to list in Hong Kong, Ascletis (HKEx: 1672), is actually down by an even steeper 23 percent since its own ground-breaking IPO in late last month.

That leads nicely into the finale for this IPO wrap, whose moral appears to be that the current IPO bonanza, which dates back to last fall, could be starting to draw down as investors get their fill of new listings. There are still a few more to come, most notably from the financial technology, or fintech sector, whose listings were put on hold due to a regulator crackdown at the start of this year. But I would expect the number of new offerings to start to wind down heading into fall, and all except the hottest will probably make lackluster to outright poor debuts.