By Wei Gu
HONG KONG - In a tough stock market, flashy names are losing their drawing power. A great brand helped Facebook sell expensive shares on May 18, but the price has subsequently fallen 20 per cent.
The glitz of Graff Diamonds and the glamour of Formula One were not pulling in enough investors, so both the retailer and the race operator have decided to wait to get the valuations they want. This week they pulled their initial public offerings - $1 billion for Graff in Hong Kong and up to $3 billion for the race operator in Singapore.
Palm oil has much less cachet. But Malaysia's Felda is pushing ahead with a $3 billion offering. So-called cornerstone investors have agreed to take about two-thirds of the shares. It is set to be the world's second-largest IPO this year, after Facebook.
Price explains part of Felda's likely success. As a state-owned enterprise, Felda was more interested in getting the deal done than in extracting the most money from investors. But the company's business also fits with a defensive mood in the markets and a far from exuberant global economy.
The demand for edible oils (Felda also processes soybeans and canola) is expected to hold steady, while Formula One depends on the more cyclical cash flows from race promotion fees, broadcasting rights and advertising.
There is another factor. As a state-controlled company, Felda benefits from strong political support. Malaysia's Prime Minster Najib Razak unveiled the listing plan himself. He wants a success, since he is expected to seek a fresh mandate soon and the rural Malay vote is seen as critical.
Political considerations may also help the biggest IPO still in the Asian pipeline, Chinese state-owned insurer PICC Group, which plans to raise up to $6 billion in a Hong Kong-Shanghai dual listing. It can look for support from fellow SOEs and state funds.
In the stock market, big names are often assumed to be the most resilient. But in nervous times, safety often lies in the dull and protected.
(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own)