People wearing face masks following the outbreak of the coronavirus disease (COVID-19) shop at the Sanya International Duty Free Trade Complex in Sanya, Hainan Province, China, Nov. 25, 2020. Photo taken Nov. 25, 2020 .REUTERS/Tingshu Wang

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HONG KONG, Aug 12 (Reuters) – China Tourism Group Duty Free Corp ( 601888.SS ) is aiming to raise up to $2.16 billion through a new listing in Hong Kong, according to a term sheet reviewed by Reuters, in what it will be the biggest stock sale in the city so far this year.

Shanghai-listed China Tourism is planning to sell 102.76 million shares priced between HK$143.50 and HK$165.50 ($18.30 and $21.10) each, the term sheet said.

The offering is already fully subscribed, according to two people with direct knowledge of the matter. The sources spoke on condition of anonymity because they were not authorized to discuss the matter with the media.

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China Tourism, which has built China’s largest duty-free retail network, did not respond to a request for comment on the deal’s launch or subscription rate.

The launch of the deal comes as southern China’s Hainan Island, where China Tourism has several major trading outlets, remains under strict restrictions due to an outbreak of COVID-19.

The price range represents a 29.3% to 38.7% discount to the stock’s closing price of 201.19 yuan on Thursday in Shanghai. Shanghai shares fell 3.1% on Friday after the start of the Hong Kong deal.

Hong Kong stock sales of Chinese-listed companies are usually offered at a discount to entice investors to buy shares, but the discount marked by Chinese tourism is higher than normal. The rate was chosen to help ensure positive trading of the stock in the secondary market, one of the sources with direct knowledge told Reuters.

Shanghai-listed China Tourism shares have recovered most of their losses since lockdowns across Hainan began to be ordered last week. Its shares are down 11% year-to-date.

China Tourism plans to set the final price next Thursday, the term sheet said, and Hong Kong shares will begin trading on August 25.

Almost 40% of the shares offered in the deal have been sold to the foundation’s shareholders, who will invest about $795 million, according to the term sheet.

Sanya, a resort city on the southern tip of Hainan Island at the center of the COVID outbreak, reported 1,690 symptomatic cases and 1,504 asymptomatic cases from August 1 to August 10. Read more

The duty-free shop operator’s deal, if executed, would overtake Tianqi Lithium’s ( 002466.SZ ) $1.71 billion deal, which opened in late June, to become Hong Kong’s largest share sale in 2022.

Tianqi’s Hong Kong shares were valued at a 50% discount to its Shenzhen shares and have been trading only slightly higher since it debuted in mid-July.

“After Tianqi Lithium’s lackluster performance, the only way they could get out of the China Tourism deal was by offering it at a good discount,” said Aequitas Research director Sumeet Singh, who publishes at Smartkarma.

“If it goes well, other deals should follow as the pipeline for deals with Hong Kong is now quite complete and should start soon.”

There have been $4.9 billion in initial public offerings and secondary share sales in the City this year compared with $34.7 billion at the same time last year, according to Dealogic data.

It’s the slowest year to date for new listings since 2009.

($1 = 7.8432 Hong Kong dollars)

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Reporting by Scott Murdoch; Editing by Stephen Coates, Lincoln Feast and Kenneth Maxwell

Our Standards: The Thomson Reuters Trust Principles.

Scott Murdoch

Thomson Reuters

Scott Murdoch has been a journalist for more than two decades working for Thomson Reuters and News Corp in Australia. He has specialized in financial journalism for most of his career and covers equity and debt capital markets across Asia based in Hong Kong.

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