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Yum China shares drop as much as 6.3% on Hong Kong debut

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Fast-food group Yum China’s stock fell as much as 6.3 per cent on its Hong Kong debut, as the market struggled to digest the latest “homecoming” listing of a Chinese company. Shares in Yum China, which operates KFC and Pizza Hut restaurants in the world’s second-biggest economy, slipped on Thursday after the group raised about $2.2bn earlier this month. The stock ended trading 5.3 per cent lower, while the broader Hang Seng fell 0.6 per cent. Some traders said there were concerns around Yum China’s growth prospects. Louis Tse, managing director of Hong Kong-based VC Asset Management, said investors saw little room for Yum to expand its market share in China, where it had been operating for more than 30 years. It had more than 9,000 restaurants in the country as of June. “If you add a few more [restaurants] there it doesn’t make that much impact on their revenue,” said Mr Tse. “You’re talking about volume, you’re not talking about high profit margins.” Yum China’s shares were sold to investors at HK$412 on September 3, about 5 per cent below the price of the company’s US-listed stock at that time. Their fall on Thursday puts Yum China’s Hong Kong-traded shares below the closing price for the company’s New York-listed American depositary receipts on Wednesday. “It’s bad timing,” said Andy Maynard, a trader at China Renaissance. Mr Maynard pointed to Hong Kong listing rules that require a five-day waiting period between when shares are priced and when they begin trading, during which global markets had dipped. “If Yum China had come a month ago, we wouldn’t be euphorically talking about it . . . but it wouldn’t be as negative as it is today,” he added. The Hong Kong listing of Yum China, which has traded in New York since 2016, comes against a backdrop of tensions between Washington and Beijing. The float makes it the latest multibillion-dollar share sale by a Chinese company threatened with forced delisting from Wall Street. Legislation passed by the US Senate as well as plans announced by the Trump administration this year have laid out how Chinese companies listed on the New York Stock Exchange and Nasdaq could be forced to exit US markets if they do not provide American regulators with access to their audit reports.


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