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Yum China shares drop greater than four% on Hong Kong debut

SINGAPORE – Yum China's shares were traded in Hong Kong on Thursday but lost more than 4% in early trading.

Yum China, which operates the KFC, Taco Bell, and Pizza Hut fast food restaurants in China, raised $ 2.22 billion by selling 41.9 million shares at a price of Hong Kong $ 412 (US $ 53.16) Dollars) per piece sold in this secondary listing.

The company has been listed in New York since 2016.

Yum China's debut in Hong Kong follows the secondary listings of gambling giant NetEase and e-commerce company JD.com, which raised Hong Kong dollars 21.09 billion (US $ 2.7 billion) and Hong Kong dollars 30.05 billion, respectively. Raised dollars ($ 3.87 billion).

Pedestrians walk past Yum! Brands Shanghai, China

Bloomberg | Getty

The series of mega-deals marks a hot year for listings in Hong Kong. Chinese companies listed in the US are flocking to the city to do their secondary listings amid mounting tensions between the US and China. The U.S. Senate passed law in June that could essentially ban many Chinese companies from listing on American stock exchanges.

R.J. Hottovy, strategist for consumer equity research at Morningstar, suggested that the stock's initial decline might indicate that investors are seeing problems with the company itself rather than tired of its IPO.

"It's clear that not everyone is on board right now to invest in this area. Honestly, there's a lot of uncertainty about Covid," he told CNBC on Thursday. "Will people be eating out less … will they be interested in online groceries? … Demand is certainly what I think is probably the biggest concern."

Overall, however, Hottovy pointed out that the company has seen "pretty impressive growth".

"I think Yum China is doing pretty well. I think there may be an opportunity. We currently view these stocks as slightly undervalued," he said.

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