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China's Momenta debuts at a low in Hong Kong amid AI listing caution

Momenta Global shares debuted?flat on Hong Kong's Stock Exchange Wednesday after the?Chinese autonomous-driving company raised approximately HK$5,89 billion ($751 millions) in its initial public offer.

The stock opened at HK$301 compared to its IPO price, which was HK$295.60. It reached as high as HK$314.80 and then traded at the HK$299 mark.

Momenta's debut will be a test for investor demand in Chinese AI and advanced tech companies. Hong Kong is facing a record number of lock-up expirations after a successful first half of new listings.

Dickie Woong, executive director for research at Hong Kong's uSMART, said that the cooling of market sentiment was due to July's peak unlocking. Some new listings haven't performed as 'expected'.

Investors are more selective about their valuations, particularly in AI and tech.

According to the prospectus, cornerstone investors are big investors who have committed to buying shares before listing. These include existing backer Mercedes-Benz and BlackRock funds, as well as China's Boyu Capital.

Other cornerstone investors are GIC, Fidelity, Oaktree and Franklin Templeton, as well as ChinaAMC.

Gary Ng is a senior economist at Natixis CIB. He said that the lineup of cornerstone investors - and pricing at the highest end of the range - showed a decent level of global investor interest in China's AI story.

Ng stated that "the lack of a sudden surge in interest suggests that sentiment is still cautious, with an emphasis on long-term prospects, as opposed to the global AI hype."

There can be pressures on the valuation of tech companies. It is important to monitor whether these firms are able to hold up after listing, as this may not have been the case in previous cases.

Hong Kong's debutants also experienced a mixed day on Wednesday. Reconova, a visual AI firm, opened 16.9% lower while Eacon, a mining autonomous-driving company started trading at 3.5% higher.

BasicSemi, a maker of silicon carbide chips, opened 7.9% higher than Baogai.

Momenta, founded in 2016 by Cao Xudong (former Microsoft researcher), sells software for driving assistance to automakers. The systems assist cars to steer, brake and 'change lanes, but the driver must remain alert and prepared to take control.

Momenta will use 60% of its IPO proceeds to fund research and development. 20% will go towards robotaxi services. 10% is allocated for the mass-produced vehicle industry.

In its prospectus, the company claimed that 680,000 vehicles would be using its software by 2025. Customers and partners of the company include Toyota, Mercedes-Benz SAIC Motor, General Motors BYD, Audi, and SAIC Motor.

(source: Reuters)