Benjamin Franklin famously stated that “In this world nothing can be said to be certain, except death and taxes.” Investors and economists are almost always more interested in the latter than the former, given the relevance of tax rates to the business environment, government budgets and household income. Yet this week it was the “death” part which attracted attention in a major Hong Kong Initial Public Offering (IPO).
In recent weeks, investor interest in the IPO of Fu Shou Yuan International Group Ltd. has been growing as the listing date grew closer. The Shanghai-based company’s offering was a rare opportunity for markets to get involved in what is sure to be a hugely growing industry – the “death care” market in China.
The popularity of the listing is probably related to a surprisingly high level of familiarity in markets with one of Asia’s biggest economy’s biggest problems: China is getting old. This topic has been raised frequently in relation to China’s economic reforms and more specifically with regard to gaps in the pension fund system. Investors, it seems, are keen to follow the (only half right) cliché about the Chinese character for “crisis” being the same as the character for “opportunity.”Enjoying this article? Click here to subscribe for full access. Just $5 a month.
Indeed, China’s population growth during the last decades has resulted in one of the world’s most rapidly aging populations. Fu Shou Yuan itself estimated that China currently has 180 million people aged over 60, and that this figure will rise to 200 million in 2015.
After days of anticipation, Fu Shou Yuan finally listed shares worth $215 million on Friday. The retail investor part of the offering was oversubscribed by a factor of 670. Four strategic investors – including recently listed Cinda Asset Management, along with PE investor Carlyle and hedge fund Farallon – bought $45 million worth of the offering.
Death in China is indeed a big business, partly because soaring land valuations affect grave values as much as they affect China’s bubbly property market. In Shanghai, one square metre of tomb site now costs RMB 50,000 ($8,235). This compares to a an average of “only” RMB 22,500 at the end of 2012.
Fu Shou Yuan mainly operates in “first-tier” cities like Shanghai that have high average incomes but equally high land values.
While the IPO may not be the biggest deal in recent years, it did offer an unusual investment opportunity. After all, it is not every day that “increasing life expectancy” is highlighted by a company as a risk factor for their business.