A heady share price “pop” on the first day of trading was something Hong Kong investors once expected as a standard feature of new listings. JD Logistics, a Chinese spin-off similar to Amazon’s warehouse and deliveries arm, rose 18 per cent on Friday morning — then relinquished gains.

That left the logistics unit of ecommerce group JD.com with a valuation of about $31bn. Expectations had pinned the valuation at $40bn.

The Hong Kong market has simply run out of steam. More than two-thirds of all listings in the city in the past three months are now trading below their issue price.

After record volumes of new listings in the first quarter, nine times the previous year, investors are spoiled for choice. But many more floats are lined up for the coming months, including gaming giant NetEase spinning off a music streaming business.

JD Logistics also faces another intractable problem. SF Express, China’s largest express-delivery company, has a wide lead and better margins. Listed in Shenzhen as SF Holdings, its gross margins of 14 per cent compares with JD at 8.6 per cent. That gap is set to grow. After booking a net loss of Rmb4bn ($630m) last year, a bigger loss is expected for the current year as JD boosts spending.

Further risks lie in JD Logistics’ heavy reliance on parent JD.com, which accounted for 54 per cent of the total last year. JD.com is among the 12 tech giants targeted by China’s antitrust regulators.

Demographic trends are against JD Logistics too. China’s ageing workforce and falling birth rates are putting pressure on labour costs. Automation is helping in warehouses, yet it relies on more than 247,000 people to make deliveries.

JD Logistics shares trade at a steep 58 times trailing earnings, double that of US peer FedEx. Even accounting for the growth potential at home, the significant catch-up challenge is not reflected in its slim 15 per cent discount to SF Holdings. Investors were right to be cautious.

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