Will Tobacco IPO Light Up?

Cheap cigarettes are easily available everywhere in China

The world's largest cigarette company is filing its IPO in Hong Kong -- China National Tobacco.

I raised my eyebrows when I found out.

To clarify, it's the Chinese state-owned tobacco monopoly's international subsidiary, China Tobacco International, is planning the listing. Its revenues were HK$5.1 billion (US$651 million) from January to September last year, according to documents filed with the Hong Kong stock exchange.

The state-owned monopoly filed an IPO in Hong Kong

China National Tobacco buys leaves from overseas markets such as Brazil and the United States, and then sells them to domestic cigarette manufacturers at a 6 percent mark-up.

The Chinese company also has a monopoly on all tobacco exports from China, which largely caters to Chinese tourists in duty-free outlets across Asia -- a very small market.

China National Tobacco doesn't publish data on its accounts, but Bloomberg News said a rare release of financial data in 2012 suggests the state-owned enterprise's earned profits were on par with HSBC and Walmart.

It's intriguing the application for the listing is being made now, at a time when everyone knows smoking is harmful to your health -- and who will invest in this IPO? Sounds like a test of investors' ethics.

According to the World Health Organization, 7 million deaths last year were attributed from cancer and other lung diseases, or 1 in 10 deaths worldwide, 1 million in China alone.

The country produces the most cigarettes in the world

The Chinese government puts out feeble public service announcements about the harmful effects of smoking on health, but in reality it makes a lot of money from holding the monopoly on selling tobacco...

In Hong Kong where smoking rates fell 10 percent in 2017, we'll have to see if people have the appetite to encourage others to light up...