Shares of Shanghai Fosun Pharmaceutical fell as much as 12% on Tuesday in their Hong Kong debut, underscoring weak investor appetite for new offerings and dashing hopes for any recovery in the city's IPO market.

Fosun Pharmaceutical's $512 million equity offering was the biggest to hit Hong Kong in three months and was seen a test case by many for future deals.

The disappointing start is a warning for other IPO hopefuls, including an up to $6 billion Shanghai-Hong Kong IPO of People's Insurance Company of China Group (PICC) and an $800 million offer of billionaire Li Ka-shing's extended-stay hotel business.

"It reflects that people aren't interested" in new listings, said Alvin Cheung, associate director at Prudential Brokerage in Hong Kong. "Investors are afraid that prices will drop below listing prices."

Hong Kong led the world in IPOs in 2009 and 2010, but new issues have slumped more than 80% so far this year to just $1.83 billion, according to Thomson Reuters data.

Most deals in 2012 have been so-called block offerings that target a select number of institutional investors and seek to bypass volatile demand from retail investors.

"Why should I buy these new listings and not choose companies in the main board? The Hang Seng index has been doing really well," Cheung added.

Fosun Pharmaceutical's Shanghai-listed shares also fell on Tuesday, down 1.5%, compared with a 0.2% gain in the Shanghai Composite Index. The stock has jumped 21% in 2012, but is down about 7% since the company started meeting with investors in October to pitch the Hong Kong deal.

Investors are hesitant to buy the stock ahead of third-quarter earnings due later on Tuesday, a source familiar with the IPO said.

Fosun Pharmaceutical's listing was the biggest in Hong Kong since mining company Inner Mongolia Yitai Coal sold about $900 million of stock in July. Its offering priced at the bottom of an indicative range.

Fosun Pharmaceutical is a unit of one of China's largest conglomerates, Fosun International, whose main shareholder is billionaire Guo Guangchang.

Fosun Pharmaceutical, which gets about two-thirds of its revenue from pharmaceutical manufacturing, plans to use about half of the IPO proceeds for domestic and international acquisitions, setting aside about $250 million to spend in a sector that bankers say is ripe for deal making.

About 40% of the funds will be used for research and development and to pay down debt, the company said in a filing.

China International Capital Corp (CICC), Deutsche Bank , JPMorgan and UBS managed the offering.