Asia IPOs boom on China listings, more to follow
Asia’s initial public offering market is booming as economies inch out of recession and equity markets improve, setting the scene for the region to emerge as the world’s top spot for firms rushing to raise money.
But unlike the last Asian IPO boom two years ago, industry sources say tight pricing is key for companies to avoid a sell-off, especially ahs the economic climate remains uncertain.
From Australia’s top department store Myer Group to Hong Kong-based pharmaceuticals retailer Sinopharm Group, companies are expediting listing plans as IPO markets open up after a two-year hiatus caused by the global financial crisis.
“There is definitely appetite for the right deal, people are looking to places to park cash as cash has been building up,” said Frank Villante, Sydney-based chief investment officer with Souls Funds Management.
Villante said it was essential for companies price their issues attractively to generate strong demand for the offers.
China is leading the rush in the region’s IPOs, mainly after new rules allowed listings to resume after a ten-month break. Australia, India and South Korea are seeing a pick-up, but nowhere near the flurry of deals in Hong Kong and mainland China.
Another reason why new issues from China are the most is that pre-IPO investors such as hedge funds and banks finally see an opportunity to exit while the markets are up.
While some of the early offers such as China State Construction Engineering Corp’s $7.3 billion IPO, the world’s largest this year, made a stronger-than-expected debut in July, others have had a less than spectacular start.
Chinese real estate firms are prominent among the wave of IPO hopefuls as private equity and hedge fund backers rush to exit in an improved market after missing out last year. But bankers say it’s unlikely all IPOs in the group will be welcomed by investors.
China’s main Shanghai bourse .SSEC jumped 87 percent between January and the end of July. But it fell 22 percent in August, fuelling speculation the regulator could either halt or slow down the number of new offerings in the next few months.
STRONG GROWTH IN ASIA
The resurgence in listings across sectors means more business for investment banks busy lining up new equity for Asian corporates to help pay down their debts.
“There is a lot of supply but in an environment of slower global growth, Asia continues to offer some of the most attractive investment opportunities,” said Justin Haik, Morgan Stanley’s Head of Asia Pacific Equity Syndicate.
“We see substantial capacity to absorb these offerings.”
He estimated the immediate Hong Kong pipeline at about $10 billion-$15 billion of equity offerings from now until December.
Filed under: management by Specialist