Anyone with a vested interest in Asia’s equity-capital markets must be finding it tough to stay optimistic.
Companies have been forced to pull deals all over the place, with another four falling by the wayside last week alone. Slumping revenues are forcing bankers to rethink the way they allocate resources to Asian ECM – traditionally, the cash cow of investment banking in the region. The global turmoil that has derailed so many listings is showing no sign of easing: the eurozone tumult alone is threatening to keep markets shut until at least the end of June, as investors wait for more clarity on Greece’s future.
Asian ECM has certainly had better years. Even China, the source of the bulk of banking revenues over the past decade, is no longer a sure thing. Rather than piling into the next billion-dollar IPO, investors are asking if the country’s runaway growth can continue as the economy shifts towards a consumption model.
Hong Kong – the world’s busiest market for new listings for each of the last three years – has had its slowest start to the year since 2003, with just US$1.36bn raised in the first five months.
As depressing as all that may sound, there is also some room for hope. While the traditionally busy China and Hong Kong markets have slipped, others in the region are stepping up.
Singapore is luring more foreign issuers than ever. While market conditions will still pose challenges, the arrival of the likes of Formula 1 and Manchester United – following last year’s blockbuster from Hutchison Ports – shows that its exchange’s appeal to overseas issuers is now firmly established.
At least, when it comes to certain industries and structures, Singapore has opened up a comfortable lead over Hong Kong.
More broadly, South-East Asia now seems to be in the ascendancy. While listings in Hong Kong are struggling, Malaysia is preparing to welcome two of the biggest new floats of the year. Its strong domestic liquidity and years of pent-up demand mean more are likely to follow.
The Philippines is following through on its promise to put more shares in public hands, by enforcing its underused free-float rules to address the scores of thinly traded stocks. Indonesia, too, is well placed to capitalise on its new investment-grade rating – although it needs to learn from its earlier mistakes if it is to restart its programme of privatisations.
As one door closes, another opens. To restore confidence in Asian ECM, however, a few more need to stay open.
To see the digital version on this report, please click here.
