Institutional growth

In a year when growth in the US revived confidence in the global economy, it was the growth of Asia’s institutional investor base that drove the region’s capital markets forward.

Asia’s deepening savings pool and the rising sophistication of homegrown asset managers, insurers and pension funds were behind the defining themes of 2017.

Asian companies printed bigger deals at longer tenors and higher valuations, and hot IPOs in Hong Kong proved that the city could rival New York as a platform for high-growth stocks.

China dominated again in 2017, but not in the way anyone had expected. At the start of the year, global investors were worried that slowing mainland growth rates and tighter credit conditions would burst the economic bubble. Chinese authorities slammed the brakes on exuberant acquisitions and clamped down on outflows. Amid the volatility and uncertainty, it looked as though dealmakers were in for another long, hard slog.

That all changed, however, by the end of the first quarter. Growth rates stabilised and global investors returned.

Renewed confidence in China’s economy allowed issuers to access international capital at low cost, and sent investors searching for the next growth story.

Technology emerged as the investment theme of the year. The switch into growth mode laid the foundation for a 100%-plus rally in China’s top internet stocks, in turn opening the door for a new wave of listings from the sector. Early-stage companies from China to South-East Asia were able to raise capital in the public markets at high valuations – and without cornerstone investors.

Add on the old industry players that are looking to raise money for expansion, a benign rates backdrop and rising global growth rates and the future looks bright for 2018. With Asian investors leading the charge, support for growth equity, hybrid capital and long-term funding looks set to continue.

That, however, poses a number of questions. Can Asia sustain current valuations? What is the role for global funds and intermediaries? Can Asian investors protect the region from global shocks?

Bond markets are due a breather – if not an outright correction – after a breathless run in 2017, and equity underwriters know that momentum is hard to recover once it is lost.

But with deep-pocketed regional institutions behind them, it is a brave call to bet against Asia’s capital markets.

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