Bespoke tailoring
Investment banking fee income declined in Asia Pacific ex-Japan, but issuers were willing to pay for advice when it was innovative or solved a problem. JP Morgan, IFR Asia’s Bank of the Year, found the right pools of capital for its clients and grew its market share across asset classes.
Most international investment banks struggled in 2023 as volumes dropped across equities and offshore bonds and loans, but JP Morgan found inventive ways to connect clients to global capital even when markets were unfavourable.
As a result, the bank grew its Asian investment banking revenues to US$382m, up around 9% from
the previous year even though the total fee pool shrank by 6%.
“While we can’t control the volume of activity in the market, we can ensure we are thoughtful in where we invest time, and creative in delivering solutions for our clients,” said Paul Uren, head of investment banking for Asia Pacific. “No transaction has been easy this year and taken a straight path from A to B.”
In all key areas across Asia Pacific ex-Japan, JP Morgan grew its share of the pie. In G3 bonds its market share grew by 1.3 percentage points to 6.9%, in common stock it jumped by 0.9 points to 2.9%, and in the resurgent equity-linked market it leaped 4.5 points to 10.6%.
“Almost every deal has had an element of problem-solving during 2023,” said Uren. “We have worked closely with clients to prepare early, be nimble and lead with advice.”
Many of JP Morgan’s tailor-made solutions came in the Australian market, where M&A transactions and private equity divestments needed bespoke capital markets structuring.
Throughout the year, JP Morgan helped lead four block trades totalling A$1.37bn in Australian infrastructure services provider Ventia Services Group as CIMIC Group and Apollo Global Management exited their positions.
In September, JP Morgan was an active bookrunner on BHP Group’s US$4.75bn multi-tranche offering, the largest G3 corporate issue in Asia ex-Japan in 2023, which helped the metal miner to repay a loan taken to acquire OZ Minerals in May.
When gold producer Newmont Corp made an offer for Newcrest Mining, JP Morgan helped the target company maximise its selling price, drawing on a multi-year relationship. The US$19.5bn M&A transaction was Australia’s largest of the year and one of the year’s biggest fee events in Asia ex-Japan.
“We don’t try to be all things to all people,” said Uren. “We closely back clients that we have developed close relationships with and know well, supporting them with advice and capital. Our goal is to be alongside them when their most critical transactions are being done.”
JP Morgan was sole bookrunner when diversified mining company Mineral Resources printed an upsized US$1.1bn deal, and structuring agent for APA Group’s €500m 60-year non-call 5.25 issue, a rare hybrid offering in the G3 market. The debut euro hybrid trade helped fund the energy infrastructure group’s acquisition of assets from Alinta Energy.
Chinese offshore equity deals were few and far between, but JP Morgan led the deals that mattered.
“Globally IPO markets remained challenging in 2023, and that was reflected in Hong Kong where issuance volumes were at historic lows,” said Peihao Huang, co-head of ECM for Asia ex-Japan. “We were however able to leverage our global platform and local market capabilities to provide tailor-made solutions to our clients in the region, be that through convertible bonds, GDRs, rights issues, various types of cross-border transactions as well as the IPO product.”
In November, it helped Will Semiconductor bring a US$445m Swiss GDR offering that priced at the top of guidance. This was the first Chinese GDR offering in four months, following a change in regulations that led to a freeze in issuance.
WuXi XDC’s HK$4.06bn (US$520m) November float stood head and shoulders above other Hong Kong listings. IPOs earlier in the year had been narrowly distributed to friends and family or had disappointed in the aftermarket.
As one of the sponsors for the Chinese contract medical researcher’s offering, JP Morgan found high-quality international cornerstone investors to anchor the deal. Huge institutional demand then allowed it to price at the top of the range, multiple times covered, and trade up, allowing the greenshoe to be exercised.
JP Morgan was also an underwriter on the HK$18.8bn rights offering for Hong Kong’s Link REIT. The deal was announced on February 10 as stress was growing in the US banking system, and ran from March 9–21, a period that encompassed the collapses of Silicon Valley Bank and Credit Suisse. Despite the weak backdrop, Link REIT’s deal closed oversubscribed and earned underwriters a chunky 1.5% fee.
It was one of JP Morgan’s deals that really opened the Indian IPO market in 2023. Condom maker Mankind Pharma’s Rs43.2bn float in May was the first sizable Indian IPO of the year to perform well on its debut, giving investors confidence to put their money to work in more floats.
As well as other IPOs like the seven times subscribed IPO for skincare and baby product company Honasa Consumer, JP Morgan was front and centre when it came to block trades. After helping IDFC First Bank sell an upsized Rs30bn qualified institutional placement in October, JP Morgan was sole bookrunner when Warburg Pincus sold shares in a block trade in December.
The bank also reopened the bond market for Indian issuers: first with Export-Import Bank of India’s US$1bn sustainability bond in January, the first Indian G3 bond for nine months, and then with ReNew Energy’s US$400m green bond in April, which was the first widely distributed Asian high-yield corporate deal of the year.
JP Morgan brought frontier sovereign Mongolia to the US dollar market twice in 2023, accompanied both times by liability management exercises that cut interest costs and broke up maturities into manageable chunks.
Investment-grade issuance dominated, though, and the bank led deals for top names like Malaysian sovereign wealth fund Khazanah Nasional, bringing its first rated deal, the Hong Kong sovereign’s green bond and a euro issuance from Singapore’s Temasek Holdings.
“We tended to prioritise areas like the sovereign-linked space, and won new clients in Hong Kong and Korea,” said Madhur Agarwal, head of DCM for Asia ex-Japan. Those new clients included Hong Kong Mortgage Corp and Korea Housing Finance Corp.
In South Korea, JP Morgan was kept busy with G3 deals for big names like Export-Import Bank of Korea, and helped the likes of Shinhan Financial Group raise social bonds and Korea Electric Power print a US$1bn sustainability bond.
The trend for social bonds from Korea played to JP Morgan’s strengths in ESG. As well as labelled deals it brought investors offerings connected to the electric vehicle sector.
JP Morgan in May helped battery producer SK On bring its debut offshore bond. The same month, it was lead financial adviser when SK On sold a US$900m private equity placement to international investors like Qatar Investment Authority, the last part of a US$1.8bn institutional equity raising.
“Over the past several years, we have seen the pool of capital ready for investment in private situations grow consistently,” said Sunil Dhupelia, co-head of ECM for Asia ex-Japan. “Historically that was sovereign wealth funds and pension funds, but that pool of capital has expanded significantly to include a broad spectrum of funds who have become more relevant to privately negotiated deals for listed companies.”
When Chinese data centre REIT operator GDS Holdings wanted to raise funds, JP Morgan acted as placement agent for a private US$580m seven-year convertible bond placement.
Equity-linked bonds returned to prominence as issuers tried to limit their interest costs, and JP Morgan’s strengths in the asset class meant it was well positioned.
It was sole bookrunner for battery materials maker L&F’s US$500m seven-year put five convertible bond, which saw the debut trade upsized, and helped bring electric car maker Nio’s US$1bn dual-tranche CB, the year’s biggest international convertible offering from a Chinese company.
These deals were testament to JP Morgan’s ability to identify pockets of liquidity in rocky market conditions to achieve the best solutions for its clients.
“When markets get more volatile, clients tend to turn to JP Morgan,” said Uren. “We have stayed close to clients, and advised them to be ready. That enabled our clients to be very nimble to take advantage of windows that are shorter than ever.”
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