Asia Pacific has strongest IPOs, Singapore’s SGX leads ASEAN markets

Singapore Exchange. Photo: Bloomberg

When it comes to initial public offerings, Asia Pacific has turned out to be the most active region by number of deals, and second only to Europe in terms of capital raised.

This does, however, represent a decrease of 37 per cent and 65 per cent respectively, over the same period last year, but is broadly in line with global trends, according to a report by consultancy EY.

The market for IPOs was the weakest globally — since 2009 — in the first quarter of this year. But there was a resounding turnaround in Q2, with a 120 per cent upswing in capital raised to $29.6 billion in 246 deals, up almost a third on Q1.

Global IPO

However IPO activity at the mid-year point remains significantly below that of the same period last year. At 437 listings, IPO volumes are 38 per cent lower and at $43 billion, total capital raised is almost two-thirds down on first half of last year.

Asia Pacific pushed on ahead of the world, with 229 IPOs raising $17 billion in the first half of the year. That made the region the most active among all other regions in the first half of the year.

For the quarter, proceeds rose to $9.3b and the number of deals rose by 14 per cent to 122 IPOs. Capital raised increased by 20 per cent compared with the prior quarter. Investor sentiment appears less cautious than in some other regions and there is a healthy pipeline of companies ready to go public when the timing is right.

“The outlook for the IPO market in Asia-Pacific is brightening following a period of uncertainty. Although a number of political and economic headwinds including Brexit, the slowdown in China’s growth rate, fluctuating commodity prices and the possibility of a further interest rate rise in the US continue to weigh on investors, a sense of optimism is returning,” said Max Loh, EY Asean and Singapore Managing Partner.

Asia Pac IPO

Singapore (SGX) saw its largest new listing in three years – Frasers Logistics & Industrial Trust raised $668.7 million when it listed in June. Earlier in the quarter, Manulife REIT raised $469.9 million. These two were among Asia-Pacific exchanges’ top 10 deals for the quarter. Malaysia, Indonesia, Thailand and the Philippines contributed to a total of 10 IPOs, raising $630 million.

“Barring an uptick in volatility and erosion of confidence, the stage does seem set for an increase in IPOs in the second half of the year,” Loh said.

Countries in the ASEAN region had a muted start to 2016, with investors in “wait-and-see” mode in the face of uneven global economic data, lower corporate earnings, commodity price volatility, the uncertainty over the UK’s EU referendum and divergent interest rate policies.

As a result, investment options such as REITS and business trusts remain popular due to their liquidity and steady yields. For this same reason, debt issuance activity by corporates is also very much in vogue. However, toward the end of the second quarter, IPO activity in ASEAN started to pick up, with higher average deal size.

As the market has stabilized, several tech startups have also raised IPOs. Others are looking for alternative sources of funding, such as private equity and crowdfunding as they wait for IPO pricing to improve and for market conditions to become more attractive.

exchanges

Greater China had another slow IPO quarter in Q2, with investors wary of the slowdown in growth rate on the Mainland and the possibility of a currency devaluation. As a result, the number of deals for the rst six months of 2016 was 101 IPOs, down from 236 IPOs in Q2 ’16. Capital raised was also down, to $10.5 billion from $40.7 billion in the rst half of 2015. However, the outlook for the second half of the year is more positive with a strong IPO pipeline in both mainland China and Hong Kong.

“Since the volatility at the beginning of the year, the market is stabilizing and gaining momentum pending greater economic and political stability in two of China’s key trading partners, the US and the UK. In addition, the regulators continue with measures to create a healthy and stable environment and build a multilayer capital market, laying a solid basis for IPO reform and a return to higher activity levels,” said Terence Ho, EY Greater China IPO Leader.

The Hong Kong IPO market has been relatively quiet this year mainly due to uncertainty around another rise in US interest rates and concerns over the slowdown in growth rate in mainland China. In the first six months of 2016, there were 23 IPOs on the Hong Kong Main Board, raising $5.5b in proceeds, a drop of 26 per cent and 67 per cent, respectively on the same period last year.

Banks in mainland China were eager to get listed, to gain access to the capital needed to fuel their growth. Most of them went for Hong Kong, because hte route to an A-share IPO in China takes longer time. Two of the three largest deals in Asia in the first half of 2016 are examples of this sector: China Zheshang Bank Co. Ltd. and Bank of Tianjin Co. Ltd., which both listed on the Hong Kong Main Board in March, raising $1.9 billion and $989 million, respectively.

The outlook for the rest of the year appears to be bright. There are more than 800 companies that are ready to go public in China, which makes for a strong pipeline. However, in the short term, the regulator will continue to keep a close eye on market conditions and modulate new listings accordingly.

In Hong Kong, the market is expected to be more active through the remainder of 2016. There is a strong pipeline of companies waiting for the right window to open. This is expected to include a number of large listings.

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.