APAC IPOs recover in H1 2017, with strong SGX rebound

An investor stands in front of a board displaying stock prices at the Australian Securities Exchange. Photo: Reuters

IPO activity in Asia Pacific has seen a strong recovery in H1 2017 after a sluggish 2016, according to data from global law firm Baker McKenzie and management consultancy EY. This has been underpinned by strong domestic listings, with Singapore bourse showing good recovery.

Overall IPO volume, including domestic and cross-border listings, in the region rose to 530 deals, the highest since 2011. IPO value rose by 59 per cent year-on-year to $37.2 billion, accounting for 41.4 per cent of global IPO proceeds.

Q2 2017 global IPOs. Credit: EY

Asia Pacific retained its cross-border IPO crown for the sixth year, raising a total of $5.785 billion from 33 deals. The region accounted for 47 per cent of total capital raised (i.e. $12.23 billion) via global cross-border listings in H1.

However, the region’s cross-border IPO Index dropped to 12.5 from 19.4 in H1 2016, indicative of domestic deals accounting for the lion’s share of new equity listings.

Domestic IPOs dominated in all stock exchanges across Asia Pacific, except in the Stock Exchange of Hong Kong (SEHK), which remains the preferred hub for cross-border listings globally as it is a leading exchange for Mainland China companies.

The region’s domestic listings raised a total of $31.5 billion from 498 IPOs in H1 2017, representing a 91 per cent and 74 per cent year-on-year increase in deal value and volume respectively.

China contributed heavily in reaching this total, raising a total of $16 billion from 219 IPOs. This surge in new listings across Mainland China exchanges was triggered by the country’s recent move to allow exchanges to take over the IPO approval process and clear the backlog of companies waiting to list.

APAC IPOs – Highlights

Q2 2017 APAC data. Credit: EY

Asia-Pacific hosted two of the world’s three largest IPOs in H1 2017 — the $2.3-billion IPO of tech firm Netmarble Games on the KRX in May, and the $2.2-billion IPO of financial services company Guotai Junan Securities on Hong Kong (HKEX) in April.

IPO activity was broadly spread throughout the region with Greater China exchanges the busiest with 317 IPOs, ahead of Southeast Asia (48), Australia & New Zealand (45), Japan (38) and South Korea (20).

The Australian Securities Exchange (ASX) ranked fourth among global stock exchanges by deal numbers for this period, while the Korea Exchange (KRX) main market and KOSDAQ junior market ranked fifth among global exchanges in terms of proceeds.

In Southeast Asia, the Indonesia Stock Exchange (IDX) was the most active with 13 deals totalling $220.7 million, while the highest proceeds came from Malaysia ($1.34 billion), Thailand ($905.3 million) and the Philippines ($361.4 million). In Singapore, five IPOs on the Singapore Exchange (SGX) raised a total of $182 million in Q2 2017.

Max Loh, EY Asean and Singapore Managing Partner, Ernst & Young LLP, said: “Asia-Pacific’s position as the leading center of IPO activity will remain unchallenged through the remainder of 2017 with Greater China leading the way. Notably, Korea made a significant contribution to total proceeds in H1 2017, with mega IPOs from the technology and financial sectors.”

Among the money centres, the SEHK and the Tokyo Stock Exchange (TSE) were the only two exchanges that rebounded from the subdued market and saw an increase in the capital raised.

David Holland, Head of Capital Markets in Asia Pacific at Baker McKenzie, said, “The biggest influence on overall cross-border capital markets activity in Asia Pacific is Chinese companies listing on the Hong Kong exchange, which fell in the first half of 2017. While the number of transactions increased from the low base in FY16, cross-border transactional activity hasn’t tracked the strong equity markets across the region.”

“Looking forward to the next year, we think we will see a modest increase in transactional activity overall across the region. Capital flows out of China continue to represent the biggest area of uncertainty in capital markets in Asia Pacific.”

2017 Sector Breakdown

The financial sector continues to be a key driver of IPO activity in Asia-Pacific, given that this sector also saw the most cross-border listings, with all five deals coming from Chinese issuers raising a total of $3.7 billion on the SEHK.

However, the capital raised through cross-border listings in this sector saw a drop in value for the second year running and was down by 22 per cent when compared to the same period in 2016.

Most sectors, except real estate, witnessed an increase in capital raised from countries in Asia Pacific. High technology, industrials, materials, consumer products and services, financials, energy and power, and retail all witnessed an increase in the number of IPOs.

In fact, domestic IPOs from the technology sector saw the largest percentage increase in terms of total capital raised and deal volume in the region, with 83 technology firms going public in the first half of 2017, raising $5.27 billion. This is the best performing year in terms of total capital raised and the second best performing year in terms of the volume of technology companies listing over the last six years.

Tech IPOs

H1 2017 tech listings. Credit: Baker & McKenzie

Asia Pacific led the front when it came to tech IPOs, with the Korea Stock Exchange and the Shenzhen Stock Exchange being the most popular choices, both raising more than $1 billion.

Netmarble Games Corp accounted for the majority of capital raised on the KRX, at $2.35 billion, South Korea’s largest technology IPO over the last six years. The remaining capital came from six IPOs listing on Kosdaq, the Korean equivalent of Nasdaq. 2017 is set to be a record year for Kosdaq as valuations are currently high, and the cost and complexity of listing are relatively low.

The Shenzhen Stock Exchange has hit record capital levels with $1.8 billion from 33 tech IPOs. Of these, 24 IPOs worth $1.1 billion came from the ChiNext board, which is typically aimed at high-growth high-tech startups.

The Shenzhen Stock Exchange announced in June 2017 its plan to extend its Tech 2.0 platform beyond Chinese companies to Indian fintech companies and technology-based startups, helping them connect with private equity and venture capital investors in China. The SEHK is also conducting a public consultation until 18 August on the launch of a new Third Board, which aims to attract technology and new economy companies to list in Hong Kong.

Singapore bourse sees strong recovery

Q2 2017 SGX data. Credit: EY

Singapore saw nine IPOs in the first six months of 2017 with S$464 million in proceeds and a total market capitalisation of S$2.14 billion, according to data by Deloitte Singapore. Of the nine, eight IPOs raised S$310 million with S$1.7 billion market capitalisation and one Business Trust on the SGX Mainboard raised S$154 million in proceeds.

The two Mainboard listings were the IPO of HRnetGroup Limited with the highest funds raised (i.e. S$174 million) and a market capitalisation of S$867 million, followed by Dasin Retail Trust which raised S$154 million with a market capitalisation of S$440 million.

The performance of the first six months reinforces positive investor sentiments for Singapore’s equity market, which includes the Mainboard business trust lodgement by NetLink NBN Trust; this is forecast to raise approximately S$2.5 billion, making it among the largest business trusts on the Singapore bourse.

For H1 2017, according to Deloitte, all IPO listings showed positive post-listing performances both at first-day closing and current prices with an impressive average increase of 40 per cent in their share price since IPO. UnUsUaL Limited was the top performer with the first-day closing price of S$0.435, up 118 per cent and current share price of S$0.510 as at 30 June 2017, up 155 per cent from its IPO price of S$0.20.

Commenting on the outlook for the remaining part of 2017, Dr Kan said, “We are expecting a strong pipeline of blockbuster listings in H2 2017 and coupled with the strong post-IPO performance of the companies listed in 2017 H1, Singapore’s IPO market is certainly buzzing with excitement.”

Two of the companies listed in H1 — Kimly Limited and Aoxin Q&M Dental Group Limited — have both made sizeable acquisitions within two months since IPO. Capital raising has served to expedite their expansion plans, sending a positive signal to investors and other potential IPO aspirants.

Loh of EY said, “The Singapore Exchange (SGX) is likely to lead the IPO pipeline for Southeast Asia in the second half of 2017. It is well- positioned as a platform for growth, alongside Indonesia, Thailand and the Philippines.”

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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.