Vietnam has toppled traditional money markets such as South Korea, Singapore and Australia in IPO listings to become the fourth leading Asia Pacific-based issuer in term of value in the first quarter this year, cites Baker McKenzie in its latest report “North America Capital Raising Drive Cross-Border IPOs”.
However, geopolitical uncertainty and market volatility have dampened the IPO market in the first half of 2018 in Asia Pacific in general with a decrease of 21 per cent in value compared to the same period of last year.
But the global law firm asserts that Asia Pacific has still managed to retain its place as the most active despite these global instabilities.
The dip in Asia Pacific
Overall IPO value stood at $31.9 billion, down 21 per cent on the year, while 400 deals were recorded, a fall of 31 per cent. The declines are replicated across both the domestic and cross-border markets with the domestic value falling 22 per cent to $26 billion and volume down 34 per cent at 360, while cross-border value fell 12 per cent to $5.6 billion and volume holding at 40, according to the report.
Despite the drop in activity, the Asia Pacific cross-border index grew by over 21 per cent to 15.9 as the share of cross-border listings in the region increased to 18 per cent (from 16 per cent in H1 2017) in terms of value and to 10 per cent (from 7 per cent in H1 2017) in terms of volume.
“In Asia-Pacific, deal flow could improve as market reforms may facilitate greater cross-border listings in Asia-Pacific,” said David Holland, Asia Pacific Chair, Capital Markets of Baker McKenzie.
He gave an example of dual share structure in Hong Kong which may attract companies who would have otherwise listed in the US – and the introduction of depository receipts on the mainland, which allow Chinese citizens to participate in the investments of international firms.
Among Asia Pacific countries, Vietnam is seen as a highlight in listing activities given the performance of Vinhomes JSC, the luxury villa and serviced apartment development arm of Vietnam’s biggest property developer Vingroup. Robust investor appetite and soaring demand for quality housing in cities have pushed Vinhomes to become the second most valuable listed firm in the Southeast Asian country.
China sees a slide
The over-one-billion-people country also cannot avoid the inevitable negative effects of geopolitical uncertainty and market volatility. Public listings of Chinese companies weakened in the first half with value of $18.9 billion, down 18 per cent year-on-year in value while 70 per cent in volume, the report showed.
It states that the declining IPO activity is attributed to restrictive listing rules, which have resulted in Chinese companies, particularly those in the tech industry, to choose overseas destination to go public.
Meanwhile, Chinese companies were the world’s most active cross-border issuers in H1 2018. China accounted for 36 per cent of the total number of cross-border issues and 44 per cent of the total cross-border capital raising during the period.
The report showed that high technology sector led all other sectors by value in terms of Chinese cross-border IPOs ($4246 million), followed by real estate ($1111 million) and financials ($913 million).
China is now allowing tech companies easier access to domestic investors. Authorities have endorsed the Chinese depositary receipts (CDRs) scheme. In its current form, the scheme will cover listed tech firms with a market capitalization of more than $ 32 billion, and unlisted tech firms with valuations of more than $3.1 billion.
Domestic listings in India, meanwhile, have been robust and are expected to remain so until the last quarter when the upcoming election cycle begins, while a surprise change in government in Malaysia isn’t expected to impact significantly on business.