Asia had its best third quarter on record for initial public offerings (IPOs), although Hong Kong fell silent as many companies suspended listing plans at the regional powerhouse amid sweeping regulatory crackdown from China.
Thanks to successful deals in markets like South Korea and India, the region’s first share sales raised US $ 56 billion in the three months to Thursday, the most ever recorded for such a period, according to data compiled by Bloomberg.
“Activity will continue – 2021 remains an extraordinary year for volume in equity capital markets,” said William Smiley, co-head of Asia ex-Japan equity markets at Goldman Sachs Group Inc. “Global investors still want access to Asian growth. “
Asia’s third quarter record came despite the slowdown in Hong Kong, one of the busiest trading places in the world.
As Beijing broadened its efforts to tame companies and align business models with Chinese President Xi Jinping’s (習近平) “common prosperity” campaign, an estimated US $ 1 trillion was swept away from the value of Chinese stocks in the world in July and the Hong Kong stock index plunged into a bear market in August.
This saw listing volumes in the financial hub drop to $ 6 billion in the third quarter, behind South Korea for the first time in four years.
It was also the lowest quarterly IPO volume for Hong Kong since early last year, when the COVID-19 pandemic took hold and equity capital markets came to a halt.
Equity performance also suffered. Companies listed in Hong Kong in the third quarter that raised at least $ 100 million saw their shares rise 2.8% on average from their offer prices, according to data compiled by Bloomberg.
That’s up from 20 percent in South Korea and 25 percent in India, both of which saw strong volume increases compared to the first two quarters.
“After a very strong first half for the street, we are still seeing good levels of activity for the rest of the year, albeit at a slower pace,” said Magnus Andersson, Co-Head of Capital Markets Asia-Pacific equities at Morgan Stanley. “We expect to have a healthy pipeline early next year.”
IPOs by game developer Krafton Inc and online banking KakaoBank Corp pushed third-quarter volumes to $ 10.4 billion in South Korea, about four times what had been recouped in each. of the two previous quarters.
Similarly, in India, food delivery start-up Zomato Ltd raised US $ 1.3 billion in July.
Many more announcements are pending for the last quarter, starting with digital payments company Paytm, which has asked to raise up to 166 billion rupees ($ 2.24 billion) in what would be the largest introduction. on the country’s stock exchange.
“India now has a tech savvy and educated population with good internet penetration,” said Anvita Arora, co-director of Asia-Pacific equity markets at Bank of America Corp. “The combination of technological success factors is there. In general, the technology pipeline is very strong.
As Shanghai secured the biggest third-quarter deal in Asia with the bumper bid from China Telecom Corp (中國 電信), few bankers expect a large pipeline of Chinese listing candidates to return anytime soon.
This is due to continued uncertainty on the regulatory front and as issuers wait for new rules on overseas IPOs.
Chinese companies that initially considered listings in Hong Kong or the United States might choose to raise funds privately instead while waiting for the clouds to clear.
Even with the slowdown in Hong Kong, early share sales in Asia have raised US $ 140.5 billion so far this year, more than the same period another year, according to data compiled by Bloomberg.
While IPOs of Chinese issuers may slow over the next three months, listed companies continue to raise funds.
London-based insurer Prudential PLC recovered US $ 2.4 billion from a Hong Kong stock sale last month in one of the territory’s biggest tracking deals of the year.
The nature of transactions in Asia would be different from last year, and a more thoughtful approach to price, size and structure may be needed, but deals will continue to be made, Smiley said.
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