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Asia ex-Japan share sales are expected to rebound in the final quarter of 2017, led by tech-related IPOs in Hong Kong and insurance listings in India, helping the region’s equity capital markets shrug off a dismal nine months and draw level with last year.
Banks and securities firms will also take comfort from the fact that while deal volumes slumped in the region, they earned 24% more in fees on them, pocketing $4.4 billion, according to Thomson Reuters estimates. That suggests they are working on more profitable deals or on those with higher margins.
Equity deals in the region dropped 13.9% this year through the end of September, led by a slump in the sale of existing shares that more than offset big gains in IPOs in mainland China exchanges and in India, Thomson Reuters data showed.
Asia-Pacific equity capital markets (ECM) activity fell to $136 billion, with follow-on share sales tumbling 25.6%, according to the data through Sept 27. Initial public offerings rose 18.7% to $49.6 billion as new listings in China’s high-tech exchange ChiNext and the Shenzhen Small & Medium Enterprise board more than doubled.
The IPOs in Hong Kong and more insurance listings in India are seen keeping activity busy as the year draws to a close. Activity in those markets contrasts sharply to a slump in Australia that is likely to weigh on the overall deal volume in the region.
“The fourth quarter will be active and we will see a lot of IPOs,” said Harish Raman, who heads equity syndicate for Asia ex Japan at Citigroup, the second ranked bank in equity underwriting this year.
“Looking into next year, there are several large new listings out of China, so from an IPO standpoint it could be quite interesting.” Upcoming deals include listings from Razer Inc, a gaming hardware maker backed by Intel Corp and Hong Kong billionaire Li Ka-shing, and China Literature Ltd, a Tencent Holdings Ltd unit and the country’s largest online publishing and e-book company.
The two firms plan to raise $400 million and $800 million, respectively, in coming weeks and could benefit from renewed enthusiasm over technology listings in Hong Kong after ZhongAn Online Property & Casualty Insurance Co surged in its debut following a $1.5 billion IPO.
Two giant listings that were expected to take place in 2017, from state-owned China Tower Corp – which operates the mobile phone network for China’s three wireless carriers – and Sinopec Marketing Co Ltd, are unlikely to happen as neither companies have filed IPO materials yet. The deals, expected to raise at least $10 billion each, will likely roll into 2018 and boost activity next year.
In Australia, IPO volumes for the first nine months of 2017 sank 62% as companies that originally planned to go public ended up being scooped up in debt-fuelled acquisitions by domestic and foreign buyers.
After a series of new listings from insurance companies, India will likely have a record year for IPOs. Three more insurers – HDFC Standard Life Insurance Co Ltd, state-run GIC Re, and New India Assurance Co Ltd – have filed for IPOs, which bankers expect to raise more than $4 billion combined, although all three may not list by December.
“The Indian market may not be able to replicate the same IPO pipeline as this year, given all the big insurance deals…but you’ll see a lot of secondary activity from India next year,” Citigroup’s Raman added.
