Asia-Pacific tops global IPO activity

Postmen from Japan Post on their rounds. Japan Post bagged the crown of the world's biggest IPO of 2015 with its US$12 billion share sale.
Postmen from Japan Post on their rounds. Japan Post bagged the crown of the world's biggest IPO of 2015 with its US$12 billion share sale.PHOTO: REUTERS

It's seen as promising a better 2016 as China reopens its listings market with new rules

The Asia-Pacific region dominated global initial public offering (IPO) activity in the past 12 months, improving on its 2014 showing and promising a better 2016 as mainland China reopens its listings market with new rules in place.

Global IPO listings volume fell by 2 per cent to 1,218, raising a total capital of US$195.5 billion (S$276.7 billion) - a 25 per cent nosedive from 2014 - according to EY's annual report on global IPO trends.

While there was no single reason for the decline in activity, uncertainties over central bank monetary policies, concerns over a slowing China and a record year for mergers and acquisitions could have been among the factors. Firms also had a greater range of attractive financing options such as issuing bonds.

In the United States, the IPO market was disappointing with 169 filings raising only US$30 billion, according to Renaissance Capital IPO Centre's 2015 annual review. EY's figure was similar at 173 worth US$33.3 billion.

Technology company listings, a mainstay of IPO activity, were most affected, raising only US$8.1 billion - a 27 per cent decline from 2014.

"For the first eight months of the year, the IPO market was on target to reach over 200 IPOs with solid returns, but went into a tailspin in August and September that wiped out positive performance, drove abnormally high IPO discounts and brought issuance to a near halt by year-end," the review said.

The New York Stock Exchange lost its top spot as the world's leading bourse to Hong Kong after four years, as the Chinese territory raised US$31.2 billion through 71 listings marking an IPO market share of 15.7 per cent, data released by Dealogic showed. The New York bourse logged a lacklustre 9.8 per cent market share, raising US$19.57 billion - its lowest level since 2009 - through 52 floats.

Nasdaq (US$17.5 billion) and Shanghai (US$17.1 billion) came next with London, Europe's biggest stock exchange, rounding off the top five raising US$16.2 billion.

More companies will list in Hong Kong in the coming weeks, especially in the wake of China's lifting of the IPO freeze and its legislature approving a new registration system that could be in place as early as March, Xinhua news agency said.

The latest reform is aimed at developing China's financial market, with changes expected to help firms raise money more efficiently and reduce the involvement of regulators in the capital market.

The old system was seen as distorting the IPO market and encouraging official corruption.

The Chinese stock market crash beginning in mid-June was blamed partly on an IPO glut - leading to a freeze on new listings.

Chinese exchanges re-opened to new listings in December with a strong pipeline of more than 650 companies ready to go public.

Despite the listing pause in the world's second largest economy, the Asia-Pacific was the only region to perform better this year, being home to seven of the world's busiest exchanges by the number of IPOs and accounting for 55 per cent of global deal numbers and 46 per cent of global capital raised.

"A range of economic headwinds ... low oil and commodity prices and exchange rate volatility affected the level of IPO activity in South-east Asia but ultimately failed to substantially impact the volume and value of IPOs across Asia-Pacific," said Mr Max Loh, Asean and Singapore managing partner at EY.

The Singapore Exchange saw its first mainboard IPO listing for 2015 in December, with China retail assets firm BHG Retail Reit priced at 80 cents apiece. The junior Catalist board had notched up only 12.

The EY global report saw prospects for 2016 improving, with a strong first quarter, although economic fundamentals, volatility and monetary policy will continue to affect the market.

"With stock markets riding high and a lack of competition from other asset classes, investors remain keen to back equities," said Ms Maria Pinelli, EY's global vice-chair, strategic growth markets. "IPOs seem to have been more resilient to volatility spikes this year than you'd expect, so it will be interesting to see if this continues in 2016."

A version of this article appeared in the print edition of The Straits Times on December 31, 2015, with the headline 'Asia-Pacific tops global IPO activity'. Print Edition | Subscribe