Asia-Pacific IPO market defies recession caused by pandemic

New-listing activity in 2020 saw 45% rise in proceeds from 2019

New listings in Singapore were steady at 11.
New listings in Singapore were steady at 11.PHOTO: ST FILE

The uncertainty and volatility last year failed to make a significant dent in the initial public offering (IPO) market across the Asia-Pacific, according to an Ernst & Young (EY) report.

The smaller exchanges in the Asean region, however, saw a modest drop in the number of IPOs and proceeds, said the Global IPO Trends report, with data sourced from financial markets platform Dealogic.

New listings in Singapore were steady at 11.

Mr Max Loh, who leads the EY Asean IPO team, said the Asia-Pacific IPO market remained relatively resilient last year in the face of the coronavirus-induced recession.

"Any impact has clearly been buffered by government fiscal stimuli, low interest rates, an abundance of liquidity and the roll-out of vaccines," he said.

While the exchanges in the Greater China region continued to lead the way in terms of number of IPOs and the proceeds raised, Asean exchanges recorded a steady number of IPOs with proceeds raised increasing due to larger average deal sizes, Mr Loh said.

"This augurs cautious optimism that with a faster though uneven recovery in the region in 2021, the need for companies to access capital, boost liquidity, transform and drive growth will lead to an improving IPO market both from a number and size perspective," he said.

The report, released yesterday, showed that Asia-Pacific IPO activity last year surpassed that of 2019 - with 20 per cent more deals and a 45 per cent increase in proceeds to US$136.2 billion (S$180.2 billion) - the highest level since 2010.

Some of this rise in activity can be attributed to a particularly active second half.

In the fourth quarter of last year, deal numbers rose by 5 per cent and proceeds increased by 4 per cent, compared with the same period in 2019.

In the Asean region, IPO activity saw a modest decline last year, both in numbers that fell by 13 per cent and funds raised that fell by 5 per cent, compared with 2019.

Mr Ringo Choi, leader of the EY Asia-Pacific IPO team, said that looking ahead, IPO candidates will need to continue to take the necessary precautions to maintain their liquidity.

"IPO companies, and new economy companies especially, have proven their importance to the economy and their ability to pivot, adapt and prosper in response to the pandemic," he said.

  • ASIA-PACIFIC IPO ACTIVITY

  • 20%

    Proportion by which the number of deals increased last year from 2019.

    $180.2b

    Amount in proceeds last year.

Looking ahead, the Asia-Pacific IPO market trend remains positive for the first half of this year.

EY expects IPO-bound companies in high-performing sectors, such as technology, healthcare and industrials, to continue to do well this year and be well received by IPO investors.

However, the speed of recovery from disappointing 2020 earnings reports due in the first quarter of this year will affect market sentiments, Mr Choi noted.

The EY report said the Covid-19 pandemic has left a scar on Asia-Pacific economies.

For IPO candidates in heavily impacted sectors, the wound is still deep, and they will continue to find it hard to raise money until the economy rebounds, it said.

Worldwide, IPO processes and ecosystems have adapted to changes forced by the pandemic, such as by holding virtual roadshows.

Strong 2020 IPO activity demonstrates that global equity markets are resilient, open and working.

For investors in today's low interest rate environment, equity investments offer a means to achieve higher returns, the report said.

Last year, global IPO numbers were up 19 per cent, while proceeds increased 29 per cent from 2019. A total of 1,363 IPOs were launched, with total proceeds of US$268 billion.

A version of this article appeared in the print edition of The Straits Times on January 22, 2021, with the headline 'Asia-Pacific IPO market defies recession caused by pandemic'. Subscribe