IPOs in Asia face headwinds after a year of record fund raising

HONG KONG • After a bumper year of stock listings, Asian companies may find it hard to repeat the success in 2022 given the prospect of rising interest rates and China's tightening grip on big tech companies.

Thanks to a blistering first half amid a global boom, initial public offerings in the region have reached US$190 billion (S$260 billion) so far this year, already a record and up 31 per cent from the whole of 2020.

But the momentum has weakened notably in recent months as Beijing escalated a regulatory assault on private enterprise, putting major deals on hold and injecting uncertainties into next year.

Bankers say they expect Asia's IPO market to be less frenzied and more balanced in 2022, as higher inflation erodes valuations of tech firms and tighter US monetary policy reduces the supply of idle cash.

The listings landscape may also look more diverse, with South Korean and Indian industries from clean energy to financial services filling the void left by once-dominant Chinese tech.

"Markets in 2022 are going to face a more normalised environment," said Mr William Smiley, co-head of equity capital markets at Goldman Sachs in Asia ex-Japan. "Withdrawal of fiscal and monetary stimulus, coupled with expectations for higher inflation may challenge risk assets, including equity markets."

Beijing's tight scrutiny of its tech firms, on issues ranging from data security to a loophole long used by companies to list overseas, is also expected to continue to slow the pace of fund raising from the sector.

This, plus the secondary market's sluggish performance, have pushed Hong Kong, a popular destination for Chinese tech firms, out of the world's top three listing venues.

Several companies, from snack producer Weilong Delicious Global Holdings to Apple supplier Biel Crystal, have pushed back share offerings in the city, and could make the last three months of this year the weakest fourth quarter since 2018 for Asian IPOs.

Picking up the slack could be Chinese firms not affected by Beijing's regulatory clampdown or beneficiaries of the nation's development priorities, including new energy providers and electric vehicle makers.

Morgan Stanley Asia Pacific co-head of equity capital markets, Magnus Andersson said: "It's not only consumer, Internet and tech, it's also more industrials and financial institutions." Candidates include Hozon New Energy Automobile and the property management arm of Longfor, reported Bloomberg.

The subdued presence of Chinese tech will also help make the region's IPO pipeline geographically more balanced, as South Korea, India and South-east Asia maintain a busy issuance calendar. Companies in India, South Korea and Indonesia have all raised record amounts via first time share sales this year.

Mega deals in the works include LG Energy Solution's US$10.8 billion IPO in Seoul and Life Insurance of India's Mumbai offering with a valuation as high as US$131 billion.

Some of South-east Asia's biggest tech unicorns are also expected to float shares next year, said Ms Selina Cheung, co-head of equity capital markets, Asia at UBS. "Now it's the right time as investors' attention is diverting from China, at least over the short term."

Despite expectations of weaker supply from Chinese tech firms as first-time share sellers, an increased number of their US-traded peers will likely seek listings in Hong Kong or Shanghai. A few prominent names that have listed in the Asian financial hub in recent years include Weibo, Baidu and Alibaba.

Expected Hong Kong listings include ride-hailing giant Didi and streaming video site IQiyi.

BLOOMBERG