A POSSIBLE revival in initial public offerings (IPOs) in Hong Kong after a pickup in Chinese regulatory approvals and a string of mega deals in India are expected to make Asia a bright spot for equity deals in the second half of this year, bankers and analysts said.
Despite the extended downturn in Asia IPOs, India’s share in Asia equity capital market (ECM) deals is at record high now, and the surge in deals is expected to last for the foreseeable future, they added.
India’s total ECM deals jumped 137 per cent in H1 2024 from the same period last year, with US$28.5 billion raised, according to LSEG data. IPOs accounted for US$4.3 billion of that, up 89.3 per cent from H1 2023.
Hyundai India’s US$2.5 billion to US$3 billion IPO due later in 2024 is set to be the South Asian country’s largest ever new share sale, and it would also be one of the biggest IPOs globally this year.
In comparison, elsewhere in Asia, mainland Chinese ECM deals dropped nearly 70 per cent to be worth US$25.5 billion, and IPOs were off 83.1 per cent to US$5.3 billion, the worst H1 performance in 11 years.
The value of IPOs in Hong Kong fell from US$2.1 billion in H1 2023 to US$1.5 billion, the LSEG data showed.
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“As investors get to grips with India’s growth outlook and the growth adjusted valuations, helped further by the monetary easing environment, it will spur foreign investors to come back,” said Citigroup Asia ECM origination head Udhay Furtado.
“That pivot to India growth is a staggered rotation. That’s why it’s not been a flood. I think you’ll see that change with the names that are coming to market in the next 18 months as they are going to be globally impactful.”
While Hong Kong’s IPO market remains at a low, the Hang Seng’s almost 9 per cent rise in the past three months is seen as a positive to encourage more public market debuts in the coming months.
“While global investors remain cautious towards Hong Kong and China, there is improved sentiment on the back of ongoing policy support and strong corporate earnings,” said Sunil Dhupelia, JPMorgan’s co-head of Asia ECM ex-Japan.
“This has led to global investors reducing underweight positions in the past couple of months,” he said, referring to the two markets.
The China Securities Regulatory Commission (CSRC) has approved applications from 76 IPO hopefuls so far this year to list offshore, compared to 80 for all of 2023, according to the regulator’s website.
Some Chinese companies, however, still find the process of gaining approval uncertain, and volatile markets mean some do not go ahead with launching a deal, bankers said.
“If the broader market valuation increases, you will see a lot more follow-on deals and blocks in Hong Kong from China – that will come first,” said Selina Cheung, UBS’ co-head of Asia equity capital markets.
“Hopefully we are on the right upward trend with the right policy supports. When the market is sufficiently strong, hopefully the CSRC will have a relaxation towards approving IPOs.” REUTERS
