IPO activity to pick up in second half of the year
Updated: 2009-07-03 07:34
(HK Edition)
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HONG KONG: The pace of initial public offerings (IPOs) in the city will likely gear up in step with that of the regional market in the second half of the year as subdued volatility and improved sentiment has made it easier for firms to tap the equity market, analysts said.
"The IPO market will start to get pretty active," said Kester Ng, Asia-Pacific head of equity capital and derivatives markets at JPMorgan Chase & Co.
"A lot of companies that put IPOs on the shelf for the last 18 months have started working," he added.
As many as 100 companies may be reviving their Hong Kong IPO plans after the equities rout delayed sales scheduled for last year, said Jonathan Penkin, Goldman Sachs's head of equity capital markets in Asia outside Japan.
IPOs in Hong Kong and the mainland may raise as much as $39 billion this year, accounting firm Ernst & Young LLP said last month.
Among the candidates in Hong Kong's IPO pipeline, Canada-based energy producer Amber Energy Inc will stage its debut next Friday.
Meanwhile, Justin Haik, a managing director in Morgan Stanley's global capital markets group, expects at least five IPOs worth more than $1 billion each in Asia during the next six to 12 months.
American International Group Inc's Asian life insurance unit may raise as much as $8 billion in an IPO-most possibly in Hong Kong-during the first quarter next year.
The IPO market in the region has been basically in a dormant state during the first half, when regional markets were plagued by steep volatility.
During the period, funds raised in IPOs in Asia, excluding Japan and mainland China, dwindled significantly to $3.36 billion from $14.3 billion a year earlier.
The amount accounted for only 10 percent of the $33 billion stock offerings in the region, which was the lowest ratio in at least 10 years.
In Hong Kong alone, which is the largest IPO market in the region, only 18 firms successfully listed their shares on the local bourse during the first six months.
However, things have been getting better towards the second half in terms of IPO success as general sentiment improved amid subdued volatility, market watchers said.
Stock-market gyrations that made it harder for companies to complete IPOs are easing, said bankers.
Lower price expectations among companies mulling IPOs may also draw more investors to sales, said Goldman's Penkin.
Sportswear maker 361 Degrees International priced a $233 million IPO in Hong Kong last month at 8.7 times estimated profit for the current financial year, versus rival Anta Sports Products Ltd's 16 times.
"Issuers' expectations on price have come down from what it was last year," Penkin said. "The valuation gap has closed a little."
China Daily - Bloomberg
(HK Edition 07/03/2009 page3)