China IPO Activity Expected to Recover Losses in 1st Half of 2012
Global IPO activity saw an improvement in Q2 2012, according to Ernst & Young’s Global IPO update.
So far this quarter, a total of 206 deals has raised US$41.8 billion, an increase of 5% by deal numbers and 141% higher by capital raised compared to Q1 2012 (US$17.4 billion via 196 deals). However, this quarter was 46% lower by number of deals and 36% lower by capital raised than in Q2 2011 (US$65.6 billion via 383 deals). The latter was, however, the highest second quarter since Q2 2007.
This quarter, the overall capital raised was boosted by Facebook’s US$16.0 billion IPO, which made up 38% of this quarter’s total. Even without this IPO, the overall global IPO activity in Q2 2012 (US$25.8 billion) was 49% higher by capital raised compared to Q1 2012.
Dilys Chau, Assurance Partner at Ernst & Young comments: “The second quarter results show relative optimism for capital-raising. However, this optimism is in certain markets and capital market activity continues to be hampered by lack of investor confidence and economic uncertainty. Balanced monetary policy in the developed and emerging economies will be important for investor and issuers’ confidence to return.”
Greater China IPO activity
In the first half of 2012, the Hong Kong Stock Exchange (HKEx) raised US$4 billion (HK$31 billion) over 31 deals. The Shenzhen Stock Exchange (SZSE), including the SME board and the ChiNext board, recorded 88 deals with capital raised of US$7.7 billion (RMB$49 billion) in the first half of 2012. The Shanghai Stock Exchange (SSE) raised US$3.8 billion (RMB$24 billion) over 16 deals. There were 8 deals on the Taiwan Stock Exchange (TWSE) with capital raised US$242 million (NT$7.25 billion).
Jacky Lai, Assurance Partner at Ernst & Young comments: “Both the number of deals and the funds raised in the HKEx, SZEx and SSE in the first half of 2012 are less than the corresponding period last year. Chinese IPO activity has slowed down due to the uncertainty of the global economy and the sovereign debt crisis in Europe. There was no mega IPO in Hong Kong in the past six months. The largest deal in the first half of 2012 was Haitong Securities Co Ltd. raising US$1.9 billion (HK$14.4 billion). The A-Share market in the Mainland remained active in the first half of 2012 with 104 deals, however, total funds raised dropped 58% from the first half of 2011.”
Chau concludes, “The pipeline of companies waiting to go public remains high. Both issuers and investors are being far more cautious, particularly in light of the difficult current market conditions. They are just waiting for the global market to stabilize and concerns over global growth to dissipate before they decide to become active again. ”
Asia IPOs in Q2 2012
IPO activity in Asian markets accounted for 35% of global IPO funds raised in Q2 2012 (or 56% of global funds raised when excluding the Facebook IPO), with 104 deals raising US$14.5 billion. This was an 87% increase compared to the previous quarter (US$7.8 billion via 96 deals) but a 47% decline compared to Q2 2011 (US$27.7 billion via 165 deals).
The largest Asian IPOs this quarter were the US$3.1 billion listing of Malaysia’s palm oil producer, Felda Global Ventures Holdings Bhd on Bursa Malaysia and China’s Haitong Securities Co Ltd (US$1.8 billion) on the HKEx. Out of the top 20 global IPOs this quarter, eight were listed on the Asian stock exchanges.
Of the top 20 IPOs this quarter, nine listed on the US stock exchanges. Excluding the Facebook IPO, North America exchanges still accounted for 24% of capital raised in Q2 2012, (US$6.3 billion in 31 IPOs, compared to US$6.6 billion in 45 deals in Q1 2012). By number of deals, technology companies continue to drive the US IPO market, while energy and consumer products companies led by capital raised.
IPOs by sectors in Q2 2012
The leading sectors by capital raised were the high technology sector (US$17.9 billion in 32 deals), financials (US$5.7 billion via 14 deals), followed by consumer staples (US$4.5 billion in 18 deals).