A rise in Chinese regulatory approvals and a potential surge in initial public offerings (IPOs) in Hong Kong following a series 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 a prolonged slowdown in IPOs in Asia, India’s share of Asian equity capital market (ECM) deals is now at a record high, and deals are expected to continue to rise in the near future, they said.
Total capital market deals in India grew 137 per cent in the first half of 2024 compared to the same period last year, adding $28.5 billion, according to LSEG data. Initial public offerings accounted for $4.3 billion of that amount, an 89.3 per cent increase from the first half of 2023.
Hyundai India’s US$2.5 billion to US$3 billion IPO in late 2024 will be the largest new share sale ever in the South Asian country, and one of the world’s biggest IPOs this year.
LSEG data showed the value of IPOs in Hong Kong fell to US$1.5 billion from US$2.1 billion in the first half of 2023.
“As investors digest India’s growth outlook and revised growth valuations, further supported by an environment of monetary easing, this will prompt foreign investors to come back,” said Uday Furtado, head of asset management at Citigroup Asia.
“This pivot of India’s growth is a gradual rotation. That’s why it hasn’t been flooded. I think you will see that change with the names that will come to the market in the next 18 months, because they will have global implications.”
While the Hong Kong IPO market remains on the lower side, the Hang Seng index’s nearly 9 per cent rise in the past three months is seen as positive to encourage more public market debuts in the coming months.
“While global investors are cautious on Hong Kong and China, sentiment has improved due to continued policy support and strong corporate earnings,” said Sunil Dupelia, co-head of Asia ECM outside Japan at JPMorgan.
“This has led to global investors reducing their underweight positions in the past two months,” he said, referring to both markets.
The China Securities Regulatory Commission (CSRC) has approved applications from 76 IPO-inclined companies to list overseas so far this year, while a total of 80 companies’ applications are expected to be approved in 2023, according to the regulator’s website.
Bankers said some Chinese companies still view the approval process as uncertain, and volatile markets mean some firms are not moving to launch deals.
“If the broader market valuation rises, you’re going to see a lot of subsequent deals and blocks from China to Hong Kong — which will come first,” said Selina Cheung, co-head of capital markets in Asia at UBS.
