(The June 27 story has been corrected to correct the spelling of “Dupelia” in paragraph 10.)
Scott Murdock
SYDNEY (Reuters) – A possible revival in Hong Kong IPOs following a surge in Chinese regulatory approvals and a string of big 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 prolonged decline in initial public offerings (IPOs) in Asia, India’s share of deals in the Asian equity capital market (ECM) is now at an all-time high and the deal surge is expected to continue for the foreseeable future, they added.
According to LSEG, the total number of ECM deals in India in the first half of this year grew by 137% compared to the same period last year, with $28.5 billion raised. IPOs accounted for $4.25 billion of this amount, up 89.3% from the first half of last year.
Hyundai’s (OTC:) $2.5 billion to $3 billion Indian IPO, due later in 2024, is set to be the South Asian country’s largest ever new share sale, as well as one of the world’s largest IPOs this year. year.
Elsewhere in Asia, by comparison, ECM deal volume in mainland China fell nearly 70% to $25.5 billion and IPOs fell 83.1% to $5.3 billion, the worst first-half performance in 11 years.
Hong Kong IPO valuations fell from $2.12 billion in the first half of 2023 to $1.46 billion, according to LSEG.
“As investors begin to understand India’s growth prospects and growth-adjusted valuations, further aided by monetary easing, it will encourage foreign investors to return,” Citigroup Asia ECM head Udhay Furtado said.
“This pivot to India’s growth is a phased rotation. That’s why it wasn’t a flood. I think you will see this change with the names that come to market in the next 18 months as they will have a global impact.”
Although Hong Kong’s IPO market remains subdued, growth of nearly 9% over the past three months is seen as a positive factor contributing to an increase in the number of public market debuts in the coming months.
“While global investors remain cautious on Hong Kong and China, sentiment is improving on continued policy support and strong corporate earnings,” said Sunil Dhupelia, co-head of Asia ECM at JPMorgan, ex-Japan.
“This has led global investors to trim underweight positions over the last couple of months,” he said, referring to both markets.
The China Securities Regulatory Commission (CSRC) has approved applications from 76 IPO applicants to list offshore companies this year, up from 80 in all of 2023, according to data on the regulator’s website.
However, some Chinese companies still find the approval process uncertain and volatile markets mean some are not pursuing a deal, bankers say.
“If broader market valuations increase, you’ll see a lot more follow-on deals and blocks into Hong Kong from China – that will come first,” said Selina Cheung, UBS co-head of Asian equity capital markets.
“Hopefully we are on the right upward trend with the right political support. Once the market is strong enough, we hope the CSRC will relax its approval of the IPO.”