Investment banks will be eagerly looking to Asia for business opportunities this year. The big United States investment banks, the so-called bulge bracket, which includes Merrill Lynch, Salomons, Morgan Stanley and Goldman Sachs, have always been alert to opportunities in Asia and in the mainland in particular. This year, investor interest in China is expected to grow as it continues to open up its markets in compliance with its World Trade Organisation commitments.
Asia is already an outstanding performer in one main area of investment banking activity: raising equity market capital. After the boom year of 2000, when Internet stocks were still listing at high valuations to an eager investment market, companies worldwide raised US$277 billion in 2001, down 39 per cent. Last year, global equity capital raised was just US$208 billion, down another 25 per cent.
Asia, excluding Japan and Australasia, has done far better. Asian equity capital raised did fall by 61 per cent in 2001 to US$22.9 billion, but last year the primary market bounced back, with about US$29 billion raised, a 26 per cent increase.
The underlying Asian stock markets are likely to face more challenges this year, with global economic growth worse than expected, according to ING Financial Markets. However, ING said Asian stock markets were likely to outperform the rest of the world, reaching 17 per cent above their December 2002 levels in the second half.
In the fixed income market, ING said there was high potential demand for Asian US dollar corporate bonds. About US$20 billion in new Asian dollar bonds are expected to be issued this year, and bonds worth US$5 billion are due to mature.
Asia, and particularly the mainland, will continue to be a significant source of business for investment banks this year, according to Michael Carr, head of investment banking for Goldman Sachs.