INVESTMENT BANK Cazenove Asia is expanding. It aims to open a representative office in Shanghai at the end of the year, which will be its second on the mainland after Beijing.
Karman Hsu, the bank's Hong Kong-based managing director and head of corporate finance, said two hubs were needed on the mainland because the market was huge and opportunities were vast. In Shanghai, the number of private enterprises was growing and so was the opportunity for the bank to offer its services to companies aiming to raise capital.
Cazenove Asia's corporate finance department focuses on equity capital markets, including initial public offerings, share placings, rights issues, convertible bond issues, financial advisory and corporate broking. Cazenove also wants to expand in Southeast Asia. It recently added a senior manager in Singapore to head its corporate finance business for the region. Mr Hsu said Cazenove needed a dedicated team to expand its presence in Singapore, where it saw opportunities for cross-border and domestic transactions.
Overall, Cazenove's outlook for the Asian market is upbeat. 'Barring any macro-economic or geopolitical shocks, we expect sentiment to remain optimistic in the second half of the year as investors return to fundamentals,' it said. In the past, investors were focused on issues such as yuan revaluation, uncertainty about China's accession into the World Trade Organisation and the Chinese government's austerity measures. Some of these issues were now a done deal, such as yuan revaluation, and investors had done their homework and were now ready to invest, according to Mr Hsu.
The bank expects consumer, retail and distribution plays to perform well, as they are resilient to a soft landing and credit squeeze. Asset-backed companies will benefit from an inflationary environment. The bank also believes there will be an increasing number of mergers and acquisitions within the region, while sector consolidation will continue. Private equity funds will be active players in investment and divestment.
The bank believes liquidity is abundant and is sustainable for the rest of the year. However, the Asian IPO pipeline is full - especially in the mainland and Hong Kong - and investors are spoiled for choice. Potential issuers should prepare for windows of opportunity.