Asian IPO market predicted to rebound within a year, suggests new study

Hong Kong expected to fare better than Singapore, says global law firm Reed Smith and Mergermarket

PUBLISHED : Tuesday, 13 September, 2016, 6:25pm
UPDATED : Tuesday, 13 September, 2016, 11:03pm

Initial public offering (IPO) activity in Asia is expected to bounce back within the next 12 months, according to a new study.

The report, co-produced by global law firm Reed Smith and Mergermarket Group, found 44 per cent of Asia-based respondents expect the region’s IPO market to return to last years’ highs within a year, with 11 per cent predicting it to rebound within six months.

However, a resounding 70 per cent also said the recent turmoil in Chinese equity markets had influenced their IPO strategy.

Denise Jong, Reed Smith’s corporate partner in Hong Kong said: “It has been challenging in the more established Asian markets such as Singapore and Hong Kong, in part due to the domino effect of US Fed rate decisions and the Chinese slowdown, but also just the sheer base of each market is very different.

Hong Kong is a bit bigger [than Singapore], and so may be able to weather the storm better. With newer emerging markets, such as Vietnam, volatility is driven more by local conditions
Denise Jong, corporate partner at Reed Smith in Hong Kong

“Hong Kong is a bit bigger, and so may be able to weather the storm better. With newer emerging markets, such as Vietnam, volatility is driven more by local conditions,” Jong added.

Nick Cheek, global managing editor at Remark, Mergermarket’s publishing and events division, added investor appetite for IPOs has dulled considerably over the last 12 months, with the total global volume down 38 per cent to 339, from 544 in the first half of 2015.

“The reasons for the decline have been well documented including uncertainty surrounding the outcomes of both the 2016 US election and the UK’s EU referendum. The leave result has only succeeded in ratcheting up volatility,” added Cheek.

“Yet despite the uncertainty, the results of our survey suggest that companies globally are optimistic about the future direction of activity.”

When it comes to post-IPO challenges, 59 per cent of respondents cited greater public scrutiny among their top three reservations, and 49 per cent said they were concerned about their stock being subject to market volatility.

Short-termism, shareholder pressure and the risk of litigation also ranked high in the list of reservations about becoming a publicly listed company.

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