Opinion | Sharp sell-offs in Asian equity markets make future for IPO sector uncertain

It was all looking so buoyant. Galaxy Securities and Sinopec Engineering raised a combined US$3.6 billion through Hong Kong listings, heralding a reopening for Hong Kong's long-languishing IPO market. The public offer portion of the Sinopec listing was reportedly 28 times subscribed, and Galaxy's shares rose 6 per cent on their first day of trading last Wednesday.

Then, on Thursday, a calamitous combination of bad mainland economic data, mixed signals about the direction of central banks' money-printing plans and simple investor jitters saw Asian markets, and Japan's in particular, sell off sharply. Sinopec had the misfortune to start trading in the middle of this, and it fell fractionally on its debut on Thursday.

So Galaxy traded well and Sinopec did not. One out of two ain't bad. But Sinopec's poor start and the big sell-off last week bodes ill for Hong Kong's IPO calendar.

Jonathan Penkin, head of equity capital markets Asia ex-Japan at Goldman Sachs, put a brave face on things, saying, "These two banner IPOs send a very encouraging sign to the market and potential issuers. However, investors remain cautious on China's outlook and will be selective."

Frank Gong, chairman of China investment banking/coverage at JP Morgan, said: "We will continue to see some volatilities in the equity markets which could impact the windows for new listings in Hong Kong. New issuers should get ready to capture the right market window."

Last week's sell-off and Mando China's pullback of its US$270 million float were certainly bad news for the developers looking to spin off property listings on the Hong Kong exchange.