Tech listings to fuel Asia's IPO markets as more players step out of China's shadow
WHILE Beijing's regulatory crackdown has stirred volatility, strong levels of activity in markets like South Korea, India and South-east Asia will continue to drive Asia's initial public offering (IPO) frenzy.
Bankers signalled that investors are keen to pick out tech listings in the rest of Asia which may have been overshadowed by Chinese peers.
Fintech, consumer technology and healthcare plays have featured prominently in record jumps in regional IPO offerings, driven in part by rising demand among investors in these traditionally overlooked markets to own a piece of the "new economy", said Udhay Furtado, Citi's co-head of Asia equity capital markets.
"Whereas in China and in the United States, we already have the Googles, Amazons, Alibabas and Tencents, we should see a much more even spread of listings across Asean, India and (South) Korea in the next 12 months," Mr Furtado told The Business Times (BT).
Thus far this year, Asia Pacific bourses have seen 768 IPO listings, totalling US$108 billion. Some 20 of these IPOs are valued above US$1 billion. Last year, total deal count for the region stood at 852, valued at US$113 billion. 24 of these were deals above US$1 billion.
This year's jumbo equity issues include Indian food delivery company Zomato's July IPO which was oversubscribed 35 times, giving it a valuation of US$12 billion, as well as South Korean digital bank KakaoBank, which raised US$2.3 billion in its August debut.
Citi, which was involved in both listings, had itself seen a record listing haul this year, raising US$30 billion from IPOs for Asian clients, as at Aug 16 this year. Figures from Dealogic, also as at Aug 16, shows Citi coming in third as bookrunner with 27 deals under its belt, totalling US$5.75 billion - after two Chinese investment banks, Citic Securities (52 deals totalling US$8.56 billion) and China International Capital Corporation (34 deals totalling US$6.30 billion).
A Citi spokesperson said the bank has recorded its strongest half year for equity and broader investment banking revenues in the region.
Even as Chinese deals slow due to what he referred to as a "regulatory overhang", Mr Furtado said investors can look to a slew of IPOs coming from other digital players in India. "India is definitely one to watch just because of the size and the scale. It's sort of an 'Alibaba moment' for Indian unicorns, ten years after the Chinese listings," he said.
South Korea would also be an interesting market to watch due to the large size of its issuers, he said. Apart from KakaoBank, the country has seen several landmark issuances this year, including e-commerce company Coupang's stunning debut on the New York Stock Exchange, which saw shares go up 81 per cent from its IPO at US$63.50 apiece.
Prevailing macro trends also facilitate this new crop of public listings. "We're in a relatively stable, low rate environment, with excess liquidity where people are paying for growth. And there is little doubt that the digital companies have accelerated through this Covid-19 period. That is the recipe for many of these companies trying to IPO now," Mr Furtado said.
Over at Credit Suisse, which was also involved in the Zomato and KakaoBank's IPOs, Felicity Chan, the bank's head of equity syndicate for South-east Asia, told BT: "The spotlight has shifted from China as the major source of equity issuance in the region, to other exciting markets such as India, (South) Korea and South-east Asia. This year, we have seen more US$1 billion and greater IPOs in these three geographies fuelled by new economy issuers."
Mr Furtado, Ms Chan and other investment bankers BT spoke to acknowledged, broadly, that the volatility in China cannot be ignored, given that it has long been the region's hottest IPO market. But they sidestepped specific questions on how this would affect overall deal volumes ahead.
China has in recent months introduced anti-monopoly legislation, as well as data security and protection laws, targeted at Internet companies operating a variety of services from food delivery to e-commerce. High-profile companies, including e-commerce titan Alibaba and ride-hailing giant Didi, have been investigated and sanctioned.
Data compiled by Bloomberg shows that China and Hong Kong accounted for about 60 per cent of Asian tech IPOs since the end of June, down from 83 per cent in the second quarter. As at the end of August, about three quarters of Chinese companies that listed overseas this year were trading below their IPO prices.
DBS's group head of capital markets Eng-Kwok Seat Moey also pointed out that Asean markets still have significant room to catch up on digital penetration.
"Companies in the region with business models geared towards digital commerce and digital acceleration will ride this wave and continue to demonstrate high growth rates in the next few years. These will be attractive prospects for new IPOs in the medium term," she said.
The Singapore Exchange's (SGX) recent introduction of a framework to allow special purpose acquisition companies, or SPACs, marks a "progressive step" to "reinforce its leadership as one of Asia's leading bourses", she added.
"Asia continues to host a number of attractive target companies in the mid-market size range that might be small for the US markets, but just the right size for Asian exchanges such as SGX," she said.
Elsewhere in the region, South Korea and Malaysia also allow blank cheque companies to list.
UBS's head of investment banking for South-east Asia and India Nicolo Magni described the environment for IPOs in South-east Asia as "particularly exciting", driven both by scarcity value on the supply side and by an increased presence of regional capital available on the demand front.
Data from Dealogic shows 84 Asean-listed IPOs this year to date, valued at US$8.58 billion, compared to 106 deals at US$6.67 billion for the whole of last year.
Mr Magni said more action is also expected on the Indonesian stock exchange, after e-commerce company Bukalapak debuted in the bourse's biggest-ever IPO. He noted too that Singapore's SPAC framework puts the SGX in good stead to attract more growth-oriented companies.
"The Philippines and Thailand also remain key markets where local and international demand will drive increased activity. More broadly, we will continue to see all exchanges in Asean making efforts structurally to facilitate these mega listings."
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