Asia-Pacific lags global peers in Q1 IPO activity: EY

THE Asia-Pacific was the worst-performing region in terms of initial public offering (IPO) activity compared with its peers, based on findings from EY’s quarterly report of global IPO trends released on Monday (Apr 8).

There were 119 deals with US$5.8 billion in proceeds recorded in the Asia-Pacific over the quarter, representing a 34 per cent year-on-year decline by volume and a 56 per cent fall by value.

EY noted that the decline was “especially sharp” in mainland China and Hong Kong, where deal volumes fell by more than half as the average deal size declined by over two-thirds.

Japan was the sole exception, being the only market in the region to see a slight increase in deal count as the Nikkei Index hit an all-time high in February.

EY’s Asean and Singapore IPO leader Chan Yew Kiang attributed South-east Asia’s subdued performance to high interest rates and inflationary pressures, which, in turn, affected the confidence levels of investors and issuers in the region.

However, he foresees a “more favourable climate for IPOs” ahead, in view of an anticipated reduction in interest rates as inflationary pressures begin to subside.

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“This challenging economic environment has prompted companies in the region to recalibrate their strategies, placing a heightened emphasis on achieving profitability… A strong performance from the global IPO markets will encourage South-east Asian companies that have been hesitant to go public to re-evaluate their position,” said Chan.

Globally, there were 287 IPO deals that took place in Q1 2024, down 7 per cent compared with the previous year.

Proceeds were nonetheless 7 per cent higher on the year at US$23.7 billion, which EY attributed to a significant number of newly issued IPOs where current share prices surpassed their offer prices.

This trend could indicate an improvement in global valuations and pricing levels amid growing confidence among issuers and investors, said EY.

Contrary to the Asia-Pacific region, the Americas continued to perform well in terms of IPO activity, with deal volumes rising 21 per cent year on year to 52 deals.

Proceeds were up 178 per cent to US$8.4 billion after hitting a 20-year low in 2022.

Notably, each of the top seven US IPO deals in Q1 2024 raised over US$500 million versus just one in Q1 2023.

Europe, the Middle East, India and Africa (EMEIA) launched 116 IPOs in the first quarter, up 40 per cent from the previous year.

Proceeds came in at US$9.5 billion, representing a 58 per cent increase year on year. This in turn enabled EMEIA to maintain its top position in global IPO market share by proceeds since Q4 2023. 

The surge in both deal volume and value was attributed to larger average deal sizes from IPOs in Europe and India.

EY also lauded India as a “standout performer” given its recent surge in IPO volume.

EY global IPO leader George Chan said he expects the global economy to remain on a “soft growth trajectory” for the rest of 2024, with developed markets “likely to see modest growth while emerging markets stay on a firmer growth path”. 

Stock markets have already priced in the expectation of rate cuts in various major economies, in his view.

“As elections this year amplify uncertainty, IPO candidates will need to closely monitor election outcomes and assess how specific policies could affect stakeholder interests, and re-evaluate IPO strategies and timing as necessary,” he said.