Recovery in investment banking activity likely to continue into 2026 amid positive macro environment

[SINGAPORE] Improved macroeconomic conditions have led to a recovery in investment banking activity across Asean this year – and bankers expect the momentum to continue into 2026.

Interest rates eased in 2025, after the US Federal Reserve cut interest rates twice in the year to date.

This has lowered the cost of capital, revived confidence and made refinancing, expansion and acquisition plans more feasible, said Clifford Lee, global head of investment banking at DBS.

It also helped narrow valuation gaps – expectations from both issuers and investors became more realistic and unlocked dealmaking that had been deferred in previous years, Lee added.

As a result, 2025 saw broad-based growth in investment banking activity.

In the first nine months of 2025, merger and acquisition (M&A) deal value in Asia-Pacific excluding Japan rose 44.5 per cent year on year to US$684.6 billion, indicated data from financial service provider LSEG.

Amount raised by equity and equity-related offerings was up 42.2 per cent to US$190.2 billion, while those raised by primary bond offerings was up 20.9 per cent to US$3.98 trillion.

This led to some US$18.6 billion worth of investment banking fees generated in the region in the first nine months of 2025, up 24 per cent on year.

If interest rates remain around current levels and global growth stays resilient, Gan Kok Kim, head of global investment banking at OCBC, is confident that this momentum can continue into 2026.

Real estate investment trusts (Reits) could see renewed debt issuance momentum on the back of pent-up demand during the high-rates environment of 2022 to 2024, he said.

Companies in new economy sectors – particularly those aligned with structural megatrends like artificial intelligence (AI) – should also continue to attract equity investor interest, he added.

Gan also expects continued mid-market deal flow in Singapore, Malaysia and Indonesia – supported by a stable regulatory environment, strong liquidity from corporates and financial sponsors, and sustained cross-border interest underpinned by the region’s fundamentals.

“Overall, a benign rate backdrop and resilient investor sentiments should keep capital markets active across all fronts,” he said.

Singapore IPOs

A Deloitte report indicated that Singapore was South-east Asia’s biggest initial public offering (IPO) market by proceeds, with nine deals raising US$1.6 billion as at Nov 14.

This was the best performance over the last three years, said Edmund Leong, head of group corporate banking and group investment banking at UOB.

Typical Reit secondary fund raisings continued to be robust while there were also several successful Reit and corporate listings, Leong said.

“Notably, four out of the five recent listings are trading above IPO price as at Nov 21, 2025,” he added.

With such tailwinds, bankers expect the positive momentum for Singapore to continue in 2026, supported by ongoing efforts to boost market activity.

Since Deloitte’s report on Nov 18, the Singapore Exchange (SGX) has received more listing announcements, including that of surgical tech company UltraGreen.ai, which is looking to raise US$377.1 million in an IPO on the mainboard.

“The Monetary Authority of Singapore’s initiatives combined with a strengthening pipeline and renewed investor appetite are reinforcing each other,” said DBS’ Lee, who expects that total issuance volumes on SGX could double in 2026.

“This creates a powerful flywheel effect where successful deals are boosting confidence among both issuers and investors, encouraging more companies to come to market.”

UOB’s Leong said the bank is already seeing a stronger pipeline of listing work moving into 2026 across a variety of business sectors.

“We anticipate the equities market to continue on a strong starting note in 2026, with interest rate sensitive sectors like Reits poised to do well as declining interest rate trends continue,” Leong said.

2025: A tale of two halves

Activity was subdued in the first half of the year due to market volatility, which dampened boardroom confidence and cross-border transactions, said Martin Siah, Singapore country head and head of global corporate and investment banking for South-east Asia at Bank of America (BofA).

But momentum accelerated significantly in the third quarter and into year-end, as improving macroeconomic conditions restored deal confidence, he noted.

Siah – who saw M&A as the main driver of activity in Asean – said activity in the region was anchored in broader macro themes.

Data centres remain a strategic investment hotspot, fuelled by the accelerating AI race, while wealth creation and capital inflows into Singapore support transactions across asset management, wealth management and insurance sectors, he said.

UOB also saw M&A dominated activity, driven by consolidation in financial services, technology, energy and industrials, with activity backed by both corporate and private equity.

Meanwhile, DBS’ Lee noted a “particularly evident” uplift in equity markets.

Healthcare, biotech and e-commerce were key drivers of activity, supported by strong structural tailwinds, such as the region’s rapidly ageing population, he said.

Real estate also stood out amid a diverse pipeline of Reits spanning industrial, logistics, hospitality, commercial and retail, he added.

Citi saw strong interest from South-east Asia issuers to issue bonds amid lower interest rates, said Harry Naysmith, managing director, Asean senior coverage, investment banking.