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2014 to be strong year for IPOs: EY

The 239 deals closed in Q1 raised a record breaking US$44.3b

[SINGAPORE] This year is shaping up to be a robust year for initial public offerings (IPOs).

The 239 deals closed in the first quarter, raising some US$44.3 billion, broke the record for being the best-performing first quarter for the global IPO market since 2011, said the report EY Global IPO Trends: Q1 2014 released yesterday.

Compared with the first quarter of last year, deal numbers were 47 per cent higher and capital raised was 82 per cent more.

In fact, IPO activity in January touched record levels for the last decade, with 101 IPOs raising US$18.5 billion, the report noted.

The deals closed in the first 12 weeks of the year followed on the market momentum built up in the strong end to 2013, and prospects are said to continue being bright for the second half of this year.

EY described investors' confidence and appetite for IPOs as "off the scale", with average deal sizes 24 per cent higher than at the same period last year; six deals raised more than US$1 billion.

Maria Pinelli, EY's Global vice-chair of Strategic Growth Markets, said: "A combination of rising equity indices and lower volatility set the global IPO market off to a strong start in the first quarter. We believe this points the way to sustained high levels of activity through the first half of 2014."

In fact, she added, EY expected the sharp growth trajectory established in the first quarter to extend through the second half of the year as well.

Asia-Pacific was the most active region in the first quarter, accounting for 47 per cent by global deal number and 41 per cent of global deal value. In the region, 110 IPOs raised US$18.1 billion in the first quarter, despite the economic fundamentals being less than compelling; the unwinding of US tapering is causing repatriation of investments and the slowdown in Chinese manufacturing has held Asian equity indices back.

Seven of the quarter's 20 largest IPOs were on Asian exchanges; this includes the largest, which was the US$3.1 billion listing of HK Electric Investments Ltd in Hong Kong in January.

Max Loh, EY's Asean and Singapore managing partner, said: "With the reopening of mainland China's stock exchanges delivering the predicted run of new listings and a pipeline of around 700 companies ready to go public, Asia will continue to see a high number of IPOs.

"In Asean, Indonesia led the way in terms of the number of IPOs, as companies went public ahead of the upcoming elections. Barring any geopolitical issues, the growth trajectory for Asean IPOs looks positive, especially in the second half of 2014."

IPO performance was also strong in the US, with 69 deals raising US$11.7 billion.

In EMEIA (Europe, Middle East, India and Africa), there were 59 deals raising US$14.4 billion.

In terms of industry sectors, energy, technology and real estate led globally by capital raised this year. EY noted that, though technology may not always be the leading sector in any geography, it is often new or innovative technology that is the driving force behind the popularity and success of the leading sectors.

It added that, as boundaries blur between technology and other industries, companies may move away from traditional sector categorisation in an effort to maximise valuation as they come to the market.

Globally, private equity (PE) and venture capital (VC) were key drivers of IPOs in the first quarter, accounting for a third of global deal numbers.

Ms Pinelli said: "Geopolitical shocks aside, with sound economic fundamentals and strong global liquidity fuelling new listings, the global pipeline is looking extremely healthy. We believe that IPO activity will come from a broad range of geographic markets and from multiple sectors, including technology, real estate, energy and healthcare."

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