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Shares rally boosts ECM volumes in Asia Pacific

Ken Yikun Wang

06 Sep 2017

The shares rally in Asia Pacific has galloped ahead this year. Photographer: Eddie Keogh
The shares rally in Asia Pacific has galloped ahead this year. Photographer: Eddie Keogh

A rally across Asia Pacific equity markets led to a pick-up in share sales and equity-linked offerings in the first half, with bankers now expecting the pace of activity to continue for the rest of the year.

IFR Asia’s Ken Yikun Wang, Senior Researcher, Equities, and Anuradha S, Deputy Editor Equities (Asia), explore the scene.

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Equity and equity-linked issues in APAC, ex Japan, rose 2.7 percent year-on-year in the first half to US$96.8 billion from US$94.3bn, according to Thomson Reuters data. The MSCI Asia ex-Japan Index climbed 18.4 percent during the same period.

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Goldman Sachs led the first-half APAC ECM league table with 27 deals for US$6.6bn and Citic Securities came next on US$4.9bn, while UBS was third on US$4.5bn.

Bankers see ECM activity in the first half as being slightly better than expected and they generally expect a busier second half.

“Thanks to a strong performance in stock markets across Asia in the first half of the year, ECM activity in Asia Pacific has picked up gradually since the beginning of the year,” said Peihao Huang, head of ECM solutions for Asia at UBS.

As market sentiment remains optimistic, Huang expects more companies will carry out equity financing in the second half.

“In the second half, the Hong Kong IPO and China-US IPO markets are likely to be very active. Activity in South-East Asia, especially in Thailand, India and Singapore, can also be expected to continue to be relatively high,” she said.

“If market conditions improve, we expect to see a pick-up in activity in Australia, given it has had a slow start to the year.”

Asia Pacific ECM Offerings – H1
Asia Pacific ECM Offerings – H1

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China dominates Asia Pacific ECM activity

China remained the main engine for equity fundraising in the first half, accounting for US$53.6bn of the total funds raised.

Citic topped the China equity and equity-linked league table, having raised a combined US$4.7bn. China Securities was second for total fundraising of US$3.6bn. Guotai Junan Securities ranked third with US$3.3bn.

China ECM offerings- H1
China ECM offerings- H1

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Of the 10 biggest ECM deals in APAC during the first half, five involved Chinese companies.

“In China’s domestic market, the number of A-share IPOs is likely to remain high although the average deal size may be relatively small. In addition, some sizable equity-linked deals may emerge in the second half,” said Huang.

In March, China Everbright Bank raised RMB30bn (US$4.3bn) from A-share convertible bonds, the largest offering in APAC ECM in the first half and also the biggest domestic convertible bond in seven years.

Asia Pacific ECM – Top 1H 2017 Issuer Nation
Asia Pac ECM – Top H1 Issuer Nation
Top 10 Asia Pacific (excluding Japan) ECM Deals for 1H 2017
Top 10 Asia PAC ECM Deals – H1

In Hong Kong, Guotai Junan Securities completed a HK$17.3bn (US$2.2bn) IPO in March.

Two giant Chinese state-owned companies are lining up even bigger deals. Sinopec Marketing and China Tower aim to raise US$5bn-US$10bn each from Hong Kong IPOs by the end of the year.

The biggest equity offering outside China was the W2.65trn (US$2.3bn) listing of Netmarble Games in South Korea in April. As the joint lead on Netmarble’s IPO, NH Investment & Securities topped the South Korea league table with proceeds of US$2.8bn.

In India, equity offerings soared to US$10bn in the first six months of this year, compared with US$3.8bn a year earlier. Kotak Mahindra came top with six deals and US$1.7bn of league table credit. Bank of America Merrill Lynch was next on US$978 million.

State Bank of India’s Rs150bn (US$2.3bn) placement in June was the country’s largest institutional share sale on record and the third biggest ECM deal in APAC in the first six months.

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In South-East Asia, the Philippines had the busiest first half, with equity issuance rising to US$1.8bn from US$717m last year. UBS topped that league table.

Thailand saw ECM proceeds almost triple to US$1bn from US$355m, and Siam Commercial Bank led the league table.

ECM volume in Indonesia rose to US$707.7m from US$696m and Bank Mandiri led the rankings. Malaysian issuance rose to US$1.4bn from US$1bn; CIMB led the league table.

Singapore’s ECM volume, meanwhile, plunged to US$1.11bn from US$2.76bn and DBS topped the league table.

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In Australia, ECM volumes in the first half fell 10.2 percent year-on-year to A$9.16bn (US$6.96bn), after a number of deals were pulled due to poor market conditions. Macquarie topped the league table with US$2.3bn of proceeds.

Office products retailer Officeworks, for example, canceled a planned A$1.4bn IPO in May. It had been a strong candidate for the country’s largest listing this year.

About IFR Asia

International Financing Review Asia (IFR Asia) is Asia’s most authoritative capital markets magazine, with unrivaled coverage of bond, loan and equity markets plus important trends and news.

It not only offers insightful analysis of high-profile international deals but also comprehensive and knowledgeable coverage of the all-important domestic markets.

IFR Asia provides market-leading analysis of debt restructuring throughout the region.

In 2017 IFR Asia turned 20 years old and reached its 1,000 issue. Its commemorative issue reflects on IFR Asia’s raison d’être: the growth of the Asian financial markets.

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Belt & Road research

In our latest report, Thomson Reuters Deals Intelligence explores to what extent the Belt & Road Initiative is a key driver for China’s deal activity.

Download report — Deals Insight – China Deals Landscape in 2017

Acquisitions along Belt & Road countries have reached a record high so far this year.

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Download report — Asia Pacific equity capital markets overview

Here are some key figures:

  • US$33.3 billion – the total deal value of China outbound acquisitions along Belt & Road countries.
  • 136 percent YTD percentage increase in value compared to 2016 YTD.
  • 39 percent market share accounted for Chinese outbound acquisitions along Belt & Road countries.

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