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After a promising start in the first two quarters, global IPO activity dropped dramatically midway through the year, principally due to investors’ concerns about sovereign debt issues in Europe and Standard & Poor’s downgrade of US credit rating.

Capital raised for the first 11 months globally totalled US$155.8 billion. The value of IPOs by year-end 2011 will be approximately US$170 billion, down by 40% compared to 2010, according to Ernst & Young’s year-end Global IPO update. However, 2011 IPO funds raised still exceed 2009 by 50%.

“The uncertainty around the unanimous resolution around the Eurozone debt crisis and impact on the global economy has left investors and issuers with a lack of confidence,” says Ringo Choi, Regional Managing Partner, China South, Ernst & Young.

Greater China sustains lead

Greater China exchanges completed 410 deals in 2011 raising US$79.3 billion, a 42% drop in funds raised compared to 2010 (US$136.8 billion). The largest IPO on Greater China exchanges this year was the US$10 billion listing of Glencore International on the Hong Kong Stock Exchange (HKEx), followed by Prada SpA, a US$2.5 billion listing on the Hong Kong Stock Exchange (HKEx).

Issuers from Greater China continued to lead global IPO activity with IPO value of US$67.9 billion, representing 40% of global IPO funds raised. A big wave of Hong Kong IPOs in December helping the HKEx to end the year of 2011 with a strong finish, as issuers made use of the less volatile capital market to complete their IPOs before the year end.

“Greater China has been a key driver of the IPO resurgence in the days following the global recession," says Dilys Chau, Assurance Partner, Ernst & Young.

Chau adds that in 2010, Greater China exchanges led the world in bringing new companies to market, this trend continued in 2011 with the HKEx, the Shenzhen Stock Exchange and the SSE among the top five exchanges by capital raised.

With a big wave of IPOs in December, the HKEx will co-lead global exchanges by IPO funds raised in 2011 with the New York Stock Exchange with US$33.4 billion, notes Chau.

Moving into 2012

Jacky Lai, Assurance Partner, Ernst & Young says that despite market uncertainty, new IPO filings continue to increase around the world and a large backlog has built up as companies await greater macroeconomic stability.

"The key to the IPO market recovery lies in the speedy resolution of the European debt crisis, which is likely to have a stabilizing effect on the global capital market and restore investors’ confidence. Many fast growing companies will continue to look at IPOs as a way of raising capital and remain at the heart of their growth strategies,” says Lai.

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