After a slow start to 2012, momentum lifted in the second quarter, but significant macroeconomic volatility and changes in political leadership in many parts of the world, weighed on global IPO activity for the remainder of the year.
In the year to date, the amount of capital raised globally is down by 30% at US$118.5 billion. The number of deals is also down by 37% (768 IPOs), compared to full year 2011 (1,225 deals, $170 billion).
However, another 50 companies, with a combined deal value of around $6 billion are expected to list by the end of December, according to Ernst & Young’s Year-end Global IPO update.
“The weakening economy, unstable equity market conditions and poor performances on some IPO transactions undoubtedly impacted investors’ confidence,” says Geoffrey Choi, Banking and Capital Markets Leader for Ernst & Young in Greater China.
Activity in Greater China in 2012 weakened due to lack of mega deals. “The after-market in Greater China in particular has been depressed and across Greater China investment confidence is weak with investors holding back,” says Ivan Tong, Assurance Partner at Ernst & Young.
Tong adds that although the Greater China market has seen signs of improvement in the last quarter – thanks to the People’s Insurance Co of China Ltd. raising $3.4 billion, (the largest deal on HKEx this year) – Chinese and foreign companies into China are currently finding it difficult to complete their IPOs, as investors are showing signs of scepticism in this market.
The Hong Kong, Shanghai and Shenzhen exchanges only completed 214 deals which raised $27.9 billion, down 62% by capital raised compared to 2011 (362 IPOs, raising $72.5 billion).
“Looking ahead to 2013, we expect a better outlook, as many new supportive policies - which were on hold amid leadership change – will start to take effect," notes Terence Ho, Ernst & Young’s Greater China Strategic Growth Markets Leader. "They include economic initiatives that will be rolled out in the Mainland and expected to benefit companies in certain preferential sectors. With expected reduced stock market volatility, supportive new economic policies, and better and brighter economic prospects, IPO activities in the latter half of 2013 is set to improve – suggesting that it could be the right time for companies currently in the pipeline to list next year.”
Currently over 800 IPO applicants, who are on the China Securities Regulatory Commission’s list, are projected to raise approximately RMB500 billion ($80 billion) compared to total funds of RMB103 billion ($16 billion) raised by A-share IPOs in 2012.
"We also expect to see more H-share IPO offerings in Hong Kong following the introduction of new supportive policies that allow medium to small Privately-owned Enterprises to list in Hong Kong’s H-share market,” says Ho.