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Public listings around the world reached a peak in 2021 as financial markets were booming. However, 2022 has seen a downturn, with Asia IPO figures languishing due to rising inflation and interest rates.
A report by Ernst & Young showed that as of September 28 globally there were 992 IPOs that raised $146 bn, a decline of 44% and 57%, respectively. A large chunk of this money has been raised by the technology sector. In Asia-Pacific, public markets saw five of the world’s top 10 IPOs, with the Asia IPO market contributing 61% of global listings.
While Asia has been buoyant, the region saw 25% fewer listings to 608 as of September end and proceeds were down 22% to $100.8 bn. “With uncertainties being the IPO market’s biggest challenge, companies and investors continue to wait for a more stable and positive stock market sentiment before any sustained appetite for IPO activity re-emerges,” says Paul Go, an EY Global IPO Leader.
However, economic headwinds have not stopped listings in Asia, albeit companies have been unable to hold their valuations after making a debut.
The health of Asia’s IPO market
Although IPO activity around the globe is muted, Asia’s IPO market got a shot in the arm due to Chinese exchanges. With 148 deals, Shenzhen ranked first in the world, while Shanghai ranked second with 119 listings. In terms of proceeds, Shenzhen raised $26 bn while Shanghai raised $47.5 bn, which is 18% and 32%, respectively, of the global proceeds from IPOs.
Public listings in China have picked up despite the global economic headwinds as some feel that the conditions might worsen later. In fact, the A-share market in China is seeing a record number of listings, driven by industrials, technology, and healthcare.
Chinese IPOs are thriving as the country has continued its accommodative monetary policy while the world has been hiking interest rates at a fast pace. Separately, the large domestic investor base has pushed up the valuations of companies despite a global slump.
China’s biggest IPO in 2022 has been China Mobile, which raised $8.6 bn and was up 10% on its debut day. The company was forced out of the New York Stock Exchange over alleged ties to the Chinese military. The stock is now up over about 20% over its listing price in Shanghai. Oil giant CNOOC surged as much as 44% on its debut day in Shanghai. The country’s third largest listing in 2022, Hygon Information Technology, raised $1.6 bn and the share price more than doubled on debut day in Shanghai.
However, the same cannot be said for Hong Kong, which has seen its IPO market dwindle. Until September end, the city saw only 42 IPOs, down from 71 IPOs during the same period in 2021. The bigger hit has been on proceeds, with only $8.9 bn raised in the past nine months, the lowest since 2013, compared to $37.1 bn raised last year.
However, there is some recovery in the Hong Kong market compared to early 2022, with two lacklustre IPO debuts of Zhejiang Leapmotor (down 34%) and Onewo (down 15%). Both the IPOs were undersubscribed. While global headwinds are weighing on Hong Kong’s IPO market, investors are more concerned about the economic and political direction of the city as China has increased political intervention.
The US-China delisting issue had raised hopes for the Hong Kong market seeing big Chinese firms coming back home, but a compromise between Washington and Beijing has prevented that. The city’s biggest IPO in 2022 happened in October, with Chinese lithium battery supplier CALB raising $1.29 bn, but slipping as much as 1.7% on debut day.
In India, financial markets have outperformed most of their peers in the region as foreign buyers increased shareholdings. However, Life Insurance Corporation mega IPO, the largest on record for the country, had to be delayed and proved to be a wealth destructor for investors. The stock is down over 33% against the IPO price as of October 5. Indian exchanges saw more deals till September 2022 compared to the same period last year, but proceeds have fallen about 40%.
South Korea’s exchange was the third biggest after Shanghai and Shenzhen for IPO proceeds but saw a decline in the total number of listings. Late last month, battery parts maker W-Scope Chungju Plant Co plunged 31% on its debut date, the worst first-day performance to date in Korea. The company had already halved its IPO due to poor market response.
South Korea’s chip design firm Openedges Technology has cut its listing price by over 30% due to weak demand. The stock is now down 90% from its IPO price. KB Star REIT saw only two times oversubscription last month and fell as much as 5.8% on its debut this week.
In Japan, IPO numbers are down 40% with only 37 deals in the six months through September. This is the steep plunge after 2008 when IPOs were down 78%. Demand for IPO has declined dramatically, with total proceeds raised during this period down by 60%. Most big issues have avoided listing in 2022, awaiting a more stable market to get the best valuations.
The situation is similar in broader Asia, especially the ASEAN region, where companies eyeing a public listing have put their plans on hold.
Outlook for Asia IPO
“Many companies’ IPO plans were put on ice in early 2022, in anticipation of more favourable market conditions,” says EY’s Go. “Provided the market uncertainties and volatility can subside, the launch of long-awaited blockbuster IPOs together with improved after-market returns may reverse the sentiment and attract more companies to follow.”
“Many mega-IPOs were postponed in the first half of 2022, indicating a strong pipeline coming on to the market when conditions improve. Greater focus on renewable sources of energy in response to rising oil and gas prices means that big energy deals can be expected – something driven by ongoing support for ESG factors,” says knowledge solutions company Intuition.
“Whilst we continue to see companies preparing to go public and there will be some limited attempts to tap the market in H2 2022, it is expected that the broader pipeline will realistically be pushed back into 2023,” PwC had said earlier this year.
