Asia IPOs face headwinds after record year of fundraising

(Bloomberg) – After a record year of stock quotes, Asian companies may struggle to repeat success in 2022 given the prospect of rising interest rates and China’s tightening grip on big technologies.

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Thanks to a meteoric first half in the midst of a global boom, initial public offerings in the region have reached $ 190 billion so far this year, already a record and up 31% from overall. 2020. But momentum has weakened considerably in recent months as Beijing has stepped up a regulatory attack on private enterprise, putting major deals on hold and injecting uncertainty into next year.

Bankers say they expect Asia’s IPO market to be less frenetic and more balanced in 2022, as higher inflation erodes valuations of tech companies and tighter US monetary policy reduces the supply of unused cash. The list landscape may also appear more diverse, with South Korea and India leading the way and sectors ranging from clean energy to financial services filling the void left by once-dominant Chinese technology.

“The markets in 2022 will face a more normalized environment,” said William Smiley, co-head of equity capital markets at Goldman Sachs Group Inc. in Asia Ex-Japan. “The withdrawal of fiscal and monetary stimulus, coupled with higher inflation expectations, can challenge risky assets, including stock markets. “

Beijing’s scrutiny of its tech companies, on issues ranging from data security to a loophole long used by companies to register overseas, is also expected to continue to slow the pace of fundraising from of the sector.

This, added to the poor performance of the secondary market, pushed Hong Kong, a popular destination for Chinese technology companies, out of the top three places in the world. Several companies, from snack producer Weilong Delicious Global Holdings Ltd. Apple Inc. supplier Biel Crystal Manufactory Ltd. pushed back stock offerings in the city, a development that is expected to make the last three months of this year the weakest fourth quarter. since 2018 for IPOs in Asia.

“Divert from China”

Chinese companies may not be affected by Beijing’s regulatory crackdown or the beneficiaries of the country’s development priorities, including new energy suppliers and electric vehicle manufacturers.

The new year should see a more diverse group of companies entering the market, said Magnus Andersson, co-head of equity capital markets for Asia-Pacific at Morgan Stanley. “It’s not just the consumer, the Internet and technology, it’s also more industrialists and financial institutions.”

Candidates include startup Hozon New Energy Automobile Co. and the property management business of developer Longfor Group Holdings Ltd., Bloomberg reported earlier.

The moderate presence of Chinese tech will also help to geographically balance the region’s IPO pipeline, as South Korea, India and Southeast Asia maintain a busy issuance schedule.

Companies in India, South Korea and Indonesia all raised record amounts through share sales for the first time this year. And there’s more to come: Ongoing mega-deals include LG Energy Solution’s $ 10.8 billion Seoul IPO and Life Insurance Corp.’s offering. from India to Mumbai with a valuation of up to $ 131 billion.

Some of Southeast Asia’s biggest tech unicorns are also expected to launch stocks next year, said Selina Cheung, co-head of equity capital markets for Asia at UBS Group AG. “Now is the right time, as investor attention is shifting away from China, at least in the short term. “

Homecoming IPO

Despite expectations of a lower supply from Chinese tech companies as first-time sellers of stocks, more of their US-listed counterparts are likely to seek listing in Hong Kong or Shanghai. , a phenomenon known as “coming home”.

Weibo Corp., Baidu Inc. and Alibaba Group Holding Ltd. The trend is expected to accelerate in the face of growing threats from the United States to delist Chinese companies from the list.

Rideshare giant Didi Global Inc. and video streaming site IQiyi Inc. are already in the queue for such announcements in Hong Kong, while Futu Holdings Ltd., Tencent Music Entertainment Group and Pinduoduo Inc. are also in line. likely candidates.

Once Beijing’s regulatory situation clears up, “the show will bounce back,” Goldman’s Smiley said. “The positioning is light and China is under-owned.”

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