Asian market expects growth due to opening China
2022.12.16 02:34
Asian market expects growth due to opening China
Budrigannews.com – Dealmakers stated that China’s anticipated re-opening to the rest of the world in 2023, following a series of COVID-19 lockdowns, is expected to provide a much-needed boost to Asian equity capital markets activity, which is currently at three-year lows.
Equity capital markets activity, which includes initial public offerings (IPOs), secondary listings, and follow-on equity sales, is also seen as positive by a easing of China’s two-year tech sector crackdown and a breakthrough for the U.S. audit watchdog to gain access to mainland firms’ financial accounts.
According to Goldman Sachs (NYSE:)’s Edward Byun, “market activity will come in stages as China’s re-opening happens.” co-head of equity capital markets outside of Japan, stating that trading in secondary markets and subsequent capital raises would benefit first.
“We will begin to see the conditions emerge for a resumption of the IPO market as confidence on the recovery builds.”
According to data from Refinitiv, the value of IPOs in Asia-Pacific, including Japan, decreased by 43.3% this year, while the value of all equity capital market transactions decreased by 52%.
As IPOs, once a staple of Asia’s financial hub and a major fee earner for the city’s banks, fell to the lowest level in ten years, Hong Kong was the region’s most affected market.
After withdrawing funds from China for two years, the country’s gradual reopening ought to compel global investors to begin investing there once more.
According to Harish Raman, Citigroup (NYSE:), “Many international investors moved money back to the United States, but China is still the elephant in the room, and you can’t ignore it.” ‘s head of value organization for Asia Pacific.
More More stability-Deutsche Bank
“If you think that the United States has really reached its peak, that valuations are getting out of hand, and that you want to take some profit, where are you going to deploy that? It has to come back to China,”
According to data provided by Refinitiv, new share sales in Hong Kong decreased by 74% to $7.4 billion this year, from $28.17 billion in 2021. According to separate Dealogic data, 44 of the 70 IPOs in the city this year are trading below their offer price.
However, the city wasn’t the only major market that was affected.
This year, investors struggled with the Russia-Ukraine conflict, rising energy costs, and spiraling inflation that has driven global interest rates to record highs, leading to a 95% drop in Nasdaq initial public offerings (IPOs).
IPO fundraising in Australia decreased to $633.1 million this year from $9.6 billion in 2021, but Australian stocks outperformed with only a slight decline.
Matthew Beggs, co-head of equity capital markets for Australasia at UBS, stated, “My expectation is that we do get some IPO activity in the first half of 2023, and provided we do get that and the benefit of a more stable market and calm economic backdrop, we will get a lot more activity in the second half.”
According to the data provided by Refinitiv, IPOs in India decreased by nearly 60% to $7.13 billion from $17.05 billion.
However, domestic Chinese deals increased, with Shanghai’s STAR Market IPOs gaining 11.4% in value as companies forced to raise funds locally while awaiting final regulations for international share sales.
Last year, China’s Securities Regulatory Commission (CSRC) issued draft guidelines for Chinese companies planning to list overseas, but no final rules have been announced.
Separately, the U.S. accounting watchdog gained full access to inspect and investigate Chinese businesses for the first time, preventing delisting risks for approximately 200 mainland companies in New York.
According to Refinitiv data, only five Chinese companies completed U.S. initial public offerings this year, raising a combined $162.5 million, down from $12.8 billion last year.
According to Goldman Sachs’ Byun, “Given the latest developments (on the audit access), we will hopefully see the window reopen for U.S. offerings over the course of 2023.”
