Asia’s IPO market: India surges, Hong Kong seeks revival

Asia’s equity capital market (ECM) is set to rebound in the second half of 2024, fuelled by increased Indian IPOs and a possible uptick in Hong Kong listings. India is leading the way despite a regional IPO slowdown.

In the first half of 2024, India’s ECM deals surged by 137 per cent to $28.5 billion, according to LSEG data. IPO activity also increased by 89.3 per cent to $4.25 billion compared to the previous year.

Hyundai is planning a $2.5-3 billion IPO in India in 2024, which would be the country’s largest ever. This would also be one of the biggest IPOs globally this year.

In contrast, Chinese ECM deals dropped by nearly 70 per cent to $25.5 billion, with IPOs down 83.1 per cent to $5.3 billion, marking the worst first half performance in 11 years in Asia.

Hong Kong, a key IPO hub, also felt the pressure, with the value of IPOs dropping to $1.46 billion in the first half, down from $2.12 billion in the same period of 2023.

Market analysts attribute India’s success to several factors, including:

Growth potential:  Investors are increasingly drawn to India’s promising growth prospects, leading to a more favourable view of growth-adjusted valuations.

Monetary easing: A supportive monetary environment further incentivizes foreign investors to return to the Indian market.

Future Outlook for India: Experts anticipate a “staggered rotation” of investor focus towards India, with a steady flow of impactful companies entering the market over the next 18 months.

The Hang Seng index’s impressive near nine per cent surge over the past three months could encourage more companies to go public in the coming months. Additionally, ongoing policy support and strong corporate earnings are contributing to improved investor sentiment towards Hong Kong and China, albeit cautiously.

While the China Securities Regulatory Commission (CSRC) has approved a respectable number of IPO applications (76) so far in 2024, surpassing the total for all of 2023 (80).

Market experts like Selina Cheung, UBS’ co-head of Asia equity capital markets, believe that a broader market valuation increase in Hong Kong could trigger a rise in follow-on deals and block trades from Chinese companies.

Ultimately, a combination of supportive policy measures and a significant market recovery are seen as key to a relaxation of IPO approvals by the CSRC.

 

Attribution: Reuters