APAC dominates global IPO activity with US$97.1b worth of deals in 2018

It accounted for five of the top ten exchanges globally by proceeds.

The Asia Pacific (APAC) region continued to lead global initial public offering (IPO) activity, racking in US$97.1b across 666 deals in 2018, according to a report by Ernst & Young (EY).

APAC accounted for six of the top ten exchanges globally by deal number and five of the top ten exchanged by proceeds, the report found.

In Q4, a number of APAC IPO candidates, particularly those in the technology sector, saw their valuations decline on the back of liquidity drying up and investors looking to deleverage. Poor post-IPO stock price performance over the last several quarters were also partly to blame, EY highlighted.

“The good news is that the number of IPO candidates bringing their companies to market remain high, despite investor sentiment, largely because the cost of capital is set to rise,” EY added in its report. “However, it may take some time before IPO pricing rebounds.”

Also read: Singapore hits $145.74b worth of deals in 2018

Japan posted 97 IPOs which is 2% higher compared to 2017 and represents a significant 333% increase from 2017 proceeds. The report noted how in Q4, technology giant SoftBank Corp. went public, making it Japan’s largest IPO to date and the largest IPO in 2018 globally.

“New listing rules on weighted voting rights and pre-revenue biotech companies attracted high profile technology and biotech companies to list in Hong Kong,” EY said, with Hong Kong’s main market and growth enterprise market seeing a rise of 24% by deal number to 197 deals and 120% by proceeds (US$35.4b) in 2018.

According to the report, the number of companies filing to go public in Hong Kong jumped almost three-fold in 2018 driven in part by China’s burgeoning technology sector and attractive listing reforms. On the other hand, EY noted how Hong Kong’s IPO activity could face headwinds going into 2019 in the form of weaker secondary markets.

Countries in the Association of Southeast Asian Nations (ASEAN) however saw a slight -7% decline in IPO volume falling to 115 deals in 2018 compared to 2017, EY noted. Proceeds crashed 34% to US$7.1b.

“Specifically for Q4 2018, ASEAN IPO volumes and proceeds declined 27% and 46%, respectively,” EY added.

The Indonesian Stock Exchange (IDX) saw the highest deal numbers amongst ASEAN exchanges in 2018, accounting for 45% of ASEAN deal volume and 16% by proceeds, EY noted in its report.

Also read: Vietnam overtakes Singapore in IPO fund market

Vietnam and Thailand stock exchanges led in ASEAN exchanges by proceeds with 36% each. Each of these exchanges hosted two sizeable IPOs during 2018.

By sector, industrials was the most active in ASEAN by deal numbers with 24 deals, followed by consumer products and real estate at 15 and 14 IPOs, respectively. Real estate however led by proceeds with US$2.2b. Industrials (US$1.8b) and financials (US$1.1b) came in at second and third.

“On the whole, 2018 was relatively quiet in the Southeast Asia IPO markets, as economic uncertainty, trade tensions and emerging market issues persist,” EY LLP ASEAN and Singapore managing partner Max Loh said in a statement. “Looking ahead to 2019, with ASEAN exchanges innovating to build their IPO pipeline, and if geopolitical and economic volatility subsides, we may see more sustained IPO activity in H2 2019.”

The technology and media entertainment sectors are forecasted to continue driving APAC’s IPO market in 2019, whilst traditional sectors such as natural resources are expected to increase their IPO presence as persistent trade issues with US make oil and gas IPOs more attractive.