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Asian markets had a blockbuster IPO season in 2021, with total proceeds of $162 bn from 1,108 new issuances. Asia IPO market saw big listings in South Korea, India and Australia, while China and Hong Kong faced challenges due to Beijing’s regulatory scrutiny.
Market experts had predicted that this trend would continue in 2022. The results for the first three months are now out and the Asia IPO buzz has started off the year on a strong note. A report by Ernst & Young said that while IPO activity started on a strong note, the volatility in stock markets due to the Russia-Ukraine war has resulted in a reversal.
Performance of Asia IPO market in 2022
In the first quarter of 2021 Asian markets recorded 188 IPOs to raise $42.7 bn in proceeds. While the total volume of IPOs in Asia-Pacific fell by 16% year on year, there was an 18% increase in proceeds. Global IPO activity was considerably weak, as 321 deals raised raise $54.4 bn in proceeds, the EY report says. This means that Asia-Pacific accounted for 78% of the total IPO proceeds raised around the world.
“A decrease in IPO activity was not unexpected when compared with Q1 2021 as the latter was the most active quarter in the last 21 years. However, the market shock from geopolitical tensions and other economic concerns in the second half of the quarter created volatility and impacted the capital markets,” said Paul Go, EY Global IPO Leader.
In Asia, Q1 2022 IPO figures are better than Q1 2021. Four out of seven mega IPOs around the globe were listed in Asia-Pacific. Industrial IPOs were the most popular and raised $3.3 bn followed by materials ($5.3 bn). Energy and telecommunication IPOs brought in the most amount of money in the region, collectively raising $19.7 bn during the first three months of 2022.
While the Russia-Ukraine war has led to a trend reversal in the Asia IPO space, it is not the only problem. Other issues include stock market volatility, price correction in overvalued stocks that were recently listed, concerns of rising commodity and energy prices, rising inflation and hawkish central banks, and lastly the Covid-19 pandemic which is weighing on economic recovery.
Who raised money in Asia?
Greater China saw a modest 2% rise in proceeds, but deals fell by 28%. Japan’s IPO activity slowed with only some small caps going public. In Japan 15 IPOs raised a mere $0.2 billion. South Korea was the best-performing country, with 19 IPOs raising $11.2 billion, a 368% rise in proceeds.
Asia’s biggest IPO in the first three months of 2022 was South Korea’s LG Energy Solution, the world’s second-largest EV battery maker. The IPO was South Korea’s biggest-ever and raised $10.8 billion, shedding light on the emergence of EV battery suppliers.
In China, state-owned telecom giant China Mobile raised $8 billion via a Shanghai Stock Exchange listing. The company was earlier listed on the New York Stock Exchange but was forced to delist following a Trump administration order. The world’s largest solar panel maker Jinko Solar went public earlier this year by raising $1.58 billion by listing in Shanghai.
Most recently, Indonesia’s largest tech firm, GoTo Group, raised $1.1 billion after listing on Indonesia Stock Exchange. It was the biggest IPO in Southeast Asia in 2022 and is the fourth-most-valuable company listed in Indonesia.
IPO activity on the Hong Kong Stock Exchange has been marred due to geopolitical issues and regulatory changes. The region saw 15 deals, raising $1.9 bn in the first three months of 2022.
India was a big contributor to the IPO boom seen in 2021 but has somewhat frazzled out this year. The government is readying up the IPO of state-owned Life Insurance Corporation of India (LIC), the biggest insurer in the country, that aims to have a record listing by raising $10 billion. However, market volatility and geopolitical worries forced the Indian government to delay the IPO.
Several other companies across Asia have postponed their IPOs as markets face headwinds. Japan’s SBI Sumishin Net Bank postponed its IPO on the Tokyo Stock Exchange. The listing was supposed to be Japan’s biggest this year with a potential fundraise of $1.2 bn.
Singapore’s Olam International delayed listing its unit Olam Food Ingredients on the London Stock Exchange citing the Ukraine war.
What’s next for Asia IPO market?
While IPO activity in Hong Kong has been weak, KPMG sees an increased pace as 150 companies across different sectors have applied to go public. Additionally, as the US moves to delist Chinese firms, Hong Kong will be the natural destination for homecoming listings.
Syngenta Group, a unit of China National Chemical Corp, is likely to list this year in Shanghai and plans to raise $10.2 billion. The company’s IPO was halted last year by China on missing financial data. Apple supplier Crystal Manufactory Ltd may go public in Hong Kong in 2022 to raise $2 billion. China Tourism Group Duty Free Corp had suspended its $5 bn Hong Kong IPO plans over concerns of sluggish markets.
Indian online education startup Byju’s is exploring the SPAC route to raise $4 billion. Taiwan’s MediaTek plans to list its Bluetooth chip unit Airoha Technology on the Emerging Stock Market before making a full IPO.
“In many parts of Asia-Pacific, the COVID-19 pandemic is still impacting the economy and IPO activity. There is, however, optimism of more IPO activity to come in the second half of the year,” says Ringo Choi, EY Asia-Pacific IPO Leader, adding that firms eyeing an IPO should have alternate plans to raise money.
