Record-setting Asian IPO boom likely to taper off

HONG KONG: As in the United States, initial public offering (IPO) activity out of Asia has had its strongest-ever start to a year. That frenzy for new shares is likely to taper off as demand falls back to earth in the next few months.

Asian companies, like their global peers, notched their best first quarter for listings ever, thanks to a flood of liquidity during the pandemic, super-low interest rates, and rallying stock markets.

The firms raised US$49.3 billion through first-time share sales at home and abroad, a 154 per cent jump over the same period last year, data compiled by Bloomberg show.

IPOs globally raised an unprecedented US$215 billion, with almost half of that haul coming from the record wave of issuance by special-purpose acquisition companies (SPACs) in the US.

Now, a global rotation out of highly valued tech and healthcare stocks that have dominated market activity, as well as fading excitement around SPACs in the US, is clouding the outlook for new deals.

“Inevitably, there is a mark to market of comparable valuations,” said William Smiley, cohead of equity capital markets at Goldman Sachs Group Inc in Asia ex-Japan.

“In terms of our pipeline, there hasn’t been any significant impact from the recent rotation, but opportunistic issuance may have decelerated.”

Asia’s IPO space faces an added challenge: the travails of Chinese tech firms, which dominate fundraising in the region. These companies are facing a crackdown against monopolistic practices at home and are also in focus as US-China tensions keep rising.

The red flags are already there, with the investor mania seen earlier this year for deals like the one by Chinese TikTok rival Kuaishou Technology starting to die down.

That said, muted investor appetite for listings isn’t affecting the queue of hopefuls.

Tencent Music Entertainment Group, Weibo Corp and Trip.com Group Ltd are among US-traded Chinese companies seeking socalled “homecoming” listings in Hong Kong.

Tech and healthcare firms make up the bulk of the listing pipeline in Asia, say bankers. Among them: healthcare startup WeDoctor, which is planning a multibillion dollar Hong Kong IPO.