HSBC: IPO market to pick up in Q2, Q3
PETALING JAYA: The initial public offering (IPO) market would likely pick up momentum given the strong fundamentals in Asian markets and renewed interest in the equity markets.
HSBC head of equity capital markets for South-east Asia Matthew Song said sentiments in Asia were stronger, therefore the IPO market would pick up pace in the second and third quarters of this year.
“Last year we saw a lot of market volatility in the third and last quarter so there was a drop in the IPO market. Some of the deals that were not able to be executed will be pushed into this year,” he said at a media briefing.
Song added that investors were ready to put their money back into the market since volatility had cooled off and Asian markets had more or less priced in the effects from the eurozone crisis.
“Sentiments among equity investors are definitely more bullish as we can see from the allocation of funds from fund managers and hedge funds.
“All the indices in Asia are up too,” he said.
The positive market sentiments across Asia are fuelled by fund inflows from Europe and the United States, good corporate results, organic growth among companies and more Asian companies eyeing merging and acquisition opportunities in Europe and the US.
On the local front, he was confident that the IPO market would “hijack” similar sentiments and outpace its 2010 and 2011 performances. News reports recently highlighted Felda Global Ventures Holdings Bhd going for listing on the Main Market, Khazanah Nasional Bhd listing its healthcare arm Integrated Healthcare Holdings Sdn Bhd and the upcoming Gas Malaysia Bhd IPO.
He pointed out that issuers recognised that there was money flowing into Asia and that they wished to equitise at a wide market window.
“Even if the market window closes, the market will continue to be there with a low interest rate environment for corporates to continue to borrow,” he said.
Aside from that, there are Us$30bil worth of redemptions of convertible bonds maturing this year which means a lot of money will be put back into the bond market.
“If the market becomes more volatile, what issuers can do is take advantage of the volatility by issuing convertible bonds so that the option on their convertible bond is worth much more thus giving them value,” Song said.
“But if the market grows more positive, obviously they should go for pure equity placement whether it is going private or public or by issuing new shares.”
Going forward, he said there could be a shift from rights issues to follow-on placements, basically meaning issuing placements at a discount.
HSBC has forecast a 15% to 20 % uptrend for the KLCI; hitting 1,800 points by year-end as money continues to boost the equity market.
“In the near future it will continue to trade in a bend but in the 12month forecast the price to earnings valuations will catch up to where we were in 2007,” he said.
Song noted that in terms of price to book value, the local market was still below where it used to trade historically.
Although the market was trading at a discount and liquidity has never been an attraction, Song said
Malaysia had shown resilience in the past two years and that it was attracting European as well as US investors who were looking for defensive yield-driven stocks.
The trading themes for the year would revolve around consumer retail, commodity and mining, he said.