HONG KONG (Reuters) - Share sales in Asia ex-Japan have picked up pace this year and are set to rise sharply in the coming months, with $10 billion listings from two Chinese firms expected to reinstate Hong Kong as the world’s top IPO destination, bankers and analysts said.
Deals in India and South Korea will also drive a pick up in the region’s equity capital markets (ECM) activity that - according to preliminary Thomson Reuters data - rose 7 percent across Asia-Pacific exchanges in the first half of 2017, versus an almost 50 percent drop in the corresponding year-ago period.
While IPOs in Shanghai and Shenzhen, both currently ahead of Hong Kong in IPO rankings, are expected to slow down after more than doubling so far this year, volumes will still be strong enough to boost activity, the bankers and analysts said.
China has curbed the pace of IPO approvals to prevent an oversupply of shares, but it remains the busiest market in the world for new listings. A queue of almost 600 companies waiting to go public indicates there is no shortage of deals.
“They’ve decided to reduce the pipeline of IPOs, but the reality is that the market still needs a lot of money,” said Ringo Choi, Asia-Pacific IPO leader at consulting firm EY.
New listings in China were a key driver of the $85.5 billion of equity offerings in Asia-Pacific in the first half, which offset an 8.1 percent decline in follow-on share sales, according to Thomson Reuters data through June 27.
For Hong Kong, EY forecast about $25.8 billion of IPOs this year, only a quarter of which has been achieved so far.
Most of this will come from end-2017 listings by state-owned China Tower Corp - which operates the mobile phone network for China’s three wireless carriers - and Sinopec Marketing Co Ltd that are expected to raise at least $10 billion each.
These IPOs should push Hong Kong up the world IPO rankings, bankers said. It was No.1 last year, but dropped to No.4 as new listings fell 41.5 percent over the first half of 2017.
Follow-on offerings or block trades, however, remained strong in the city, jumping 71 percent, and are expected to grow, helped by an 18 percent rally in local stocks .HSI.
“The overall market backdrop has improved from a year earlier and global investors are now more willing to allocate capital to Asia,” said Aaron Arth, head of Financing Group in Asia ex-Japan at Goldman Sachs.
Among the IPOs Hong Kong is expected to see this year are, at least a $1 billion listing from Zhong An Online Property and Casualty Insurance, China’s first online-only insurer, and $1 billion each from China United Insurance Holding Corp (IPO-CNUT.HK) and Ping An Securities (IPO-PINS.HK) .
Despite political upheaval, South Korea’s deal activity has surged and it was home to the largest IPO so far in the region - the $2.3 billion from Netmarble Games Corp (251270.KS).
Volumes are seen rising further with budget airline Jin Air Co Ltd, Kyobo Life Insurance [KYOBO.UL] and Celltrion Healthcare expected to go public in the second half of 2017.
In India, offerings from insurers including General Insurance Corporation of India, SBI Life Insurance and New India Assurance, as well as National Stock Exchange are expected to lift ECM activity, on top of expected deals from infrastructure investment trusts.
Reporting by Elzio Barreto; Editing by Himani Sarkar