China comes roaring back in the global IPO market
Securities regulators and investors seem eager to make up for lost time
JOYCE HO, Nikkei staff writer
HONG KONG -- The global market for initial public offerings recovered briskly in the first quarter of 2017, raising a total of $36 billion, helped by a six-year high in Asian IPOs totaling $12.76 billion.
Asia, in turn, was lifted by strong momentum in mainland China, where the securities regulator has sped up approvals for stock flotations. According to financial data provider Dealogic, Chinese companies raised a total of $8.48 billion from 122 first-time share sales over the three months to March. That amounts to 66.5% of the region's total funds raised from IPOs and 55.5% of deal volume.
Both figures are a threefold increase from the same period last year, when a dramatic sell-off in A-shares and a botched trading halt chilled the mainland IPO market. Deals got underway only slowly after a four-month suspension that began in July 2015.
The acceleration is in line with Beijing's desire to wean heavily indebted companies off excessive reliance on bank credit, and to ease strains on domestic lenders. Since the third quarter of last year regulators have been expediting listings of manufacturers and debt-riddled commercial banks.
Of the 644 IPO applications being processed by the China Securities Regulatory Commission, 40 had gained approval as of March 30, while another 560 companies were still in the logjam, according to the regulator's notice on March 31.
Although the average IPO on the Shanghai bourse was modest, at $84 million, the large amount of deals made it the No. 1 IPO hub in Asia, raising $4.72 billion in all. Worldwide, it ranked second behind New York, which bounced back with several blockbusters, including the $3.9 billion market debut of instant messaging app maker Snap.
The acceleration in IPO approvals in China contributed to a sharp slowdown in backdoor listings, in which an unlisted company buys one that has already gone public. Many of these acquisitions come with a substantial premium attached. According to Dealogic, the value of reverse mergers in China fell to $228 million in the first quarter, versus $15.20 billion during the same period in 2016.
Delivery company S.F. Holding, a close partner to Chinese e-commerce giant Alibaba Group Holding, became Shenzhen's largest public company, worth more 200 billion yuan ($29.01 billion), by taking over shell company Maanshan Dingtai Rare Earth & New Materials in December.
Hong Kong -- the world's top IPO hub for the past two years -- slipped to sixth place globally and third in Asia due to the absence of jumbo deals, usually launched by mainland financial services companies backed by state-owned cornerstone investors.
Including the Growth Enterprise Market board, the city managed to attract just $1.82 billion from 34 maiden share sales in the first three months of the year, down 54% by value despite a 70% increase in deal volume compared with a year ago.
Hong Kong's largest transaction was the $446 million debut of a regional Chinese lender, Jilin Jiutai Rural Commercial Bank, in January. That was, however, barely one-fourth the amount raised by the secondary listing of Guotai Junan Securities, which announced on March 27 plans to tap $2.1 billion from the Hong Kong market. The country's third-largest brokerage by operating revenue and assets, Guotai Junan is already listed in Shanghai and its international arm made its debut in Hong Kong seven years ago.
Japan, the runner-up in Asia's IPO race for the quarter, hosted two of the five largest flotations in the region: a $611 million share issue by Sushiro Global Holdings, an Osaka-based conveyor-belt sushi chain backed by European private equity firm Permira, and a $433 million offering by Tokyo-based market research company Macromill.
Thailand, taking fourth place in Asia, saw total funds raised from IPOs jump eighteenfold on the back of the $506 million share sale by TPI Polene Power, which generates electricity from waste.