Greater China will see record IPOs next year with at least 50 companies to be approved for listing in January, led by sectors including technology and healthcare, as mainland China resumes IPO activities in 2014.
In a statement released Monday, Ernst & Young (EY) said global Initial Public Offering (IPO) activities would remain robust in the first quarter of 2014, following a strong showing in the last quarter of 2013, which clocked a total of 864 deals generating some US$163 billion. The consulting firm noted that increased investor confidence and better market fundamentals would drive a stellar start in 2014.
According to EY, global IPO activities in first-quarter 2014 could chalk up US$35 billion to US$45 billion from 250 to 300 deals.
Ringo Choi, EY's Asia-Pacific IPO leader, explained: "2013 marks the end of a two-year decline in IPO activity. The improving macroeconomic backdrop, easing global monetary conditions, reduced political uncertainty, and rising investor confidence in key markets saw the banner year end on a high that exceeded expectations."
He said the robust growth would continue across all regions, with strong activities in the U.S. and Europe where private equity would remain a key driver. This sector had supported 182 IPO deals worh US$56.4 billion this year, contributing 35 percent of overall deals worldwide, Choi said.
He noted that the reopening of mainland China exchanges in the first quarter of 2014 would line up over 700 companies for IPO approval, facilitating futher activities in the region.
IPOs in Asia this year would likely reach 347, compared to 414 in the previous year, with proceeds dipping to US$44.4 billion compared to US$56.2 billion in 2012. This fall was due to the suspension of IPO activities in China in 2013, said EY, though it noted that the halt in Chinese IPO made a small dent in overall activities in the region.
China Securities Regulatory Commission in October 2012 suspended IPOs as part of efforts to clamp down on fraud and irregularities, and announced it wouold resume IPO activities in January 2014.
Max Loh, EY's Asean and Singapore managing partner and IPO leader, said in a statement last week: "Despite the freeze in IPO activity in Mainland China, with listings suspended since late 2012, the region has seen high levels of activity in 2013--with Hong Kong, Japan, and Southeast Asia seeing an increase in the number of deals and capital raised. This trend is set to continue into 2014.
"We expect continued robustness of Mainland China and Southeast Asia IPOs in 2014 and beyond. The robust economic activity in the individual Asean economies and the economic integration benefits from the creation of the Asean Economic Community (AEC) should create further momentum," Loh said.
Jacky Lai, EY's assurance partner, added that Greater China also saw high levels of activity in 2013--in spite of the freeze in IPO activities. Hong Kong, for instance, is estimated to generate HK$162 billion (US$20.89 billion) in funds this year, 80 percent more than total funds last year. The Hong Kong Stock Exchange in 2013 placed second only to the New York Stock Exchange based on overall deals raised, increasing its number of IPOs by 60 percent to 96, Lai said.
EY expects over 100 IPOs to be launched in Hong Kong next year, raising about HK$180 billion ($23.22 billion).
Choi said: "We expect 2014 to be a record year globally and in the region, with economic fundamentals and strong global liquidity fueling new listings. We expect an influx of mainland China IPOs in 2014 and beyond, with the first batch of over 50 companies getting approval from the regulator for listing as early as January 2014.
"In Hong Kong, we expect to see more IPO activities in 2014, building on strong momentum in 2013 and a number of significant spinoffs of local Hong Kong companies to improve shareholders' value. Sectors which will lead the way include the financials, technology, real estate and healthcare sectors."
According to a report on China Daily, two of the largest Chinese companies in the first batch of IPOs expected to launch by end-January are Shaanxi Coal Industry and China Post Group. Together, the two companies are expected to generate 27.2 billion yuan (US$4.45 billion), contributing some 62 percet of overall capital among the first batch of IPOs.
Terence Ho, EY's Greater China strategic growth markets leader, said: "Small and medium-sized enterprises will be the main driving force of Chinese mainland IPOs next year. IPO funds raised in the Chinese A-share market in 2014 can be as much as 200 billion yuan (US$32.73 billion)."