Technology sector to rev up IPO recovery

IT firms and emerging markets including China, India and Brazil, will lead recovery of public listing activities, finds new survey on global investors.

The technology sector, as well as China and India, will rejuvenate the Initial Public Offering (IPO) market and drive listing activities over the next 12 months, according to a new survey by Ernst & Young.

Released Friday, the study revealed that 49 percent of investors believe IT companies will be at the forefront of a worldwide resurgence in the IPO market.

Conducted in September 2009, the online survey polled 305 respondents from Asia, Latin America, Europe and the United States on their expectations regarding the IPO environment and factors affecting its development. More than half of these were asset managers from hedge funds, mutual fund, pension funds, private equity and banks.

"Technology companies often lead IPO recovery because they are perceived to have good market growth," Greg Ericksen, global vice-chair of strategic growth markets at Ernst & Young, said in the report.

Coming in behind the technology sector are financial services at 43 percent, and the oil and gas sector at 38 percent. The result for the financial services is "unexpected", noted Ericksen, but he added companies in this sector have started to stabilize. "Those [financial companies] that have survived the economic downturn are now in a better position to attract investors than they have been for some time," he said.

China to lead way
According to the survey findings, the emerging markets of China, India and Brazil, were highlighted as economies that will lead the recovery. China took the most votes, with 75 percent of investors championing the market as most likely to recover first, followed by India and Brazil at 57 percent each.

U.S. and Singapore were also regarded as potential markets to lead IPO recovery, receiving votes from 31 percent and 30 percent, respectively, of respondents. In comparison, developed markets such as the United Kingdom, Australia and Germany, were only expected to experience an upturn between the first quarter of 2010 and second quarter of 2011. In fact, a large minority of investors believed markets such as France and Japan, would not see recovery for at least another 18 months, according to Ernst & Young.

The survey also predicted companies backed by private equity funds would be among the first to be listed in the U.S. market. "Private equity-backed companies are playing a significant role in driving public offerings, and given the backlog of companies awaiting exit within their portfolios, they are poised to increase in importance," said John Harley, Ernst & Young's global private equity leader.