HONG KONG (BLOOMBERG) – After a record year of stock quotes, Asian companies could struggle to repeat success in 2022 given the prospect of rising interest rates and the tightening grip of the China on Big Tech.
Thanks to a meteoric first half amid a global boom, initial public offerings in the region have reached US $ 190 billion (S $ 260 billion) so far this year, already a record and up 31 % compared to the whole of 2020.
But momentum has weakened considerably in recent months as Beijing stepped up a regulatory attack on private companies, putting major deals on hold and injecting uncertainty into next year.
Bankers say they expect Asia’s IPO market to be less frenetic and more balanced in 2022, as higher inflation erodes valuations of tech companies and tighter US monetary policy reduces the supply of unused cash.
The list landscape may also appear more diverse, with South Korea and India leading the way and sectors ranging from clean energy to financial services filling the void left by once-dominant Chinese technology.
“The markets in 2022 will face a more normalized environment,” said William Smiley, co-head of equity capital markets at Goldman Sachs in Asia ex-Japan. “The withdrawal of fiscal and monetary stimulus, coupled with higher inflation expectations, can challenge risky assets, including stock markets. “
Beijing’s scrutiny of its tech companies, on issues ranging from data security to a loophole long used by companies to register overseas, is also expected to continue to slow the pace of fundraising from of the sector.
This, added to the poor performance of the secondary market, pushed Hong Kong, a popular destination for Chinese technology companies, out of the top three places in the world.
Several companies, from snack producer Weilong Delicious Global Holdings to Apple supplier Biel Crystal Manufactory, have pushed back stock offerings in the city, a development that is expected to make the last three months of this year the weakest fourth quarter since 2018 for Asian IPOs.
Chinese companies unaffected by Beijing’s regulatory crackdown or beneficiaries of the country’s development priorities, including new energy suppliers and electric vehicle manufacturers, could take over.
The new year is expected to see a more diverse group of companies entering the market, said Magnus Andersson, co-head of equity capital markets for Asia-Pacific at Morgan Stanley. “It’s not just the consumer, the Internet and technology, it’s also more industrialists and financial institutions.” Candidates include start-up Hozon New Energy Automobile and property management business of developer Longfor, Bloomberg reported earlier.
The moderate presence of Chinese tech will also help to geographically balance the region’s IPO pipeline, as South Korea, India and Southeast Asia maintain a busy issuance schedule. Companies in India, South Korea and Indonesia all raised record amounts through share sales for the first time this year.
And there’s more to come: Ongoing mega-deals include LG Energy Solution’s US $ 10.8 billion IPO in Seoul and India’s life insurance offering in Mumbai with a valuation of up to 131 billion US dollars.