Most people who know will try to tell you that the market for stock market flotations in Hong Kong is, in spite of appearances, buoyant.
Theyll say the capital-raising environment is actually quite good, that roadshows are well attended and a raft of interesting deals from a variety of sectors are ready to come to market. The pipeline is strong, they say, predicting a flood of offerings. When? you ask. Soon, they reply.
Volatile Asian equity markets have resulted and with such potential sources of uncertainty, companies and their advisers are electing to keep their powder dry until summer, when they hope the capital markets will be calmer.
With first-day trading pops becoming one of the most important benchmarks for IPO performance, the opening-day falls of Chow Tai Fook Jewelry Group and New China Life Insurance late last year did little in the way of persuading others that the first quarter of this year was the right time to launch a public share offering.
You can see why banks are keen to present a bullish view. ECM revenues are vital to banks in Asia, providing a sizeable portion of many of their overall revenues when times are good. By the same token, when bringing deals to market doesnt quite make sense, the impact on revenues can be quick and big.
If you want to find them, signs of a potential revival can be unearthed. AIG raised HK$ 46.7 billion ($6 billion) through a block trade sale of AIA early last month that suggested green shoots. Bankers said the deal was cause for optimism. They added, however, that most deals likely to make it to market will be on the small side and a bulge-bracket, headline-grabbing, confidence-fuelling stock market flotation was unlikely in the immediate future.
But that is what the equity capital markets in Hong Kong need a company big and brave enough to see plans for a flotation through rather than just talk about it. When one eventually takes the leap of faith, others will undoubtedly follow and the year for ECM bankers in Asia could yet be saved.