The Asian equity capital markets business is showing signs of life once more, although after several false dawns, battle-weary bankers are stopping short of predicting the worst is over.
So far this year, it has been driven largely by block trades, albeit some large ones, as companies and bookrunners working on potential initial public offerings prefer to keep their powder dry.
Market volatility, as a result of continuing global economic uncertainty and eurozone concerns, is holding back a recovery that has the potential to be pivotal, given the health of the IPO pipeline.
Chris Laskowski, chief operating officer for corporate and investment banking at Citi in Hong Kong, says: "Things, perhaps a little surprisingly, are getting busy. Some had thought, only half jokingly, that the IPO market was never coming back.
"I dont think the IPO market will come roaring back, but there is momentum and the block trades are driving it. Deals are getting done now with some higher-quality assets and liquid deals."
Recent block trades have included an almost $1 billion divestiture for Cairn India. And Temasek Holdings raised $1.28 billion from the sale of 400 million shares in SingTel. This reportedly included one order for $200 million from a sole US investor.
Last month, Coal Asia, the Philippines coal-reserve company, surged 50% on its first day of trading in an offering that was heavily oversubscribed.
First day pops have become an important indicator of IPO performance and are keenly watched by companies considering stock market floats. Coal Asia sold 800 million shares in the fourth-largest IPO in the Philippines this year after debuts by GT Capital Holdings, East West Banking and Calata Corporation. This quarter, two more companies Philippine Business Bank and D&L Industries are due to come to market.
The latest blow to any potential resurgence in the Asian IPO market came last month when ARA Asset Management, a Singaporean real-estate investment trust backed by billionaire Hong Kong entrepreneur Li Ka-shing, pulled its planned offering due to poor market conditions. The yuan-denominated offering would have been Singapores first to be sold in Chinas currency.
Meanwhile, the bright light of the IPO business has been Malaysia, where the Kuala Lumpur exchange has $7.5 billion in new listings this year, outstripping Hong Kongs disappointing $6.3 billion.
Among deal highlights in Malaysia is IHH Healthcare, which is trading up almost a fifth from its IPO price. The pipeline for Malaysian deals also looks strong, with power company Malakoff Corporation and port owner Westports Malaysia both looking to raise around $1 billion.
The pipeline for deals in Asia is robust, with hundreds of companies at a stage in their development where a public float is the logical next step. The metals and mining sector is particularly healthy and all eyes will be on the first of the companies that successfully comes to market. A strong debut by one is likely to lead a raft of others to follow suit.
According to figures from Ernst & Young, Asia posted an impressive performance during the third quarter, accounting for close to 80% of capital raised globally. This comes against the backdrop of uncertainty as a result of the crisis in the eurozone, continuing instability in the Middle East and the closeness of the US presidential race.
Six of the top 10 global IPOs during the quarter were listed on Asian stock exchanges. Japan Airlines floated on the Tokyo Stock Exchange, raising $8.5 billion and making it the second-largest public stock listing of the year after Facebook. IHH raised $2.1 billion through its debut, while Chinas Inner Mongolia Yitai Coal floated on the Hong Kong Stock Exchange, raising $900 million.
Earlier this year, the postponement of the much-hyped $1 billion IPO of Graff Diamonds dealt a blow to the Asian ECM when hopes were high that Graffs float, followed by that of Formula One, would light the touch paper for the ailing market.
Graff, the London-based luxury jeweller specializing in the largest diamonds, pulled its offering at the 11th hour, citing adverse market conditions, after it struggled to fill its order book. The company had begun taking orders from retail investors for its Hong Kong IPO, which would, at the time, have been the second-largest in the region this year.
Those IPOs completed this year have tended to feature a growing cast of bookrunners, a development that has frustrated many bankers in the region as well as some issuers, who have been unhappy with the disorganization that often results from having such a large syndicate.
"It just makes for an unwieldy process," says one banker. "You can understand that companies want to cover as wide a variety of potential investors as possible through their choice of lead managers and bookrunners, but trying to get a deal away in tough market conditions when 12 people are telling you 12 different things is nigh on impossible. It certainly hasnt helped the IPO market to gain momentum."