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Opinion

Asian equities: Haitong proves a false dawn

Chinese broker’s Hong Kong listing fails to revitalize the market.

The fears of ECM bankers across Asia were realized when shares in Haitong Securities were flat after their stock market debut. It was the last thing the market needed. If the second-largest Chinese brokerage had posted a decent first day pop, or even ended in solid positive territory, the ailing primary equity capital markets of the region might well have burst into life.

Instead, its opening-day performance served to underline the uncertainty dogging the market. If other companies were looking for encouragement to push the button on their own offerings, they did not get it.

Haitong’s $1.7 billion deal was the first large IPO to hit the Hong Kong market in months. It had already delayed its offering once, amid concerns about market conditions late last year. However, after much pondering, the company and its bookrunners decided the time was right.

Shares in the company ended their first day of trading on the Hang Seng index down 0.2%.

Bankers on the deal, while not expecting the stock to soar, were hoping for a decent opening, pricing the deal realistically and giving the market a shot in the arm as a result. Now they must be wondering if they leaped too soon.

With ECM revenues so crucial to the fortunes of banks in the region, the pressure is now on to unblock the pipeline of deals that are waiting for the right conditions to come to market. It is clear that now is not that time. Given the crisis in the eurozone and worries over Chinese growth and succession of power at the forefront of the minds of investors, it could be some time before volatility in the equity markets abates.

Regulators in Hong Kong are also preparing to force banks to do more rigorous due diligence on companies for which they are acting as sponsors, which could add to their woes. A report from the Securities and Futures Commission last year said it had "identified certain deficiencies in the work carried out by some sponsors, as well as some inadequacies in their internal systems and control". Some bankers have expressed concern over what the SFC might have planned for them.

Haitong’s opening-day performance falls short of being a disaster for the market, but as the highest-profile recent indicator of investor sentiment it does suggest that a new phase of growth in the ECM markets of Asia remains some way off.

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